As filed with the Securities and Exchange Commission on February 27, 1997
File Nos. 33-61869
811-7339
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
----
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_X__/
Pre-Effective Amendment No. ___ / __ /
Post-Effective Amendment No. _1_ /__X_/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 / X /
Amendment No. 2 / X _/
(Check appropriate box or boxes)
PIONEER SMALL COMPANY FUND
(Exact name of registrant as specified in charter)
--------------------------------------------------
60 State Street, Boston, Massachusetts 02109
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(Address of principal executive office) Zip Code
Registrant's Telephone Number, including Area Code: (617) 742-7825
---------------------------------------------------------------------
Joseph P. Barri, Hale and Dorr, 60 State Street, Boston, MA 02109
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(Name and address of agent for service)
It is proposed that this filing will become effective (check
appropriate box):
_ _ immediately upon filing pursuant to paragraph (b)
_X_ on February 28, 1997 pursaunt to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)
___ on [date] pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f)-2 of the Investment Company Act
of 1940. On December 27, 1996, the Registrant filed the Notice required by Rule
24f-2 for its most recent fiscal year ending October 31, 1996.
<PAGE>
PIONEER SMALL COMPANY FUND
Class A, Class B and Class C Shares
Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of Information Required by
Items of the Registration Form
Location in Prospectus
Form N-1A Item Number or Statement of
and Caption Additional Information
----------- ----------------------
1. Cover Page............................................Prospectus - Cover
Page
2. Synopsis..............................................Prospectus - Expense
Information
3. Condensed Financial
Information........................................Prospectus - Financial
Highlights
4. General Description of
Registrant.........................................Prospectus -
Investment Objective
and Policies;
Management of the
Fund; The Trust
5. Management of the Fund................................Prospectus -
Management of the Fund
6. Capital Stock and Other
Securities.........................................Prospectus -
Investment Objective
and Policies;
Dividends,
Distributions and
Taxation; The Trust
7. Purchase of Securities
Being Offered......................................Prospectus -
Distribution Plans;
Fund Share
Alternatives; Share
Price; How to Buy Fund
Shares; Shareholder
Services
8. Redemption or Repurchase..............................Prospectus - Fund
Share Alternatives;
How to Sell Fund
Shares; Shareholder
Services
9. Pending Legal Proceedings.............................Not Applicable
<PAGE>
Location in Prospectus
Form N-1A Item Number or Statement of
and Caption Additional Information
----------- ----------------------
10. Cover Page............................................Statement of
Additional Information
- Cover Page
11. Table of Contents.....................................Statement of
Additional Information
- Cover Page
12. General Information and
History............................................Statement of
Additional Information
- Cover Page;
Description of Shares
13. Investment Objectives and
Policy.............................................Statement of
Additional Information
- Investment Policies
and Restrictions
14. Management of the Fund................................Statement of
Additional Information
- Management of the
Funds; Investment
Adviser
15. Control Persons and Principle
Holders of Securities..............................Statement of
Additional Information
- Management of the
Funds
16. Investment Advisory and Other
Services...........................................Statement of
Additional Information
- Management of the
Funds; Investment
Adviser; Shareholder
Servicing/Transfer
Agent; Underwriting
Agreement and
Distribution Plans;
Custodian; Independent
Public Accountants
17. Brokerage Allocation and
Other Practices....................................Statement of
Additional Information
- Portfolio
Transactions
18. Capital Stock and Other
Securities.........................................Statement of
Additional Information
- Description of
Shares; Certain
Liabilities
19. Purchase, Redemption and
Pricing of Securities
Being Offered......................................Statement of
Additional Information
- Determination of Net
Asset Value; Letter of
Intention; Systematic
Withdrawal Plan
<PAGE>
Location in Prospectus
Form N-1A Item Number or Statement of
and Caption Additional Information
----------- ----------------------
20. Tax Status............................................Statement of
Additional Information
- Tax Status and
Dividends
21. Underwriters..........................................Statement of
Additional Information
- Principal
Underwriter
22. Calculation of Performance
Data..............................................Statement of
Additional Information
- Investment Results
23. Financial Statements..................................Statement of
Additional Information
- Financial Statements
<PAGE>
<PAGE>
[Pioneer logo]
Pioneer India Fund
Class A, Class B and Class C Shares
Prospectus
February 28, 1997
Pioneer India Fund (the "Fund") seeks long-term growth of capital by
investing in a portfolio consisting primarily of equity securities of
companies in India. Any current income generated from these securities is
incidental to the investment objective of the Fund. The Fund is a diversified
open-end investment company designed for investors seeking to achieve long-
term capital growth. There is no assurance that the Fund will achieve its
investment objective.
Pioneering Management Corporation ("PMC") is the Fund's investment
manager. ITI Pioneer AMC Ltd. (the "Indian Adviser") is the Fund's investment
adviser in India and, subject to PMC's supervision, is responsible for
managing the Fund's investments in the Indian securities markets. The Indian
Adviser is a joint venture between PMC and Investment Trust of India Limited
("ITI"), a corporation organized under the laws of India. ITI was established
in 1946 and is one of India's leading providers of financial services. The
Indian Adviser was the first institution to establish locally-registered
private sector mutual funds in India.
Because of economic and political developments in India, both PMC and the
Indian Adviser believe that India's economy has significant potential to
experience growth in the next several years. For these reasons, PMC and the
Indian Adviser also believe that the equity securities of many companies in
India offer significant potential for long-term capital growth.
Investments in India's securities markets entail significant risks in
addition to the risks customarily associated with investing in United States
("U.S.") securities. The Fund is intended for investors who can accept the
risks associated with its investments and may not be suitable for all
investors. See "Investment Objective and Policies--Risk Factors" for a
discussion of these risks. Because the Fund invests primarily in securities
of companies in India, the Fund is not intended to be a complete investment
program.
