[Pioneer logo]
Pioneer India Fund
Prospectus
Class A and Class B Shares
February 28, 1995
(revised October 2, 1995)
Pioneer India Fund (the "Fund") seeks long-term growth of capital by
investing in a portfolio consisting primarily of equity securities of
companies in India. 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 long-
term capital growth. There is, of course, no assurance that the Fund will
achieve its investment objective.
Pioneering Management Corporation (the "Manager") is the Fund's investment
manager. ITI Pioneer AMC Ltd. (the "Indian Adviser") is the Fund's investment
adviser in India and, subject to the Manager's supervision, is responsible
for managing the Fund's investments in the Indian securities markets. The
Indian Adviser is a joint venture between the Manager and Investment Trust of
India Limited ("ITI"), a corporation organized under the laws of India. ITI
was established in 1946 and is one of India's leading providers of financial
services. The Indian Adviser was the first institution to establish locally-
registered private sector mutual funds in India.
Because of recent economic and political developments in India, both the
Manager and the Indian Adviser believe that India's economy has significant
potential to experience rapid growth in the next several years. For these
reasons, the Manager and the Indian Adviser also believe that the equity
securities of many companies in India offer significant potential for
long-term capital growth.
Investments in India's securities markets entail significant risks in
addition to the risks 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--Risk Factors" for a discussion of
these risks. Because the Fund invests primarily in securities of companies in
India, the Fund is not intended to be a complete investment program.
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 are not federally insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other
government agency. Shares of the Fund involve investment risks, including the
possible loss of some or all of the principal investment.
This Prospectus (Part A of the Registration Statement) provides
information about the Fund that you should know before investing in the Fund.
Please read and retain it for your future reference. More information about
the Fund is included in the Statement of Additional Information also dated
February 28, 1995 (revised October 2, 1995) (Part B of the Registration
Statement), which is incorporated in 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 8
V. FUND SHARE ALTERNATIVES 9
VI. SHARE PRICE 10
VII. HOW TO BUY FUND SHARES 10
Class A Shares 10
Class B Shares 11
VIII. HOW TO SELL FUND SHARES 13
IX. HOW TO EXCHANGE FUND SHARES 14
X. DISTRIBUTION PLANS 14
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION 15
XII. SHAREHOLDER SERVICES 16
Account and Confirmation Statements 16
Additional Investments 16
Automatic Investment Plans 16
Financial Reports and Tax Information 16
Distribution Options 16
Directed Dividends 17
Direct Deposit 17
Voluntary Tax Withholding 17
Telephone Transactions and Related Liabilities 17
FactFone(SM) 17
Retirement Plans 17
Telecommunications Device for the Deaf (TDD) 17
Systematic Withdrawal Plans 17
Reinstatement Privilege (Class A Shares Only) 18
XIII. THE FUND 18
XIV. INVESTMENT RESULTS 18
APPENDIX A: India 19
APPENDIX B: Certain Investment Practices 22
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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 on
actual expenses for the period ended October 31, 1994, expressed as a
percentage of the Fund's average net assets.
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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 average 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% 2.21%
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Total Operating Expenses
(after Expense Limitation):(3) 2.25% 3.21%
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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) 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 by the Manager 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 6.57% 7.50%
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.
(4) These are the maximum annual fees and assume that the Distribution Plans
are in effect for an entire year; actual expenses of the Class A shares
for the fiscal period ending October 31, 1995 are expected to be lower.
Example:
You would pay the following dollar amounts on a $1,000 investment,
assuming a 5% annual return at the end of each time period:
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 $72 $129 $188 $330*
--Assuming no
redemption $32 $ 99 $168 $330*
*Class B shares convert to Class A shares eight years after purchase; therefore,
Class A share 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 percentages set forth in the table above under the caption "Other
Expenses" are based on the amount of expenses incurred by the Fund during the
period from June 23, 1994 (commencement of operations) to October 31, 1994.
The example is designed for information purposes only, and should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.
For further information regarding management fees, 12b-1 fees and other
expenses of the Fund, including information regarding the basis upon which
fees and expenses are reduced or reallocated, see "Management of the Fund,"
"Distribution Plan" 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 indirectly paying more than the economic
equivalent of the maximum sales charge permitted under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. ("NASD").
The maximum 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 of
the Fund 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 audited financial
statements as of October 31, 1994 appears in the Fund's Annual Report which
is incorporated by reference in the Fund's Statement of Additional
Information. The information listed below should be read in conjunction with
the financial statements contained in the 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 India Fund
Financial Highlights for Each Class A Share Outstanding Throughout Each
Period
For the period from June 23, 1994
(Commencement of Operations) to October 31, 1994(+)
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Net asset value, beginning of period $ 11.50
Income from investment operations:
Net investment income $ 0.04
Net realized and unrealized loss on investments and
other foreign currency related transactions*** (0.26)
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Total loss from investment operations $ (0.22)
Distribution to shareholders --
Net decrease in net asset value $ (0.22)
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Net asset value, end of period $ 11.28
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Total return* (1.91%)
Ratio of net operating expenses to average net assets 2.25%**
Ratio of net investment income to average net assets 0.92%**
Portfolio turnover rate 108.73%**
Net assets, end of period (in thousands) $11,445
Ratios assuming no reduction of fees or expenses by PMC:
Net operating expenses 6.57%**
Net investment loss (3.40%)**
Financial Highlights for Each Class B Share Outstanding Throughout Each Period
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Net asset value, beginning of period $ 11.50
Income from investment operations:
Net investment income --
Net realized and unrealized loss on investments and
other foreign currency related transactions*** (0.26)
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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 $ 11.24
========
Total return* (2.26%)
Ratio of net operating expenses to average net assets 3.21%**
Ratio of net investment income to average net assets (0.01%)**
Portfolio turnover rate 108.73%**
Net assets, end of period (in thousands) $6,084
Ratios assuming no reduction of fees or expenses by PMC:
Net operating expenses 7.50%**
Net investment loss (4.28%)**
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(+)The per share data presented above is based upon average shares and
average net assets outstanding for the period presented.
*Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of 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, under normal circumstances, at least 65%
of its total assets in equity securities of Indian Companies (including
Depositary Receipts as defined below). For purposes of its investment
policies, the Fund considers a company to be an "Indian Company" if it (i) is
organized under the laws of India, (ii) derives at least 50% of its revenues
from goods produced or sold, investments made, or services performed, in
India, or has at least 50% of its assets in India, or (iii) has securities
that are traded principally on any Indian stock exchange (including India's
Over the Counter Exchange).
The Fund may invest up to 35% of its total assets in (i) equity securities
of issuers (other than Indian Companies) which, in the judgment of the
Manager or the Indian Adviser, may benefit from the Indian economy, (ii) debt
securities issued by Indian Companies or by the Government of India or its
agencies or instrumentalities, and (iii) short-term investments (as described
below).
Equity securities in which the Fund may invest consist of common and
preferred stock (including convertible preferred stock); American, Global or
other types of depositary receipts (collectively, "Depositary Receipts");
convertible bonds, notes and debentures; shares of closed-end investment
companies; equity interests in trusts, partnerships, joint ventures or
similar enterprises; and common stock purchase warrants and rights.
Substantially all of the equity securities purchased by the Fund are expected
to be traded on an Indian or other foreign stock exchange or over-the-counter
market. However, as described in "Risk Factors," the Fund may be subject to
significant delays or limitations on the timing and amount of its direct
investments in India.
Debt securities in which the Fund may invest consist of bonds, debentures,
notes and similar debt instruments which may be comparable in quality to debt
securities rated BB or lower by Standard & Poor's Ratings Group ("Standard &
Poors") or Ba or lower by Moody's Investors Service, Inc. ("Moody's"). The
Fund may invest up to 25% of its total assets in debt securities. For a
description of the risks of investing in lower quality debt securities, see
"Risk Factors" in this Prospectus. The Manager expects that most of the
Fund's investments in debt securities will not be rated by Standard & Poor's,
Moody's, or any other U.S. rating organization.
The Fund may employ forward foreign currency exchange contracts in an
attempt to hedge foreign currency risks associated with the Fund's
investments. However, there currently is no market, or only a limited market
for these contracts with respect to the Indian rupee (hereinafter the
"rupee") and the currencies of certain other foreign countries in which the
Fund may invest. Consequently, there can be no assurance that these contracts
will be available for hedging currency risks at the times when the Fund
wishes to use them. See Appendix B and the Statement of Additional
Information for a description of forward foreign currency exchange contracts
and associated risks.
The Fund also may invest in restricted and illiquid securities and
repurchase agreements, may purchase securities on a when-issued, delayed
delivery or forward commitment basis and may borrow money for temporary
emergency purposes. See Appendix B and the Statement of Additional
Information for a description of these investment and management techniques,
associated risks and limitations on the Fund's use of these techniques.
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 India's economy or securities market to such an extent that
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the Manager or the Indian Adviser believes there to be extraordinary risks in
being substantially invested in the equity securities of Indian Companies.
In selecting securities for investment by the Fund, the Manager and/or the
Indian Adviser perform a fundamental analysis of each company being
considered for inclusion in the Fund's portfolio. In performing this
fundamental analysis, the Manager and the Indian Adviser consider a variety
of factors, including financial condition, growth prospects, asset valuation,
management expertise, existing or potential dividend payments, the liquidity
of the security, the market valuation of the company and the effect the
investment would have on the diversification of the Fund's portfolio. 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, and may be affected by limitations imposed by U.S. or Indian
law.
Investment in India
Because of recent economic and political developments and changes in
India, the Manager and the Indian Adviser believe that India's economy has
significant potential to experience rapid growth in the next several years.
For these reasons, the Manager and the Indian Adviser also believe that the
equity securities of many Indian Companies offer significant potential for
long-term capital growth. For a summary description of India and its
securities markets, see Appendix A.
Since mid-1991, the Government of India, led by India's Prime Minister and
Finance Minister, has taken steps to liberalize India's trade policies,
reform India's financial sector, and place greater reliance on market
mechanisms to direct economic activity. A significant component of the
Government's reform program has been the creation and empowerment of the
Securities and Exchange Board of India (the "SEBI") as the governmental
regulator of India's securities market. Another important component of the
reform program has been the promotion of foreign investment in key areas of
India's economy and the further development of India's private sector. As a
result of this policy and other factors, foreign investment in India's
economy and securities market has increased significantly during the last two
years. See "Risk Factors," "Restrictions on Investment in India" and Appendix
A.
In 1992, the Government of India announced, under a new policy intended to
encourage foreign investment, that Foreign Institutional Investors ("FIIs")
who satisfied certain conditions would be permitted to make direct
investments in India's securities market. Previously, non-Indian nationals
generally were not permitted to make portfolio investments in India's
securities market. Under the new policy, FIIs are permitted to invest
directly or on behalf of their institutional clients in any equity or debt
instrument which is listed on any Indian stock exchange. FIIs are required to
register with the SEBI. The Manager is registered with the SEBI as an FII to
invest in India on behalf of the Fund and other approved clients. At present,
FII authorizations are granted for five years and may be renewed with the
approval of the SEBI. The Manager intends to renew its registration as an FII
on March 18, 1998 (the date on which the Manager's current FII registration
expires). See "Risk Factors" and "Restrictions on Investment in India."
Risk Factors
Investing in the Fund entails a substantial degree of risk. Because of the
special risks associated with investing in India, 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 India, which are in addition to the
usual risks of investing in developed countries around the world.
Investment in India and Certain Other Foreign Countries. The concentration
of the Fund's investments in Indian Companies will cause the value of the
Fund's assets to be particularly susceptible to the effects of political and
economic developments in India. India has a longstanding border dispute with
Pakistan. In addition, religious and ethnic unrest persists in India and has
caused disruptions in the recent past. It remains possible that disruption
associated with these tensions could destabilize India's economy and
adversely affect the net asset value of the Fund. Moreover, it is possible
that changes in the current leadership of the Government of India could
result in a halt in, or even reverse the progress of, economic reforms that
are currently being undertaken in India. See Appendix A.
