[Pioneer logo]
Pioneer
Emerging Markets
Fund
Prospectus
Class A and Class B Shares
March 31, 1995
(revised October 16, 1995)
Pioneer Emerging Markets Fund (the "Fund") seeks long-term growth of
capital by investing primarily in securities of issuers in countries with
emerging economies or securities markets. Any current income generated from
these securities is incidental to the investment objective of the Fund. The
Fund is a diversified open-end investment company designed for investors
seeking to achieve capital growth and diversification through foreign
investments. There is, of course, no assurance that the Fund will achieve its
investment objective.
In pursuit of its objective, the Fund may employ active investment
management techniques, including futures and options, in an attempt to hedge
the foreign currency and other risks associated with the Fund's investments.
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.
Investing in countries with emerging economies or securities markets may
offer significant investment opportunities. However, investments in foreign
securities, particularly in emerging markets, entail significant 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 (Part A of the Registration Statement) 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 Statement of Additional Information (Part B of the
Registration Statement), also dated March 31, 1995 (revised October 16,
1995), 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 3
Risk Factors 4
IV. MANAGEMENT OF THE FUND 6
V. FUND SHARE ALTERNATIVES 7
Class A Shares 7
Class B Shares 8
VI. SHARE PRICE 8
VII. HOW TO BUY FUND SHARES 8
VIII. HOW TO SELL FUND SHARES 11
IX. HOW TO EXCHANGE FUND SHARES 12
X. DISTRIBUTION PLANS 13
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION 13
XII. SHAREHOLDER SERVICES 14
Account and Confirmation Statements 14
Additional Investments 14
Automatic Investment Plans 14
Financial Reports and Tax Information 14
Distribution Options 14
Directed Dividends 14
Direct Deposit 14
Voluntary Tax Withholding 14
Telephone Transactions and Related Liabilities 15
FactFone(SM) 15
Retirement Plans 15
Telecommunications Device for the Deaf (TDD) 15
Systematic Withdrawal Plans 15
Reinvestment Privilege (Class A Shares Only) 15
XIII. THE FUND 16
XIV. INVESTMENT RESULTS 16
APPENDIX 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 estimated annual operating expenses based
upon actual expenses for the fiscal year ended November 30, 1994.
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Class A Class B
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Shareholder Transaction Expenses
Maximum Initial Sales Charge on Purchases
(as a percentage of offering price) 5.75% None
Maximum Sales Charge on Reinvestment of Dividends None None
Maximum Deferred Sales Charge)
(as a percentage of original purchase price or
redemption price, as applicable) None(1) 4.00%
Redemption Fee(2) None None
Exchange Fee None None
Annual Operating Expenses(4)
(as a percentage of net assets):
Management Fee (after Expense Limitation)(3) 0.00% 0.00%
12b-1 Fees(4) 0.25% 1.00%
Other Expenses (including transfer agent fee,
custodian fees and accounting and printing expenses) 2.00% 2.33%
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Total Operating Expenses
(after Expense LImitation):(3) 2.25% 3.33%
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(1) Purchases of $1,000,000 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.
(2) Separate fees (currently $10 and $20, respectively) apply to domestic and
international bank wire transfers of redemption proceeds.
(3) Pioneering Management Corporation (the "Manager") agreed not to impose a
portion of its management fee and to make other arrangements, if
necessary, to limit the operating expenses of the Fund as listed below.
This agreement is voluntary and temporary and may be revised or
terminated at any time.
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Class A Class B
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Expense Limitation 2.25% see below*
Expenses Absent
Limitation
Total Operating Expenses 4.13% 1.25%
Management Fee 1.25% 1.25%
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* The portion of Fund-wide expenses attributable to Class B shares will be
reduced only to the extent such expenses are reduced for the Class A shares
of the Fund.
Example:
You would pay the following dollar amounts on a $1,000 investment,
assuming a 5% annual return:
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One Year Three Years Five Years Ten Years
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Class A Shares $79 $124 $171 $301
Class B Shares
--Assuming complete
redemption at end
of period $74 $132 $194 $339*
--Assuming no
redemption $34 $102 $174 $339*
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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.
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 returns. Actual
Fund expenses and returns vary from year to year and may be higher or lower
than those shown.
For further information regarding management fees, 12b-1 fees and other
expenses of the Fund, including information regarding the basis upon which
fees and expenses are reduced or reallocated, see "Management of the Fund,"
"Distribution Plans" and "How to Buy Fund Shares" in this Prospectus and
"Management of the Fund," "Principal Underwriter" and "Distribution Plans" in
the Statement of Additional Information. The Fund's payment of a 12b-1 fee
may result in long-term shareholders paying more than the economic equivalent
of the maximum initial sales charge permitted under the Rules of Fair
Practice 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 the Fund for shares of other publicly
available Pioneer mutual funds. See "How to Exchange Fund Shares."
II. FINANCIAL HIGHLIGHTS
The following information has been derived from financial statements which
have been audited by Arthur Andersen LLP, independent public accountants, in
connection with their examination of the Fund's financial statements. Arthur
Andersen LLP's report on the Fund's financial statements as of November 30,
1994 appears in the Fund's Annual Report, which is incorporated by reference
into the Statement of Information. The information listed below should be
read in conjunction with the financial statements contained in the Fund's
Annual Report. The Annual Report includes more information about the Fund's
performance and is available free of charge by calling Shareholder Services
at 1-800-225-6292.
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PIONEER EMERGING MARKETS FUND
Financial Highlights for Each Class A Share Outstanding Throughout Each
Period:
For the Period Beginning June 23, 1994 (Commencement of Operations) to
November 30, 1994
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Net asset value, beginning of period $ 12.50
---------------
Income from investment operations:
Net investment income $ 0.08
Net realized and unrealized loss on investments and other foreign currency related
transactions*** (0.34)
---------------
Total loss from investment operations $ (0.26)
Distribution to shareholders --
---------------
Net decrease in net asset value $ (0.26)
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Net asset value, end of period $ 12.24
===============
Total return* (2.08%)
Ratio of net operating expenses to average net assets 2.25%**
Ratio of net investment income to average net assets 1.85%**
Portfolio turnover rate 259.22%**
Net assets, end of period (in thousands) $17,067
Ratios assuming no reduction of fees or expenses by PMC:
Net operating expenses 4.13%**
Net investment loss (0.03%)**
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Financial Highlights for Each Class B Share Outstanding Throughout Each Period:
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Net asset value, beginning of period $ 12.50
---------------
Income from investment operations:
Net investment income $ 0.02
Net realized and unrealized loss on investments and other foreign currency related
transactions*** (0.33)
---------------
Total loss from investment operations $ (0.31)
Distribution to shareholders --
---------------
Net decrease in net asset value $ (0.31)
---------------
Net asset value, end of period $ 12.19
===============
Total return* (2.48%)
Ratio of net operating expenses to average net assets 3.33%**
Ratio of net investment income to average net assets 0.77%**
Portfolio turnover rate 259.22%**
Net assets, end of period (in thousands) $4,319
Ratios assuming no reduction of fees or expenses by PMC:
Net operating expenses 5.21%**
Net investment loss (1.11%)**
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+ The per share data presented above is based upon average shares outstanding
and average net assets for the period presented.
* Assumes initial investment at net asset value at the beginning of the
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of the period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
*** Includes the balancing effect of calculating per share amounts.
III. INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital. The Fund
pursues this objective by investing in securities of issuers in countries
with emerging economies or securities markets.
Under normal circumstances, at least 65% of the Fund's total assets are
invested in securities of companies that are domiciled or primarily doing
business in emerging countries and securities of these countries'
governmental issuers. For purpose of the Fund's investments, "emerging
countries" are countries with economies or securities markets that are not
considered by the Manager to be developed. Currently, emerging countries
include: Algeria, Argentina, Australia, Bangladesh, Brazil, Bulgaria, Chile,
China, Columbia, Costa Rica, Czech Republic, Ecuador, Egypt, Ghana, Greece,
Hong Kong, Hungary, India, Indonesia, Israel, Jamaica, Jordan, Kenya, Kuwait,
Malaysia, Mexico, Morocco, Nigeria, Pakistan, Peru, the Philippines, Poland,
Portugal, Russia, South Africa, South Korea, Sri Lanka, Taiwan, Thailand,
Turkey, Uruguay, Venezuela, Vietnam and Zimbabwe. At the Manager's
discretion, the Fund may invest in other emerging countries.
A company is considered to be domiciled in an emerging country if it is
organized under the laws of, and has a principal office in, such country. A
company is considered by the Manager as primarily doing business in an
emerging country if that company derives at least 50% of its gross revenues
or profits from either (i) goods or services produced in emerging countries
or (ii) sales made in emerging countries.
Under normal circumstances, the Fund maintains investments in at least six
emerging countries. Except for temporary defensive purposes, the Fund will
not invest 25% or more of its total assets in securities of issuers in any
one country, emerging or developed. From time to time, the Fund may
concentrate its investments in a particular region.
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The Fund may also invest up to 35% of its total assets in equity and debt
securities of companies in any developed country, other than the United
States ("U.S."), and of such countries' governmental issuers and in
short-term investments (as described below). See "Other Eligible
Investments."
Although the Fund may invest in both equity and debt securities, the
Manager expects that equity and equity-related securities will ordinarily
offer the greatest potential for long-term growth of capital and will
constitute the majority of the Fund's assets. The equity and equity-related
securities of companies in which the Fund invests consist of common stock and
securities with common stock characteristics, such as preferred stock, equity
interests in other unincorporated entities, warrants, rights or debt
securities convertible into common stock, and depositary receipts for these
securities. The Fund will also invest in call options on such securities.
The Fund may also invest in debt securities of corporate and governmental
issuers that the Manager believes offer opportunities for long-term capital
appreciation due to favorable credit quality, interest rate or currency
exchange rate changes. Debt securities in which the Fund invests may be of
any quality or maturity. Many of the debt securities available in emerging
market countries are of poor credit quality and may be in default. However,
the Fund will not invest more than 10% of its total assets in debt securities
rated below investment grade or unrated securities of comparable quality. See
"Lower-Rated Debt Securities and Associated Risk Factors" in the Appendix to
this Prospectus. The value of debt securities, particularly those with longer
maturities, can generally be expected to rise as interest rates decline and
to fall as interest rates rise. Movements in currency exchange rates may
offset or amplify such fluctuations, as measured in U.S. dollars.
In pursuit of its objective, the Fund may employ certain active investment
management techniques including forward foreign currency exchange contracts,
options and futures contracts on currencies and securities indices and
options on these futures contracts. These techniques may be employed in an
attempt to hedge foreign currency and other risks associated with the Fund's
portfolio securities. The Fund may also enter into repurchase agreements and
invest in restricted and illiquid securities. See the Appendix to this
Prospectus and the Statement of Additional Information for a description of
these investment practices and securities and associated risks.
For temporary defensive purposes, the Fund may invest up to 100% of its
total assets in short-term investments (as described below). The Fund will
assume a temporary defensive posture when political and economic factors
affect securities markets to such an extent that the Manager believes there
to be extraordinary risks in being substantially invested in emerging
countries.
In selecting securities for investment by the Fund, the Manager assesses
the general attractiveness of specific countries based on an analysis of
internal conditions, including political stability, financial practices,
market practices, economic growth prospects, levels of interest rates and
inflation, general market valuations and potential changes in currency
relationships. Based on the relative return and risk among countries, a
target weighting is set for the allocation of the Fund's assets among
emerging countries. As a parallel process, which involves many of the same
factors as, and influences the outcome of, country allocation, the Manager
performs a fundamental analysis of each company being considered for
inclusion in the Fund's portfolio. In performing this fundamental analysis,
the Manager considers a variety of factors, including financial condition,
growth prospects, asset valuation, management expertise, existing or
potential dividend payments, stock liquidity and the market valuation of the
company. The specific size of the Fund's investment in any one company is
determined by the relationship of the relative return and risk among
individual investments. Because current income is not the Fund's investment
objective, the Fund will not restrict its investments to securities of
issuers with a record of timely dividend payments.
While investing in emerging countries involves substantial risks, as
discussed below, the Manager believes investments in such countries offer
opportunities for capital growth. Certain emerging countries have at times
experienced economic growth rates well in excess of those of the more
developed countries, including the United States. By carefully selecting
securities of issuers in emerging countries, the Manager seeks to provide,
over the long term, a higher rate of capital appreciation than would
generally be possible by investing in securities of issuers in developed
countries. Of course there can be no assurance that the Manager will achieve
this objective.
