File Nos. 2-32773 and 811-1835
As Filed With The Securities and Exchange Commission on February 29, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
----
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. ___ / /
Post-Effective Amendment No. 45 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 28 / X /
(Check appropriate box or boxes)
PIONEER II
(Exact name of registrant as specified in charter)
60 State Street, Boston, Massachusetts 02109
(Address of principal executive office) Zip Code
Registrant's Telephone Number, including Area Code: (617) 742-7825
Joseph P. Barri, Hale and Dorr, 60 State Street, Boston, MA 02109
(Name and address of agent for service)
It is proposed that this filing will become effective (check appropriate box):
___ immediately upon filing pursuant to paragraph (b)
___ on April 24, 1995 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
_X_ on May 1, 1996 pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) of the Investment Company Act
of 1940. The Registrant filed a notice required by Rule 24f-2 for its most
recent fiscal year on November 29, 1995.
<PAGE>
PIONEER II
Cross-Reference Sheet Showing Location in Prospectus and Statement
of Additional Information of Information Required by Items of
the Registration Form
Location in Prospectus
or Statement of
Form N-1A Item Number and Caption Additional Information
1. Cover Page.............................. Prospectus - Cover Page
2. Synopsis................................ Prospectus - Expense
Information
3. Condensed Financial Information......... Prospectus - Statement of
Selected Per Share Data
4. General Description of Registrant....... Prospectus - Investment
Objectives and Policies;
Management of the Fund;
Information About Fund
Shares
5. Management of the Fund.................. Prospectus - Management
of the Fund
6. Capital Stock and Other Securities...... Prospectus - Investment
Objectives and Policies;
Information About Fund
Shares
7. Purchase of Securities Being Offered.... Prospectus - Information
About Fund Shares;
Distribution Plan;
Shareholder Services
8. Redemption or Repurchase................ Prospectus - Information
About Fund Shares;
Shareholder Services
9. Pending Legal Proceedings............... Not Applicable
10. Cover Page.............................. Statement of Additional
Information - Cover Page
11. Table of Contents....................... Statement of Additional
Information - Cover Page
12. General Information and History......... Statement of Additional
Information - Cover Page;
Certain Liabilities;
Description of Shares
<PAGE>
13. Investment Objectives and Policies...... Statement of Additional
Information - Investment
Policies and Restrictions
14. Management of the Fund.................. Statement of Additional
Information - Management
of the Fund; Investment
Adviser
15. Control Persons and Principle
Holders of Securities................. Statement of Additional
Information - Management
of the Fund
16. Investment Advisory and Other
Services.............................. Statement of Additional
Information - Management
of the Fund; Investment
Advisor; Shareholder
Servicing/Transfer Agent;
Custodian; Independent
Public Accountants
17. Brokerage Allocation and Other
Practices............................. Statement of Additional
Information - Portfolio
Transactions
18. Capital Stock and Other Securities...... Statement of Additional
Information - Methods of
Accounting for Profits or
Losses from the Sale of
Securities; Description
of Shares; Certain
Liabilities
19. Purchase Redemption and Pricing of
Securities Being Offered.............. Statement of Additional
Information -
Determination of Net
Asset Value; Letter
Intention; Systematic
Withdrawal Plan
20. Tax Status.............................. Statement of Additional
Information - Tax Status
21. Underwriters............................ Statement of Additional
Information - Principal
Underwriter; Distribution
Plan
-2-
<PAGE>
22. Calculation of Performance Data......... Statement of Additional
Information - Investment
Results
23. Financial Statements.................... Statement of Additional
Information - Cover Page
-3-
<PAGE>
PIONEER II [Pioneer Logo]
Prospectus
May 1, 1996
The investment objectives of Pioneer II (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 in
securities whose prices reflect a premium resulting from their current market
popularity. Pioneer II follows a policy of investing a portion of its assets,
not to exceed 25%, in foreign 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. INVESTMENTS IN SECURITIES ISSUED BY FOREIGN COMPANIES OR GOVERNMENTS
ENTAIL RISKS IN ADDITION TO THOSE CUSTOMARILY ASSOCIATED WITH INVESTING IN U.S.
SECURITIES. THE FUND IS INTENDED FOR INVESTORS WHO CAN ACCEPT THE RISKS
ASSOCIATED WITH ITS INVESTMENTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. SEE
"INVESTMENT OBJECTIVES AND POLICIES" FOR A DISCUSSION OF THESE RISKS.
This Prospectus 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, also dated May1 , 1996, which is incorporated into this
Prospectus by reference. A copy of the Statement of Additional Information and
the Fund's most recent 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.
TABLE OF CONTENTS PAGE
I. EXPENSE INFORMATION...................................
II. FINANCIAL HIGHLIGHTS..................................
III. INVESTMENT OBJECTIVES AND POLICIES..
IV. MANAGEMENT OF THE FUND........................
V. DISTRIBUTION PLAN........................................
VI. INFORMATION ABOUT FUND SHARES........
How to Purchase Shares.........................................
Net Asset Value and Pricing of Orders..................
Dividends, Distributions and Taxation...................
Redemptions and Repurchases...............................
Redemption of Small Accounts..............................
Description of Shares and Voting Rights...............
VII. SHAREHOLDER SERVICES...............................
Account and Confirmation Statements...................
Additional Investments...........................................
Automatic Investment Plans...................................
Financial Reports and Tax Information..................
Distribution Options...............................................
Directed Dividends.................................................
Direct Deposit........................................................
Voluntary Tax Withholding...................................
Exchange Privilege.................................................
Telephone Transactions and Related Liabilities.....
FactFone SM........................................................
Retirement Plans.....................................................
Telecommunications Device for the Deaf (TDD)...
Systematic Withdrawal Plans..................................
Reinstatement Privilege..........................................
VIII. INVESTMENT RESULTS....................................
- -----------------
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 December 31, 1995. Management fees have been restated to reflect the
maximum, basic and minimum fees payable to Pioneering Management Corporation
("PMC") under the most recently approved management contract. See "Management of
the Fund." Actual management fees and total operating expenses for the fiscal
year ended December 31, 1995 were 0.45% and 0.93%, respectively,under a
management contract previously in effect.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C>
Maximum Initial Sales Charge on Purchases (as a percentage of offering price) 1 5.75%
Maximum Sales Charge on Reinvestment of Dividends None
Maximum Deferred Sales Charge1 None
Redemption Fee2 None
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets):
Management Fee3
Basic Maximum Minimum
Management Fee 0.60% 0.70% 0.50%
12b-1 Fees 0.19% 0.19% 0.19%
Other Expenses (including accounting and
transfer agent fees, custodian fees and
printing expenses) 0.29% 0.29% 0.29%
----- -
TOTAL OPERATING EXPENSES 1.08% 1.18% 0.98%
(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 ("CDSC") 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:
<PAGE>
Management Fee 1 Year 3 Years 5 Years 10 Years
- -------------- ------ ------- ------- --------
Basic $10 $32 $56 $125
Maximum $11 $35 $61 $135
Minimum $9 $29 $51 $113
The example above assumes reinvestment of all dividends and distributions
and that the percentage amounts listed under "Annual Operating Expenses" remain
the same each year.
THE EXAMPLE IS DESIGNED FOR INFORMATION PURPOSES ONLY, AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL FUND
EXPENSES AND RETURN VARY FROM YEAR TO YEAR AND MAY BE HIGHER OR LOWER THAN THOSE
SHOWN.
For further information regarding management fees, 12b-1 fees and other
expenses of the Fund, including information regarding the basis upon which
management fees and 12b-1 fees are paid, see "Management of the Fund,"
"Distribution Plan" and "How to Purchase Shares" in this Prospectus and
"Management of the Fund" and "Principal Underwriter" and "Distribution Plan" in
the Statement of Additional Information. The Fund's payment of a Rule 12b-1 fee
may result in long-term shareholders paying more than the economic equivalent of
the maximum sales charge permitted under the 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 other publicly available Pioneer
mutual funds. See "Exchange Privilege."
II. FINANCIAL HIGHLIGHTS
The following information has been derived from financial statements which
have been audited by Arthur Andersen LLP, independent public accountants, in
connection with their examination of the Fund's financial statements. Arthur
Andersen LLP's report on the Fund's financial statements as of September 30,
1995 appears in the Fund's Annual Report which is incorporated by reference in
the Statement of Additional Information. 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.
<PAGE>
<TABLE>
<CAPTION>
PIONEER II -- FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
FOR THE YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................................. $19.38 $20.55 $18.86 $18.22 $16.65
------ ------ ------ ------ ------
Income from investment operations --
Net investment income .................. $ 0.35 $ 0.36 $ 0.38 $ 0.44 $ 0.52
(loss) on investments, forward
foreign currency contracts and
other foreign currency related
transactions ............................... 3.04 1.05 2.85 1.27 3.16
---- ---- ---- ---- ----
Total income (loss) from
investment operations ................ $ 3.39 $ 3.04 $ 1.41 $ 3.23 $ 1.71
Distribution to shareholders from --
Net investment income ................. (0.30) (0.33) (0.39) (0.47) (0.55)
Net realized capital gains ............. (1.81) (2.25) (1.15) (0.60) (0.26)
------ ------ ------ ------ ------
Net increase (decrease) in
net asset value ...........................$ 1.28 $1.28 $(1.17) $ 1.69 $ 0.64
Net asset value, end of period ......... $20.66 $19.38 $20.55 $18.86 $18.22
====== ====== ====== ====== ======
Total return* ................................ 19.92% 7.37% 18.15% 9.92% 24.61%
Ratio of net operating expenses to
average net assets .......................... 0.93%** 0.90%+ 0.96%+ 0.95%+ 0.83%
Ratio of net investment income to
average net assets ......................... 1.85%** 1.59%+ 1.89%+ 2.31%+ 3.02%
Portfolio turnover rate .................... 63% 68% 66% 64% 46%
Net assets end of period
(in thousands) ..............................5,114,963 4,509,225 4,347,672 3,974,712 4,039,234
Ratios net of expenses paid through
third party brokerage/service and
certain expense offset arrangements:
Net operating expenses .............. 0.91% 0.90% 0.95% 0.93% --
Net investment income .............. 1.87% 1.59% 1.90% 2.32% --
1990 1989 1988 1987 1986
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ....................................$21.12 $18.29 $24.09 $18.48 $16.65
------ ------ ------ ------ ------
Income from investment operations --
Net investment income ................ $0.59 $ 0.65 $ 0.54 $ 0.46 $ 0.43
Net realized and unrealized gain
(loss) on investments, forward
foreign currency contracts and
other foreign currency related
transactions ...............................(3.81) 3.84 (3.86) 6.67 3.07
------ ---- ------- ----
<PAGE>
Total income (loss) from
investment operations ............... $3.68 $(3.22) $ 4.49 $(3.32) $ 7.13
Distribution to shareholders from --
Net investment income ................ (0.64) (0.62) (0.48) (0.49) (0.52)
Net realized capital gains ............ (1.91) (1.04) (2.00) (1.03) (1.15)
------ ------ ------ ------
Net increase (decrease) in
net asset value ...........................$ 2.87 $(5.77) $ 2.83 $(5.80) $ 5.61
------- ------- ------ ------- ------
Net asset value, end of period ........ $15.35 $21.12 $18.29 $24.09 $18.48
====== ====== ====== ====== ======
Total return* ................................(17.16%) 26.55% (12.04%) 41.37% 22.77%
Ratio of net operating expenses to
average net assets ......................... 0.75% 0.77% 0.81% 0.75% 0.72%
Ratio of net investment income to
average net assets ......................... 3.18% 3.31% 3.06% 2.18% 2.43%
Portfolio turnover rate .................... 42% 34% 30% 26% 29%
Net assets end of period
(in thousands) .............................3,588,735 4,411,923 3,724,615 4,456,459 2,841,545
Ratios net of expenses paid through
third party brokerage/service and
certain expense offset arrangements:
Net operating expenses ............... -- -- -- -- --
Net investment income ............... -- -- -- -- --
</TABLE>
* Assumes initial investment at net asset value at the beginning of each year,
reinvestment of all 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.
** Ratios include expenses paid through third party brokerage/service and
certain expense offset arrangements.
+ Ratios for 1994, 1993 and 1992 have been modified to comply with certain
provisions of SEC Release No. 33-7197: Payment for Investment Company
Services with Brokerage Commissions. Ratios of net operating expenses and
net investment income to average net assets prior to 1992 have not been
modified as such.
<PAGE>
III. INVESTMENT OBJECTIVES AND POLICIES
The 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 in securities whose prices reflect a
premium resulting from their current market popularity. As 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 give
assurance that its investment objectives will be achieved.
The major portion of the Fund's assets will be invested in equity
securities, including common and preferred stocks and securities convertible
into common or preferred stocks. Assets of the Fund will be substantially fully
invested at all times and, by this means, management intends to avoid
speculating upon broad changes in the level of the market.
In general, the largest portion of the Fund's portfolio, at any time, will
consist of securities which have yielded their holders an interest or dividend
return within the preceding twelve months; but non-income-producing securities
may be held for anticipated increases in value.
It is the policy of the Fund not to engage in trading for short-term
profits and the Fund intends to limit its portfolio turnover to the extent
practicable. Nevertheless, changes in the portfolio will be made promptly when
determined to be advisable by reason of developments not foreseen at the time of
the investment decision, and usually without reference to the length of time a
security has been held. Accordingly, portfolio turnover rate will not be
considered a limiting factor in the execution of investment decisions. See
"Financial Highlights" for the Fund's actual turnover rate.
The Fund may purchase put and call options on securities indices to manage
cash flow and to attempt to remain fully invested in the stock market, instead
of or in addition to buying and selling stocks. The Fund may also purchase these
options in order to hedge against risks of market-wide price fluctuations.
Options on securities indices are similar to options on securities except that
the delivery requirements are different. Unlike a securities option, which gives
the holder the right to purchase or sell a specified security at a specified
price, an option on a securities index gives the holder the right to receive a
cash "exercise settlement amount" equal to (i) the difference between the
exercise price of the option and the value of the underlying securities index on
the exercise date, (ii) multiplied by a fixed "index multiplier." In exchange
for undertaking the obligation to make such a cash payment, the writer of the
securities index option receives a premium.
Gains or losses on the Fund's transactions in securities index options
depend on price movements in the securities market generally (or, for narrow
market indices, in a particular industry or segment of the market) rather than
the price movement of individual securities held by the Fund. The effectiveness
of hedging through the purchase of stock index options will depend upon the
extent to which price movements in the portion of the securities portfolio being
<PAGE>
hedged correlate with the price movements in the selected stock index. Perfect
correlation may not be possible because the securities held or to be acquired by
the Fund may not exactly match the composition of the stock index on which
options are written. If the forecasts of the Fund's investment adviser regarding
movements in securities prices are incorrect, the Fund's investment results may
have been better without the hedge. A more thorough description of these
investment practices and their associated risks is contained in the Fund's
Statement of Additional Information.
The Fund may sell a securities index option it has purchased or write a
similar option prior to the expiration of the purchased option in order to close
out its position in a securities index option which it has purchased. The Fund
may also allow options to expire unexercised, which would result in the loss of
the premium paid. There is no assurance that a liquid secondary market will
exist for any particular option at any particular time, and the Fund may
therefore be unable to effect closing transactions on, or sell, options it has
purchased. The Fund will not invest more than 20% of its net assets in premiums
on index put and call options.
The Fund may also invest a portion of its portfolio in temporary cash
investments including finance company obligations, corporate commercial paper
and other short-term commercial obligations, in each case rated or issued by
companies with similar securities outstanding that are rated Prime-1 or Aa or
better by Moody's Investors Service or A-1 or AA or better by Standard & Poor's
Ratings Group or, if unrated, of comparable quality as determined by the Fund's
investment adviser.
The objectives and policies described above may not be changed without
shareholder approval. Other investment policies and restrictions on investment
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 follows a practice of generally investing
between 10% and 25% of its assets in foreign securities. The Fund may invest up
to 5% of its net assets in securities of issuers located in countries with
emerging economies or securities markets. See "Investments in Emerging Markets"
in the Statement of Additional Information. In addition, no more than 5% of the
Fund's net assets may be invested in debt securities, including convertible
securities, which are rated below investment grade or the equivalent.
Investing in securities of foreign companies and countries involves certain
considerations and risks which are not typically associated with investing 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. Interest and dividends paid by foreign issuers and, in some
cases, gains realized upon the sale of foreign securities may be subject to
withholding and other foreign taxes which may decrease the net
<PAGE>
return on such investments as compared to the Fund's net return from securities
issued 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. 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. Each of these risks may be heightened
in the case of investments in emerging markets. See "Investment Policies and
Restrictions" in the Statement of Additional Information.
The Fund has the ability to hold a portion of its assets in foreign
currencies and to enter into forward foreign currency contracts to facilitate
settlement of foreign securities transactions or to protect against changes in
foreign currency exchange rates. A forward foreign currency contract involves an
obligation to purchase or sell a specific currency on a future date, at a price
set at the time of the contract. The Fund might sell a foreign currency on
either a spot or forward basis to hedge against an anticipated decline in the
dollar value of securities in its portfolio or securities it intends or has
contracted to sell or to preserve the U.S. dollar value of dividends, interest
or other amounts it expects to receive. Although this strategy could minimize
the risk of loss due to a decline in the value of the hedged foreign currency,
it could also limit any potential gain which might result from an increase in
the value of the currency. Alternatively, the Fund might purchase a foreign
currency or enter into a forward purchase contract for the currency to preserve
the U.S. dollar price of securities it is authorized to purchase or has
contracted to purchase.
The Fund may also engage in cross-hedging by using forward contracts in one
currency to hedge against fluctuations in the value of securities denominated in
a different currency (including the U.S. dollar), if the Fund's investment
adviser determines that there is a pattern of correlation between the two
currencies. Cross-hedging may also include entering into a forward transaction
involving two foreign currencies, using one foreign currency as a proxy for the
U.S. dollar to hedge against variations in the other foreign currency if the
investment adviser determines that there is a pattern of correlation between the
proxy currency and the U.S. dollar.
If the Fund enters into a forward contract to buy foreign currency for any
purpose, the Fund will be required to place cash or liquid, high grade debt
securities in a segregated account with the Fund's custodian in an amount equal
to the value of the Fund's total assets committed to the consummation of the
forward contract. The Fund may enter into forward currency contracts having an
intrinsic value of up to 30% of its net assets.
<PAGE>
The Fund may purchase and write put and call options on foreign currencies
for the purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the U.S. dollar cost of foreign
securities to be acquired. The Fund may also use options on currency to
cross-hedge, which involves writing or purchasing options on one currency to
hedge against changes in exchange rates of a different currency (including the
U.S. dollar) with a pattern of correlation. Cross-hedging may also include using
a foreign currency as a proxy for the U.S. dollar if the investment adviser
determines that there is a pattern of correlation between that currency and the
U.S. dollar. The writing of an option on foreign currency will constitute only a
partial hedge, up to the amount of the premium received, and the Fund could be
required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on a foreign currency
may constitute an effective hedge against exchange rate fluctuations. However,
in the event of unanticipated rate movements adverse to the Fund's option
position, the Fund may forfeit the entire amount of the premium plus related
transaction costs. Options on foreign currencies to be written or purchased by
the Fund will be traded on U.S. or foreign exchanges or over-the-counter.
Options on foreign currencies which are traded in the over-the-counter market
may be considered illiquid securities and there can be no assurance that a
liquid secondary market will exist at any particular time for any particular
option. The Fund may not invest more than 10% of its net assets in premiums on
purchased currency options. See "Other Policies and Risks" in the Statement of
Additional Information.
The Fund's transactions in options on securities indices, currencies,
options on currencies and forward foreign currency contracts may be limited by
the requirements for qualification of the Fund as a regulated investment company
for tax purposes. See "Tax Status" in the Statement of Additional Information.