The Fund expects that, under normal circumstances, most of its investments
in Indian Companies will be in securities that are listed or traded on an
Indian stock exchange. The securities markets in India and in certain other
foreign countries in which the Fund may invest are smaller and less liquid,
and may be significantly more volatile, than the securities market in the
United States. The Bombay Stock Exchange (the "BSE") was established in 1875
and is the principal stock exchange in India, accounting for over two-thirds
of the secondary trading market in India. Although the BSE has greater
liquidity and a greater number of listed issues than many emerging markets,
the relatively small trading volume and market capitalization of most
securities listed on the BSE may cause the Fund's investments to be less
liquid and subject to greater volatility than comparable U.S. investments.
The limited liquidity of the BSE and other securities markets in which the
Fund may invest also may affect the Fund's ability to accurately value its
portfolio securities or to acquire or dispose of securities at the prices and
times that it desires or in order to meet redemption requests.
In managing the Fund's portfolio, the Manager and the Indian Adviser will
attempt to prevent the Fund from being exposed to undue illiquidity risk that
may be associated with investing in the Indian securities market. For
example, if deemed appropriate by the Manager or the Indian Adviser, the Fund
may concentrate its equity investments in Indian Companies in larger
capitalization issuers and/or issuers whose
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equity securities (including Depositary Receipts) are traded in securities
markets outside of India. At times, the market for such securities may be
more liquid than the market for equity securities of smaller capitalization
Indian Companies.
Disclosure and regulatory standards in India's securities markets and in
other foreign markets in which the Fund may invest are less stringent than
U.S. standards in certain respects. Although issuers in India are subject to
accounting, auditing and financial standards and requirements that are based
on U.K. standards and requirements, such standards and requirements, as well
as those applicable to other foreign issuers, may differ significantly from
those applicable to issuers located in developed countries. In addition,
there may be substantially less publicly available information about issuers
in India and many of the other foreign countries in which the Fund may invest
than there is about U.S. issuers.
There is generally less governmental supervision and regulation of
securities exchanges and securities professionals in India and other foreign
countries in which the Fund may invest than exists in the United States.
However, the Government of India, acting through the SEBI, has promulgated
several rules and regulations to reform India's securities market and
regulate the activities of securities professionals. For example, in late
1992, the SEBI promulgated regulations prohibiting insider trading in the
Indian securities markets. However, there can be no assurance that the SEBI
will be able to enforce such rules and regulations as effectively as similar
rules and regulations are enforced in U.S. securities markets. See Appendix A
for a further description of recent reforms in India's securities market.
The value of the Fund's investments in India could be adversely affected
by the circulation of improperly registered shares or the occurrence of other
fraudulent activities in India's securities markets. In 1992, irregularities
and frauds in the Indian securities transactions of several banks were
exposed. Certain bank officials and stockbrokers were found to have violated
established rules and guidelines by using bank funds for speculative
securities transactions. A special committee formed by the Government of
India's Parliament blamed the scandal on the Reserve Bank of India and
India's Ministry of Finance for failing to prevent and detect the fraudulent
activity and on the behavior of various market participants and four foreign
banks in particular. Subsequent to the discovery of the bank/securities
scandal, major Indian securities market indices fell more than 40% from their
highest levels. However, as a result of the scandal, India's Ministry of
Finance strengthened the SEBI's regulatory authority and made other
significant reforms in India's securities markets. See Appendix A.
Indian stock exchanges have in the past been subject to repeated closure
and there can be no assurance that this will not recur. Settlement procedures
in India and other foreign countries in which the Fund may invest are less
developed and reliable than those in the United States and the Fund may
experience settlement delays or other material differences. In addition,
significant delays are common in registering transfers of securities in
India, and the Fund may be unable to sell portfolio securities until the
registration process is completed. The recent inflow of funds into the Indian
securities market has placed added strains on the settlement system, and
several custodial institutions in India have announced that they do not
possess the physical capacity to undertake new business. Accordingly, the
Fund may be subject to significant delays or limitations on the timing of its
direct investments in India and significant limitations on the volume of
trading during any particular period, imposed by its subcustodian in India or
otherwise as a result of such physical or other operational constraints. The
foregoing factors could impede the ability of the Fund to effect portfolio
transactions on a timely basis, have an adverse effect on the net asset value
of the Fund's shares and make it more difficult for the Fund to obtain cash
necessary to satisfy applicable federal income tax requirements for avoiding
federal income and/or excise taxation. See "Dividends, Distributions and U.S.
Taxation."
The value of the Fund's investments in the securities of Indian Companies
and other foreign issuers may be adversely affected by fluctuations in the
relative rates of exchange between the currencies of different countries. 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 quoted or denominated in a foreign currency will increase
or decrease in response to changes in the value of foreign currencies in
relation to the U.S. dollar. In addition, the value of the Fund's investments
in Indian Companies and other foreign issuers may be adversely affected by
exchange control regulations. Under the FII guidelines as currently in effect
in India, the Manager has received approvals required to establish bank and
custodial accounts and to convert rupees into U.S. dollars on behalf of the
Fund. Although the Government of India has announced its intention ultimately
to make the rupee fully convertible, there can be no assurance that it will
not impose restrictions in the future that may adversely affect the ability
of the Fund to convert its income and capital from certain investments from
rupees to U.S. dollars. See Appendix A.
Brokerage commissions and other securities transaction costs, including
custody costs, in India and in certain other foreign countries in which the
Fund may invest are generally higher than in the United States. In addition,
brokers in India and certain other countries in which the Fund may invest
generally are not as well capitalized as brokers in the United States, and
are therefore more susceptible to financial failure in times of market,
political or economic stress.
Additionally, in India and other foreign countries in which the Fund may
invest, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of securities, property or other assets of the
Fund, political or social instability, or diplomatic developments which could
adversely affect U.S. investments in these countries.
Investment in Lower Quality Debt Securities. The Fund's investments in
debt securities may consist of debt securities
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issued by Indian Companies or the Government of India or its agencies or
instrumentalities. These debt securities may be comparable in quality to debt
securities rated BB or lower by Standard & Poor's or Ba or lower by Moody's.
Debt securities of such quality are commonly referred to in the United States
as "junk bonds" and 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. While generally providing
greater income than investments in higher quality securities, lower quality
debt securities involve greater risk of loss of principal and income,
including the possibility of default or bankruptcy of the issuers of such
securities, and have greater price volatility, especially during periods of
economic uncertainty or change. Lower quality debt securities also tend to be
affected by economic changes and short-term corporate developments to a
greater extent than higher quality securities, which react primarily to
fluctuations in the general level of interest rates. Lower quality debt
securities will also be affected by the market's perception of their credit
quality, especially during times of adverse publicity, and the outlook for
economic growth. The market for lower quality debt securities is generally
less liquid than the market for higher quality debt securities. Therefore,
the Manager's and the Indian Adviser's judgment may at times play a greater
role in valuing these securities than in the case of higher quality debt
securities.
The Fund's investments in debt securities issued by the Government of
India or its agencies or instrumentalities involve special risks in addition
to those described above. The willingness or ability of an Indian
governmental issuer to repay principal and pay interest when due may be
affected adversely by the size of the issuer's debt service burden relative
to India's economy as a whole, changes in India's economy, political
constraints to which the issuer is subject and various other factors. In
addition, there are no legal proceedings available in India by which the Fund
could seek recourse for the default of a debt security issued by the
Government of India or one of its agencies or instrumentalities.
The Fund's investments in debt securities may also include zero coupon and
payment-in-kind debt securities, which tend to be affected to a greater
extent by interest rate changes, and therefore tend to be more volatile, than
debt securities which pay interest periodically and in cash.
Restrictions on Investment in India
Under India's guidelines applicable to FIIs, the Fund's direct investments
in India may include only securities that are listed or traded on an Indian
stock exchange, and the Fund may not hold more than 5% of the total issued
capital of any issuer of such securities. Further, at least 70% of the total
investments made by the Fund pursuant to the Manager's FII authorization must
be in equity securities. In addition, all non-resident portfolio investments,
including the Fund's investments, may not exceed 24% of the issued share
capital of any Indian issuer. Accordingly, the Fund's ability to invest in
certain Indian Companies may be restricted. Although the Government of India
recently has implemented policies to encourage foreign investment, there can
be no assurance that additional restrictions will not be imposed in the
future.
Indian Taxes
It is expected that most of the Fund's investments in Indian Companies
will be subject to the following taxes imposed by the Government of India.
India imposes a withholding tax at a rate of 20% on dividend and interest
income earned on Indian investments. India also imposes a tax on capital
gains realized on Indian investments at a rate of 10% on long-term capital
gains and 30% on short-term capital gains. Gains from all listed securities
(including debt) held for periods in excess of 12 months are treated as
long-term gains. Under the Income Tax Treaty in effect between India and the
United States, the applicable Indian tax rate on interest income is generally
reduced to 15%, and the applicable Indian tax rate on dividend income may be
reduced to 15% in the event that the Fund owns at least 10% of the voting
stock of the Indian resident company that pays dividends to the Fund. This
treaty does not reduce or eliminate the Indian taxation of capital gains the
Fund may realize with respect to its Indian investments. If the Fund elects
to "pass-through" to shareholders amounts of qualified foreign taxes it pays,
Fund shareholders will be required to include such amounts in income (in
addition to the dividends they actually receive) and certain Fund
shareholders may be able to claim a foreign tax credit or deduction on their
U.S. federal income tax returns for their proportionate shares of Indian
taxes paid by the Fund, subject to applicable limitations under the U.S.
Internal Revenue Code of 1986, as amended (the "Code"). "See Dividends,
Distributions and U.S. Taxation."
The Manager may decide to explore opportunities for the Fund to invest in
India through a structure that would reduce withholding and other taxes
imposed by India.
Other Eligible Investments
Equity Securities of Companies That May Benefit From India's Economy. As
noted above, the Fund may invest in the equity securities of companies, other
than Indian Companies (defined above), that may benefit from India's economy.
The Fund's investments in the equity securities of such issuers may involve
some or all of the risks associated with investments in Indian issuers. See
"Risk Factors."
Short-Term Investments. As noted above, 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
or better by Moody's, or A-1, AA or better by 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
6
<PAGE>
guaranteed by the U.S. Government or the government of a foreign country or
their respective agencies or instrumentalities; and repurchase agreements.
In addition, the Fund may invest up to 100% of its total assets in such
short-term investments for temporary defensive purposes. The Fund will assume
a temporary defensive posture only when political and economic factors cause
the Manager or the Indian Adviser to believe that there are extraordinary
risks in being substantially invested in the equity securities of Indian
Companies.
Debt Securities. Although the Fund invests primarily in equity securities
of Indian Companies, the Fund may invest up to 25% of its total assets in
debt securities (including short-term debt securities) issued by Indian
Companies or by the Government of India or its agencies or instrumentalities.
The Fund may invest in debt securities of any quality or maturity. See "Risk
Factors." The net asset value of the Fund attributable to its investments in
debt securities can generally be expected to change as general levels of
interest rates fluctuate. The value of debt securities generally varies
inversely with changes in interest rates, and prices of debt securities with
longer maturities are more sensitive to interest rate changes than those with
shorter maturities.
Other Investment Companies. The Fund may invest up to 10% of its total
assets, calculated at the time of purchase, in the securities of closed-end
investment companies. The Fund may not invest more than 5% of its total
assets in the securities of any one investment company or acquire more than
3% of the voting securities of any other investment company. The Fund will
indirectly bear its proportionate share of any management or other fees paid
by closed-end investment companies in which it invests, in addition to its
own fees.
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 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 securities for which they
may be exchanged. For purposes of the Fund's investment policies, investments
in ADRs, GDRs and similar instruments will be deemed to be investments in the
equity securities of the foreign issuers into which they may be converted.
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.
Investments in Initial Public Offerings. The Fund may invest in initial
public offerings of Indian issuers. At the initial stage of such an offering,
the issuer may reserve up to 24% of the offering for nonresident Indian
investors and certain foreign institutional investors such as the Fund. The
issuer also may reserve up to 20% of the offering for locally offered mutual
funds. The price available to the Fund in such an offering may be higher or
lower than the price available to other institutions. When the Fund commits
to purchase from the reserved portion of such an offering, it may be required
to place the purchase price in a bank deposit account (that does not pay
interest) before receiving securities. In addition, until the purchase is
settled, the Fund may not know if it will receive the amount of securities
for which it has subscribed.
Portfolio Turnover
The Fund will attempt to be substantially fully invested at all times,
except as described above. To the extent consistent with investment
considerations, the Manager and the Indian Adviser intend to minimize the
Fund's realization of short-term capital gains with respect to securities
subject to Indian short-term capital gains taxes. See "Indian Taxes."
