PIONEER SMALL COMPANY FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A and Class B Shares
November 1, 1995
(revised as of May 28, 1996)
This Statement of Additional Information (Part B of the Registration Statement)
is not a Prospectus, but should be read in conjunction with the Prospectus,
dated November 1, 199 (revised as of May 28, 1995). 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 Pioneer Small Company Fund (the "Fund") at 60 State
Street, Boston, Massachusetts 02109. The most recent semi-annual report is
attached to this Statement of Additional Information and is hereby incorporated
by reference.
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions..............................2
2. Management of the Fund...........................................11
3. Investment Adviser...............................................15
4. Underwriting Agreement and Distribution Plans....................16
5. Shareholder Servicing/Transfer Agent.............................18
6. Custodian........................................................18
7. Principal Underwriter............................................19
8. Independent Public Accountants...................................19
9. Portfolio Transactions...........................................19
10. Tax Status and Dividends.........................................21
11. Description of Shares............................................24
12. Certain Liabilities..............................................25
13. Letter of Intention..............................................26
14. Systematic Withdrawal Plan.......................................26
15. Determination of Net Asset Value.................................27
16. Investment Results...............................................28
17. Financial Statements.............................................30
Appendix A.......................................................A-31
Appendix B.......................................................B-36
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
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1. INVESTMENT POLICIES AND RESTRICTIONS
The Fund's current prospectus (the "Prospectus") presents the investment
objectives and the principal investment policies of the Fund. Additional
investment policies and a further description of some of the policies described
in the Prospectus appear below.
The following policies and restrictions supplement those discussed in the
Prospectus. Whenever an investment policy or restriction states a maximum
percentage of the Fund's assets that may be invested in any security or presents
a policy regarding quality standards, this standard or other restrictions shall
be determined immediately after and as a result of the Fund's investment.
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered in determining whether
the investment complies with the Fund's investment objectives and policies.
Lending of Portfolio Securities
The Fund may lend portfolio securities to member firms of the New York Stock
Exchange, under agreements which would require that the loans be secured
continuously by collateral in cash, cash equivalents or United States (U.S.)
Treasury Bills maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned as well as the benefit of an increase in the market value of the
securities loaned and would also receive compensation based on investment of the
collateral. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of consent on a material matter affecting the
investment.
As with other extensions of credit there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. The Fund will lend portfolio securities only to firms which have
been approved in advance by the Board of Trustees, which will monitor the
creditworthiness of any such firms. At no time would the value of the securities
loaned exceed 30% of the value of the Fund's total assets.
Forward Foreign Currency Transactions
The Fund may engage in foreign currency transactions. These transactions may be
conducted on a spot, i.e., cash basis, at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market. The Fund also has
authority to deal in forward foreign currency exchange contracts involving
currencies of the different countries in which the Fund will invest as a hedge
against possible variations in the foreign exchange rate between these
currencies and the U.S. dollar. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. The Fund's dealings in forward
foreign currency contracts will be limited to hedging either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
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of forward foreign currency contracts with respect to specific receivables or
payables of the Fund, accrued in connection with the purchase and sale of their
portfolio securities denominated in foreign currencies. Portfolio hedging is the
use of forward foreign currency contracts to offset portfolio security positions
denominated or quoted in such foreign currencies. There is no guarantee that the
Fund will be engaged in hedging activities when adverse exchange rate movements
occur. The Fund will not attempt to hedge all of its foreign portfolio
positions, and the Fund will enter into such transactions only to the extent, if
any, deemed appropriate by the investment adviser. The Fund will not enter into
speculative forward foreign currency contracts.
If the Fund enters into a forward contract to purchase foreign currency, the
custodian bank will segregate cash or high grade liquid debt securities in a
separate account in an amount equal to the value of the total assets committed
to the consummation of such forward contract. Those assets will be valued at
market daily and if the value of the assets in the separate account declines,
additional cash or securities will be placed in the accounts so that the value
of the account will equal the amount of the Fund's commitment with respect to
such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also limit the opportunity
for gain if the value of the hedged currency should rise. Moreover, it may not
be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level they anticipate. The cost to the Fund of
engaging in foreign currency transactions varies with such factors as the
currency involved, the size of the contract, the length of the contract period
and the market conditions then prevailing. Since transactions in foreign
currency and forward contracts are usually conducted on a principal basis, no
fees or commissions are involved. The Fund may close out a forward position in a
currency by selling the forward contract or by entering into an offsetting
forward contract.
Options on Securities
The Fund may write (sell) covered call options on certain portfolio securities,
but options may not be written on more than 25% of the aggregate market value of
any single portfolio security (determined each time a call is sold as of the
date of such sale). The Fund does not intend to write covered call options on
portfolio securities with an aggregate market value exceeding 5% of the Fund's
total assets in the coming year. As the writer of a call option, the Fund
receives a premium less commission, and, in exchange, foregoes the opportunity
to profit from increases in the market value of the security covering the call
above the sum of the premium and the exercise price of the option during the
life of the option. The purchaser of such a call written by the Fund has the
option of purchasing the security from the Fund at the option price during the
life of the option. Portfolio securities on which options may be written are
purchased solely on the basis of investment considerations consistent with the
Fund's investment objectives. All call options written by the Fund are covered;
the Fund may cover a call option by owning the securities subject to the option
so long as the option is outstanding or using the other methods described below.
In addition, a written call option may be covered by purchasing an offsetting
option or any other option which, by virtue of its exercise price or otherwise,
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covers the Fund's net exposure on its written option position. The Fund does not
consider a security covered by a call option to be "pledged" as that term is
used in the Fund's policy which limits the pledging or mortgaging of its assets.
The Fund may purchase call options on securities for entering into a "closing
purchase transaction," i.e., a purchase of a call option on the same security
with the same exercise price and expiration date as a "covered" call already
written by the Fund. These closing sale transactions enable the Fund to
immediately realize gains or minimize losses on its options positions. There is
no assurance that the Fund will be able to effect such closing purchase
transactions at a favorable price. If the Fund cannot enter into such a
transaction it may be required to hold a security that it might otherwise have
sold. The Fund's portfolio turnover may increase through the exercise of options
if the market price of the underlying securities goes up and the Fund has not
entered into a closing purchase transaction. The commission on purchase or sale
of a call option is higher in relation to the premium than the commission in
relation to the price on purchase or sale of the underlying security.
Options on Securities Indices
The Fund may purchase call and put options on securities indices for the purpose
of hedging against the risk of unfavorable price movements adversely affecting
the value of the Fund's securities or securities which the Fund intends to buy.
Securities index options will not be used for speculative purposes.
