[Pioneer Logo]
Pioneer
Europe Fund
Class A, Class B and Class C Shares
Prospectus
February 28, 1996
(revised September 23, 1996)
Pioneer Europe Fund (the "Fund") seeks long-term growth of capital. The
Fund pursues this objective by investing in a diversified portfolio
consisting primarily of securities of European companies and in Depositary
Receipts for such securities. Any current income generated from these
securities is incidental to the investment objective of the Fund. There is no
assurance that the Fund will achieve its investment objective.
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 Objective and Policies" for a discussion of
these risks.
This Prospectus provides information about the Fund that you should know
before investing. Please read and retain it for your future reference. More
information about the Fund is included in the Fund's Statement of Additional
Information, also dated February 28, 1996 (revised September 23, 1996), which
is incorporated into this Prospectus by reference. A copy of the Statement of
Additional Information may be obtained free of charge by calling Shareholder
Services at 1-800-225-6292 or by written request to the Fund at 60 State
Street, Boston, Massachusetts 02109. Additional information about the Fund
has been filed with the Securities and Exchange Commission (the "SEC") and is
available upon request and without charge.
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TABLE OF CONTENTS PAGE
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I. EXPENSE INFORMATION 2
II. FINANCIAL HIGHLIGHTS 2
III. INVESTMENT OBJECTIVE AND POLICIES 4
IV. EUROPE 6
Risk Factors 6
V. MANAGEMENT OF THE FUND 6
VI. FUND SHARE ALTERNATIVES 8
VII. SHARE PRICE 8
VIII. HOW TO BUY FUND SHARES 9
IX. HOW TO SELL FUND SHARES 12
X. HOW TO EXCHANGE FUND SHARES 13
XI. DISTRIBUTION PLANS 14
XII. DIVIDENDS, DISTRIBUTIONS AND TAXATION 14
XIII. SHAREHOLDER SERVICES 15
Account and Confirmation Statements 15
Additional Investments 15
Automatic Investment Plans 15
Financial Reports and Tax Information 15
Distribution Options 16
Directed Dividends 16
Direct Deposit 16
Voluntary Tax Withholding 16
Telephone Transactions and Related Liabilities 16
FactFoneSM 16
Retirement Plans 16
Telecommunications Device for the Deaf (TDD) 16
Systematic Withdrawal Plans 17
Reinstatement Privilege (Class A Shares Only) 17
XIV. THE FUND 17
XV. INVESTMENT RESULTS 17
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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.
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I. EXPENSE INFORMATION
This table is designed to help you understand the charges and expenses
that you, as a shareholder, will bear directly or indirectly when you invest
in the Fund. The table reflects annual operating expenses, based upon actual
expenses incurred for the fiscal year ended October 31, 1995. For Class C
shares, operating expenses are based on estimated expenses that would have
been incurred if Class C shares had been outstanding for the entire fiscal
year ended October 31, 1995.
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Class A Class B Class C+
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Shareholder Transaction Expenses:
Maximum Initial Sales Charge on
Purchases (as a percentage of
offering price) 5.75%1 None None
Maximum Sales Charge on Reinvestment
of Dividends None None None
Maximum Deferred Sales Charge
(as a percentage of original
purchase price or redemption
proceeds, as applicable) None1 4.00% 1.00%
Redemption fee2 None None None
Exchange fee None None None
Annual Operating Expenses
(as a percentage of average net assets):
Management fee 1.00% 1.00% 1.00%
12b-1 fees 0.21% 1.00% 1.00%
Other Expenses (including transfer
agent fee, custodian fees and
accounting and printing expenses) 0.88% 0.82% 0.82%
----- ----- -----
Total Operating Expenses 2.09% 2.82% 2.82%
===== ===== =====
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+ Class C shares were first offered on January 31, 1996.
1 Purchases of $1 million or more and purchases by participants in certain
group plans are not subject to an initial sales charge but may be subject
to a contingent deferred sales charge ("CDSC") as further described under
"How to Sell Fund Shares."
2 Separate fees (currently $10 and $20, respectively) apply to domestic and
international wire transfers of redemption proceeds.
Example:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return with or without redemption at the end of each of the time
periods:
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1 Year 3 Years 5 Years 10 Years
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Class A Shares $77 $119 $163 $286
Class B Shares
--Assuming complete
redemption at end of
period $69 $117 $169 $297
--Assuming no
redemption $29 $ 87 $149 $297
Class C shares**
--Assuming complete
redemption at end of
period $39 $ 87 $149 $315
--Assuming no
redemption $29 $ 87 $149 $315
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*Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used after year eight.
**Class C shares redeemed during the first year after purchase are subject to
a 1% CDSC.
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 may vary from year to year and may be higher or lower
than those shown.
For further information regarding management fees, 12b-1 fees and other
expenses of the Fund, see "Management of the Fund," "Distribution Plans" and
"How To Buy Fund Shares" in this Prospectus and "Management of the Fund" and
"Distribution Plans" in the Statement of Additional Information. The Fund's
payment of a 12b-1 fee may result in long-term shareholders indirectly paying
more than the economic equivalent of the maximum initial sales charge
permitted under the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD").
The maximum initial sales charge is reduced on purchases of specified
larger amounts of Class A shares and the value of shares owned in other
Pioneer mutual funds is taken into account in determining the applicable
initial sales charge. See "How to Buy Fund Shares." No sales charge is
applied to exchanges of shares of other publicly available Pioneer mutual
funds. See "How to Exchange Fund Shares."
II. FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP,
independent public accountants. Arthur Andersen LLP's report on the Fund's
financial statements as of October 31, 1995 appears in the Fund's Annual
Report, which is incorporated by reference into the Statement of Additional
Information. The information listed below should be read in conjunction with
the financial statements contained in the Fund's Annual Report. Class C
shares is a new class of shares; no financial highlights exist for Class C
shares. 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.
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PIONEER EUROPE FUND
Selected Data for a Class A Share Outstanding Throughout Each Period:
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4/2/91
(Commencement
For the Year Ended October 31, of operations to
--------------------------------------
1995+ 1994 1993 1992 10/31/91
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Net asset value, beginning of period $ 19.91 $ 17.73 $ 14.63 $ 15.20 $ 15.00
------ ------ ------ ------- ---------
Increase (decrease) from investment
operations:
Net investment income (loss) $ 0.12 $ 0.10 $ 0.04 $ 0.10 $ 0.00
Net realized and unrealized gain (loss)
on investments and
other forward foreign currency related
transactions 2.57 2.65 3.33 (0.62) 0.20
------ ------ ------ ------- ---------
Total increase (decrease) from
investment operations $ 2.69 $ 2.75 $ 3.37 $ (0.52) $ 0.20
Distribution to shareholders from:
Net investment income (0.01) (0.31) (0.09) (0.05) --
Net realized gains (1.40) (0.26) (0.18) 0.00 --
------ ------ ------ ------- ---------
Net increase (decrease) in net asset value $ 1.28 $ 2.18 $ 3.10 $ (0.57) $ 0.20
------ ------ ------ ------- ---------
Net asset value, end of period $ 21.19 $ 19.91 $ 17.73 $ 14.63 $ 15.20
====== ====== ====== ======= =========
Total return* 15.12% 15.97% 23.47% (3.46%) 1.33%
Ratio of net operating expenses to average
net assets 1.76%+++ 1.86% 2.00% 2.00% 2.00%**
Ratio of net investment income to average
net assets 0.59%+++ 0.28% 0.24% 0.74% 0.10%**
Portfolio turnover rate 61.51% 99.92% 68.58% 49.79% 7.34%**
Net assets, end of period (in thousands) $78,505 $67,375 $48,827 $35,205 $23,993
Ratios assuming no reduction of fees or
expenses by Pioneering Management
Corporation ("PMC"):
Net operating expenses 2.10% 2.48% 2.77% 3.46% 4.93%**
Net investment income (loss) 0.25% (0.34%) (0.53%) (0.72%) (2.83%)**
Ratios assuming a reduction of fees and
expenses by PMC and a reduction for
fees paid indirectly:
Net operating expenses 1.75%
Net investment loss (0.60%)
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Selected Data for a Class B Share Outstanding Throughout Each Period:
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For the April 4, 1994
Year to October
Ended 31,
10/31/95 1994
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Net asset value, beginning of period $19.80 $17.96
-------- --------
Increase (decrease) from investment operations:
Net investment income (loss) $(0.02) $ 0.01
Net realized and unrealized gain (loss) on investments and
other forward foreign currency related transactions 2.56 1.88
-------- --------
Total increase (decrease) from investment operations $ 2.54 $ 1.89
Distribution to shareholders from:
Net investment income (0.02) (0.05)
Net realized gain (loss) (1.40) (0.00)
-------- --------
Net increase (decrease) in net asset value $ 1.12 $ 1.84
-------- --------
Net asset value, end of period $20.92 $19.80
======== ========
Total return* 14.43% 10.55%
Ratio of net operating expenses to average net assets 2.49%+++ 2.47%**
Ratio of net investment income (loss) to average net assets (0.13%)+++ (0.75%)**
Portfolio turnover rate 61.51% 99.92%
Net assets, end of period (in thousands) $8,826 $3,037
Ratios assuming no reduction of fees or expenses by PMC:
Net operating expenses 2.85% 2.95%**
Net investment income (loss) (0.49%) (1.23%)**
Ratios assuming a reduction of fees and expenses by PMC and
a reduction for fees paid indirectly:
Net operating expenses 2.46%
Net investment loss (0.10%)
</TABLE>
+The per share data is based upon average shares outstanding for the period
presented.
+++Ratios include fees paid indirectly.
*Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
**Annualized.
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III. INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital. The Fund
pursues this objective by investing in a diversified portfolio consisting
primarily of securities of companies (a) that are organized under the laws of
a European country and have a principal office in a European country or (b)
that derive 50% or more of their total revenues from business in Europe or
(c) the equity securities of which are traded principally on a stock exchange
in Europe; and in Depositary Receipts for such securities (collectively,
"European Securities").
Under normal circumstances at least 80% of the assets of the Fund are
invested in European Securities consisting of common stock and in securities
with common stock characteristics, such as preferred stock, warrants and debt
securities convertible into common stock. The Fund will not invest more than
5% of its total assets in convertible debt securities rated at the time of
purchase by a national ratings agency below investment grade, i.e., BBB or
better by Moody's Investors Service ("Moody's") or Baa by Standard & Poor's
Ratings Group ("Standard & Poor's"). Such securities may have speculative
characteristics and changes in economic conditions or other circumstances may
lead to a lesser capacity to make principal and interest payments than is the
case with higher rated securities. In the event that the rating on a
convertible debt security is downgraded below investment grade, PMC, the
Fund's investment manager, will dispose of the security in a timely manner.
The Fund may invest the balance of its assets in Temporary Investments (as
defined below).
The Fund may invest in the securities of companies domiciled in any
European country, including but not limited to Austria, Belgium, Finland,
France, Germany, Italy, the Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, the United Kingdom and the countries of Eastern Europe in the
event that markets develop for those securities.
In pursuit of its objective, the Fund may pursue certain active management
techniques including options and futures. These techniques may be employed in
an attempt to hedge interest rate or other risks associated with the Fund's
securities. The risks associated with the Fund's transactions in options and
futures, which are considered to be derivative securities, may include some
or all of the following: market risk, leverage and volatility risk,
correlation risk, credit risk and liquidity and valuation risk.
Forward foreign currency contracts, options and futures contracts are
described below and in greater detail in the Statement of Additional
Information under the caption "Investment Policies and Restrictions."
The Fund's investment objective and certain investment restrictions
designated as fundamental set forth in the Statement of Additional
Information may not be changed without shareholder approval.
Forward Foreign Currency Contracts
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 United
States ("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, if PMC 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 PMC 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 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.
Options
To realize greater income than would be realized on portfolio transactions
alone, the Fund may write (sell) covered call and put options on any
securities in which it may invest or on any securities index based on
securities in which the Fund may invest. The Fund may also purchase put and
call options on such securities and indices.
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
4
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multiplier." In exchange for undertaking the obligation to make such a cash
payment in the event the option is exercised, 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 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. In the event of
market changes, the Fund's position in stock index options may not be easily
closed out. If PMC's forecasts regarding movements in securities prices are
incorrect, the Fund's investment results may have been better without the
hedge. The Fund has no present intention of investing more than 5% of the
Fund's total assets in securities index option transactions.
The Fund may also 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
with a pattern of correlation. Cross- hedging may also include using a
foreign currency as a proxy for the U.S. dollar if PMC 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. The Fund will only write or purchase
options on foreign currencies that are traded on U.S. or foreign exchanges or
over-the-counter. The Fund may sell an option it has purchased or a similar
option prior to the expiration of the purchased option in order to close out
its position in the purchased option. The Fund may also allow purchased
options to expire unexercised, which would result in the loss of the premium
paid. Options traded in the over-the-counter market may be considered
illiquid. 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 may not invest more than 10% of its net assets in premiums on
purchased options. See "Investment Policies and Restrictions" in the
Statement of Additional Information.
The Fund's transactions in forward currency contracts, futures and options
as described herein 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.
Investments in Depositary Receipts
The Fund may hold securities of foreign issuers in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") and other similar instruments or other
securities convertible into securities of eligible issuers. Generally, ADRs
in registered form are designed for use in U.S. securities markets, and EDRs
and GDRs and other similar global instruments in bearer form are designed for
use in non-U.S. securities markets.
ADRs are denominated in U.S. dollars and represent an interest in the
right to receive securities of foreign issuers deposited in a U.S. bank or
correspondent bank. ADRs do not eliminate all the risk inherent in investing
in the securities of non-U.S. issuers. However, by investing in ADRs rather
than directly in equity securities of non-U.S. issuers, the Fund will avoid
currency risks during the settlement period for either purchases or sales.
EDRs and GDRs are not necessarily denominated in the same currency as the
securities for which they may be exchanged. For purposes of the Fund's
investment policies, investments in ADRs, GDRs and similar instruments will
be deemed to be investments in the underlying equity securities of the
foreign issuers. The Fund may acquire depositary receipts from banks that do
not have a contractual relationship with the issuer of the security
underlying the depositary receipt to issue and secure such depositary
receipt. To the extent the Fund invests in such unsponsored depositary
receipts there may be an increased possibility that the Fund may not become
aware of events affecting the underlying security and thus the value of the
related depositary receipt. In addition, certain benefits (i.e., rights
offerings) which may be associated with the security underlying the
depositary receipt may not inure to the benefit of the holder of such
depositary receipt.
Futures Contracts
The Fund may purchase and sell futures contracts on securities, securities
indices, currencies and interest rates and purchase and write call and put
options on such futures contracts. The Fund may also enter into closing
purchase and sale transactions with respect to such futures contracts and
options. The Fund will engage in futures contracts and related options
transactions for bona fide hedging purposes as defined in regulations of the
Commodity Futures Trading Commission or to seek to increase total return to
the extent permitted by such regulations.
The Fund may not purchase or sell futures contracts or purchase related
options to increase total return, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of initial
margin deposits on the Fund's outstanding futures and the amount of premiums
paid for outstanding options on futures entered into for the purpose of
seeking to increase total return, adjusted to reflect the amount of any such
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option which is "in-the-money," would exceed 5% of the value of the Fund's
net assets. These transactions involve brokerage costs, require margin
deposits and, in the case of contracts and options obligating the Fund to
purchase securities or currencies, require the Fund to segregate assets to
cover such contracts and options. The loss incurred by the Fund in writing
options on futures is potentially unlimited and may exceed the amount of the
premium received.
Repurchase Agreements
The Fund may enter into repurchase agreements, generally not exceeding
seven days. Such repurchase agreements will be fully collateralized with
securities whose market value is not less than 100% of the obligation, valued
daily. Collateral will be held in a segregated, safekeeping account for the
benefit of the Fund. The Fund may be prevented from realizing the value of
the collateral by reason of an order of a court with jurisdiction over an
insolvency proceeding with respect to the other party to the repurchase
agreement.