However, changes in the Fund's portfolio may be made promptly when determined
by the Manager or the Indian Adviser 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 100% 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. The Fund's
investment policies and nonfundamental investment restrictions may be changed
by the Board of Trustees without shareholder approval. See "Investment
Policies, Restrictions and Risk Factors" in the Statement of Additional
Information.
7
<PAGE>
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 Pioneering Management Corporation as
Manager and by ITI Pioneer AMC Ltd. as Indian 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 Manager
The Fund is managed under a contract with the Manager. The Manager is
responsible for the overall management of the Fund's business affairs and the
day-to-day management of Fund assets that are not under the Indian Adviser's
management, subject only to the authority of the Board of Trustees. The
Manager is a wholly-owned subsidiary of The Pioneer Group, Inc. ("PGI"), a
publicly-traded Delaware corporation. Pioneer Funds Distributor, Inc.
("PFD"), an indirect wholly-owned subsidiary of PGI, is the principal
underwriter of the Fund.
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 PMC'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 Funds. Mr.
Tripple joined PMC 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. Mr. Tripple has been responsible for the day-to-day management of
the Fund since its inception. Mr. Mark Madden, Vice President of the Manager,
has shared the responsibility for the day-to-day management of the Fund with
Mr. Tripple since April 3, 1995. Mr. Madden joined the Manager in 1990 after
working for other investment and industrial firms.
The Manager manages and serves as the investment adviser for several 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 manages the
Fund's business affairs, supervises the Indian Adviser's performance of its
portfolio management responsibilities and allocates the management of Fund
assets between itself and the Indian Adviser. The Manager's supervisory
responsibilities include consulting with the Indian Adviser on a regular
basis regarding the Indian Adviser's decisions to purchase, sell or hold
particular securities. The Manager is authorized in its discretion to use
Fund assets that are under its management to buy and sell securities for the
Fund's account. The Manager pays all advisory fees to the Indian Adviser and
all ordinary operating expenses, including executive salaries and the rental
of office space, relating to its services for the Fund, with the exception of
the following which are paid by the Fund: (a) 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; (b) the charges and expenses of auditors; (c) the charges and
expenses of any custodian, transfer agent, plan agent, dividend disbursing
agent and registrar appointed by the Fund with respect to shares of the Fund;
(d) issue and transfer taxes chargeable to the Fund in connection with
securities transactions to which the Fund is a party; (e) insurance premiums,
interest charges, dues and fees for membership in trade associations, and all
taxes and corporate fees payable by the Fund to federal, state or other
governmental agencies; (f) fees and expenses involved in registering and
maintaining registrations of the Fund and/or its shares with the SEC,
individual states or blue sky securities agencies, territories and foreign
countries, including the preparation of prospectuses and statements of
additional information for filing with the SEC; (g) all expenses of
shareholders' and Trustees' meetings and of preparing, printing and
distributing prospectuses, notices, proxy statements and all reports to
shareholders and to governmental agencies; (h) charges and expenses of legal
counsel to the Fund and to Trustees; (i) distribution fees paid by the Fund
in accordance with Rule 12b-1 promulgated by the SEC pursuant to the 1940
Act; (j) compensation of those Trustees of the Fund who are not affiliated
with or interested persons of the Manager, the Fund (other than as Trustees),
PGI or PFD; (k) the cost of preparing and printing share certificates; and
(l) interest on borrowed money, if any. The Fund also pays all brokers' and
underwriting commissions chargeable to the Fund in connection with its
portfolio transactions.
Orders for the Fund's portfolio securities transactions in the Indian
securities markets are placed by the Indian Adviser. Orders for the Fund's
portfolio securities transactions in all other markets are placed by the
Manager. Both the Manager and the Indian Adviser strive 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 by the Indian Adviser or the Manager 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
8
<PAGE>
investment adviser or manager. See the Statement of Additional Information
for a further description of the Manager's and Indian Adviser'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. While this fee, which is
computed daily and paid monthly, is higher than most management fees, the
costs of managing the Fund are significantly greater than the costs of
managing a domestic fund.
The Manager has 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 necessary to limit Class A expenses to 2.25% of the
average daily net assets attributable to 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.
During the period from June 23, 1994 through October 31, 1994, the Fund
incurred expenses of $222,831, including management fees paid or payable to
the Manager of $40,723. Pursuant to its expense limitation agreement, the
Manager did not impose management fees and limited expenses, resulting in a
reduction of $139,908.
John F. Cogan, Jr., Chairman and President of the Fund, Chairman of PFD
and the Manager and President and a Director of PGI, beneficially owned 15%
of the outstanding capital stock of PGI as of the date of this Prospectus.
The Indian Adviser
ITI Pioneer AMC Ltd., the Indian investment adviser to the Fund, is
responsible for investing the Fund's assets in the Indian securities markets
and providing certain related services to the Manager, subject to the
supervision of the Manager, which, in turn, is subject to the supervision of
the Fund's Board of Trustees. The Indian Adviser is a joint venture of the
Manager, a Delaware corporation, and Investment Trust of India Limited
("ITI"), a corporation organized under the laws of India. ITI was established
in 1946 and is one of India's leading providers of financial services. The
Indian Adviser was the first institution in India to establish locally-
registered private sector mutual funds in India. The Manager and ITI
currently own approximately 45% and 54%, respectively, of the Indian
Adviser's total equity capital.
All investment decisions made by the Indian Adviser are made by an
investment committee comprised of certain of the Indian Adviser's directors
and officers, including Ravi Mehrotra, Chief Investment Officer, and R.
Sukumar, Fund Manager. Prior to joining ITI Pioneer in 1993, Mr. Mehrotra
worked in the financial services and banking industries in India. Mr. Sukumar
joined ITI Pioneer in 1994 after working in the banking industry and in
corporate finance.
As compensation for its services under its Subadvisory Agreement with the
Manager, the Indian Adviser receives a subadvisory fee at an annual rate from
0.10% to 0.60% of the Fund's average gross assets invested in India's
securities markets, including assets invested in Depositary Receipts for
securities traded in India's securities markets. The fee, which is paid by
the Manager, accrues monthly and is paid quarterly.
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 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 or their representatives may receive different
compensation depending on which Class of shares they sell. Shares may be
exchanged only for shares of the same Class of another Pioneer 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 United States to persons who are not U.S.
9
<PAGE>
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 IRA accounts but may not be
available to other types of retirement plan accounts. Call PSC for more
information.
You are strongly urged to consult with your financial representative prior
to requesting a telephone purchase. To purchase shares by telephone, you must
establish your bank account of record by completing the appropriate section
of your Account Application or an Account Options Form. PSC will
electronically debit the amount of each purchase from this pre-designated
bank account. Telephone purchases may not be made for 30 days after the
establishment of your bank of record or any change to your bank information.
Telephone purchases will be priced at the net asset value plus any
applicable sales charge next determined after PSC's acceptance of a telephone
purchase instruction and receipt of good funds (usually three days after the
purchase instruction). You may always elect to deliver purchases to PSC by
mail. See "Telephone Transactions and Related Liabilities" for additional
information.
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>
Dealer
Sales Charge as a Allowance
Percentage of as a
-----------------
Net Percentage of
Offering Amount Offering
Amount of Purchase Price Invested Price
- --------------------- ------ ------- -------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than
$100,000 4.50 4.71 4.00
$100,000 but less
than $250,000 3.50 3.63 3.00
$250,000 but less
than $500,000 2.50 2.56 2.00
$500,000 but less
than $1,000,000 2.00 2.04 1.75
$1,000,000 or more -0- -0- See below
</TABLE>
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
10
<PAGE>
$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 "Waiver or Reduction of Contingent Deferred Sales Charge." 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. In addition to the exceptions listed in
each Fund's prospectus, Class A shares of the Fund may be sold at net asset
value per share without a sales charge to Optional Retirement Program
participants if (i) the employer has authorized a limited number of
investment company providers for the Program, (ii) all authorized investment
company providers offer their shares to Program participants at net asset
value, (iii) the employer has agreed in writing to actively promote the
authorized investment company providers to Program participants and (iv) the
Program provides for a matching contribution for each participant
contribution. Information about such arrangements is available from PFD.
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 financial planners 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. Shares may also be
sold at net asset value in connection with certain reorganization,
liquidation, or acquisition transactions involving other investment companies
or personal holding companies.
Reduced sales charges for Class A shares are available through an
agreement to purchase a specified quantity of Fund shares over a designated
13-month period by completing the "Letter of Intention" section of the
Account Application. Information about the Letter of Intention procedure,
including its terms, is contained in the Statement of Additional Information.
Investors who are clients of a broker- dealer with a current sales agreement
with PFD may purchase Class A shares of the Fund at net asset value, without
a sales charge, to the extent that the purchase price is paid out of proceeds
from one or more redemptions by the investor of shares of certain other
mutual funds. In order for a purchase to qualify for this privilege, the
investor must document to the broker-dealer that the redemption occurred
within the 60 days immediately preceding the purchase of 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 funds.
Further details may be obtained from PFD.
Class B Shares
You may buy Class B shares at net asset value without the imposition of an
initial sales charge. However, Class B shares redeemed within six years of
purchase will be subject to a CDSC at the rates shown in the table below. The
charge will be assessed on the amount equal to the lesser of the current
market value or the original purchase cost of the shares being redeemed. No
CDSC will be imposed on
11
<PAGE>
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 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 trust
accounts, waiver applies upon the death of all beneficial owners) or a total
and permanent disability (as defined in Section 72 of the Code) of all
registered owners occurring after the purchase of the shares being redeemed
or (b) the redemption is made in connection with limited automatic
redemptions as set forth in "Systematic Withdrawal Plans" (limited in any
year to 10% of the value of the account in the Fund at the time the
withdrawal plan is established).
The CDSC on Class B shares 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 Individual Retirement
Account ("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 (limited in any year to 10% of the value of the participant's
account at the time the distribution amount is established; a required
minimum distribution due to the participant's attainment of age 70-1/2 may
exceed the 10% limit only if the distribution amount is based on plan assets
held by Pioneer); (c) the distribution is from a 401(a) or 401(k) retirement
plan and is a return of excess employee deferrals or employee contributions
or a qualifying hardship distribution as defined by the Code or results from
a termination of employment (limited with respect to a termination to 10% per
year of the value of the plan's assets in the Fund as of the later of the
prior December 31 or the date the account was established unless the plan's
assets are being rolled over to or reinvested in the same class of shares of
a Pioneer mutual fund subject to the CDSC of the shares originally held); (d)
the distribution is from an IRA, 403(b) or employer- sponsored retirement
plan and is to be rolled over to or reinvested in the same class of shares in
a Pioneer mutual fund and which will be subject to the applicable CDSC upon
redemption; (e) the distribution is in the form of a loan to a participant in
a plan which permits loans (each repayment of the loan will constitute a new
sale which will be subject to the applicable CDSC upon redemption); or (f)
the distribution is from a qualified defined contribution plan and represents
a participant's directed transfer (provided that this privilege has been
pre-authorized through a prior agreement with PFD regarding participant
directed transfers).
The CDSC on Class 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.
<PAGE>
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 sell (redeem) Fund shares on any day the Exchange is
open by selling either some or all of your shares to the Fund.
You may sell your shares either through your broker-dealer or directly to
the Fund. Please note the following:
(bullet) If you are selling shares from a retirement account, you must make your
request in writing (except for exchanges to other Pioneer 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 apply:
(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. Proper account identification will
be required for each telephone redemption. The telephone redemption option is
not available to retirement plan accounts. A maximum of $50,000 may be
redeemed by telephone or fax and the proceeds may be received by check or
bank wire or electronic funds transfer. To receive the proceeds by check: the
check must be made payable exactly as the account is registered and the check
must be sent to the address of record which must not have changed in the last
30 days. To receive the proceeds by bank wire or electronic funds transfer:
the proceeds must be sent to your bank address of record which must have been
properly pre-designated either on your Account Application or on an Account
Options Form and which must not have changed in the last 30 days. To redeem
by fax send your redemption request to 1-800-225-4240. You may always elect
to deliver redemption instructions to PSC by mail. See "Telephone
Transactions and Related Liabilities" below. Telephone 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.