Fund returns and share prices fluctuate and the value of your account upon
redemption may be more or less than your purchase price. Shares in the Fund
are not deposits or obligations of, or guaranteed or endorsed by, any bank or
other depository institution, and are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
government agency. Shares of the Fund involve investment risks, including the
possible loss of some or all of the principal investment.
This Prospectus provides information about the Fund that you should know
before investing. Please read and retain it for your future reference. More
information about the Fund is included in the Statement of Additional
Information also dated February 28, 1997, which is incorporated in this
Prospectus by reference. A copy of the Statement of Additional Information
may be obtained free of charge by calling Shareholder Services at
1-800-225-6292 or by written request to the Fund at 60 State Street, Boston,
Massachusetts 02109. Additional information about the Fund has been filed
with the Securities and Exchange Commission (the "SEC") and is available upon
request and without charge.
TABLE OF CONTENTS PAGE
--------- ------------------------------------------------------ --------
I. EXPENSE INFORMATION 2
II. FINANCIAL HIGHLIGHTS 3
III. INVESTMENT OBJECTIVE AND POLICIES 4
IV. MANAGEMENT OF THE FUND 9
V. FUND SHARE ALTERNATIVES 10
VI. SHARE PRICE 11
VII. HOW TO BUY FUND SHARES 11
VIII. HOW TO SELL FUND SHARES 15
IX. HOW TO EXCHANGE FUND SHARES 16
X. DISTRIBUTION PLANS 17
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION 17
XII. SHAREHOLDER SERVICES 18
Account and Confirmation Statements 18
Additional Investments 19
Automatic Investment Plans 19
Financial Reports and Tax Information 19
Distribution Options 19
Directed Dividends 19
Direct Deposit 19
Voluntary Tax Withholding 19
Telephone Transactions and Related Liabilities 19
FactFone(SM) 20
Retirement Plans 20
Telecommunications Device for the Deaf (TDD) 20
Systematic Withdrawal Plans 20
Reinstatement Privilege (Class A Shares Only) 20
XIII. THE FUND 20
XIV. INVESTMENT RESULTS 21
APPENDIX A: India 21
APPENDIX B: Certain Investment Practices 24
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
I. EXPENSE INFORMATION
This table is designed to help you understand the charges and expenses
that you, as a shareholder, will bear directly or indirectly when you invest
in the Fund. The table reflects annual operating expenses based on actual
expenses of Class A and Class B shares for the period ended October 31, 1995.
For Class C shares, operating expenses are based on expenses that would have
been incurred if Class C shares had been outstanding for the entire fiscal
year ended October 31, 1996.
<TABLE>
<CAPTION>
Class A Class B Class C+
---------- ---------- ------------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Initial Sales Charge on Purchases (as a
percentage of offering price) 5.75%(1) None None
Maximum Sales Charge on Reinvestment of Dividends None None None
Maximum Deferred Sales Charge (as a percentage of
purchase price or redemption proceeds, as
applicable) None(1) 4.00% 1.00%
Redemption fee2 None None None
Exchange fee None None None
Annual Operating Expenses
(as a percentage of average net assets):
Management fee (after fee reduction)3 0.00% 0.00% 0.00%
12b-1 fees 0.25% 1.00% 1.00%
Other Expenses (including transfer agent fee,
custodian fees and accounting and printing
expenses) (after expense reduction)3 2.00% 2.13% 2.06%
========== ========== ============
Total Operating Expenses
(after fee and expense reductions)3 2.25% 3.13% 3.06%
========== ========== ============
</TABLE>
+ Class C shares were first offered on January 31, 1996.
1 Purchases of $1 million or more and purchases by participants in certain
group plans are not subject to an initial sales charge but may be subject
to a contingent deferred sales charge ("CDSC") as further described in "How
to Sell Fund Shares."
2 Separate fees (currently $10 and $20, respectively) apply to domestic and
international wire transfers of redemption proceeds.
3 PMC has agreed not to impose all or a portion of its management fee and to
make other arrangements, if necessary, to limit the Class A share operating
expenses of the Fund to 2.25% of the Fund's average daily net assets
attributable to Class A shares. The portion of Fund-wide expenses
attributable to Class B and Class C shares will be reduced only to the
extent such expenses were reduced for the Class A shares of the Fund. This
agreement is voluntary and temporary and may be revised or terminated by
PMC at any time.
Class A Class B Class C
-------- -------- ---------
Expenses Absent Fee and Expense Reductions
Management Fee 1.25% 1.25% 1.25%
Other Expenses 2.79% 2.98% 2.38%
Total Operating Expenses 4.29% 5.23% 4.63%
Example:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return, reinvestment of all dividends and distributions and that the
percentage amounts listed under "Annual Operating Expenses" remain the same
each year.
One Year Three Years Five Years Ten Years
--------- ------------ ----------- -----------
Class A Shares $79 $124 $171 $301
Class B Shares
--Assuming complete
redemption at end
of period $72 $127 $184 $324
--Assuming no
redemption $32 $ 97 $164 $324
Class C shares**
--Assuming
complete
redemption at
end of period $41 $ 95 $161 $337
--Assuming no
redemption $31 $ 95 $161 $337
*Class B shares convert to Class A shares eight years after purchase;
therefore, Class A share expenses are used after year eight.
**Class C shares redeemed during the first year after purchase are subject to
a 1% CDSC.
The example is designed for information purposes only, and should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.