Risk Factors
Investing in the Fund entails a substantial degree of risk. Because of the
special risks associated with investing in emerging countries, an investment
in the Fund may not be suitable for all investors and should not be
considered an overall investment program. Investors are strongly advised to
consider carefully the special risks involved in investing in emerging
countries, which are in addition to the usual risks of investing in developed
countries around the world. See the Appendix to this Prospectus for
additional risks associated with an investment in the Fund.
The political and economic structures in many emerging countries are
expected to undergo significant evolution and rapid development, and such
countries may lack the social, political and economic stability
characteristic of more developed countries. Unanticipated political or social
developments may affect the values of the Fund's investments and the
availability to the Fund of additional investments in such countries. The
small size and limited history of the securities markets in certain of such
countries and the limited volume of trading in securities in those countries
makes the Fund's investments in such countries less liquid and more volatile
than investments in countries with more developed securities markets, such as
the U.S., Japan and most Western European countries.
Investing in emerging countries involves the risks of expropriation,
nationalization, confiscation of assets and property or the imposition of
restrictions on foreign investment and on repatriation of capital invested.
In the event of such expropriation, nationalization or other confiscation in
any emerging
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country, the Fund could lose its entire investment in that country.
Economies in individual emerging countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross
domestic product, rates of inflation, currency valuation, capital
reinvestment, resource self-sufficiency and balance of payments positions.
Many emerging countries have experienced substantial, and in some cases
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, very
negative effects on the economies and securities markets of certain emerging
countries.
Economies in emerging countries generally are dependent heavily upon
international trade and, accordingly, have been and may continue to be
affected adversely by trade barriers, exchange controls, managed adjustments
in relative currency values and other protectionist measures imposed or
negotiated by the countries with which they trade. These economies also have
been, and may continue to be, affected adversely by economic conditions in
the countries with which they trade.
The securities markets of many emerging countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of developed countries. Disclosure and regulatory standards in many
respects are less stringent than in the U.S. and other major markets. There
also may be a lower level of monitoring and regulation of emerging securities
markets and the activities of investors in such markets, and enforcement of
existing regulations has been extremely limited.
There may be less publicly available information about international
securities and issuers than is available with respect to U.S. securities and
issuers. International companies generally are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies. The Fund's net
investment income and/or capital gains from its international investment
activities may be subject to non-U.S. withholding and other taxes.
In addition, the value of securities denominated or quoted in
international currencies may also be adversely affected by fluctuations in
the relative rates of exchange between the currencies of different nations
and by exchange control regulations. The Fund's investment performance may be
negatively affected by a devaluation of a currency in which the Fund's
investments are denominated or quoted. Further, the Fund's investment
performance may be significantly affected, either positively or negatively,
by currency exchange rates because the U.S. dollar value of securities
denominated or quoted in another currency will increase or decrease in
response to changes in the value of such currency in relation to the U.S.
dollar.
Brokerage commissions, custodial services and other costs relating to
investment in international securities markets generally are more expensive
than in the U.S.; this is particularly true with respect to securities
markets in emerging countries. Such markets have settlement and clearance
procedures that differ from those of more developed markets. In certain
markets there have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult to conduct
such transactions. The inability of the Fund to make intended securities
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security caused
by settlement problems could result either in losses to the Fund due to a
subsequent decline in value of the portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible
liability to the Fund.
In addition, security settlement and clearance procedures in some emerging
countries may not fully protect the Fund against loss or theft of its assets
in situations that may arise that may not be foreseeable. By way of example
and without limitation, a fraudulent or otherwise deficient security
settlement or a conversion, theft or default by a broker, dealer or other
intermediary could result in losses to the Fund. Neither the Manager nor the
Fund's custodian is liable to the Fund or its shareholders for such losses
incurred by the Fund in the absence of willful misfeasance, bad faith or
gross negligence in the performance of their respective duties.
Most of the emerging market companies in which the Fund invests are
relatively small, lesser-known companies. Although many such companies offer
greater growth potential than larger, more mature, better-known companies,
investing in the securities of such companies also involves greater risk and
the possibility of greater portfolio price volatility. Among the reasons for
the greater price volatility of these smaller companies are the lower degree
of liquidity in the markets for such stocks and the greater sensitivity of
small companies to changing economic conditions. These companies may have
higher investment risk than that associated with larger companies due to
greater business risks of small size and limited product lines, markets,
distribution channels and financial and managerial resources.
In addition to risks associated with investments in foreign private
issuers, investments in foreign governmental securities entail risk that the
foreign government will repudiate its underlying obligation or alter any
favorable tax treatment associated with the obligation. There may be
difficulty in enforcing outside the U.S. legal rights against foreign
governments.
Other Eligible Investments
Under normal circumstances, the Fund may invest up to 35% of its total
assets in the investments described in this section.
Securities of Developed Country Issuers. The Fund may invest in equity and
debt securities of companies that are domiciled or primarily doing business
in developed countries, other than the U.S., and of such countries'
governmental issuers.
Short-Term Investments. For temporary defensive or cash management
purposes the Fund may invest in short-term investments consisting of:
corporate commercial paper and other short-term commercial obligations, in
each case rated or issued by international or domestic companies with similar
securities outstanding that are rated Prime-1, Aa or better by
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Moody's Investors Service, Inc. ("Moody's") or A-1, AA or better by Standard
and Poor's Ratings Group ("Standard & Poor's"); obligations (including
certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks (located in the United States or foreign countries)
with securities outstanding that are rated Prime-1, Aa or better by Moody's,
or A-1, AA or better by Standard and Poor's; obligations of comparable
quality issued or guaranteed by the U.S. Government or the government of a
foreign country or their respective agencies or instrumentalities; and
repurchase agreements.
Investments in Depositary Receipts
The Fund may hold securities of foreign issuers in the form of American
Depositary Receipts ("ADRs"), 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 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.
GDRs are not necessarily denominated in the same currency as the underlying
securities which they represent. 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.
Brady Bonds
The Fund may invest in so-called "Brady Bonds" and other sovereign debt
securities of countries that have restructured or are in the process of
restructuring sovereign debt pursuant to the "Brady Plan." Brady Bonds are
debt securities issued under the framework of the Brady Plan as a mechanism
for debtor nations to restructure their outstanding external indebtedness
(generally, commercial bank debt). In restructuring its external debt under
the Brady Plan framework, a debtor nation negotiates with its existing bank
lenders as well as multilateral institutions such as the World Bank and the
International Monetary Fund (the "IMF"). The Brady Plan framework, as it has
developed, contemplates the exchange of commercial bank debt for newly issued
bonds (Brady Bonds).
Brady Bonds have recently been issued by Costa Rica, Mexico, Nigeria, the
Philippines, Uruguay and Venezuela and may be issued by other countries.
Brady Bonds may involve a high degree of risk, may be in default or present
the risk of default. Investors should recognize that Brady Bonds have been
issued only recently, and, accordingly, they do not have a long payment
history. Agreements implemented under the Brady Plan to date are designed to
achieve debt and debt-service reduction through specific options negotiated
by a debtor nation with its creditors. As a result, the financial packages
offered by each country differ.
Portfolio Turnover
The Fund will be substantially fully invested at all times, except as
described above. However, the volatility of certain emerging markets and the
need for the Manager to allocate and reallocate the Fund's investments among
several markets can be expected to generate a portfolio turnover rate higher
than that of funds investing in equity securities of issuers in the U.S. or
other developed countries. Changes in the portfolio may be made promptly when
determined to be advisable by reason of developments not foreseen at the time
of the initial investment decision, and usually without reference to the
length of time a security has been held. Accordingly, portfolio turnover
rates are not considered a limiting factor in the execution of investment
decisions. It is anticipated that the portfolio turnover rate of the Fund
will not exceed 300% in the coming year. A high rate of portfolio turnover
(100% or more) involves correspondingly greater transaction costs which must
be borne by the Fund and its shareholders and may, under certain
circumstances, make it more difficult for the Fund to qualify as a regulated
investment company under the Internal Revenue Code. See "Dividends,
Distributions and Taxation."
The Fund's investment objective and certain investment restrictions
designated as fundamental in the Statement of Additional Information may be
changed by the Board of Trustees only with shareholder approval.
IV. MANAGEMENT OF THE FUND
The Fund's Board of Trustees has overall responsibility for management and
supervision of the Fund. There are currently eight Trustees, six of whom are
not "interested persons" of the Fund, as defined in the Investment Company
Act of 1940, as amended (the "1940 Act"). The Board meets at least quarterly.
By virtue of the functions performed by the Manager as investment adviser,
the Fund requires no employees other than its executive officers, all of whom
receive their compensation from the Manager 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 Fund is managed under a contract with the Manager, which serves as
investment adviser to the Fund and is responsible for the overall management
of the Fund's business affairs, subject only to the authority of the Board of
Trustees. The Manager is a wholly owned subsidiary of The Pioneer Group, Inc.
("PGI"), a Delaware corporation. Pioneer Funds Distributor, Inc. ("PFD"), an
indirect subsidiary of PGI,
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is the principal underwriter of shares of the Fund. John F. Cogan, Jr.,
Chairman and President of the Fund, Chairman and a Director of the Manager,
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.
Each international equity portfolio managed by the Manager, including the
Fund, is overseen by an Equity Committee, which consists of the Manager's
most senior equity professionals, and a Portfolio Management Committee, which
consists of the Manager's international equity portfolio managers. Both
committees are chaired by Mr. David Tripple, the Manager's President and
Chief Investment Officer and Executive Vice President of each of the Pioneer
mutual funds. Mr. Tripple joined the Manager in 1974 and has had general
responsibility for the Manager's investment operations and specific portfolio
assignments for over five years.
Dr. Norman Kurland, Senior Vice President of the Manager and Vice
President of the Fund, is generally responsible for the management of the
international portfolios managed by the Manager. Dr. Kurland joined the
Manager in 1990 after working with a variety of investment and industrial
concerns. Day-to-day management of the Fund is the responsibility of Mr. Mark
Madden, Vice President of the Manager since June 1994. Mr. Madden joined the
Manager in 1990 after working for other investment and industrial firms.
In addition to the Fund, the Manager also manages and serves as the
investment adviser for other mutual funds and is an investment adviser to
certain other institutional accounts. The Manager's and PFD's executive
offices are located at 60 State Street, Boston, Massachusetts 02109.
Under the terms of its contract with the Fund, the Manager assists in the
management of the Fund and is authorized in its discretion to buy and sell
securities for the account of the Fund. The Manager pays all the ordinary
operating expenses, including executive salaries and the rental of office
space relating to its services for the Fund with the exception of the
following which are to be paid by the Fund: (i) charges and expenses for fund
accounting, pricing and appraisal services and related overhead, including,
to the extent such services are performed by personnel of the Manager, or its
affiliates, office space and facilities and personnel compensation, training
and benefits; (ii) the charges and expenses of auditors; (iii) the charges
and expenses of any custodian, transfer agent, plan agent, dividend
disbursing agent and registrar appointed by the Fund; (iv) issue and transfer
taxes, chargeable to the Fund in connection with securities transactions to
which the Fund is a party; (v) insurance premiums, interest charges, dues and
fees for membership in trade associations and all taxes and corporate fees
payable by the Fund to federal, state or other governmental agencies; (vi)
fees and expenses involved in registering and maintaining registrations of
the Fund and/or its shares with the SEC, state or blue sky securities
agencies and foreign countries, including the preparation of prospectuses and
statements of additional information for filing with the SEC; (vii) all
expenses of shareholders' and Trustees' meetings and of preparing, printing
and distributing prospectuses, notices, proxy statements and all reports to
shareholders and to governmental agencies; (viii) charges and expenses of
legal counsel to the Fund and the Trustees; (ix) distribution fees paid by
the Fund in accordance with Rule 12b-1 promulgated by the SEC pursuant to the
1940 Act; (x) compensation of those Trustees of the Fund who are not
affiliated with or interested persons of the Manager, the Fund (other than as
Trustees), PGI or PFD; (xi) the cost of preparing and printing share
certificates; and (xii) 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.
Orders for the Fund's portfolio securities transactions are placed by the
Manager, 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 the Fund or other funds for which PGI or any
affiliate or subsidiary serves as investment adviser or manager. See the
Statement of Additional Information for a further description of the
Manager's brokerage allocation practices.