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<PAGE>
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 fund will continue to be subject to
the CDSC until the original 12-month period expires. However, no CDSC is
payable with respect to purchases of Class A shares by 401(a) or 401(k)
retirement plans with 1,000 or more eligible participants or with at least
$10 million in plan assets.
General. Redemptions may be suspended or payment postponed during any
period in which any of the following conditions exist: the Exchange or BSE is
closed or trading on either 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 indicated otherwise on your Account
Application or by writing to PSC. Proper account identification will be
required for each telephone exchange. Telephone exchanges may not exceed
$500,000 per account per day. Each telephone exchange request, whether by
voice or by FactFone, will be recorded. You are strongly urged to consult
with your financial representative prior to requesting a telephone exchange.
See "Telephone Transactions and Related Liabilities" below.
Automatic Exchanges. You may automatically exchange shares from one
Pioneer account for shares of the same Class in another Pioneer account on a
monthly or quarterly basis. The accounts must have identical registrations
and the originating account must have a minimum balance of $5,000. The
exchange will be effective on the 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
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 below 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 tax basis of these shares and the timing of
the transaction, and special tax rules may apply.
You should consider the differences in objectives and policies of the
Pioneer mutual funds, as described in each fund's current prospectus, before
making any exchange. 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.
X. DISTRIBUTION PLANS
The Fund has adopted a Plan of Distribution for both Class A shares (the
"Class A Plan") and Class B shares (the "Class B Plan") in accordance with
Rule 12b-1 under the 1940 Act pursuant to which certain distribution and
service fees are paid.
Pursuant to the Class A Plan, the Fund reimburses PFD for its actual
expenditures to finance any activity primarily intended to
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<PAGE>
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 average 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 Fund's Class A shareholders. The
Class A Plan does not provide for the carryover of reimbursable expenses
beyond 12 months from the time the Fund is first invoiced for an expense. The
limited carryover provision in the 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% federal
excise tax on a portion of its undistributed ordinary income and capital
gains if it fails to meet certain distribution requirements with respect to
each calendar year. The Fund intends to make distributions in a timely manner
and, accordingly, does not expect to be subject to the excise tax.
The Fund's policy is to pay to shareholders dividends from net investment
income, if any, and to make distributions from net capital gains, if any, in
December. Distributions from net short-term capital gains, if any, may be
paid with such dividends; distributions from income and/or capital gains may
also be made at such times as may be necessary to avoid federal income or
excise tax.
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.
The Fund will be subject to foreign withholding taxes or other foreign
taxes on income (including interest, dividend and capital gains taxes imposed
by India and possibly other countries) from certain foreign investments,
which will reduce the yield on those investments. In any year in which the
Fund qualifies, it may make an election that will permit certain of
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<PAGE>
its shareholders to take a credit (or, if more advantageous, a deduction) for
all or a portion of foreign income or other qualified taxes, including Indian
income taxes on interest, dividends and capital gains, paid by the Fund. Each
shareholder would then include in gross income (in addition to dividends
actually received) his or her proportionate share of the amount of qualified
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. Certain shareholders,
including shareholders not subject to U.S. federal income taxation, will not
be entitled to the benefit of a deduction or credit with respect to foreign
income taxes paid by the Fund. As a result of certain limitations under the
Code on foreign tax credits, which have different effects depending upon a
shareholder's particular tax situation, shareholders may be able to claim a
credit only for less than the full amount of their proportionate share of the
foreign taxes paid by the Fund. Further, the creditable portion may be
smaller to the extent the Fund's income consists of U.S.-source income,
generally including capital gains from the sale of both U.S. and foreign
stocks and securities and certain foreign currency gains, rather than
foreign-source income such as interest and dividends on foreign stocks and
securities.
Dividends and other distributions and the proceeds of redemptions,
repurchases or exchanges 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 such backup withholding or if the Fund
receives notice from the IRS or a broker that backup withholding applies.
Please refer to the Account Application for additional information.
The description above relates only to U.S. federal income tax consequences
for shareholders who are U.S. persons, i.e., U.S. citizens or residents or
U.S. corporations, partnerships, trusts or estates and who are subject to
U.S. federal income taxes. 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 advisers 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 the custodian of the Fund's portfolio securities
and other assets. 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. The Custodian has appointed Standard
Chartered Bank as subcustodian to hold investments purchased by the Fund in
India.
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 all
shareholders who have more than one Pioneer account.
Shareholders whose shares are held in the name of an investment
broker-dealer or other party will not normally have an account with the Fund
and might not be able to utilize some of the services available to
shareholders of record. Examples of services which might not be available are
investment or redemption of shares by mail or telephone, automatic
reinvestment of dividends and capital gains distributions, withdrawal plans,
Letters of Intention, Rights of Accumulation, telephone exchanges and
redemptions, and newsletters.
Additional Investments
You may add to your account by sending a check (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 a Pioneer
Investomatic Plan, are invested in full and fractional shares of the Fund at
the applicable offering price in effect as of the close of 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 preauthorized draft drawn on a checking
account. Pioneer Investomatic Plan investments are voluntary, and you may
discontinue the Plan at any time without penalty upon 30 days' written notice
to PSC. PSC acts as agent for the purchaser, the broker-dealer and 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.
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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 fund
account invested in a second Pioneer 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 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 an account (before any reinvestment)
and forward the amount withheld to the IRS as a credit against your federal
income taxes. This option is not available for retirement plan accounts or
for accounts subject to backup withholding.
Telephone Transactions and Related Liabilities
Your account is automatically authorized to have telephone transaction
privileges unless you indicate otherwise on your Account Application or by
writing to PSC. You may purchase, sell or exchange Fund shares by telephone.
See "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 the caller to provide the personal identification number (PIN) for
the account and send you a written confirmation of each telephone
transaction. Different procedures may apply to accounts that are registered
to non-U.S. citizens or that are held in the name of an institution or in the
name of an investment broker-dealer or other third-party. If reasonable
procedures, such as those described above, are not followed, the Fund may be
liable for any loss due to unauthorized or fraudulent instructions. The Fund
may implement other procedures from time to time. In all other cases, neither
the Fund 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(SM) is an automated inquiry and telephone transaction system
available to Pioneer shareholders by dialing 1-800- 225-4321. FactFone(SM)
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(SM) 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(SM).
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 business,
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
accompanying this Prospectus should not be used to establish any of these
plans. Separate applications are required.
Telecommunications Device for the Deaf (TDD)
If you have a hearing disability and you own TDD keyboard equipment, you
can call our TDD number toll-free at 1-800- 225-1997, weekdays from 8:30 a.m.
to 5:30 p.m. Eastern Time, to contact our telephone representatives with
questions about your account.
<PAGE>
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 share 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
checks of $50 or more will be sent to you, or any person designated by you,
monthly or quarterly, and your periodic redemptions of shares may be taxable
to
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you. Payments can be made either by check or electronic transfer to a bank
account designated by you. If you direct that withdrawal checks be paid 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.
Reinvestment 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 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 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 India Fund is an open-end, diversified management investment
company (commonly referred to as a mutual fund) organized as a Delaware
business trust on April 4, 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 purpose 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 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 fund performance 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
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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.
APPENDIX A
INDIA
The information set forth in this Appendix is based on various publicly
available sources. No representation is made that any correlation exists or
will exist between India or its economy in general and the performance of the
Fund.
I. THE COUNTRY OF INDIA
Geography and Population
India is the seventh largest country in the world, covering an area of
approximately 3,300,000 square kilometers. It is situated in South Asia and
is bordered by Nepal, Bhutan and China in the north, Myanmar and Bangladesh
in the east, Pakistan in the west and Sri Lanka in the south.
India is the world's second most populous country. The 1991 census
estimated India's total population at approximately 844 million. Although
migration from rural to urban centers has been increasing steadily, India's
population remains predominantly rural; the 1991 census reported that 74.3%
of the total population still lives in the countryside. India's total
population is projected to increase to 925 million in 1996, 1 billion in 2001
and 1.1 billion in 2007.
Hindi is the official national language and is spoken by approximately 30%
of India's population. English is widely used in India as the language of
jurisprudence, commercial transactions and higher and technical education.
Government
India became independent from the United Kingdom in 1947. India is a
federal republic and is governed by a parliamentary democracy under the
Constitution of India. The executive, legislative and judicial functions of
India's Government are separated and certain powers are reserved to India's
25 States and 7 Union Territories.
India's Parliament consists of the Lok Sabha (House of the People) and the
Rajya Sabha (Council of States). The Lok Sabha is elected directly by
universal suffrage for a period of five years while the Rajya Sabha comprises
members indirectly elected by the States and Union Territories for a 6-year
term and members nominated by the President of India. The Prime Minister and
the Council of Ministers, who are responsible to the Lok Sabha, hold
effective executive power. The present Prime Minister is Mr. Narasimha Rao,
who leads the Congress (I) Party. The Congress (I) Party holds the largest
number of seats in the Lok Sabha, and, since December 1993, has held an
absolute parliamentary majority.
International Relations
With the exception of Pakistan, India's foreign relations are generally
stable. In 1993, India renegotiated its foreign debt to Russia and undertook
to rebuild its trade ties with the Central Asian states emerging from the
break-up of the former Soviet Union. In addition, India and China in
September 1993 agreed to pursue a negotiated settlement of the two countries'
longstanding border dispute. Although relations with the United States have
generally improved following the breakup of the former Soviet Union,
important differences persist between the United States and India regarding
relations with Pakistan, protection of intellectual property rights and
India's refusal to become a signatory to the Nuclear Non- Proliferation
Treaty. More than one million persons of Indian origin live in the United
States.
India's relations with Pakistan remain tense. Amidst allegations that
Pakistan was involved in the outbreak of urban bombings in India that
occurred after the destruction of the Ayodhya mosque in late 1992, India has
attempted to have Pakistan denounced by the international community as a
terrorist state. The principal dispute between the two countries relates to
Pakistan's claim to the Indian border state of Jammu and Kashmir, which was
created in connection with the partition of India at the time of
independence. India has fought two wars with Pakistan (1947-48 and 1965)
since independence to retain its control over Jammu and Kashmir. A third war
with Pakistan resulted in 1971 over the secession of Pakistan's eastern
province, which is now the People's Republic of Bangladesh. Meetings between
the Indian and Pakistani foreign ministers were held in early January 1994,
but no progress was reported on the Jammu and Kashmir issue.
Ethnic and Cultural Diversity and Conflict
India has a diverse mix of ethnic and cultural groups. The major line of
distinction, however, tends to be religion, which in some areas closely
mirrors cultural or ethnic divisions as well. There are a large number of
religions practiced in India, with Hinduism being the major religion,
followed by an estimated 82% of the total population. The other principal
religious groups are Muslims, constituting an estimated 11% of the total
population, Christians, Sikhs, Buddhists, and Jains.
Religious and ethnic differences have been a recurring source of conflict
in India throughout the post-independence era and on several occasions have
erupted in violence. Most recently, Hindu fundamentalist groups, encouraged
by elements within the Bharatiya Janata Party ("BJP"), a fundamentalist Hindu
party and the principal opposition to the current Government, were
responsible for the destruction of a 16th century mosque in Ayodhya in
December 1992. This incident led to a major conflict between elements of the
Hindu and Muslim populations and to widespread communal rioting throughout
the country. Particularly serious were bombings in Bombay in March 1993 which
killed more than 250 people and temporarily closed the Bombay Stock Exchange.
Terrorists bombings have occurred from time to time in a number of other
Indian cities.
Within the past two years, the Government of India appears to have brought
under control separatist movements in the States of Assam and Punjab.
However, separatist
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movements in the northeastern states of Nagaland and Manipur have mounted new
guerilla insurgencies. Since 1990, the Government of India has been involved
in a struggle with Muslim separatist guerilla groups in the State of Jammu
and Kashmir and has committed more than 250,000 army troops to control the
insurgency.
Overview of India's Economy and Recent Developments
Modern economic development in India began in the mid- 1940s with the
publication of the Bombay Plan. The Planning Commission was established in
1950 to assess the country's available resources and to identify growth
areas. A centrally planned economic model was adopted, and in order to
control the direction of private investment, all investment and major
economic decisions required government approval. Foreign investment was
allowed only selectively. This protectionist regime held back development of
India's economy until the mid-1980s when there began to be some move towards
liberalization and market orientation of the economy. With the measures
introduced in the budget of 1985, the annual growth of the country's real
gross domestic product ("GDP") rose from an average 3-4 percent since the
1940s to an average 6.1 percent between 1986 and 1990.