For further information regarding management fees, 12b-1 fees and other
expenses of the Fund, see "Management of the Fund," "Distribution Plans" and
"How to Buy Fund Shares" in this Prospectus and "Management of the Fund,"
"Principal Underwriter" and "Distribution Plans" in the Statement of
Additional Information. The Fund's payment of a 12b-1 fee may result in
long-term shareholders indirectly paying more than the economic equivalent of
the maximum initial sales charge permitted under the Conduct Rules of the
National Association of Securities Dealers, Inc. ("NASD").
The maximum initial sales charge is reduced on purchases of specified
larger amounts of Class A shares and the value of shares owned in other
Pioneer mutual funds is taken into account in determining the applicable
initial sales charge. See "How to Buy Fund Shares." No sales charge is
applied to exchanges of shares of the Fund for shares of other publicly
available Pioneer mutual funds. See "How to Exchange Fund Shares."
2
<PAGE>
II. FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP,
independent public accountants. Arthur Andersen LLP's report on the Fund's
audited financial statements as of October 31, 1996 appears in the Fund's
Annual Report which is incorporated by reference in the Fund's Statement of
Additional Information. The information listed below should be read in
conjunction with the financial statements contained in the Annual Report. The
Annual Report includes more information about the Fund's performance and is
available free of charge by calling Shareholder Services at 1-800-225-6292.
Pioneer India Fund
Selected Data for a Class A Share Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
June 23, 1994
For the Year Ended (Commencement
October 31, of Operations) to
1996 1995 October 31, 1994+
---------- ---------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.47 $ 11.28 $ 11.50
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.03 $ (0.01) $ 0.04
Net realized and unrealized gain (loss) on investments
and foreign currency related transactions*** (1.57) (2.78) (0.26)
---------- ---------- ------------------
Net increase (decrease) from investment operations $ (1.54) $ (2.79) $ (0.22)
Distribution to shareholders from net investment income -- (0.02) --
Net increase (decrease) in net asset value (1.54) $ (2.81) $ (0.22)
---------- ---------- ------------------
Net asset value, end of period $ 6.93 $ 8.47 $ 11.28
========== ========== ==================
Total return* (18.18)% (24.78%) (1.91%)
Ratio of net operating expenses to average net assets 2.28%++ 2.28%+++ 2.25%**
Ratio of net investment income (loss) to average net assets 0.32%++ (0.14%)+++ 0.92%**
Portfolio turnover rate 64% 53% 109%**
Average commission rate paid per exchange listed
transaction++++ $0.0266
Net assets, end of period (in thousands) $12,388 $ 8,397 $11,445
Ratios assuming no reduction of fees or expenses by PMC:
Net operating expenses 4.29% 4.21% 6.57%**
Net investment income (loss) (1.69)% (2.07%) (3.40%)**
Ratios assuming a reduction of fees and expenses by PMC and
a reduction for fees paid indirectly:
Net operating expenses 2.25% 2.25%
Net investment income (loss) 0.35% (0.11%)
</TABLE>
Selected Data for a Class B Share Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
For the Year Ended June 23, 1994
October 31, (Commencement
---------------------- of Operations) to
1996 1995 October 31, 1994+
---------- ---------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.39 $ 11.24 $11.50
Increase (decrease) from investment operations:
Net investment income (loss) $ (0.03) $ (0.07) --
Net realized and unrealized gain (loss) on investments
and foreign currency related transactions*** (1.56) (2.77) (0.26)
---------- ---------- ------------------
Net increase (decrease) from investment operations $ (1.59) $ (2.84) $(0.26)
Distribution to shareholders from net investment income -- (0.01) --
Net increase (decrease) in net asset value (1.59) $ (2.85) $(0.26)
---------- ---------- ------------------
Net asset value, end of period $ 6.80 $ 8.39 $11.24
========== ========== ==================
Total return* (18.95)% (25.31%) (2.26%)
Ratio of net operating expenses to average net assets 3.15%++ 3.01%+++ 3.21%**
Ratio of net investment income (loss) to average net assets (0.45)%++ (0.86%)+++ (0.01%)**
Portfolio turnover rate 64% 53% 109%**
Average commission rate paid per exchange listed
transaction++++ $0.0266
Net assets, end of period (in thousands) $ 8,275 $ 5,991 $6,084
Ratios assuming no reduction of fees or expenses by PMC:
Net operating expenses 5.23% 4.91% 7.50%**
Net investment income (loss) (2.53)% (2.76%) (4.28%)**
Ratios assuming a reduction of fees and expenses by PMC and
a reduction for fees paid indirectly:
Net operating expenses 3.13% 2.97%
Net investment income (loss) (0.43)% (0.82%)
</TABLE>
+The per share data presented above is based upon average shares and average
net assets outstanding for the period presented.
+++Ratios include fees paid indirectly.
++++Amount may fluctuate from period to period as a result of portfolio
transactions executed in different markets where trading practices and
commission rate structures may vary.
*Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of the period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
**Annualized
3
<PAGE>
Selected Data for a Class C Share Outstanding Throughout the Period(1):
<TABLE>
<CAPTION>
For the period January 31, 1996
through October 31, 1996
<S> <C>
Net asset value, beginning of period $ 7.85
Increase (decrease) from investment operations:
Net investment income (loss) $ (0.02)
Net realized and unrealized gain (loss) on investments
and other forward foreign currency related transactions (1.06)
--------------------------------
Net increase (decrease) in net asset value $ (1.08)
--------------------------------
Net asset value, end of period $ 6.77
================================
Distributions to shareholders from:
Net investment income (loss) --
Net realized gain (loss) --
Total return* (13.76)%
Ratio of net operating expenses to average net assets 3.12%**+
Ratio of net investment income (loss) to average net assets (0.42)%**+
Portfolio turnover rate 64%
Average commission rate paid per exchange listed transaction+++ $0.0266
Net assets, end of period (in thousands) $ 557
Ratios assuming no reduction of fees or expenses by PMC:
Net operating expenses 4.63%**
Net investment income (loss) (1.93)%**
Ratios assuming a reduction of fees and expenses by PMC and a
reduction for fees paid indirectly:
Net operating expenses 3.06%**
Net investment income (loss) (0.36)%**
</TABLE>
(1)Class C shares were first offered on January 31, 1996.
