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-32
APPENDIX B--Other Pioneer Information..........................B-37
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
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1. INVESTMENT POLICIES, 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.
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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
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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.
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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
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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
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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:
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(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,
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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.
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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
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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
B-12
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
B-13
<PAGE>
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
B-14
<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.
B-15
<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.
B-19
<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
its gains from the sale of stock, securities and certain other investments held
B-20
<PAGE>
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
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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
B-23
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affect the characterization as long-term or short-term of some capital gains and
losses realized by the Fund. Certain options, futures and forward contracts on
foreign currency may be subject to Section 988, described above, and accordingly
produce ordinary income or loss. Losses on certain options, futures or forward
contracts and/or offsetting positions (portfolio securities or other positions
with respect to which the Fund's risk of loss is substantially diminished by one
or more options, futures or forward contracts) may also be deferred under the
tax straddle rules of the Code, which may also affect the characterization of
capital gains or losses from straddle positions and certain successor positions
as long-term or short-term. The tax rules applicable to options, futures,
forward contracts and straddles may affect the amount, timing and character of
the Fund's income and loss and hence of distributions to shareholders. Certain
tax elections may be available that would enable the Fund to ameliorate some
adverse effects of the tax rules described in this paragraph.
Federal law requires that the Fund withhold (as "backup withholding")
31% of reportable payments, including dividends, capital gain dividends, and the
proceeds of redemptions (including exchanges) and repurchases, to shareholders
who have not complied with IRS regulations. In order to avoid this withholding
requirement, shareholders must certify on their Account Applications, or on
separate W-9 Forms, that their Social Security or other Taxpayer Identification
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.
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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
shareholders. In addition, the amounts received by a shareholder cannot be
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<PAGE>
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
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<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.
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Yields are calculated in accordance with standard formulas mandated by the
Securities and Exchange Commission.
In addition, by using a personal identification number ("PIN"),
shareholders may enter purchases, exchanges and redemptions, access their
account balance and last three transactions and may order a duplicate statement.
See "FactFoneSM" in the Prospectus for more information.
All performance numbers communicated through FactFoneSM represent past
performance; figures for all quoted bond funds include the maximum applicable
sales charge. A shareholder's actual yield and total return will vary with
changing market conditions. The value of Class A and Class B shares (except for
Pioneer money market funds, which seek a stable $1.00 share price) will also
vary and may be worth more or less at redemption than their original cost.
17. FINANCIAL STATEMENTS
The 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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MSCI EAFE MSCI Europe 14 MSCI World IFC Composite S&P500
Net of Taxes Net of Taxes Net of Taxes
%Total Return %Total Return %Total Return %Total Return %TR
- --------------------------------------------------------------------------------
Dec 1970 -11.66 -10.64 -3.09 N/A 4.01
Dec 1971 29.59 26.33 18.36 N/A 14.31
Dec 1972 36.35 14.40 22.48 N/A 18.98
Dec 1973 -14.92 -8.77 -15.24 N/A -14.66
Dec 1974 -23.16 -24.07 -25.47 N/A -26.47
Dec 1975 35.39 41.45 32.80 N/A 37.20
Dec 1976 2.54 -7.80 13.40 N/A 23.84
Dec 1977 18.06 21.90 0.68 N/A -7.18
Dec 1978 32.62 21.88 16.52 N/A 6.56
Dec 1979 4.75 12.31 10.95 N/A 18.44
Dec 1980 22.58 11.90 25.67 N/A 32.42
Dec 1981 -2.28 -12.46 -4.79 N/A -4.91
Dec 1982 -1.86 3.97 9.71 N/A 21.41
Dec 1983 23.69 20.96 21.93 N/A 22.51
Dec 1984 7.38 0.62 4.72 N/A 6.27
Dec 1985 56.16 78.93 40.56 27.74 32.16
Dec 1986 69.44 43.85 41.89 12.81 18.47
Dec 1987 24.63 3.66 16.16 13.53 5.23
Dec 1988 28.27 15.81 23.29 58.25 16.81
Dec 1989 10.54 28.5 16.61 54.67 31.49
Dec 1990 -23.45 -3.5 -17.02 -29.87 -3.17
Dec 1991 12.13 13.11 18.28 17.63 30.55
Dec 1992 -12.17 -4.71 -5.23 0.33 7.67
Dec 1993 32.56 29.28 22.50 68.18 9.99
Dec 1994 7.78 2.28 5.08 -0.76 1.31
Source for MSCI EAFE, IFC Composite, and S&P500: Ibbotson Associates
Source for MSCI Europe 14 and MSCI World: Lipper Analytical Services
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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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<PAGE>
INDEX DESCRIPTIONS
MSCI
Morgan Stanley Capital International Indices, developed by the Capital
International S.A., are based on share prices of some 1470 companies listed on
the stock exchanges around the world.
Countries in the MSCI EAFE Portfolio are: Australia; Austria; Belgium; Denmark;
Finland; France; Germany; HongKong; Italy; Japan; Netherlands; N.Zealand;
Norway; Singapore/Malaysia; Spain; Sweden; Switzerland; United Kingdom
Countries in the MSCI EUROPE 14 Portfolio are: Austria, Belgium, Denmark,
Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Spain, Sweden,
Switzerland, United Kingdom
Countries in the MSCI WORLD Portfolio are: Australia; Austria; Belgium; Canada;
Denmark; Finland; France; Germany; Hong Kong; Italy; Japan; Netherlands;
N.Zealand; Norway; Singapore/Malaysia; Spain; Sweden; Switzerland; United
Kingdom; United States.
INTERNATIONAL FINANCE CORPORATION COMPOSITE
An index representing the performance of a composite of Latin America
(Argentina, Brazil, Chile, Columbia, Mexico, Peru, Venezuela), East Asia (China,
Korea, Philippines, Taiwan), South Asia (India, Indonesia, Malaysia, Pakistan,
Sri Lanka, Thailand), Europe/Mideast/Africa (Greece, Hungary, Jordan, Nigeria,
Poland, Portugal, Turkey, Zimbabwe).
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the
United States; prior to March 1957 it consisted of 90 of the largest stocks.
Source for MSCI EAFE, IFC Composite, and S&P500: Ibbotson Associates
Source for MSCI Europe 14 and MSCI World: Lipper Analytical Services
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REAL GROSS DOMESTIC PRODUCT FOR INDIA AND THE WORLD
Year India * World **
1991 1.1 2.3
1992 4.0 3.3
1993 3.9 3.2
1994(e) 5.1 3.6
1995(e) 5.7 3.8
* Source: Consensus Forecasts, December 1994. Real GDPs are for fiscal years
beginning April 1st.
** Source: Morgan Stanley & Company International Ltd.
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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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