In 1991, faced with a rising oil import bill, an adverse balance of
payments and a large foreign debt, India had reached a position where it was
unable to obtain further commercial borrowings. At this time, the government
of Prime Minister Narasimha Rao took office and has since moved to
significantly reform the structure of India's economic system. The
Government's reforms generally have been supported by consensus among India's
other main political parties, including the BJP.
In July 1991, the new Government's Finance Minister, Dr. Manmohan Singh,
presented the Government's first budget and announced a new industrial
policy. In consequence, for many industrial sectors, it became no longer
necessary to obtain government approval for new investments. Foreign
companies can now hold up to 51 percent of an Indian company as opposed to 40
percent previously. As a result of these policies and other factors, foreign
investment in India has greatly increased in recent years. For example, U.S.
private sector investment in India during 1992 and 1993 exceeded the total
amount of money invested in India by U.S. companies during the previous 40
years.
The process of liberalization was taken further with the budget of
February 1992 when the rupee was made partially convertible and import
tariffs were reduced. Personal tax rates were brought down and it was
announced that foreign institutional investors would be able to invest
directly in the Indian capital markets. In September 1992, the guidelines for
foreign institutional investors were published and a number of foreign
institutional investors have been registered by the Securities and Exchange
Board of India.
While political instability and communal violence have led to a slowdown
in India's economic growth and the implementation of reforms, the Manager and
the Indian Adviser believe that the prospects for economic growth and
liberalization remain sound.
The budgets of February 1993 and 1994 continued to demonstrate the
Government of India's commitment to economic reform. In particular, the rupee
was allowed to float freely, interest rates were reduced and major reductions
were made in customs and excise duties. Tax holidays were given to encourage
new investment in industrially backward areas and in new power projects. In
order to stimulate capital investment a system for computing long-term
capital gains tax was introduced, which favors those whose gains accrue over
a longer period. Further, the proposed Finance Bill 1994 proposes to reduce
tax rates for certain corporations and withdraw a surcharge applicable to
individual tax rates.
II. INDIA'S SECURITIES MARKET
There currently are 22 recognized stock exchanges in India (including the
Over The Counter Exchange of India). Activity and broad interest in the
market have increased in recent years compared to historical norms. This
increase reflects the growth of the private sector's role in the Indian
economy and greater participation in the market by individual investors and
foreign institutional investors. In addition, the Government of India has
actively promoted expanded capital market activity by both foreign and
domestic investors and has adopted policies designed to increase domestic
companies' reliance on the capital markets as a source of financing.
In 1991, the Government of India introduced a program of economic
structural reforms, including certain measures to stimulate growth and
activity in India's capital markets. These reforms included the grant of
statutory authority to the Securities and Exchange Board of India ("SEBI") as
an independent agency to promulgate and enforce rules governing India's
capital markets. The SEBI has undertaken a number of initiatives to reform
the Indian securities market and regulate the activities of securities
professionals. For example, the SEBI has promulgated rules and regulations
that prohibit securities trading on the basis of material nonpublic inside
information. The SEBI has also required broker-dealers to register, and has
established registration criteria that must be met by broker-dealers. The
SEBI has occasionally encountered resistance to its reforms from portions of
India's community of securities brokers.
Banking and Securities Market Scandal
In April 1992, irregularities and frauds in the securities transactions of
several banks were exposed. Certain bank officials and stockbrokers were
found to be violating established rules and guidelines in a manner designed
to siphon off bank funds to brokers for speculative transactions in shares.
These irregularities and frauds are commonly referred to in India as the
"securities scam". An important contributing cause of the securities scam was
the prevalence of low rates of interest that put pressure on banks to find
various mechanisms for earning higher rates of return on their assets. The
fall in share prices subsequent to the discovery of the securities scam
brought the major market indices down over 40% from their highs.
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The Indian Parliament formed a special Joint Parliamentary Committee
("JPC") to investigate the securities scam. In its report issued in December
1993, the JPC blamed the scandal on the Reserve Bank of India and India's
Ministry of Finance for failing to prevent and detect this fraudulent
activity and on the behavior of various market participants and four foreign
banks in particular. The JPC cited a "culture of nonaccountability which
permeated all sections of the Government and Banking system over the years"
as a factor contributing to the scandal. However, as a result of the scandal,
India's Ministry of Finance strengthened the SEBI's regulatory authority and
made other significant reforms in India's securities markets.
A and B Shares
Equity securities that are traded in the Indian securities markets are
divided into two groups, A shares (also known as "specified shares") and B
shares (also known as "non- specified shares"). A shares are actively traded,
listed equity shares of companies which have a large equity base, and which
meet certain other requirements. All other listed equity shares traded in
India's securities markets are B shares.
The distinction between A shares and B shares is important because the
trade settlement practices for these two classes of securities are different.
While B shares trade only on a cash basis, trades in A shares may be effected
on either a cash basis or a "squared-up" basis. Squaring up a position
involves effecting a trade which is the opposite of an earlier trade. On the
settlement date for such a trade, only the net cash from the offsetting or
squared-up trades is transferred. Transactions in A shares are settled once
every 14 days through the Bombay Stock Exchange's clearing house.
Transactions involving B shares are settled once every 7 days among exchange
members.
Prior to January 21, 1994, A shares were also traded on a "carryover"
basis in which settlement of a trade often would not occur for up to 90 days
or more. The SEBI issued a directive in late 1993 that "carryover" trading be
eliminated by January 21, 1994. The implementation of this directive caused a
general decline in the prices of securities traded in India's securities
markets.
The Bombay Stock Exchange
Shares listed on the Bombay Stock Exchange ("BSE") account for over 90% of
the market capitalization of securities listed on India's 22 stock exchanges,
and over two-thirds of secondary market trading volume in India occurs on the
BSE. The BSE was established in 1875 and is a self-regulatory organization
owned by its members and governed by a Board of Governors. The BSE at present
consists of approximately 560 member brokers. The BSE has a high daily
trading volume, both in terms of the number of transactions and their value.
Active trading on the BSE and other Indian stock exchanges is concentrated in
shares of relatively few issuers and only a limited portion of many
companies' shares are part of the public float. However, compared to the
securities markets of many other emerging countries, India's securities
market is broad-based and unconcentrated in that the ten largest issuers
represent a relatively small portion of total market capitalization.
The BSE is officially open from 11:30 a.m. to 2:30 p.m. Monday through
Friday. However, brokers currently are unable to process the volume of
transactions resulting from a three hour trading session because their
recordkeeping is not computerized. Therefore, trading is normally conducted
for two hours a day from 12:30 p.m. to 2:30 p.m. The BSE is closed on bank
holidays and certain religious holidays. Special trading sessions are held
outside normal trading hours simultaneously with the annual Government budget
announcements and on the commencement of the BSE's financial year. A special
trading session for odd lots is held for an hour on Saturdays.
Orders executed on the BSE are transmitted from the offices of brokers to
the trading floor for execution by an open outcry auction. There are separate
trading posts for different groups of securities. Spreads may vary
considerably. A computerized system is used for settling daily transactions.
The BSE clearing house is managed by the State Bank of India and receives
payments and deliveries on behalf of members of the BSE in respect of A
shares. For B shares, delivery and payment is made outside the clearing house
directly among members. There is usually a lag of a few days between delivery
of securities by sellers and receipt of payment.
The following table shows performance information for the periods
indicated for the Bombay Stock Exchange, as represented by the BSE Sensitive
Index, which is comprised of securities of large capitalization issuers.
BSE SENSITIVE INDEX
[Base Year = 1979-80 = 100]
Period-End Index Level
- --------------- ----------------
1982 235.83
1983 252.92
1984 271.87
1985 527.36
1986 524.45
1987 442.17
1988 666.26
1989 778.64
1990 1048.29
1991 1908.85
1992 2615.37
1993 3346.06
1994 3926.90
The Over the Counter Exchange of India
The Over the Counter Exchange of India ("OTCEI") was built along the lines
of the U.S. Nasdaq National Market and began operations in mid-1992. Trading
on this exchange is fully automated. The OTCEI is a "quote driven market"
with a network of market makers and dealers. The OTCEI is operated only in
Bombay at present, and it intends to commence trading in Delhi and Madras.
These cities are expected to be connected through the OTCEI main computer,
offering uniform national quotations and considerably reducing arbitrage
21
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opportunities. The OTCEI mainly provides an avenue for raising funds for
small companies having a capital float between 300,000 rupees and 250 million
rupees. The OTCEI has approximately 50 members and 95 dealers in Bombay and
it has appointed approximately 75 dealers in Delhi. The OTCEI has recently
initiated market making and trading in corporate debt instruments.
Creation of the National Stock Exchange
The National Stock Exchange ("NSE") was created by the Government of India
in part to increase the interconnectivity among India's several stock
exchanges and thereby to reduce interexchange arbitrage opportunities (i.e.,
to increase the transparency of India's securities exchanges). It is expected
that the NSE will commence trading in late 1994 with fully computerized
trading, settlement and information dissemination systems. Financial
institutions own the NSE but they must apply and qualify for trading on the
same basis as others wishing to trade. Membership will be open to
corporations and individuals on an equal basis. Qualifications for membership
will include capital adequacy standards and educational training.
Other NSE features that will benefit investors (when implemented) include
the use of a normal T+5 settlement system for equities and next day
settlement for debt. The existence of a fully automated system with all
members connected using dedicated lines should eliminate arbitrage
opportunities on multiple- exchange listed stocks. Computerization will also
provide the ability to match trades, thereby promoting best execution of
investors' transactions.
The NSE commenced operations in November 1994. Equity trading is open to
both institutional and individual investors. Debt and equity trading will
eventually be book- entry with a central depositary. Futures and option
trading is planned to begin in 1995.
APPENDIX B
CERTAIN INVESTMENT PRACTICES
Forward Foreign Currency Exchange Contracts
The Fund has the ability to hold a portion of its assets in foreign
currencies and to enter into forward foreign currency exchange 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 hedge against an
anticipated decline in the U.S. 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.
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 use of forward foreign currency exchange contracts is a highly
specialized activity which involves investment techniques and risks that are
different from those associated with ordinary portfolio transactions. The use
of forward foreign currency exchange contracts 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 a hedging position may not
match the foreign currency fluctuations intended to be hedged, and (3) market
risk that an incorrect prediction of exchange rates by the Manager or the
Indian Adviser may cause the Fund to perform less favorably than if such
position had not been entered. The loss that may be incurred by the Fund in
entering into forward foreign currency exchange contracts is potentially
unlimited. There is no limit on the percentage of the Fund's assets that may
be invested in forward foreign currency exchange contracts.
There currently is no market, or only a limited market, for forward
foreign currency exchange contracts with respect to the rupee and the
currencies of certain other foreign countries in which the Fund may invest.
Consequently, there can be no assurance that such contracts will be available
for hedging currency risks at the times when the Fund wishes to use them. In
addition, the Fund's transactions in forward foreign currency exchange
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.
Borrowing
The Fund may borrow money only from banks and only for temporary emergency
purposes such as in connection with the redemption of Fund shares or in
connection with the clearance of portfolio transactions. The aggregate amount
of
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the Fund's borrowings may not exceed 33-1/3% of the Fund's total assets
(including the amount borrowed) taken at market value. In addition, the Fund
will not purchase securities for its portfolio while the Fund's outstanding
borrowings exceed 5% of its total assets. The Fund will incur interest and
other expenses in connection with its borrowings.
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 illiquid securities, including
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 may adopt guidelines and delegate to the
Manager the daily function of determining and monitoring the liquidity of
restricted securities. The Board, however, will retain sufficient oversight
and be 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 will
carefully monitor 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.
When-Issued Securities and Forward Commitments
The Fund may purchase securities on a when-issued, delayed delivery or
forward commitment basis. When these transactions are negotiated, the price
of the securities is fixed at the time of the commitment, but delivery and
payment take place after the date of the commitment. When- issued securities
and forward commitments involve a risk of loss if the value of the security
to be purchased declines prior to the settlement date. When the Fund
purchases securities on a when-issued, delayed delivery or forward commitment
basis, the Fund's custodian will maintain in a segregated account cash or
liquid, high grade debt securities having a value (determined daily) at least
equal to the amount of the Fund's purchase commitment.