+Ratios include fees paid indirectly.
+++Amount may fluctuate from period to period as a result of portfolio
transactions executed in different markets where trading practices and
commission rate structures may vary.
*Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of the period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
**Annualized.
III. INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital. The Fund
pursues this objective by investing, under normal circumstances, at least 65%
of its total assets in equity securities of Indian Companies (including
Depositary Receipts as defined below). For purposes of its investment
policies, the Fund considers a company to be an "Indian Company" if it (i) is
organized under the laws of India, (ii) derives at least 50% of its revenues
from goods produced or sold, investments made, or services performed, in
India, or has at least 50% of its assets in India, or (iii) has securities
that are traded principally on any Indian stock exchange (including India's
Over the Counter Exchange).
The Fund may invest up to 35% of its total assets in (i) equity securities
of issuers (other than Indian Companies) which, in the judgment of PMC or the
Indian Adviser, may benefit from the Indian economy, (ii) debt securities
issued by Indian Companies or by the Government of India or its agencies or
instrumentalities, and (iii) short-term investments (as described below).
Equity securities in which the Fund may invest consist of common and
preferred stock (including convertible preferred stock); American, Global or
other types of depositary receipts (collectively, "Depositary Receipts");
convertible bonds, notes and debentures; shares of closed-end investment
companies; equity interests in trusts, partnerships, joint ventures or
similar enterprises; and common stock purchase warrants and rights.
Substantially all of the equity securities purchased by the Fund are expected
to be traded on an Indian or other foreign stock exchange or over-the-counter
market. However, as described in "Risk Factors," the Fund may be subject to
significant delays or limitations on the timing and amount of its direct
investments in India.
Debt securities in which the Fund may invest consist of bonds, debentures,
notes and similar debt instruments which may be comparable in quality to debt
securities rated BB or lower by Standard & Poor's Ratings Group ("Standard &
Poor's") or Ba or lower by Moody's Investors Service, Inc. ("Moody's"). The
Fund may invest up to 25% of its total assets in debt securities. For a
description of the risks of investing in
4
<PAGE>
lower quality debt securities, see "Risk Factors" in this Prospectus. PMC
expects that most of the Fund's investments in debt securities will not be
rated by Standard & Poor's, Moody's, or any other U.S. rating organization.
The Fund may employ forward foreign currency exchange contracts in an
attempt to hedge foreign currency risks associated with the Fund's
investments. However, there currently is no market, or only a limited market
for these contracts with respect to the Indian rupee (hereinafter the
"rupee") and the currencies of certain other foreign countries in which the
Fund may invest. Consequently, there can be no assurance that these contracts
will be available for hedging currency risks at the times when the Fund
wishes to use them. See Appendix B and the Statement of Additional
Information for a description of forward foreign currency exchange contracts
and associated risks.
The Fund also may invest in restricted and illiquid securities and
repurchase agreements, may purchase securities on a when-issued, delayed
delivery or forward commitment basis and may borrow money for temporary
emergency purposes. See Appendix B and the Statement of Additional
Information for a description of these investment and management techniques,
associated risks and limitations on the Fund's use of these techniques.
For temporary defensive purposes, the Fund may invest up to 100% of its
total assets in short-term investments (as described below). The Fund will
assume a temporary defensive posture when political and economic factors
affect India's economy or securities market to such an extent that PMC or the
Indian Adviser believes there to be extraordinary risks in being
substantially invested in the equity securities of Indian Companies.
In selecting securities for investment by the Fund, PMC and/or the Indian
Adviser perform a fundamental analysis of each company being considered for
inclusion in the Fund's portfolio. In performing this fundamental analysis,
PMC and the Indian Adviser consider a variety of factors, including financial
condition, growth prospects, asset valuation, management expertise, existing
or potential dividend payments, the liquidity of the security, the market
valuation of the company and the effect the investment would have on the
diversification of the Fund's portfolio. The specific size of the Fund's
investment in any one company is determined by the relationship of the
relative return and risk among individual investments, and may be affected by
limitations imposed by U.S. or Indian law.
Investment in India
Because of economic and political developments and changes in India, PMC
and the Indian Adviser believe that India's economy has significant potential
to experience growth in the next several years. For these reasons, PMC and
the Indian Adviser also believe that the equity securities of many Indian
Companies offer significant potential for long-term capital growth. For a
summary description of India and its securities markets, see Appendix A.
Since mid-1991, the Government of India, led by India's former prime
minister and finance minister, has taken steps to liberalize India's trade
policies, reform India's financial sector, and place greater reliance on
market mechanisms to direct economic activity. A significant component of the
Government's reform program has been the creation and empowerment of the
Securities and Exchange Board of India (the "SEBI") as the governmental
regulator of India's securities market. Another important component of the
reform program has been the promotion of foreign investment in key areas of
India's economy and the further development of India's private sector. As a
result of this policy and more recent developments, foreign investment in
India's economy and securities market has increased significantly. See "Risk
Factors," "Restrictions on Investment in India" and Appendix A.