The Fund may only purchase and sell options that are traded only in a regulated
market which is open to the public. Currently, options on stock indices are
traded only on national securities exchanges or over-the-counter, both in the
United States and in foreign countries. A securities index fluctuates with
changes in the market values of the securities included in the index. For
example, some stock index options are based on a broad market index such as the
S&P 500 or the Value Line Composite Index in the U.S., the Nikkei in Japan or
the FTSE 100 in the United Kingdom. Index options may also be based on a
narrower market index such as the S&P 100 or on an industry or market segment
such as the AMEX Oil and Gas Index or the Computer and Business Equipment Index.
The Fund may purchase put options in order to hedge against an anticipated
decline in securities prices that might adversely affect the value of the Fund's
portfolio securities. If the Fund purchases a put option on a securities index,
the amount of the payment it would receive upon exercising the option would
depend on the extent of any decline in the level of the securities index below
the exercise price. Such payments would tend to offset a decline in the value of
the Fund's portfolio securities. However, if the level of the securities index
increases and remains above the exercise price while the put option is
outstanding, the Fund will not be able to profitably exercise the option and
will lose the amount of the premium and any transaction costs. Such loss may be
partially offset by an increase in the value of the Fund's portfolio securities.
The Fund may purchase call options on securities indices in order to remain
fully invested in a particular foreign stock market or to lock in a favorable
price on securities that it intends to buy in the future. If the Fund purchases
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a call option on a securities index, the amount of the payment it receives upon
exercising the option depends on the extent of an increase in the level of other
securities indices above the exercise price. Such payments would in effect allow
the Fund to benefit from securities market appreciation even though it may not
have had sufficient cash to purchase the underlying securities. Such payments
may also offset increases in the price of securities that the Fund intends to
purchase. If, however, the level of the securities index declines and remains
below the exercise price while the call option is outstanding, the Fund will not
be able to exercise the option profitably and will lose the amount of the
premium and transaction costs. Such loss may be partially offset by a reduction
in the price the Fund pays to buy additional securities for its portfolio.
The Fund may sell the securities index option it has purchased or write a
similar offsetting securities index option in order to close out a position in a
securities index option which it has purchased. These closing sale transactions
enable the Fund to immediately realize gains or minimize losses on their
respective options positions. However, there is no assurance that a liquid
secondary market on an options exchange will exist for any particular option, or
at any particular time, and for some options no secondary market may exist. In
addition, securities index prices may be distorted by interruptions in the
trading of securities of certain companies or of issuers in certain industries,
or by restrictions that may be imposed by an exchange on opening or closing
transactions, or both, which would disrupt trading in options on such indices
and preclude the Fund from closing out its options positions. If the Fund is
unable to effect a closing sale transaction with respect to options that it has
purchased, it would have to exercise the options in order to realize any profit.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that can not be reflected in
the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions.
In addition to the risks of imperfect correlation between the Fund's respective
portfolio and the index underlying the option, the purchase of securities index
options involves the risk that the premium and transaction costs paid by the
Fund in purchasing an option will be lost. This could occur as a result of
unanticipated movements in prices of the securities comprising the securities
index on which the option is based.
Futures Contracts and Options on Futures Contracts
To hedge against changes in securities prices or currency exchange rates, the
Fund may purchase and sell various kinds of futures contracts, and purchase and
write (sell) call and put options on any of such futures contracts. The Fund may
also enter into closing purchase and sale transactions with respect to any of
such contracts and options. The futures contracts may be based on various
securities (such as U.S. Government securities), securities indices, foreign
currencies and other financial instruments and indices. The Fund will engage in
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futures and related options transactions for bona fide hedging and non-hedging
purposes as described below. All futures contracts entered into by the Fund are
traded on U.S. exchanges or boards of trade that are licensed and regulated by
the Commodity Futures Trading Commission (the "CFTC") or on foreign exchanges.
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, the Fund can
seek to offset a decline in the value of its current portfolio securities
through the sale of futures contracts. When interest rates are falling or
securities prices are rising, the Fund, through the purchase of futures
contracts, can attempt to secure better rates or prices than might later be
available in the market when it effects anticipated purchases. Similarly, the
Fund can sell futures contracts on a specified currency to protect against a
decline in the value of such currency and a decline in the value of its
portfolio securities which are denominated in such currency. The Fund can
purchase futures contracts on a foreign currency to establish the price in U.S.
dollars of a security denominated in such currency that the Fund has acquired or
expects to acquire.
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
on securities or currency are traded guarantees that, if still open, the sale or
purchase will be performed on the settlement date.
Hedging Strategies. Hedging, by use of futures contracts, seeks to establish
with more certainty the effective price, rate of return and currency exchange
rate on portfolio securities and securities that the Fund owns or proposes to
acquire. The Fund may, for example, take a "short" position in the futures
market by selling futures contracts in order to hedge against an anticipated
rise in interest rates or a decline in market prices or foreign currency rates
that would adversely affect the value of the Fund's portfolio securities. Such
futures contracts may include contracts for the future delivery of securities
held by the Fund or securities with characteristics similar to those of the
Fund's portfolio securities. Similarly, the Fund may sell futures contracts in a
foreign currency in which its portfolio securities are denominated or in one
currency to hedge against fluctuations in the value of securities denominated in
a different currency if there is an established historical pattern of
correlation between the two currencies. If, in the opinion of Pioneering
Management Corporation ("PMC"), there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of their hedging
strategies. Although under some circumstances prices of securities in the Fund's
portfolio may be more or less volatile than prices of such futures contracts,
PMC will attempt to estimate the extent of this volatility difference based on
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historical patterns and compensate for any such differential by having the Fund
enter into a greater or lesser number of futures contracts or by attempting to
achieve only a partial hedge against price changes affecting the Fund's
portfolio securities. When hedging of this character is successful, any
depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of the Fund's portfolio securities would
be substantially offset by a decline in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This may be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices or rates that are currently available.
Options on Futures Contracts. The acquisition of put and call options on futures
contracts will give the Fund the right (but not the obligation) for a specified
price to sell or to purchase, respectively, the underlying futures contract at
any time during the option period. As the purchaser of an option on a futures
contract, the Fund obtains the benefit of the futures position if prices move in
a favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium, to sell a
futures contract (if the option is exercised), which may have a value higher
than the exercise price. Conversely, the writing of a put option on a futures
contract generates a premium which may partially offset an increase in the price
of securities that the Fund intends to purchase. However, the Fund becomes
obligated to purchase a futures contract (if the option is exercised) which may
have a value lower than the exercise price. Thus, the loss incurred by the Fund
in writing options on futures is potentially unlimited and may exceed the amount
of the premium received. The Fund will incur transaction costs in connection
with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
The Fund may use options on futures contracts for bona fide hedging or
non-hedging purposes as discussed below.