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Pioneer India Fund
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
JASKARAN S. TEJA, Vice President
NORMAN KURLAND, Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
INVESTMENT MANAGER
PIONEERING MANAGEMENT CORPORATION
INDIAN INVESTMENT ADVISER
ITI PIONEER AMC LTD.
PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANT
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR
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
0995-2692
(c)Pioneer Funds Distributor, Inc.
<PAGE>
PIONEER INDIA FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A and Class B Shares
February 28, 1995
(revised October 2, 1995)
This Statement of Additional Information (Part B of the Registration
Statement) is not a Prospectus, but should be read in conjunction with the
Prospectus (the "Prospectus") dated February 28, 1995 (revised October 2, 1995)
of Pioneer India 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 Risk Factors.............B-2
2. Management of the Fund.........................................B-10
3. Investment Adviser.............................................B-14
4. Principal Underwriter..........................................B-15
5. Distribution Plans.............................................B-16
6. Shareholder Servicing/Transfer Agent...........................B-18
7. Custodian......................................................B-18
8. Independent Public Accountant..................................B-18
9. Portfolio Transactions.........................................B-19
10. Tax Status and Dividends.......................................B-20
11. Description of Shares..........................................B-24
12. Certain Liabilities............................................B-25
13. Determination of Net Asset Value...............................B-26
14. Systematic Withdrawal Plan.....................................B-26
15. Letter of Intention............................................B-27
16. Investment Results.............................................B-27
17. Financial Statements...........................................B-30
APPENDIX A--Description of Bond Ratings........................B-31
APPENDIX B--Other Pioneer Information..........................B-34
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 RISK FACTORS
The Fund's Prospectus identifies the investment objective and the
principal investment policies of the Fund and the risk factors associated with
the Fund's investments. Additional investment policies of the Fund and a
supplemental discussion of applicable 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.
Risk Factors Associated With Investments in India and Other Foreign Countries
The Fund is intended for long-term investors who can accept the risks
associated with investing primarily in equity securities of Indian Companies (as
defined in the Prospectus) and other foreign issuers, as well as the risks
associated with investments quoted or denominated in foreign currencies. In
addition, certain of the Fund's potential investment and management techniques
entail special risks. There can be no assurance that the Fund will achieve its
investment objective. See "Investment Objective and Policies--Risk Factors" in
the Prospectus.
The securities markets of India and most other countries with emerging
markets are each less liquid and subject to greater price volatility and have a
smaller market capitalization than the U.S. securities market. Issuers and
securities markets in India and these other countries are not subject to as
extensive and frequent accounting, financial and other reporting requirements or
as comprehensive government regulations as are issuers and securities markets in
the United States. Certain of the securities markets in which the Fund may
invest are marked by a relatively high concentration of market capitalization
and trading volume in a small number of issuers representing a limited number of
industries, as well as a high concentration of ownership of such securities by a
limited number of investors. See "Risk Factors" and "Restrictions on Investment
in India" in the Prospectus. The limited liquidity of these securities markets
may also affect the Fund's ability to accurately value its portfolio securities
or to acquire or dispose of securities at the price and time it wishes to do so
or in order to meet redemption requests.
Foreign investment in the securities market of India and in certain
other emerging markets is restricted or controlled to varying degrees. These
restrictions may limit the Fund's ability to invest in these countries and may
increase the expenses of the Fund. For a description of the restrictions on
foreign investment in India, see "Restrictions on Investment in India" in the
Prospectus and Appendix A to the Prospectus.
India and other emerging countries are subject to a greater degree of
economic, political and social instability than is the case in the United States
and most of the Western European countries. Such instability may result from,
among other things, the following: (i) authoritarian governments or military
involvement in political and economic decision making, including changes or
attempted changes in governments through extra- constitutional means; (ii)
popular unrest associated with demands for improved political, economic or
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection or
conflict. Such economic, political and social instability could disrupt the
principal financial markets in which the Fund invests and adversely affect the
value of the Fund's assets. For a description of possible sources of economic,
political and social instability in India, see "Risk Factors" and "Restrictions
on Investment in India" in the Prospectus and Appendix A to the Prospectus.
B-2
<PAGE>
The Fund's income and, in some cases, capital gains from foreign
securities will be subject to applicable taxation in certain of the countries in
which it invests, and in some cases treaties may not be available to reduce the
otherwise applicable tax rates. For a description of the Indian taxes that will
apply to the Fund's investments in India, see "Indian Taxes" in the Prospectus.
The Fund may elect, when eligible, to "pass-through" to the Fund's shareholders
those taxes that are treated as income or certain other qualified taxes for U.S.
federal income tax purposes. If the Fund is eligible for and makes such
election, U.S. shareholders will be required to include in income their
proportionate shares of the amount of qualifying non-U.S. taxes paid by the Fund
and may be entitled to claim either a credit or deduction for all or a portion
of such taxes. Certain shareholders, including shareholders not subject to U.S.
taxation, will not be entitled to the benefit of a deduction or credit with
respect to non-U.S. income taxes paid by the Fund. See "Taxation." If the Fund
does not make the election, it may deduct foreign taxes that it has paid in
computing its income available for distribution to shareholders to satisfy
applicable tax distribution requirements.
Foreign securities markets also have different clearance and settlement
procedures than securities markets in the United States, and in certain foreign
markets there have been times when settlements have been unable to keep pace
with the volume of securities transactions for a variety of reasons (including,
in India, custodial infrastructure limitations), making it difficult to conduct
such transactions. For a discussion of such problems in India's securities
market, see "Risk Factors" and "Restrictions on Investment in India" in the
Prospectus. Such delays in settlement could result in temporary periods when a
portion of the Fund's assets are uninvested and no return is earned on such
assets. The inability of the Fund to make intended security purchases due to
settlement problems could result in lost opportunities to the Fund due to
subsequent increases in value of the securities. Conversely, the Fund's
inability to sell portfolio securities promptly because of settlement problems
may result in losses to the Fund due to subsequent declines in value of the
portfolio securities. In addition, because payments in connection with
securities transactions in certain foreign countries (including India) generally
are made to and received from brokers (and not clearinghouses) the Fund will be
exposed to broker-counterparty risk in connection with such transactions.
Effects of Fluctuations in Foreign Currency Exchange Rates
Because the Fund, under normal circumstances, will invest a substantial
portion of its assets in securities which are denominated or quoted in Indian
rupees (hereinafter "rupees") and other foreign currencies, the strength or
weakness of the U.S. dollar against such currencies will affect the Fund's
investment performance. A decline in the value of any particular foreign
currency against the U.S. dollar will cause a decline in the U.S. dollar value
of the Fund's holdings of securities denominated or quoted in such currency and,
therefore, may cause an overall decline in the Fund's net asset value and any
net investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Fund. Even if the Fund attempts to hedge against the effects
of adverse changes in foreign currency exchange rates, there will be significant
limitations on the Fund's ability to hedge effectively against the currency
risks associated with its portfolio investments. See Appendix B to the
Prospectus.
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 United States, 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, however, and
B-3
<PAGE>
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 buy and sell 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.
Forward Foreign Currency Exchange Contracts
The Fund may conduct foreign currency transactions 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 may enter into forward foreign
currency exchange contracts ("forward contracts") involving rupees or currencies
of other foreign countries in which the Fund may invest. Forward contracts are
contractual agreements to purchase or sell a specified currency at a specified
future date and price set at the time the parties enter into the contract.
Forward contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers.
Currently, there is no market, or only a limited market, for these
contracts with respect to the rupee and the currencies of certain other foreign
countries in which the Fund may invest. Consequently, there can be no assurance
that such contracts will be available for hedging currency risks at the time
when the Fund wishes to use them.
The Fund may enter into forward contracts to hedge against foreign
currency risk in the following circumstances. First, when the Fund intends to
purchase or sell a security denominated or quoted in a foreign currency, or when
the Fund anticipates the receipt in a foreign currency of dividend or interest
payments on such a security that it holds, the Fund may wish to "lock in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such dividend
or interest payment, as the case may be. By entering into a forward contract for
the purchase or sale, for a fixed amount of U.S. dollars, of the amount of
foreign currency involved, the Fund will attempt to protect itself against an
adverse change in the relationship between the U.S. dollar and the subject
foreign currency during the period between the date on which the Fund enters
into the forward contract and the date on which the contract matures or is
closed out.
Second, when the Manager believes that the currency of a particular
foreign country may suffer a significant decline against the U.S. dollar, it may
attempt to hedge the Fund's exposure to such currency by entering into a forward
contract to sell, for a fixed amount of U.S. dollars, the amount of foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated or quoted in the subject foreign currency. The precise
matching of the forward contract amounts and the value of the portfolio
securities involved generally will not be possible because the future value (in
foreign currencies) of such securities will change as a consequence of
securities market movements between the date on which the contract is entered
into and the date it matures or is closed out.
The Fund's custodian will place cash or liquid, high grade debt
securities (i.e., securities rated in one of the top three rating categories by
Standard & Poor's Ratings Group ("Standard & Poors") or by Moody's Investors
Service, Inc. ("Moody's") or, if unrated by such rating organizations,
determined by the Manager to be of comparable credit quality) into a segregated
account with the Fund's custodian in an amount equal to the value of the Fund's
total assets committed to the consummation of forward contracts requiring the
Fund to purchase foreign currencies. If the value of the securities placed in
the segregated account declines, the Fund will place additional cash or
securities in the account so that the value of the account will equal the amount
of the Fund's commitments with respect to such contracts. The segregated account
will be marked-to-market on a daily basis.
B-4
<PAGE>
Forward contracts entered into by the Fund for hedging purposes will
limit the opportunity for gain in the event that the value of the hedged
currency rises. In addition, the use of forward contracts to protect against a
decline in the value of a foreign currency to which the Fund has exposure will
not eliminate fluctuations in the prices of securities denominated or quoted in
such currency. It simply will establish a rate of exchange which the Fund will
be able to achieve at a specified future point in time. Moreover, it may not be
possible for the Fund to hedge against a currency devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the anticipated devaluation level.
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 deposits, fees or commissions generally are involved. At
the maturity of a forward contract, the Fund may either accept or make delivery
of the currency specified in the contract or, at or prior to maturity, enter
into a closing purchase transaction involving the purchase or sale of an
offsetting contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract.
Illiquid Securities
The Fund may invest up to 15% of its net assets in illiquid securities.
See "Restricted and Illiquid Securities" in Appendix B to the Prospectus.
Generally, a security will 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 restrictions 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 U.S. 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
144A or Regulation S under the Securities Act of 1933, as amended (collectively,
"144A securities"), which may be illiquid for purposes of this limitation, often
sell at a price lower than similar securities that are not subject to
restrictions on resale.
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 to the Manager, pursuant to guidelines reviewed and approved by
the Trustees. The Manager takes into account a number of factors in making
liquidity determinations. 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 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). The
Manager, with the Indian Adviser's assistance, will monitor the liquidity of the
Fund's portfolio securities on an ongoing basis and will report periodically to
the Trustees on this subject.
State securities laws may impose further limitations on the amount of
illiquid securities that the Fund may purchase.
B-5
<PAGE>
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 in 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, the Manager will carefully consider the
creditworthiness of the seller pursuant to procedures reviewed and approved by
the Trustees. See "Repurchase Agreements" in Appendix B to the Prospectus.
When-Issued Securities and Forward Commitments
The Fund will purchase securities on a when-issued, delayed delivery or
forward commitment basis only with the intention of completing the transaction
and actually purchasing the securities. If deemed appropriate by the Manager or
the Indian Adviser, however, the Fund may dispose of or renegotiate a commitment
after it is entered into, and may sell securities it has committed to purchase
before those securities are delivered to the Fund on the settlement date. In
these cases, the Fund may realize a taxable gain or loss.
When the Fund agrees to purchase securities on a when-issued, delayed
delivery or forward commitment basis, the Fund's custodian will set aside cash
or liquid, high grade debt securities equal to the amount of the commitment in a
segregated account. The market value of the Fund's net assets may fluctuate to a
greater degree when it sets aside portfolio securities than when it sets aside
cash. Because the Fund's liquidity and ability to manage its portfolio might be
affected when it sets aside cash or portfolio securities to cover purchase
commitments, the Fund expects that its commitments to purchase when-issued
securities and forward commitments will not exceed 33% of the value of its total
assets absent unusual market conditions. When the Fund engages in when-issued
and forward commitment transactions, it relies on the other party to the
transaction to consummate the trade. Failure of such party to do so may result
in the Fund incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
The market value of securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
the Fund, starting on the day the Fund agrees to purchase the securities.