The Fund may enter into repurchase agreements with banks and broker-dealers,
generally not exceeding seven days. Such repurchase agreements will be fully
collateralized with U.S. Treasury and/or U.S. government agency obligations with
a market value of not less than 100% of the obligations, 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.
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, six of whom are not
"interested persons" of the Fund as defined in the Investment Company Act of
1940, as amended (the "1940 Act"). The Board meets at least quarterly. By virtue
of the functions performed 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
<PAGE>
names and general background of each Trustee and executive officer of the Fund.
The Fund is managed under a contract with PMC. PMC serves as investment adviser
to the Fund and is responsible for the overall management of the Fund's business
affairs, subject only to the authority of the Board of Trustees. PMC is a
wholly-owned subsidiary of The Pioneer Group, Inc. ("PGI"), a Delaware
corporation. Pioneer Funds Distributor, Inc. ("PFD"), an indirect wholly-owned
subsidiary of PGI, is the principal underwriter of shares of the Fund.
Each domestic equity portfolio managed by PMC, including the Fund, is
overseen by an Equity Committee, which consists of PMC's most senior equity
professionals, and a Portfolio Management Committee, which consists of PMC's
domestic equity portfolio managers. Both committees are chaired by Mr. David
Tripple, PMC's President and Chief Investment Officer and Executive Vice
President of the Pioneer mutual 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. The day-to-day management of the Fund
is the primary responsibility of Mr. Francis J. Boggan, Vice President of the
Fund and PMC. Mr. Boggan joined PMC in 1991, and assumed full responsibility for
the Fund as of January 1, 1996. Previously, he was responsible for managing from
80% to 90% of the Fund's portfolio. Prior to joining PMC, Mr. Boggan was
Director of Equity Investments at Farmers Group, Inc. 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.
John F. Cogan, Jr., Chairman and President of the Fund, Chairman of PFD, and
President and a Director of PGI and PMC, owned approximately 15% of the
outstanding capital stock of PGI as of the date of this Prospectus.
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 Trust, 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 expenses, including
executive salaries and the rental of certain office space, related to its
services for the Fund, with the exception of the following which are to be paid
by the Fund: (a) charges and expenses for fund accounting, pricing and appraisal
services and related overhead, including, to the extent such services are
performed by personnel of PMC or its affiliates, office space and facilities and
personnel compensation, training and benefits; (b) the charges and expenses of
auditors; (c) the charges and expenses of any custodian, transfer agent, plan
agent, dividend disbursing agent and registrar appointed by the Trust with
respect to the Fund; (d) issue and transfer taxes, chargeable to the Fund in
connection with securities transactions to which the Fund is a party; (e)
insurance premiums, interest charges, dues and fees for membership in trade
<PAGE>
associations, and all taxes and corporate fees payable by the Fund to federal,
state or other governmental agencies; (f) fees and expenses involved in
registering and maintaining registrations of the Fund and/or its shares with the
SEC, individual states or blue sky securities agencies, territories and foreign
countries, including the preparation of Prospectuses and Statements of
Additional Information for filing with regulatory agencies; (g) all expenses of
shareholders' and Trustees' meetings and of preparing, printing and distributing
prospectuses, notices, proxy statements and all reports to shareholders and to
governmental agencies; (h) charges and expenses of legal counsel to the Fund and
the Trustees; (i) distribution fees paid by the Fund in accordance with Rule
12b-1 promulgated by the SEC pursuant to the 1940 Act; (j) compensation of those
Trustees of the Trust who are not affiliated with or interested persons of PMC,
the Trust (other than as Trustees), PGI or PFD; (k) the cost of preparing and
printing share certificates; and (l) interest on borrowed money, if any. In
addition to the expenses described above, the Fund shall pay all brokers' and
underwriting commissions chargeable to the Fund in connection with securities
transactions to which the Fund is a party.
Orders for the Fund's portfolio securities transactions are placed by PMC,
which strives to obtain the best price and execution for each transaction. In
circumstances where two or more broker-dealers are in a position to offer
comparable prices and execution, consideration may be given to whether the
broker-dealer provides investment research or brokerage services or sells shares
of any Pioneer mutual fund. See the Statement of Additional Information for a
further description of PMC's brokerage allocation practices.
MANAGEMENT FEE
As compensation for its management services and certain expenses which PMC
incurs on behalf of the Fund, the Fund pays PMC a management fee that is
comprised of two components. The first component is a basic fee equal to 0.60%
per annum of the Fund's average daily net assets (the "Basic Fee"). The second
component is a performance fee adjustment.
COMPUTING THE PERFORMANCE FEE ADJUSTMENT. The Basic Fee is subject to an upward
or downward adjustment, depending on whether, and to what extent, the investment
performance of the Fund for the performance period exceeds, or is exceeded by,
the record of the index determined by the Fund to be appropriate over the same
period. The Trustees have designated the Lipper Growth and Income Funds Index
(the "Index") for this purpose. The Index represents the arithmetic mean
performance (i.e., equally weighted) of the thirty largest funds with a growth
and income investment objective.
<PAGE>
The performance period consists of the current month and the prior 35 months
("performance period"). Each percentage point of difference (up to a maximum of
+/-10) is multiplied by a performance adjustment rate of 0.01%. Thus, the
maximum annualized adjustment rate is +/-0.10%. This performance comparison is
made at the end of each month. An appropriate percentage of this rate (based
upon the number of days in the current month) is then mutliptlied by the Fund's
average net assets for the entire performance period, giving a dollar amount
that will be added to (or subtracted from) the Basic Fee.
The Fund's performance is calculated based on its net asset value per share. For
purposes of calculating the performance adjustment, any dividends or capital
gains distributions paid by the Fund are treated as if reinvested in Fund shares
at the net asset value per share as of the record date for payment. The record
for the Index is based on change in value and is adjusted for any cash
distributions from the companies whose securities comprise the Index.
Because the adjustment to the Basic Fee is based on the comparative performance
of the Fund and the record of the Index, the controlling factor is not whether
Fund performance is up or down, but whether it is up or down more or less than
the record of the Index. Moreover, the comparative investment record of the Fund
is based solely on the relevant performance period without regard to the
cumulative performance over a longer or shorter period of time.
From time to time, the Trustees may determine that another securities index is a
more appropriate benchmark than the Index for purposes of evaluating the
perfromance of the Fund. In such event, a successor index may be substituted for
the Index. However, the calculation of the performance adjustment for any
portion of the performance period prior to the adoption of the successor index
would still be based upon the Fund's performance compared to the Index.
The Fund's current management contract with PMC became effective May 1, 1996.
Under the terms of the contract, beginning on May 1, 1996 the Fund will pay
management fees at a rate equal to the Basic Fee plus or minus the amount of the
performance adjustment for the current month and the preceding 35 months. At the
end of each succeeding month, the performance period will roll forward one month
so that it is always a 36-month period consisting of the current month and the
prior 35 months as described above. If including the intial rolling performance
period (that is, the period prior to the effectiveness of the management
contract), has the effect of increasing the Basic Fee for any month, such
aggregate prior results will be treated as Index neutral for purposes of
calculating the performance adjustment for such month. Otherwise, the
performance adjustment will be made as described above.
The Basic Fee is computed daily, the performance fee adjustment is calculated
once per month and the entire management fee is normally paid monthly.
<PAGE>
Until May 1, 1996, as compensation for its management services and certain
expenses which PMC incured, PMC was 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 was
normally computed daily and paid monthly. During the fiscal year ended September
30, 1995, the Fund incurred expenses of approximately $43,240,000, including
management fees paid to PMC of approximately $21,051,000.
V. DISTRIBUTION PLAN
The Fund has a Plan of Distribution (the "Plan") adopted 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 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 twelve 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 daily net assets during such period. The Plan may not be
amended to increase
<PAGE>
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 BUY FUND SHARES FROM ANY SECURITIES BROKER-DEALER WHICH HAS A SALES
AGREEMENT WITH PFD. IF YOU DO NOT HAVE A SECURITIES BROKER-DEALER, PLEASE CALL
1-800-225-6292. SHARES WILL BE PURCHASED AT A PUBLIC OFFERING PRICE, THAT IS,
THE NET ASSET VALUE PER SHARE PLUS ANY APPLICABLE SALES CHARGE, NEXT COMPUTED
AFTER RECEIPT OF A PURCHASE ORDER, EXCEPT AS SET FORTH BELOW. THE MINIMUM
INITIAL INVESTMENT IS $50. Separate minimum investment requirements apply to
retirement plans and to telephone and wire orders placed by broker-dealers; no
sales charges or minimum requirements apply to the reinvestment of dividends or
capital gains distributions.
The 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."
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 mutual fund
account; it may not be used to establish a new account. Proper account
identification will be required for each telephone purchase. A maximum of
$25,000 per account may be purchased by telephone each day. The telephone
purchase privilege is available to Individual Retirement 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 predesignated bank account.
Telephone purchases may not be made for 30 days after the establishment of your
bank of record or any change to your bank information.
Telephone purchases will be priced at the net asset value, plus any
applicable sales charge next determined after PSC's receipt of a telephone
purchase instruction and receipt of good funds (usually three days after the
purchase instruction). You may always elect to deliver purchases to PSC by mail.
See "Telephone Transactions and Related Liabilities" for additional information.
<PAGE>
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:
DEALER
SALES CHARGE AS A % OF ALLOWANCE
NET AS A % OF
OFFERING AMOUNT OFFERING
PRICE INVESTED PRICE
AMOUNT OF PURCHASE
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
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 CDSC of 1% is imposed in the event of certain redemption
transactions within 12 months 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 shall not be payable if the purchaser is
affiliated with the broker-dealer or if the purchase represents the reinvestment
of a redemption made during the previous 12 calendar months. Broker-dealers who
receive a commission in connection with purchases at net asset value by 401(a)
or 401(k) retirement plans with 1,000 or more eligible participants or with at
least $10 million in plan assets will be required to return any commission paid
or a pro rata portion thereof if the retirement plan redeems its shares within
12 months of purchase. See also "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 may pay to Mutual of Omaha
Investor Services, Inc. 50% of PFD's retention of any sales commission on sales
of the Funds' 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 Sections 401 or
408 of the Internal Revenue Code of 1986, as amended (the "Code") although more
than one beneficiary is involved.
<PAGE>
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 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 so 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 the Pioneer mutual funds with a value of
$45,000 would pay a sales charge of 4.50% of the offering price on the new
investment.
Sales charges may also be reduced through an agreement to purchase a
specified quantity of shares over a designated thirteen-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 to 401(k)
retirement plans with 100 or more participants or at least $500,000 in plan
assets. In addition shares of the Fund may be sold at net asset value per share
without a sales charge to Optional Retirement Program (the "Program")
participants if (i) the employer has authorized a limited number of investment
company providers for the Program, (ii) all authorized investment company
providers offer their shares to Program participants at net asset value, (iii)
the employer has agreed in writing to actively promote the authorized investment
company providers to Program participants and (iv) the Program provides for a
matching contribution for each participant contribution. Information about the
above 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
employees and partners 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 and
<PAGE>
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 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 last 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 hours on the Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also generally
determined prior to the close of regular trading hours 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 hours 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.
<PAGE>
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. It is the responsibility of broker-dealers to
transmit orders so that they will be received by PFD prior to its close of
business. An order received by a broker-dealer following the close of regular
trading on the Exchange will be confirmed at the redemption 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 Subchapter M of 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% 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 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, twice each year during the months of June and December and to
distribute net long-term capital gains, if any, in December. Distributions from
net short-term capital gains, if any, may be paid with such dividends;
distributions of dividends from income and/or capital gains may also be made at
such other times as may be necessary to avoid federal income or excise tax.
Dividends from the Fund's net investment income, certain net foreign exchange
gains, and net short-term capital gains are taxable as ordinary income and
dividends from the Fund's net long-term capital gains are taxable as long-term
capital gains.
UNLESS SHAREHOLDERS SPECIFY OTHERWISE, ALL DISTRIBUTIONS WILL BE
AUTOMATICALLY REINVESTED IN ADDITIONAL FULL AND FRACTIONAL SHARES OF THE FUND.
FOR FEDERAL INCOME TAX PURPOSES, ALL DIVIDENDS ARE TAXABLE AS DESCRIBED ABOVE
WHETHER A SHAREHOLDER TAKES THEM IN CASH OR REINVESTS THEM IN ADDITIONAL SHARES
OF THE FUND. INFORMATION AS TO THE FEDERAL TAX STATUS OF DIVIDENDS AND
DISTRIBUTIONS WILL BE PROVIDED TO SHAREHOLDERS ANNUALLY. For further information
on the distribution options available to shareholders, see "Distribution
Options" and "Directed Dividends" below.
<PAGE>
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.
The Fund may be subject to foreign withholding taxes or other foreign taxes
on income (possibly including capital gains) on certain of its foreign
investments, if any, which will reduce the yield or return from those
investments. The Fund anticipates that it will not qualify to pass such taxes
through to its shareholders, who consequently will not include them in income or
be entitled to associated foreign tax credits or deductions.
Dividends and other distributions and the proceeds of redemptions,
exchanges or repurchases of Fund shares paid to individuals and other non-exempt
payees will be subject to 31% backup withholding of federal income tax if the
Fund is not provided with the shareholder's correct taxpayer identification
number and certification that the number is correct and the shareholder is not
subject to such backup withholding or 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. Shareholders
should consult their own tax advisors 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,
signed by all registered owners, in proper form and, if applicable, your share
certificates properly endorsed and in good order for transfer. Redemptions will
be made in cash less any applicable CDSC at the net asset value per share next
determined following receipt in good order by PSC of all necessary documents.
Good order means that the certificates must be endorsed by the record
owner(s) exactly as the shares are registered and the signature(s) must be
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
<PAGE>
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 record holder at the address of record and the address was not
changed in the prior 30 days. You cannot provide a signature guarantee by
facsimile ("fax"). Payment normally will be made within seven days after receipt
in good order of the aforementioned 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,
please contact PSC at 1-800-225-6292.
REDEMPTIONS 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 wire 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.
ADDITIONAL CONDITIONS OF REDEMPTION. For the convenience of shareholders,
the Fund has authorized PFD to act as its agent in the repurchase of shares of
the Fund. 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 regular trading on 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 contingent deferred sales charge (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
<PAGE>
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.
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.
Redemptions may be suspended or payment postponed during any period in
which any of the following conditions exist: the Exchange is closed or trading
on the Exchange is restricted; an emergency exists as a result of which disposal
by the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund to fairly determine the value of the net
assets of its portfolio; or the Securities and Exchange Commission (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. A CDSC is payable to PFD on these investments in the event of a
share redemption within 12 months following the share purchase, at the rate of
1% of the lesser of the value of the shares redeemed (exclusive of reinvested
dividend and capital gain distributions) or the total cost of such shares. In
determining whether a CDSC is payable, and, if so, the amount of the charge, 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 fund will continue to be subject to the CDSC until the original 12-month
period expires. 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 as follows: (a) for automatic
redemptions as described in "Systematic Withdrawal Plans" (limited to 10% of the
value of the account subject to the CDSC); (b) if the redemption results from
the death or a total and permanent disability (as defined in Section 72 of the
Code) occurring after the purchase of the shares being redeemed of a shareowner
or participant in an employer-sponsored retirement plan; (c) if the distribution
is part of a series of substantially equal payments made over the life
expectancy of the participant or the joint life expectancy of the participant
and his or her beneficiary; or (d) if the distribution is to a participant in an
employer-sponsored retirement plan and is (i) a return of excess employee
deferrals or contributions, (ii) a qualifying hardship distribution as defined
by the Code, (iii) from a termination of employment, (iv) in the form of a loan
to a participant in a plan which permits loans, or (v) from a qualified defined
contribution plan and represents a participant's directed transfer (provided
that this privilege has been pre-authorized through a prior agreement
<PAGE>
with PFD regarding participant directed transfers). The CDSC on any shares
subject to a CDSC may be waived or reduced for either non-retirement or
retirement plan accounts if: (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
A new shareholder has a minimum of 24 months (including the six months
following the mailing of the notice described below) to increase the value of
his/her 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 notice by the Fund to you of the Fund's intention to redeem the
shares.
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund is a diversified open-end management investment company (commonly
referred to as a mutual fund) which was originally organized as a Massachusetts
corporation on March 18, 1969, and reorganized as a Massachusetts business trust
on February 15, 1985 and as a Delaware business trust on May 1, 1996.
The Fund has authorized an unlimited number of shares of beneficial
interest and the Trustees are authorized to create additional series of the
Fund. 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."The Fund is not required, and does not intend, to
hold annual shareholder meetings, although special meetings may be called for
the purposes of electing or removing Trustees, changing fundamental investment
restrictions or approving a management contract. Each share represents an equal
proportionate interest in the Fund with each other share. Each share has equal
rights as to voting, redemption, dividends and liquidation. 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 will recognize stock certificates representing shares of Pioneer
II, Inc. issued prior to its reorganization as a Massachusetts business trust as
evidence of ownership of an equivalent number of shares of beneficial interest.
Any shareholder desiring to surrender a stock certificate
<PAGE>
to the Fund for a share certificate representing an equivalent number of shares
of beneficial interest may do so by making a written request for such exchange
to PSC. Such request must be accompanied by the surrendered stock certificate
which must be endorsed on the back exactly in the manner as such certificate is
registered.
The Trustees have the authority, without further shareowner approval, to
classify and reclassify the shares of the Fund, or any additional series of the
Fund, into one or more classes. As of the date of this Prospectus, the Trustees
have authorized the issuance of 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.
In addition to the requirements under Delaware law, the Declaration of Trust
provides that a shareowner of the Fund may bring a derivative action on behalf
of the Fund only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Fund, or 10% of the outstanding shares of the series
or class to which such action relates, shall join in the request for the
Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareowner request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the Fund for
the expense of any such advisers in the event that the Trustees determine not to
bring such action.
When issued and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, shares of the Fund are fully-paid and
non-assessable. 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.
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 securities.
The principal business address of the Custodian's Mutual Fund Division is 40
Water Street, Boston, Massachusetts 02109.
<PAGE>
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. 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 and newsletters.
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.
AUTOMATIC INVESTMENT PLANS
You may also arrange for regular 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 at any time without
penalty upon 30 days written notice to PSC. PSC acts as agent for the purchaser,
the broker-dealer and PGI 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 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 new account application.
<PAGE>
Two other options available 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 for
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 mutual
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 Fund).
Invested dividends may be in any amount, and there are no fees or charges for
this service. This option is not currently available for retirement plan
accounts.
DIRECT DEPOSIT
If you have elected to take distributions, whether dividends or dividends
and capital gains, in cash, or have established a Systematic Withdrawal Plan,
you may choose to have those cash payments deposited directly into your savings,
checking or NOW bank account. You may establish this service by completing the
appropriate section on the Account Application when opening a new account or the
Account Options Form for an existing account.
VOLUNTARY TAX WITHHOLDING
You may request (in writing) that PSC withhold 28% of the dividends and
capital gains distributions paid from your account (before any reinvestment) and
forward the amount withheld to the Internal Revenue Service 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
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.
Exchanges must be at least $1,000. 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. An exchange of shares may be made only in states where legally
permitted.
<PAGE>
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 an 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 the Fund. Proper account
identification will be required for each telephone exchange. Each
telephone exchange request, whether by voice or by FactFonesm, will be
recorded. YOU ARE STRONGLY URGED TO CONSULT WITH YOUR FINANCIAL
REPRESENTATIVE PRIOR TO REQUESTING A TELEPHONE EXCHANGE. SEE "TELEPHONE
TRANSACTIONS AND RELATED LIABILITIES" BELOW. Telephone exchange
requests may not exceed $500,000 per account per day.
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,
the exchange usually will occur on that day if the requirements above have been
met. If the exchange request is received after 4:00 p.m. Eastern Time, the
exchange will usually occur on the following business day.
You should consider the differences in objectives and policies of the
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.