In 1992, the Government of India announced, under a new policy intended to
encourage foreign investment, that Foreign Institutional Investors ("FIIs")
who satisfied certain conditions would be permitted to make direct
investments in India's securities market. Previously, non-Indian nationals
generally were not permitted to make portfolio investments in India's
securities market. Under the new policy, FIIs are permitted to invest
directly or on behalf of their institutional clients in any equity or debt
instrument which is listed on any Indian stock exchange. FIIs are required to
register with the SEBI. PMC is registered with the SEBI as an FII to invest
in India on behalf of the Fund and other approved clients. At present, FII
authorizations are granted for five years and may be renewed with the
approval of the SEBI. PMC intends to renew its registration as an FII on
March 18, 1998 (the date on which PMC's current FII registration expires).
See "Risk Factors" and "Restrictions on Investment in India."
Risk Factors
Investing in the Fund entails a substantial degree of risk. Because of the
special risks associated with investing in India, an investment in the Fund
may not be suitable for all investors and should not be considered an overall
investment program. Investors are strongly advised to consider carefully the
special risks involved in investing in India, which are in addition to the
usual risks of investing in developed countries around the world.
Investment in India and Certain Other Foreign Countries. The concentration
of the Fund's investments in Indian Companies will cause the value of the
Fund's assets to be particularly susceptible to the effects of political and
economic developments in India. India has a longstanding border dispute with
Pakistan. In addition, religious and ethnic unrest persists in India and has
caused disruptions in the recent past. It remains possible that disruption
associated with these tensions could destabilize India's economy and
adversely affect the net asset value of the Fund. The leadership of the
Government of India, which initiated recent financial reforms, is now out of
power. The new government has not changed major policies to date nor halted
or reversed the progress of economic reforms of India. Moreover, it is
possible that changes in the current leadership of the Govern-
5
<PAGE>
ment of India could result in a halt in, or even reverse the progress of,
economic reforms in India. See Appendix A.
The Fund expects that, under normal circumstances, most of its investments
in Indian Companies will be in securities that are listed or traded on an
Indian stock exchange. The securities markets in India and in certain other
foreign countries in which the Fund may invest are smaller and less liquid,
and may be significantly more volatile, than the securities market in the
United States. The Bombay Stock Exchange (the "BSE"), established in 1875,
and the National Stock Exchange ("NSE"), established in 1994 (see Appendix
A), are the principal stock exchanges in India, and account for over
two-thirds of the secondary trading market in India. Although the BSE has
greater liquidity and a greater number of listed issues than many emerging
markets, the relatively small trading volume and market capitalization of
most securities listed on the BSE may cause the Fund's investments to be less
liquid and subject to greater volatility than comparable U.S. investments.
The limited liquidity of the BSE and other securities markets in which the
Fund may invest also may affect the Fund's ability to accurately value its
portfolio securities or to acquire or dispose of securities at the prices and
times that it desires or in order to meet redemption requests.
In managing the Fund's portfolio, PMC and the Indian Adviser will attempt
to prevent the Fund from being exposed to undue illiquidity risk that may be
associated with investing in the Indian securities market. For example, if
deemed appropriate by PMC or the Indian Adviser, the Fund may concentrate its
equity investments in Indian Companies in larger capitalization issuers
and/or issuers whose equity securities (including Depositary Receipts) are
traded in securities markets outside of India. At times, the market for such
securities may be more liquid than the market for equity securities of
smaller capitalization Indian Companies.
Disclosure and regulatory standards in India's securities markets and in
other foreign markets in which the Fund may invest are less stringent than
U.S. standards in certain respects. Although issuers in India are subject to
accounting, auditing and financial standards and requirements that are based
on U.K. standards and requirements, such standards and requirements, as well
as those applicable to other foreign issuers, may differ significantly from
those applicable to issuers located in developed countries. In addition,
there may be substantially less publicly available information about issuers
in India and many of the other foreign countries in which the Fund may invest
than there is about U.S. issuers.
There is generally less governmental supervision and regulation of
securities exchanges and securities professionals in India and other foreign
countries in which the Fund may invest than exists in the United States.
However, the Government of India, acting through the SEBI, has promulgated
several rules and regulations to reform India's securities market and
regulate the activities of securities professionals. For example, in 1992,
the SEBI promulgated regulations prohibiting insider trading in the Indian
securities markets. However, there can be no assurance that the SEBI will be
able to enforce such rules and regulations as effectively as similar rules
and regulations are enforced in U.S. securities markets. See Appendix A for a
further description of recent reforms in India's securities market.
The value of the Fund's investments in India could be adversely affected
by the circulation of improperly registered shares or the occurrence of other
fraudulent activities in India's securities markets. In 1992, irregularities
and frauds in the Indian securities transactions of several banks were
exposed. Subsequent to the discovery of the bank/securities scandal, major
Indian securities market indices fell more than 40% from their highest
levels. However, as a result of the scandal, India's Ministry of Finance
strengthened the SEBI's regulatory authority and made other significant
reforms in India's securities markets.
The BSE has had frequent closures before the NSE became operational. Due
in part to competition from the NSE, there have been no such occurrences in
the past. However, there can be no assurance that such closures will not
recur. Settlement procedures in India and other foreign countries in which
the Fund may invest are less developed and reliable than those in the U.S.,
and the Fund may experience settlement delays or other material differences.
In addition, significant delays are common in registering transfers of
securities in India, and the Fund may be unable to sell portfolio securities
until the registration process is completed. Recent inflows of funds into the
Indian securities market have placed added strains on the settlement system,
and several custodial institutions in India have announced that they do not
possess the physical capacity to undertake new business. Although a number of
custodial institutions have augmented their capacity, the Fund may be subject
to significant delays or limitations on the timing of its direct investments
in India and significant limitations on the volume of trading during any
particular period, imposed by its subcustodian in India or otherwise as a
result of such physical or other operational constraints. The foregoing
factors could impede the ability of the Fund to effect portfolio transactions
on a timely basis, have an adverse effect on the net asset value of the
Fund's shares and make it more difficult for the Fund to obtain cash
necessary to satisfy applicable federal income tax requirements for avoiding
federal income and/or excise taxation. See "Dividends, Distributions and U.S.