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 Investment Company Act of 1940, as amended (the "1940 Act"))
of the Fund's outstanding voting securities. The Fund may not:
(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
B-6
<PAGE>
investment policies, 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 Securities Act of 1933, as amended (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.
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:
B-7
<PAGE>
(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 Securities and Exchange Commission (the "Commission"),
investments are concentrated in a particular industry if such investments
aggregate 25% or more of the Fund's total assets. This policy does not apply to
the Fund's 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 Manager or
the Indian 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.
(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,
B-8
<PAGE>
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 10% of its total assets in the aggregate of (1)
securities of any issuer which, together with its predecessors, has been in
operation for less than three years and (2) restricted securities, excluding
securities eligible for resale pursuant to Rule 144A under the 1933 Act or
foreign securities which are offered or sold outside the United States in
accordance with Regulation S under the 1933 Act; provided, however, that the
Fund may not invest more than 15% of its net assets in restricted securities
including those eligible for resale under Rule 144A. 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.
(e) Invest for the purpose of exercising control over or management of
any company.
(f) Purchase warrants of any issuer, if, as a result of such purchases,
more than 2% of the value of the Fund's net assets would be invested in
warrants, which are not listed on the New York Stock Exchange, the American
Stock Exchange or comparable international exchanges or more than 5% of the
value of the net assets of the Fund would be invested in warrants generally,
whether or not listed. 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.
(g) 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 Manager,
the Indian Adviser or any investment management subsidiary of the Manager or the
Indian Adviser individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer.
(h) 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.
(i) 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.
(j) Invest more than 5% of its total assets in restricted securities,
excluding Rule 144A securities; provided, however, the Fund may not invest more
than 15% of its total assets in restricted securities, including such Rule 144A
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.
(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-9
<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
Chairman of the Board, Pioneer Group, Inc. ("PGI");
President and Trustee Chairman and Director of Pioneering
Management Corporation ("PMC"); Chairman
of the Board and Chief Executive Officer
of Pioneer Winthrop Advisers ("PWA") since
1993; Chairman of the Board of Pioneer
Funds Distributor, Inc. ("PFD"); Director
of Pioneering Services Corporation ("PSC")
and Pioneer Capital Corporation ("PCC");
President and Director of Pioneer Plans
Corporation ("PPC"), Pioneer Investment
Corp. ("PIC"), Pioneer International Corp.
("PIntl"), and Pioneer Metals &
Technology, Inc. ("PMT"); Chairman of the
Board, President and Director of Teberebie
Goldfields Limited; Chairman of the Board,
President and Director of Pioneer
Goldfields Limited ("PGL"); Chairman of
the Supervisory Board of Pioneer Fonds
Marketing GmbH; and Chairman and Partner,
Hale and Dorr (counsel to the Fund).
RICHARD H. EGDAHL, M.D., Professor of Management, Boston
Trustee University School of Management;
53 Bay State Road Professor of Public Health,
Boston, Massachusetts Boston University School of Public Health;
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.
MARGARET B.W. GRAHAM, Manager of Research Operations,
Trustee Xerox Palo Alto Research Center,
The Keep since September 1991; Professor of
P.O. Box 110 Operations Management and Management
Little Deer Isle, Maine of Technology, Boston University
B-10
<PAGE>
School of Management ("BUSM"), since 1989;
Associate Dean, BUSM, 1988 to 1990 and
previously, Associate Professor,
Department of Operations Management, BUSM.
JOHN W. KENDRICK, Professor Emeritus and Adjunct
Trustee Scholar, George Washington
6363 Waterway Drive University; Economic Consultant and
Falls Church, Virginia Director, American Productivity and
Quality Center, American Enterprise
Institute.
MARGUERITE A. PIRET, President, Newbury, Piret & Company,
Trustee Inc. (a merchant banking firm).
One Boston Place,
Suite 2635
Boston, Massachusetts.
DAVID D. TRIPPLE*, Executive Vice President and
Trustee and Executive Director of PGI and PWA (since
Vice President 1993); Director of PFD,
since 1989; Director of PCC, PIC, PIntl
and Pioneer SBIC Corporation; President
(since 1993), Director, President and
Chief Investment Officer of PMC.
STEPHEN K. WEST Partner, Sullivan & Cromwell (a law
Trustee firm); Trustee, The Winthrop Focus
125 Broad Street Funds (mutual funds).
New York, New York
JOHN WINTHROP, President, John Winthrop & Co., Inc.
Trustee (a private investment firm);
One North Adgers Wharf Director of NUI Corp., and Trustee
Charleston, South Carolina of Alliance Capital Reserves, Alliance
Government Reserves and Alliance Tax
Exempt Reserves.
JASKARAN S. TEJA, Senior Vice President, PIntl since
Vice President 1992; Director, PGI since 1994, the
Indian Adviser since 1993, Forest-Starma,
Komsomols-on-Amur, Russia since 1993,
Pioneer Investments, Russia since 1993;
Independent International Consultant from
1988 to 1992; Permanent
Representative/Ambassador of India to the
United Nations and other international
organizations before 1988.
NORMAN KURLAND, Senior Vice President of PMC since
Vice President 1993; Vice President of PMC from
1990 to 1993; International
Portfolio Manager and Analyst, Keystone
Custodian Funds from 1987 to 1990.
B-11
<PAGE>
WILLIAM H. KEOUGH, Senior Vice President, Chief
Treasurer Financial Officer and
Treasurer of PGI and Treasurer of PFD,
PMC, PSC, PCC, PIC, PIntl, PMT, PWA, PGL
and Pioneer SBIC Corporation and Treasurer
and Director of PPC.
ERIC W. RECKARD, Manager of Fund Accounting and
Assistant Treasurer Compliance of PMC
since May, 1994; Manager of Auditing and
Business Analysis of PGI prior to May,
1994.
JOSEPH P. BARRI, Secretary of PGI, PMC, PCC, PPC,
Secretary PIC, PIntl, PMT and PWA; Clerk
of PFD and PSC and Partner, Hale and Dorr
(counsel to the Fund).
ROBERT P. NAULT, General Counsel of PGI since 1995;
Assistant Secretary formerly of Hale
and Dorr (counsel to the Fund) where he
most recently served as a junior partner.
Each of the above persons, with the exception of Jaskaran S. Teja and
Norman Kurland, is also an officer and/or Trustee of the Pioneer mutual funds
listed below. The Fund's Agreement and Declaration of Trust provides that the
holders of two-thirds of its outstanding shares may vote to remove a Trustee of
the Fund at any special meeting of shareholders. The business address of all
officers is 60 State Street, Boston, Massachusetts 02109.
At January 31, 1995, the Trustees and officers of the Fund beneficially
owned, in the aggregate, less than 1% of the shares outstanding.
All of the outstanding capital stock of PFD, PMC and PSC is owned by
PGI, a Delaware corporation. The table below lists, as of February 22, 1995, all
of the Pioneer funds that will be offered to the public in the United States and
the investment adviser(s) 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 India Fund * PFD
Pioneer International Growth Fund PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer America Income Trust PMC PFD
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<PAGE>
Pioneer Short-Term Income Trust PMC PFD
Pioneer Income Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer California Double Tax-Free Fund PMC PFD
Pioneer New York Triple Tax-Free Fund PMC PFD
Pioneer Massachusetts Double Tax-Free Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer U.S. Government Money Fund PMC PFD
Pioneer Tax-Free Money Fund PMC PFD
Pioneer Interest Shares, Inc. PMC **
Pioneer Emerging Markets Fund PMC PFD
Pioneer Variable Contracts Trust PMC ***
- ------------------------------
* ITI Pioneer AMC Ltd. manages the Fund's investments in India, and PMC
manages all of the Fund's other investments.
** This fund is a closed-end investment company.
*** 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.
The Manager also manages the investments of certain institutional
private accounts. Messrs. Cogan, Tripple, Keough and Barri, officers and/or
Trustees of the Fund, are also officers and/or directors of PFD, PMC, PSC
(except Mr. Tripple) and PGI. To the knowledge of the Fund, no officer or
Trustee of the Fund owned 5% or more of the issued and outstanding shares of PGI
as of the date of this Statement of Additional Information, except Mr. Cogan who
then owned approximately 15% of such shares.
Compensation of Officers and Trustees
The Fund pays no salaries or compensation to any of its officers. The
Fund pays an annual trustees' fee of $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. Any such fees and expenses paid to affiliates or interested persons of PMC,
PFD or PSC are reimbursed to the Fund under its Management Contract.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Fund: +
Total Compensation
from Pioneer Family
Aggregate Compensation of Funds (19 Funds
Name of Trustee from the Fund* including the Fund)**
John F. Cogan, Jr. $167 $ 9,000
Richard H. Egdahl, M.D. $167 $55,650
Margaret B. W. Graham $167 $55,650
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John W. Kendrick $167 $55,650
Marguerite A. Piret $250 $66,650
David D. Tripple $167 $ 9,000
Stephen K. West $233 $63,650
John Winthrop $233 $63,650
- ---------------------
* As of fiscal period ended October 31, 1994.
** As of December 31, 1994
+ No Trustee received or accrued any pension or other retirement
benefits from the Fund during either of the covered periods.
3. INVESTMENT ADVISERS
The Manager. As described in the Prospectus, Pioneering Management
Corporation, 60 State Street, Boston, Massachusetts, serves as the Fund's
investment manager. The Fund's management contract with the Manager expires
initially on June 22, 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, the
Manager is entitled to a management fee at the rate of 1.25% per annum of the
Fund's average daily net assets. This fee is normally computed daily and paid
monthly. The Manager has 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 necessary to limit Class A expenses to 2.25% of the
average daily net assets attributable to the Fund's 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 through October 31, 1994, the Fund paid
or owed total management fees to the Manager of approximately $40,723.
The Manager 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, the Manager 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 mutual
funds that invest in emerging markets, such as the Fund, because of their higher
operating costs, and the Fund expects to seek such relief to the extent it
becomes necessary to do so.
The Indian Adviser. As described in the Prospectus, ITI Pioneer AMC
Ltd. (the "Indian Adviser") serves as investment adviser with respect to the
Fund's investments in India. The Indian Adviser is a joint venture between the
Manager and Investment Trust of India, Ltd., a leading provider of financial
services in India. The Indian Adviser has entered into an advisory contract with
the Manager and the Fund. The advisory contract expires initially on June 22,
1996, but it is renewable annually after such date by the vote of a majority of
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<PAGE>
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.
The advisory contract terminates if assigned and may be terminated without
penalty by any 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.
In accordance with the following schedule, the Indian Adviser is
entitled to a subadvisory fee (payable by the Manager and not by the Fund) as
compensation for its subadvisory services and expenses incurred:
0.10% of the Fund's average gross assets invested in India's securities
markets, including assets invested in American, Global or other types
of depositary receipts for securities traded in India's securities
markets if such gross assets are no greater than $15,000,000;
0.20% of such gross assets if such gross assets are greater than
$15,000,000 but no greater than $45,000,000;
0.40% of such gross assets if such gross assets are greater than
$45,000,000 but no greater than $60,000,000; and
0.60% of such gross assets if such gross assets are greater than
$60,000,000.
The above subadvisory fee is normally computed monthly and paid quarterly. In
addition, the applicable fee rate applies to all assets that are the basis for
the Indian Adviser's fee. For example, if such assets were $50,000,000 for any
one year, the Indian Adviser's fee pursuant to the above fee schedule would be
$200,000 ($50,000,000 X 0.40%). For the period June 23, 1994 (commencement of
operations) through October 31, 1994, the Manager paid or owed subadvisory fees
to the Indian Adviser of approximately $1,178.
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 22, 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 operations) through October 31, 1994, net underwriting
commissions earned by PFD were approximately $6,439. Commissions reallowed to
dealers during such period were $608,257.
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.