As compensation for its management services and certain expenses which the
Manager incurs, the Manager is entitled to a management fee equal to 1.25%
per annum of the Fund's average daily net assets. The fee is normally
computed daily and paid monthly. The management fee paid by the Fund is
greater than those paid by most funds. Due to the added complexity of
managing funds with an emerging markets investment strategy, however,
management fees for emerging markets funds tend to be higher than those paid
by most funds.
The Manager has agreed not to impose a portion of its management fee and
to make other arrangements, if necessary, to limit other expenses of the Fund
to the extent required to reduce operating Class A expenses to 2.25% of the
average daily net assets attributable to the Class A shares; the portion of
the Fund-wide expenses attributable to Class B shares will be reduced only to
the extent such expenses are reduced for Class A shares. This agreement is
voluntary and temporary and may be revised or terminated by the Manager at
any time. For the period from June 23, 1994 to November 30, 1994, the Fund
incurred expenses of $291,103, including management fees paid or payable to
the Manager of $84,871. As a result of the voluntary expense limitation
described above, the Manager waived its entire management fee for the period
ended November 30, 1994. See the Statement of Additional Information for more
information.
V. FUND SHARE ALTERNATIVES
The Fund continuously offers two Classes of shares designated as Class A
and Class B 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
7
<PAGE>
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 contingent deferred sales charge ("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 1.00% of the Fund's average daily net assets attributable to Class B
shares. Your entire investment in Class B shares is invested in the Fund
without deduction of any sales charge at 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
per share 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.
Purchasing Class A or Class B 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.
Investment dealers and 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.
VI. 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 international currencies are converted to U.S. dollars utilizing
foreign exchange rates employed by the Fund's independent pricing services.
Generally, trading in international 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. Occasionally, events which affect the values of such
securities and such exchange rates may occur between the times at which they
are determined and the close of regular trading on the Exchange and will
therefore not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities are valued at their fair value as determined in
good faith by the Trustees. All assets of the Fund for which there is no
other readily available valuation method are valued at their fair value as
determined in good faith by the Trustees.
VII. HOW TO BUY FUND SHARES
You may buy Fund shares at the public offering price 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 for assistance.
The minimum initial investment is $1,000 for Class A and Class B 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 shares, except that the subsequent minimum investment
amount for Class B 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 indicated otherwise on your Account
Application or by writing to Pioneering Services Corporation ("PSC"). The
telephone purchase option may be used to purchase additional shares for an
existing fund account; it may not be used to establish a new account. Proper
account identification will be required for each telephone purchase. A
maximum of $25,000 per account may be purchased by telephone each day. The
telephone purchase privilege is available to Individual Retirement Accounts
("IRAs") but may not be available to other types of retirement plan accounts.
Call PSC for more information.
You are strongly urged to consult with your financial representative prior
to requesting a telephone purchase. To purchase shares by telephone, you must
establish your bank account of record by completing the appropriate section
of your Account Application or an Account Options Form. PSC will
electronically debit the amount of each purchase from this predesignated bank
account. Telephone purchases may
8
<PAGE>
not be made for 30 days after the establishment of your bank of record or any
change to your bank information.
Telephone purchases will be priced at the net asset value plus any
applicable sales charge next determined after PSC's acceptance of a telephone
purchase instruction and receipt of good funds (usually three days after the
purchase instruction). You may always elect to deliver purchases to PSC by
mail. See "Telephone Transactions and Related Liabilities" for additional
information.
Class A Shares
You may buy Class A shares at the public offering price, that is, at the
net asset value per share next computed after receipt of a purchase order,
plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge as a Dealer
Percentage of Allowance
----------------- 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>
No sales charge is payable at the time of purchase on investments of
$1,000,000 or more or for 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 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 pays 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.
The schedule of sales charges above is applicable to purchases of Class A
shares of the Fund by (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 Internal Revenue Code of 1986, as
amended (the "Code"), 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.
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. 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 the Manager 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 investment advisers adhering to standards established
by PFD; (i) other funds and accounts for which the Manager 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. In addition, Class A
shares of a Fund may be sold at net asset value per share without a sales
charge to Optional Retirement Program participants if (i) the employer has
authorized a limited number of investment providers for the Program, (ii) all
authorized providers offer their shares to Program participants at net asset
value, (iii) the employer has agreed in writing to actively promote the
authorized investment providers to Program participants and (iv) the Program
provides for a matching contribution for each participant contribution.
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. Informa-
9
<PAGE>
tion 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 shares of the Fund; that the
client paid a sales charge on the original purchase of the shares redeemed;
and that the mutual fund whose shares were redeemed also offers net asset
value purchases to redeeming shareholders of any of the Pioneer mutual funds.
Further details may be obtained from PFD.
Class B Shares
You may buy Class B shares at net asset value per share next computed
after receipt of a purchase order 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.
<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 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 of the shares 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"), for which the Fund is applying, 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 or opinion will be available. The
conversion of Class B shares to Class A shares will not occur if such ruling
or 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.
Waiver or Reduction of Contingent Deferred Sales Charge. The CDSC on Class
B shares and on any Class A shares subject to a CDSC may be waived or reduced
for non-retirement accounts if: (a) the redemption results from the death of
all registered owners of an account (in the case of UGMAs, UTMAs and other
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
shareholders 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 and on any Class A shares subject to a CDSC may
be waived or reduced for retirement plan accounts if: (a) the redemption
results from the death or a total and permanent disability (as defined in
Section 72 of the Code) occurring after the purchase of the shares being
redeemed of a shareholder or participant in an employer-sponsored retirement
plan; (b) the distribution is to a participant in an IRA, 403(b) or
employer-sponsored retirement plan, is part of a series of substantially
equal payments made over the life expectancy of the participant or the joint
life expectancy of the participant and his or her beneficiary or as scheduled
periodic payments to a participant (limited in any year to 10% of the value
of the participant's account at the time 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
10
<PAGE>
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 B 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 CDSC in connection with the
acquisition of shares of any registered investment management company; or (b)
the redemption is made pursuant to the Fund's right to liquidate or
involuntarily redeem shares in a shareholder's account.
Broker-Dealers
An order for either 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.
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.
VIII. HOW TO SELL FUND SHARES
You can arrange to redeem Fund shares on any day the Exchange is open by
selling (redeeming) 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 and accepted less any applicable CDSC. Sale proceeds
generally will be sent to you in cash, normally within seven days after your
order is accepted. 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 situations 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, Pioneer 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, if a signature
guarantee is required, 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 indicated otherwise on your
Account Application or by writing to PSC. You may redeem up to $50,000 of
your shares by telephone or fax and receive the proceeds by check or bank
wire or electronic funds transfer. The redemption proceeds must be made
payable exactly as the account is registered. To receive the proceeds by
check: the check must be made payable exactly as the account is registered
and the check must be sent to the address of record which must not have
changed in the last 30 days. To receive the proceeds by bank wire or
electronic funds transfer: the proceeds must be sent to your bank address of
record which must have been properly pre-designated either on your Account
Application or on an Account Options Form and which must not have changed in
the last 30 days. To redeem by fax send your redemption request to
1-800-225-4240. The telephone redemption option is not available to
retirement plan accounts. You may always elect to deliver redemption
instructions to PSC by mail. See "Telephone Transactions and
11
<PAGE>
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 $1,000,000 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.
IX. 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 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 the 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 mutual fund account for shares of the same Class in another Pioneer
mutual fund 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 18th day of the
month.
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.
Class A or Class B shares which would normally be subject to a CDSC upon
redemption will not be charged the applicable CDSC at the time of the
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 Class B 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 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
Pioneer mutual fund. Therefore, an exchange could result in a gain or loss on
the shares sold, depending on the cost basis of these shares and the timing
of the transaction, and special tax rules may apply in particular
circumstances.
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. To prevent abuse of the exchange privilege to the
detriment of other Fund shareholders, the Fund and PFD reserve the right to
limit the number and/or frequency of exchanges and/or to charge a fee for
exchanges. The exchange privilege may be changed or discontinued and may be
subject to additional limitations, including certain restrictions on
purchases by market timer accounts.
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X. DISTRIBUTION PLANS
The Fund has adopted a Plan of Distribution for both Class A shares
("Class A Plan") and Class B shares ("Class B Plan") in accordance with Rule
12b-1 under the 1940 Act pursuant to which certain distribution and service
fees are paid. Expenditures of the Fund for continuing service fees to
broker-dealers pursuant to the Class A Plan are accrued daily beginning
January 1, 1995; other expenses pursuant to the Class A Plan will be paid as
accrued.
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. The Class
A Plan does not provide for the carryover of reimbursable expenses beyond
twelve months from the time the Fund is first invoiced for an expense. The
limited carryover provision in the Class A Plan may result in an expense
invoiced to the Fund in one fiscal year being paid in the subsequent fiscal
year and thus being treated for purposes of calculating the maximum
expenditures of the Fund as having been incurred in the subsequent fiscal
year. In the event of termination or non-continuance of the Class A Plan, the
Fund has 12 months to reimburse any expense which it incurs prior to such
termination or non-continuance, provided that payments by the Fund during
such twelve-month period shall not exceed 0.25% of the Fund's average daily
net assets attributable to the Class A shares during such period.
The Class B Plan provides 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
Class B 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 Class B 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
shares. PFD also receives the proceeds of any CDSC imposed on the redemption
of Class B 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 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 13th month following the
purchase. 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 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.
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION
The Fund has elected to be treated, has qualified, and intends to qualify
each year as a "regulated investment company" under Subchapter M of the Code,
so that it will not pay federal income taxes on income and capital gains
distributed to shareholders at least annually.
Under the Code, the Fund will be subject to a nondeductible 4% excise tax
on a portion of its undistributed income and capital gains if it fails to
meet certain distribution requirements with respect to each calendar year.
The Fund intends to make distributions in a timely manner and accordingly
does not expect to be subject to the excise tax.
The Fund pays dividends from net investment income and distributes its net
realized short and long-term capital gains, if any, annually, usually in the
month of 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. 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
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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.
Dividends and other distributions and the proceeds of redemptions or
repurchases of Fund shares paid to individuals and other non-exempt payees
will be subject to a 31% backup withholding of federal income tax if the Fund
is not provided with the shareholder's correct taxpayer identification number
and certification that the number is correct and 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 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. Non-U.S. shareholders and tax-exempt shareholders
are subject to different tax treatment that is not described above.
Shareholders should consult their own tax advisors regarding state, local and
other applicable tax laws.
XII. 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 the countries in which the Fund may
invest.
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 account.
Shareholders whose shares are held in the name of an investment
broker-dealer or other party will not normally have an account with the Fund
and might not be able to utilize some of the services available to
shareholders of record. Examples of services which might not be available are
investment or redemption of shares by mail or telephone, automatic
reinvestment of dividends and capital gains distributions, withdrawal plans,
Letters of Intention, Rights of Accumulation, telephone exchanges, 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 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 an 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 draft drawn on a checking
account. 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 to you information
about the tax status of dividends and distributions.
Distribution Options
Dividends and capital gains distributions, if any, will automatically be
invested in additional shares of the Fund, at the applicable net asset value
per share, unless you indicate another option on the 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
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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 indicated otherwise on your Account Application or by
writing to PSC. You may purchase, sell or exchange Fund shares by telephone.
See "Share Price" for more information. For personal assistance, call
1-800-225-6292 between 8:00 a.m. and 8:00 p.m. Eastern Time on weekdays.
Computer-assisted transactions may be available to shareholders who have
pre-recorded certain bank information (see "FactFone(SM)"). You are strongly
urged to consult with your financial representative prior to requesting any
telephone transaction. To confirm that each transaction instruction received
by telephone is genuine, the Fund will record each telephone transaction,
require you to provide your personal identification number ("PIN") 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 nor PSC
nor PFD will be responsible for the authenticity of instructions received by
telephone; therefore, you bear the risk of loss for unauthorized or
fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund
by telephone to institute a redemption or exchange. You should communicate
with the Fund in writing if you are unable to reach the Fund by telephone.
FactFone(SM)
FactFone is an automated inquiry and telephone transaction system
available to Pioneer shareholders by dialing 1-800-225-4321. FactFone allows
you to obtain current information on your Pioneer mutual fund accounts and to
inquire about the prices and yields of all publicly available Pioneer mutual
funds. In addition, you may use FactFone to make computer-assisted telephone
purchases, exchanges and redemptions from your Pioneer accounts if you have
activated your PIN. Telephone purchases and redemptions require the
establishment of a bank account of record. You are strongly urged to consult
with your financial representative prior to requesting any telephone
transaction. Shareholders whose accounts are registered in the name of a
broker-dealer or other 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 you own TDD keyboard equipment, you
can call our TDD number toll-free at 1-800-225-1997, weekdays from 8:30 a.m.
to 5:30 p.m. Eastern Time to contact our telephone representatives with
questions about your account.