Temporary Investments
Temporary Investments are short-term (less than 12 months to maturity)
obligations, consisting of: (a) obligations issued or guaranteed by the U.S.
government or the government of a European country or their respective
agencies or instrumentalities; (b) international organizations designated or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) 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 or A-1 or AA or better by Standard & Poor's; and (d) obligations
(including certificates of deposit, time deposits, demand deposits and
bankers' acceptances) of banks (located in the U.S. or in European countries)
with securities outstanding that are rated Prime-1 or Aa or better by Moody's
or A-1 or AA or better by Standard & Poor's.
The Fund may, for temporary defensive purposes, invest up to 100% of its
assets in Temporary Investments. The Fund may assume a temporary defensive
posture only when political and economic factors broadly affect one or more
European equity markets to such an extent that PMC believes there to be
extraordinary risks in being substantially fully invested.
Portfolio Turnover
Securities in the Fund's portfolio will be sold whenever PMC believes that
it is necessary without regard to length of time the particular security may
have been held. This policy is subject to certain requirements for continuing
the Fund's qualification as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"). A high portfolio turnover rate
(100% or more) involves greater expenses to the Fund and may increase the
possibility of shareholders realizing taxable capital gains. See "Financial
Highlights" for the actual turnover rates.
IV. EUROPE
PMC believes that a new and favorable environment for investing in Europe
has been created, and may continue to develop. One of the more significant
changes is the economic integration of the European Union ("EU") member
states. It is not possible to quantify the economic benefits that might have
been derived from the attainment of a single market among member states of
the EU. However, a single market is generally expected to reduce costs of
doing business, thereby resulting in a reduction of prices, and to spur
increased competition among businesses in member states. There can be no
assurance that such economic benefits will be realized.
Another development that may provide investment opportunities is the
development and expansion of free-market economies in Eastern Europe. The
Fund may invest up to 5% of its assets in securities of companies with
principal executive offices located in Eastern European countries and which
trade on recognized European securities exchanges. The Fund may also invest
in other European Securities whose issuers can benefit from the expansion of
free-market economies in Eastern European countries.
Risk Factors
Investing in securities of foreign companies and governments involves
certain considerations and risks which are not typically associated with
investing in securities of domestic companies and the U.S. government.
European companies are not subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to U.S.
companies. There may also be less government supervision and regulation of
European securities exchanges, brokers and listed companies than exists in
the United States. Interest and dividends paid by European issuers may be
subject to withholding and other foreign taxes which will decrease the net
return on such investments as compared to interest and dividends paid to a
fund by domestic companies or by the U.S. government.
In addition, the value of European securities may also be adversely
affected by fluctuations in the relative rates of exchange between the
currencies of different nations and by exchange control regulations. There
may be less publicly available information about European companies compared
to reports and ratings published about U.S. companies. European securities
markets generally have substantially less trading volume than domestic
markets and securities of some European companies are less liquid and more
volatile than securities of comparable U.S. companies. Brokerage commissions
in Europe are generally fixed, and other transaction costs on European
securities exchanges are generally higher than in the United States. To the
extent the Fund invests in securities of companies located in Eastern
European countries, there will be both country risks relating to the relative
brevity of the free-market movements in such countries and company risks
relating to the brevity of the public- company experience of such companies.
V. MANAGEMENT OF THE FUND
The Fund's Board of Trustees has overall responsibility for management and
supervision of the Fund. There are currently
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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 by
PMC, the Fund requires no employees other than its executive officers, all of
whom receive their compensation from PMC or other sources. The Statement of
Additional Information contains the names and general business and
professional background of each Trustee and executive officer of the Fund.
The Manager
The Fund is managed under a contract with PMC, which is responsible for
the overall management of the Fund's assets and business affairs, subject
only to the authority of the Board of Trustees. PMC is a wholly-owned
subsidiary of The Pioneer Group, Inc. ("PGI"), a publicly-traded Delaware
corporation. Pioneer Funds Distributor, Inc. ("PFD"), an indirect
wholly-owned subsidiary of PGI, is the principal underwriter of the Fund.
John F. Cogan, Jr., Chairman and President of the Fund, Chairman and a
Director of PMC, Chairman of PFD, and President and a Director of PGI,
beneficially owned approximately 15% of the outstanding capital stock of PGI
as of the date of this Prospectus.
All portfolios managed by PMC, including the Fund, are overseen by an
Investment Committee (the "Committee"), which consists of PMC's most senior
investment professionals. The Committee is chaired by Mr. David Tripple,
PMC's President and Chief Investment Officer and Executive Vice President of
the Fund. Mr. Tripple joined PMC in 1974 and has had general responsibility
for PMC's investment operations and specific portfolio assignments for over
five years.
Dr. Norman Kurland, Senior Vice President of PMC and Vice President of the
Fund, is generally responsible for the management of the international
portfolios managed by PMC. Dr. Kurland joined PMC in 1990 after working with
a variety of investment and industrial concerns. Patrick M. Smith, Vice
President of PMC, has been primarily responsible for day-to-day management of
the Fund since January 1994. Mr. Smith joined PMC in 1992 after working with
several investment advisers.
In addition to the Fund, PMC also manages and serves as the investment
adviser for other mutual funds and is an investment adviser to private
institutional accounts. PMC's and PFD's executive offices are located at 60
State Street, Boston, Massachusetts 02109. In an effort to avoid conflicts of
interest with the Fund, the Fund and PMC have adopted a Code of Ethics that
is designed to maintain a high standard of personal conduct by directing that
all personnel defer to the interests of the Fund and its shareholders in
making personal securities transactions.
In managing the Fund, PMC relies primarily on the knowledge, experience
and judgment of its research staff, but also receives and uses information
from a variety of outside sources, including brokerage firms, electronic data
bases, specialized research firms and technical journals.
Investment advisory services are provided to the Fund by PMC pursuant to a
management contract between PMC and the Fund. PMC assists in the management
of the Fund and is authorized in its discretion to buy and sell securities
for the account of the Fund. PMC pays all the ordinary operating expenses,
including executive salaries and the rental of 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 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 regulatory
agencies, 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 to 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 the Trust (other than as Trustees), PMC, 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 pays all brokers' and underwriting commissions chargeable to
the Fund in connection with securities transactions to which the Fund is a
party.
Effective April 30, 1994, as compensation for its management services and
certain expenses which the Manager incurs, the Manager is entitled to a
management fee equal to 1.00% per annum of the Fund's average daily net
assets up to $300 million, 0.85% of the next $200 million and 0.75% of the
excess over $500 million. While this fee, which is computed daily and paid
monthly, is higher than most management fees, the costs of managing an
international fund, such as the Fund, are significantly greater than the
costs of managing a domestic fund. These greater costs include staff time and
expenses required to deal with language, timing and geographic differences
relating to daily operations of the Fund. During the fiscal year ended
October 31, 1995, the Fund incurred expenses of $1,636,578, including
management fees paid or payable to PMC of $758,700.
Prior to March 1, 1996, PMC had agreed not to impose a portion of its
management fee to the extent that the Class A expenses of the Fund would
otherwise exceed 1.75% of the Fund's average daily net assets attributable to
the Class A
7
<PAGE>
shares; the portion of the management fee attributable to Class B shares was
waived only to the extent the fee is waived for Class A shares. During the
fiscal year ended October 31, 1995, this arrangement resulted in a reduction
of the Fund's management fee of $258,946. See the Statement of Additional
Information for more information.
The primary objective of PMC in placing orders for the purchase and sale
of securities for the Fund's portfolio is to obtain the most favorable net
results taking into account such factors as price, commission, size of order,
difficulty of execution and skill required of the broker-dealer. Brokerage
commissions in European countries are generally fixed and other transaction
costs on European securities exchanges are generally higher than in the U.S.
Orders for the Fund's portfolio securities transactions are placed by PMC,
which strives to obtain the best price and execution for each transaction. In
circumstances in which two or more broker-dealers are in a position to offer
comparable prices and execution, consideration may be given to whether the
broker-dealer provides investment research or brokerage services or sells
shares of any Pioneer mutual fund. See the Statement of Additional
Information for a further description of brokerage allocation practices.
VI. FUND SHARE ALTERNATIVES
The Fund continuously offers three Classes of shares designated as Class
A, Class B and Class C shares, as described more fully in "How to Buy Fund
Shares." If you do not specify in your instructions to the Fund which Class
of shares you wish to purchase, exchange or redeem, the Fund will assume that
your instructions apply to Class A shares.
Class A Shares. If you invest less than $1 million in Class A shares, you
will pay an initial sales charge. Certain purchases may qualify for reduced
initial sales charges. If you invest $1 million or more in Class A shares, no
sales charge will be imposed at the time of purchase, however, shares
redeemed within 12 months of purchase may be subject to a CDSC. Class A
shares are subject to distribution and service fees at a combined annual rate
of up to 0.25% of the Fund's average daily net assets attributable to Class A
shares.
Class B Shares. If you plan to invest up to $250,000, Class B shares are
available to you. Class B shares are sold without an initial sales charge,
but are subject to a CDSC of up to 4% if redeemed within six years. Class B
shares are subject to distribution and service fees at a combined annual rate
of 1% of the Fund's average daily net assets attributable to Class B shares.
Your entire investment in Class B shares is available to work for you from
the time you make your investment, but the higher distribution fee paid by
Class B shares will cause your Class B shares (until conversion) to have a
higher expense ratio and to pay lower dividends, to the extent dividends are
paid, than Class A shares. Class B shares will automatically convert to Class
A shares, based on relative net asset value, eight years after the initial
purchase.
Class C Shares. Class C shares are sold without an initial sales charge,
but are subject to a 1% CDSC if they are redeemed within the first year after
purchase. Class C shares are subject to distribution and service fees at a
combined annual rate of up to 1% of the Fund's average daily net assets
attributable to Class C shares. Your entire investment in Class C shares is
available to work for you from the time you make your investment, but the
higher distribution fee paid by Class C shares will cause your Class C shares
to have a higher expense ratio and to pay lower dividends, to the extent
dividends are paid, than Class A shares. Class C shares have no conversion
feature.
Selecting a Class of Shares. The decision as to which Class to purchase
depends on the amount you invest, the intended length of the investment and
your personal situation. If you are making an investment that qualifies for
reduced sales charges, you might consider Class A shares. If you prefer not
to pay an initial sales charge on an investment of $250,000 or less and you
plan to hold the investment for at least six years, you might consider Class
B shares. If you prefer not to pay an initial sales charge and you plan to
hold your investment for one to eight years, you may prefer Class C shares.
Investment dealers or their representatives may receive different
compensation depending on which Class of shares they sell. Shares may be
exchanged only for shares of the same Class of another Pioneer mutual fund
and shares acquired in the exchange will continue to be subject to any CDSC
applicable to the shares of the Fund originally purchased. Shares sold
outside the U.S. to persons who are not U.S. citizens may be subject to
different sales charges, CDSCs and dealer compensation arrangements in
accordance with local laws and business practices.
VII. SHARE PRICE
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 a Class of the Fund is determined by dividing the fair market value
of its assets, less liabilities attributable to that Class, by the number of
shares of that Class outstanding. The net asset value is computed once daily,
on each day the New York Stock Exchange (the "Exchange") is open, as of the
close of regular trading on the Exchange.
Securities are valued at the last sale price on the principal exchange or
market where they are traded. Securities which have not traded on the date of
valuation, or securities for which sales prices are not generally reported,
are valued at the mean between the current bid and asked prices. Securities
quoted in foreign currencies are converted to U.S. dollars utilizing foreign
exchange rates employed by the Fund's independent pricing services.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of regular trading on the Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are
also generally determined prior to the close of regular trading on the
Exchange. Occa
8
<PAGE>
sionally, events which affect the values of such securities and such exchange
rates may occur between the times at which they are determined and the close
of regular trading on the Exchange and will therefore not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities are
valued at their fair value as determined in good faith by the Trustees. All
assets of the Fund for which there is no other readily available valuation
method are valued at their fair value as determined in good faith by the
Trustees.
VIII. HOW TO BUY FUND SHARES
You may buy Fund shares from any securities broker- dealer which has a
sales agreement with PFD. If you do not have a securities broker-dealer,
please call 1-800-225- 6292. Shares will be purchased at the public offering
price, that is, the net asset value per share plus any applicable sales
charge, next computed after receipt of a purchase order, except as set forth
below.
The minimum initial investment is $1,000 for Class A, Class B and Class C
shares except as specified below. The minimum initial investment is $50 for
Class A accounts being established to utilize monthly bank drafts, government
allotments, payroll deduction and other similar automatic investment plans .
Separate minimum investment requirements apply to retirement plans and to
telephone and wire orders placed by broker-dealers; no sales charges or
minimum requirements apply to the reinvestment of dividends or capital gains
distributions. The minimum subsequent investment is $50 for Class A shares
and $500 for Class B and Class C shares except that the subsequent minimum
investment amount for Class B and Class C share accounts may be as little as
$50 if an automatic investment plan (see "Automatic Investment Plans") is
established.
Telephone Purchases. Your account is automatically authorized to have the
telephone purchase privilege unless you indicate otherwise on your Account
Application or by writing to Pioneering Services Corporation ("PSC"). The
telephone purchase option may be used to purchase additional shares for an
existing mutual fund account; it may not be used to establish a new account.
Proper account identification will be required for each telephone purchase. A
maximum of $25,000 per account may be purchased by telephone each day. The
telephone purchase privilege is available to Individual Retirement 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.
Class A Shares
You may buy Class A shares at the public offering price as follows:
<TABLE>
<CAPTION>
Dealer
Sales Charge as a Allowance
Percentage of: as a
----------------------
Net Percentage of
Offering Amount Offering
Amount of Purchase Price Invested Price
- ----------------------------- --------- ---------- ---------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than
$100,000 4.50 4.71 4.00
$100,000 but less than
$250,000 3.50 3.63 3.00
$250,000 but less than
$500,000 2.50 2.56 2.00
$500,000 but less than
$1,000,000 2.00 2.04 1.75
$1,000,000 or more -0- -0- see below
</TABLE>
The schedule of sales charges above is applicable to purchases of Class A
shares of the Fund by an (i) an individual, (ii) an individual and his or her
spouse and children under the age of 21 and (iii) a trustee or other
fiduciary of a trust estate or fiduciary account or related trusts or
accounts including pension, profit-sharing and other employee benefit trusts
qualified under Section 401 or 408 of the Code of 1986, although more than
one beneficiary is involved. The sales charges applicable to a current
purchase of Class A shares of the Fund by a person listed above is determined
by adding the value of shares to be purchased to the aggregate value (at the
then current offering price) of shares of any of the other Pioneer mutual
funds previously purchased and then owned, provided PFD is notified by such
person or his or her broker-dealer each time a purchase is made which would
qualify. Pioneer mutual funds include all mutual funds for which PFD serves
as principal underwriter. See the "Letter of Intention" section of the
Account Application.
No sales charge is payable at the time of purchase on investments of $1
million or more or for purchases by participants in certain group plans
(described below) subject to a CDSC of 1% which may be imposed in the event
of a redemption of Class A shares within 12 months of purchase. See "How to
Sell Fund Shares." PFD may, in its discretion, pay a commission to broker-
dealers who initiate and are responsible for such purchases as follows: 1% on
the first $5 million invested; 0.50% on the next $45 million; and 0.25% on
the excess over $50 million. These commissions will not be paid if the
purchaser is affiliated with the broker-dealer or if the purchase represents
the reinvestment of a redemption made during the previous 12 calendar months.