Other Considerations. The Fund will engage in futures and related options
transactions only for bona fide hedging or non-hedging purposes in accordance
with CFTC regulations which permit principals of an investment company
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
to engage in such transactions without registering as commodity pool operators.
The Fund is not permitted to engage in speculative futures trading. The Fund
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will determine that the price fluctuations in the futures contracts and options
on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or which the Fund expects to
purchase. Except as stated below, the Fund's futures transactions will be
entered into for traditional hedging purposes -- i.e., futures contracts will be
sold to protect against a decline in the price of securities (or the currency in
which they are denominated) that the Fund owns, or futures contracts will be
purchased to protect the Fund against an increase in the price of securities (or
the currency in which they are denominated) it intends to purchase. As evidence
of this hedging intent, the Fund expects that on 75% or more of the occasions on
which it takes a long futures or option position (involving the purchase of
futures contracts), the Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities or assets denominated in
the related currency in the cash market at the time when the futures or option
position is closed out. However, in particular cases, when it is economically
advantageous for the Fund to do so, a long futures position may be terminated or
an option may expire without the corresponding purchase of securities or other
assets.
As an alternative to literal compliance with the bona fide hedging definition, a
CFTC regulation permits the Fund to elect to comply with a different test, under
which the sum of the amounts of initial margin deposits on the Fund's existing
non-hedging futures contracts and premiums paid for options on futures entered
into for non-hedging purposes (net of the amount the positions are "in the
money") would not exceed 5% of the market value of the Fund's total assets. The
Fund will engage in transactions in futures contracts and related options only
to the extent such transactions are consistent with the requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), for maintaining its
qualifications as a regulated investment company for federal income tax
purposes.
Transaction costs associated with futures contracts and related options involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating the Fund to purchase securities or currencies, require the
Fund to segregate assets to cover such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while the Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates, securities prices or currency exchange
rates may result in a poorer overall performance for the Fund than if it had not
entered into any futures contracts or options transactions. In the event of an
imperfect correlation between a futures position and a portfolio position which
is intended to be protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss. It is not possible to hedge fully or
perfectly against the effect of currency fluctuations on the value of foreign
securities because currency movements impact the value of different securities
in differing degrees.
Other Policies and Risks
It is the policy of the Fund not to concentrate its investments in securities of
companies in any particular industry. In the opinion of the staff of the
Securities and Exchange Commission (the "Commission"), investments are deemed to
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be concentrated in a particular industry if such investments constitute 25% or
more of the Fund's total assets. The 1940 Act provides that the policy of the
Fund with respect to concentration is a fundamental policy.
Investment Restrictions
Fundamental Investment Restrictions. The Fund has adopted certain additional
investment restrictions which may not be changed without the affirmative vote of
the holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities. The Fund may not:
(1)......Issue senior securities, except as permitted by paragraphs
(2), (6) and (7) below. For purposes of this restriction, the issuance of shares
of beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments, forward foreign exchange contracts, repurchase agreements and
reverse repurchase agreements entered into in accordance with the Fund's
investment policy, and the pledge, mortgage or hypothecation of the Fund's
assets within the meaning of paragraph (3) below are not deemed to be senior
securities.
(2)......Borrow money, except from banks as a temporary measure to
facilitate the meeting of redemption requests or 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 as it may deemed to be on
underwriter in a sale of restricted securities held in its portfolio.
(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.
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(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.
It is the fundamental policy of the Fund not to concentrate its investments in
securities of companies in any particular industry. In the opinion of the
Commission, investments are concentrated in a particular industry if such
investments aggregate 25% or more of the Fund's total assets. The Fund's policy
does not apply to investments in U.S. Government securities.
The Fund does not intend to enter into any reverse repurchase agreement, lend
portfolio securities or invest in securities index put and call warrants, as
described in fundamental investment restrictions (2), (6) and (7) above, during
the coming year.
Non-fundamental Investment Restrictions. The following restrictions have been
designated as non-fundamental and may be changed by a vote of the Fund's Board
of Trustees without approval of shareholders.
The Fund may not:
(1) purchase securities for the purpose of controlling management of
other companies;
(2) purchase or retain the securities of any company if officers of the
Fund or Trustees of the Fund, or officers and directors of its adviser or
principal underwriter, individually own more than one-half of 1% of the
securities of such company or collectively own more than 5% of the securities of
such company; or
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(3) invest in any security which is illiquid, including any repurchase
agreement maturing in more than seven days, and any securities of any enterprise
which has a business history of less than three years, including the operation
of any predecessor business to which it has succeeded if more than 15% of the
net assets of the Fund, taken at market value, would be invested in such
securities.
In order to register its shares in certain jurisdictions, the Fund has agreed to
adopt certain additional investment restrictions, which are non-fundamental and
which may be changed by a vote of the Fund's Board of Trustees. Pursuant to
these additional investment restrictions, the Fund may not (i) invest more than
2% of its assets in warrants, valued at the lower of cost or market, provided
that it may invest up to 5% of its total assets, as so valued, in warrants
listed on the New York or American Stock Exchanges, (ii) invest in interests in
oil, gas or other mineral exploration or development leases or programs, (iii)
invest in real estate investment trusts or real estate limited partnerships. The
Fund does not intend to borrow money during the coming year, and in any case
would do so only as a temporary measure for extraordinary purposes or to
facilitate redemptions.
2. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. The executive officers of the Fund are responsible for the Fund's
operations, which is managed by PMC. The Trustees and executive officers of the
Fund are listed below, together with their principal occupations during the past
five years. An asterisk indicates those Trustees who are "interested persons" of
the Fund within the meaning of the 1940 Act.
JOHN F. COGAN, JR.,* President and Director of The Pioneer Group,
Chairman of the Board, Inc.("PGI");Chairman and a Director of
President and Trustee Pioneering Management Corporation ("PMC"),
Pioneer Funds Distributor, Inc. ("PFD");
Director of Pioneering Services Corporation
("PSC"), Pioneer Capital Corporation ("PCC") and
Forest-Starma ( a Russian corporation);
President and Director of Pioneer Plans
Corporation ("PPC"), Pioneer Investment Corp.
("PIC"), Pioneer Metals and Technology, Inc.