Taxation."
The value of the Fund's investments in the securities of Indian Companies
and other foreign issuers may be adversely affected by fluctuations in the
relative rates of exchange between the currencies of different countries. The
Fund's investment performance may be significantly affected, either
positively or negatively, by currency exchange rates because the U.S. dollar
value of securities quoted or denominated in a foreign currency will increase
or decrease in response to changes in the value of foreign currencies in
relation to the U.S. dollar. In addition, the value of the Fund's investments
in Indian Companies and other foreign issuers may be adversely affected by
exchange control regulations. Under the FII guidelines as currently in effect
in India, PMC has received approv-
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als required to establish bank and custodial accounts and to convert rupees
into U.S. dollars on behalf of the Fund. Although the Government of India has
announced its intention ultimately to make the rupee fully convertible, there
can be no assurance that it will not impose restrictions in the future that
may adversely affect the ability of the Fund to convert its income and
capital from certain investments from rupees to U.S. dollars. See Appendix A.
Brokerage commissions and other securities transaction costs, including
custody costs, in India and in certain other foreign countries in which the
Fund may invest are generally higher than in the United States. In addition,
brokers in India and certain other countries in which the Fund may invest
generally are not as well capitalized as brokers in the U.S., and are
therefore more susceptible to financial failure in times of market, political
or economic stress.
Additionally, in India and other foreign countries in which the Fund may
invest, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of securities, property or other assets of the
Fund, political or social instability, or diplomatic developments which could
adversely affect U.S. investments in these countries.
Investment in Lower-Quality Debt Securities. The Fund's investments in
debt securities may consist of debt securities issued by Indian Companies or
the Government of India or its agencies or instrumentalities. These debt
securities may be comparable in quality to debt securities rated BB or lower
by Standard & Poor's or Ba or lower by Moody's. Debt securities of such
quality are commonly referred to in the U.S. as "junk bonds" and are
considered speculative, and payments of interest thereon and repayment of
principal may be questionable. In some cases, such securities may be highly
speculative, have poor prospects for reaching investment grade standing and
be in default. While generally providing greater income than investments in
higher-quality securities, lower-quality debt securities involve greater
risk of loss of principal and income, including the possibility of default or
bankruptcy of the issuers of such securities, and have greater price
volatility, especially during periods of economic uncertainty or change.
Lower-quality debt securities also tend to be affected by economic changes
and short-term corporate developments to a greater extent than higher-quality
securities, which react primarily to fluctuations in the general level of
interest rates. Lower-quality debt securities will also be affected by the
market's perception of their credit quality, especially during times of
adverse publicity, and the outlook for economic growth. The market for
lower-quality debt securities is generally less liquid than the market for
higher-quality debt securities. Therefore, PMC's and the Indian Adviser's
judgment may at times play a greater role in valuing these securities than in
the case of higher-quality debt securities.
The Fund's investments in debt securities issued by the Government of
India or its agencies or instrumentalities involve special risks in addition
to those described above. The willingness or ability of an Indian
governmental issuer to repay principal and pay interest when due may be
affected adversely by the size of the issuer's debt service burden relative
to India's economy as a whole, changes in India's economy, political
constraints to which the issuer is subject and various other factors. In
addition, there are no legal proceedings available in India by which the Fund
could seek recourse for the default of a debt security issued by the
Government of India or one of its agencies or instrumentalities.
The Fund's investments in debt securities may also include zero coupon and
payment-in-kind debt securities, which tend to be affected to a greater
extent by interest rate changes, and therefore tend to be more volatile, than
debt securities which pay interest periodically and in cash.
Restrictions on Investment in India
Under India's guidelines applicable to FIIs, the Fund's direct investments
in India may include only securities that are listed or to be listed on a
recognized stock exchange or traded on a recognized Indian stock exchange,
and the Fund may not hold more than 10% of the total issued capital of any
issuer of such securities. Further, at least 70% of the total investments
made by the Fund pursuant to PMC's FII authorization must be in equity
securities. In addition, all non-resident portfolio investments, including
the Fund's investments, may not exceed 24% of the issued share capital of any
Indian issuer. Accordingly, the Fund's ability to invest in certain Indian
Companies may be restricted. Although the Government of India recently has
implemented policies to encourage foreign investment, there can be no
assurance that additional restrictions will not be imposed in the future.
Indian Taxes
It is expected that most of the Fund's investments in Indian Companies
will be subject to the following taxes imposed by the Government of India.
India imposes a withholding tax at a rate of 20% on dividend and interest
income earned on Indian investments. India also imposes a tax on capital
gains realized on Indian investments at a rate of 10% on long-term capital
gains and 30% on short-term capital gains. Gains from all listed securities
(including debt) held for periods in excess of 12 months are treated as
long-term gains. Under the Income Tax Treaty in effect between India and the
U.S., the applicable Indian tax rate on interest income is generally reduced
to 15%, and the applicable Indian tax rate on dividend income may be reduced
to 15% in the event that the Fund owns at least 10% of the voting stock of
the Indian resident company that pays dividends to the Fund. This treaty does
not reduce or eliminate the Indian taxation of capital gains the Fund may
realize with respect to its Indian investments. If the Fund elects to
"pass-through" to shareholders amounts of qualified foreign taxes it pays,
Fund shareholders will be required to include such amounts in income (in
addition to the dividends they actually receive) and certain Fund
shareholders may be able to claim a foreign tax credit or deduction on their
U.S. federal income tax returns for their proportionate shares of Indian
taxes paid by the Fund, subject to applicable limitations under the U.S.