Systematic Withdrawal Plans
If your account has a total value of at least $10,000 you may establish a
Systematic Withdrawal Plan ("SWP") providing for fixed payments at regular
intervals. Withdrawals from Class B shares accounts are limited to 10% of the
value of the account at the time the plan is implemented. See "Waiver or
Reduction of Contingent Deferred Sales Charge" 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
reinvestment occurs. 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
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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.
XIII. THE FUND
Pioneer Emerging Markets Fund is an open-end, diversified management
investment company (commonly referred to as a mutual fund) organized as a
Delaware business trust on March 23, 1994. The Fund has authorized an
unlimited number of shares of beneficial interest. As an open-end management
investment company, the Fund continuously offers its shares to the public and
under normal conditions must redeem its shares upon the demand of any
shareholder at the then current net asset value per share, 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 two classes of shares, designated
Class A and Class B. 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 and Class B
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 and classes 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 certificates.
XIV. 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
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; 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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APPENDIX
CERTAIN INVESTMENT PRACTICES
This Appendix provides a brief description of certain securities in which
the Fund may invest and certain transactions it may make. For a more complete
discussion of these and other securities and practices, see "Investment
Objective and Policies" in this Prospectus and "Investment Policies and
Restrictions" in the Statement of Additional Information.
Lower-Rated Debt Securities and Associated Risk Factors
Although the Fund invests primarily in equity and equity-related
securities, the Fund may also invest in debt securities of corporate and
governmental issuers which are considered by the Manager to offer the
potential for long-term growth of capital. The Fund may invest in debt
securities of any maturity or quality including those not currently paying
interest or in default. However, the Fund will not invest more than 10% of
its total assets in debt securities which are rated at the time of investment
below investment grade by Moody's or by Standard & Poor's or, if unrated,
judged by the Manager to be of comparable credit quality. Debt securities in
the lowest investment grade (those rated Baa by Moody's or BBB by Standard &
Poor's or comparable unrated securities) have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity to make interest payments and repay principal than is
the case with higher grade debt securities. In addition, debt securities
rated Ba or below by Moody's or BB or below by Standard & Poor's (or
comparable unrated securities), commonly called "junk bonds," are considered
speculative, and payments of interest thereon and repayment of principal may
be questionable. In some cases, such securities may be highly speculative,
have poor prospects for reaching investment grade standing and be in default.
As a result, investment in such debt securities will entail greater
speculative risks than those associated with investment in investment-grade
debt securities (i.e., debt securities rated Baa or higher by Moody's or BBB
or higher by Standard & Poor's).
Corporate debt securities are subject to the risk of an issuer's inability
to meet principal and interest payments on the obligations (credit risk) and
may also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and
general market liquidity (market risk). Lower rated or unrated (i.e., junk
bond) debt securities are more likely to react to developments affecting
market and credit risk than are more highly rated securities, which react
primarily to movements in the general level of interest rates. The Manager
considers both credit risk and market risk in making investment decisions for
the Fund.
Options on Securities Indices
The Fund may purchase put and call options on indices that are based on
securities in which it may invest to manage cash flow and to manage its
exposure to foreign and domestic stocks or stock markets instead of, or in
addition to, buying and selling stock. The Fund may also purchase options in
an attempt to hedge against risks of market-wide price fluctuations.
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 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
an option which it has purchased. The Fund may also allow options to expire
unexercised, which would result in the loss of the premium paid.
Forward Foreign Currency Exchange Contracts and Options on Foreign Currencies
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. The Fund might sell a foreign currency on
either a spot or forward basis to seek to hedge against an anticipated
decline in the dollar value of securities in its portfolio or securities it
intends or has contracted to sell or to preserve the U.S. dollar value of
dividends, interest or other amounts it expects to receive. Although this
strategy could minimize the risk of loss due to a decline in the value of the
hedged foreign currency, it could also limit any potential gain which might
result from an increase in the value of the currency. Alternatively, the Fund
might purchase a foreign currency or enter into a forward purchase contract
for the currency to preserve the U.S. dollar price of securities it is
authorized to purchase or has contracted to purchase.
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If the Fund enters into a forward contract to buy foreign currency for any
purpose, the Fund will be required to place cash or liquid, high grade debt
securities in a segregated account of the Fund maintained by 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 purchase 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 purchase of an option on a foreign currency
may constitute an effective hedge against exchange rate fluctuations.
Futures Contracts and Options on Futures Contracts
To hedge against changes in securities prices, currency exchange rates or
interest rates, the Fund may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on any of such futures
contracts. The Fund may also enter into closing purchase and sale
transactions with respect to any of such contracts and options. The futures
contracts may be based on various stock and other securities indices, foreign
currencies and other financial instruments and indices. The Fund may engage
in futures and related options transactions for hedging and other
non-speculative purposes permitted by regulations of the Commodity Futures
Trading Commission. These transactions involve brokerage costs, require
margin deposits and, in the case of contracts and options obligating the Fund
to purchase currencies, require the Fund to segregate assets to cover such
contracts and options.
Risks and Limitations Associated with Transactions in Options, Futures
Contracts and Forward Foreign Currency Exchange Contracts
The Fund may employ certain active investment management techniques
including options on securities indices, options on currency, futures
contracts and options on futures, forward foreign currency exchange contracts
and currency swaps. Each of these active management techniques involves (1)
liquidity risk that contractual positions cannot be easily closed out in the
event of market changes or generally in the absence of a liquid secondary
market, (2) correlation risk that changes in the value of hedging positions
may not match the securities market and foreign currency fluctuations
intended to be hedged, and (3) market risk that an incorrect prediction of
securities prices or exchange rates by the Manager may cause the Fund to
perform less favorably than if such positions had not been entered. The
ability to terminate over-the-counter options is more limited than with
exchange traded options and may involve the risk that the counter-party to
the option will not fulfill its obligations. The use of options, futures and
forward foreign currency exchange contracts are highly specialized activities
which involve investment techniques and risks that are different from those
associated with ordinary portfolio transactions. The Fund may not enter into
futures contracts and options on futures contracts for speculative purposes.
There is no limit on the percentage of the Fund's assets that may be subject
to futures contracts and options on such contracts entered into for bona fide
hedging purposes or forward foreign currency exchange contracts. The loss
that may be incurred by the Fund in entering into futures contracts and
written options thereon and forward foreign currency exchange contracts is
potentially unlimited. The Fund may not invest more than 5% of its total
assets in purchased options other than protective put options.
The Fund's transactions in options, forward foreign currency exchange
contracts, futures contracts and options on futures contracts may be limited
by the requirements for qualification of the Fund as a regulated investment
company for tax purposes. See "Tax Status" in the Statement of Additional
Information.
Repurchase Agreements
The Fund may enter into repurchase agreements not exceeding seven days in
duration. In a repurchase agreement, an investor (e.g., the Fund) purchases a
debt security from a seller which undertakes to repurchase the security at a
specified resale price on an agreed future date (ordinarily a week or less).
The resale price generally exceeds the purchase price by an amount which
reflects an agreed-upon market interest rate for the term of the repurchase
agreement. Repurchase agreements entered into by the Fund will be fully
collateralized with U.S. Treasury and/or U.S. Government agency obligations
with a market value of not less than 100% of the obligation, valued daily.
Collateral will be held in a segregated, safekeeping account for the benefit
of the Fund. In the event that a repurchase agreement is not fulfilled, the
Fund could suffer a loss to the extent that the value of the collateral falls
below the repurchase price or if the Fund is 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.
Restricted and Illiquid Securities
The Fund may invest in restricted securities (i.e., securities that would
be required to be registered prior to distribution to the public), including
restricted securities eligible for resale to certain institutional investors
pursuant to Rule 144A under the Securities Act of 1933. In addition, the Fund
may invest up to 15% of its net assets in restricted securities sold and
offered under Rule 144A that are illiquid either as a result of legal or
contractual restrictions or the absence of a trading market.
The Board of Trustees of the Fund has adopted guidelines and delegated to
the Manager the daily function of determining and monitoring the liquidity of
restricted securities. The Board, however, retains sufficient oversight and
is ultimately responsible for the determinations. Since it is not possible to
predict with assurance exactly how the market for restricted securities sold
and offered under Rule 144A will develop, the Board carefully monitors the
Fund's investments in these securities, focusing on such important factors,
among others, as valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the level of
illiquidity in the Fund to the extent that qualified institutional buyers
become for a time uninterested in purchasing these restricted securities.
Securities of non-U.S. issuers that the Fund acquires in Rule 144A
transactions, but which the Fund may resell publicly in a non-U.S. securities
market, are not considered restricted securities.
18
<PAGE>
The Pioneer Family of Mutual Funds
International Growth Funds
Pioneer India Fund
Pioneer Emerging Markets Fund
Pioneer International Growth Fund
Pioneer Europe Fund
Growth Funds
Pioneer Gold Shares
Pioneer Growth Shares
Pioneer Capital Growth Fund
Growth and Income Funds
Pioneer Three
Pioneer II
Pioneer Fund
Pioneer Real Estate Shares
Pioneer Equity-Income Fund
Income Funds
Pioneer Income Fund
Pioneer Bond Fund
Pioneer America Income Trust
Pioneer Short-Term Income Trust
Tax-Free Income Funds
Pioneer California Double Tax-Free Fund*
Pioneer Massachusetts Double Tax-Free Fund*
Pioneer New York Triple Tax-Free Fund*
Pioneer Tax-Free Income Fund*
Pioneer Intermediate Tax-Free Fund*
Money Market Funds
Pioneer Tax-Free Money Fund
Pioneer Cash Reserves Fund
Pioneer U.S. Government Money Fund
*Not suitable for retirement accounts.
19
<PAGE>
[Pioneer logo]
Pioneer
Emerging Markets
Fund
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
NORMAN KURLAND, Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR
INVESTMENT ADVISER
PIONEERING MANAGEMENT CORPORATION
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 and service forms
and telephone transactions .................................. 1-800-225-6292
FactFone(SM)
Automated fund yields, automated prices
and account information ..................................... 1-800-225-4321
Retirement plans ............................................. 1-800-622-0176
Toll-free fax ................................................ 1-800-225-4240
Telecommunications Device for the Deaf (TDD) ................. 1-800-225-1997
1095-2772
(C)Pioneer Funds Distributor, Inc.
<PAGE>
PIONEER EMERGING MARKETS FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A and Class B Shares
March 31, 1995
(revised October 16, 1995)
This Statement of Additional Information (Part B of the Registration
Statement) is not a Prospectus, but should be read in conjunction with the
Prospectus dated March 31, 1995 (October 16, 1995), of Pioneer Emerging Markets
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.
TABLE OF CONTENTS
Page
1. Investment Policies, Restrictions and Associated Risks..........B-2
2. Management of the Fund..........................................B-14
3. Investment Adviser..............................................B-18
4. Principal Underwriter...........................................B-19
5. Distribution Plans..............................................B-19
6. Shareholder Servicing/Transfer Agent............................B-21
7. Custodian.......................................................B-22
8. Independent Public Accountants..................................B-22
9. Portfolio Transactions..........................................B-22
10. Tax Status......................................................B-24
11. Description of Shares...........................................B-27
12. Certain Liabilities.............................................B-27
13. Determination of Net Asset Value................................B-28
14. Systematic Withdrawal Plan......................................B-29
15. Letter of Intention.............................................B-29
16. Investment Results..............................................B-30
17. Financial Statements............................................B-32
APPENDIX A -- Description of Bond Ratings.......................B-33
APPENDIX B -- Additional General Economic Information
and Other Pioneer Information.....................B-36
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED
OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES, RESTRICTIONS AND ASSOCIATED RISKS
The Fund's Prospectus (the "Prospectus") identifies the investment
objective and the principal investment policies of the Fund and the risk factors
associated with the Fund's investments. Other investment policies of the Fund
and associated risk factors are set forth below. This Statement of Additional
Information should be read in conjunction with the Prospectus. Capitalized terms
not otherwise defined herein have the meaning given to them in the Prospectus.