("PMT"), Pioneer International Corp. ("Pintl"),
Luscina, Inc. Pioneer First Russia, Inc. ("First
Russia"), Pioneer Omega, Inc. ("Omega") and
Theta Enterprises, Inc.; Chairman, President and
a Director of Pioneer Goldfields Limited
("PGL"); Chairman of the Supervisory Board of
Pioneer Fonds Marketing GMbH ("Pioneer GmbH");
Member of the Supervisory Board of Pioneer First
Polish Trust Fund Joint Stock Company ("PFPT");
Chairman and President of all the Pioneer Funds
and Chairman and Partner, Hale and Dorr (counsel
to the Fund).
RICHARD H. EGDAHL, M.D., Professor of Management, Boston University
Trustee School of Management, since 1988; Professor of
Boston University Public Health, Boston University School of
Health Policy Public Health; Professor of Surgery, Boston of
Institute University School Medicine and Boston University
53 Bay State Road Health Policy Institute; Director, Boston
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Boston, Massachusetts Executive Vice President and Vice Chairman of
the Board, University Hospital; Academic Vice
University Medical Center; 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); Springer-Verlag New York, Inc.
(publisher); Honorary Trustee, Franciscan
Children's Hospital and Trustee of all the
Pioneer mutual funds.
MARGARET B.W. GRAHAM, Manager of Research Operations, Xerox Palo Alto
Trustee Research Center, since September 1991;
The Keep Professor of Operations Management and
Post Office Box 110 Management of Technology, Boston University
Little Deer Isle, Maine School of Management ("BUSM"), since 1989;
Associate Dean, BUSM, 1988 to 1990; previously,
Associate Professor, Department of Operations
Management, BUSM and Trustee of all the Pioneer
mutual funds, except Pioneer Variable Contracts
Trust.
JOHN W. KENDRICK, Professor Emeritus and Adjunct Scholar, George
Trustee Washington University; Economic Consultant
6363 Waterway Drive and Director, American Productivity and Quality
Falls Church, Virginia Center; American Enterprise Institute and
Trustee of all the Pioneer mutual funds, except
Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, President, Newbury, Piret & Company, Inc.
Trustee (a merchant banking firm); Trustee of all the
One Boston Place, Pioneer mutual funds.
Suite 2363
Boston, Massachusetts
DAVID D. TRIPPLE*, Executive Vice President and Director of PGI and
Trustee and Executive PWA since 1993; Director of PFD, since 1989;
Vice President Director of PCC, PIC, Pintl, and Corporation;
President (since 1993); Director, President and,
Chief Investment Officer of PMC and Trustee of
all the Pioneer mutual funds.
STEPHEN K. WEST, Partner, Sullivan & Cromwell (a law firm);
Trustee Trustee, The Winthrop Focus Funds (mutual funds)
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125 Broad Street and Trustee of all the Pioneer mutual funds.
New York, New York
JOHN WINTHROP, President, John Winthrop & Co., Inc. (a private
Trustee investment firm); Director of NUI Corp; Trustee
One North Adgers Wharf of Alliance Capital Reserves, Alliance
Charleston, South Carolina Government Reserves and Alliance Tax Exempt
Reserves and Trustee of all the Pioneer mutual
funds, except Pioneer Variable Contracts Trust.
WILLIAM H. KEOUGH, Senior Vice President, Chief Financial Officer
Treasurer and Treasurer of PGI; Treasurer of PFD, PMC,
PSC, PCC, PIC, PIntl, PMT, PGL, PWA and Pioneer
SBIC Corporation; Treasurer and Director of PPC
and Treasurer of all the Pioneer mutual funds..
JOSEPH P. BARRI, Secretary of PGI, PMC, PPC, PIC, PIntl, PMT,and
Secretary and PCC; Clerk of PFD and PSC; Partner, Hale and
Dorr (counsel to the Fund) and Secretary of all
the Pioneer mutual funds.
ERIC W. RECKARD, Manager of Fund Accounting and Compliance of PMC
Assistant Treasurer since May, 1994; Manager of Auditing and
Business Analysis of PGI prior to May 1994 and
Assistant Treasurer of all the Pioneer mutual
funds..
ROBERT P. NAULT, General Counsel of PGI since 1995; formerly of
Assistant Secretary Hale and Dorr (counsel to the Fund) where he
most recently served as a junior partner and
Assistant Secretary of all the Pioneer mutual
funds..
WARREN J. ISABELLE, Director of Research and Vice President of PMC.
Vice President
Each of the above (except Mr. Isabelle) is also an officer and/or Trustee or
Director of the Pioneer mutual funds listed below. The Fund's Agreement and
Declaration of Trust (the "Declaration of Trust") provides that the holders of
two-thirds of its outstanding shares may vote to remove a Trustee of the Fund at
any special meeting of shareholders. See "Description of Shares" below. The
business address of all officers is 60 State Street, Boston, Massachusetts
02109.
As of the date of this SAI, all of the outstanding capital stock of PMC and PSC
is owned by PGI, a publicly-owned Delaware corporation, and all of the
outstanding capital stock of PFD is indirectly owned by PGI. The table below
lists all the Pioneer mutual funds currently offered to the public and the
investment adviser and principal underwriter for each fund.
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Investment Principal
Fund Name Adviser Underwriter
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Three PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer International Growth Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Short-Term Income Fund PMC PFD
Pioneer Income Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
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 Variable Contracts Trust PMC **
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* This fund is a closed-end fund.
** 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.
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 on 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 plus $120 per meeting attended to each Trustee
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who is not affiliated with PMC, PFD or PGI and pays an annual trustees' fee of
$500 plus expenses to each Trustee affiliated with PMC, PFD or PGI. Any such
fees and expenses paid to affiliates or interested persons of PMC, PFD or PGI
are reimbursed to the Fund under its Management Contract.
The following table sets forth certain information with respect to the estimated
compensation of each Trustee of the Fund for the fiscal year ending October 31,
1996:
Pension or
Retirement Total
Benefits Compensation
Compensation Accrued as from Fund and
Aggregate Part of Pioneer Family
Name of Trustee from the Fund* Fund's Expenses of Funds**
John F. Cogan, Jr. $ 500 $0 $11,500
Richard H. Egdahl, M.D. 1,940 0 $62,000
Margaret B.W. Graham 1,940 0 $60,000
John W. Kendrick 1,940 0 $60,000
Marguerite A. Piret 2,040 0 $74,000
David D. Tripple 500 0 $11,500
Stephen K. West 2,040 0 $68,000
John Winthrop 2,040 0 $66,000
----- - ------
$12,940 0 $413,000
- ----------------------------------------------------------------------------
* As of Fund's fiscal year end.
** Estimated as of December 31, 1995 (calendar year end for all Pioneer mutual
funds).