Internal Revenue Code of 1986, as amended (the "Code"). "See Dividends,
Distributions and U.S. Taxation."
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PMC may explore opportunities for the Fund to invest in India through a
structure that would reduce withholding and other taxes imposed by India.
Other Eligible Investments
Equity Securities of Companies That May Benefit From India's Economy. As
noted above, the Fund may invest in the equity securities of companies, other
than Indian Companies (defined above), that may benefit from India's economy.
The Fund's investments in the equity securities of such issuers may involve
some or all of the risks associated with investments in Indian issuers. See
"Risk Factors."
Short-Term Investments. As noted above, the Fund may invest in short-term
investments, consisting of corporate commercial paper and other short-term
commercial obligations, in each case rated or issued by international or
domestic companies with similar securities outstanding that are rated Prime-1
or better by Moody's, or A-1, AA or better by Standard & Poor's; obligations
(including certificates of deposit, time deposits, demand deposits and
bankers' acceptances) of banks (located in the U.S. or foreign countries)
with securities outstanding that are rated Prime-1, Aa or better by Moody's,
or A-1, AA or better by Standard and Poor's; obligations of comparable
quality issued or guaranteed by the U.S. government or the government of a
foreign country or their respective agencies or instrumentalities; and
repurchase agreements.
In addition, the Fund may invest up to 100% of its total assets in such
short-term investments for temporary defensive purposes. The Fund will assume
a temporary defensive posture only when political and economic factors cause
PMC or the Indian Adviser to believe that there are extraordinary risks in
being substantially invested in the equity securities of Indian Companies.
Debt Securities. Although the Fund invests primarily in equity securities
of Indian Companies, the Fund may invest up to 25% of its total assets in
debt securities (including short-term debt securities) issued by Indian
Companies or by the Government of India or its agencies or instrumentalities.
The Fund may invest in debt securities of any quality or maturity. See "Risk
Factors." The net asset value of the Fund attributable to its investments in
debt securities can generally be expected to change as general levels of
interest rates fluctuate. The value of debt securities generally varies
inversely with changes in interest rates, and prices of debt securities with
longer maturities are more sensitive to interest rate changes than those with
shorter maturities.
Other Investment Companies. The Fund may invest up to 10% of its total
assets, calculated at the time of purchase, in the securities of closed-end
investment companies. The Fund may not invest more than 5% of its total
assets in the securities of any one investment company or acquire more than
3% of the voting securities of any other investment company. The Fund will
indirectly bear its proportionate share of any management or other fees paid
by closed-end investment companies in which it invests, in addition to its
own fees.
Investments in Depositary Receipts. The Fund may hold securities of
foreign issuers in the form of American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other similar instruments or other
securities convertible into securities of eligible issuers. Generally, ADRs
in registered form are designed for use in U.S. securities markets, and GDRs
and other similar global instruments in bearer form are designed for use in
non-U.S. securities markets.
ADRs are denominated in U.S. dollars and represent the right to receive
securities of foreign issuers deposited in a U.S. bank or correspondent bank.
ADRs do not eliminate all the risk inherent in investing in the securities of
non-U.S. issuers. However, by investing in ADRs rather than directly in
equity securities of non-U.S. issuers, the Fund will avoid currency risks
during the settlement period for either purchases or sales. GDRs are not
necessarily denominated in the same currency as the securities for which they
may be exchanged. For purposes of the Fund's investment policies, investments
in ADRs, GDRs and similar instruments will be deemed to be investments in the
equity securities of the foreign issuers into which they may be converted.
The Fund may acquire depositary receipts from banks that do not have a
contractual relationship with the issuer of the security underlying the
depositary receipt to issue and secure such depositary receipt. To the extent
the Fund invests in such unsponsored depositary receipts there may be an
increased possibility that the Fund may not become aware of events affecting
the underlying security and thus the value of the related depositary receipt.
In addition, certain benefits (i.e., rights offerings) which may be
associated with the security underlying the depositary receipt may not inure
to the benefit of the holder of such depositary receipt.
Investments in Initial Public Offerings. The Fund may invest in initial
public offerings of Indian issuers. At the initial stage of such an offering,
the issuer may reserve up to 24% of the offering for nonresident Indian
investors and certain foreign institutional investors such as the Fund. The
issuer also may reserve up to 20% of the offering for locally offered mutual
funds. The price available to the Fund in such an offering may be higher or
lower than the price available to other institutions. When the Fund commits
to purchase from the reserved portion of such an offering, it may be required
to place the purchase price in a bank deposit account (that does not pay
interest) before receiving securities. In addition, until the purchase is
settled, the Fund may not know if it will receive the amount of securities
for which it has subscribed.
Portfolio Turnover
The Fund will attempt to be substantially fully invested at all times,
except as described above. To the extent consistent with investment
considerations, PMC and the Indian Adviser intend to minimize the Fund's
realization of short-term capital gains with respect to securities subject
to Indian short-term capital gains taxes. See "Indian Taxes." However,
changes in the Fund's portfolio may be made promptly when determined by PMC
or the Indian Adviser to be advisable by
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reason of developments not foreseen at the time of the initial investment
decision, and usually without reference to the length of time a security has
been held. Accordingly, portfolio turnover rates are not considered a
limiting factor in the execution of investment decisions. It is anticipated
that the portfolio turnover rate of the Fund will not exceed 100% in the
coming year. A high rate of portfolio turnover (100% or more) involves
correspondingly greater transaction costs which must be borne by the Fund and
its shareholders and may, under certain circumstances, make it more difficult
for the Fund to qualify as a regulated investment company under the Code. See
"Dividends, Distributions and Taxation."