For the protection of the Fund's performance and shareholders, the Fund and
PFD reserve the right to refuse any exchange request or restrict, at any time
without notice, the number and/or frequency of exchanges to prevent abuses of
the exchange privilege. Such abuses may arise from frequent trading in response
to short-term market fluctuations, a pattern of trading by an individual or
group that appears to be an attempt to "time the market," or any other exchange
request which, in the view of management, will have a detrimental effect on the
Fund's portfolio management strategy or its operations. In addition, the Fund
and PFD reserve the right to charge
<PAGE>
a fee for exchanges or to modify, limit, suspend or discontinue the exchange
privilege with notice to shareholders as required by law.
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 9:00 p.m. Eastern Time on
weekdays. Computer-assisted transactions may be available to shareholders who
have pre-recorded certain bank information (see "FactFoneSM). YOU ARE STRONGLY
URGED TO CONSULT WITH YOUR FINANCIAL REPRESENTATIVE PRIOR TO REQUESTING ANY
TELEPHONE TRANSACTION. To confirm that each transaction instruction received by
telephone is genuine, the Fund 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 held in the name of an institution or
in the name of an investment broker-dealer or other third-party. If reasonable
procedures, such as those described above, are not followed, the Fund may be
liable for any loss due to unauthorized or fraudulent instructions. The Fund may
implement other procedures from time to time. In all other cases, neither the
Fund, PSC nor PFD will be responsible for the authenticity of instructions
received by telephone, therefore, you bear the risk of loss for unauthorized or
fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund by
telephone to institute a redemption or exchange. You should communicate with the
Fund in writing if you are unable to reach the Fund by telephone.
FACTFONESM
FactFone SM is an automated inquiry and telephone transaction system
available to Pioneer shareholders by dialing 1-800-225-4321. FactFoneSM 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 FactFoneSM to make computer-assisted telephone
purchases, exchanges and redemptions from your Pioneer accounts if you have
activated your PIN. Telephone purchases and redemptions require the
establishment of a bank account of record. YOU ARE STRONGLY URGED TO CONSULT
WITH YOUR FINANCIAL REPRESENTATIVE PRIOR TO REQUESTING ANY TELEPHONE
TRANSACTION. Shareholders whose accounts are registered in the name of a
broker-dealer or other third party may not be able to use FactFoneSM. See "How
to Purchase Shares," "Exchange Privilege," Redemptions and Repurchases" and
"Telephone Transactions and Related Liabilities." Call PSC for assistance.
<PAGE>
RETIREMENT PLANS
You should contact the Retirement Plans Department of PSC at 1-800-622-0176
for information relating to retirement plans for business, Simplified Employee
Pension Plans, IRAs, and Section 403(b) retirement plans for employees of
certain non-profit organizations and public school systems, all of which are
available in conjunction with investments in the Fund. The Pioneer Mutual Funds
Account Application accompanying this Prospectus should not be used to establish
any of these plans. Separate applications are required.
TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD)
If you have a hearing disability and you 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.
SYSTEMATIC WITHDRAWAL PLANS
If your account has a total value of at least $10,000 you may establish a
Systematic Withdrawal Plan ("SWP") providing for fixed payments at regular
intervals. Withdrawals will be limited to 10% of the value of the account if a
CDSC is applicable. See "Waiver or Reduction of Contingent Deferred Sales
Charge." Periodic checks of $50 or more will be sent to you, or any person
designated by you, monthly or quarterly and your periodic redemptions of shares
may be taxable to you. 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 in effect immediately after
receipt of the written request for reinstatement. You may realize a gain or loss
for federal income tax purposes as a result of the redemption, and special tax
rules may apply if a reinvestment occurs. Subject to the provisions outlined
under "Exchange Privilege"
<PAGE>
above, you may also reinvest in shares of certain 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 COMPLETING 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 (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 computation method above 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 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.
Investment results of the Fund may also be compared to other investments or
savings vehicles and/or to unmanaged market indexes, indicators of economic
activity or averages of mutual funds results. Rankings or listings by magazines,
newspapers or independent statistical or rating services, such as Lipper
Analytical Services, Inc., may also be referenced. The Fund's investment
<PAGE>
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
and uses of the Fund's investment results, see the Statement of Additional
Information.
<PAGE>
THE PIONEER FAMILY OF MUTUAL FUNDS
INTERNATIONAL GROWTH FUNDS
Pioneer International Growth Fund
Pioneer Europe Fund
Pioneer Emerging Markets Fund
Pioneer India Fund
GROWTH FUNDS
Pioneer Capital Growth Fund
Pioneer Growth Shares
Pioneer Mid-Cap Fund
Pioneer Small Company Fund
Pioneer Gold Shares
GROWTH AND INCOME FUNDS
Pioneer Equity-Income Fund
Pioneer Fund
Pioneer II
Pioneer Real Estate Shares
INCOME FUNDS
Pioneer Short-Term Income Trust
Pioneer America Income Trust
Pioneer Bond Fund
Pioneer Income Fund
TAX-FREE INCOME FUNDS
Pioneer Intermediate Tax-Free Fund*
Pioneer Tax-Free Income Fund*
MONEY MARKET FUNDS
Pioneer U.S. Government Money Fund
Pioneer Cash Reserves Fund
*Not suitable for retirement accounts
<PAGE>
PIONEER II [Pioneer Logo]
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
OFFICERS
JOHN F. COGAN, JR., Chairman And President
DAVID D. TRIPPLE, Executive Vice President
FRANCIS J. BOGGAN, 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, Mass. 02109
Telephone: (617) 742-7825
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
FactFoneSM
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
0196-3007
[Copyright] Pioneer Funds Distributor, Inc.
<PAGE>
PIONEER II
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
This Statement of Additional Information is not a Prospectus, but
should be read in conjunction with the Prospectus (the "Prospectus") dated May
1, 1996 of Pioneer II (the "Fund"). A copy of the Prospectus can be obtained
free of charge by calling Shareholder Services at 1-800-225-6292 or by written
request to the Fund at 60 State Street, Boston, Massachusetts 02109. The most
recent Annual Report to Shareholders is attached to this Statement of Additional
Information and is hereby incorporated in this Statement of Additional
Information by reference.
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions................................. 2
2. Management of the Fund............................................... 9
3. Investment Adviser................................................... 14
4. Shareholder Servicing/Transfer Agent................................. 14
5. Custodian............................................................ 14
6. Principal Underwriter................................................ 15
7. Distribution Plan.................................................... 16
8. Independent Public Accountants....................................... 17
9. Portfolio Transactions............................................... 17
10. Tax Status........................................................... 18
11. Description of Shares................................................ 21
12. Certain Liabilities.................................................. 22
13. Determination of Net Asset Value..................................... 22
14. Systematic Withdrawal Plan........................................... 23
15. Letter of Intention.................................................. 24
16. Investment Results................................................... 24
17. Financial Statements................................................. 27
Appendix A........................................................... 28
Appendix B........................................................... 41
--------------------
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 Fund's current prospectus (the "Prospectus") presents the investment
objective and the principal investment policies of the Fund. Additional
investment policies and a further description of some of the policies described
in the Prospectus appear below.
The following policies and restrictions supplement those discussed in the
Prospectus. Whenever an investment policy or restriction states a maximum
percentage of the Fund's assets that may be invested in any security or presents
a policy regarding quality standards, this standard or other restrictions shall
be determined immediately after and as a result of the Fund's investment.
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered in determining whether
the investment complies with the Fund's investment objectives and policies.
SECURITIES INDEX OPTIONS
The Fund may purchase call and put options on securities indices for
the purpose of hedging against the risk of unfavorable price movements adversely
affecting the value of the Fund's securities or securities the Fund intends to
buy. Securities index options will not be used for speculative purposes.
Currently, options on stock indices are traded only on national
securities exchanges. A securities index fluctuates with changes in the market
values of the securities included in the index. For example, some stock index
options are based on a broad market index such as the S&P 500 or the Value Line
Composite Index, or a narrower market index such as the S&P 100. Indices may
also be based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on stock indices are
currently traded on the Chicago Board Options Exchange, the New York Stock
Exchange and the American Stock Exchange.
The Fund may purchase put options on securities indices in order to
hedge against an anticipated decline in securities prices that might adversely
affect the value of the Fund's portfolio securities. If the Fund purchases a put
option on a securities index, the amount of the payment it would receive upon
exercising the option would depend on the extent of any decline in the level of
the securities index below the exercise price. Such payments would tend to
offset a decline in the value of the Fund's portfolio securities. However, if
the level of the securities index increases and remains above the exercise price
while the put option is outstanding, the Fund will not be able to profitably
exercise the option and will lose the amount of the premium and any transaction
costs. Such loss may be partially offset by an increase in the value of the
Fund's portfolio securities.
-2-
<PAGE>
The Fund may purchase call options on securities indices in order to
remain fully invested in the stock market or to lock in a favorable price on
securities that it intends to buy in the future. If the Fund purchases a call
option on a securities index, the amount of the payment it receives upon
exercising the option depends on the extent of any increase in the level of the
securities index above the exercise price. Such payments would in effect allow
the Fund to benefit from securities market appreciation even though it may not
have had sufficient cash to purchase the underlying securities. Such payments
may also offset increases in the price of securities that the Fund intends to
purchase. If, however, the level of the securities index declines and remains
below the exercise price while the call option is outstanding, the Fund will not
be able to exercise the option profitably and will lose the amount of the
premium and transaction costs. Such loss may be partially offset by a reduction
in the price the Fund pays to buy additional securities for its portfolio.
The Fund may sell the securities index option it has purchased or write
a similar offsetting securities index option in order to close out a position in
a securities index option which it has purchased. These closing sale
transactions enable the Fund immediately to realize gains or minimize losses on
its options positions. All securities index options purchased by the Fund will
be listed and traded on an exchange. However, there is no assurance that a
liquid secondary market on an options exchange will exist for any particular
option, or at any particular time, and for some options no secondary market may
exist. In addition, securities index prices may be distorted by interruptions in
the trading of securities of certain companies or of issuers in certain
industries, or by restrictions that may be imposed by an exchange on opening or
closing transactions, or both, which could disrupt trading in options on such
indices and preclude the Fund from closing out its options positions. If the
Fund is unable to effect a closing sale transaction with respect to options that
it has purchased, it would have to exercise the options in order to realize any
profit.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the options markets. The purchase of options is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. Personnel
of the Fund's investment adviser have considerable experience in options
transactions.
In addition to the risks of imperfect correlation between the Fund's
portfolio and the index underlying the option, the purchase of securities index
options involves the risk that the premium and transaction costs paid by the
Fund in purchasing an option will be lost. This could occur as a result of
unanticipated movements in prices of the securities comprising the securities
index on which the option is based.
INVESTMENTS IN EMERGING MARKETS
The Fund may invest up to 5% of its net assets in securities of issuers
located in countries with emerging economies or securities markets. Countries
with emerging economies or
-3-
<PAGE>
securities markets include among others: Argentina, Bangladesh, Brazil, Chile,
China, Columbia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel,
Jamaica, Jordan, Kenya, Korea, Kuwait, Morocco, Nigeria, Pakistan, Philippines,
Poland, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela and Zimbabwe. Political
and economic structures in many of such countries may be undergoing significant
evolution and rapid development, and such countries may lack the social,
political and economic stability characteristic of more developed countries. As
a result, the risks associated with foreign markets which are described in the
Prospectus under the caption "Investment Objectives and Policies," including the
risks of nationalization or expropriation of assets, may be heightened. In
addition, unanticipated political or social developments may affect the values
of the Fund's investments and the availability to the Fund of additional
investments in such countries. The small size and inexperience of the securities
markets in certain of such countries and the limited volume of trading in
securities in those countries may make the Fund's investments in such countries
less liquid and more volatile than investments in countries with more developed
securities markets (such as Japan or most Western European countries).
FORWARD FOREIGN CURRENCY TRANSACTIONS
The foreign currency transactions of the Fund may be conducted on a
spot (i.e., cash) basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market. The Fund also has authority to
purchase and/or write forward foreign currency exchange contracts involving
currencies of the different countries in which it will invest as a hedge against
possible variations in the foreign exchange rates between these currencies and
the U.S. Dollar. This is accomplished through contractual agreements to purchase
or sell a specified currency at a specified future date and price set at the
time of the contract. The Fund's transactions in forward foreign currency
contracts will be limited to hedging either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of forward foreign
currency contracts with respect to specific receivables or payables of the Fund
accruing in connection with the purchase and sale of its portfolio securities
denominated in foreign currencies. Portfolio hedging is the use of forward
foreign currency contracts to offset portfolio security positions denominated or
quoted in such foreign currencies. There is no guarantee that the Fund will be
engaged in hedging activities when adverse exchange rate movements occur. The
Fund will not attempt to hedge all of its foreign portfolio positions and will
enter into such transactions only to the extent, if any, deemed appropriate by
the Fund's investment adviser. The Fund will not enter into speculative forward
foreign currency contracts.
If the Fund enters into a forward contract to purchase foreign
currency, its custodian bank will segregate cash or high grade liquid debt
securities in a separate account of the Fund in an amount equal to the value of
the Fund's total assets committed to the consummation of such forward contract.
Those assets will be valued at market daily and if the value of the assets in
the separate account declines, additional cash or securities will be placed in
the account so that the value of the account will equal the amount of the Fund's
commitment with respect to such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such
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transactions limit the opportunity for gain if the value of the hedged currency
should rise. Moreover, it may not be possible for the Fund to hedge against a
devaluation that is so generally anticipated that the Fund is not able to
contract to sell the currency at a price above the devaluation level it
anticipates.
The cost to the Fund of engaging in foreign currency transactions
varies with such factors as the currency involved, the size of the contract, the
length of the contract period and the market conditions then prevailing. Since
transactions in foreign currency and forward contracts are usually conducted on
a principal basis, no fees or commissions are involved. The Fund may close out a
forward position in a currency by selling the forward contract or entering into
an offsetting forward contract.
OPTIONS ON FOREIGN CURRENCIES
The Fund may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that of transactions in forward
contracts. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such decreases in the value of portfolio securities,
the Fund may purchase put options on the foreign currency. If the value of the
currency declines, the Fund will have the right to sell such currency for a
fixed amount of dollars which exceeds the market value of such currency. This
would result in a gain that may offset, in whole or in part, the negative effect
of currency depreciation on the value of the Fund's securities denominated in
that currency.
Conversely, if a rise in the dollar value of a currency is projected
for those securities to be acquired, thereby increasing the cost of such
securities, the Fund may purchase call options on such currency. If the value of
such currency increases, the purchase of such call options would enable the Fund
to purchase currency for a fixed amount of dollars which is less than the market
value of such currency. Such a purchase would result in a gain that may offset,
at least partially, the effect of any currency related increase in the price of
securities the Fund intends to acquire. As in the case of other types of options
transactions, however, the benefit the Fund derives from purchasing foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, if currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain losses on
transactions in foreign currency options which would deprive it of a portion or
all of the benefits of advantageous changes in such rates.
The Fund may also write options on foreign currencies for hedging
purposes. For example, if the Fund anticipates a decline in the dollar value of
foreign currency denominated securities because of declining exchange rates, it
may, instead of purchasing a put option, write a covered call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised, and the decrease in value of portfolio securities will be
offset by the amount of the premium received by the Fund.
Similarly, the Fund could write a put option on the relevant currency,
instead of purchasing a call option, to hedge against an anticipated increase in
the dollar cost of securities to
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be acquired. If exchange rates move in the manner projected, the put option will
expire unexercised allowing the Fund to offset such increased cost up to the
amount of the premium. However, as in the case of other types of options
transactions, the writing of a foreign currency option will constitute only a
partial hedge up to the amount of the premium, only if rates move in the
expected direction. If unanticipated exchange rate fluctuations occur, the
option may be exercised and the Fund would be required to purchase or sell the
underlying currency at a loss which may not be fully offset by the amount of the
premium. As a result of writing options on foreign currencies, the Fund also may
be required to forego all or a portion of the benefits which might otherwise
have been obtained from favorable movements in currency exchange rates.
A call option written on foreign currency by the Fund is "covered" if
the Fund owns the underlying foreign currency subject to the call, or if it has
an absolute and immediate right to acquire that foreign currency without
additional cash consideration. A call option is also covered if the Fund holds a
call on the same foreign currency for the same principal amount as the call
written where the exercise price of the call held is (a) equal to or less than
the exercise price of the call written or (b) greater than the exercise price of
the call written if the amount of the difference is maintained by the Fund in
cash and high grade liquid debt securities in a segregated account with its
custodian.
The Fund may close out its position in a currency option by either
selling the option it has purchased or entering into an offsetting option.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend portfolio securities to member firms of the New York
Stock Exchange, under agreements which would require that the loans be secured
continuously by collateral in cash, cash equivalents or United States Treasury
Bills maintained on a current basis at an amount at least equal to the market
value of the securities loaned. The Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned as well as the benefit of any increase in the market value of the
securities loaned and would also receive compensation based on investment of the
collateral. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of their consent on a material matter affecting
the investment.
As with other extensions of credit there are risks of delay in recovery
or even loss of rights in the collateral should the borrower of the securities
fail financially. The Fund will only lend portfolio securities to firms which
have been approved in advance by the Fund's Board of Trustees, which will
monitor the creditworthiness of any such firms. At no time would the value of
the securities loaned exceed 30% of the value of the Fund's total assets. In the
Fund's last fiscal year, it did not lend portfolio securities with a value
exceeding 5% of the Fund's net assets and, while it reserves the right to do so,
the Fund has no present intention of lending portfolio securities with any such
value during the coming year.
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<PAGE>
Investment Restrictions
Fundamental Investment Restrictions. The Fund has adopted certain additional
investment restrictions which may not be changed without the affirmative vote of
the holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities. The Fund may not:
(1)......Issue senior securities, except as permitted by the Fund's
borrowing, lending and commodity restrictions, and for purposes of this
restriction, the issuance of shares of beneficial interest in multiple classes
or series, the purchase or sale of options, futures contracts and options on
futures contracts, forward commitments, forward foreign exchange contracts,
repurchase agreements, reverse repurchase agreements, dollar rolls, swaps and
any other financial transaction entered into pursuant to the Fund's investment
policies as described in the Prospectus and this Statement of Additional
Information and in accordance with applicable SEC pronouncements, as well as the
pledge, mortgage or hypothecation of the Fund's assets within the meaning of the
Fund's fundamental investment restriction regarding pledging, are not deemed to
be senior securities.
(2)......Borrow money, except from banks as a temporary measure to
facilitate the meeting of redemption requests or for extraordinary or emergency
purposes and except pursuant to reverse repurchase agreements or dollar rolls,
in all cases in amounts not exceeding 10% of the Fund's total assets (including
the amount borrowed) taken at market value.
(3)......Guarantee the securities of any other company, or , mortgage,
pledge, hypothecate or assign or otherwise encumber as security for indebtedness
its securities or receivables in an amount exceeding the amount of the borrowing
secured thereby.
(4)......Purchase securities of a company if the purchase would result
in the Fund's 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's owning more than 10% of the outstanding voting securities of such
company.
(6)......Act as an underwriter, except as it may deemed to be on
underwriter in a sale of restricted securities held in its portfolio.
(7)......Make loans, except by purchase of debt obligations in which
the Fund may invest consistent with its investment policies, by entering into
repurchase agreements or through the lending of portfolio securities, in each
case only to the extent permitted by the Prospectus and this Statement of
Additional Information.
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<PAGE>
(8)......Invest in real estate, commodities or commodity contracts,
except that the Fund may invest in financial futures contracts and related
options and in any other financial instruments which may be deemed to be
commodities or commodity contracts in which the Fund is not prohibited from
investing by the Commodity Exchange Act and the rules and regulations
thereunder.
(9)......Purchase securities on "margin" or effect " short sales" of
securities.
(10) purchase securities for the purpose of controlling management of
other companies.
(11) 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.