Broker-dealers who receive a commission in connection with Class A share
purchases at net asset value by 401(a) or 401(k) retirement plans with 1,000
or more eligible participants or with at least $10 million in plan assets
will be required to return any commission paid or a pro rata portion thereof
if the retirement
9
<PAGE>
plan redeems its shares within 12 months of purchase. See also "How to Sell
Fund Shares." 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 Fund's Class A shares
through such dealer. From time to time, PFD may elect to reallow the entire
initial sales charge to participating dealers for all Class A sales with
respect to which orders are placed during a particular period. Dealers to
whom substantially the entire sales charge is reallowed may be deemed to be
underwriters under the federal securities laws.
Qualifying for a Reduced Sales Charge. Class A shares of the Fund may be
sold at a reduced or eliminated sales charge to certain group plans ("Group
Plans") under which a sponsoring organization makes recommendations to,
permits group solicitation of, or otherwise facilitates purchases by, its
employees, members or participants. Class A shares of the Fund may be sold at
net asset value without a sales charge to 401(k) retirement plans with 100 or
more participants or $500,000 or more in plan assets. Information about such
arrangements is available from PFD.
Class A shares of the Fund may be sold at net asset value per share
without a sales charge to: (a) current or former Trustees and officers of the
Fund and partners and employees of its legal counsel; (b) current or former
directors, officers, employees or sales representatives of PGI or its
subsidiaries; (c) current or former directors, officers, employees or sales
representatives of any subadviser or predecessor investment adviser to any
investment company for which PMC serves as investment adviser, and the
subsidiaries or affiliates of such persons; (d) current or former officers,
partners, employees or registered representatives of broker- dealers which
have entered into sales agreements with PFD; (e) members of the immediate
families of any of the persons above; (f) any trust, custodian, pension,
profit-sharing or other benefit plan of the foregoing persons; (g) insurance
company separate accounts; (h) certain "wrap accounts" for the benefit of
clients of financial planners adhering to standards established by PFD; (i)
other funds and accounts for which PMC or any of its affiliates serves as
investment adviser or manager; and (j) certain unit investment trusts. Shares
so purchased are purchased for investment purposes and may not be resold
except through redemption or repurchase by or on behalf of the Fund. The
availability of this privilege is conditioned upon the receipt by PFD of
written notification of eligibility. Class A shares of the Fund may be sold
at net asset value per share without a sales charge to Optional Retirement
Program (the "Program") participants if (i) the employer has authorized a
limited number of investment company providers for the Program, (ii) all
authorized investment company providers offer their shares to Program
participants at net asset value, (iii) the employer has agreed in writing to
actively promote the authorized investment company providers to Program
participants and (iv) the Program provides for a matching contribution for
each participant contribution. Class A shares may also be sold at net asset
value in connection with certain reorganization, liquidation, or acquisition
transactions involving other investment companies or personal holding
companies.
Reduced sales charges for Class A shares are available through an
agreement to purchase a specified quantity of Fund shares over a designated
13-month period by completing the "Letter of Intention" section of the
Account Application. Information about the Letter of Intention Procedure,
including its terms, is contained in the Statement of Additional Information.
Investors who are clients of a broker-dealer with a current sales agreement
with PFD may purchase Class A shares of the Fund at net asset value, without
a sales charge, to the extent that the purchase price is paid out of proceeds
from one or more redemptions by the investor of shares of certain other
mutual funds. In order for a purchase to qualify for this privilege, the
investor must document to the broker-dealer that the redemption occurred
within the 60 days immediately preceding the purchase of Class A shares; that
the client paid a sales charge on the original purchase of the shares
redeemed; and that the mutual fund whose shares were redeemed also offers net
asset value purchases to redeeming shareholders of any of the Pioneer mutual
funds. Further details may be obtained from PFD.
Class B Shares
You may buy Class B shares at net asset value without the imposition of an
initial sales charge. However, Class B shares redeemed within six years of
purchase will be subject to a CDSC at the rates shown in the table below. The
charge will be assessed on the amount equal to the lesser of the current
market value or the original purchase cost of the shares being redeemed. No
CDSC will be imposed on increases in account value above the initial purchase
price, including shares derived from the reinvestment of dividends or capital
gains distributions.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a quarter will be aggregated and deemed to have been made
on the first day of that quarter. In processing redemptions of Class B
shares, the Fund will first redeem shares not subject to any CDSC, and then
shares held longest during the six-year period. As a result, you will pay the
lowest possible CDSC.
The CDSC for Class B shares subject to a CDSC upon redemption will be
determined as follows:
<TABLE>
<CAPTION>
Year Since CDSC as a Percentage of Dollar
Purchase Amount Subject to CDSC
------------------------- -------------------------------
<S> <C>
First 4.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter none
</TABLE>
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to
the Fund in connection with
10
<PAGE>
the sale of Class B shares, including the payment of compensation to
broker-dealers.
Class B shares will automatically convert into Class A shares at the end
of the calendar quarter that is eight years after the purchase date, except
as noted below. Class B shares acquired by exchange from Class B shares of
another Pioneer mutual fund will convert into Class A shares based on the
date of the initial purchase and the applicable CDSC. Class B shares acquired
through reinvestment of distributions will convert into Class A shares based
on the date of the initial purchase to which such shares relate. For this
purpose, Class B shares acquired through reinvestment of distributions will
be attributed to particular purchases of Class B shares in accordance with
such procedures as the Trustees may determine from time to time. The
conversion of Class B shares to Class A shares is subject to the continuing
availability of a ruling from the Internal Revenue Service ("IRS"), which the
Fund has obtained, or an opinion of counsel that such conversions will not
constitute taxable events for federal tax purposes. There can be no assurance
that such ruling will be in effect at the time any particular conversion
would normally occur. The conversion of Class B shares to Class A shares will
not occur if such ruling is no longer in effect or such opinion is not
available and, therefore, Class B shares would continue to be subject to
higher expenses than Class A shares for an indeterminate period.
Class C Shares
You may buy Class C shares at net asset value without the imposition of an
initial sales charge; however, Class C shares redeemed within one year of
purchase will be subject to a CDSC of 1%. The charge will be assessed on the
amount equal to the lesser of the current market value or the original
purchase cost of the shares being redeemed. No CDSC will be imposed on
increases in account value above the initial purchase price, including shares
derived from the reinvestment of dividends or capital gains distributions.
Class C shares do not convert to any other Class of Fund shares.
For the purpose of determining the time of any purchase, all payments
during a quarter will be aggregated and deemed to have been made on the first
day of that quarter. In processing redemptions of Class C shares, the Fund
will first redeem shares not subject to any CDSC, and then shares held for
the shortest period of time during the one-year period. As a result, you will
pay the lowest possible CDSC.
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to
the Fund in connection with the sale of Class C shares, including the payment
of compensation to broker-dealers.
All Classes of Shares
Waiver or Reduction of Contingent Deferred Sales Charge. The CDSC on Class
B shares may be waived or reduced for non-retirement accounts if: (a) the
redemption results from the death of all registered owners of an account (in
the case of UGMAs, UTMAs and trust accounts, waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase
of the shares being redeemed or (b) the redemption is made in connection with
limited automatic redemptions as set forth in "Systematic Withdrawal Plans"
(limited in any year to 10% of the value of the account in the Fund at the
time the withdrawal plan is established).
The CDSC on Class B shares may be waived or reduced for retirement plan
accounts if: (a) the redemption results from the death or a total and
permanent disability (as defined in Section 72 of the Code) occurring after
the purchase of the shares being redeemed of a shareholder or participant in
an employer-sponsored retirement plan; (b) the distribution is to a
participant in an IRA, 403(b) or employer-sponsored retirement plan, is part
of a series of substantially equal payments made over the life expectancy of
the participant or the joint life expectancy of the participant and his or
her beneficiary or as scheduled periodic payments to a participant (limited
in any year to 10% of the value of the participant's account at the time the
distribution amount is established; a required minimum distribution due to
the participant's attainment of age 70-1/2 may exceed the 10% limit only if
the distribution amount is based on plan assets held by Pioneer); (c) the
distribution is from a 401(a) or 401(k) retirement plan and is a return of
excess employee deferrals or employee contributions or a qualifying hardship
distribution as defined by the Code or results from a termination of
employment (limited with respect to a termination to 10% per year of the
value of the plan's assets in the Fund as of the later of the prior December
31 or the date the account was established unless the plan's assets are being
rolled over to or reinvested in the same class of shares of a Pioneer mutual
fund subject to the CDSC of the shares originally held); (d) the distribution
is from an IRA, 403(b) or employer-sponsored retirement plan and is to be
rolled over to or reinvested in the same class of shares in a Pioneer mutual
fund and which will be subject to the applicable CDSC upon redemption; (e)
the distribution is in the form of a loan to a participant in a plan which
permits loans (each repayment of the loan will constitute a new sale which
will be subject to the applicable CDSC upon redemption); or (f) the
distribution is from a qualified defined contribution plan and represents a
participant's directed transfer (provided that this privilege has been
pre-authorized through a prior agreement with PFD regarding participant
directed transfers).
The CDSC on Class C shares and on any Class A shares subject to a CDSC may
be waived or reduced as follows: (a) for automatic redemptions as described
in "Systematic Withdrawal Plans" (limited to 10% of the value of the account
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 shareholder 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
11
<PAGE>
expectancy of the participant or the joint life expectancy of the participant
and his or her beneficiary; or (d) if the distribution is to a participant in
an employer-sponsored retirement plan and is (i) a return of excess employee
deferrals or contributions, (ii) a qualifying hardship distribution as
defined by the Code, (iii) from a termination of employment, (iv) in the form
of a loan to a participant in a plan which permits loans, or (v) from a
qualified defined contribution plan and represents a participant's directed
transfer (provided that this privilege has been pre-authorized through a
prior agreement with PFD regarding participant directed transfers).
The CDSC on Class B and Class C shares and on any Class A 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 contingent deferred sales charge
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.
Broker-Dealers. An order for any Class of Fund shares received by PFD from
a broker-dealer prior to the close of regular trading on the Exchange is
confirmed at the price appropriate for that Class as determined at the close
of regular trading on the Exchange on the day the order is received, provided
the order is received by PFD prior to PFD's close of business (usually, 5:30
p.m. Eastern Time). It is the responsibility of broker-dealers to transmit
orders so that they will be received by PFD prior to its close of business.
PFD or its affiliates may provide additional compensaton to certain dealers
or such dealers' affiliates based on certain objective criteria established
from time to time by PFD. All such payments are made out of PFD's or the
affiliate's own assets. These payments will not change the price an investor
will pay for shares or the amount that the Fund will receive from such sale.
General. The Fund reserves the right in its sole discretion to withdraw
all or any part of the offering of shares when, in the judgment of the Fund's
management, such withdrawal is in the best interest of the Fund. An order to
purchase shares is not binding on, and may be rejected by, PFD until it has
been confirmed in writing by PFD and payment has been received.
IX. HOW TO SELL FUND SHARES
You can arrange to sell (redeem) Fund shares on any day the Exchange is
open by selling either some or all of your shares to the Fund.
You may sell your shares either through your broker-dealer or directly to
the Fund. Please note the following:
(bullet) If you are selling shares from a retirement account, you must
make your request in writing (except for exchanges to other
Pioneer mutual funds which can be requested by phone or in
writing). Call 1-800-622-0176 for more information.
(bullet) If you are selling shares from a non-retirement account, you may
use any of the methods described below.
Your shares will be sold at the share price next calculated after your
order is received in good order less any applicable CDSC. Sale proceeds
generally will be sent to you in cash, normally within seven days after your
order is received in good order. The Fund reserves the right to withhold
payment of the sale proceeds until checks received by the Fund in payment for
the shares being sold have cleared, which may take up to 15 calendar days
from the purchase date.
In Writing. You may sell your shares by delivering a written request,
signed by all registered owners, in good order to PSC, however, you must use
a written request, including a signature guarantee, to sell your shares if
any of the following applies:
(bullet) you wish to sell over $50,000 worth of shares,
(bullet) your account registration or address has changed within the last
30 days,
(bullet) the check is not being mailed to the address on your account
(address of record),
(bullet) the check is not being made out to the account owners, or
(bullet) the sale proceeds are being transferred to a Pioneer account with
a different registration.
Your request should include your name, the Fund's name, your fund account
number, the Class of shares to be redeemed, the dollar amount or number of
shares to be redeemed, and any other applicable requirements as described
below. Unless instructed otherwise, PSC will send the proceeds of the sale to
the address of record. Fiduciaries and corporations are required to submit
additional documents. For more information, contact PSC at 1-800-225-6292.
Written requests will not be processed until they are received in good
order by PSC. Good order means that there are no outstanding claims or
requests to hold redemptions on the account, certificates are endorsed by the
record owner(s) exactly as the shares are registered and the signature(s) are
guaranteed by an eligible guarantor. You should be able to obtain a signature
guarantee from a bank, broker, dealer, credit union (if authorized under
state law), securities exchange or association, clearing agency or savings
association. A notary public cannot provide a signature guarantee. Signature
guarantees are not accepted by facsimile ("fax"). For additional information
about the necessary documentation for redemption by mail, please contact PSC
at 1-800-225-6292.
By Telephone or by Fax. Your account is automatically authorized to have
the telephone redemption privilege unless you indicate otherwise on your
Account Application or by writing to PSC. Proper account identification will
be required for each telephone redemption. A maximum of $50,000 per account
per day may be redeemed by telephone or fax and the proceeds may be received
by check or bank wire or electronic funds transfer. To receive the proceeds
by check: the
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check must be made payable exactly as the account is registered and the check
must be sent to the address of record which must not have changed in the last
30 days. To receive the proceeds by bank wire or by electronic funds
transfer: the proceeds must be sent to your bank address of record which must
have been properly predesignated either on your Account Application or on an
Account Options Form and which must not have changed in the last 30 days. To
redeem by fax send your redemption request to 1-800-225-4240. You may always
elect to deliver redemption instructions to PSC by mail. See "Telephone
Transactions and Related Liabilities" below. Telephone and fax redemptions
will be priced as described above. You are strongly urged to consult with
your financial representative prior to requesting a telephone redemption.
Selling Shares Through Your Broker-Dealer. The Fund has authorized PFD to
act as its agent in the repurchase of shares of the Fund from qualified
broker-dealers and reserves the right to terminate this procedure at any
time. Your broker-dealer must receive your request before the close of
business on the Exchange and transmit it to PFD before PFD's close of
business to receive that day's redemption price. Your broker-dealer is
responsible for providing all necessary documentation to PFD and may charge
you for its services.
Small Accounts. The minimum account value is $500. If you hold shares of
the Fund in an account with a net asset value of less than the minimum
required amount due to redemptions or exchanges, the Fund may redeem the
shares held in this account at net asset value if you have not increased the
net asset value of the account to at least the minimum required amount within
six months of notice by the Fund to you of the Fund's intention to redeem the
shares.
CDSC on Class A Shares. Purchases of Class A shares of $1 million or more,
or by participants in a Group Plan which were not subject to an initial sales
charge, may be subject to a CDSC upon redemption. A CDSC is payable to PFD on
these investments in the event of a share redemption within 12 months
following the share purchase, at the rate of 1% of the lesser of the value of
the shares redeemed (exclusive of reinvested dividend and capital gain
distributions) or the total cost of such shares. Shares subject to the CDSC
which are exchanged into another Pioneer mutual fund will continue to be
subject to the CDSC of the shares originally held until the original 12-month
period expires. However, no CDSC is payable upon redemption with respect to
Class A shares purchased by 401(a) or 401(k) retirement plans with 1,000 or
more eligible participants or with at least $10 million in plan assets.
General. Redemptions may be suspended or payment postponed during any
period in which any of the following conditions exist: the Exchange is closed
or trading on the Exchange is restricted; an emergency exists as a result of
which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund to fairly
determine the value of the net assets of its portfolio; or the SEC, by order,
so permits.