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<PAGE>
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 valuation procedures) as evidenced by a listing on the
American Stock Exchange or the New York Stock Exchange or by quotation on the
Nasdaq National Market. 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 the Manager'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
of the Fund (the "Class A Plan") and a plan of distribution with respect to
Class B shares of the Fund (the "Class B Plan") (together, the "Plans").
The 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 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.
The 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
B-16
<PAGE>
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.
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
October 31, 1994, the Fund incurred total distribution fees of $2,038 and $9,361
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.
B-17
<PAGE>
For the period from June 23, 1994 through October 31, 1994, the Fund
incurred total distribution fees of $2,038 and $9,361 pursuant to the Fund's
Class A Plan and Class B Plan, respectively.
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.
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 Subcustodian of Fund assets held in India is Standard
Chartered Bank. The Custodian also provides bookkeeping and pricing assistance
to the Fund and assistance in arranging for forward 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
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 continuation of the Fund's international subcustodian arrangements.
8. INDEPENDENT PUBLIC ACCOUNTANT
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.
B-18
<PAGE>
9. PORTFOLIO TRANSACTIONS
Orders for the Fund's portfolio securities transactions in the Indian
securities market are placed by the Indian Adviser. Orders for the Fund's
portfolio securities transactions in all other markets are placed by the
Manager. In selecting brokers or dealers, the Manager and the Indian Adviser
consider factors relating to best execution, including, but not limited to, the
size and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability and financial condition of the dealer; the dealer's execution
services rendered on a continuing basis; and the reasonableness of any dealer
spreads. Many transactions in foreign equity securities are executed by
broker-dealers in foreign countries in which commission rates are fixed and
non-negotiable (unlike commission rates are in the United States) and are
generally higher than in the United States.
The Manager and the Indian Adviser may select broker-dealers which
provide brokerage and/or research services to the Fund and/or other investment
companies or accounts managed by the Manager or the Indian Adviser. Such
services may include advice concerning the value of securities; the advisability
of investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). The Manager and the Indian Adviser maintain 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 the Manager 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
of the Fund believes that no exact dollar value can be calculated for such
services.
The research received from broker-dealers may be useful to the Manager
and the Indian Adviser in rendering investment management services to the Fund
as well as to other investment companies or accounts managed by the Manager or
the Indian Adviser, 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 the Manager
or the Indian Adviser in carrying out its obligations to the Fund. The receipt
of such research has not reduced the Manager's normal independent research
activities; however, it has enabled the Manager and the Indian Adviser 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 the Manager or the Indian Adviser. 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 the Manager or the Indian Adviser
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 October 31, 1994, the Fund paid or
accrued aggregate brokerage commissions of $41,282.
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<PAGE>
The Trustees periodically review the Manager's and the Indian Adviser's
performance of their respective responsibilities in connection with the
placement of portfolio transactions on behalf of the Fund.
In addition to the Fund, the Manager acts as investment adviser to the
other Pioneer funds and certain private accounts with investment objectives
similar to those of the Fund. Similarly, the Indian Adviser acts as investment
adviser to certain investment funds registered in India. These funds have
investment objectives similar to the Fund's investment objective. Accordingly,
securities may meet investment objectives of the Fund, such other funds and such
private accounts. In such cases, the decision 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 include other investments which each fund or account
presently has in a particular industry or country and the availability of 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 complex or a private account managed
by the Manager or the Indian Adviser seeks to acquire the same security at about
the same time, the Fund may not be able to acquire as large a position in the
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 the Manager
or the Indian Adviser 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.
The Trustees periodically review the Manager's and the Indian Adviser's
performance of their respective responsibilities in connection with portfolio
transactions on behalf of the Fund.
For the period from June 23, 1994 through October 31, 1994, the Fund
paid brokerage or underwriting commissions of $6,439.
10. TAX STATUS AND DIVIDENDS
It is the Fund's policy to meet the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company. These requirements relate to the sources of its
income, diversification of its assets, and distribution of its income to
shareholders. 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
B-20
<PAGE>
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 investment company taxable income, which includes net
investment income, net short-term capital gain in excess of net long-term
capital loss, and certain net foreign exchange gains are taxable as ordinary
income, whether received in cash or in additional shares. Dividends from net
long-term capital gain in excess of net short-term capital loss, if any, whether
received in cash or additional shares, are taxable to the Fund's shareholders as
long-term capital gains for federal income tax purposes without regard to the
length of time shares of the Fund have been held. The federal income tax status
of all distributions will be reported to shareholders annually.
Any dividend declared by the Fund in October, November or December as
of a record date in such a month and paid during the following January will be
treated for federal income tax purposes as received by shareholders on December
31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency- denominated debt
securities, 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.
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
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. Certain elections may, if available, ameliorate these
adverse tax consequences, but any such election would require the Fund to
recognize taxable income or gain without the concurrent receipt of cash. The
Fund may limit and/or manage its holdings in passive foreign investment
companies to minimize its tax liability or maximize its return from these
investments.
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,
B-21
<PAGE>
how payments received on obligations in default should be allocated between
principal and income, and whether exchanges of debt obligations in a workout
context are taxable. These and other issues will be addressed by the Fund, in
the event it invests in such securities, in order to ensure that it distributes
sufficient income to preserve its status as a regulated investment company and
to avoid becoming subject to federal income or excise tax.
If the Fund invests in certain PIKs, zero coupon securities, or, in
general, any other securities with original issue discount (or with market
discount if the Fund elects to include market discount in income currently), the
fund must accrue income on such investments prior to the receipt of the
corresponding cash payments. However, the Fund must distribute, at least
annually, all or substantially all of its net income, including such accrued
income, to shareholders to qualify as a regulated investment company under the
Code and avoid Federal income and excise taxes. Therefore, the Fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing the cash, to satisfy
distribution requirements.
At the time of an investor's purchase of Fund shares, a portion of the
purchase price is often attributable to realized or unrealized appreciation in
the Fund's portfolio or undistributed taxable income of the Fund. Consequently,
subsequent distributions from such appreciation or income may be taxable to such
investor even if the net asset value of the investor's shares is, as a result of
the distributions, reduced below the investor's cost for such shares and the
distributions in reality represent a return of a portion of the investment.
Any loss realized by a shareholder upon the redemption of shares with a
tax holding period of six months or less will be treated as a long-term capital
loss to the extent of any amounts treated as distributions of long-term capital
gain with respect to such shares.
In addition, if Class A shares redeemed or exchanged have been held for
less than 91 days, (1) in the case of a reinvestment at net asset value, the
sales charge paid on such shares is not included in their tax basis under the
Code, and (2) in the case of an exchange, all or a portion of the sales charge
paid on such shares is not included in their tax basis under the Code, to the
extent a sales charge that would otherwise apply to the shares received is
reduced pursuant to the exchange privilege. In either case, the portion of the
sales charge not included in the tax basis of the shares redeemed or surrendered
in an exchange is included in the tax basis of the shares acquired in the
reinvestment or exchange. Losses on certain redemptions may be disallowed under
"wash sale" rules in the event of other investments in the Fund within a period
of 61 days beginning 30 days before and ending 30 days after a redemption or
other sale of shares.
For federal income tax purposes, the Fund is permitted to carry forward
a net capital loss in any year to offset net capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent net 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. On October 31, 1994, the Fund had a capital loss carryforward of
$16,086, which will expire in the year 2002.
Only a small portion, if any, of the Fund's dividends may qualify for
the 70% dividends-received deduction available to corporations, because the Fund
does not expect that it will generally receive any significant amount of
qualifying dividends, i.e., dividends from U.S domestic corporations. The Code
contains holding period requirements, debt-financing restrictions and other
limitations relating to any otherwise qualifying dividends.
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The Fund will be subject to withholding and other taxes imposed by
foreign countries (including, in the case of India and possibly other countries,
taxes on interest, dividends and capital gains, as described in the Prospectus)
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.
Qualified foreign taxes generally include taxes that would be treated
as income taxes under U.S. tax regulations but do not include most other taxes,
such as stamp taxes, securities transaction taxes, and similar taxes. If the
Fund makes the election described above, shareholders may deduct their pro rata
portion of qualified foreign taxes paid by the Fund in computing their income
subject to U.S. federal income taxation or, alternatively, use them as foreign
tax credits, subject to applicable limitations under the Code, against their
U.S. federal income taxes. Shareholders who do not itemize deductions for
federal income tax purposes will not, however, be able to deduct their pro rata
portion of qualified foreign taxes paid by the Fund, although such shareholders
will be required to include their shares of such taxes in gross income.
If a shareholder chooses to take a credit for the foreign taxes deemed
paid by such shareholder, the amount of the credit that may be claimed in any
year may not exceed the same proportion of the U.S. tax against which such
credit is taken which the shareholder's taxable income from foreign sources (but
not in excess of the shareholder's entire taxable income) bears to his entire
taxable income. For this purpose, long-term and short-term capital gains the
Fund realizes and distributes to shareholders will generally not be treated as
income from foreign sources in their hands, nor will distributions of certain
foreign currency gains subject to Section 988 of the Code and of any other
income realized by the Fund that is deemed, under the Code, to be U.S.-source
income in the hands of the Fund. This foreign tax credit limitation may also be
applied separately to certain specific categories of foreign-source income and
the related foreign taxes. As a result of these rules, which have different
effects depending upon each shareholder's particular tax situation, certain
shareholders may not be able to claim a credit for the full amount of their
proportionate share of the foreign taxes paid by the Fund. Shareholders who are
not liable for U.S. income taxes, including tax-exempt shareholders, will
ordinarily not benefit from this election. If the Fund does make the election,
it will provide required tax information to shareholders. If the Fund does not
make the election, it may deduct such taxes in computing its income available
for distribution to shareholders to satisfy applicable tax distribution
requirements.
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
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<PAGE>
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
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
amounts treated as ordinary dividends from the Fund and, unless an effective IRS
Form W-8 or authorized substitute is on file, to 31% backup withholding on
certain other payments from the Fund. 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.
B-24
<PAGE>
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.
On January 31, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc., 250
Vesey Street, World Financial Center, North Tower, New York, New York 10281
owned of record approximately 17.5% of the Fund's shares.
12. CERTAIN LIABILITIES
As a Delaware business trust, the Fund's operations are governed by its
Agreement and Declaration of Trust dated April 4, 1994. A copy of the Fund's
Certificate of Trust, also dated April 4, 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.
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.
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<PAGE>
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. As stated in the Prospectus, when the Fund invests in
initial public offerings of Indian issuers it may not know if it will receive
the total amount of securities for which it has subscribed. Such investments
will also be valued at fair value as determined in good faith by the Board of
Trustees, although the actual computations may be made by persons acting
pursuant to the direction of the Board.
The maximum offering price per Class A share is the net asset value per
Class A share, plus the maximum sales charge. Class B 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 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, provided that
withdrawals from Class B share accounts are limited to 10% of the value of the
account at the time the SWP is implemented. A designation of a third party to
receive checks requires an acceptable signature guarantee.
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
B-26
<PAGE>
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 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 and Pioneer Money Market Account, Inc., 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.
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.
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<PAGE>
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
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.
The average annual total returns for Class A and Class B shares of the
Fund for the period from June 23, 1994 (commencement of operations) through
October 31, 1994 were as follows: Class A shares (1.91)%, Class B shares
(2.17)%.
The total returns for Class A and Class B shares of the Funds for the
period from June 23, 1994 through October 31, 1994 were as follows: Class A
shares (1.91)%, Class B shares (2.26)%.
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");
International Finance Corporation Composite, an unmanaged index of foreign stock
markets including Latin America, East Asia, South Africa, Europe/Mid East and
B-28
<PAGE>
Africa; 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 October 31, 1994 were -1.91% and
- -2.26%, 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 - 7.54% and -6.17%,
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 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 funds.
B-29
<PAGE>
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 FactFone 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 audited financial statements of the Fund for the period June 23,
1994 (commencement of operations) through October 31, 1994 are attached hereto.
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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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 Be.
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.
- ---------------------------------
1. Rates all governmental bodies having $1,000,000 or more of debt
outstanding, unless adequate information is not available.
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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.
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.
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APPENDIX B
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. India is one of the world's most
dynamic and rapidly growing markets with liberalized pro-business government
policies and a huge, burgeoning middle class eager for consumer goods. Pioneer
India Fund is the first open-end U.S. mutual fund with both U.S. and Indian
advisers, providing global expertise with local perspective.
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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