The Fund does not intend to enter into any reverse repurchase agreement, lend
portfolio securities or invest in securities index put and call warrants, as
described in fundamental investment restrictions (1), (2), (7) and (8) above,
during the coming year.
Non-fundamental Investment Restrictions.
It is the policy of the Fund not to concentrate its investments in securities of
companies in any particular industry. In the opinion of the Commission,
investments are concentrated in a particular industry if such investments
aggregate 25% or more of the Fund's total assets. The Fund's policy does not
apply to investments in U.S. Government securities. The Fund has agreed to abide
by the foregoing non-fundamental policy which it will not change without the
affirmative vote of a majority of the Fund's outstanding shares of beneficial
interest.
The following restrictions have been designated as non-fundamental and may be
changed by a vote of the Fund's Board of Trustees without approval of
shareholders.
The Fund may not:
(1) purchase or retain the securities of any company if officers of the
Fund or Trustees of the Fund, or officers and directors of its adviser or
principal underwriter, individually own more than one-half of 1% of the
securities of such company or collectively own more than 5% of the securities of
such company; or
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<PAGE>
(2) invest no more than 15% of its net assets in the aggregate of (a)
securities which at the time of investment are not readily marketable, (b)
securities the disposition of which is restricted under federal securities laws
(excluding restricted securities that have been determined by the Trustees of
the Fund (or the person designated by them to make such determinations) to be
readily marketable) and (c) repurchase agreements maturing in more than seven
days.
In addition, in connection with the offering of its shares in various
states and foreign countries, the Fund has agreed not to: (1) invest in puts,
calls, straddles, spreads, or any combination thereof other than the purchase
and sale of put and call options on currencies and the purchase of put and call
options on securities indices, or in oil, gas or other mineral leases or
exploration or development programs; (2) invest more than 5% of its total assets
in equity securities of any issuer which are not readily marketable, i.e.,
securities for which a bona fide market does not exist at the time of purchase
or subsequent valuation; (3) pledge, mortgage, hypothecate or otherwise encumber
its assets; (4) 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;
and (5) invest in real estate limited partnerships. These restrictions may not
be changed without the approval of the regulatory agencies in such states or
foreign countries.
OTHER POLICIES AND RISKS
The Fund expects that its investments in foreign securities will range
from 10% to 25% of its assets. However, the Fund reserves the right to reduce or
eliminate its holdings of foreign securities whenever management believes such
action to be in the best interests of the shareholders.
The Fund is managed by Pioneering Management Corporation ("PMC") which
also serves as investment adviser to other Pioneer mutual funds and private
accounts with investment objectives identical or similar to those of the Fund.
Securities frequently meet the investment objectives of the Fund, the other
Pioneer mutual funds and such private accounts. In such cases, the decision to
recommend a purchase to one fund or account rather than another is based on a
number of factors. The determining factors in most cases are the amount of
securities of the issuer then outstanding, the value of those securities and the
market for them. Other factors considered in the investment recommendations
include other investments which each fund presently has in a particular industry
and the availability of investment funds in each fund or account.
It is possible that at times identical securities will be held by more
than one fund and/or account. However, positions in the same issue may vary and
the length of time that any fund or account may choose to hold its investment in
the same issue may likewise vary. To the extent that more than one of the
Pioneer mutual funds 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
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position in such security as it desires or it may have to pay a higher price for
the security. Similarly, the Fund may not be able to obtain as large an
execution of an order to sell or as high a price for any particular portfolio
security if PMC decides to sell on behalf of another account the same portfolio
security at the same time. On the other hand, if the same securities are bought
or sold at the same time by more than one fund or account, the resulting
participation in volume transactions could produce better executions for the
Fund. In the event more than one account purchases or sells the same security on
a given date, the purchases and sales will normally be made as nearly as
practicable on a pro rata basis in proportion to the amounts desired to be
purchased or sold by each. Although the other Pioneer mutual funds may have the
same or similar 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 those of the
Fund.
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 Corporation or the equivalent. Debt securities rated "BBB" may have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments. Debt securities rated lower than "BBB" are speculative
investments and the yields on these bonds will fluctuate over time. If the
rating of a debt security is reduced below investment grade ("BBB"), PMC will
consider whatever action is appropriate, consistent with the Fund's investment
objective and policies.
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.*, Chairman of the Board, President and Trustee, Date of Birth
("DOB"): June 1926
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneering Management Corporation
("PMC") and Pioneer Funds Distributor, Inc. ("PFD"); Director of Pioneering
Services Corporation ("PSC"), Pioneer Capital Corporation ("PCC") and
Forest-Starma (a Russian corporation); President and Director of Pioneer Plans
Corporation ("PPC"), Pioneer Investment Corp. ("PIC"), Pioneer Metals and
Technology, Inc. ("PMT"), Pioneer International Corp. ("PIntl"), Luscina, Inc.,
Pioneer First Russia, Inc. ("First Russia"), Pioneer Omega, Inc. ("Omega") and
Theta Enterprises, Inc.; Chairman of the Board and Director of Pioneer
Goldfields Limited ("PGL") and Teberebie Goldfields Limited; Chairman of the
Supervisory Board of Pioneer Fonds Marketing, GmbH ("Pioneer GmbH"); Member of
the Supervisory Board of Pioneer First Polish Trust Fund Joint
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<PAGE>
Stock Company ("PFPT"); Chairman, President and Trustee of all of the Pioneer
mutual funds and Partner, Hale and Dorr (counsel to the Fund).
RICHARD H. EGDAHL, M.D., TRUSTEE, DOB: December 1926
BOSTON UNIVERSITY HEALTH POLICY INSTITUTE, 53 BAY STATE RD., BOSTON, MA 02115
Professor of Management, Boston University School of Management, since
1988; Professor of Public Health, Boston University School of Public Health;
Professor of Surgery, Boston University School of Medicine; Director, Boston
University Health Policy Institute and Boston University Medical Center;
Executive Vice President and Vice Chairman of the Board, University Hospital;
Academic Vice President for Health Affairs, Boston University; Director, Essex
Investment Management Company, Inc. (investment adviser), Health Payment Review,
Inc. (health care containment software firm), Mediplex Group, Inc. (nursing care
facilities firm), Peer Review Analysis, Inc. (health care facilities firm) and
Springer-Verlag New York, Inc. (publisher); Honorary Trustee, Franciscan
Children's Hospital and Trustee of all of the Pioneer mutual funds.
MARGARET B.W. GRAHAM, TRUSTEE, DOB: May 1947
THE KEEP, P.O. BOX 110. LITTLE DEER ISLE, ME 04650
Founding Director, Winthrop Group, Inc., consulting firm since 1982;
Manager of Research Operations, Xerox Palo Alto Research Center, between 1991
and 1994; Professor of Operations Management and Management of Technology,
Boston University School of Management ("BUSM"), between 1989 and 1993 and
Trustee of all of the Pioneer mutual funds except Pioneer Variable Contracts
Trust.
JOHN W. KENDRICK, TRUSTEE, DOB: July 1917
6363 WATERWAY DRIVE, FALLS CHURCH, VA 22044
Professor Emeritus and Adjunct Scholar, George Washington University;
Economic Consultant and Director, American Productivity and Quality Center;
American Enterprise Institute and Trustee of all of the Pioneer mutual funds,
except Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, TRUSTEE, DOB: May 1948
ONE BOSTON PLACE, SUITE 2363, BOSTON, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm) and
Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, TRUSTEE AND EXECUTIVE VICE PRESIDENT, DOB: February 1944
Executive Vice President and a Director of PGI; Director of PFD, PCC,
PIC, PIntl and Pioneer SBIC Corporation; President, Chief Investment Officer and
a Director of PMC, Executive Vice President and Trustee of all of the Pioneer
mutual funds.
STEPHEN K. WEST, TRUSTEE, DOB: September 1928
125 BROAD STREET, NEW YORK, NEW YORK 10004
Partner, Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus
Funds (mutual funds) and Trustee of all of the Pioneer mutual funds except
Pioneer Variable Contracts Trust.
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<PAGE>
JOHN WINTHROP, TRUSTEE, DOB: June 1936
ONE NORTH ADGERS WHARF, CHARLESTON, SOUTH CAROLINA 29401
President, John Winthrop & Co., Inc. (a private investment firm);
Director of NUI Corp.; Trustee of Alliance Capital Reserves, Alliance Government
Reserves and Alliance Tax Exempt Reserves and Trustee of all of the Pioneer
mutual funds.
WILLIAM H. KEOUGH, TREASURER, DOB: April 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI and
Treasurer of PFD, PMC, PSC, PCC, PIC, PIntl, PMT, PGL and Pioneer SBIC
Corporation and Treasurer and Director of PPC and Treasurer of all of the
Pioneer mutual funds.
JOSEPH P. BARRI, Secretary, DOB: August 1946
Secretary of PGI, PMC, PPC, PIC, PIntl, PMT and PCC; Clerk of PFD and
PSC; Partner, Hale and Dorr (counsel to the Fund) and Secretary of all of the
Pioneer mutual funds.
ERIC W. RECKARD, Assistant Treasurer, DOB: June 1956
Manager of Fund Accounting and Compliance of PMC since May 1994,
Manager of Auditing and Business Analysis for PGI prior to May 1994 and
Assistant Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, Assistant Secretary, DOB: March 1964
General Counsel of PGI since 1995; formerly of Hale and Dorr (counsel
to the Fund) where he most recently served as junior partner; and Assistant
Secretary of all of the Pioneer mutual funds since 1995.
FRANCIS J. BOGGAN, VICE PRESIDENT, DOB: July 1957
Vice President of PMC.
The Fund's Amended and Restated Declaration of Trust (the "Declaration
of Trust") provides that the holders of two-thirds of its outstanding shares may
vote to remove a Trustee of the Fund at any meeting of shareholders. See
"Description of Shares" below. The business address of all officers is 60 State
Street, Boston, Massachusetts 02109.
All of the outstanding capital stock of PFD, PMC and PSC is owned,
directly or indirectly, by PGI, a publicly-owned Delaware corporation. PMC, the
Fund's investment adviser, serves as the investment adviser for the Pioneer
mutual funds listed below and manages the investments of certain institutional
private accounts.
The table below lists all the Pioneer mutual funds currently offered to
the public and the investment adviser and principal underwriter for each fund.
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INVESTMENT PRINCIPAL
FUND NAME ADVISER UNDERWRITER
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Mid-Cap Fund PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Small Company Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer Income Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer U.S. Government Money Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares, Inc. PMC 1
Pioneer Variable Contracts Trust PMC 2
1 This fund is a closed-end fund.
2 This is a series of eight separate portfolios designed to provide
investment vehicles for the variable annuity and variable life insurance
contracts of various insurance companies or for certain qualified pension
plans. PMC, the Fund's investment adviser, also manages the investments of
certain institutional private accounts. 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.
The Fund pays no salaries or compensation to any of its officers.
Commencing on November 1, 1995, each series of the Fund will pay an annual
trustees' fee to each Trustee who is not affiliated with PGI, PMC, PFD or PSC
consisting of two components: (a) a base fee of $500 and (b) a variable fee,
calculated on the basis of the average net assets of the Fund, estimated to be
approximately $5,267 for 1996. In addition, the Fund will pay a per meeting fee
of $120 to each Trustee who is not affiliated with PGI, PMC, PFD or PSC. The
Fund will also pay an annual committee participation fee to Trustees who serve
as members of committees established to act on behalf of one or more of the
Pioneer mutual funds. Committee fees will be allocated to the Fund on the basis
of the Fund's average net assets. Each Trustee who is a member of the Audit
Committee for the Pioneer mutual funds will receive an annual fee equal to 10%
of the aggregate annual trustees' fee, except for the Audit Committee Chair who
will receive an annual
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trustees' fee equal to 20% of the aggregate annual trustees' fee. The 1996 fees
for the Audit Committee members and the Audit Committee Chair are expected to be
approximately $6,000 and $12,000, respectively. Members of the Pricing Committee
for the Pioneer mutual funds, as well as any other committee which renders
material functional services to the Board of Trustees for the Pioneer mutual
funds, will receive an annual fee equal to 5% of the annual trustees' fee,
except for the Committee Chair who will receive an annual trustees' fee equal to
10% of the annual trustees' fee. The 1996 fees for the Pricing Committee members
and the Pricing Committee Chair are expected to be approximately $3,000 and
$6,000, respectively. Any such fees paid to affiliates or interested persons of
PGI, PMC, PFD or PSC are reimbursed to the Fund under its Management Contract.
In 1995, the Fund paid an annual trustee's fee of $6,000, and a payment of $500
plus expenses per meeting attended, to each Trustee who was not affiliated with
PGI, PMC, PFD or PSC and paid an annual trustee's fee of $500 plus expenses to
each Trustee affiliated with PGI, PMC, PFD or PSC. Any such fees and expenses
paid to affiliates or interested persons of PGI, PMC, PFD or PSC were reimbursed
to the Fund under its management contract. As of the date of this Statement of
Additional Information, the Trustees and officers of the Fund owned, in the
aggregate, less than 1% of the outstanding securities of the Fund. As of such
date, to the knowledge of the Fund, no person owned more than 5% of the
outstanding shares of the Fund.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Fund:
Pension or Total Compensation
Retirement Benefits from the Fund
Accrued as Part and all other
Aggregate of the Fund's Pioneer Mutual
Compensation Expenses Funds **
Name of Trustee from the Fund*
John F. Cogan, Jr. $ 500.00 $0 $11,000
Richard H. Egdahl, M.D. 11,805.00 0 63,315
Margaret B.W. Graham 11,805.00 0 62,398
John W. Kendrick 11,805.00 0 62,398
Marguerite A. Piret 13,442.50 0 76,704
David D. Tripple 500.00 0 11,000
Stephen K. West 12,360.00 0 68,180
John Winthrop 12,900.00 0 71,199
--------- -- ------
Total $75,117.50 $0 $426,194
========== == ========
* As of Fund's fiscal year end.
** As of December 31, 1995 (calendar year end for all Pioneer Funds).
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3. INVESTMENT ADVISER
The Fund has contracted with PMC, 60 State Street, Boston,
Massachusetts, to act as its investment adviser. The Management contract expires
initially on May 31, 1997, but it is renewable annually after such date by the
vote of a majority of the Board of Trustees of the Fund (including a majority of
the Board of Trustees who are not parties to the contract or interested persons
of any such parties) cast in person at a meeting called for the purpose of
voting on such renewal. This contract terminates if assigned and may be
terminated without penalty by either party by vote of its Board of Directors or
Trustees or a majority of its outstanding voting securities and the giving of
sixty days' written notice. The management contract was approved by the
shareholders of the Fund on April 30, 1996.
Effective May 1, 1996, as compensation for its management services and expenses
incurred, and certain expenses which PMC incurs on behalf of the Fund, the Fund
pays PMC a basic fee of 0.60% of the Fund's average daily net assets (the "Basic
Fee"). An appropriate percentage of this rate (based upon the number of days in
the current month) of this annual Basic Fee is applied to the Fund's average net
assets for the current month, giving a dollar amount which is the monthly fee.
Performance Fee Adjustment
The Basic Fee is subject to an upward or downward adjustment, depending on
whether and to what extent, the investment performance of the Fund for the
performance period exceeds, or is exceeded by, the record of the index
determined by the Fund to be approprate over the same period. The Trustees have
designated the Lipper Growth and Income Funds Index (the "Index") for this
purpose. The Index represents the arithmetic mean performance (i.e., equally
weighted) of the thirty largest funds with a growth and income objective.
The performance period consists of the current month and the prior 35 months
("performance period"). Each percentage point of difference (up to a maximum of
+/-10) is multiplied by a performance adjustment rate of 0.01%. The maximum
annualized adjustment rate is +/- 0.10%. This performance comparison is made at
the end of each month. An appropriate percentage of this rate (based upon the
number of days in the current month) is then applied to the fund's average net
assets for the entire performance period, giving a dollar amount that is added
to (or subtracted from) the Basic Fee.
The Fund's performance is calculated based on net asset value. For purposes of
calculating the performance adjustment, any dividends or capital gains
distributions paid by the Fund are treated as if reinvested in Fund shares at
the net asset value as of the record date for payment. The record for the Index
is based on change in value and is adjusted for any cash distributions from the
companies whose securities whose securities comprise the Index.
Application of Performance Adjustment
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The application of the performance adjustment is illustrated by the following
hypothetical example, assuming that the net asset value of the Fund and the
level of the Index were $10 and 100, respectively, on the first day of the
performance period.
Investment Performance * Cumulative Change
First Day End of Period Absolute Percentage
Points
Fund $ 10 $ 13 +$ 3 + 30%
Index 100 123 + 23 + 23%
* Reflects performance at net asset value. Any dividends or capital gains
distributions paid by the Fund are treated as if reinvested in shares of the
Fund at net asset value as of the payment date and any dividends paid on
securities which comprise the Index are treated as if reinvested on the
ex-dividend date.
The difference in relative performance for the performance period is +7
percentage points. Accordingly, the annualized management fee rate for the last
month of the performance period would be calculated as follows: An appropriate
percentage (based upon the number of days in the current month) of the Basic Fee
of 0.60% would be applied to the Fund's average daily net assets for the month
resulting in a dollar amount. The +7 percentage point difference is multiplied
by the performance adjustment rate of 0.02% producing a rate of 0.14%. An
appropriate percentage of this rate (based upon the number of days in the
current month) is then applied to the average daily net assets of the Fund over
the performance period resulting in a dollar amount which is added to the dollar
amount of the Basic Fee. The management fee paid is the dollar amount calculated
for the performance period. If the investment performance of the Fund during the
performance period was exceeded by the record of the Index, the dollar amount of
performance adjustment would be deducted from the Basic Fee.
Because the adjustment to the Basic Fee is based on the comparative performance
of the Fund and the record of the Index, the controlling factor is not whether
Fund performance is up or down, but whether it is up or down more or less than
the record of the Index. Moreover, the comparative investment performance of the
Fund is based solely on the relevant performance period without regard to the
cumulative performance over a longer or shorter period of time.
From time to time, the Trustees may determine that another securities index is a
more appropriate benchmark than the Index for purposes of evaluating the
perfromance of the Fund. In such event, a successor index may be substituted for
the Index. However, the calculation of the performance adjustment for any
portion of the performance period prior to the adoption of the seccessor index
would still be based upon the Fund's performance compared to the Index.
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The Fund's current management contract with PMC became effective May 1, 1996.
Under the terms of the contract, beginning on May 1, 1996, the Fund will pay
management fees at a rate equal to the Basic Fee plus or minus the amount of the
performance adjustment for the current month and the preceding 35 months. At the
end of each succeeding month, the performance period will roll forward one month
so that it is always a 36-month period consisting of the current month and the
prior 35 months as described above. If including the intial rolling performance
period (that is, the period prior to the effectiveness of the management
contract), has the effect of increasing the Basic Fee for any month, such
aggregate prior results will be treated as Index neutral for purposes of
calculating the performance adjustment for such month. Otherwise, the
performance adjustment will be made as described above.
The Basic Fee is computed daily, the performance fee adjustment is calculated
once per month and the entire management fee is normally paid monthly.
Prior to May 1, 1996, as compensation for its management services and expenses
incurred, PMC is entitled to a management fee at the rate of 0.50% per annum of
the Fund's average daily net assets up to $250,000,000, 0.48% of the next
$50,000,000, and 0.45% of any excess over $300,000,000. The fee is normally
computed daily and paid monthly.
During its fiscal years ended September 30, 1993, 1994 and 1995, the
Fund paid total management fees to PMC of approximately $18,959,000, $20,186,000
and $21,051,000, respectively.
4. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston,
Massachusetts, to act as dividend disbursing agent and transfer agent for the
Fund. This contract terminates if assigned and may be terminated without penalty
by either party by vote of its Board of Directors or Trustees or a majority of
its outstanding voting securities and the giving of ninety days' written notice.