3. INVESTMENT ADVISER
The Fund has contracted with PMC, 60 State Street, Boston, Massachusetts, to act
as its investment adviser. A description of the services provided to the Fund
under its management contract and the expenses paid by the Fund under the
contract is set forth in the Prospectus under the caption "Management of the
Fund."
The term of the management contract is one year and is renewable annually 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). The vote must be 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 upon sixty days' written
notice by vote of the Board of Directors or Trustees or a majority of the
outstanding voting securities. Pursuant to the management contract, PMC will not
be liable for any error of judgment or mistake of law or for any loss sustained
by reason of the adoption of any investment policy or the purchase, sale or
retention of any securities on the recommendation of PMC. PMC, however, is not
protected against liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the respective management
contract.
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<PAGE>
As compensation for its management services and expenses incurred, PMC is
entitled to a management fee from the Fund at the rate of 0.85% per annum of he
Fund's average daily net assets. The fee is normally computed and accrued daily
and paid monthly.
PMC has agreed not to impose any management fees and make other arrangements, if
necessary, to limit expenses for the Fund's Class A shares to not more than
1.75% of such Class's average net assets. The management fee attributable to the
fund's Class B shares will not be imposed to the same extent that it is not
imposed for Class A shares. This agreement is temporary and voluntary and may be
terminated at any time by PMC.
See "Expense Information" in the Prospectus.
The expense of organizing the Fund and initially registering its shares under
federal and state securities laws are being charged to the Fund's operations, as
an expense, over a period not to exceed 60 months from the Fund's inception date
If any of the original shares are redeemed by any holder thereof prior to the
end of the amortization period, the redemption proceeds will be decreased by the
pro rata share of the unamortized expenses as of the date of redemtption. The
pro rata shares derived by dividing the number of original shares redeemed by
the total number of orginal shares outstanding at thetime of redemption.
4. UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS
The Fund entered into an Underwriting Agreement with PFD. The Underwriting
Agreement will continue from year to year if annually approved by the Trustees.
The Underwriting Agreement provides that PFD will bear expenses for the
distribution of the Fund's shares, except for expenses incurred by PFD for which
it is reimbursed by the Fund under the Plan. PFD bears all expenses it incurs in
providing services under the Underwriting Agreement. Such expenses include
compensation to its employees and representatives and to securities dealers for
distribution related services performed for the Fund. PFD also pays certain
expenses in connection with the distribution of the Fund's shares, including the
cost of preparing, printing and distributing advertising or promotional
materials, and the cost of printing and distributing prospectuses and
supplements to prospective shareholders. The Fund bears the cost of registering
its shares under federal and state securities law and the laws of certain
foreign countries. 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 has adopted a plan of distribution pursuant to Rule 12b-1 under the
1940 Act with respect to its Class A shares (the "Class A Plan") and a plan of
distribution with respect to its Class B shares (the "Class B Plan") (together,
the "Plans").
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 Fund 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 each
Prospectus. The expenses of the Fund pursuant to the Class A Plan are accrued on
a fiscal year basis and may not exceed, with respect to Class A shares, the
annual rate of 0.25% of the Fund's average annual net assets attributable to
Class A.
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<PAGE>
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 in consideration of personal services and/or
account maintenance services rendered by the dealer with respect to Class B
shares. PFD will advance to dealers the first-year service fee at a rate equal
to 0.25% of the amount invested. As compensation therefor, PFD may retain the
service fee paid by the Fund with respect to such shares for the first year
after purchase. Dealers will become eligible for additional service fees with
respect to such shares commencing in the thirteenth month following purchase.
Dealers may from time to time be required to meet certain other criteria in
order to receive service fees. PFD or its affiliates are entitled to retain all
service fees payable under the Class B Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class B Plan is to
compensate PFD for its distribution services to the Fund. PFD pays commissions
to dealers as well as expenses of printing prospectuses and reports used for
sales purposes, expenses with respect to the preparation and printing of sales
literature and other distribution-related expenses, including, without
limitation, the cost necessary to provide distribution-related services, or
personnel, travel office expenses and equipment. The Class B Plan also provides
that PFD will receive all contingent deferred sales charges ("CDSCs")
attributable to Class B shares. (See "Distributions Plans" in the Prospectus.)
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
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<PAGE>
persons of the Fund, as defined in the 1940 Act (none of whom had or have any
direct or indirect financial interest in the operation of the Plans), 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 each Fund and their current
and future shareholders. Under their terms, the Plans remain in effect from year
to year provided such continuance is approved annually by vote of the Trustees
in the manner described above. The Plans may not be amended to increase
materially the annual percentage limitation of average net assets which may be
spent for the services described therein without approval of the shareholders of
the Fund affected thereby, and material amendments of the Plans must also be
approved by the Trustees in the manner described above. A Plan may be terminated
at any time, without payment of any penalty, by vote of the majority of the
Trustees who are not interested persons of the Fund and have no direct or
indirect financial interest in the operations of the Plan, or by a vote of a
majority of the outstanding voting securities of the respective Class of the
Fund (as defined in the 1940 Act). A Plan will automatically terminate in the
event of its assignment (as defined in the 1940 Act).
5. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston, Massachusetts, to act
as shareholder servicing and transfer agent for the Fund. This contract
terminates if assigned and may be terminated without penalty by either party
upon ninety days' written notice by vote of its Board of Directors or Trustees
or a majority of its outstanding voting securities.
Under the terms of its contract with the Fund, PSC services shareholder
accounts, and its duties include: (i) processing sales, redemptions and
exchanges of shares of the Fund; (ii)distributing dividends and capital gains
associated with Fund portfolio accounts; and (iii)maintaining account records
and responding to shareholder inquiries.
PSC receives an annual fee of $22.00 per each Class A and Class B shareholder
account from the Fund as compensation for the services described above. PSC is
also reimbursed by the Fund for its cash out-of-pocket expenditures. The annual
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.
6. CUSTODIAN
Brown Brothers Harriman & Co. (the "Custodian") is the custodian of the Fund's
assets. The Custodian's responsibilities include safekeeping and controlling the
Fund's cash and securities, handling the receipt and delivery of securities, and
collecting interest and dividends on the Fund's investments. The Custodian does
not determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities, including
repurchase agreements, issued by the Custodian and may deal with the Custodian
as a principal in securities transactions. Portfolio securities may be deposited
into the Federal Reserve-Treasury Department Book Entry System or the Depository
Trust Company.
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<PAGE>
7. PRINCIPAL UNDERWRITER
PFD serves as the principal underwriter for the Fund in connection with the
continuous offering of the Class A and Class B shares of 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 (other than
municipal debt securities issued by state political subdivisions or their
agencies or instrumentalities) provided (i)the securities meet the investment
objectives and policies of the Fund; (ii)the securities are acquired by the Fund
for investment and not for resale; (iii)the securities are not restricted as to
transfer either by law or liquidity of market; and (iv)the securities have a
value which is readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange or the New
York Stock Exchange or the Nasdaq National Market.