Redemptions and repurchases are taxable transactions to shareholders. The
net asset value per share received upon redemption or repurchase may be more
or less than the cost of shares to an investor, depending on the market value
of the portfolio at the time of redemption or repurchase.
X. HOW TO EXCHANGE FUND SHARES
Written Exchanges. You may exchange your shares by sending a letter of
instruction to PSC. Your letter should include your name, the name of the
Fund out of which you wish to exchange and the name of the Pioneer mutual
fund into which you wish to exchange, your fund account number(s), the Class
of shares to be exchanged and the dollar amount or number of shares to be
exchanged. Written exchange requests must be signed by all record owner(s)
exactly as the shares are registered.
Telephone Exchanges. Your account is automatically authorized to have the
telephone exchange privilege unless you indicate otherwise on your Account
Application or by writing to PSC. Proper account identification will be
required for each telephone exchange. Telephone exchanges may not exceed
$500,000 per account per day. Each telephone exchange request, whether by
voice or by FactFone, 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.
Automatic Exchanges. You may automatically exchange shares from one
Pioneer account for shares of the same Class in another Pioneer account on a
monthly or quarterly basis. The accounts must have identical registrations
and the originating account must have a minimum balance of $5,000. The
exchange will be effective on the day of the month designated on your Account
Application or Account Options Form.
General. Exchanges must be at least $1,000. You may exchange your
investment from one Class of Fund shares at net asset value, without a sales
charge, for shares of the same Class of any other Pioneer mutual fund. Not
all Pioneer mutual funds offer more than one Class of shares. A new Pioneer
mutual fund account opened through an exchange must have a registration
identical to that on the original account.
Shares which would normally be subject to a CDSC upon redemption will not
be charged the applicable CDSC at the time of an exchange. Shares acquired in
an exchange will be subject to the CDSC of the shares originally held. For
purposes of determining the amount of any applicable CDSC, the length of time
you have owned shares acquired by exchange will be measured from the date you
acquired the original shares and will not be affected by any subsequent
exchange.
Exchange requests received by PSC before 4:00 p.m. Eastern Time, will be
effective on that day if the requirements above have been met, otherwise,
they will be effective on the next business day. PSC will process exchanges
only after receiving an exchange request in good order. There are currently
no fees
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or sales charges imposed at the time of an exchange. An exchange of shares
may be made only in states where legally permitted. For federal and
(generally) state income tax purposes, an exchange is considered to be a sale
of the shares of the fund exchanged and a purchase of shares in another fund.
Therefore, an exchange could result in a gain or loss on the shares sold,
depending on the tax basis of these shares and the timing of the transaction,
and special tax rules may apply.
You should consider the differences in objectives and policies of the
Pioneer mutual funds, as described in each fund's current prospectus, before
making any exchange. For the protection of the Fund's performance and
shareholders, the Fund and PFD reserve the right to refuse any exchange
request or restrict, at any time without notice, the number and/or frequency
of exchanges to prevent abuses of the exchange privilege. Such abuses may
arise from frequent trading in response to short-term market fluctuations, a
pattern of trading by an individual or group that appears to be an attempt to
"time the market," or any other exchange request which, in the view of
management, will have a detrimental effect on the Fund's portfolio management
strategy or its operations. In addition, the Fund and PFD reserve the right
to charge a fee for exchanges or to modify, limit, suspend or discontinue the
exchange privilege with notice to shareholders as required by law.
XI. DISTRIBUTION PLANS
The Fund has adopted a Plan of Distribution for each Class of shares (the
"Class A Plan," "Class B Plan," and "Class C Plan") in accordance with Rule
12b-1 under the 1940 Act pursuant to which certain distribution and service
fees are paid.
Pursuant to the Class A Plan, the Fund reimburses PFD for its actual
expenditures to finance any activity primarily intended to result in the sale
of Class A shares or to provide services to holders of Class A shares,
provided the categories of expenses for which reimbursement is made are
approved by the Fund's Board of Trustees. As of the date of this Prospectus,
the Board of Trustees has approved the following categories of expenses for
Class A shares of the Fund: (i) a service fee to be paid to qualified
broker-dealers in an amount not to exceed 0.25% per annum of the Fund's daily
net assets attributable to Class A shares; (ii) reimbursement to PFD for its
expenditures for broker-dealer commissions and employee compensation on
certain sales of the Fund's Class A shares with no initial sales charge (See
"How to Buy Fund Shares"); and (iii) reimbursement to PFD for expenses
incurred in providing services to Class A shareholders and supporting
broker-dealers and other organizations (such as banks and trust companies) in
their efforts to provide such services. Banks are currently prohibited under
the Glass- Steagall Act from providing certain underwriting or distribution
services. If a bank was prohibited from acting in any capacity or providing
any of the described services, management would consider what action, if any,
would be appropriate.
Expenditures of the Fund pursuant to the Class A Plan are accrued daily
and may not exceed 0.25% of the Fund's average daily net assets attributable
to Class A shares. Distribution expenses of PFD are expected to substantially
exceed the distribution fees paid by the Fund in a given year. The Class A
Plan may not be amended to increase materially the annual percentage
limitation of average net assets which may be spent for the services
described therein without approval of the shareholders of the Fund.
Both the Class B Plan and the Class C Plan provide that the Fund will pay
a distribution fee at the annual rate of 0.75% of the Fund's average daily
net assets attributable to the applicable Class of shares and will pay PFD a
service fee at the annual rate of 0.25% of the Fund's average daily net
assets attributable to that Class of shares. The distribution fee is intended
to compensate PFD for its distribution services to the Fund. The service fee
is intended to be additional compensation for personal services and/or
account maintenance services with respect to Class B and Class C shares. PFD
also receives the proceeds of any CDSC imposed on the redemption of Class B
and Class C shares.
Commissions of 4%, equal to 3.75% of the amount invested and a first
year's service fee equal to 0.25% of the amount invested in Class B shares,
are paid to broker- dealers who have selling agreements with PFD. PFD may
advance to dealers the first year service fee at a rate up to 0.25% of the
purchase price of such shares and, as compensation therefore, PFD may retain
the service fee paid by the Fund with respect to such shares for the first
year after purchase. Dealers will become eligible for additional service fees
with respect to such shares commencing in the 13th month following the
purchase.
Commissions of up to 1% of the amount invested in Class C shares,
consisting of 0.75% of the amount invested and a first year's service fee of
0.25% of the amount invested, are paid to broker-dealers who have selling
agreements with PFD. PFD may advance to dealers the first year service fee at
a rate up to 0.25% of the purchase price of such shares and, as compensation
therefore, PFD may retain the service fee paid by the Fund with respect to
such shares for the first year after purchase. Commencing in the 13th month
following the purchase of Class C shares, dealers will become eligible for
additional annual distribution fees and service fees of up to 0.75% and
0.25%, respectively, of the net asset value of such shares.
Dealers may from time to time be required to meet certain criteria in
order to receive service fees. PFD or its affiliates are entitled to retain
all service fees payable under the Class B Plan or the Class C Plan for which
there is no dealer of record or for which qualification standards have not
been met as partial consideration for personal services and/or account
maintenance services performed by PFD or its affiliates for shareholder
accounts.
XII. DIVIDENDS, DISTRIBUTIONS AND TAXATION
The Fund has elected to be treated, has qualified, and intends to qualify
each year as a "regulated investment com
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pany" 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 by the end of the calendar
year. The Fund intends to make distributions in a timely manner and
accordingly does not expect to be subject to the excise tax.
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 backup withholding or the Fund receives notice
from the IRS or a broker that such withholding applies. Please refer to the
Account Application for additional information.
The Fund pays dividends from net investment income and distributes its net
realized short and long-term capital gains, if any, annually, usually in
December, with additional distributions made only as required to avoid
federal income or excise tax. Unless shareholders specify otherwise, all
distributions will be automatically reinvested in additional full and
fractional shares of the Fund. 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. 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 annually to shareholders. For further information on the
distribution options available to shareholders, see "Distribution Options"
and "Directed Dividends" below.
In any year in which the Fund qualifies, it may make an election that will
permit certain of its shareholders to take a credit (or, if more
advantageous, a deduction) for foreign income taxes paid by the Fund. Each
shareholder would then treat as an additional dividend his or her appropriate
share of the amount of foreign taxes paid by the Fund. If this election is
made, the Fund will notify its shareholders annually as to their share of the
amount of foreign taxes paid and the foreign source income of the Fund.
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, trust or estates, and who are subject to
U.S. federal income tax. Shareholders should consult their own tax advisors
regarding state, local and other applicable tax laws.
XIII. 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 Pioneering Services Corporation, P.O.
Box 9014, Boston, Massachusetts 02205-9014. Brown Brothers Harriman & Co.
(the "Custodian") serves as custodian of the Fund's portfolio securities. The
principal business address of the mutual fund division of the Custodian is 40
Water Street, Boston, Massachusetts 02109. The Custodian oversees a network
of subcustodians and depositories in Europe.
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
details of transactions are sent to shareholders as transactions occur,
except Automatic Investment Plan transactions which are confirmed quarterly.
The Pioneer Combined Account Statement, mailed quarterly, is available to
shareholders who have more than one Pioneer mutual fund account.
Shareholders whose shares are held in the name of an investment
broker-dealer or other party will not normally have an account with the Fund
and might not be able to utilize some of the services available to
shareholders of record. Examples of services which might not be available are
purchases, exchanges or redemptions by mail or telephone, automatic
reinvestment of dividends and capital gains distributions, withdrawal plans,
Letters of Intention, Rights of Accumulation and newsletters.
Additional Investments
You may add to your account by sending a check (minimum of $50 for Class A
shares and $500 for Class B and Class C shares) to PSC (account number and
Class of shares should be clearly indicated). The bottom portion of a
confirmation statement may be used as a remittance slip to make additional
investments. Additions to your account, whether by check or through a Pioneer
Investomatic Plan, are invested in full and fractional shares of the Fund at
the applicable offering price in effect as of the close of regular trading on
the Exchange on the day of receipt.
Automatic Investment Plans
You may arrange for regular automatic investments of $50 or more through
government/military allotments, payroll deduction or through a Pioneer
Investomatic Plan. A Pioneer Investomatic Plan provides for a monthly or
quarterly investment by means of a pre-authorized electronic funds transfer
or 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. PSC acts as agent for the purchaser, the
broker-dealer and PFD in maintaining these plans.
Financial Reports and Tax Information
As a shareholder, you will receive financial reports at least
semiannually. In January of each year, the Fund will mail you information
about the tax status of dividends and distributions.
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Distribution Options
Dividends and capital gains distributions, if any, will automatically be
invested in additional shares of the Fund, at the applicable net asset value
per share, unless you indicate another option on the Account Application.
Two other options available are (a) dividends in cash and capital gains
distributions in additional shares; and (b) all dividends and capital gains
distributions in cash. These two options are not available, however, for
retirement plans or for an account with a net asset value of less than $500.
Changes in your distribution options may be made by written request to PSC.
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 Pioneer Fund
or Pioneer II). Invested dividends may be in any amount, and there are no
fees or charges for this service. Retirement plan shareholders may only
direct dividends to accounts with identical registrations, i.e., PGA IRA Cust
for John Smith may only go into another account registered PGA IRA Cust for
John Smith.
Direct Deposit
If you have elected to take distributions, whether dividends or dividends
and capital gains, in cash, or have established a Systematic Withdrawal Plan,
you may choose to have those cash payments deposited directly into your
savings, checking or NOW bank account. You may also establish this service by
completing the appropriate section on the Account Application when opening a
new account or the Account Options Form for an existing account.
Voluntary Tax Withholding
You may request (in writing) that PSC withhold 28% of the dividends and
capital gains distributions paid from your account (before any reinvestment)
and forward the amount withheld to the IRS as a credit against your federal
income taxes. This option is not available for retirement plan accounts or
for accounts subject to backup withholding.
Telephone Transactions and Related Liabilities
Your account is automatically authorized to have telephone transaction
privileges unless you indicate otherwise on your Account Application or by
writing to PSC. You may purchase, sell or exchange Fund shares by telephone.
See "How to Buy Fund Shares," "How to Sell Fund Shares" and "How to Exchange
Fund Shares" for more information. For personal assistance, call
1-800-225-6292 between 8:00 a.m. and 9:00 p.m. Eastern Time on weekdays.
Computer-assisted transactions may be available to shareholders who have pre-
recorded certain bank information (see FactFonesSM). You are strongly urged
to consult with your financial representative prior to requesting any
telephone transaction. To confirm that each transaction instruction received
by telephone is genuine, PSC will record each telephone transaction, require
the caller to provide the personal identification number ("PIN") for the
account and send you a written confirmation of each telephone transaction.
Different procedures may apply to accounts that are registered to non-U.S.
citizens or that are held in the name of an institution or in the name of an
investment broker-dealer or other third-party. If reasonable procedures, such
as those described above, are not followed, the Fund may be liable for any
loss due to unauthorized or fraudulent instructions. The Fund may implement
other procedures from time to time. In all other cases, neither the Fund, PSC
or PFD will be responsible for the authenticity of instructions received by
telephone, therefore, you bear the risk of loss for unauthorized or
fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund
by telephone to institute a redemption or exchange. You should communicate
with the Fund in writing if you are unable to reach the Fund by telephone.
FactFoneSM
FactFone is an automated inquiry and telephone transaction system
available to Pioneer shareholders by dialing 1-800-225-4321. FactFone allows
you to obtain current information on your Pioneer mutual fund accounts and to
inquire about the prices and yields of all publicly available Pioneer mutual
funds. In addition, you may use FactFone to make computer-assisted telephone
purchases, exchanges and redemptions from your Pioneer mutual fund accounts
if you have activated your PIN. Telephone purchases and redemptions require
the establishment of a bank account of record. You are strongly urged to
consult with your financial representative prior to requesting any telephone
transaction. Shareholders whose accounts are registered in the name of a
broker-dealer or other third party may not be able to use FactFone. See "How
to Buy Fund Shares," "How to Exchange Fund Shares," "How to Sell Fund Shares"
and "Telephone Transactions and Related Liabilities." Call PSC for
assistance.
Retirement Plans
You should contact the Retirement Plans Department of PSC at
1-800-622-0176 for information relating to retirement plans for businesses,
age-weighted profit sharing plans, 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 Account Application enclosed
with this Prospectus should not be used to establish any of these plans.
Separate applications are required.
Telecommunications Device for the Deaf (TDD)
If you have a hearing disability and access to TDD keyboard equipment, you
can call our TDD number toll-free at 1-800- 225-1997, weekdays from 8:30 a.m.
to 5:30 p.m. Eastern Time to contact our telephone representatives with
questions about your account.
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Systematic Withdrawal Plans
If your account has a total value of at least $10,000 you may establish a
Systematic Withdrawal Plan ("SWP") providing for fixed payments at regular
intervals. Withdrawals from Class B and Class C share accounts are limited to
10% of the value of the account at the time the SWP is implemented. See
"Waiver or Reduction of CDSC" for more information. Periodic payments of $50
or more will be sent to you, or any person designated by you, monthly or
quarterly and your periodic redemptions may be taxable to you. Payments can
be made either by check or electronic transfer to a bank account designated
by you. If you direct that withdrawal payments be made to another person
after you have opened your account, a signature guarantee must accompany your
instructions. Purchases of Class A shares of the Fund at a time when you have
a SWP in effect may result in the payment of unnecessary sales charges and
may, therefore, be disadvantageous.
You may obtain additional information by calling PSC at 1-800-225-6292 or
by referring to the Statement of Additional Information.