Under the terms of its contract with the Fund, PSC services shareholder
accounts, and its duties include: (i) processing sales, redemptions and
exchanges of shares of the Fund; (ii) distributing dividends and capital gains
associated with Fund portfolio accounts; and (iii) maintaining account records
and responding to routine shareholder inquiries.
PSC receives an annual fee of $22.00 per shareholder account from the
Fund as compensation for the services described above. This fee is set at an
amount determined by vote of a majority of the Trustees (including a majority of
the Trustees who are not parties to the contract with PSC or interested persons
of any such parties) to be comparable to fees for such services being paid by
other investment companies.
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5. CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109 (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 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 entered into its most recent Underwriting Agreement with PFD,
effective November 1, 1991. The Trustees who are not, and were not at the time
they voted, interested persons of the Fund, as defined in the 1940 Act, approved
the Underwriting Agreement. 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 not borne by the Fund. During the fiscal
years ending September 30, 1993, 1994 and 1995, net underwriting commissions
retained by PFD in connection with its offering of Fund shares were
approximately $1,363,000, $1,982,000 and $1,498,000, respectively. Commissions
reallowed to dealers for the same years were approximately $9,628,000,
$13,259,000, and $10,054,000, 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 and state securities law.
The Fund and PFD have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Under the Underwriting Agreement, PFD will use its best efforts in rendering
services to the Fund.
The Fund 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) or 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
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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.
7. DISTRIBUTION PLAN
The Fund has adopted a plan of distribution, effective November 1,
1991, pursuant to Rule 12b-1 promulgated by the Securities and Exchange
Commission 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 daily net assets. In accordance
with the terms of the Plan, PFD provides to the Fund for review by the Trustees
a quarterly written report of the amounts expended under the Plan and the
purpose for which such expenditures were made.
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 has 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
will automatically terminate in the event of its assignment (as defined in the
1940 Act). In the Trustees' quarterly review of the Plan, they will consider its
continued appropriateness and the level of compensation it provides.
During the fiscal year ended September 30, 1995, the Fund paid total
distribution fees pursuant to the Plan of approximately $8,744,000. Distribution
fees were paid by the Fund to PFD in reimbursement of expenses related to
servicing of shareholder accounts and to compensating dealers and sales
personnel.
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8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, One International Place, Boston, Massachusetts
02110, is the Fund's independent public accountants, providing audit services,
tax return review, and assistance and consultation with respect to the
preparation of filings with the 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.
PMC may select dealers which provide brokerage and/or research services
to the Fund and/or other investment companies managed by PMC. Consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended, the Fund may
pay commissions to such broker-dealers in an amount greater than the amount
another firm might charge as compensation for such services 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. Such services may include advice concerning the value of securities; the
advisability of investing in, purchasing or selling securities; the availability
of securities or the purchasers or sellers of securities; providing stock price
quotation services; furnishing analyses, 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 broker-dealers who provide such services on a regular basis. However, because
it is anticipated that many transactions on behalf of the Fund and other
investment companies managed by PMC are placed with broker-dealers (including
broker-dealers on the listing) without regard to the furnishing of such
services, it is not possible to estimate the proportion of such transactions
directed to such broker-dealers solely because such services were provided.
Management believes that no exact dollar value can be calculated for such
services.
The research received from broker-dealers may be useful to PMC in
rendering investment management services to the Fund as well as other investment
companies managed by PMC, although not all of such research may be useful to the
Fund. Conversely, such information provided by brokers or dealers who have
executed transaction orders on behalf of such other PMC clients may be useful to
PMC in carrying out its obligations to the Fund. The receipt of such research
has not reduced PMC's normal independent research activities; however, it
enables
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PMC to avoid the additional expenses which might otherwise be incurred if it
were to attempt to develop comparable information through its own staff.
Pursuant to certain directed brokerage arrangements with third party
broker-dealers, such broker-dealers may pay certain of the Fund's custody
expenses. See "Financial Highlights" in the Prospectus.
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 September 30, 1993, 1994 and 1995, the
Fund paid or owed aggregate brokerage commissions of approximately $16,655,000,
$15,295,000 and $11,552,000, respectively.
10. 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. These requirements relate to the sources of its
income, the diversification of its assets and the timing of its distributions.
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 reinvested 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 reinvested in 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, options on
certain 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. Any such
transactions that are not directly related to the Fund's investment in stock or
securities may increase the amount of gain it is
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deemed to recognize from the sale of certain investments held for less than 3
months, which gain is limited under the Code to less than 30% of its annual
gross income, and may under future Treasury regulations produce income not among
the types of "qualifying income" from which the Fund must derive at least 90% of
its annual gross income. If the net foreign exchange loss for a year were to
exceed the Fund's investment company taxable income (computed without regard to
such loss) the resulting overall ordinary loss for such year would not be
deductible by the Fund or its shareholders in future years.
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.
At the time of an investor's purchase of Fund shares, a portion of the
purchase price may be attributable to realized or unrealized appreciation in the
Fund's portfolio or undistributed taxable income of the Fund, subsequent
distributions on such shares from such appreciation or income may be taxable to
such investor even if the net asset value of the investor's shares is, as a
result of the distributions, reduced below the investor's cost for such shares
and the distributions in reality represent a return of a portion of the
investment.
Redemptions and exchanges are taxable events. Any loss realized by an
investor upon the redemption or other sale of Fund 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 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 (including those made pursuant to automatic dividend
reinvestments) within a period of 61 days beginning 30 days before and ending 30
days after a redemption or other sale of shares.
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For federal income tax purposes, the Fund is permitted to carry forward
a net capital loss in any year to offset capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent capital gains are
offset by such losses, they would not result in federal income tax liability to
the Fund and are not expected to be distributed as such to shareholders.
For 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 to its shareholders may be
treated as qualifying dividends. Any corporate shareholder should consult its
tax adviser regarding the possibility that its tax basis in its shares may be
reduced, for federal income tax purposes, by reason of "extraordinary dividends"
received with respect to the shares. Corporate shareholders must meet the
minimum holding period requirement stated above (46 or 91 days) with respect to
their Fund shares, taking into account any holding period reductions from
hedging or other transactions that diminish their risk of loss, 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
(in addition to dividends actually received) 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.
The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company under
the Code, it will also not be required to pay any Massachusetts income tax.
Options written or purchased by the Fund on certain securities indices
and foreign currencies, as well as certain foreign currency forward contracts,
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 such forward contracts may not have been disposed
of or closed out and delivery may not have been made thereunder. The tax rules
applicable to these derivative instruments may affect the characterization as
long-term or
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short-term of some capital gains and losses realized by the Fund. Certain
options and forward contracts on foreign currency may be subject to Section 988,
described above, and accordingly may produce ordinary income or loss. Losses on
certain options and forward contracts and/or offsetting positions (portfolio
securities or other positions with respect to which the Fund's risk of loss is
substantially diminished by one or more options or forward contracts) may also
be deferred under the tax straddle rules of the Code, which may also affect the
characterization of capital gains or losses from straddle positions and certain
successor positions as long-term or short-term. The tax rules applicable to
options, forward contracts and straddles may affect the amount, timing and
character of the Fund's income and loss and hence of distributions to
shareholders. Certain tax elections may be available that would enable the Fund
to ameliorate some adverse effects of the tax rules described in this paragraph.
Federal law requires that the Fund withhold (as "backup withholding")
31% of reportable payments, including dividends, capital gain dividends and the
proceeds of redemptions (including exchanges) and repurchases, to shareholders
who have not complied with Internal Revenue Service ("IRS") regulations. In
order to avoid this withholding requirement, shareholders must certify on their
Account Applications, or on separate W-9 Forms, that the Social Security Number
or other Taxpayer Identification Number they provide is their correct number and
that they are not currently subject to backup withholding, or that they are
exempt from backup withholding. The Fund may nevertheless be required to
withhold if it receives notice from the IRS or a broker that the number provided
is incorrect or backup withholding is applicable as a result of previous
underreporting of interest or dividend income.
The description above relates only to U.S. federal income tax
consequences for shareholders who are U.S. persons (i.e., U.S. citizens or
residents and U.S. domestic corporations, partnerships, trusts or estates) and
who are subject to U.S. federal income tax. Investors who are not U.S. persons
may be subject to different U.S. tax treatment, including a possible 30% U.S.
nonresident alien withholding tax (or U.S. nonresident alien withholding tax at
a lower treaty rate) on any amounts treated as ordinary dividends from the Fund
and, unless an effective IRS Form W-8 or authorized substitute is on file, to
31% backup withholding on certain other payments from the Fund. The description
does not address the special tax rules applicable to particular types of
investors, such as banks, insurance companies, or tax-exempt entities.
Shareholders should consult their own tax advisors 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 which may be divided into such separate series as the
Trustees may establish. Currently the Fund consists of only one series. The
Trustees may, however, establish additional series of shares in the future, and
may divide or combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests in the Fund. The
Declaration of Trust further authorizes the Trustees to classify or reclassify
any series of the shares into one or more classes. . Pursuant thereto, the
Trustees have authorized the issuance of only one class of shares of the Fund.
Each share represents an equal proportionate interest in the Fund with each
other share.
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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.
The shares of each series of the Fund are entitled to vote separately
to approve investment advisory agreements or changes in investment restrictions,
but shareholders of all series vote together in the election and selection of
Trustees and accountants. Shares of all series of the Fund vote together as a
class on matters that affect all series of the Fund in substantially the same
manner. As to matters affecting a single series or class, shares of such series
or class will vote separately. No amendment adversely affecting the rights of
shareholders may be made to the Fund's Declaration of Trust without the
affirmative vote of a majority of its shares. Shares have no preemptive or
conversion rights. Shares are fully paid and non-assessable by the Fund, except
as stated below.
See "Certain Liabilities."
12. CERTAIN LIABILITIES
The Fund was orignallyen organized as a Massachusetts business trust
and was reorganized as a Delaware business trust on May 1, 1996, pursuant to an
Agreement and Plan of Reorganization approved by the shareholders of the Fund.
As a Delaware business trust, the Fund's operations are governed by its
Declaration of Trust dated April 1, 1996. A copy of the fund's Certificate of
Trust, also dated May 1, 1996, is on file with the office of the Secretary of
State of Delaware. Generally, Delaware business trust shareholders are not
personally liable for obligations of the Delaware business trust under Delaware
law. The Delaware Business Trust Act (the "Delaware Act") provides that a
shareholder of a Delaware business trust shall be entitled to the same
limitation of liability extended to shareholders of private for-profit
corporations. The Fund's Declaration of Trust expressly provides that the Fund
is organized under the Delaware Act and that the Declaration of Trust is to be
governed by Delaware law. There is nevertheless a remote possibility that a
Delaware business trust, such as the fund, might become a party to an action in
another state whose courts refused to apply Delaware law, in which case the
trust's shareholders could become subject to personal liability.
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To guard against this risk, the Declaration of Trust (i) contains an
express disclaimer of shareholder liability for acts or obligations of the Fund
and provides that notice of such disclaimer may be given in each agreement,
obligation or instrument entered into or executed by the Fund or its Trustees,
(ii) provides for the indemnification out of Fund property of any shareholders
held personally liable for any obligations of the Fund or any series of the Fund
and (iii) 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 is
limited to circumstances in which all of the following factors are present: (1)
a court refused to apply Delaware law; (2) the liability arose under tort law
or, if not, no contractual limitation of liability was in effect; and (3) the
Fund itself would be unable to meet its obligations. In light of Delaware law,
the nature of the Fund's business and the nature of its assets, the risk of
personal liability to a Fund shareholder 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
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 (currently 4:00 PM, Eastern
Time) on each day on which the New York Stock Exchange is open for trading. 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, President's 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 in good order for
the shares of the Fund are received 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
-26-
<PAGE>
direction of the Board. The Fund's maximum offering price per share is
determined by adding the maximum distribution charge to the net asset value per
share.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a
convenient method of receiving fixed payments at regular intervals from shares
of the Fund deposited by the applicant under this SWP. The applicant must
deposit or purchase for deposit with PSC shares of the Fund having a total value
of not less than $10,000. Periodic payments of $50 or more will be deposited
monthly or quarterly directly into a bank account designated by the applicant,
or will be sent by check to the applicant, or any person designated by the
applicant. 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 SWP account. Redemptions are taxable transactions. 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.
SWP may be terminated at any time (1) by written notice to PSC or from
PSC to the shareholder; (2) upon receipt by PSC of appropriate evidence of the
shareholder's death; or (3) when all shares under the SWP have been redeemed.
15. LETTER OF INTENTION
Purchases 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 the shares of record
he holds in the Fund and in all other Pioneer mutual funds
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<PAGE>
except Pioneer Money Market Trust as of the date of his Letter of Intention as a
credit toward determining the applicable 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 specified in the Letter of
Intention. A Letter of Intention is not a binding obligation upon the investor
to purchase, or the Fund to sell, the full amount indicated and the investor
should read the provisions of the Letter of Intention contained in the Account
Application carefully before signing.
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 with that of other mutual funds with similar investment
objectives, and to stock or other relevant indices. For example, the Fund's
total return 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; 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") or the 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, FORTUNE, 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 INVESTMENT COMPANIES SERVICE, DONOGHUE'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.
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 Return Quotations and Other Performance
Quotations
One of the primary 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
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<PAGE>
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 by the average
annual compounded total return for the period. The income and capital components
of a given return may be separated and portrayed in a variety of ways in order
to illustrate their relative significance. Performance may also be portrayed in
terms of cash or investment values, without percentages. Past performance cannot
guarantee any particular future result.
Generally, performance illustrations will include or be accompanied by
the Funds' 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 Securities and Exchange Commission: p(l+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 returns of the Fund are reflected
in the table below:
Returns as of 9/30/95
Average Annual Total Return (%)
1 Year 5 Year 10 Year Life Inception
12.11 14.90 11.72 14.33 9/30/69
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 1969 until the present. The Fund may also 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 1969 until the present is set forth below.
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.
-29-
<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's bond funds;
o annualized 7-day yields and 7-day effective (compound) yields
for Pioneer's money market funds; and
o dividends and capital gains distributions on all Pioneer
mutual funds.
Yields are calculated in accordance with standard formulas mandated by
the Securities and Exchange Commission.
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; figures for all quoted bond funds include the maximum applicable
sales charge. A shareholder's actual yield and total return will vary with
changing market conditions. The value of Class A, Class B and Class C shares
(except for Pioneer money market funds, which seek a stable $1.00 share price)
will also vary, and they may be worth more or less at redemption than their
original cost.
17. FINANCIAL STATEMENTS
The Fund's audited financial statements for the fiscal year ended
September 30, 1995 are included in the Fund's Annual Report to Shareholders,
which report is incorporated by reference into and attached to this Statement of
Additional Information. The Fund's Annual Report to Shareholders is so
incorporated and attached in reliance upon the report of Arthur Andersen LLP,
independent public accountants, as experts in accounting and auditing.
-30-
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS1
MOODY'S INVESTOR'S SERVICE, INC.2
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat bigger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
- ---------------------------------------------
1 THE RATINGS INDICATED HEREIN ARE BELIEVE TO BE THE MOST RECENT RATINGS
AVAILABLE AT THE DATE OF THIS PROSPECTUS FOR THE SECURITIES LISTED. RATINGS ARE
GENERALLY GIVEN TO SECURITIES AT THE TIME OF ISSUANCE. WHILE THE RATING AGENCIES
MAY FROM TIME TO TIME REVISE SUCH RATINGS, THEY UNDERTAKE NO OBLIGATION TO DO
SO, AND THE RATINGS INDICATED DO NOT NECESSARILY REPRESENT RATINGS WHICH WILL BE
GIVEN TO THESE SECURITIES ON THE DATE OF THE FUND'S FISCAL YEAR-END.
2 RATES BONDS OF ISSUERS WHICH HAVE $600,000 OR MORE OF DEBT, EXCEPT BONDS OF
EDUCATIONAL INSTITUTIONS, PROJECTS UNDER CONSTRUCTION, ENTERPRISES WITHOUT
ESTABLISHED EARNINGS RECORDS AND SITUATIONS WHERE CURRENT FINANCIAL DATA IS
UNAVAILABLE.
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<PAGE>
Pioneer II Fund
<TABLE>
<CAPTION>
Date Initial Investment Offering Price Sales Charge Shares Purchased Net Asset Value Initial Net Asset
Included Per Share Value
<S> <C> <C> <C> <C> <C> <C>
9/30/69 $10,000 $5.31 5.75% 1,883.239 $5.00 $9,425
</TABLE>
Dividends and Capital Gains Reinvested
Value of Shares
Date From Investment From Cap. Gains From Dividends Total Value
Reinvested Reinvested
12/31/69 $8,842 $0 $0 $8,842
12/31/70 $8,051 $0 $163 $8,214
12/31/71 $9,500 $385 $355 $10,240
12/31/72 $9,708 $2,199 $510 $12,417
12/31/73 $8,559 $2,177 $616 $11,352
12/31/74 $6,252 $1,990 $607 $8,849
12/31/75 $9,021 $3,129 $1,120 $13,270
12/31/76 $13,616 $5,712 $2,045 $21,373
12/31/77 $15,903 $7,532 $2,960 $26,395
12/31/78 $16,309 $10,027 $3,889 $30,225
12/31/79 $19,623 $14,350 $6,047 $40,020
12/31/80 $23,333 $19,059 $9,037 $51,429
12/31/81 $22,788 $22,247 $10,820 $55,855
12/31/82 $25,725 $28,010 $15,010 $68,745
12/31/83 $30,640 $37,959 $20,820 $89,419
12/31/84 $27,909 $36,527 $22,120 $86,556
12/31/85 $33,033 $50,984 $29,727 $113,744
12/31/86 $34,163 $59,663 $34,106 $127,932
12/31/87 $29,473 $65,731 $32,289 $127,493
12/31/88 $32,788 $81,884 $40,573 $155,245
12/31/89 $35,217 $105,331 $49,177 $189,725
12/31/90 $29,435 $90,721 $46,749 $166,905
12/31/91 $34,783 $114,167 $60,936 $209,886
12/31/92 $34,972 $128,226 $66,364 $229,562
12/31/93 $36,422 $162,514 $74,033 $272,969
12/31/94 $31,845 $167,857 $68,549 $268,251
12/31/95 $36,648 $221,052 $83,393 $341,093
<PAGE>
WORST CASE/BEST CASE INVESTMENT SCENARIOS 5000
Yearly Investments in Pioneer II from January 1,1976
The table below shows the year-by-year valuation of an annual additional
investment of $5,000. The Worst Case scenario assumes the investment was made on
the day that the Dow Jones Industrial Average ("DJIA") was at its yearly high.
The Best Case scenario assumes that the investment was made on the day that DJIA
was at its yearly low. Both scenarios assume reinvestment of all dividends and
capital gains without sales charge. The DJIA is a recognized unmanaged index of
common stocks of 30 industrial companies listed on the New York Stock Exchange.
<TABLE>
<CAPTION>
WORST CASE BEST CASE
(PURCHASE AT YEARLY DJIA HIGHS) (PURCHASE AT YEARLY DJIA HIGHS)
Cumulative Value Cumulative Value
Year High Date Investment on 12/31 Low Date Investment on 12/31
----- --------- ---------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1976 9/21/76 5000 4,831 1/2/76 5000 7,078
1977 1/3/77 10000 11,505 11/2/77 10000 13,674
1978 9/8/78 15000 17,175 2/28/78 15000 20,868
1979 10/5/79 20000 27,306 11/7/79 20000 32,724
1980 11/20/80 25000 39,586 4/21/80 25000 48,532
1981 4/27/81 30000 47,566 9/25/81 30000 57,775
1982 12/27/82 35000 63,202 8/12/82 35000 77,579
1983 11/29/83 40000 86,876 1/3/83 40000 107,024
1984 1/6/84 45000 88,561 7/24/84 45000 109,071
1985 12/16/85 50000 121,076 1/4/85 50000 149,577
1986 12/2/86 55000 140,743 1/22/86 55000 173,642
1987 8/25/87 60000 143,686 10/19/87 60000 177,785
1988 10/21/88 65000 179,671 1/20/88 65000 222,238
1989 10/9/89 70000 224,172 1/3/89 70000 277,402
1990 7/16/90 75000 201,323 10/11/90 75000 249,173
1991 12/31/91 80000 258,043 1/9/91 80000 319,692
1992 6/1/92 85000 287,341 10/9/92 85000 354,996
1993 12/29/93 90000 346,566 1/20/93 90000 427,878
1994 1/31/94 95000 345,243 4/4/94 95000 425,647
1995 12/13/95 100000 443,895 1/30/95 100000 547,394
</TABLE>
Annual Growth Rate: 13.39% 14.84%
(Internal Rate of Return)
The valuation columns in the table include the effect of sales charges
on these yearly investments. Sales charges have been reduced, as appropriate, to
reflect the rate applicable to the value of the total account, according to the
schedule in the Fund's prospectus. The figures shown above should not be
considered as representative of future returns. Income taxes have not been
considered.