8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP is the Fund's independent public accountants, providing
audit services, tax return review, and assistance and consultation with respect
to the preparation of filings with the Commission.
9. PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on behalf
of the Fund by PMC pursuant to authority contained in the Fund's management
contract. In selecting brokers or dealers, PMC will consider various relevant
factors, including, but not limited to, the size and type of the transaction;
the nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial condition
of the dealer; the dealer's execution services rendered on a continuing basis;
and the reasonableness of any dealer spreads.
PMC may select broker-dealers which provide brokerage and/or research services
to the Fund and/or other investment companies managed by PMC. In addition, if
PMC determines in good faith that the amount of commissions charged by a
broker-dealer is reasonable in relation to the value of the brokerage and
research services provided by such broker, the Fund may pay commissions to such
broker-dealer in an amount greater than the amount another firm may charge. Such
services may include advice concerning the value of securities; the advisability
of investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). PMC maintains a listing of broker-dealers who provide such services
on a regular basis. However, because it is anticipated that many transactions on
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behalf of the Fund and other investment companies managed by PMC are placed with
broker-dealers (including broker-dealers on the listing) without regard to the
furnishing of such services, it is not possible to estimate the proportion of
such transactions directed to such dealers solely because such services were
provided.
The research received from broker-dealers may be useful to PMC in rendering
investment management services to the Fund as well as other investment companies
managed by PMC, although not all such research may be useful to the Fund.
Conversely, such information provided by brokers or dealers who have executed
transaction orders on behalf of such other PMC clients may be useful to PMC in
carrying out its obligations to the Fund. The receipt of such research has not
reduced PMC's normal independent research activities; however, it enables PMC to
avoid the additional expenses which might otherwise be incurred if it were to
attempt to develop comparable information through its own staff.
In circumstances where two or more broker-dealers offer comparable prices and
executions, preference may be given to a broker-dealer which has sold shares of
the Fund as well as shares of other investment companies or accounts managed by
PMC. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the Fund.
The Trustees periodically review PMC's performance of its responsibilities in
connection with the placement of portfolio transactions on behalf of the Fund.
In addition to the Fund, PMC acts as investment adviser to other Pioneer mutual
funds and certain private accounts with investment objectives similar to those
of the Fund. Securities frequently meet the investment objectives of the Fund,
such other funds and such private accounts. In such cases, the decision to
recommend a purchase to one fund or account rather than another is based on a
number of factors. The determining factors in most cases are the amount of
securities of the issuer then outstanding, the value of those securities and the
market for them. Other factors considered in the investment recommendations
include other investments which each fund or account presently has in a
particular industry and the availability of investment funds in each fund or
account.
It is possible that at times identical securities will be held by more than one
fund and/or account. However, positions in the same issue may vary and the
length of time that any fund or account may choose to hold its investment in the
same issue may likewise vary. To the extent that the Fund, another mutual fund
in the Pioneer group or a private account managed by PMC may not be able to
acquire as large a position in such security as it desires, it may have to pay a
higher price for the security. Similarly, the Fund may not be able to obtain as
large an execution of an order to sell or as high a price for any particular
portfolio security if PMC decides to sell on behalf of another account the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one fund or account, the
resulting participation in volume transactions could produce better executions
for the Fund or the account. In the event more than one account purchases or
sells the same security on a given date, the purchases and sales will normally
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be made as nearly as practicable on a pro rata basis in proportion to the
amounts desired to be purchased or sold by each.
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 the Fund's
income, the diversification of its assets, and the timing of its distributions.
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 under Subchapter M, the Fund must, among other things,
derive at least 90% of its gross income for each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies
(the "90% income test"), limit its gains from the sale of stock, securities and
certain other investments held for less than three months to less than 30% of
its annual gross income (the "30% test") and satisfy certain diversification and
income distribution requirements.
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
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resulting overall ordinary loss for such year would not be deductible by the
Fund or its shareholders in future years.
If the Fund acquires stock in certain non-U.S. corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, rents, royalties or capital gain) or hold at least 50% of their
assets in investments producing such passive income ("passive foreign investment
companies"), the Fund could be subject to Federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if all income or gain actually
received by the Fund is timely distributed to its shareholders. The Fund would
not be able to pass through to its shareholders any credit or deduction for such
a tax. Certain elections may, if available, ameliorate these adverse tax
consequences but any such election would require the Fund to recognize taxable
income or gain without the concurrent receipt of cash. The Fund may limit and/or
manage its holdings in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
At the time of an investor's purchase of Fund shares, a portion of the purchase
price 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 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 educed 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 same 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 such Fund and are not expected to be distributed as such to shareholders.
Options written or purchased and futures contracts entered into by the Fund on
certain securities, securities indices and foreign currencies, as well as
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certain foreign currency forward contracts, may cause the Fund to recognize
gains or losses from marking-to-market at the end of its taxable year even
though such options may not have lapsed, been closed out, or exercised or such
futures or forward contracts may not have been closed out or disposed of and may
affect the characterization as long-term or short-term of some capital gains and
losses realized by the Fund. Certain options, futures and forward contracts on
foreign currency may be subject to Section 988, described above, and accordingly
produce ordinary income or loss. Losses on certain options, futures or forward
contracts and/or offsetting positions (portfolio securities or other positions
with respect to which the Fund's risk of loss is substantially diminished by one
or more options, futures or forward contracts) may also be deferred under the
tax straddle rules of the Code, which may also affect the characterization of
capital gains or losses from straddle positions and certain successor positions
as long-term or short-term. The tax rules applicable to options, futures,
forward contracts and straddles may affect the amount, timing and character of
the Fund's income and loss and hence of its 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.
For purposes of the 70% dividends-received deduction available to corporations,
dividends received by the Fund, if any, from U.S. domestic corporations in
respect of any share of stock with a tax holding period of at least 46 days (91
days in the case of certain preferred stock) held in an unleveraged position and
distributed and designated by the Fund may be treated as qualifying dividends.