Emerging Markets and Associated Risk
Emerging Countries. Investing in securities of issuers in emerging
countries may entail greater risks than investing in securities of issuers in
developed countries. These risks include (i) less social, political and economic
stability; (ii) the small current size of the markets for such securities and
the currently low or nonexistent volume of trading, which result in a lack of
liquidity and in greater price volatility; (iii) certain national policies which
may restrict the Fund's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests; (iv)
foreign taxation; and (v) the absence of developed structures governing private
or foreign investment or allowing for judicial redress for injury to private
property.
Political and Economic Risks. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, the Fund
could lose its entire investment in any such country.
In addition, even though opportunities for investment may exist in
emerging markets, any change in the leadership or policies of the governments of
those countries or in the leadership or policies of any other government which
exercises a significant influence over those countries, may halt the expansion
of or reverse the liberalization of foreign investment policies now occurring
and thereby eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of Latin American countries previously
expropriated large quantities of real and personal property similar to the
property which will be represented by the securities purchased by the Fund. The
claims of property owners against those governments were never finally settled.
There can be no assurance that any property represented by securities purchased
by the Fund will not also be expropriated, nationalized, or otherwise
confiscated. If such confiscation were to occur, the Fund could lose a
substantial portion of its investments in such countries. The Fund's investments
would similarly be adversely affected by exchange control regulation in any of
those countries.
Religious, Political and Ethnic Instability. Certain countries in which
the Fund may invest may have vocal minorities that advocate radical religious or
revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for wide-spread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of the Fund's investment in
those countries.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Fund. As illustrations,
certain countries require governmental approval prior to investments by foreign
B-2
<PAGE>
persons, or limit the amount of investment by foreign persons in a particular
company, or limit the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. The Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
Non-Uniform corporate Disclosure Standards and Governmental Regulation.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the securities held by the Fund will not be
registered with the Securities and Exchange Commission (the "Commission") and
such issuers thereof will not be subject to the Commission's reporting
requirements. Thus, there will be less available information concerning foreign
issuers of securities held by the Fund than is available concerning U.S.
issuers. In instances where the financial statements of an issuer are not deemed
to reflect accurately the financial situation of the issuer, the Fund's
investment adviser, Pioneering Management Corporation ("PMC"), will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S.
issuers.
Currency Fluctuations. Because the Fund, under normal circumstances,
will invest a substantial portion of its total assets in the securities which
are denominated or quoted in foreign currencies, the strength or weakness of the
U.S. dollar against such currencies will account for part of the Fund's
investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Fund's holdings of securities denominated in such currency and, therefore, will
cause an overall decline in the Fund's net asset value and any net investment
income and capital gains to be distributed in the U.S. dollars to shareholders
of the Fund.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the pace of business activity in certain other countries, and
the U.S., and other economic and financial conditions affecting the world
economy.
Although the Fund values its assets daily in terms of U.S. dollars, the
Fund does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may do so from time to time, and investors
should be aware of the costs of currency conversion. Although currency dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
B-3
<PAGE>
Adverse Market Characteristics. Securities of many emerging country
issuers may be less liquid and their prices more volatile than securities of
comparable U.S. issuers. In addition, foreign securities exchanges and brokers
are generally subject to less governmental supervision and regulation than in
the U.S., and foreign securities exchange transactions are usually subject to
fixed commissions, which are generally higher than negotiated commissions on
U.S. transactions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause the Fund
to miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security could result in possible
liability to the purchaser. PMC will consider such difficulties when determining
the allocation of the Fund's assets, although PMC does not believe that such
difficulties will have a material adverse effect on the Fund's portfolio trading
activities.
Non-U.S. Withholding Taxes. The Fund's investment income or, in some
cases, capital gains from foreign issuers may be subject to foreign withholding
or other taxes, thereby reducing the Fund's net investment income and/or net
realized capital gains. See "Taxes."
Rule 144A Illiquid Securities
The Fund may invest up to 15% of its net assets in restricted
securities sold and offered pursuant to Rule 144A under the Securities Act of
1933, as amended (the "1933 Act"), that are illiquid. See "Restricted and
Illiquid Securities" in the Prospectus. Generally, a security may be considered
illiquid if the Fund is unable to dispose of such security within seven days at
approximately the price at which it values such security. Securities may also be
considered illiquid as a result of certain legal or contractual restriction on
resale. The sale of illiquid securities, if they can be sold at all, generally
will require more time and result in higher brokerage charges and other selling
expenses than will the sale of liquid securities, such as securities eligible
for trading on U.S. securities exchanges or in the over-the-counter markets.
Moreover, restricted securities (i.e., securities that would be required to be
registered prior to distribution to the general public), such as securities
eligible for resale pursuant to Rule 144 ("144A securities"), which may be
illiquid for purposes of this limitation, often sell, if at all, at a price
lower than similar securities that are not subject to restrictions on resale.
With respect to liquidity determinations generally, the Board of
Trustees has the ultimate responsibility for determining whether specific
securities, including Rule 144A securities are liquid or illiquid. The Board has
delegated the function of making day to day determinations of liquidity to PMC,
pursuant to guidelines reviewed by the Trustees. PMC takes into account a number
of factors in reaching liquidity decisions. These factors may include, but are
not limited to: (i) the frequency of trading in the security; (ii) the number of
dealers who make quotes for the security; (iii) the number of dealers who have
undertaken to make a market in the security; (iv) the number of other potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited and the
mechanics of transfer). PMC will monitor the liquidity of securities in the
Fund's portfolio and report periodically on such decisions to the Trustees.
State securities laws may impose further limitations on the amount of
illiquid securities that the Fund may purchase.
B-4
<PAGE>
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. The Fund will not invest in securities index options for speculative
purposes.
Currently, options on stock indices are traded only on national
securities exchanges and over-the-counter, both in the United States 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.
The Fund may purchase put options in order to hedge against an
anticipated decline in securities prices that might adversely affect the value
of the Fund's portfolio securities. If the Fund purchases a put option on a
securities index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any decline in the level of the securities
index below the exercise price. Such payments would tend to offset a decline in
the value of the Fund's portfolio securities. However, if the level of the
securities index increases and remains above the exercise price while the put
option is outstanding, the Fund will not be able to profitably exercise the
option and will lose the amount of the premium and any transaction costs. Such
loss may be partially offset by an increase in the value of the Fund's portfolio
securities.
The Fund may purchase call options on securities indices in order 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 may 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 any 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 to immediately 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
B-5
<PAGE>
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.
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.
Forward Foreign Currency Transactions
The foreign currency transactions of the Fund may be conducted on a
spot, i.e. cash basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market. The Fund also has authority to deal
in forward foreign currency exchange contracts involving currencies of the
different countries in which it will invest as a hedge against possible
variations in the foreign exchange 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 may not
necessarily 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.
If the Fund enters into a forward contract to purchase foreign
currency, its custodian bank will segregate cash or high grade liquid debt
securities in a separate account of the Fund in an amount equal to the value of
the Fund's total assets committed to the consummation of such forward contract.
Those assets will be valued at market daily and if the value of the assets in
the separate account declines, additional cash or securities will be placed in
the accounts so that the value of the account will equal the amount of the
Fund's commitment with respect to such contracts.
Although the Fund has no current intention of doing so in the coming
year, the Fund may 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.
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.
B-6
<PAGE>
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 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 increased, 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 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 Futures Contracts
To hedge against changes in securities prices or currency exchange
rates, the Fund may purchase and sell various kinds of futures contracts, and
purchase and write (sell) call and put options on any of such futures contracts.
The Fund may also enter into closing purchase and sale transactions with respect
to any of such contracts and options. The futures contracts may be based on
various securities (such as U.S. Government securities), securities indices,
foreign currencies and other financial instruments and indices. The Fund will
engage in futures and related options transactions for hedging purposes. 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
B-7
<PAGE>
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 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.
The Fund will be required, in connection with transactions in futures
contracts and the writing of options on futures, to make margin deposits, which
will be held by the Fund's custodian for the benefit of the futures commission
merchant through whom the Fund engages in such futures contracts and options
transactions. In the case of futures contracts or options requiring the Fund to
purchase securities, the Fund must place cash or high-grade liquid debt
securities in a segregated account maintained by the custodian and marked to
market daily to cover such futures contracts and options.
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 order 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 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.
B-8
<PAGE>
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 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, 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 which may have a value lower than the exercise price. Thus, the
loss incurred by the Fund in writing options on futures 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.
The Fund may use options on futures contracts for hedging purposes.
Other Considerations. As noted above, the Fund may engage in futures
and related options transactions only for hedging purposes. CFTC regulations
permit principals of an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), to engage in such transactions
for bona fide hedging (as defined in such regulations) and certain other limited
purposes 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 contracts
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 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
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.
B-9
<PAGE>
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.
Transaction costs associated with futures contracts and related options
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.
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
in differing degrees.
Repurchase Agreements
The Fund may enter into repurchase agreements with "primary dealers" in
U.S. Government securities and banks which furnish collateral at least equal in
value or market price to the amount of their repurchase obligation. The Fund may
also enter into repurchase agreements involving certain foreign government
securities. The primary risk associated with repurchase agreements is that, if
the seller defaults, the Fund might suffer a loss to the extent that the
proceeds from the sale of the underlying securities and other collateral held by
the Fund in connection with the related repurchase agreement are less than the
repurchase price. Another risk is that, in the event of bankruptcy of the
seller, the Fund could be delayed or prohibited from disposing of the underlying
securities and other collateral held by the Fund in connection with the related
repurchase agreement pending court proceedings. In evaluating whether to enter a
repurchase agreement, PMC will carefully consider the creditworthiness of the
seller pursuant to procedures reviewed and approved by the Trustees. See
"Repurchase Agreements" in the Prospectus.
Investment Restrictions
The Fund has adopted certain additional investment restrictions which
may not be changed without the affirmative vote of the holders of a "majority"
(as defined in the 1940 Act) of the Fund's outstanding voting securities. The
Fund may not:
B-10
<PAGE>
(1) Issue senior securities, except as permitted by paragraphs (2), (6)
and (7) below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments, forward foreign exchange contracts, repurchase agreements and
reverse repurchase agreements entered into in accordance with the Fund's
investment policy, and the pledge, mortgage or hypothecation of the Fund's
assets within the meaning of paragraph (3) below are not deemed to be senior
securities.
(2) Borrow money, except from banks as a temporary measure for
extraordinary emergency purposes and except pursuant to reverse repurchase
agreements and then only in amounts not to exceed 33 1/3% of the Fund's total
assets (including the amount borrowed) taken at market value. The Fund will not
use leverage to attempt to increase income. The Fund will not purchase
securities while outstanding borrowings (including reverse repurchase
agreements) exceed 5% of the Fund's total assets.
(3) Pledge, mortgage, or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such pledging,
mortgaging or hypothecating does not exceed 33 1/3% of the Fund's total assets
taken at market value.
(4) Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the 1933 Act.
(5) Purchase or sell real estate, except that the Fund may (i) lease
office space for its own use, (ii) invest in securities of issuers that invest
in real estate or interests therein, (iii) invest in securities that are secured
by real estate or interests therein, (iv) purchase and sell mortgage-related
securities and (v) hold and sell real estate acquired by the Fund as a result of
the ownership of securities.
(6) Make loans, except that the Fund may lend portfolio securities in
accordance with the Fund's investment policies and may purchase or invest in
repurchase agreements, bank certificates of deposit, a portion of an issue of
publicly distributed bonds, bank loan participation agreements, bankers'
acceptances, debentures or other securities, whether or not the purchase is made
upon the original issuance of the securities.
(7) Invest in commodities or commodity contracts or in puts, calls, or
combinations of both, 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.
(8) With respect to 75% of its total assets, purchase securities of an
issuer (other than the U.S. Government, its agencies or instrumentalities), if
(a) such purchase would cause more than 5% of the Fund's total
assets, taken at market value, to be invested in the securities of such
issuer, or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by the
Fund.
B-11
<PAGE>
In addition, although the Fund is not currently registered in Germany,
the following restrictions will apply, to the extent required, upon such
registration. If and so long as the Fund is registered in Germany, the following
investment restrictions will apply which may not be changed without the prior
approval of the Fund's shareholders. The Fund may not:
(i) invest in the securities of any other domestic or foreign
investment company or investment fund, except in connection with a plan of
merger or consolidation with or acquisition of substantially all the assets of
such other investment company or investment fund;
(ii) purchase or sell real estate, or any interest therein, and real
estate mortgage loans, except that the Fund may invest in securities of
corporate or governmental entities secured by real estate or marketable
interests therein or securities issued by companies (other than real estate
limited partnerships, real estate investment trusts and real estate funds) that
invest in real estate or interests therein;
(iii) borrow money in amounts exceeding 10% of the Fund's total assets
(including the amount borrowed) taken at market value;
(iv) pledge, mortgage or hypothecate its assets in amounts exceeding
10% of the Fund's total assets taken at market value;
(v) purchase securities on margin or make short sales; or
(vi) redeem its securities in-kind.