Reinstatement Privilege (Class A Shares Only)
If you redeem all or part of your Class A shares of the Fund, you may
reinvest all or part of the redemption proceeds without a sales charge in
Class A shares of the Fund if you send a written request to PSC not more than
90 days after your shares were redeemed. Your redemption proceeds will be
reinvested at the next determined net asset value of the Class A shares of
the Fund in effect immediately after receipt of the written request for
reinstatement. You may realize a gain or loss for federal income tax purposes
as a result of the redemption, and special tax rules may apply if a
reinstatement occurs. In addition, if redemption resulted in a loss and an
investment is made in shares of the Fund within 30 days before or after the
redemption, you may not be able to recognize the loss for federal income tax
purposes. Subject to the provisions outlined under "How to Exchange Fund
Shares" above, you may also reinvest in Class A shares of other Pioneer
mutual funds; in this case, you must meet the minimum investment 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.
XIV. THE FUND
Pioneer Europe Fund is an open-end, diversified management investment
company (commonly referred to as a mutual fund) organized as a Massachusetts
business trust on June 22, 1990. The Fund has authorized an unlimited number
of shares of beneficial interest. As an open-end management investment
company, the Fund usually 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, less any
applicable CDSC. See "How to Sell Fund Shares." The Fund is not required, and
does not intend, to hold annual shareholder meetings, although special
meetings may be called for the purposes of electing or removing Trustees,
changing fundamental investment restrictions or approving a management or
subadvisory contract.
The Trustees have the authority, without further shareholder 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 three classes of shares, designated
Class A, Class B and Class C. The shares of each class represent an interest
in the same portfolio of investments of the Fund. Each class has equal rights
as to voting, redemption, dividends and liquidation, except that each class
bears different distribution and transfer agent fees and may bear other
expenses properly attributable to the particular class. Class A, Class B and
Class C shareholders have exclusive voting rights with respect to the Rule
12b-1 distribution plans adopted by holders of those shares in connection
with the distribution of shares. The Fund reserves the right to create and
issue additional series of shares.
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 by the Fund. Shares will remain on deposit with the Fund's
transfer agent and certificates will not normally be issued. The Fund
reserves the right to charge a fee for the issuance of Class A share
certificates; certificates will not be issued for Class B or Class C shares.
XV. INVESTMENT RESULTS
The average annual total return (for a designated period of time) on an
investment in the Fund may be included in advertisements, and furnished to
existing or prospective shareholders. The average annual total return for
each Class is computed in accordance with the SEC's standardized formula. The
calculation for all Classes assumes the reinvestment of all dividends and
distributions at net asset value and does not reflect the impact of federal
or state income taxes. In addition, for Class A shares the calculation
assumes the deduction of the maximum sales charge of 5.75%; for Class B and
Class C shares the calculation reflects the deduction of any applicable CDSC.
The periods illustrated would normally include one, five and ten years (or
since the commencement of the public offering of the shares of a Class, if
shorter) through the most recent calendar quarter.
One or more additional measures and assumptions, including but not limited
to historical total returns; distribution returns;
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results of actual or hypothetical investments; changes in dividends,
distributions or share values; or any graphic illustration of such data may
also be used. These data may cover any period of the Fund's existence and may
or may not include the impact of sales charges, taxes or other factors.
Other investments or savings vehicles and/or unmanaged market indexes,
indicators of economic activity or averages of mutual funds results may be
cited or compared with the investment results of the Fund. Rankings or
listings by magazines, newspapers or independent statistical or rating
services, such as Lipper Analytical Services, Inc., may also be referenced.
The Fund's investment results will vary from time to time depending on
market conditions, the composition of the Fund's portfolio and operating
expenses of the Fund. All quoted investment results are historical and should
not be considered representative of what an investment in the Fund may earn
in any future period. For further information about the calculation methods
and uses of the Fund's investment results, see the Statement of Additional
Information.
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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 Mid-Cap Fund
Pioneer Growth Shares
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 Tax-Free Income Fund*
Pioneer Intermediate Tax-Free Fund*
Money Market Fund
Pioneer Cash Reserves Fund
*Not suitable for retirement accounts.
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Pioneer
Europe Fund
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
NORMAN KURLAND, Ph.D., Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR
PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.
SHAREHOLDER SERVICES AND TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
Telephone: 1-800-225-6292
SERVICE INFORMATION
If you would like information on the following, please call:
Existing and new accounts, prospectuses,
applications, service forms
and telephone transactions ................. 1-800-225-6292
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
0996-3686
(C)Pioneer Funds Distributor, Inc.
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PIONEER EUROPE FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A, Class B and Class C Shares
February 28, 1996
(revised September 23, 1996)
This Statement of Additional Information (Part B of the Registration
Statement) is not a Prospectus, but should be read in conjunction with the
Prospectus (the "Prospectus") dated February 28, 1996 (revised September 23,
1996), as amended and/or supplemented from time to time, of Pioneer Europe Fund
(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, and is hereby incorporated into, this Statement of
Additional Information.
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions................................... 2
2. Management of the Fund................................................. 8
3. Investment Manager..................................................... 12
4. Principal Underwriter.................................................. 13
5. Distribution Plans..................................................... 14
6. Shareholder Servicing/Transfer Agent................................... 16
7. Custodian.............................................................. 16
8. Independent Public Accountants......................................... 16
9. Portfolio.............................................................. 16
10. Tax.................................................................... 18
11. Description of Shares.................................................. 20
12. Certain Liabilities.................................................... 20
13. Letter of Intention.................................................... 21
14. Systematic Withdrawal Plan............................................. 21
15. Determination of Net Asset Value....................................... 22
16. Investment Results..................................................... 22
17. Financial.............................................................. 24
Appendix A............................................................. 25
Appendix B............................................................. 35
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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
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1. INVESTMENT POLICIES AND RESTRICTIONS
The Fund's 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. Capitalized terms not otherwise defined herein have the meaning given to
them in the Prospectus.
The following policies and restrictions supplement those discussed in
the Prospectus. Except with respect to the policy on borrowing described below,
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 objective and policies, other
than the policy on borrowing.
Lending of Portfolio Securities
The Fund may lend portfolio securities to member firms of the New York
Stock Exchange, under agreements which require that the loans be fully
collateralized by cash, cash equivalents or United States ("U.S.") Treasury
Bills whose market value is not less than 100% of the securities loaned, marked
to market daily. The Fund would continue to receive the equivalent of the
interest or dividends paid by the issuer on 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 lend portfolio securities only to firms which
have been approved in advance by the Fund's Board of Trustees. Pioneering
Management Corporation ("PMC"), the Fund's investment adviser, will monitor the
creditworthiness of any such firms pursuant to standards approved by the Fund's
Board of Trustees. At no time would the value of the securities loaned exceed
30% of the value of the Fund's total assets. The Fund did not lend portfolio
securities during the last fiscal year and has no present intention to engage in
any material portfolio lending in the future.
Forward Foreign Currency Contracts
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 deal
in forward foreign currency exchange contracts involving currencies as a hedge
against possible variations in the foreign exchange rate between these
currencies and the U.S. dollar. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. The Fund's dealings 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 PMC. The Fund will not enter into speculative forward foreign
currency contracts.
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If the Fund enters into a forward contract to purchase foreign
currency, its custodian bank will segregate cash or liquid, high grade 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 or the amount of the Fund's obligation on such
forward contract increases, 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 transactions also limit the opportunity
for gain if the value of the hedged currency should rise. Moreover, it may not
be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency transactions
varies with such factors as the currency involved, the size of the contract, the
length of the contract period and the market conditions then prevailing. Since
transactions in foreign currency and forward contracts are usually conducted on
a principal basis, no fees or commissions are involved. The Fund may close out a
forward position in a currency by selling the forward contract or 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 a Fund anticipated a decline in the dollar value of
foreign currency denominated securities because of declining exchange rates, it
could, 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 be acquired. If exchange rates move in the
manner projected, the put option will expire unexercised and allow 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 liquid, high grade debt securities in a segregated account with its
custodian.
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The Fund may close out its position in a currency option by either
selling the option it has purchased or entering into an offsetting option.
Futures Contracts and Options on Future Contracts
All futures contracts entered into by the Fund are traded on U.S.
exchanges or boards of trade that are licensed and regulated by the Commodity
Futures Trading Commission (the "CFTC") or on foreign exchanges.
Futures Contracts. A futures contract may generally be described as an
agreement between two parties to buy and sell particular financial instruments
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, the
Fund can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
falling or securities prices are rising, the Fund, through the purchase of
futures contracts, can attempt to secure better rates or prices than might later
be available in the market when it effects anticipated purchases. Similarly, the
Fund can sell futures contracts on a specified currency to seek to protect
against a decline in the value of such currency and a decline in the value of
its portfolio securities which are denominated in such currency. The Fund can
purchase futures contracts on foreign currency to establish the price in U.S.
dollars of a security denominated in such currency that the Fund has acquired or
expects to acquire.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting transactions which may
result in a profit or a loss. While futures contracts on securities or currency
will usually be liquidated in this manner, the Fund may instead make, or take,
delivery of the underlying securities or currency whenever it appears
economically advantageous to do so. A clearing corporation associated with the
exchange on which futures on securities or currency are traded guarantees that,
if still open, the sale or purchase will be performed on the settlement date.
Hedging Strategies. Hedging, by use of futures contracts, seeks to
establish with more certainty the effective price, rate of return and currency
exchange rate on portfolio securities and securities that the Fund owns or
proposes to acquire. The Fund may, for example, take a "short" position in the
futures market by selling futures contracts in an attempt to hedge against an
anticipated rise in interest rates or a decline in market prices or foreign
currency rates that would adversely affect the value of the Fund's portfolio
securities. Such futures contracts may include contracts for the future delivery
of securities held by the Fund or securities with characteristics similar to
those of the Fund's portfolio securities. Similarly, the Fund may sell futures
contracts in currency in which its portfolio securities are denominated or in
one currency to seek to hedge against fluctuations in the value of securities
denominated in a different currency if there is an established historical
pattern of correlation between the two currencies. If, in the opinion of PMC,
there is a sufficient degree of correlation between price trends for the Fund's
portfolio securities and futures contracts based on other financial instruments,
securities indices or other indices, the Fund may also enter into such futures
contracts as part of its hedging strategy. Although under some circumstances
prices of securities in the Fund's portfolio may be more or less volatile than
prices of such futures contracts, PMC will attempt to estimate the extent of
this volatility difference based on historical patterns and compensate for any
such differential by having the Fund enter into a greater or lesser number of
futures contracts or by attempting to achieve only a partial hedge against price
changes affecting the Fund's securities portfolio. When hedging of this
character is successful, any depreciation in the value of portfolio securities
will be substantially offset by appreciation in the value of the futures
position. On the other hand, any unanticipated appreciation in the value of the
Fund's portfolio securities would be substantially offset by a decline in the
value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing
futures contracts. This would be done, for example, when the Fund anticipates
the subsequent purchase of particular securities when it has the necessary cash,
but expects the prices or currency exchange rates then available in the
applicable market to be less favorable than prices or rates that are currently
available.
Options on Futures Contracts. The acquisition of put and call options
on futures contracts will give the Fund the right (but not the obligation) for a
specified price to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures
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contract, the Fund obtains the benefit of the futures position if prices move in
a favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium
which may partially offset a decline in the value of the Fund's assets. By
writing a call option, the Fund becomes obligated, in exchange for the premium,
to sell a futures contract if the option is exercised, which may have a value
higher than the exercise price. Conversely, the writing of a put option on a
futures contract generates a premium which may partially offset an increase in
the price of securities that the Fund intends to purchase. However, the Fund
becomes obligated to purchase a futures contract if the option is exercised,
which may have a value lower than the exercise price. Thus, the loss incurred by
the Fund in writing call options on futures (and in entering into futures
transactions) is potentially unlimited and may exceed the amount of the premium
received. The Fund will incur transaction costs in connection with the writing
of options on futures.
The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option on the same series.
There is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Other Considerations. The Fund will engage in futures and related
options transactions for bona fide hedging purposes in accordance with CFTC
regulations or to seek to increase total return to the extent permitted by such
regulations, which permit principals of an investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), to engage in
such transactions without registering as commodity pool operators. The Fund is
not permitted to engage in speculative futures trading. The Fund will determine
that the price fluctuations in the futures contracts and options on futures used
for hedging purposes are substantially related to price fluctuations in
securities held by the Fund or which it expects to purchase.
Except as stated below, the Fund's futures transactions will be entered
into for traditional hedging purposes -- i.e., futures contracts will be sold to
seek to protect against a decline in the price of securities (or the currency in
which they are denominated) that the Fund owns, or futures contracts will be
purchased to seek to protect the Fund against an increase in the price of
securities (or the currency in which they are denominated) it intends to
purchase. As evidence of this hedging intent, the Fund expects that on 75% or
more of the occasions on which it takes a long futures or option position
(involving the purchase of futures contracts), the Fund will have purchased, or
will be in the process of purchasing, equivalent amounts of related securities
or assets denominated in the related currency in the cash market at the time
when the futures or option position is closed out. However, in particular cases,
when it is economically advantageous for the Fund to do so, a long futures
position may be terminated or an option may expire without the corresponding
purchase of securities or other assets. As an alternative to literal compliance
with the bona fide hedging definition, a CFTC regulation permits the Fund to
elect to comply with a different test, under which the sum of the amounts of
initial margin deposits on the Fund's existing futures contracts and premiums
paid for options on futures entered into for the purpose of seeking to increase
total return (net of the amount the positions are "in the money") would not
exceed 5% of the market value of the Fund's net assets. The Fund will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for maintaining its qualification as a
regulated investment company for federal income tax purposes.
While transactions in futures contracts and options on futures may
reduce certain risks, such transactions themselves entail certain other risks.
Thus, while the Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates, securities prices or currency exchange
rates may result in a poorer overall performance for the Fund than if it had not
entered into any futures contracts or options transactions. In the event of an
imperfect correlation between a futures position and a portfolio position which
is intended to be protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss.
Perfect correlation between the Fund's futures positions and portfolio
positions will be difficult to achieve because no futures contracts based on
foreign corporate equity securities are currently available. The only futures
contracts available to hedge the Fund's portfolio are various futures on U.S.
Government securities and foreign currencies, futures on a municipal securities
index and stock index futures. In addition, it is not possible to hedge fully or
perfectly against the effect of currency fluctuations on the value of foreign
securities because currency movements impact the value of different securities
to different degrees.
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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 and over-the-counter, both in the U.S. and in foreign
countries. 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 in the U.S., the Nikkei in Japan or the FTSE 100 in the United Kingdom.
Index options may also be based on a narrower market index such as the S&P 100
or on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index.
The Fund may purchase put options in an attempt 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.
The Fund may purchase call options on securities indices in order to
remain fully invested in a particular foreign 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 an increase in the
level of other securities indices 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. 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 would 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 can not
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 PMC have experience in options transactions and gains and losses on
investments in options (and futures as described above) depend on PMC's ability
to predict correctly the direction of stock prices, currency exchange and
interest rates and other economic factors.
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.
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Investment Restrictions
Fundamental Investment Restrictions. The following list presents all of
the fundamental investment restrictions applicable to the Fund. These
restrictions cannot be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. As used in the Prospectus and this
Statement of Additional Information, such approval means the approval of the
lesser of (i) the holders of 67% or more of the shares represented at a meeting
if the holders of more than 50% of the outstanding shares are present in person
or by proxy, or (ii) the holders of more than 50% of the outstanding shares.
Pursuant to these restrictions, the Fund may not:
(1)......borrow money, except from banks to meet redemptions in amounts
not exceeding 33 1/3% (taken at the lower of cost or current value) of its total
assets (including the amount borrowed);
(2)......purchase securities of an issuer (other than the U.S.