Any corporate shareholder should consult its tax adviser regarding the
possibility that its tax basis in its shares may be reduced, for federal income
tax purposes, by reason of "extraordinary dividends" received with respect to
the shares. Corporate shareholders must meet the minimum holding period
requirement stated above (46 or 91 days), taking into account any holding-period
reductions from certain hedging or other transactions that diminish risk of
loss, with respect to their Fund shares in order to qualify for the deduction
and, if they borrow to acquire Fund shares, may be denied a portion of the
dividends-received deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be included in determining the excess (if any)
of a corporation's adjusted current earnings over its alternative minimum
taxable income, which may increase a corporation's alternative minimum tax
liability.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to investments in those countries. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes. The
Fund does not expect to satisfy the requirements for passing through to
shareholders their pro rata shares of foreign taxes paid by the Fund, with the
result that its shareholders will not include such taxes in their gross incomes
and will not be entitled to a tax deduction or credit for such taxes on their
own tax returns
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions, and certain
prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
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<PAGE>
The Fund is not subject to Massachusetts corporation franchise or excise taxes
and, provided that it qualifies as a regulated investment company under the
Code, also will not be required to pay any Massachusetts income tax.
Federal law requires that the Fund withhold (as "backup withholding") 31% of
reportable payments, including dividends, capital gain dividends, and the
proceeds of redemptions (including exchanges) and repurchases, to shareholders
who have not complied with Internal Revenue Service ("IRS") regulations. In
order to avoid this withholding requirement, shareholders must certify on their
Account Applications, or on separate W-9 Forms, that 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 the special tax rules
applicable to particular types of investors, such as banks, insurance companies,
or tax-exempt entities. Shareholders should consult their own tax advisers on
these matters and on state, local and other applicable tax laws. Investors other
than U.S. persons may be subject to different U.S. tax treatment, including a
possible 30% U.S. 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.
11. DESCRIPTION OF SHARES
The Fund's Declaration of Trust permits the Board of Trustees to authorize the
issuance of an unlimited number of full and fractional shares of beneficial
interest which may be divided into such separate series as the Trustees may
establish. Currently, the Fund consists of only one series. The Trustees may,
however, establish additional series of shares in the future, and may divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the Fund. The Declaration of
Trust further authorizes the Trustees to classify or reclassify any series of
the shares into one or more classes. Pursuant thereto, the Trustees have
authorized the issuance of two classes of shares of the Fund, designated as
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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<PAGE>
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to a meeting of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have, under certain circumstances, the right to remove one or more
Trustees.
The shares of the Fund are entitled to vote separately to approve investment
advisory agreements or changes in investment restrictions, but shareholders of
all series vote together in the election and selection of Trustees and
accountants. Shares of all series of the Fund vote together as a class on
matters that affect all series of the Fund in substantially the same manner. As
to matters affecting a single series or class, shares of such series or class
will vote separately. No amendment adversely affecting the rights of
shareholders may be made to the Fund's Declaration of Trust without the
affirmative vote of a majority of its shares. Shares have no preemptive or
conversion rights. Shares are fully paid and non-assessable by the Fund, except
as stated below.
12. CERTAIN LIABILITIES
As a Delaware business trust, the Fund's operations are governed by its
Declaration of Trust dated August 8, 1995. A copy of the fund's Certificate of
Trust, also dated August 8, 1995, is on file with the office of the Secretary of
State of Delaware. Generally, Delaware business trust shareholders are not
personally liable for obligations of the Delaware business trust under Delaware
law. The Delaware Business Trust Act (the "Delaware Act") provides that a
shareholder of a Delaware business trust shall be entitled to the same
limitation of liability extended to shareholders of private for-profit
corporations. The Fund's Declaration of Trust expressly provides that the Fund
is organized under the Delaware Act and that the Declaration of Trust is to be
governed by Delaware law. 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 become subject to personal liability.
To guard against this risk, the Declaration of Trust (I) contains an express
disclaimer of shareholder liability for acts or obligations of the Fund and
provides that notice of such disclaimer may be given in each agreement,
obligation or instrument entered into or executed by the Fund or its Trustees,
(ii) provides for the indemnification out of Fund property of any shareholders
held personally liable for any obligations of the Fund or any series of the Fund
and (iii) provides that the Fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Fund and
satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss beyond his or her investment because of shareholder liability is
limited to circumstances in which all of the following factors are present: (1)
a court refused to apply Delaware law; (2) the liability arose under tort law
or, if not, no contractual limitation of liability was in effect; and (3) the
Fund itself would be unable to meet its obligations. In light of Delaware law,
the nature of the Fund's business and the nature of its assets, the risk of
personal liability to a Fund shareholder is remote.
The Declaration of Trust further provides that the Fund shall indemnify each of
its Trustees and officers against liabilities and expenses reasonably incurred
by them, in connection with, or arising out of, any action, suit or proceeding,
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<PAGE>
0threatened against or otherwise involving such Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the Fund.
The Declaration of Trust does not authorize the Fund to indemnify any Trustee or
officer against any liability to which he or she would otherwise be subject by
reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
13. LETTER OF INTENTION
Purchases in the Class A shares of the Fund of $50,000 or more (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 each 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 the shares of record he holds in the Fund and in all other Pioneer
mutual funds as of the date of the Letter of Intention as a credit toward
determining the applicable 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 Class A shares having a
purchase price equal to 5% of the stated investment specified in the Letter of
Intention. A Letter of Intention is not a binding obligation upon the investor
to purchase, or the Fund to sell, the full amount indicated and the investor
should carefully read the provisions of the Letter of Intention set forth in the
Account Application before signing.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a convenient
method of receiving fixed payments at regular intervals from Class A 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 deposited monthly or
quarterly directly into a bank account designated by the applicant or will be
sent by check to the applicant, or any person designated by him monthly or
quarterly. Withdrawals from Class B share accounts are limited to 10% of the
value of the account at the time the SWP is implemented.
Any income dividends or capital gains distributions on shares under the SWP will
be credited to the Plan account on the payment date in full and fractional
shares at the net asset value per share in effect on the record date.
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<PAGE>
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 Plan account. Redemptions are taxable transactions to
shareholders. In addition, the amounts received by a shareholder cannot be
considered as yield or income on his or her investment because part of such
payments may be a return of his or her investment.
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 Plan have been redeemed.
15. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined as of the
close of regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m., Eastern Time) on each day on which 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 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 the class. For purposes of determining net asset value,
expenses of the classes of the Fund are accrued daily.
Securities that 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 (excluding those whose trading 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 of Trustees.
The Fund's maximum offering price per Class A share is determined by adding the
maximum sales charge to the net asset value per Class A share. Class B shares
are offered at net asset value without the imposition of an initial sales
charge.