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well-known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may be used, if appropriate. The indices
are not available for direct investment. The data presented is not meant to be
indicative of the performance of the Fund, reflects past performance and does
not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the
United States; prior to March 1957 it consisted of 90 of the largest stocks.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of 30 blue chip stocks.
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the New York Stock Exchange (NYSE), plus stocks listed on the American Stock
Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization
as the upper bound of the NYSE ninth decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 Index according to price-to-book ratios. The Growth Index contains
stocks with higher price-to-book ratios, and the Value Index contains stocks
with lower price-to-book ratios. Both indexes are market capitalization
weighted.
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds from 1977 to 1991 are
constructed with data from The Wall Street Journal. Over 1926-1976, data are
obtained from the Government bond file at the Center for Research in Security
Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a
one-bond portfolio with a term of approximately 20 years and a reasonably
current coupon was used, and whose returns did not reflect potential tax
benefits, impaired negotiability, or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
minus the current date. The bond was "held" for the calendar year and returns
were computed. Total returns for 1977-1991 are calculated as the change in the
flat price or and-interest price.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of the intermediate-term government bonds for 1977-1991 are
calculated from The Wall Street Journal prices, using the change in flat price.
Returns from 1934-1986 are obtained from the CRSP Government Bond File.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than 5 years, and this bond is "held"
for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934-1942, almost all bonds
with maturities near 5 years were partially or full tax-exempt and were selected
using the rules described above. Personal tax rates were generally low in that
period, so that yields on tax-exempt bonds were similar to yields on taxable
bonds. From 1926-1933, there are few bonds suitable for construction of a series
with a 5-year maturity. For this period, five year bond yield estimates are
used.
MSCI
Morgan Stanley Capital International Indices, developed by the Capital
International S.A., are based on share prices of some 1470 companies listed on
the stock exchanges around the world.
Countries in the MSCI EAFE Portfolio are:
Australia; Austria; Belgium; Denmark; Finland; France; Germany; Hong Kong;
Italy; Japan; Netherlands; N. Zealand; Norway; Singapore/Malaysia; Spain;
Sweden; Switzerland; United Kingdom.
6 MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
For 1969-1991, corporate bond total returns are represented by the Salomon
Brothers Long-Term High-Grade Corporate Bond Index. Since most large corporate
bond transactions take place over the counter, a major dealer is the natural
source of these data. The index includes nearly all Aaa- and Aa-rated bonds. If
a bond is downgraded during a particular month, its return for the month is
included in the index before removing the bond from future portfolios.
Over 1926-1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946-1968, Ibbotson
and Sinquefield backdated the Salomon Brothers' index, using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon for
1969-1991. Capital appreciation returns were calculated from yields assuming (at
the beginning of each monthly holding period) a 20-year maturity, a bond price
equal to par, and a coupon equal to the beginning-of-period yield. For the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite
yield data were used, assuming a 4 percent coupon and a 20-year maturity. The
conventional present-value formula for bond price for the beginning and
end-of-month prices was used. (This formula is presented in Ross, Stephen A.,
and Randolph W. Westerfield, Corporate Finance, Times
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly income
return was assumed to be one-twelfth the coupon.
U.S. (30 DAY) TREASURY BILLS
For the U.S. Treasury bill index, data from The Wall Street Journal are used for
1977-1991; the CRSP U.S. Government Bond File is the source until 1976. Each
month a one-bill portfolio containing the shortest-term bill having not less
than one month to maturity is constructed. (The bill's original term to maturity
is not relevant.) To measure holding period returns for the one-bill portfolio,
the bill is priced as of the last trading day of the previous month-end and as
of the last trading day of the current month.
NAREIT-EQUITY INDEX
All of the data is based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMSE and the NASDAQ. The data is
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 Newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighing at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income. Liquidating dividends, whether full or partial,
are treated as income.
RUSSELL 2000 SMALL STOCK INDEX
Index of the 2,000 smallest stocks in the Russell 3000 Index (TM); the smallest
company has a market capitalization of approximately $13 million.
The Russell 30000 is comprised of the 3,000 largest US companies as determined
by market capitalization representing approximately 98% of the US equity market.
The largest company in the index has a market capitalization of $67 billion. The
Russell Indexes (TM) are reconstituted annually as of June 1st, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization-weighted
index which measures the performance of more than 85 securities.
The index contains performance data on five major categories of property;
office, retail, industrial, apartment and miscellaneous. Additionally, the Index
has real estate portfolio encumbered by 16% third party mortgages. The companies
in the WRESEC are 79% equity and hybrid REIT's and 21% real estate operating
companies. The capitalization is 47% NYSE, 33% AMEX and 20% OTC."
STANDARD & POOR'S MIDCAP 400 INDEX
The Standard and Poor's MidCap 400 Index is a market-value-weighted index. The
performance data for the MidCap 400 Index were calculated by taking the stocks
presently in the MidCap 400 Index and tracking them backwards in time as long as
there were prices reported. No attempt was made to determine what stocks "might
have been" in the MidCap 400 Index five or ten years ago had it existed.
Dividends are reinvested on a monthly basis prior to June 30, 1991, and are
reinvested daily thereafter.
-34-
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The S&P MidCap 400 Index and the S&P 500 together represent approximately 85% of
the total market capitalization of stocks traded in the United States.
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963-1987 and The Wall Street Journal for the years 1988-1994.
Source: Ibbotson Associates
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A
Dec 1931 -43.34 -49.03 -49.75 -9.52 N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A
Dec 1933 53.99 73.71 142.87 0.51 N/A N/A
Dec 1934 -1.44 8.07 24.22 2.03 N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A
Dec 1942 20.34 14.12 44.51 9.29 N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60
Dec 1994 1.31 5.06 3.11 2.78 3.13 -0.64
Dec 1995 37.43 36.84 34.46 2.74 38.13 36.99
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.1 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.18 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
Dec 1966 3.65 4.69 N/A 5.75 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.48 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.44 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.71 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.38 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.12 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.1 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.58 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.3 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.8 11.21 5.21 26.39 5.60
-38-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S & P Bank
NAREIT - Russell Wilshire Midcap Savings
Equity 2000 Real Estate 400 Account
Dec 1925 N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 3.86
Dec 1961 N/A N/A N/A N/A 3.90
Dec 1962 N/A N/A N/A N/A 4.08
Dec 1963 N/A N/A N/A N/A 4.17
Dec 1964 N/A N/A N/A N/A 4.19
Dec 1965 N/A N/A N/A N/A 4.23
Dec 1966 N/A N/A N/A N/A 4.45
Dec 1967 N/A N/A N/A N/A 4.67
Dec 1968 N/A N/A N/A N/A 4.68
Dec 1969 N/A N/A N/A N/A 4.80
-39-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S & P Bank
NAREIT - Russell Wilshire Midcap Savings
Equity 2000 Real Estate 400 Account
Bank Savings Account
Dec 1970 N/A N/A N/A N/A 5.14
Dec 1971 N/A N/A N/A N/A 5.30
Dec 1972 8.01 N/A N/A N/A 5.37
Dec 1973 -15.52 N/A N/A N/A 5.51
Dec 1974 -21.40 N/A N/A N/A 5.96
Dec 1975 19.30 N/A N/A N/A 6.21
Dec 1976 47.59 N/A N/A N/A 6.23
Dec 1977 22.42 N/A N/A N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 11.19
Dec 1983 30.64 29.13 27.61 26.10 9.71
Dec 1984 20.93 -7.30 20.64 1.18 9.92
Dec 1985 19.10 31.05 22.20 35.58 9.02
Dec 1986 19.16 5.68 20.30 16.21 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 6.92
Dec 1988 13.49 24.89 24.18 20.87 7.20
Dec 1989 8.84 16.24 2.37 35.54 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 7.80
Dec 1991 35.7 46.05 20.03 50.1 4.61
Dec 1992 14.59 18.41 7.36 11.91 2.89
Dec 1993 19.65 18.91 15.24 13.96 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 4.96
Dec 1995 15.27 28.44 13.65 30.94 5.24
Source: Ibbotson Associates
-40-
<PAGE>
APPENDIX B
Additional Pioneer Information
The Pioneer group of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest and most experienced
money managers in the United States.
As of December 31, 1995, PMC employed a professional investment staff
of 44, with a combined average of 15 years' experience in the financial services
industry.
Total assets of all Pioneer mutual funds at December 31, 1995, were
approximately $12 billion representing 982,369 shareholder accounts, 637,060
non-retirement accounts and 345,309 retirement accounts.
-41-
<PAGE>
PIONEER II
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
The financial highlights of the Registrant for the fiscal year ended
September 30, 1995 are included in Part A of the Registration
Statement and the financial statements of the Registrant are
incorporated by reference into Part B of the Regisration Statement
from the 1995 Annual Report to Shareholders for the fiscal year ended
September 30, 1995 (filed electronically on November 27, 1995, 1996;
file no. 811-1466; accession number 0000078758-95-000011 ).
(b) Exhibits:
1. Declaration of Trust*
2. By-Laws*
3. None
4. Specimen Stock Certificate*
5. Form of Management Contract
6.1. Underwriting Agreement*
6.2. Form of Dealer Sales Agreement*
7. None
8.2. Form of Custodian Agreement with Brown Brothers Harriman &
Co.*
9. Investment Company Service Agreement*
9.2 Form of Agreement and Plan of Reorganization
10. Opinion of Hale and Dorr*
11. Consent of Arthur Andersen LLP
12. None
13. Form of Stock Purchase Agreement*
14. None
C-1
<PAGE>
15. Distribution Plan*
16. Description of Average Annual Total Return*
17. Financial Data Schedule
19. Powers of Attorney*
* Previously filed. Incorporated by reference from the exhibits filed with
the Registration Statement, as amended from time to time, of the
Registrant (File Nos. 2-32773 and 811-1835). Parts A and B of this
Post-Effective Amendment No. 45 describe certain changes from
Registrant's currently effective Registration Statement proposed to take
effect on May 1, 1996 following approval by shareholders of the
Registrant at a meeting scheduled to be held on April 30, 1996. These
changes include the reorganization of the Registrant as a Delaware
business trust and the adoption of a new management contract in the form
filed herewith. If the proposed changes are approved by shareholders,
certain Exhibits relating to the same will be filed by an additional
Post-Effective Amendment which will become simultaneously effective with
this Post-Effective Amendment.
Item 25. Persons Controlled By or Under Common Control With Registrant
The Pioneer Group, Inc., a publicly-traded Delaware corporation ("PGI"), owns
100% of the outstanding capital stock of Pioneering Management Corporation, a
Delaware corporation ("PMC"), Pioneering Services Corporation ("PSC"), Pioneer
Funds Distributor, Inc. ("PFD"), Pioneer Capital Corporation ("PCC"), Pioneer
Fonds Marketing GmbH ("GmbH"), Pioneer SBIC Corp. ("SBIC"), Pioneer Associates,
Inc., Pioneer International Corporation, Pioneer Plans Corporation ("PPC"),
Pioneer Goldfields Limited ("PGL"), and Pioneer Investments Corporation ("PIC"),
all Massachusetts corporations. PGI also owns 100% of the outstanding capital
stock of Pioneer Metals and Technology, Inc. ("PMT"), a Delaware corporation,
and Pioneer First Polish Trust Fund Joint Stock Company ("First Polish"), a
Polish corporation. PGI owns 90% of the outstanding shares of Teberebie
Goldfields Limited ("TGL"). The Registrant, Pioneer Fund, Pioneer Bond Fund,
Pioneer Intermediate Tax-Free Fund, Pioneer Growth Trust, Pioneer Europe Fund,
Pioneer International Growth Fund, Pioneer Short-Term Income Trust, Pioneer
Tax-Free State Series Trust and Pioneer America Income Trust (each of the
foregoing, a Massachusetts business trust), and Pioneer Interest Shares, Inc. (a
Nebraska corporation) and Pioneer Growth Shares, Pioneer Income Fund, Pioneer
India Fund, Pioneer Tax-Free Income Fund, Pioneer Small Company Fund, Pioneer
Real Estate Shares, Pioneer Mid-Cap Fund, Pioneer Money
C-2
<PAGE>
Market Trust, Pioneer Emerging Markets Fund and Pioneer Variable Contracts Trust
(each of the foregoing, a Delaware business trust) are all parties to management
contracts with PMC. PCC owns 100% of the outstanding capital stock of SBIC. SBIC
is the sole general partner of Pioneer Ventures Limited Partnership, a
Massachusetts limited partnership. John F. Cogan, Jr. owns approximately 15% of
the outstanding shares of PGI. Mr. Cogan is Chairman of the Board, President and
Trustee of the Registrant and of each of the Pioneer investment companies;
Director and President of PGI; President and Director of PPC, PIC, Pioneer
International Corporation and PMT; Director of PCC and PSC; Chairman of the
Board and Director of PMC, PFD and TGL; Chairman, President and Director of PGL;
Chairman of the Supervisory Board of GmbH; Chairman and Member of Supervisory
Board of First Polish; and Chairman and Partner, Hale and Dorr.
Item 26. Number of Holders of Securities
At January 31, 1996, there were approximately holders 389,904 of the
Registrant's shares of beneficial interest.
Item 27. Indemnification
Except for the Declaration of Trust dated January 8, 1985 establishing
the Registrant as a trust under Massachusetts law, there is no contract,
arrangement or statute under which any director, officer, underwriter or
affiliated person of the Registrant is insured or indemnified. The Declaration
of Trust provides that no Trustee or officer will be indemnified against any
liability of which the Registrant would otherwise be subject by reason of or for
willful misfeasance, bad faith, gross negligence or reckless disregard of such
person's duties.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Act"), may be available to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment of the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
C-3
<PAGE>
Item 28. Business and other Connections of Investment Adviser
All of the information required by this item is set forth in the Form
ADV, as amended, of Pioneering Management Corporation. The following sections of
such Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part 2;
(b) Section 6, Business Background, of each Schedule D.
Item 29. Principal Underwriter
(a) See Item 25 above.
(b) Directors and Officers of PFD:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
John F. Cogan, Jr. Director and Chairman Chairman of the Board,
President and Trustee
Robert L. Butler Director and President None
David D. Tripple Director Executive Vice
President and Trustee
Steven M. Graziano Senior Vice President None
Stephen W. Long Senior Vice President None
John C. Drachman Vice President None
Barry C. Knight Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Elizabeth B. Rice Vice President None
Gail A. Smyth Vice President None
Constance S. Spiros Vice President None
Marcy Supovitz Vice President None
Steven R. Berke Assistant Vice None
President
C-4
<PAGE>
Mary Sue Hoban Assistant Vice None
President
William H. Keough Treasurer Treasurer
Roy P. Rossi Assistant Treasurer None
Joseph P. Barri Clerk Secretary
Robert P. Nault Assistant Clerk Assistant Secretary
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records are maintained at the Registrant's office at
60 State Street, Boston, Massachusetts; contact the Treasurer.
Item 31. Management Services
The Registrant is not a party to any management-related service
contract, except as described in the Prospectus and the Statement of Additional
Information.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, a copy of the Registrant's report to shareholders furnished pursuant to
and meeting the requirements of Rule 30d-1 from which the specified information
is incorporated by reference, unless such person currently holds securities of
the Registrant and otherwise has received a copy of such report, in which case
the Registrant shall state in the Prospectus that it will furnish, without
charge, a copy of such report on request, and the name, address and telephone
number of the person to whom such a request should be directed.
The Registrant's prior undertaking which set forth certain
indemnification provisions of its officers and Trustees as set forth in the
Registrant's Declaration of Trust has been deleted. All indemnification
provisions are contained in the Registrant's Declaration of Trust, as approved
by shareholders on January 8, 1985. See Item 27 above.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 45 to its
Registration Statement pursuant to Rule 485(a) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and The Commonwealth of Massachusetts, on the 28th day of
February, 1996.
PIONEER II
By: /s/Joseph P. Barri
Joseph P. Barri
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 45 to the Registrant's Registration Statement (File
Nos. 2-32773 and 811-1835) has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
John F. Cogan, Jr.* Chairman of the Board )
John F. Cogan, Jr. and President )
(Principal Executive )
Officer) )
) February 28, 1996
)
William H. Keough* Chief Financial Officer )
William H. Keough and Treasurer (Principal )
Financial and Accounting )
Officer) )
Trustees:
)
John F. Cogan, Jr.* )
John F. Cogan, Jr. )
)
)
Richard H. Egdahl, M.D.* )
Richard H. Egdahl, M.D. )
)
)
Margaret B. W. Graham* )
Margaret B. W. Graham )
)
)
John W. Kendrick* )
John W. Kendrick )
)
)
Marguerite A. Piret* )
Marguerite A. Piret )
)
)
David D. Tripple* )
David D. Tripple )
)
)
Stephen K. West* )
Stephen K. West )
)
)
John Winthrop* )
John Winthrop )
- ------------
*By:/s/Joseph P. Barri Dated: February 28, 1996
------------------------
Joseph P. Barri
Attorney-in-fact
<PAGE>
Exhibit Index
Exhibit Number Exhibit
5. Form of Management Contract
9.2. Form of Agreement and Plan of Reorganization
11. Consent of Arthur Andersen LLP
EXHIBIT A
MANAGEMENT CONTRACT
THIS AGREEMENT dated this 1st day of May, 1996 between Pioneer II, a Delaware
business trust (the "Trust"), and Pioneering Management Corporation, a Delaware
corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement") for the
purpose of registering its shares for public offering under the Securities Act
of 1933, as amended (the "1933 Act"),
WHEREAS, the parties hereto deem it mutually advantageous that the Manager
should be engaged, subject to the supervision of the Trust's Board of Trustees
and officers, to manage the Trust.
NOW, THEREFORE, in consideration of the mutual covenants and benefits set forth
herein, the Trust and the Manager do hereby agree as follows:
1. (a) The Manager will regularly provide the Trust with investment
research, advice and supervision and will furnish continuously an investment
program for the Trust, consistent with the investment objectives and policies of
the Trust. The Manager will determine from time to time what securities shall be
purchased for the Trust, what securities shall be held or sold by the Trust and
what portion of the Trust's assets shall be held uninvested as cash, subject
always to the provisions of the Trust's Certificate of Trust, Agreement and
Declaration of Trust, By-Laws and its registration statements under the 1940 Act
and under the 1933 Act covering the Trust's shares, as filed with the Securities
and Exchange Commission, and to the investment objectives, policies and
restrictions of the Trust, as each of the same shall be from time to time in
effect, and subject, further, to such policies and instructions as the Board of
Trustees of the Trust may from time to time establish. To carry out such
determinations, the Manager will exercise full discretion and act for the Trust
in the same manner and with the same force and effect as the Trust itself might
or could do with respect to purchases, sales or other transactions, as well as
with respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
<PAGE>
(b) The Manager will, to the extent reasonably required in the
conduct of the business of the Trust and upon the Trust's request, furnish to
the Trust research, statistical and advisory reports upon the industries,
businesses, corporations or securities as to which such requests shall be made,
whether or not the Trust shall at the time have any investment in such
industries, businesses, corporations or securities. The Manager will use its
best efforts in the preparation of such reports and will endeavor to consult the
persons and sources believed by it to have information available with respect to
such industries, businesses, corporations or entities.