Government, its agencies or instrumentalities), if such purchase would at the
time result in more than 10% of the outstanding voting securities of such issuer
being held by the Fund;
(3)......purchase securities for the purpose of controlling management
of other companies;
(4)......invest in commodities or commodity contracts, except interest
rate futures contracts, options on securities, securities indices, currency and
other financial instruments, futures contracts on securities, securities
indices, currency and other financial instruments and options on such futures
contracts, forward foreign currency exchange contracts, forward commitments,
securities index put or call warrants and repurchase agreements entered into in
accordance with the Fund's investment policies;
(5)......invest in real estate or interests therein, except that the
Fund may invest in readily marketable securities, other than limited partnership
interests, of companies that invest in real estate;
(6)......make loans, provided that the lending of portfolio securities
and the purchase of debt securities pursuant to the Fund's investment objective
shall not be deemed loans for the purposes of this restriction;
(7)......act as an underwriter, except as it may be deemed to be an
underwriter in a sale of restricted securities;
(8)......issue senior securities, except as permitted by restrictions
numbers 1, 4 and 6 above, 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 currency exchange contracts and repurchase
agreements entered into in accordance with the Fund's investment policies, and
the pledge, mortgage or hypothecation of the Fund's assets within the meaning of
restriction number 9 below are not deemed to be senior securities;
(9)......guarantee the securities of any other company, or mortgage,
pledge, hypothecate, assign or otherwise encumber as security for indebtedness
its securities or receivables in an amount exceeding the amount of the borrowing
secured thereby; or
(10).....invest more than 5% of its total assets in convertible debt
securities rated by a national ratings agency below investment grade.
In addition to the foregoing fundamental restrictions, at least 75% of
the value of the Fund's total assets must be represented by cash and cash items,
U.S. Government securities, securities of other investment companies, and other
securities for the purpose of this calculation limited in respect of any one
issuer to an amount not greater in value than 5% of the value of the total
assets of the Fund and to not more than 10% of the outstanding voting securities
of such issuer.
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 staff
of the Securities and Exchange Commission (the "SEC"), investments are deemed to
be concentrated in a particular industry if such investments constitute 25% or
more
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of the Fund's total assets. The 1940 Act provides that the policy of the Fund
with respect to concentration is a fundamental policy.
Non-Fundamental Investment Restrictions. The following list represents
non-fundamental investment restrictions applicable to the Fund. These
non-fundamental restrictions may be changed by a vote of the Board of Trustees
without shareholder approval.
The Fund may not:
(a)......purchase securities "on margin" or effect "short sales" of
securities;
(b)......acquire the securities of other domestic or foreign investment
companies or investment funds if, as a result, (i) more than 10% of the Fund's
total assets would be invested in securities of closed-end investment companies,
(ii) such purchase would result in more than 3% of the total outstanding voting
securities of any one such closed-end investment company being held by the Fund,
or (iii) more than 5% of the Fund's total assets would be invested in any one
such closed-end investment company, except in connection with a plan of merger
or consolidation with or acquisition of substantially all the assets of such
other investment company or fund. The Fund will not invest in the securities of
any open-end investment company, except in connection with a plan of merger or
consolidation with or acquisition of substantially all the assets of such other
open-end investment company;
(c)......purchase any security, including any repurchase agreement
maturing in more than seven days, which is illiquid, if more than 15% of the net
assets of the Fund, taken at market value, would be invested in such securities;
(d)......purchase or retain the securities of any company if officers
or Trustees of the Fund, or officers and directors of its advisers 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.
In order to register its shares in certain jurisdictions, the Fund has
agreed to adopt certain additional investment restrictions, which are not
fundamental and which may be changed by a vote of the Fund's Board of Trustees.
Pursuant to these additional investment restrictions, the Fund may not (i)
invest more than 2% of its assets in warrants, valued at the lower of cost or
market, provided that it may invest up to 5% of its total assets, as so valued,
in warrants listed on a recognized securities exchange, and provided further
that warrants acquired in units or attached to securities shall be deemed for
this purpose to have no value, (ii) write (sell) uncovered calls or puts or any
combination thereof or purchase calls, puts, straddles, spreads or any
combination thereof, or (iii) invest in interests in oil, gas or other mineral
exploration or development leases or programs, (iv) purchase the securities of
any enterprise which has a business history of less than three years, including
the operation of any predecessor business to which it has succeeded. The Fund
does not intend to borrow money during the coming year, and will do so only as a
temporary measure for extraordinary purposes or to facilitate redemptions. The
Fund will not purchase securities while any borrowings are outstanding.
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 1940 Act.
JOHN F. COGAN, JR.*, Chairman of the Board, President and Trustee, DOB: June
1926
President, Chief Executive Officer and a Director of The Pioneer Group, Inc.
("PGI"); Chairman and a Director of Pioneering Management Corporation ("PMC")
and Pioneer Funds Distributor, Inc. ("PFD"); Director of Pioneering Services
Corporation ("PSC"), Pioneer Capital Corporation ("PCC") 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"), Pioneer First Russia, Inc.
("First Russia") and Pioneer Omega, Inc. ("Omega"); Chairman of the Board and
Director of Pioneer Goldfields Limited ("PGL") and Teberebie Goldfields Limited;
Chairman of the Supervisory Board of
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Pioneer Fonds Marketing, GmbH ("Pioneer GmbH"); Member of the Supervisory Board
of Pioneer First Polish Trust Fund Joint 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; 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, from 1991 to 1994;
Professor of Operations Management and Management of Technology, Boston
University School of Management ("BUSM"), from 1989 to 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 2635, 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; President, Chief Investment
Officer and a Director of PMC; Director of PFD, PCC, PIC, PIntl , First Russia,
Omega and Pioneer SBIC Corporation, Executive Vice President and Trustee of all
of the Pioneer mutual funds.
STEPHEN K. WEST, Trustee, DOB: September 1928
125 Broad Street, New York, NY 10004
Partner, Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus Funds
(mutual funds) and Trustee of all of the Pioneer mutual funds.
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JOHN WINTHROP, Trustee, DOB: June 1936
One North Adgers Wharf, Charleston, SC 29401
President, John Winthrop & Co., Inc. (private investment firm); Director of
NUI Corp.; Trustee of Alliance Capital Reserves, Alliance Government Reserves
and Alliance Tax Exempt Reserves and Trustee of all of the Pioneer mutual funds,
except Pioneer Variable Contracts Trust.
NORMAN KURLAND, Vice President, DOB: November 1949
Senior Vice President of PMC since 1993; Vice President of PMC from 1990 to
1993; Vice President of Pioneer India Fund, Pioneer Emerging Markets Fund and
Pioneer International Growth Fund.
WILLIAM H. KEOUGH, Treasurer, DOB: April 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIC, PIntl, PMT, PGL, First Russia, Omega and
Pioneer SBIC Corporation; 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, First Russia, Omega 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 of PMC since May 1994, Manager of Auditing,
Compliance and Business Analysis for PGI prior to May 1994 and Assistant
Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, Assistant Secretary, DOB: March 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant
Secretary of PMC, PIntl, PGL, First Russia, Omega and all of the Pioneer mutual
funds; Assistant Clerk of PFD and PSC: and formerly of Hale and Dorr (counsel to
the Fund) where he most recently served as junior partner.
The Fund's Amended and Restated Declaration of Trust (the "Declaration of
Trust") provides that the holders of two-thirds of its outstanding shares may
vote to remove a Trustee of the Fund at any meeting of shareholders. See
"Description of Shares" below. The business address of all officers is 60 State
Street, Boston, Massachusetts 02109. All of the outstanding capital stock of
PFD, PMC and PSC is owned, directly or indirectly, by PGI, a publicly-owned
Delaware corporation. PMC, the Fund's investment adviser, serves as the
investment adviser for the Pioneer mutual funds listed below and manages the
investments of certain institutional accounts.
The table below lists all the Pioneer mutual funds currently offered to the
public and the investment adviser and principal underwriter for each fund.
Investment Principal
Fund Name Adviser Underwriter
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer 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
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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 New York Triple Tax-Free Fund PMC PFD
Pioneer Massachusetts
Double Tax-Free Fund PMC PFD
Pioneer California Double Tax-Free Fund PMC PFD
Pioneer U.S. Government Money Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares, Inc. PMC Note 1
Pioneer Variable Contracts Trust PMC Note 2
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Note 1 This fund is a closed-end fund.
Note 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. As of the date of this
Statement of Additional Information, the Trustees and officers of the Fund owned
beneficially in the aggregate less than 1% of the outstanding shares 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.
Remuneration of Trustees
The Fund pays an annual trustees' fee to each Trustee who is not
affiliated with PGI, PMC, PFD or PSC consisting of two components: (a) a base
fee of $500 and (b) a variable fee, calculated on the basis of the Fund's
average net assets, estimated to be approximately $91 for 1996. In addition, the
Fund pays a per meeting fee of $120 to each Trustee who is not affiliated with
PGI, PMC, PFD or PSC. The Fund also pays an annual committee participation fee
to each Trustee who serves as a member of any committees established to act on
behalf of one or more of the of Pioneer mutual funds. Committee fees are
allocated to the Fund on the basis of the Fund's average net assets. Each
Trustee who is a member of the Audit Committee for the Pioneer mutual funds
receives an annual fee equal to 10% of the aggregate annual trustees' fee,
except the Committee Chairperson who receives an annual trustees' fee equal to
20% of the aggregate annual trustees' fee. The 1996 fees for the Audit Committee
members and Chairperson 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, receives an annual fee equal to
5% of the annual trustees' fee, except the Committee Chairperson who will
receive an annual trustees' fee equal to 10% of the annual trustees' fee. The
1996 fees for the Pricing Committee members and Chairperson 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. The Fund pays no salaries of compensation to any of its
officers.
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<PAGE>
The following table provides information regarding the compensation
paid by the Fund and the other Pioneer mutual funds to the Trustees for their
services for the Fund's most recently completed fiscal year. The Fund paid no
salaries or compensation to any of its officers. The Fund paid an annual
trustees' fee of $1,000 plus $100 per meeting attended to each Trustee who was
not an interested person of PMC, PFD or PGI and paid an annual trustees' fee of
$500 plus expenses to each other Trustee. Any such fees and expenses paid to
interested persons of PMC, PFD or PGI (currently Messrs. Cogan and Tripple) were
reimbursed to the Fund under its Management Contract.
Total Compensation
from the Pioneer
Aggregate Family of Funds
Compensation (33 funds including
Director_ From the Fund** the Fund)***
John F. Cogan, Jr. $ 500.00* $ 11,000*
Richard H. Egdahl, M.D. 2,041.41 63,315
Margaret B.W. Graham 2,041.41 63,315
John W. Kendrick 2,041.41 62,398
Marguerite A. Piret 2,715.83 76,704
David D. Tripple 500.00* 11,000*
Stephen K. West 2,379.07 68,180
John Winthrop 2,496.74 71,199
--------------------------
Totals $14,715.88 $427,111
============================
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* PMC fully reimbursed the Fund and the other funds in the Pioneer Family
of Mutual Funds for compensation paid to Messrs. Cogan and Tripple.
** For the fiscal year ended October 31, 1995.
*** For the calendar year ended December 31, 1995.
_ No Trustee received or accrued any pension or other retirement benefits
from the Fund during either of the periods covered.
3. INVESTMENT MANAGER
The Fund has contracted with PMC, 60 State Street, Boston,
Massachusetts, to act as its manager for management and advisory services. A
description of the services provided under the Management Contract and the
expenses paid by the Fund is set forth under "Management of the Fund" in the
Prospectus.
The Management Contract is renewable annually by the vote of a majority
of the Board of Trustees (including a majority of the Trustees who are not
parties to the contract or interested persons of any such parties). The vote
must be cast in person at a meeting called for the purpose of voting on each
such renewal. The contract terminates if assigned and may be terminated without
penalty by the Fund or PMC upon sixty days' written notice by vote of its Board
of Directors or Trustees or a majority of its outstanding voting securities.
Under the Fund's current Management Contract, which was approved by the
shareholders of the Fund on April 27, 1994 and became effective on April 30,
1994, as compensation for its management services and expenses incurred, PMC is
entitled to a management fee from the Fund at the rate of 1.00% per annum of the
Fund's average daily net assets up to $300 million, 0.85% of the next $200
million and 0.75% of any excess over $500 million. The fee is computed and
accrued daily and paid monthly. Prior to March 1, 1996, PMC had agreed not to
impose a portion of its management fee to the extent required to limit the Class
A shares' total expenses to 1.75% of the average daily net assets attributable
to the Class A shares. The portion of the
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management fee attributable to Class B shares was waived only to the extent the
management fee was waived for Class A shares. This agreement was voluntary and
temporary and was terminated by PMC on February 28, 1996.
PMC has agreed that if in any fiscal year the aggregate expenses of the
Fund exceed the expense limitation established by any state having jurisdiction
over the Fund, PMC will reduce its management fee to the extent required by
state law. The most restrictive state expense limit currently applicable to the
Fund provides that the Fund's expenses in any fiscal year may not exceed 2.5% of
the first $30 million of average daily net assets, 2.0% of the next $70 million
of such assets and 1.5% of such assets in excess of $100 million. In the past,
the relevant state has granted relief for international funds, such as the Fund,
because of their higher operations costs, and the Fund expects to seek such
relief to the extent it becomes necessary to do so.
Under the Fund's prior Management Contract, which terminated on April
29, 1994, as compensation for its management services and expenses incurred, PMC
was entitled to a management fee from the Fund at the rate of 1.10% per annum of
the funds average daily net assets up to $300 million, 1.05% of the next $200
million and 0.95% of any excess over $500 million. PMC had also voluntarily
agreed not impose a portion of its management fee and to make other
arrangements, if necessary to limit other expenses of the Fund to the extent to
limit the Class A shares total expenses to 2.00% of the average daily net assets
attributable to the Class A shares. This expense limitation also terminated on
April 29, 1994. Prior to April 30, 1994, the Fund relied on five Subadvisers
(collectively, the "Subadvisers") for investment advice with respect to
investments in securities of companies whose principal executive officers were
located in France, Germany, Italy, Netherlands and the United Kingdom.
These subadvisory arrangements also terminated on April 29, 1994.
The Fund paid $131,361, $243,963 and $499,754 in management fees for
the fiscal years ended October 31, 1993, 1994 and 1995, respectively. The Fund
would have incurred management fees payable to PMC during such periods of
$443,141, $592,674 and $758,700, respectively, had the fee reduction agreements
not been in place.
Under the terminated subadvisory agreements, each Subadviser was paid
an advisory fee by PMC at the annual rate of 0.50% of the average daily net
assets of the Fund managed by it. These subadvisory fees, which accrued daily
and were paid quarterly, were payable by PMC without regard to any expense
limitation affecting PMC's fees. For the fiscal year ended October 31, 1993, PMC
paid subadvisory fees of $29,478 to BPG Advisory Investment S.A.; $17,617 to
Schroder Munchmeyer Hengst Capital GmbH; $6,342 to Euromobiliare, S.I.M.,
S.p.A.; $34,763 to Mees & Hope Fundmanagement B.V.; and $45,048 to
Edinburgh-Wilmington International Capital Management. During the period from
November 1, 1993 to April 29, 1994, PMC paid subadvisory fees of $24,302,
$10,411 and $15,840 to BPG Advisory Investment S.A., Schroder Munchmeyer Hengst
Capital GmbH and Mees & Hope Fundmanagement B.V., respectively. During the same
period, no subadvisory fees were paid to Euromobiliare, S.I.M., S.p.A. and
Edinburgh-Wilmington International Capital Management.
The Fund's subadvisory agreement with a Spanish subadviser, Gestemar
Gestion, S.G.I.I.C., S.A., terminated on July 29, 1993, following a change in
the subadviser's management. PMC assumed responsibility for managing the Fund's
Spanish assets at that time. For period from November 1, 1992 to July 29, 1993,
PMC paid subadvisory fees of $10,315 to Gestemar Gestion, S.G.I.I.C., S.A.