It is the fundamental policy of the Fund not to concentrate its
investments in securities of companies in any particular industry. In the
opinion of the Commission, investments are concentrated in a particular industry
if such investments aggregate 25% or more of the Fund's total assets. The Fund's
policy does not apply to investments in U.S. Government securities.
The Fund does not intend to enter into any reverse repurchase
agreement, lend portfolio securities or invest in securities index put and call
warrants, as described in fundamental investment restrictions (2), (6) and (7)
above, during the coming year.
In addition, as a matter of nonfundamental investment policy and in
connection with the offering of its shares in various states and foreign
countries, the Fund has agreed not to:
(a) Participate on a joint-and-several basis in any securities trading
account. The "bunching" of orders for the sale or purchase of marketable
portfolio securities with other accounts under the management of the Adviser to
save commissions or to average prices among them is not deemed to result in a
securities trading account.
(b) Purchase securities on margin or make short sales unless by virtue
of its ownership of other securities, the Fund has the right to obtain, without
payment of additional consideration, securities equivalent in kind and amount to
the securities sold and, if the right is conditional, the sale is made upon the
same conditions, except that the Fund may obtain such short-term credits as may
be necessary for the clearance of purchases and sales of securities and in
connection with transactions involving forward foreign currency exchange
transactions, options, futures contracts and options on futures contracts.
B-12
<PAGE>
(c) Purchase a security 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; provided, however,
the Fund may only purchase securities of registered closed-end investment
companies and such securities may only be purchased in the open market where no
commission or profit to a sponsor or dealer results from the purchase other than
the customary brokers commission and the Fund can exceed such limitations in
connection with a plan of merger or consolidation with or acquisition of
substantially all the assets of such other closed-end investment company. 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.
(d) Invest more than 5% of its total assets in the securities of any
issuer which, together with its predecessors, has been in operation for less
than three years.
(e) Invest more than 15% of its total assets in restricted securities,
including securities eligible for resale pursuant to Rule 144A under the 1933
Act.
(f) Invest for the purpose of exercising control over or management of
any company.
(g) Purchase warrants of any issuer, if, as a result of such purchases,
more than 5% of the value of the Fund's net assets would be invested in
warrants, whether or not listed on the New York Stock Exchange, the American
Stock Exchange or comparable international exchanges. For these purposes,
warrants are to be valued at the lesser of cost or market, but warrants acquired
by the Fund in units with or attached to debt securities shall be deemed to be
without value.
(h) Knowingly purchase or retain securities of an issuer if one or more
of the Trustees or officers of the Fund or directors or officers of the Adviser
or any investment management subsidiary of the Adviser individually owns
beneficially more than 0.5% and together own beneficially more than 5% of the
securities of such issuer.
(i) Purchase interests in oil, gas or other mineral leases or
exploration programs; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production or transmission of oil, gas or
other minerals.
(j) Purchase any security which is illiquid, if more than 15% of the
net assets of the Fund, taken at market value, would be invested in such
securities. The Fund may not invest in repurchase agreements maturing in more
than seven days. The Fund currently intends to limit its investments in illiquid
securities to illiquid Rule 144A securities.
(k) Write covered calls or put options with respect to more than 25% of
the value of its total assets or invest more than 5% of its total assets in
puts, calls, spreads, or straddles, other than protective put options.
(l) Invest in real estate limited partnerships.
B-13
<PAGE>
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.*, President and Director of The Pioneer Group, Inc.
Chairman of the Board, ("PGI"); Chairman and Director of Pioneering
President and Trustee Management Corporation ("PMC"); Chairman of the
Board and Chief Executive Officer of Pioneer
Winthrop Advisers ("PWA") since 1993; Chairman of
the Board of Pioneer Funds Distributor, Inc.
("PFD"); Director of Pioneering Services
Corporation ("PSC") and Pioneer Capital
Corporation ("PCC"); President and Director of
Pioneer Plans Corporation ("PPC"), Pioneer
Investment Corp. ("PIC"), Pioneer International
Corp. ("PIntl"), and Pioneer Metals & Technology,
Inc. ("PMT"); Chairman of the Board and Director
of Teberebie Goldfields Limited; Chairman,
President and Director of Pioneer Goldfields
Limited ("PGL"); Chairman of the Supervisory Board
of Pioneer Fonds Marketing GmbH; Chairman and
President of the Pioneeer mutual funds and
Chairman and Partner, Hale and Dorr (counsel to
the Fund).
RICHARD H. EGDAHL, M.D., Professor of Management, Boston University School
Trustee of Management; Professor of Public Health,
53 Bay State Road Boston University School of Public Health;
Boston, Massachusetts Professor of Surgery, Boston University School of
Medicine and Boston University Health Policy
Institute; Director, Boston University Medical
Center; Executive Vice President and Vice Chairman
of the Board, University Hospital; Academic Vice
President for Health Affairs, Boston University;
Director, Essex Investment Management Company,
Inc. (investment adviser), Health Payment Review,
Inc. (health care containment software firm),
Mediplex Group, Inc. (nursing care facilities
firm), Peer Review Analysis, Inc. (health care
utilization management firm) and Springer-Verlag
New York, Inc. (publisher); Honorary Director,
Franciscan Children's Hospital. Boston University
Health Policy Institute and Trustee of all the
Pioneer mutual funds.
MARGARET B.W. GRAHAM, Manager of Research Operations, Xerox Palo Alto
Trustee Research Center, since September 1991;
The Keep Professor of Operations Management and
Post Office Box 110 Management of Technology, Boston
Little Deer Isle, Maine University School of Management ("BUSM"), since
B-14
<PAGE>
1989; Associate Dean, BUSM, 1988 to 1990;
previously, Associate Professor, Department of
Operations Management, BUSM and Trustee of all the
Pioneer mutual funds, except Pioneer Variable
Contracts Trust.
JOHN W. KENDRICK, Professor Emeritus, George Washington University;
Trustee Economic Consultant and Director, American
6363 Waterway Drive Productivity and Quality Center and Trustee of all
Falls Church, Virginia the Pioneer mutual funds, except Pioneer Variable
Contracts Trust.
MARGUERITE A. PIRET, President, Newbury, Piret & Company,
Trustee Inc. (a merchant banking firm);
One Boston Place, Trustee of all the Pioneer mutual funds.
Suite 2635
Boston, Massachusetts.
DAVID D. TRIPPLE*, Executive Vice President and Director of PGI
Trustee and Executive and PWA (since 1993); Director of PFD, since 1989;
Vice President Director of PCC and Pioneer SBIC Corporation;
President (since 1993); Director and Chief
Investment Officer of PMC and Trustee of all the
Pioneer mutual funds.
STEPHEN K. WEST, Partner, Sullivan & Cromwell (a law
Trustee firm) and Trustee of all the Pioneer mutual funds.
125 Broad Street
New York, New York
JOHN WINTHROP, President, John Winthrop & Co., Inc. (a private
Trustee investment firm); Director of NUI Corp.; Trustee
One North Adgers Wharf of Alliance Capital Reserves, Alliance Government
Charleston, South Carolina Reserves and Alliance Tax Exempt Reserves and
Trustee of all the Pioneer mutual funds, except
Pioneer Variable Contracts Trust.
NORMAN KURLAND, Senior Vice President of PMC since 1993; Vice
Vice President President of PMC from 1990 to 1993; International
Portfolio Manager and Analyst, Keystone Custodian
Funds from 1987 to 1990.
WILLIAM H. KEOUGH, Senior Vice President, Chief Financial Officer
B-15
<PAGE>
Treasurer and Treasurer of PGI and Treasurer of PFD, PMC,
PSC, PCC, PPC, PIC, PIntl, PMT, PWA; Pioneer SBIC
Corporation and Treasurer of all the Pioneer
mutual funds.
JOSEPH P. BARRI, Secretary of PGI, PMC, PCC, PPC, PIC, PIntl, PMT
Secretary and PWA; Clerk of PFD and PSC; Partner, Hale and
Dorr (counsel to the Fund) and Secretary of all
the Pioneer mutual funds.
ROBERT NAULT, General Counsel of PGI since 1995; Secretary
Assistant formerly of Hale and Dorr (counsel to the Fund)
where he most recently served as a junior partner
and Assistant Secretary of all the Pioneer mutual
funds.
ERIC RECKARD, Manager of Fund Accounting and Compliance of PMC
Assistant Treasurer since May, 1994; Manager of Auditing and Business
Analysis of PGI prior to May, 1994; and Assistant
Treasurer of all the Pioneer mutual funds.
The Fund's Declaration of Trust provides that the holders of two-thirds
of its outstanding shares may vote to remove a Trustee of the Fund at any
meeting of shareholders. See "Description of Shares" below. The business address
of all officers is 60 State Street, Boston, Massachusetts 02109.
The table below lists all the Pioneer mutual funds currently offered to
the public and the investment adviser and principal underwriter for each fund.
Investment Principal
Fund Name Adviser Underwriter
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Three PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer International Growth Fund PMC PFD
Pioneer India Fund Note 1 PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Short-Term Income Fund PMC PFD
Pioneer Income Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
B-16
<PAGE>
Pioneer California Double Tax-Free Fund PMC PFD
Pioneer New York Triple Tax-Free Fund PMC PFD
Pioneer Massachusetts Double PMC PFD
Tax-Free Fund
Pioneer Cash Reserves Fund PMC PFD
Pioneer U.S. Government Money Fund PMC PFD
Pioneer Tax-Free Money Fund PMC PFD
Pioneer Interest Shares, Inc. PMC Note 2
Pioneer Variable Contracts Trust PMC Note 3
- ------------------------------
Note 1 ITI Pioneer AMC Ltd. manages the Fund's investments in India, and PMC
manages all of the Fund's other investments
Note 2 This is a closed-end fund and it is underwritten by Mellon Bank.
Note 3 This is a series of seven separate portfolios designed to provide
investment vehicles for the variable annuity and variable life insurance
contracts of various insurance companies or for certain qualified pension
plans.
PMC also manages the investments of certain institutional private
accounts. All of the outstanding capital stock of PMC and PSC is owned by PGI, a
Delaware corporation. All of the capital stock of PFD is owned by PMC. Messrs.
Cogan, Tripple, Keough, Nault and Barri, officers and/or Trustees of the Fund,
are also officers and/or directors of PFD, PMC, PSC (except Mr. Tripple) and
PGI. To the knowledge of the Fund, no officer or Trustee of the Fund owned 5% or
more of the issued and outstanding shares of PGI as of the date of this
Statement of Additional Information, except Mr. Cogan who then owned
approximately 15% of such shares.
The Fund pays no salaries or compensation to any of its officers. The
Fund pays an annual trustees' fee of $500 to each Trustee who is not affiliated
with PMC, PFD or PSC as well as an annual fee of $200 to each of the Trustees
who is a member of the Fund's Audit Committee, except for the Chairman of such
Committee, who receives an annual fee of $250. The Fund also pays an annual
trustees' fee of $500 plus expenses to each Trustee affiliated with PMC, PSC or
PFD.
Total Compensa-
tion from the
Pension or Fund and other
Aggregate Retirement funds in the
Compensation Benefits Pioneer Family
Director From the Fund Accrued of Mutual Funds**
John F. Cogan, Jr. $208* $0 $ 9,000*
Richard H. Egdahl, M.D. 208 0 55,650
Margaret B.W. Graham 208 0 55,650
John W. Kendrick 208 0 55,650
Marguerite A. Piret 313 0 66,650
David D. Tripple 208* 0 9,000*
Stephen K. West 292 0 63,650
John Winthrop 292 0 63,650
Totals $1,937.00 $0 $378,900
======== =======
B-17
<PAGE>
- --------
* 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 calendar year ended December 31, 1994.
Any such fees and expenses paid to affiliates or interested persons of
PMC, PFD or PSC are reimbursed to the Fund under its Management Contract. 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, Merrill Lynch Pierce, Fenner & Smith Inc.,
Mutual Fund Operations, 4800 Deer Lake Drive East 3rd FL, Jacksonville, FL
32246-6484 owned 7.28% of the outstanding shares (91,096 shares) of the Fund.