(c) The Manager will maintain all books and records with respect to
the Trust's securities transactions required by subparagraphs (b)(5), (6), (9)
and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than those
records being maintained by the custodian or transfer agent appointed by the
Trust) and preserve such records for the periods prescribed therefor by Rule
31a-2 under the 1940 Act. The Manager will also provide to the Board of Trustees
such periodic and special reports as the Board may reasonably request.
2. (a) Except as otherwise provided herein, the Manager, at its own
expense, shall furnish to the Trust office space in the offices of the Manager
or in such other place as may be agreed upon from time to time, and all
necessary office facilities, equipment and personnel for managing the Trust's
affairs and investments, and shall arrange, if desired by the Trust, for members
of the Manager's organization to serve as officers or agents of the Trust.
(b) The Manager shall pay directly or reimburse the Trust for: (i)
the compensation (if any) of the Trustees who are affiliated with, or
"interested persons" (as defined in the 1940 Act) of, the Manager and all
officers of the Trust as such; and (ii) all expenses not hereinafter
specifically assumed by the Trust where such expenses are incurred by the
Manager or by the Trust in connection with the management of the affairs of, and
the investment and reinvestment of the assets of, the Trust.
(c) The Trust shall assume and shall pay: (i) charges and expenses
for fund accounting, pricing and appraisal services and related overhead,
including, to the extent such services are performed by personnel of the
Manager, or its affiliates, office space and facilities and personnel
compensation, training and benefits; (ii) the charges and expenses of auditors;
(iii) the charges and expenses of any custodian, transfer agent, plan agent,
dividend disbursing agent and registrar appointed by the Trust with respect to
the Trust; (iv) issue and transfer taxes chargeable to the Trust in connection
with securities transactions
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to which the Trust is a party; (v) insurance premiums, interest charges, dues
and fees for membership in trade associations and all taxes and corporate fees
payable by the Trust to federal, state or other governmental agencies; (vi) fees
and expenses involved in registering and maintaining registrations of the Trust
and/or its shares with the Commission, state or blue sky securities agencies and
foreign countries, including the preparation of Prospectuses and Statements of
Additional Information for filing with the Commission; (vii) all expenses of
shareholders' and Trustees' meetings and of preparing, printing and distributing
prospectuses, notices, proxy statements and all reports to shareholders and to
governmental agencies; (viii) charges and expenses of legal counsel to the Trust
and the Trustees; (ix) any distribution fees paid by the Trust in accordance
with Rule 12b-1 promulgated by the Commission pursuant to the 1940 Act; (x)
compensation of those Trustees of the Trust who are not affiliated with or
interested persons of the Manager, the Trust (other than as Trustees), The
Pioneer Group, Inc. or Pioneer Trusts Distributor, Inc.; (xi) the cost of
preparing and printing share certificates; and (xii) interest on borrowed money,
if any.
(d) In addition to the expenses described in Section 2(c) above, the
Trust shall pay all brokers' and underwriting commissions chargeable to the
Trust in connection with securities transactions to which the Trust is a party.
3. (a) The Trust shall pay to the Manager, as compensation for the
Manager's services and expenses assumed hereunder, a fee as set forth below.
Management fees payable hereunder shall be computed daily and paid monthly in
arrears.
(i) The fee payable hereunder shall be composed of the Basic
Fee (defined below) and a Performance Adjustment (defined below) to the Basic
Fee based upon the investment performance of the Trust in relation to the
investment record of a securities index determined by the Trustees of the Trust
to be appropriate over the same period. The Trustees have initially designated
the Lipper Growth & Income Funds Index (the "Index") for this purpose.
(ii) From time to time, the Trustees may by a vote of the
Trustees of the Trust voting in person, including a majority of its Trustees who
are not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of any such parties, determine that another securities index is a more
appropriate benchmark than the Index for purposes of evaluating the performance
of the Trust. In such event, after ten days' written notice to the Manager, a
successor index (the "Successor Index") may be substituted for the Index in
prospectively
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calculating the Performance Adjustment. However, the calculation of that portion
of the Performance Adjustment attributable to any portion of the performance
period prior to the adoption of the Successor Index will still be based upon the
Trust's performance compared to the Index.
(iii) The Basic Fee is payable at an annual rate of 0.60% of
the Trust's average daily net assets.
(iv) The Performance Adjustment consists of an adjustment to
the monthly Basic Fee to be made by applying a performance adjustment rate to
the average net assets of the Trust over the performance period. The resulting
dollar figure will be added to or subtracted from the Basic Fee depending on
whether the Trust experienced better or worse performance than the Index.
The Performance Adjustment rate is 0.01% per annum for each percentage
point rounded to the nearer point (the higher point if exactly one-half point)
that the Trust's investment performance for the period was better or worse than
the record of the Index as then constituted. The maximum performance adjustment
is 0.10% per annum. In addition, as the Trust's average daily net assets over
the performance period may differ substantially from the Trust's average daily
net assets during the current year, the performance adjustment may be further
adjusted to the extent necessary to insure that the total adjustment to the
Basic Fee on an annualized basis does not exceed 0.10%.
The initial performance period will consist of the 36 month period
beginning June 1, 1993 and ending May 31, 1996. Each month thereafter, the
performance period shall consist of the current month plus the preceding 35
months. In the event that the inclusion in the rolling performance period of
aggregate results from prior to May 1, 1996 would have the effect of increasing
the Basic Fee for any month, such aggregate prior results will be treated as
Index neutral for purposes of calculating the performance adjustment for such
month.
The Trust's investment performance will be measured by comparing the
(i) opening net asset value of one share of the Trust on the first business day
of the performance period with (ii) the closing net asset value of the one share
of the Trust as of the last business day of such period. In computing the
investment performance of the Trust and the investment record of the Index,
distributions of realized capital gains, the value of capital gains taxes per
share paid or payable on undistributed realized long-term capital gains
accumulated to the end of such period and dividends paid out of investment
income on the part of the Trust, and all cash distributions of the companies
whose stock
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comprise the Index, will be treated as reinvested in accordance with Rule 205-1
or any other applicable rule under the Investment Advisers Act of 1940, as the
same from time to time may be amended.
The computation of the performance adjustment will not be cumulative. A
positive fee adjustment will apply even though the performance of the Trust over
some period of time shorter than the performance period has been behind that of
the Index, and, conversely, a negative fee adjustment will apply for the month
even though the performance of the Trust over some period of time shorter than
the performance period has been ahead of that of the Index.
(iv) An appropriate percentage (based on the number of days in
the current month) of the annual Performance Adjustment rate shall be multiplied
by the average of the net assets of the Trust (computed in the manner set forth
in the Declaration of Trust of the Trust adjusted as provided above, if
applicable) determined as of the close of business on each business day through
out the performance period. The resulting dollar amount is added to or deducted
from the Basic Fee.
(v) In the event of termination of this Agreement, the Basic
Fee then in effect shall be computed on the basis of the period ending on the
last business day on which this Agreement is in effect subject to a pro rata
adjustment based on the number of days elapsed in the current month as a
percentage of the total number of days in such month. The amount of any
Performance Adjustment to the Basic Fee will be computed on the basis of and
applied to net assets averaged over the 36 month period ending on the last
business day on which this Agreement is in effect, provided that if this
Agreement has been in effect less than 36 months, the computation will be made
on the basis of the period of time during which it has been in effect.
(b) If the operating expenses of the Trust in any year exceed the
limits set by state securities laws or regulations in states in which shares of
the Trust are sold, the amount payable to the Manager under subsection (a) above
will be reduced (but not below $0), and the Manager shall make other
arrangements concerning expenses but, in each instance, only as and to the
extent required by such laws or regulations. If amounts have already been
advanced to the Manager under this Agreement, the Manager will return such
amounts to the Trust to the extent required by the preceding sentence.
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<PAGE>
(c) In addition to the foregoing, the Manager may from time to
time agree not to impose all or a portion of its fee otherwise payable hereunder
(in advance of the time such fee or a portion thereof would otherwise accrue)
and/or undertake to pay or reimburse the Trust for all or a portion of its
expenses not otherwise required to be borne or reimbursed by the Manager. Any
such fee reduction or undertaking may be discontinued or modified by the Manager
at any time.
4. It is understood that the Manager may employ one or more
sub-investment advisers (each a "Subadviser") to provide investment advisory
services to the Trust by entering into a written agreement with each such
Subadviser; provided, that any such agreement first shall be approved by the
vote of a majority of the Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust, the Manager
or any such Subadviser, at a meeting of Trustees called for the purpose of
voting on such approval and by the affirmative vote of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Trust. The
authority given to the Manager in Sections 1 through 6 hereof may be delegated
by it under any such agreement; provided, that any Subadviser shall be subject
to the same restrictions and limitations on investments and brokerage discretion
as the Manager. The Trust agrees that the Manager shall not be accountable to
the Trust or the Trust's shareholders for any loss or other liability relating
to specific investments directed by any Subadviser, even though the Manager
retains the right to reverse any such investment, because, in the event a
Subadviser is retained, the Trust and the Manager will rely almost exclusively
on the expertise of such Subadviser for the selection and monitoring of specific
investments.
5. The Manager will not be liable for any error of judgment or mistake
of law or for any loss sustained by reason of the adoption of any investment
policy or the purchase, sale, or retention of any security on the recommendation
of the Manager, whether or not such recommendation shall have been based upon
its own investigation and research or upon investigation and research made by
any other individual, firm or corporation, but nothing contained herein will be
construed to protect the Manager against any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
6. (a) Nothing in this Agreement will in any way limit or restrict the
Manager or any of its officers, directors, or employees from buying, selling or
trading in any securities for its or their own accounts or other accounts. The
Manager may act
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<PAGE>
as an investment advisor to any other person, firm or corporation, and may
perform management and any other services for any other person, association,
corporation, firm or other entity pursuant to any contract or otherwise, and
take any action or do any thing in connection therewith or related thereto; and
no such performance of management or other services or taking of any such action
or doing of any such thing shall be in any manner restricted or otherwise
affected by any aspect of any relationship of the Manager to or with the Trust
or deemed to violate or give rise to any duty or obligation of the Manager to
the Trust except as otherwise imposed by law. The Trust recognizes that the
Manager, in effecting transactions for its various accounts, may not always be
able to take or liquidate investment positions in the same security at the same
time and at the same price.
(b) In connection with purchases or sales of securities for
the account of the Trust, neither the Manager nor any of its Trustees, officers
or employees will act as a principal or agent or receive any commission except
as permitted by the 1940 Act. The Manager shall arrange for the placing of all
orders for the purchase and sale of securities for the Trust's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager is directed at all times to
seek for the Trust the most favorable execution and net price available except
as described herein. It is also understood that it is desirable for the Trust
that the Manager have access to supplemental investment and market research and
security and economic analyses provided by brokers who may execute brokerage
transactions at a higher cost to the Trust than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Manager is authorized to place orders for
the purchase and sale of securities for the Trust with such brokers, subject to
review by the Trust's Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided by
such brokers may be useful to the Manager in connection with its or its
affiliates' services to other clients.
(c) On occasions when the Manager deems the purchase or sale
of a security to be in the best interest of the Trust as well as other clients,
the Manager, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Manager in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Trust and to
such clients.
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<PAGE>
7. This Agreement shall become effective on the date hereof and shall
remain in force until May, 1997 and from year to year thereafter, but only so
long as its continuance is approved annually by a vote of the Trustees of the
Trust voting in person, including a majority of its Trustees who are not parties
to this Agreement or "interested persons" (as defined in the 1940 Act) of any
such parties, at a meeting of Trustees called for the purpose of voting on such
approval or by a vote of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Trust, subject to the right of the Trust and the
Manager to terminate this contract as provided in Section 8 hereof.
8. Either party hereto may, without penalty, terminate this Agreement
by vote of its Board of Trustees or Directors, as the case may be, or by vote of
a "majority of its outstanding voting securities" (as defined in the 1940 Act)
and the giving of 60 days' written notice to the other party.
9. This Agreement shall automatically terminate in the event of its
assignment. For purposes of this Agreement, the term "assignment" shall have the
meaning given it by Section 2(a)(4) of the 1940 Act.
10. The Trust agrees that in the event that neither the Manager nor any
of its affiliates acts as an investment adviser to the Trust, the name of the
Trust will be changed to one that does not contain the name "Pioneer" or
otherwise suggest an affiliation with the Manager.
11. The Manager is an independent contractor and not an employee of the
Trust for any purpose. If any occasion should arise in which the Manager gives
any advice to its clients concerning the shares of the Trust, the Manager will
act solely as investment counsel for such clients and not in any way on behalf
of the Trust or any series thereof.
12. This Agreement states the entire agreement of the parties hereto,
and is intended to be the complete and exclusive statement of the terms hereof.
It may not be added to or changed orally, and may not be modified or rescinded
except by a writing signed by the parties hereto and in accordance with the 1940
Act, when applicable.
13. This Agreement and all performance hereunder shall be governed by
and construed in accordance with the laws of The Commonwealth of Massachusetts.
14. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective
to the extent of such invalidity or
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<PAGE>
unenforceability without rendering invalid or unenforceable the remaining terms
or provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.
15. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers and their seal to be hereto affixed
as of the day and year first above written.
ATTEST: PIONEER II
By:
Joseph P. Barri John F. Cogan, Jr.
Secretary Chairman and President
ATTEST: PIONEERING MANAGEMENT
CORPORATION
By:
Joseph P. Barri David D. Tripple
Secretary President
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EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made as of the
day of April, 1996, by and between Pioneer II, a
Massachusetts business trust (the "Current Fund"), and Pioneer II, a business
trust duly formed under the laws of the State of Delaware (the "Successor
Trust").
This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368 (a)(1) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), and is intended to effect the
reorganization (a "reorganization") of the Current Fund, as a new separate
series of the Successor Trust. The reorganization will involve the transfer of
all of the assets of the Current Fund to the sole series of the Successor Trust
(the "Successor Fund") solely in exchange for (1) assumption by the Successor
Fund of all liabilities of the Current Fund and (2) the issuance of shares of
beneficial interest (the "Successor Shares") by the Successor Trust on behalf of
the Successor Fund to the Current Fund, followed by the pro rata distribution on
the Closing Date (as defined below) of the Successor Shares to the holders of
shares of beneficial interest of the Current Fund (the "Current Fund
Shareholders") in exchange for their shares of the Current Fund in liquidation
and termination of the Current Fund, all upon the terms and conditions
hereinafter set forth in this Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth the parties hereto covenant and agree as follows.
1. TRANSFER OF ASSETS OF THE CURRENT FUND IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF SUCCESSOR SHARES OF THE SUCCESSOR TRUST;
TERMINATION OF THE CURRENT FUND
1.1 Subject to the terms and conditions set forth herein and on the
basis of the representations and warranties contained herein, the Current Fund
agrees to transfer all of the assets of the Current Fund as set forth in
paragraph 1.2 and assign and transfer all of its liabilities to the Successor
Fund of the Successor Trust which has been established solely for the purpose of
acquiring all of the assets and assuming all of the liabilities of the Current
Fund. The Successor Trust has not issued any Shares or commenced operations. The
Successor Trust on behalf of the Successor Fund agrees that in exchange for all
of the assets of the Current Fund (1) the Successor Fund shall assume all of the
liabilities of the Current Fund, whether contingent or otherwise, then existing,
and further (2) the Successor Trust shall deliver to the Current Fund the number
of full and fractional Successor
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Shares equal to the value of the assets of the Current Fund transferred to the
Successor Fund, minus the liabilities of the Current Fund assumed by the
Successor Fund (the "Net Assets"), as described in paragraph 3.1 on the Closing
Date provided for in paragraph 3.1. Such transactions shall take place at the
Closing provided for in paragraph 3.1.
1.2 The assets of the Current Fund to be acquired by the Successor Fund
shall include, without limitation, all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), any claims or rights
of action or rights to register shares under applicable securities laws, any
books or records of the Current Fund and other property owned by the Current
Fund and any deferred or prepaid expenses shown as assets on the books of the
Current Fund on the Closing Date provided for in paragraph 3.1.
1.3 Immediately upon delivery to the Current Fund of Successor Shares,
any duly authorized officer of the Current Fund shall cause the Current Fund, as
the then sole shareholder of the Successor Fund, to (i) elect as Trustees of the
Successor Trust the persons who currently serve as Trustees of the Current Fund;
(ii) ratify the selection of the independent accountants; (iii) approve an
investment advisory agreement for the Successor Fund in the form currently
approved by the shareholders of the Current Fund; (iv) approve a Rule 12b-1 plan
in the form currently in place with respect to the Current Fund; and (v) adopt,
on behalf of the Successor Fund, the investment objectives, investment policies
and investment restrictions of the Current Fund.
1.4 As provided in paragraph 3.4, on the Closing Date the Current Fund
will distribute in liquidation the Successor Shares pro rata in proportion to
the Current Fund's respective shares of beneficial interest in the Current Fund
("Current Fund Shares") to Current Fund Shareholders of record determined as of
the close of business on the Closing Date, in exchange for the Current Fund
Shares. Such distribution will be accomplished by the transfer of the Successor
Shares then credited to the account of the Current Fund on the share records of
the Successor Trust to open accounts on those records in the names of the
Current Fund Shareholders and representing the respective pro rata number of the
Successor Shares received from the Successor Trust on behalf of the Successor
Fund due the Current Fund Shareholders. The Successor Trust shall not issue
certificates representing Successor Shares in connection with such distribution.
Fractional Successor Shares shall be rounded to the third place after the
decimal point.
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1.5 As soon as practicable after the distribution of the Successor
Shares as set forth in Section 1.4, the Current Fund shall be terminated and any
such further actions shall be taken in connection therewith as are required by
applicable law.
1.6 Ownership of the Successor Shares of each Successor Fund
Shareholder shall be maintained separately on the books of Pioneering Services
Corporation as the Successor Trust's shareholder services and transfer agent.
1.7 Any transfer taxes payable upon issuance of Successor Shares in a
name other than the registered holder of the Current Fund Shares on the books of
the Current Fund as of that time shall be paid by the person to whom such
Successor Shares are to be distributed as a condition of such transfer.
2. VALUATION
2.1 The value of the Current Fund's Net Assets to be acquired by the
Successor Trust on behalf of the Successor Fund hereunder shall be the net asset
value computed as of the valuation time provided in the Current Fund's
prospectus on the Closing Date using the valuation procedures set forth in the
Current Fund's current prospectus or statement of additional information.
2.2 The value of full and fractional Successor Shares to be issued in
exchange for the Current Fund's Net Assets shall be equal to the value of the
Net Assets of the Current Fund on the Closing Date, and the number of such
Successor Shares shall equal the number of full and fractional Current Fund
Shares of the Current Fund on the Closing Date.
2.3 All computations of value shall be made by Brown Brothers Harriman
& Co. as custodian for the Current Fund and the Successor Trust.
3. CLOSING AND CLOSING DATE
3.1 The transfer of the Current Fund's assets in exchange for the
assumption by the Successor Fund of the Current Fund's liabilities and the
issuance of Successor Shares to the Current Fund, as described above, together
with related acts necessary to consummate such acts (the "Closing"), shall occur
at the offices of Hale and Dorr at 60 State Street, Boston, Massachusetts 02109
on April 30, 1996 ("Closing Date"), or at such other place or date on or prior
to May 31, 1996 as the parties may agree in writing.
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All acts taking place at the Closing shall be deemed to take place
simultaneously as of the last daily determination of the net asset value of any
Current Fund or at such other time and/or place as the parties may agree.