4. PRINCIPAL UNDERWRITER
PFD serves as the principal underwriter in connection with the
continuous offering of shares of the Fund pursuant to an Underwriting Agreement,
dated October 9, 1990. The Trustees who were not interested persons of the Fund,
as defined in the 1940 Act, approved the Underwriting Agreement, which will
continue in effect from year to year, if annually approved by the Trustees. See
"Distribution Plans" below. The Underwriting Agreement provides that PFD will
bear certain distribution expenses not borne by the Fund. For the fiscal years
ended October 31, 1993, 1994 and 1995, net underwriting commissions earned by
PFD were approximately $38,447, $40,109 and $56,000, respectively. Commissions
reallowed to dealers during such periods were approximately $281,000, $482,102
and $368,000, 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. 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
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of printing and distributing prospectuses and supplements to prospective
shareholders. The Fund bears the cost of registering its shares under federal,
state and foreign securities law. See "Distribution Plans" below.
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, the Fund may issue shares for
consideration other than cash in connection with a bona fide reorganization,
statutory merger or other acquisition of portfolio securities (other than
municipal debt securities issued by state political subdivisions or their
agencies or instrumentalities) 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 immediate resale; (iii) the securities are not
restricted as to transfer either by law or liquidity of market; and (iv) the
securities have a value which is readily ascertainable (and not established only
by evaluation procedures) as evidenced by a listing on the American Stock
exchange or the New York Stock Exchange or by quotation under the Nasdaq
National Market. An exchange of securities for Fund shares will generally be a
taxable transaction to the shareholder.
5. DISTRIBUTION PLANS
The Fund has adopted plans of distribution pursuant to Rule 12b-1
promulgated by the SEC under the 1940 Act with respect to its Class A, Class B
and Class C shares (the "Class A Plan", the "Class B Plan" and the "Class C
Plan") (together, the "Plans").
Class A Plan
Pursuant to the Class A Plan the Fund reimburses PFD for its
expenditures in financing certain activities primarily intended to result in the
sale of the Class A Plan shares. Certain categories of such expenditures have
been approved by the Board of Trustees and are set forth in the Prospectus. See
"Distribution Plans" in the Prospectus. The expenses of the Fund pursuant to the
Class A Plan are accrued daily at a rate which may not exceed the annual rate of
0.25% of the Fund's average daily net assets attributable to Class A shares.
Class B Plan
The Class B Plan provides that the Fund shall pay PFD, as the Fund's
distributor for its Class B shares, a daily distribution fee equal on an annual
basis to 0.75% of the Fund's average daily net assets attributable to Class B
shares and will pay PFD a service fee equal to 0.25% of the Fund's average daily
net assets attributable to Class B shares (which PFD will in turn pay to
securities dealers which enter into a sales agreement with PFD at a rate of up
to 0.25% of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be consideration of personal services
and/or account maintenance services rendered by the dealer with respect to Class
B shares. PFD will advance to dealers the first year's service fee at a rate
equal to 0.25% of the amount invested. As compensation therefor, PFD may retain
the service fee paid by the Fund with respect to such shares for the first year
after purchase. Dealers will become eligible for additional service fees with
respect to such shares commencing in the thirteenth month following purchase.
Dealers may from time to time be required to meet certain other criteria in
order to receive service fees. PFD or its affiliates are entitled to retain all
service fees payable under the Class B Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class B Plan is
to compensate PFD for its distribution services to the Fund. PFD pays
commissions to dealers as well as expenses of printing prospectuses and reports
used for sales purposes, expenses with respect to the preparation and printing
of sales literature and other distribution related expenses, including, without
limitation, the cost necessary to provide distribution- related services, or
personnel, travel office expenses and equipment. The Class B Plan also provides
that PFD will receive all contingent deferred sales charges ("CDSCs")
attributable to Class B shares. (See "Distributions Plans" in the Prospectus.)
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<PAGE>
Class C Plan
The Class C Plan provides that the Fund will pay PFD, as the Fund's
distributor for its Class C shares, a distribution fee accrued daily and paid
quarterly, equal on an annual basis to 0.75% of the Fund's average daily net
assets attributable to Class C shares and will pay PFD a service fee equal to
0.25% of the Fund's average daily net assets attributable to Class C shares. PFD
will in turn pay to securities dealers which enter into a sales agreement with
PFD a distribution fee and a service fee at rates of up to 0.75% and 0.25%,
respectively, of the Fund's average daily net assets attributable to Class C
shares owned by investors for whom that securities dealer is the holder or
dealer of record. The service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. PFD will advance to dealers the first year's service fee at a
rate equal to 0.25% of the amount invested. As compensation therefor, PFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Commencing in the thirteenth month following a
purchase of Class C shares, dealers will become eligible for additional service
fees at a rate of up to 0.25% of the current value of the amount invested and
additional compensation at a rate of up to 0.75% of the amount invested with
respect to such shares. Dealers may from time to time be required to meet
certain other criteria in order to receive service fees. PFD or its affiliates
are entitled to retain all service fees payable under the Class C Plan for which
there is no dealer of record or for which qualification standards have not been
met as partial consideration for personal services and/or account maintenance
services performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class C Plan is
to compensate PFD for its distribution services with respect to the Class C
shares of the Fund. PFD pays commissions to dealers as well as expenses of
printing prospectuses and reports used for sales purposes, expenses with respect
to the preparation and printing of sales literature and other
distribution-related expenses, including, without limitation, the cost necessary
to provide distribution-related services, or personnel, travel office expenses
and equipment. The Class C Plan also provides that PFD will receive all CDSCs
attributable to Class C shares. (See "Distributions Plans" in the Prospectus.)
General
In accordance with the terms of the Plans, PFD provides to the Fund for
review by the Trustees a quarterly written report of the amounts expended under
the respective Plan and the purpose for which such expenditures were made. In
the Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is
not an interested person of the Fund, has any direct or indirect financial
interest in the operation of the Plans except to the extent that PFD and certain
of its employees may be deemed to have such an interest as a result of receiving
a portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plans were adopted by a majority vote of the Board of Trustees,
including all of the Trustees who are not, and were not at the time they voted,
interested persons of the Fund, as defined in the 1940 Act (none of whom has or
have any direct or indirect financial interest in the operation of the Plans)
(the "Qualified Trustees"), cast in person at a meeting called for the purpose
of voting on the Plans. In approving the Plans, the Trustees identified and
considered a number of potential benefits which the Plans may provide. The Board
of Trustees believes that there is a "reasonable likelihood" that the Plans will
benefit the Fund and its current and future shareholders. Under their terms, the
Plans remain in effect from year to year provided such continuance is approved
annually by vote of the Trustees in the manner described above. The Plans may
not be amended to increase materially the annual percentage limitation of
average net assets which may be spent for the services described therein without
approval of the shareholders of the Fund affected thereby, and material
amendments of the Plans must also be approved by the Trustees in the manner
described above. A Plan may be terminated at any time, without payment of any
penalty, by vote of the majority of the Trustees who are not interested persons
of the Fund and have no direct or indirect financial interest in the operations
of the Plan, or by a vote of a majority of the outstanding voting securities of
the respective Class of the Fund (as defined in the 1940 Act). A Plan will
automatically terminate in the event of its assignment (as defined in the 1940
Act). In the Trustees' quarterly review of the Plans, they will consider the
Plans continued appropriateness and the level of compensation they provide.
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<PAGE>
During the fiscal year ended October 31, 1995, the Fund incurred total
distribution fees of $147,374 and $56,924 pursuant to the Class A Plan and the
Class B Plan, respectively. Class C shares were first offered on January 31,
1996. Distribution fees were paid by the Fund to PFD in reimbursement of
expenses related to servicing of shareholder accounts and to compensate dealers
and sales personnel.
During the fiscal year ended October 31, 1995, CDSCs, at a rate
declining from a maximum of 4.0% of the lower of the cost or market value of the
shares being redeemed, of $6,902 were deducted from redemptions of Class B
shares made within 6 years of purchase (as described in "How to Buy Fund Shares"
in the Prospectus). Such CDSCs are paid to PFD in reimbursement of expenses
related to servicing of shareholders accounts and compensation paid to dealers
and sales personnel.
6. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston,
Massachusetts, to act as shareholder servicing and transfer agent for the Fund.
This contract terminates if assigned and may be terminated without penalty by
either party upon ninety days' written notice by vote of its Board of Directors
or Trustees, as the case may be, or a majority of the Fund's outstanding voting
securities.
Under the terms of its contract with the Fund, PSC will service
shareholder accounts, and its duties will include: (i) processing sales,
redemptions and exchanges of shares of the Fund; (ii) distributing dividends and
capital gains associated with Fund portfolio accounts; and (iii) maintaining
account records and responding to shareholder inquiries.
PSC receives an annual fee of $22.00 per Class A, Class B and Class C
shareholder account from the Fund as compensation for the services described
above. PSC is also reimbursed by the Fund for its out-of-pocket expenditures.
The annual fee is set at an amount determined by vote of a majority of the
Fund's Trustees (including a majority of the Trustees who are not parties to the
contract with PSC or interested persons of any such parties) to be comparable to
fees for such services being paid by other investment companies. The Fund may
compensate entities which have contracted to be an agent for specific
transaction processing and services. Any such payments by the Fund would be in
lieu of the per account fee which would otherwise be paid by the Fund to PSC.
7. CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109 (the "Custodian"), is the custodian of the Fund's assets. The Custodian's
responsibilities include safekeeping and controlling the Fund's cash and
securities in the U.S. as well as in Europe, handling the receipt and delivery
of securities, and determining income and collecting interest and dividends on
the Fund's investments. The Custodian fulfills its function in Europe through a
network of subcustodian banks located in European countries (the
"Subcustodians"). The Custodian also provides fund accounting, bookkeeping and
pricing assistance to the Fund and assistance in arranging for forward currency
exchange contracts as described above under "Investment Policies and
Restrictions."
The Custodian does not determine the investment policies of the Fund or
decide which securities the Fund will buy or sell. The Fund may invest in
securities issued by the Custodian or any of the Subcustodians, deposit cash in
the Custodian or any Subcustodian and deal with the Custodian or any of the
Subcustodians as a principal in securities transactions. Portfolio securities
may be deposited into the Federal Reserve-Treasury Department Book Entry System
or the Depository Trust Company in the U.S. or in recognized central
depositories in Europe. In approving the Subcustodian for European securities,
the Fund's Board of Trustees made certain determinations required by Rule 17f-5
promulgated under the 1940 Act. The Trustees will annually review and approve
the continuations of the Fund's European custodian arrangements.
8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, One International Place, Boston, Massachusetts
02110, are the Fund's independent public accountants, providing audit services
and assistance and consultation with respect to the preparation of tax returns
and filings with the SEC.
9. PORTFOLIO TRANSACTIONS
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All orders for the purchase or sale of portfolio securities are placed
on behalf of the Fund by PMC pursuant to authority contained in the Fund's
Management Contract. In selecting brokers or dealers, PMC considers other
factors relating to best execution, 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 broker-dealers which provide brokerage and/or research
services to the Fund and/or other investment companies or accounts managed by
PMC. In addition, if PMC determines in good faith that the amount of commissions
charged by a broker-dealer is reasonable in relation to the value of brokerage
and research services provided by such broker-dealer, the Fund may pay
commissions to the broker-dealer in an amount greater than the amount another
firm might charge. Such services may include advice concerning the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or the purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement). PMC maintains a listing of broker-dealers
who provide such services on a regular basis. However, because many transactions
on behalf of the Fund and other investment companies or accounts 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 to other
investment companies or accounts managed by PMC, although not all of such
research may be useful to the Fund. Conversely, such information provided by
brokers or dealers who have executed transaction orders on behalf of such other
accounts may be useful to PMC in carrying out its obligations to the Fund. The
receipt of such research has not reduced PMC's normal independent research
activities; however, it enables PMC to avoid the additional expenses which might
otherwise be incurred if it were to attempt to develop comparable information
through their own staffs.
In circumstances where two or more broker-dealers offer comparable
prices and executions, preference may be given to a broker-dealer which has sold
shares of the Fund. This policy does not imply a commitment to execute all
portfolio transactions through all broker-dealers that sell shares of the Fund.
Brokerage commissions in European countries are generally fixed (non-
negotiable) and other transaction costs on European securities exchanges are
generally higher than in the United States.
In addition to the Fund, PMC acts as investment adviser to other
Pioneer mutual funds and certain private accounts with investment objectives
similar to those of the Fund. Securities frequently meet the investment
objective of the Fund, such other funds and such private accounts. In such
cases, the decision to recommend a purchase to one fund or account rather than
another is based on a number of factors. The determining factors in most cases
are the amount of securities of the issuer then outstanding, the value of those
securities and the market for them. Other factors considered in the investment
recommendations include other investments which each fund or account presently
has in a particular industry and the availability of investment funds in each
fund or account.
It is possible that at times identical securities will be held by more
than one fund and/or account. However, positions in the same issue may vary and
the length of time that any company 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 as the Fund, the Fund may not be able to
acquire as large a position in such security as it desires or it may have to pay
a higher price for the security. Similarly, the Fund may not be able to obtain
as large an execution of an order to sell or as high a price for any particular
portfolio security if PMC decides to sell on behalf of another account the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one company 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.
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The Trustees periodically review PMC's performance of its
responsibilities in connection with portfolio transactions on behalf of the
Fund.
For the fiscal years ended October 31, 1993, 1994 and 1995, the Fund
paid or owed aggregate brokerage commissions of $205,326, $363,875 and $249,961,
respectively. For the fiscal year ended October 31, 1994, the Fund paid a
brokerage commission of $3,949 to an affiliated broker of Euromobiliare, S.I.M.,
S.p.A.. The percentage of the Fund's aggregate brokerage commissions paid to an
affiliated broker of the former Subadviser was 1%.
10. TAX STATUS
It is the Fund's policy to meet the requirements of Subchapter M of the
Code for qualification as a regulated investment company. If the Fund meets all
such requirements and distributes to its shareholders, in accordance with the
Code's timing requirements, annually all taxable and exempt income, if any,
which it receives, the Fund will be relieved of the necessity of paying federal
income tax.
In order to qualify as a regulated investment company under Subchapter
M, the Fund must, among other things, derive at least 90% of its annual gross
income from dividends, interest, gains from the sale or other disposition of
stock, securities or foreign currencies, or other income (including gains from
options, futures and forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90% income test"), limit
its gross gains from the sale of stock, securities and certain other investments
held for less than three months to less than 30% of its annual gross income (the
"30% test") and satisfy certain annual distribution and quarterly
diversification requirements.
Dividends from net investment income, net short-term capital gains and
certain net foreign exchange gains are taxable as ordinary income to the
shareholders, whether received in cash or in additional shares. Dividends from
net long-term capital gains, if any, whether received in cash or additional
shares, are taxable to the Fund's shareholders as long-term capital gains for
federal income tax purposes without regard to the length of time shares of the
Fund have been held. The federal income tax status of all distributions will be
reported to shareholders annually.
Any dividend declared by the Fund in October, November or December as
of a record date in such a month and paid during the following January will be
treated for federal income tax purposes as received by shareholders on December
31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency-denominated debt
securities, forward foreign currency contracts, foreign currencies, options and
future contracts on 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 deemed to recognize
from the sale of certain investments held for less than 3 months for purposes of
the 30% test and may under future Treasury regulations produce income not among
the types of "qualifying income" for purposes of the 90% income test. If the net
foreign exchange loss for a year were to exceed the Fund's investment company
taxable income (computed without regard to such loss) the resulting 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
sources that produce interest, dividend, rental, royalty or capital gain income)
or hold at least 50% of their assets in such passive sources ("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. In certain cases, an election may be available that
would ameliorate these adverse tax consequences. The Fund may limit its
investments in passive foreign investment companies and will undertake
appropriate actions, including consideration of any available elections, to
limit its tax liability, if any, with respect to such investments.