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<PAGE>
16. INVESTMENT RESULTS
Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Fund may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, total return of the Fund's
classes may be compared to rankings prepared by Lipper Analytical Services,
Inc., a widely recognized independent service which monitors mutual fund
performance; the Standard & Poor's 500 Stock Index ("S&P 500"), an index of
unmanaged groups of common stock; the Dow Jones Industrial Average, a recognized
unmanaged index of common stocks of 30 industrial companies listed on the New
York Stock Exchange; or The Frank Russell Indexes ("Russell 1000," "2000,"
"2500," "3000,") or the Wilshire Total Market Value Index ("Wilshire 5000"), two
recognized unmanaged indexes of broad based common stocks.
In addition, the performance of the classes of the Fund may be compared to
alternative investment or savings vehicles and/or to indexes or indicators of
economic activity, e.g., inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and financial publications,
such as Barron's, Business Week, Consumers Digest, Consumer Reports, Financial
World, Forbes, Fortune, Investors Business Daily, Kiplinger's Personal Finance
Magazine, Money Magazine, New York Times, Smart Money, USA Today, U.S. News and
World Report, The Wall Street Journal, and Worth may also be cited (if the Fund
is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources including Bloomberg
Financial Markets, CDA/Wiesenberger, Donoghue's Mutual Fund Almanac, Investment
Company Data, Inc., Johnson's Charts, Kanon Bloch Carre and Co., Lipper
Analytical Services, Inc., Micropal, Inc., Morningstar, Inc., Schabacker
Investment Management and Towers Data Systems, Inc.
In addition, from time to time quotations from articles from financial
publications such as those listed above may be used in advertisements in sales
literature, or in reports to shareholders of the Fund.
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
such 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.
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
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<PAGE>
calculations will usually assume the reinvestment of all dividends and capital
gains distributions and will be expressed as a percentage increase or decrease
from an initial value, for the entire period or for one or more specified
periods within the entire period. Total return percentages for periods of less
than one year will usually be annualized; total return percentages for periods
longer than one year will usually be accompanied by total return percentages for
each year within the period and/or by the average annual compounded total return
for the period. The income and capital components of a given return may be
separated and portrayed in a variety of ways in order to illustrate their
relative significance. Performance may also be portrayed in terms of cash or
investment values, without percentages. Past performance cannot guarantee any
particular future result.
The Fund's average annual total return quotations for each of its classes as
that information may appear in the Fund's Prospectus, this Statement of
Additional Information or in advertising are calculated by standard methods
prescribed by the Commission.
Standardized Average Annual Total Return Quotations
Average annual total return quotations for Class A and Class B shares are
computed by finding the average annual compounded rates of return that would
cause a hypothetical investment in the class made on the first day of a
designated period (assuming all dividends and distributions are reinvested) to
equal the ending redeemable value of such hypothetical investment on the last
day of the designated period in accordance with the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000, less the
maximum sales load of $57.50 for Class A shares
or the deduction of the CDSC for Class B 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 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
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<PAGE>
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 a class's mean
account size.
Automated Information Line
FactFoneSM, Pioneer's 24-hour automated information line, allows shareholders to
dial toll-free 1-800-225-4321 and hear recorded fund information, including:
o net asset value prices for all Pioneer mutual funds;
o annualized 30-day yields on Pioneer's fixed income funds;
o annualized 7-day yields and 7-day effective (compound) yields for
Pioneer's money market funds; and
o dividends and capital gains distributions on all Pioneer mutual funds.
Yields are calculated in accordance with Commission mandated standard formulas.
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, and figures for all quoted bond funds include the maximum
applicable sales charge. A shareholder's actual yield and total return will vary
with changing market conditions. The value of Class A and Class B shares (except
for Pioneer money market funds, which seek a stable $1.00 share price) will also
vary, and such shares may be worth more or less at redemption than their
original cost.
17. FINANCIAL STATEMENTS
The Fund's financial statements for the semi-annual period ended April 30, 1996
are included in the Fund's semi-annual report, which report is incorporated by
reference into and is attached to this Statement of Additional Information. The
Fund's semi-annual report is so incorporated and attached in reliance upon the
report of Arthur Andersen LLP, independent public accountants, as experts in
accounting and auditing.
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<PAGE>
APPENDIX A
Description of Bond Ratings1
Moody's Investor's Service, Inc.2
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat bigger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
- ---------------------------------------------
1 The ratings indicated herein are believed to be the most recent ratings
available at the date of this Prospectus for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating agencies
may from time to time revise such ratings, they undertake no obligation to do
so, and the ratings indicated do not necessarily represent ratings which will be
given to these securities on the date of the Fund's fiscal year-end.
2 Rates bonds of issuers which have $600,000 or more of debt, except bonds of
educational institutions, projects under construction, enterprises without
established earnings records and situations where current financial data is
unavailable.
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Standard & Poor's Ratings Group 3
AAA: Bonds rated AAA are highest grade obligations. This rating indicates an
extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high-quality obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay principal and interest, although
they are more susceptible to the adverse effects of changes in circumstances and
economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
- -------------------------------------------------
3 Rates all governmental bodies having $1,000,000 or more of debt outstanding,
unless adequate information is not available.
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<PAGE>
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the
United States; prior to March 1957 it consisted of 90 of the largest stocks.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of 30 blue chip stocks.
SMALL CAPITALIZATION STOCKS
This index is a market value weighted index of the ninth and tenth deciles of
the New York Stock Exchange (NYSE), plus stocks listed on the American Stock
Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization
as the upper bound of the NYSE ninth decile.
INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
"The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks
in the S&P 500 Index according to price-to-book ratios. The Growth Index
contains stocks with higher price-to-book ratios, and the Value Index contains
stocks with lower price-to-book ratios. Both indexes are market capitalization
weighted."
Source: Ibbotson Associates
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<TABLE>
<CAPTION>
Dow Jones U.S. Small S&P/BARRA S&P/BARRA
S&P500 Ind'l Avg Stock Index U.S. Inflation Growth Value
%TR %TR %TR %TR %TR %TR
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A
Dec 1931 -43.34 -49.03 -49.75 -9.52 N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A
Dec 1933 53.99 73.71 142.87 0.51 N/A N/A
Dec 1934 -1.44 8.07 24.22 2.03 N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A
Dec 1942 20.34 14.12 44.51 9.29 N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A
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<PAGE>
Dow Jones U.S. Small S&P/BARRA S&P/BARRA
S&P500 Ind'l Avg Stock Index U.S. Inflation Growth Value
%TR %TR %TR %TR %TR %TR
- ----------------------------------------------------------------------------------------------------------------------------
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60
Dec 1994 1.31 5.06 3.11 2.78 3.13 -0.64
</TABLE>
Source: Ibbotson Associates
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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.
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 as of December 31, 1994 were $10,038,000,000 representing a total
of 928,769 shareholder accounts.
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