3. INVESTMENT ADVISER
As stated in the Prospectus, PMC, 60 State Street, Boston,
Massachusetts, serves as the Fund's investment adviser. The Fund's management
contract with PMC expires initially on June 23, 1996, but it is renewable
annually after such date by the vote of a majority of the Board of Trustees of
the Fund (including a majority of the Board of Trustees who are not parties to
the contract or interested persons of any such parties) cast in person at a
meeting called for the purpose of voting on such renewal. This contract
terminates if assigned and may be terminated without penalty by either party by
vote of its Board of Directors or Trustees, as the case may be, or a majority of
the Fund's outstanding voting securities and the giving of sixty days' written
notice.
As compensation for its management services and expenses incurred, PMC
is entitled to a management fee at the rate of 1.25% per annum of the Fund's
average daily net assets. The fee is normally computed daily and paid monthly.
PMC has voluntarily agreed not to impose a portion of its management fee and to
make other arrangements, if necessary, to limit certain other expenses of the
Fund to the extent required to limit total Class A expenses to 2.25% of the
average daily net assets attributable to the Class A shares; the Fund-wide
expenses attributable to the Class B shares will be reduced only to the extent
such expenses are reduced for the Class A shares. This agreement is voluntary
and temporary and may be revised or terminated by PMC at any time. For the
period June 23, 1994 (commencement of operations) through November 30, 1994, the
Fund paid no management fees. The Fund would have incurred management fees
payable to PMC of $84,871 had the fee reduction agreement not been in place.
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 emerging markets 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.
B-18
<PAGE>
4. PRINCIPAL UNDERWRITER
PFD serves as the principal underwriter in connection with the
continuous offering of the shares of the Fund pursuant to an Underwriting
Agreement, dated June 23, 1994. The Trustees who were not "interested persons"
(as defined in the 1940 Act) of the Fund approved the Underwriting Agreement,
which will continue in effect from year to year, if annually approved by the
Trustees, in conjunction with the continuance of the Plans of Distribution. See
"Distribution Plans" below. The Underwriting Agreement provides that PFD will
bear certain distribution expenses not borne by the Fund. During the period June
23, 1994 (commencement of operation) through November 30, 1994, net underwriting
commissions earned by PFD were approximately $12,044. Commissions reallowed to
dealers during such period were approximately $536,877.
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 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, it may issue Fund shares for
consideration other than cash in connection with a bona fide reorganization,
statutory merger or other acquisition of portfolio securities provided (i) the
securities meet the investment objectives and policies of the Fund; (ii) the
securities are acquired by the Fund for investment and not for resale; (ii) 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 System. An exchange of securities for Fund shares will generally
be a taxable transaction to the shareholder.
The redemption price of shares of beneficial interest of the Fund may,
at PMC's discretion, be paid in cash or portfolio securities. The Fund has,
however, elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the Fund's net asset value during any 90-day period for any
one shareholder. Should the amount of redemptions by any shareholder exceed such
limitation, the Fund will have the option of redeeming the excess in cash or
portfolio securities. In the latter case, the securities are taken at their
value employed in determining the Fund's net asset value. A shareholder whose
shares are redeemed in-kind may incur brokerage charges in selling the
securities received in-kind. The selection of such securities will be made in
such manner as the Board deems fair and reasonable.
5. DISTRIBUTION PLANS
The Fund has adopted a plan of distribution pursuant to Rule 12b-1
promulgated by the Commission under the 1940 Act with respect to Class A shares
(the "Class A Plan") and a plan of distribution with respect to Class B shares
(the "Class B Plan") (together, the "Plans").
B-19
<PAGE>
Class A Plan
Pursuant to the Class A Plan the Fund may reimburse PFD for its
expenditures in financing any activity 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 for 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 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 CDSCs attributable to Class B shares. (See
"Distribution 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.
B-20
<PAGE>
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 Class or Classes 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.
During the period June 23, 1994 (commencement of operations) through
November 30, 1994, the Fund incurred total distribution fees of $0 and $2,400
pursuant to the Class A Plan and the Class B Plan, respectively. 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.
6. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with Pioneering Services Corporation ("PSC"),
60 State Street, Boston, Massachusetts, to act as shareholder servicing agent
and transfer agent for the Fund. This contract terminates if assigned and may be
terminated without penalty by either party by vote of its Board of Directors or
Trustees, as the case may be, or a majority of the Fund's outstanding voting
securities and the giving of ninety days' written notice.
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 routine shareholder inquiries.
PSC receives an annual fee of $22.00 per Class A and Class B
shareholder account from the Fund as compensation for the services described
above. This fee is set at an amount determined by vote of a majority of the
Trustees (including a majority of the Trustees who are not parties to the
contract with PSC or interested persons of any such parties) to be comparable to
fees for such services being paid by other investment companies.
B-21
<PAGE>
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 United States as well as in foreign countries, handling the
receipt and delivery of securities, and collecting interest and dividends on the
Fund's investments. The Custodian fulfills its function in foreign countries
through a network of subcustodian banks located in the foreign 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, Restrictions
and Risk Factors."
The Custodian does not determine the investment policies of the Fund or
decide which securities it 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 United States or in recognized central
depositories in foreign countries. In selecting Brown Brothers Harriman & Co.
and its network of foreign subcustodians as the custodians for foreign countries
securities, the Board of Trustees made certain determinations required by Rule
17f-5 promulgated under the 1940 Act. The Trustees annually review and approve
the continuations of its international subcustodian arrangements.
8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, One International Place, Boston, Massachusetts
02110, is the Fund's independent public accountant, providing audit services,
tax return review, and assistance and consultation with respect to the
preparation of filings with the Commission.
9. PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the Fund by PMC pursuant to authority contained in the Management
Contract. 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 of 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. Most
transactions in foreign equity securities are executed by broker-dealers in
foreign countries in which commission rates are fixed and, therefore, are not
negotiable (as such rates are in the United States) and are generally higher
than in the United States.
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. 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
B-22
<PAGE>
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 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 was to attempt to develop comparable information
through its own staff.
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 as well as shares of other investment companies or accounts
managed by PMC. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the Fund. In
addition, if PMC determines in good faith that the amount of commissions charged
by a broker is reasonable in relation to the value of the brokerage and research
services provided by such broker, the Fund may pay commissions to such broker in
an amount greater than the amount another firm may charge. For the period June
23, 1994 (commencement of operations) through November 30, 1994, the Fund paid
or accrued aggregate brokerage commissions of $136,329.
In addition to the Fund, PMC acts as investment adviser to the other
Pioneer Funds and certain private accounts with investment objectives similar to
those of the Fund. As such, securities may meet investment objectives of the
Fund, such other funds and such private accounts. In such cases, the decision to
recommend to purchase for 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 company presently has in a particular
industry or country 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, the position of any fund or account
in the same issue may vary and the length of time that any fund or account may
choose to hold its investment in the same issue may likewise vary. To the extent
that the Fund, another fund in the Pioneer group or a private account managed by
PMC seeks to acquire the same security at about the same time, the Fund may not
be able to acquire as large a position in such security as it desires or it may
have to pay a higher price for the security. Similarly, the Fund may not be able
to obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if PMC decides to sell on behalf of another
account the same portfolio security at the same time. On the other hand, if the
same securities are bought or sold at the same time by more than one account,
the resulting participation in volume transactions could produce better
executions for the Fund or other account. In the event that more than one
account purchases or sells the same security on a given date, the purchases and
sales will normally be made as nearly as practicable on a pro rata basis in
proportion to the amounts desired to be purchased or sold by each.
B-23
<PAGE>
The Trustees periodically review PMC's performance of its
responsibilities in connection with portfolio transactions on behalf of the
Fund.
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 at least annually all
investment company taxable income and net capital gain, if any, which it
receives, the Fund will be relieved of the necessity of paying federal income
tax.
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 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. For purposes of the 90% income test, income the Fund earns from
equity interests in certain entities that are not treated as corporations (e.g.,
are treated as partnerships or trusts) for U.S. tax purposes will generally have
the same character for the Fund as in the hands of such entities; consequently,
the Fund may be required to limit its equity investments in such entities that
earn fee income, rental income, or other nonqualifying income.
Dividends from net investment income, net short-term capital gains, and
certain net foreign exchange gains are taxable as ordinary income, whether
received in cash or in additional shares. Dividends from net long-term capital
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, certain options and futures contracts relating to foreign currency,
forward foreign currency contracts, foreign currencies, or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. 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.
B-24
<PAGE>
If the Fund acquires the stock of 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, or take other defensive actions with respect to
such investments.
The Fund may invest in debt obligations that are in the lowest rating
categories or are unrated, including debt obligations of issuers not currently
paying interest as well as issuers who are in default. Investments in debt
obligations that are at risk of or in default present special tax issues for the
Fund. Tax rules are not entirely clear about issues such as when the Fund may
cease to accrue interest, original issue discount, or market discount, when and
to what extent deductions may be taken for bad debts or worthless securities,
how payments received on obligations in default should be allocated between
principal and income, and whether exchanges of debt obligations in a workout
context are taxable. These and other issues will be addressed by the Fund, in
the event it invests in such securities, in order to ensure that it distributes
sufficient income to preserve its status as a regulated investment company and
to avoid becoming subject to federal income or excise tax.
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 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.
Any loss realized by a shareholder upon the redemption 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, if Class A shares redeemed or exchanged have been held for
less than 91 days, (1) in the case of a reinvestment, the sales charge paid on
such shares is not included in their tax basis under the Code if a reinvestment
occurs, and (2) in the case of an exchange, all or a portion of the sales charge
paid on such shares is not included in their tax basis under the Code, to the
extent a sales charge that would otherwise apply to the shares received is
reduced pursuant to the exchange privilege. In either case, the portion of the
sales charge not included in the tax basis of the shares redeemed or surrendered
in an exchange is included in the tax basis of the shares acquired in the
reinvestment or exchange. Losses on certain redemptions may be disallowed under
"wash sale" rules in the event of other investments in the Fund within 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.
B-25
<PAGE>
The Fund's dividends normally will not qualify for the 70%
dividends-received deduction available to corporations, because the Fund does
not expect to receive dividends from U.S domestic corporations.
The Fund may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in those countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. If more than 50% of the Fund's total assets at the close of any taxable
year consists of stock or securities of foreign corporations, the Fund may elect
to pass through to shareholders their pro rata shares of qualified 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 actually received)
and would treat such taxes as foreign taxes paid by them, for which they may be
entitled to a tax deduction or credit 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.
Provided that the Fund qualifies as a regulated investment company
("RIC") under the Code, it will not be required to pay any Massachusetts income,
corporate excise or franchise taxes. Provided that the Fund qualifies as a RIC
and meets certain income source requirements under Delaware Law, the Fund should
also not be required to pay Delaware corporation income tax.
Options written or purchased and futures contracts entered into by the
Fund on certain securities, securities indices and foreign currencies, as well
as certain foreign currency forward contracts, may cause the Fund to recognize
gains or losses from marking-to-market at the end of its taxable year even
though such options may not have lapsed, been closed out, or exercised or such
futures or forward contracts may not have been closed out or disposed of and may
affect the characterization as long-term or short-term of some capital gains and
losses realized by the Fund. Certain options, futures and forward contracts on
foreign currency 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
tax elections may be available that would enable the Fund to ameliorate some
adverse effects of the tax rules described in this paragraph.
Federal law requires that the Fund withhold (as "backup withholding")
31% of reportable payments, including dividends, capital gain dividends, and the
proceeds of redemptions (including exchanges) and repurchases, to shareholders
who have not complied with IRS regulations. In order to avoid this withholding
requirement, shareholders must certify on their Account Applications, or on
separate W-9 Forms, that their Social Security or other Taxpayer Identification
B-26
<PAGE>
Number is correct and that they are not currently subject to backup withholding,
or that they are exempt from backup withholding. The Fund may nevertheless be
required to withhold if it receives notice from the IRS or a broker that the
number provided is incorrect or backup withholding is applicable as a result of
previous underreporting of interest or dividend income.
The description above relates only to U.S. federal income tax
consequences for shareholders who are U.S. persons, i.e., U.S. citizens or
residents and U.S. domestic corporations, partnerships, trusts or estates, and
who are subject to U.S. federal income tax. The description does not address
special tax rules applicable to certain classes of investors, such as tax-exempt
entities, insurance companies, and financial institutions. Investors other than
U.S. persons may be subject to different U.S. tax treatment, including a
possible 30% U.S. withholding tax (or withholding tax at a lower treaty rate) on
dividends treated as ordinary income. 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 Agreement and 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 Agreement and 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 two
classes of shares of the Fund, Class A shares and Class B 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 Agreement and 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.