Since, at the time of an investor's purchase of Fund shares, a portion
of the per share net asset value by which the purchase price is determined may
be represented by realized or unrealized appreciation in the Fund's
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portfolio or undistributed taxable income of the Fund, subsequent distributions
(or portions thereof) on such shares may be taxable to such investor even if the
net asset value of his shares is, as a result of the distributions, reduced
below his cost for such shares and the distributions (or portions thereof) in
reality represent a return of a portion of his investment.
Redemptions and exchanges are taxable events. Any loss realized by a
shareholder upon the redemption or other sale of shares with a tax holding
period at the time of redemption of six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain with respect to such shares.
In addition, as described in the Prospectus, the tax treatment of gains
or losses on the redemption or exchange of certain Class A shares within 90 days
after their purchase may be affected by subsequent investments in the same Fund
or another fund pursuant to a reinvestment or exchange privilege, and 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 reinvestment) within 30 days before or after a redemption or other sale
of shares.
For federal income tax purposes, the Fund is permitted to carry forward
a net realized capital loss in any year to offset realized capital gains, if
any, during the eight years following the year of the loss. To the extent
subsequent net realized 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.
The Fund's dividends paid to U.S. corporate shareholders normally will
not qualify for the dividends-received deduction available to corporations,
because the Fund does not expect to receive dividends from U.S. domestic
corporations.
The Fund will 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 in some cases. If more than 50% of the value of the Fund's total assets at
the close of any fiscal year consists of stock or securities of foreign
corporations, the Fund may elect to pass through to shareholders their pro rata
shares of foreign taxes paid by the Fund, with the result that shareholders
would be required to include such taxes in their gross incomes (in addition to
dividends and distributions actually received by shareholders) and would treat
such shares as foreign taxes paid by them, for which they may be entitled to a
tax deduction or credit for such taxes on their own tax returns, subject to
certain limitations under the Code.
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.
Interest rate futures contracts or futures contracts on securities,
securities indices or foreign currencies entered into by the Fund and options
written or purchased by the Fund on securities, securities indices, foreign
currencies or futures contracts, 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 futures or
forward contracts may not have been disposed of or closed out and delivery may
not have been made thereunder and such options may not have lapsed, been closed
out, or exercised, and the tax rules applicable to these derivative instruments
may affect the characterization as long-term or short-term of some capital gains
and losses realized by the Fund. Additionally, certain options, futures, and
forward contracts on foreign currency and certain options on foreign currency
futures contracts may be subject to Section 988, described above, and
accordingly produce ordinary income or loss. Losses on certain options, futures,
or forward contracts and/or offsetting positions (portfolio securities or other
positions with respect to which the Fund's risk of loss is substantially
diminished by one or more options, futures, or forward contracts) may also be
deferred under the tax straddle rules of the Code, which may also affect the
characterization of capital gains or losses from straddle positions and certain
successor positions as long-term or short-term. The tax rules applicable to
options, futures, 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 elections may be available with respect to
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these instruments that may 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, repurchases or exchanges, 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 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 federal income tax. The description does not address any
special tax rules applicable to particular types of entities, such as banks,
insurance companies or tax-exempt organizations. Shareholders should consult
their own tax advisors on these matters and on state, local and other applicable
tax laws. Investors other than U.S. persons may be subject to different U.S. tax
treatment, including a possible 30% U.S. non-resident alien withholding tax (or
a lower treaty rate) on any amounts treated as ordinary income and, unless an
effective IRS Form W-8 or authorized substitute is one file, to 311 backup
withholding on certain other payments from the Fund. Shareholders should consult
their own tax advisers on these matters and on state, local and other applicable
tax laws.
11. DESCRIPTION OF SHARES
The Fund's Declaration of Trust permits the Board of Trustees to
authorize the issuance of an unlimited number of full and fractional shares of
beneficial interest (without par value) which may be divided into such separate
series as the Trustees may establish. 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 three classes of shares of the
Fund, Class A shares, Class B shares and Class C shares. Each share of a class
of the Fund represents an equal proportionate interest in the assets of the Fund
allocable to that class. Upon liquidation of the Fund, shareholders of each
class of the Fund are entitled to share pro rata in the Fund's net assets
allocable to such class available for distribution to shareholders. The Fund
reserves the right to create and issue additional series or classes of shares,
in which case the shares of each class of a series would participate equally in
the earnings, dividends and assets allocable to that class of the particular
series.
Shareholders are entitled to one vote for each share held and may vote
in the election of Trustees and on other matters submitted to meetings of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have, under certain circumstances, the right to remove one or more
Trustees. No 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 Trust, except as stated below. See
"Certain Liabilities."
12. CERTAIN LIABILITIES
As a Massachusetts business trust, the Fund's operations are governed
by its Declaration of Trust dated October 13, 1992, as amended from time to
time, a copy of which is on file with the office of the Secretary of State of
The Commonwealth of Massachusetts. Shareholders of a Massachusetts business
trust may, under certain circumstances, be held personally liable for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund or any
series 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. Moreover, the Declaration of Trust 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. The Declaration of
Trust also provides that the Fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Fund and
satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss beyond his or her investment because
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of shareholder liability would be limited to circumstances in which the Fund
itself would be unable to meet its obligations. In light of the nature of the
Fund's business and the nature and amount of its assets, the possibility of the
Fund's liabilities exceeding its assets, and therefore a shareholder's risk of
personal liability, is remote.
The Declaration of Trust further provides that the Fund shall indemnify
each of its Trustees and officers against liabilities and expenses reasonably
incurred by them, in connection with, or arising out of, any action, suit or
proceeding, threatened against or otherwise involving such Trustee or officer,
directly or indirectly, by reason of being or having been a Trustee or officer
of the Fund. The Declaration of Trust does not authorize the Fund to indemnify
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. LETTER OF INTENTION
Purchases in the Fund of $50,000 or over of Class A shares (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 the Class A shares purchased during
such 13-month period pursuant to a Letter of Intention had such shares been
purchased all at once. See "How to Buy Fund Shares" in the Prospectus. For
example, a person who signs a Letter of Intention providing for a total
investment in Fund Class A 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, as of the date of the Letter of Intention as a
credit toward determining the applicable sales charge for the Class A 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 carefully before signing.
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 made to the
applicant, or any person designated by him, monthly or quarterly. Class B share
accounts must meet the minimum initial investment requirement prior to
establishing a SWP. Withdrawals under a SWP from Class B and Class C share
accounts are limited to 10% of the value at the time the SWP is established. See
"Waiver or Reduction of Contingent Deferred Sales Charge" in the prospectus.
Any income dividends or capital gains distributions on shares under the
SWP will be credited to the SWP account on the payment date in full and
fractional shares at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares
deposited under the SWP in a SWP account. To the extent that such redemptions
for periodic withdrawals exceed dividend income reinvested in the SWP account,
such redemptions will reduce and may ultimately exhaust the number of shares
deposited in the SWP account. Share redemptions are taxable transactions, and in
addition, the amounts received by a shareholder cannot be considered as yield or
income on his or her investment because part of such payments may be a return of
his or her investment.
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The SWP may be terminated at any time (1) by written notice to PSC or
from PSC to the shareholder; (2) upon receipt by PSC of appropriate evidence of
the shareholder's death; or (3) when all shares under the SWP have been
redeemed.
15. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined
as of the close of regular trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 PM, Eastern Time) on each day on which the 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, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each class of the Fund is also determined on any other day in
which the level of trading in its portfolio securities is sufficiently high that
the current net asset value per share might be materially affected by changes in
the value of its portfolio securities. The Fund is not required to determine its
net asset value per share on any day in which no purchase orders for the shares
of the Fund become effective and no shares are tendered for redemption.
The net asset value per share of each class of the Fund is computed by
taking the value of all of the Fund's assets attributable to a class, less the
Fund's liabilities attributable to a class, and dividing it by the number of
outstanding shares. For purposes of determining net asset value expenses of the
classes of the Fund are accrued daily.
Securities which have not traded on the date of valuation or securities
for which sales prices are not generally reported are valued at the mean between
the last bid and asked prices. Securities for which no market quotations are
readily available (including those the trading of which has been suspended) will
be valued at fair value as determined in good faith by the Board of Trustees,
although the actual computations may be made by persons acting pursuant to the
direction of the Board. The maximum offering price per Class A share is the net
asset value per Class A share, plus the maximum sales charge. Class B and Class
C shares are offered at net asset value without the imposition of an initial
sales charge.
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, total return of
the Fund's classes may be compared to averages or rankings prepared by Lipper
Analytical Services, Inc., a widely recognized independent service which
monitors mutual fund performance; the Europe Australia Far East Index ("EAFE"),
an unmanaged index of international stock markets; The Europe 13 Index, an
unmanaged market weighted index of 13 European markets; any of the country
indexes or regional indexes prepared by Morgan Stanley Capital International;
the Standard & Poor's 500 Stock Index ("S&P 500"), an index of unmanaged groups
of common stock; or the Dow Jones Industrial Average, a recognized unmanaged
index of common stocks of 30 industrial companies listed on the New York Stock
Exchange.
In addition, the performance of the classes 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, USA Today, U.S. News and World Report
and the Wall Street Journal 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/Wiesenberger, Donoghue's Mutual Fund Almanac, Investment Company Data, Inc.,
Johnson's Charts, Lipper Analytical Services, Inc., Kanon Bloch Carre & Co.,
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.
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The Fund may also present, from time to time, historical information
depicting the value of a hypothetical account in one or more classes of the Fund
since the Fund's inception.
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.
Standardized Annual Average Total Return Quotations and Other Performance
Quotations
One of the primary methods used to measure the performance of a Class
of the Fund is "total return." "Total return" will normally represent the
percentage change in value of an account, or of a hypothetical investment in a
Class of the Fund, over any period up to the lifetime of that Class of the Fund.
Total return calculations will usually assume the reinvestment of all dividends
and capital gains distributions and will be expressed as a percentage increase
or decrease from an initial value, for the entire period or for one or more
specified periods within the entire period. Total return percentages for periods
of less than one year will usually be annualized; total return percentages for
periods longer than one year will usually be accompanied by total return
percentages for each year within the period and/or by the average annual
compounded total return for the period. The income and capital components of a
given return may be separated and portrayed in a variety of ways in order to
illustrate their relative significance. Performance may also be portrayed in
terms of cash or investment values, without percentages. Past performance cannot
guarantee any particular future result.
The Fund's average annual total return quotations for each of its
classes as that information may appear in the Prospectus, this Statement of
Additional Information or in advertising are calculated by standard methods
prescribed by the SEC.
Standardized Average Annual Total Return Quotations
Average annual total return quotations for Class A, Class B and Class C
shares are computed by finding the average annual compounded rates of return
that would cause a hypothetical investment in the class made on the first day of
a designated period (assuming all dividends and distributions are reinvested) to
equal the ending redeemable value of such hypothetical investment on the last
day of the designated period in accordance with the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000,
less the maximum sales load of $57.50 for
Class A shares or the deduction of the CDSC
for Class B and Class C shares at the end of
the period.
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical
$1,000 initial payment made at the beginning
of the designated period (or fractional
portion thereof)
For purposes of the above computation, it is assumed that all dividends and
distributions made by the Fund are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts of
a particular Class are taken into consideration. For any account fees that vary
with the size of the account, the account fee used for purposes of the above
computation is assumed to be the fee that would be charged to the Class' mean
account size.
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The average annual total return for each Class of shares for the
one-year, three-year and life-of-the-Fund periods ended October 31, 1995 were:
1 Year 5 Years 10 Years Life
------ ------- -------- ----
Class A Shares 8.52% N/A N/A 9.55% *
Class B Shares 10.43% N/A N/A 13.71% **
- --------------
* Commencement of operations, April 2, 1991.
* Commencement of operations, April 4, 1994.
Class A share results reflect the maximum sales charge of 5.75%. Class
B share results reflect the effect of the CDSC that would have been charged if
shares were redeemed at the end of each period. If PMC's voluntary fee and
expense reduction agreement had not been in place, total return would have been
lower. Class C shares were first offered on January 31, 1996.
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 fixed income 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 SEC mandated standard formulas.
In addition, using a personal identification number ("PIN"),
shareholders may enter purchases, exchanges and redemptions, access their
account balance and last three transactions and may order a duplicate statement.
See "FactFoneSM" in the Prospectus for more information.
All performance numbers communicated through FactFoneSM represent past
performance and figures for all quoted bond funds include the 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 may be worth more or less at redemption than their original
cost.
17. FINANCIAL STATEMENTS
The audited financial statements are included in the Fund's 1995 Annual
Report to Shareholders which is hereby incorporated by reference into this
Statement of Additional Information and attached hereto in reliance upon the
report of Arthur Andersen LLP, independent public accountants, as experts in
accounting and auditing.
-24-
<PAGE>
<TABLE>
<CAPTION>
Pioneer Europe Fund A
Sales
Initial Offering Charge Shares Purchased Net Asset Value Per Initial Net
Date Investment Price Included Share Asset Value
<S> <C> <C> <C> <C> <C> <C>
4/2/91 $10,000 $15.92 5.75% 628.141 $15.00 $9,425
Value of Shares
(Dividends and Capital Gains Reinvested)
From Investment From Cap. Gains From Dividends Reinvested
Date Reinvested Total Value
---- ---------- -----------
12/31/91 $9,774 $0 $0 $9,774
12/31/92 $9,253 $113 $84 $9,450
12/31/93 $11,237 $309 $274 $11,820
12/31/94 $10,986 $1,244 $304 $12,534
12/31/95 $12,431 $2,452 $344 $15,227
-25-
<PAGE>
Pioneer Europe Fund B *
Sales
Initial Offering Charge Shares Purchased Net Asset Value Per Initial Net
Date Investment Price Included Share Asset Value
<S> <C> <C> <C> <C> <C> <C>
4/4/94 $10,000 $17.96 0.00% 556.793 $17.96 $10,000
Value of Shares
(Dividends and Capital Gains Reinvested)
From From Cap. Gains From Dividends
Date Investment Reinvested Reinvested Total Value
---- ----------- ---------- ---------- -----------
12/31/94 $9,661 $793 $38 $10,492
12/31/95 $10,852 $1,772 $43 $12,267
</TABLE>
*Does not reflect the effect of the contingent deferred sales charge.
Past performance does not guarantee future results. Return and share
price fluctuate and your shares when redeemed may be worth more or less than
your original purchase.
-26-
<PAGE>
Appendix A
Risk-Adjusted Average Annual Total Return (1983-1993)
with varying U.S./International Asset Allocation
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
-27-
<PAGE>
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 Mirror/Mosby, St. Louis,
1990, p. 97 ["Level-Coupon Bonds"].) The monthly income return was assumed to be
one-twelfth the coupon.
-28-
<PAGE>
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 3000 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.
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.
-29-
<PAGE>
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
-30-
<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
-31-
<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 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
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
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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 1965 0.71 1.02 N/A 4.68 -0.46 3.93
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
-34-
<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
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S & P Bank
NAREIT - Russell Wilshire Midcap Savings
Equity 2000 Real Estate 400 Account
Bank Savings Account
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
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
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APPENDIX B
The Pioneer family of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest, most respected and
successful money managers in the United States.
As of December 31, 1995, PMC employed a professional investment staff
of 44, with a combined average of 15 years' experience in the financial services
industry.
At December 31, 1995, there were 637,060 non-retirement shareholder
accounts and 345,309 retirement shareholder accounts in the Pioneer's funds.
Total assets for all Pioneer Funds at December 31, 1995 were $12,764,708,124
representing 982,369 shareholder accounts.
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