3.2 In the event that on the Closing Date (a) the New York Stock
Exchange is closed to trading or trading thereon is restricted or (b) trading or
reporting of trading on said Exchange or in any market in which portfolio
securities of any Current Fund are traded is disrupted so that accurate
appraisal of the value of the total net assets of the Current Fund is
impracticable, the Closing shall be postponed until the first business day upon
which trading shall have been fully resumed and reporting shall have been
restored.
3.3 The Current Fund shall deliver at the Closing a certificate or
separate certificates of an authorized officer stating that it has notified the
Custodian, as custodian for the Current Fund, of the Current Fund's
reorganization as the Successor Fund.
3.4 Pioneering Services Corporation, as shareholder services and
transfer agent for the Current Fund, shall deliver at the Closing a certificate
as to the conversion on its books and records of the Current Fund Shareholder
account to an account as a holder of Successor Shares. The Successor Trust shall
issue and deliver to the Current Fund a confirmation evidencing the Successor
Shares to be credited on the Closing Date or provide evidence satisfactory to
the Current Fund that such Successor Shares have been credited to the Current
Fund's account on the books of the Successor Trust. At the Closing each party
shall deliver to the other such bills of sale, checks, assignments, stock
certificates, receipts or other documents as such other party or its counsel may
reasonably request.
3.5 Portfolio securities that are not held in book-entry form in the
name of the Custodian as record holder for the Current Fund shall be presented
by the Current Fund to the Custodian for examination no later than five business
days preceding the Closing Date. Portfolio securities which are not held in
book-entry form shall be delivered by the Current Fund to the Custodian for the
account of the Successor Fund on the Closing Date, duly endorsed in proper form
for transfer, in such condition as to constitute good delivery thereof in
accordance with the custom of brokers, and shall be accompanied by all necessary
federal and state stock transfer stamps or a check for the appropriate purchase
price thereof. Portfolio securities held of record by the Custodian in
book-entry form on behalf of the Current Fund shall be delivered to the
Successor Fund by the Custodian by recording the transfer
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of beneficial ownership thereof on its records. The cash delivered shall be in
the form of currency or by the Custodian crediting the Successor Fund' account
maintained with the Custodian with immediately available funds.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Current Fund represents and warrants as follows:
4.1.A. The Current Fund is a business trust duly organized,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts and has the power to own all of its properties and assets and,
subject to approval by the shareholders of the Current Fund, to perform its
obligations under this Agreement. The Current Fund is not required to qualify to
do business in any jurisdiction in which it is not so qualified or where failure
to qualify would not subject it to any material liability or disability. The
Current Fund has all necessary federal, state and local authorizations to own
all of its properties and assets and to carry on its business as now being
conducted;
4.1.B. The Current Fund is a registered investment company
classified as a management company of the open-end type and its registration
with the Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
is in full force and effect;
4.1.C. The Current Fund is not, and the execution, delivery
and performance of this Agreement will not result, in violation of any provision
of its Declaration of Trust or By-laws, or any agreement, indenture, instrument,
contract, lease or other undertaking to which the Current Fund is a party or by
which the Current Fund is bound;
4.1.D. The Current Fund has no material contracts or other
commitments (other than this Agreement or agreements on behalf of a Current Fund
for the purchase of securities entered into in the ordinary course of business
and consistent with its obligations under this Agreement) that will not be
terminated without liability to the Current Fund on or prior to the Closing
Date;
4.1.E. No material litigation or administrative proceeding or
investigation of or before any court or governmental body presently is pending
or threatened against the Current Fund or any of its properties or assets. The
Current Fund knows of no facts that might form the basis for the institution of
such proceedings and the Current Fund is not a party to, or subject to,
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the provisions of any order, decree or judgment of any court or governmental
body that materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
4.1.F. At the date hereof and at the Closing Date, all
federal, state and other tax returns and reports, including information returns
and payee statements, of the Current Fund required by law to have been filed or
furnished by such dates shall have been filed or furnished and all federal,
state and other taxes, interest and penalties shall have been paid so far as due
or provision shall have been made for the payment thereof and no such return is
currently under audit and no assessment has been asserted with respect to any of
such returns or reports;
4.1.G. The Current Fund has elected to be treated as a
regulated investment company under Subchapter M of the Code, has qualified as
such for each taxable year since its inception, and will qualify as such as of
the Closing Date;
4.1.H. The authorized capital of the Current Fund consists of
an unlimited number of shares of beneficial interest. All issued and outstanding
shares of beneficial interest of the Current Fund are, and at the Closing Date
will be, duly and validly issued and outstanding, fully paid and nonassessable.
The Current Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of its shares of beneficial interest, nor is
there outstanding any security convertible into any of its shares of beneficial
interest;
4.1.I. The information to be furnished by the Current Fund for
use in applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with federal securities and other laws and regulations
thereunder applicable thereto;
4.1.J. All of the issued and outstanding Current Fund Shares
will at the time of the Closing be held by the persons and in the amounts as
certified in accordance with the provisions of paragraph 3.4;
4.1.K. At the Closing Date, the Current Fund will have good
and marketable title to the assets to be transferred to the Successor Fund
pursuant to paragraph 1.1, and full right, power and authority to sell, assign,
transfer and deliver such assets hereunder, and upon delivery and in payment for
such assets, the
B-6
<PAGE>
Successor Fund will acquire good and marketable title thereto subject to no
restrictions on the full transfer thereof, including such restrictions as might
arise under the Securities Act of 1933, as amended;
4.1.L. The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Current Fund and this Agreement constitutes
a valid and binding obligation of the Current Fund enforceable in accordance
with its terms, subject to the approval of the Current Fund's Shareholders; and
4.1.M. No consent, approval, authorization or order of any
court or governmental authority is required for the consummation by the Current
Fund of the transactions contemplated herein, except such as shall have been
obtained prior to the Closing Date.
4.2 The Successor Trust represents and warrants as follows:
4.2.A. The Successor Trust is a business trust duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the power to own all of its properties and assets and to perform its
obligations under this Agreement; the Successor Trust is not required to qualify
to do business in any jurisdiction in which it is not so qualified or where
failure to qualify would not subject it to any material liability or disability;
the Successor Trust has all necessary federal, state and local authorizations to
own all of its properties and assets and to carry on its business as now being
conducted; that as of the date hereof and as of the Closing Date, the Successor
Fund is the only series of the Successor Trust; and the Successor Fund is a duly
established and designated series of the Successor Trust;
4.2.B. The Successor Trust is not, and the execution, delivery
and performance of this Agreement will not result, in violation of any provision
of the Declaration of Trust or By-laws of the Successor Trust or any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Successor Trust is a party or by which the Successor Trust is bound;
4.2.C. No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened against the Successor Trust or any of its properties or assets.
The Successor Trust knows of no facts that might form the basis for the
institution of such proceedings, and the Successor Trust is not a party to, or
B-7
<PAGE>
subject to, the provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects its business or its
ability to consummate the transactions herein contemplated;
4.2.D. The Successor Trust will cause the Successor Fund to
qualify as a regulated investment company under subchapter M of the Code for the
taxable year in which the Closing occurs and to continue to qualify as such for
each taxable year;
4.2.E. Prior to the Closing Date, there shall be no issued and
outstanding Successor Shares or any other securities of the Successor Trust;
Successor Shares issued in connection with the transactions contemplated herein
will be duly and validly issued and outstanding and fully paid and non-
assessable;
4.2.F. The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of the
Successor Trust, and this Agreement constitutes a valid and binding obligation
of the Successor Trust enforceable against the Successor Trust in accordance
with its terms;
4.2.G. The information to be furnished by the Successor Trust
for use in applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with Federal securities and other laws and regulations
applicable thereto; and
4.2.H. No consent, approval, authorization or order of any
court or governmental authority is required for the consummation by the
Successor Trust of the transactions contemplated herein, except such as shall
have been obtained prior to the Closing Date.
5. COVENANTS OF THE CURRENT FUND AND THE SUCCESSOR TRUST
5.1 The Current Fund covenants that the Successor Shares are not being
acquired for the purpose of making any distribution thereof, other than in
accordance with the terms of this Agreement.
5.2 The Current Fund covenants that it will assist the Successor Trust
in obtaining such information as the Successor Trust reasonably requests
concerning the beneficial ownership of Current Fund Shares.
B-8
<PAGE>
5.3 The Current Fund will, from time to time, as and when requested by
the Successor Trust execute and deliver, or cause to be executed and delivered,
all such assignments and other instruments, and will take or cause to be taken
such further action, as the Successor Trust may deem necessary or desirable in
order to vest in, and confirm to, the Successor Fund, title to, and possession
of, all the assets of the Current Fund to be sold, assigned, transferred and
delivered hereunder and otherwise to carry out the intent and purpose of this
Agreement.
5.4 The Successor Trust will, from time to time, as and when requested
by the Current Fund, execute and deliver or cause to be executed and delivered
all such assignments and other instruments, and will take or cause to be taken
such further action, as the Current Fund may deem necessary or desirable in
order to vest in, and confirm to, the Current Fund, on behalf of the Current
Funds, title to, and possession of, the Successor Shares issued, sold, assigned,
transferred and delivered hereunder and otherwise to carry out the intent and
purpose of this Agreement.
5.5 The Successor Trust shall use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such
state securities laws as it may deem appropriate in order to operate after the
Closing Date.
5.6 Subject to the provisions of this Agreement, the Successor Trust
and the Current Fund each will take, or cause to be taken, all action and will
do or cause to be done all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.7 As promptly as practicable, but in any event within 60 days after
the Closing Date, the Current Fund shall furnish to the Successor Trust, in such
form as is reasonably satisfactory to the Successor Trust, a statement of the
earnings and profits of the Current Fund for federal income tax purposes, and of
any capital loss carryovers and other items that will be carried over to the
Successor Fund as a result of Section 381 of the Code, and which statement will
be certified by the President or Treasurer of the Current Fund.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE CURRENT FUND
The obligations of the Current Fund to consummate the transactions
provided for herein shall be subject to the performance by the Successor Trust
of all the obligations to be performed by the Successor Trust hereunder on or
before the Closing Date and, in addition thereto, to the following further
conditions:
B-9
<PAGE>
6.1 All representations and warranties of the Successor Trust contained
in this Agreement shall be true and correct in all material respects as of the
date hereof except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date; and
6.2 The Successor Trust shall have delivered on the Closing Date to the
Current Fund a certificate executed in the Successor Trust's name by its
President or Vice President, in form and substance satisfactory to the Current
Fund, dated as of the Closing Date, to the effect that the representations and
warranties of the Successor Trust made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Current Fund
shall reasonably request.
Each of the foregoing conditions precedent may be waived by the Current Fund.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SUCCESSOR TRUST
The obligations of the Successor Trust to consummate the transactions
provided for herein shall be subject to the performance by the Current Fund of
all the obligations to be performed by the Current Fund hereunder on or before
the Closing Date and, in addition thereto, to the following further conditions:
7.1 All representations and warranties of the Current Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date;
7.2 The Current Fund shall have delivered to the Successor Trust on the
Closing Date a statement of the Current Fund's assets and liabilities, prepared
in accordance with generally accepted accounting principles consistently
applied, together with a certificate of the Treasurer or Assistant Treasurer of
the Current Fund as to its portfolio securities and the Current Fund's federal
income tax basis and holding period for each such portfolio security as of the
Closing Date; and
7.3 The Current Fund shall have delivered to the Successor Trust on the
Closing Date a certificate executed in the Current Fund's name by its President
or Vice President, in form and substance satisfactory to the Successor Trust,
dated as of the Closing Date, to the effect that the representations and
B-10
<PAGE>
warranties of the Current Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Successor
Trust shall reasonably request.
Each of the foregoing conditions precedent may be waived by the
Successor Trust.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE CURRENT FUND AND THE
SUCCESSOR TRUST
The obligations of the Current Fund and the Successor Trust are each
subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the Current Fund's Shareholders in
accordance with applicable law;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with,
the transactions contemplated hereby;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state securities authorities) deemed necessary by the
Successor Trust or the Current Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Successor Trust or the Current Fund, provided that either party hereto may for
itself waive any of such conditions;
8.4 The President of the Successor Trust shall have delivered a
certificate to the Current Fund on the Closing Date certifying that the
Successor Trust has taken all necessary action so that it shall be a registered
open-end investment company under the 1940 Act; and
8.5 The Current Fund and the Successor Trust shall have received on or
before the Closing Date an opinion of Hale and Dorr satisfactory to the Current
Fund and the Successor Trust, substantially to the effect that, with respect to
the Current Fund, for federal income tax purposes:
B-11
<PAGE>
8.5.A. The acquisition of all of the assets of a
Current Fund by the Successor Fund solely in exchange for the
issuance of Successor Shares to the Current Fund and the
assumption by the Successor Fund of all of the liabilities of
the Current Fund, followed by the distribution in liquidation
by the Current Fund of such Successor Shares to the Current
Fund Shareholders in exchange for their Current Fund Shares
and the termination of the Current Fund, will constitute a
reorganization within the meaning of Section 368(a)(1) of the
Code, and the Current Fund and the Successor Fund will each be
"a party to a reorganization" within the meaning of Section
368(b) of the Code;
8.5.B. No gain or loss will be recognized by the
Current Fund upon (i) the transfer of all of its assets to the
Successor Fund solely in exchange for the issuance of
Successor Shares to the Current Fund and the assumption by the
Successor Fund of the Current Fund's liabilities and (ii) the
distribution by the Current Fund of the Successor Shares to
the Current Fund Shareholders;
8.5.C. No gain or loss will be recognized by any
Successor Fund upon its receipt of all of the Current Fund's
assets solely in exchange for the issuance of the Successor
Shares to the Current Fund and the assumption by the Successor
Fund of all of the liabilities of the Current Fund;
8.5.D. The tax basis of the assets acquired by a
Successor Fund from the Current Fund will be the same as the
tax basis of those assets in the Current Fund's hands
immediately before the transfer;
8.5.E. The tax holding period of the assets of the
Current Fund in the hands of the Successor Fund will include
the Current Fund's tax holding period for those assets;
8.5.F. The Current Fund's Shareholders will not
recognize gain or loss upon the exchange of all of their
Current Fund Shares solely for Successor Shares as part of the
transaction;
8.5.G. The tax basis of the Successor Shares received
by Current Fund Shareholders in the transaction will be, for
each shareholder, the same as the tax basis of the Current
Fund Shares surrendered in exchange therefor; and
B-12
<PAGE>
8.5.H. The tax holding period of the Successor Shares
received by Current Fund Shareholders will include, for each
such Shareholder, the tax holding period for the Current Fund
Shares surrendered in exchange therefor, provided that the
Current Fund Shares were held as capital assets on the date of
the exchange.
The Current Fund and Successor Trust each agree to make and provide
representations with respect to the Current Fund and the Successor Fund which
are reasonably necessary to enable Hale and Dorr to deliver an opinion
substantially as set forth in this paragraph 8.5, which opinion may address such
other federal income tax consequences, if any, as Hale and Dorr believes to be
material to the transaction.
Each of the foregoing conditions precedent to the obligations of a
party, except for the receipt of the opinion of Hale and Dorr set forth in
paragraph 8.5, may be waived by that party.
9. BROKERAGE FEES AND EXPENSES
9.1 The Successor Trust and the Current Fund each represent and warrant
to the other that there are no broker's or finder's fees payable in connection
with the transactions contemplated hereby.
9.2 The Current Fund and the Successor Fund shall each be liable for
its own expenses incurred in connection with entering into and carrying out the
provisions of this Agreement whether or not the transactions contemplated hereby
are consummated; if the transactions are consummated, such expenses of the
Current Fund will be assumed by the Successor Fund as part of the transactions.
10. ENTIRE AGREEMENT
The Successor Trust and the Current Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties. The
representations, warranties and covenants contained herein or in any document
delivered pursuant hereto or in connection herewith shall survive the
consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Successor Trust and the Current Fund. In addition, either the Successor Trust or
the Current Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
B-13
<PAGE>
11.1.A. There exists a material breach by the other
party of any representations, warranties or agreements
contained herein to be performed at or prior to the Closing
Date; or
11.1.B. A condition herein expressed to be precedent
to the obligations of the terminating party has not been met
and it reasonably appears that it will not or cannot be met.
11.2 In the event of any such termination, there shall be no liability
for damages on the part of the Successor Trust or the Current Fund, or their
respective trustees, directors or officers, to the other party or its trustees,
directors or officers.
12. AMENDMENT
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the parties; provided, however,
that following the approval of this Agreement by the Current Funds'
Shareholders, no such amendment may have the effect of changing the provisions
for determining the number of Successor Shares to be paid to the Current Fund
Shareholders under this Agreement to the detriment of the Current Fund
Shareholders without their further approval.
13. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
13.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of The Commonwealth of Massachusetts.
13.4 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder shall be
made by any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation other than the parties hereto and their
respective successors and assigns any rights or remedies under or by reason of
this Agreement.
B-14
<PAGE>
13.5 All persons dealing with the Successor Trust must look solely to
the property of the Successor Trust for the enforcement of any claims against
the Successor Trust as neither the Trustees, officers, agents nor shareholders
of the Successor Trust assume any personal liability for obligations entered
into on behalf of the Successor Trust. No other series of the of the Successor
Trust hereafter established shall be responsible for any obligations assumed by
the Successor Trust on behalf of the Successor Fund under this Agreement.
13.6 A copy of the Agreement and Declaration of Trust of the Current
Fund is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the Trustees of the Current Fund as trustees and not individually and
that the obligations of this instrument are not binding upon any of the
trustees, officers, or shareholders of the Current Fund individually, but are
binding only upon the assets and property of the Current Fund.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Current Fund or the
Successor Trust, each at 60 State Street, Boston, Massachusetts 02109,
Attention: Secretary.
B-15
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
PIONEER II
By:_____________________________
Its:____________________________
Title
PIONEER II
a Delaware business trust,
on behalf of Pioneer II
By:_____________________________
Its:____________________________
Title
B-16
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated October 27, 1995 included in Pioneer II's 1995 Annual Report (and to all
references to our firm) included in or made a part of the Pioneer II
Post-Effective Amendment No. 45 and Amendment No. 28 to Registration Statement
File Nos. 2-32773 and 811-1835, respectively.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 29, 1996
[ARTICLE] 6
[CIK] 0000078758
[NAME] PIONEER II
[MULTIPLIER] 1000
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 4171726
[INVESTMENTS-AT-VALUE] 5079767
[RECEIVABLES] 59992
[ASSETS-OTHER] 132
[OTHER-ITEMS-ASSETS] 23368
[TOTAL-ASSETS] 5163259
[PAYABLE-FOR-SECURITIES] 34278
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 14018
[TOTAL-LIABILITIES] 48296
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 3829049
[SHARES-COMMON-STOCK] 247541
[SHARES-COMMON-PRIOR] 232692
[ACCUMULATED-NII-CURRENT] 44394
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 333699
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 907821
[NET-ASSETS] 5114963
[DIVIDEND-INCOME] 114455
[INTEREST-INCOME] 14628
[OTHER-INCOME] 0
[EXPENSES-NET] (42056)
[NET-INVESTMENT-INCOME] 87027
[REALIZED-GAINS-CURRENT] 402697
[APPREC-INCREASE-CURRENT] 377142
[NET-CHANGE-FROM-OPS] 866866
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (71692)
[DISTRIBUTIONS-OF-GAINS] (415685)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 14703
[NUMBER-OF-SHARES-REDEEMED] 27190
[SHARES-REINVESTED] 27336
[NET-CHANGE-IN-ASSETS] 605738
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 389305
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 21051
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 43240
[AVERAGE-NET-ASSETS] 4648535
[PER-SHARE-NAV-BEGIN] 19.38
[PER-SHARE-NII] 0.35
[PER-SHARE-GAIN-APPREC] 3.04
[PER-SHARE-DIVIDEND] 0.30
[PER-SHARE-DISTRIBUTIONS] 1.81
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 20.66
[EXPENSE-RATIO] 0.93
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