12. CERTAIN LIABILITIES
As a Delaware business trust, the Fund's operations are governed by its
Agreement and Declaration of Trust dated March 23, 1994. A copy of the Fund's
Certificate of Trust, also dated March 23, 1994, is on file with the Office of
the Secretary of State of the State of Delaware. Generally, Delaware business
trust shareholders are not personally liable for obligations of the Delaware
business trust under Delaware law. The Delaware Business Trust Act (the
"Delaware Act") provides that a shareholder of a Delaware business trust shall
be entitled to the same limitation of liability extended to shareholders of
private for-profit corporations. The Trust's Agreement and Declaration of Trust
expressly provides that the Trust has been organized under the Delaware Act and
that the Agreement and Declaration of Trust is to be governed by Delaware law.
B-27
<PAGE>
It is nevertheless possible that a Delaware business trust, such as the Fund,
might become a party to an action in another state whose courts refused to apply
Delaware law, in which case the trust's shareholders could be subject to
personal liability.
To guard against this risk, the Agreement and Declaration of Trust (i)
contains an express disclaimer of shareholder liability for acts or obligations
of the Fund and provides that notice of such disclaimer may be given in each
agreement, obligation and instrument entered into or executed by the Fund or its
Trustees, (ii) provides for the indemnification out of Fund property of any
shareholders held personally liable for any obligations of the Fund or any
series of the Fund and (iii) provides that the Fund shall, upon request, assume
the defense of any claim made against any shareholder for any act or obligation
of the Fund and satisfy any judgment thereon. Thus, the risk of a Fund
shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refused to apply Delaware law; (2) the
liability arose under tort law or, if not, no contractual limitation of
liability was in effect; and (3) the Fund itself would be unable to meet its
obligations. In the light of Delaware law, the nature of the Fund's business and
the nature of its assets, the risk of personal liability to a Fund shareholder
is remote.
The Agreement and 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 Agreement and Declaration of Trust does not
authorize the Fund to indemnify any Trustee or officer against any liability to
which he or she would otherwise be subject by reason of or for willful
misfeasance, bad faith, gross negligence or reckless disregard of such person's
duties.
13. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined
as of the close of regular trading (currently 4:00 p.m., Eastern Time) on each
day on which the New York Stock Exchange (the "Exchange") is open for trading.
As of the date of this Statement of Additional Information, the 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 so 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 of that class. 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
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<PAGE>
asset value per Class A share, plus the maximum sales charge. Class B shares are
offered at net asset value without the imposition of an initial sales charge.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a
convenient method of receiving fixed payments at regular intervals from Class A
or Class B 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 checks of $50 or more
will be sent to the applicant, or any person designated by him, monthly or
quarterly. A designation of a third party to receive checks requires an
acceptable signature guarantee. Withdrawals from Class B shares accounts are
limited to 10% of the value of the account at the time the plan is implemented.
Any income dividends or capital gains distributions on shares under the
SWP will be credited to the Plan account on the payment date in full and
fractional shares at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares
deposited under the SWP in a SWP account. To the extent that such redemptions
for periodic withdrawals exceed dividend income reinvested in the SWP account,
such redemptions will reduce and may ultimately exhaust the number of shares
deposited in the SWP account. Redemptions are taxable transactions to
shareholders. In addition, the amounts received by a shareholder cannot be
considered as an actual yield or income on his or her investment because part of
such payments may be a return of his or her investment.
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. LETTER OF INTENTION
Purchases in the Fund of $50,000 or more 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 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 his Class A shares in the Fund and all other Pioneer Funds, except
Pioneer Money Market Trust's Class A Shares, held of record as of the date of
his Letter of Intention as a credit toward determining the applicable scale of
sales charge for the Class A shares to be purchased under the Letter of
Intention.
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<PAGE>
The Letter of Intention authorizes PSC to escrow shares having a
purchase price equal to 5% of the stated investment in the Letter of Intention.
A Letter of Intention is not a binding obligation upon the investor to purchase,
or the Fund to sell, the full amount indicated and the investor should read the
provisions of the Letter of Intention contained in the Account Application
carefully before signing.
16. INVESTMENT RESULTS
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 class of its
shares as that information may appear in the Prospectus, this Statement of
Additional Information or in advertising are calculated by standard methods
prescribed by the Commission.
Standardized Average Annual Total Return Quotations
Average annual total return quotations for Class A and Class B shares
are computed by finding the average annual compounded rates of return that would
cause a hypothetical investment in that 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 shares at the end of the period.
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical
$1000 initial payment made at the beginning of
the designated period (or fractional portion
thereof)
For purposes of the above computation, it is assumed that the maximum sales
charge of 5.75% was deducted from the initial investment and that all dividends
and distributions made by the Fund are reinvested at net asset value during the
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<PAGE>
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.
Other 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, Morgan Stanley Capital
International USA Index, an unmanaged index of U.S. domestic stock markets, or
other appropriate indices of Morgan Stanley Capital International ("MSCI"); the
Standard & Poor's 500 Stock Index ("S&P 500"), an unmanaged index of common
stocks; 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, Consumer's Digest, Consumer Reports, Financial
World, Forbes, Fortune, Investors Business Daily, Kiplinger's Personal Finance
Magazine, Money Magazine, the New York Times, Smart Money, USA Today, U.S. News
and World Report, The Wall Street Journal and Worth may also be cited (if the
Fund is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources including Bloomberg
Financial Systems, CDA/Wiesenberger Investment Companies Service, Donoghue's
Mutual Fund Almanac, Investment Company Data, Inc., Johnson's Charts, Kanon
Bloch Carre & Co., Micropal, Inc., Morningstar, Inc., Schabacker Investment
Management and Towers Data Systems.
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.
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. The total return of
the Class A shares and the Class B shares of the Fund for the period June 23,
1994 (commencement of operations) through November 30, 1994 were -2.48% and
- -2.08%, respectively, assuming no payment of a sales charge. Assuming payment of
the maximum sales charge, the total return of the Class A shares and the Class B
shares of the Fund for the same period would have been -7.69% and -6.38%,
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<PAGE>
respectively. Assuming payment of the maximum sales charge and that the fee
reduction agreement had not been in place, the total return of the Class A
shares and the Class B shares of the Fund for the same period would have been
lower than the above total return figures.
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 standard formulas mandated by the
Securities and Exchange Commission.
In addition, by using a personal identification number ("PIN"),
shareholders may enter purchases, exchanges and redemptions, access their
account balance and last three transactions and may order a duplicate statement.
See "FactFoneSM" in the Prospectus for more information.
All performance numbers communicated through FactFoneSM represent past
performance; figures for all quoted bond funds include the maximum applicable
sales charge. A shareholder's actual yield and total return will vary with
changing market conditions. The value of Class A and Class B 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 Fund's Annual Report dated November 30, 1994 is incorporated by
reference into this Statement of Additional Information in reliance upon the
report of Arthur Andersen LLP, independent public accountants, as expert. A copy
of the Fund's Annual Report may be obtained without charge by calling
Shareholder Services at 1-800-225-6292 or by written request to the Fund at 60
State Street, Boston, Massachusetts 02109.
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<PAGE>
DESCRIPTION OF BOND RATINGS
The rating systems described herein are believed to be the most recent
ratings systems available from Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group at the date of this Statement of Additional Information for
the securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be given to these securities on the
date of the Fund's fiscal year end.
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
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<PAGE>
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believe possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1 and B1.
Standard & Poor's Ratings Group1
AAA: Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
- -------------------------------
1. Rates all governmental bodies having $1,000,000 or more of debt
outstanding, unless adequate information is not available.
B-34
<PAGE>
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposures to adverse
conditions.
D: Bonds rated D are in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
Unrated: Indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligations as a matter of policy.
B-35
<PAGE>
ADDITIONAL GENERAL ECONOMIC INFORMATION
Market Capitalization
According to data as of December 31, 1994 supplied by Morgan Stanley
Capital International, capitalization of foreign equity markets has increased
dramatically since 1972. Investors not investing in stocks traded on non-U.S.
markets miss over 60% of the equity investment opportunities available
worldwide.
Market Capitalization
Year Non-U.S. U.S.
1974 44% 56%
1984 46% 54%
1994 64% 36%
2004* 89% 11%
- ----------------------------
* Projection calculated by PFD based on the historical rate of increase of
non-U.S. market capitalization as supplied by data from Morgan Stanley
Capital International.
Foreign and U.S. Market Performance
Overall, the performance of foreign securities markets, such as those in
the United Kingdom, Germany, Japan and France, has outpaced that of U.S.
securities markets. Although prices of international stocks fluctuate, they have
achieved a remarkably consistent long-term performance record. Of course, there
is no guarantee they will continue to perform as well as they have in the past.
B-36
<PAGE>
MSCI EAFE MSCI Europe 14 MSCI World IFC Composite S&P500
Net of Taxes Net of Taxes Net of Taxes
%Total Return %Total Return %Total Return %Total Return %TR
- --------------------------------------------------------------------------------
Dec 1970 -11.66 -10.64 -3.09 N/A 4.01
Dec 1971 29.59 26.33 18.36 N/A 14.31
Dec 1972 36.35 14.40 22.48 N/A 18.98
Dec 1973 -14.92 -8.77 -15.24 N/A -14.66
Dec 1974 -23.16 -24.07 -25.47 N/A -26.47
Dec 1975 35.39 41.45 32.80 N/A 37.20
Dec 1976 2.54 -7.80 13.40 N/A 23.84
Dec 1977 18.06 21.90 0.68 N/A -7.18
Dec 1978 32.62 21.88 16.52 N/A 6.56
Dec 1979 4.75 12.31 10.95 N/A 18.44
Dec 1980 22.58 11.90 25.67 N/A 32.42
Dec 1981 -2.28 -12.46 -4.79 N/A -4.91
Dec 1982 -1.86 3.97 9.71 N/A 21.41
Dec 1983 23.69 20.96 21.93 N/A 22.51
Dec 1984 7.38 0.62 4.72 N/A 6.27
Dec 1985 56.16 78.93 40.56 27.74 32.16
Dec 1986 69.44 43.85 41.89 12.81 18.47
Dec 1987 24.63 3.66 16.16 13.53 5.23
Dec 1988 28.27 15.81 23.29 58.25 16.81
Dec 1989 10.54 28.5 16.61 54.67 31.49
Dec 1990 -23.45 -3.5 -17.02 -29.87 -3.17
Dec 1991 12.13 13.11 18.28 17.63 30.55
Dec 1992 -12.17 -4.71 -5.23 0.33 7.67
Dec 1993 32.56 29.28 22.50 68.18 9.99
Dec 1994 7.78 2.28 5.08 -0.76 1.31
Source for MSCI EAFE, IFC Composite, and S&P500: Ibbotson Associates
Source for MSCI Europe 14 and MSCI World: Lipper Analytical Services
<PAGE>
Pioneer Emerging Markets Fund
<TABLE>
<CAPTION>
Date Initial Investment Offering Price Sales Charge Shares Purchased Net Asset Value Initial Net Asset
Included Per Share Value
<S> <C> <C> <C> <C> <C> <C>
6/23/94 $10,000 $13.26 5.75% 754.148 $12.50 $9,425
</TABLE>
Dividends and Capital Gains Reinvested
<TABLE>
<CAPTION>
Value of Shares
Date From From Cap. Gains From Dividends Total Value
Investment Reinvested Reinvested
<S> <C> <C> <C> <C>
6/30/94 $9,427 $0 $0 $9,427
7/31/94 $9,849 $0 $0 $9,849
8/31/94 $10,483 $0 $0 $10,483
9/30/94 $10,204 $0 $0 $10,204
10/31/94 $9,940 $0 $0 $9,940
11/30/94 $9,231 $0 $0 $9,231
</TABLE>
<PAGE>
OTHER PIONEER INFORMATION
The Pioneer family of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest, most respected and
successful money managers in the United States.
As of December 31, 1994, PMC employed a professional investment staff of
46, with a combined average of 14 years' experience in the financial services
industry.
At December 31, 1994, there were 591,192 non-retirement shareholder
accounts and 337,577 retirement shareholder accounts in Pioneer's funds. Total
assets for all Pioneer Funds were $10,038,000,000 representing a total of
928,769 shareholder accounts.
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