The Fund's investment objective and certain investment restrictions
designated as fundamental in the Statement of Additional Information may be
changed by the Board of Trustees only with shareholder approval. The Fund's
investment policies and nonfundamental investment restrictions may be changed
by the Board of Trustees without shareholder approval. See "Investment
Policies, Restrictions and Risk Factors" in the Statement of Additional
Information.
IV. MANAGEMENT OF THE FUND
The Fund's Board of Trustees has overall responsibility for management and
supervision of the Fund. There are currently eight Trustees, six of whom are
not "interested persons" of the Fund as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). The Board meets at least quarterly. By
virtue of the functions performed by Pioneering Management Corporation as
manager and by ITI Pioneer AMC Ltd. as Indian Adviser, the Fund requires no
employees other than its executive officers, all of whom receive their
compensation from PMC or other sources. The Statement of Additional
Information contains the names and general business and professional
background of each Trustee and executive officer of the Fund.
The Adviser
The Fund is managed under a contract with PMC. PMC is responsible for the
overall management of the Fund's business affairs and the day-to-day
management of Fund assets that are not under the Indian Adviser's management,
subject only to the authority of the Board of Trustees. PMC is a wholly-owned
subsidiary of The Pioneer Group, Inc. ("PGI"), a publicly-traded Delaware
corporation. Pioneer Funds Distributor, Inc. ("PFD"), an indirect
wholly-owned subsidiary of PGI, is the principal underwriter of the Fund.
Mr. David Tripple, President and Chief Investment Officer of PMC and
Executive Vice President of each Pioneer mutual fund, has general
responsibility for PMC's investment operations and chairs a committee of
PMC's global equity managers which reviews PMC's research and portfolio
operations, including those of the Fund. Mr. Tripple joined PMC in 1974.
Research and management for the Fund is the responsibility of a team of
portfolio managers and analysts focusing on non-U.S. companies. Members of
the team meet regularly to discuss holdings, prospective investments and
portfolio composition. Dr. Norman Kurland, a Senior Vice President of PMC and
a Vice President of the Fund, is the senior member of the team. Dr. Kurland
joined PMC in 1990.
Day-to-day management of the Fund has been the responsibility of Mr. Mark
Madden since February 1997. Mr. Madden, a Vice President of PMC and the fund,
shared responsibility for the day-to-day management of the Fund with Mr.
Tripple from April 1995 to February 1997. Mr. Madden joined PMC in 1990 and
has 13 years of investment experience. Mr. Manish Modi is the senior analyst
focusing on India and Indian companies. Mr. Modi joined PMC in 1994 and has 7
years of investment experience.
PMC manages and serves as the investment adviser for several other mutual
funds and is an investment adviser to certain other institutional accounts.
PMC's and PFD's executive offices are located at 60 State Street, Boston,
Massachusetts 02109. In an effort to avoid conflicts of interest with the
Fund, the Fund and PMC have adopted a Code of Ethics that is designed to
maintain a high standard of personal conduct by directing that all personnel
defer to the interests of the Fund and its shareholders in making personal
securities transactions.
Under the terms of its contract with the Fund, PMC manages the Fund's
business affairs, supervises the Indian Adviser's performance of its
portfolio management responsibilities and allocates the management of Fund
assets between itself and the Indian Adviser. PMC's supervisory
responsibilities include consulting with the Indian Adviser on a regular
basis regarding the Indian Adviser's decisions to purchase, sell or hold
particular securities. PMC is authorized in its discretion to use Fund assets
that are under its management to buy and sell securities for the Fund's
account. PMC pays all advisory fees to the Indian Adviser and all ordinary
operating expenses, including executive salaries and the rental of office
space, relating to its services for the Fund, with the exception of the
following which are paid by the Fund: (a) charges and expenses for fund
accounting, pricing and appraisal services and related overhead, including,
to the extent such services are performed by personnel of PMC or its
affiliates, office space and facilities and personnel compensation, training
and benefits; (b) the charges and expenses of auditors; (c) the charges and
expenses of any custodian, transfer agent, plan agent, dividend disbursing
agent and registrar appointed by the Fund with respect to shares of the Fund;
(d) issue and transfer taxes chargeable to the Fund in connection with
securities transactions to which the Fund is a party; (e) insurance premiums,
interest charges, dues and fees for membership in trade associations, and all
taxes and corporate fees payable by the Fund to federal, state or other
governmental agencies; (f) fees and expenses involved in registering and
maintaining registrations of the Fund and/or its shares with the SEC,
individual states or blue sky securities agencies, territories and foreign
countries, including the preparation of prospectuses and statements of
additional information for filing with regulatory agencies; (g) all expenses
of shareholders' and Trustees' meetings and of preparing, printing and
distributing prospectuses, notices, proxy statements and all reports to
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<PAGE>
shareholders and to governmental agencies; (h) charges and expenses of legal
counsel to the Fund and to Trustees; (i) distribution fees paid by the Fund
in accordance with Rule 12b-1 promulgated by the SEC pursuant to the 1940
Act; (j) compensation of those Trustees of the Fund who are not affiliated
with or interested persons of PMC, the Fund (other than as Trustees), PGI or
PFD; (k) the cost of preparing and printing share certificates; and (l)
interest on borrowed money, if any. The Fund also pays all brokers' and
underwriting commissions chargeable to the Fund in connection with its
portfolio transactions.
Orders for the Fund's portfolio securities transactions in the Indian
securities markets are placed by the Indian Adviser. Orders for the Fund's
portfolio securities transactions in all other markets are placed by PMC.
Both PMC and the Indian Adviser strive to obtain the best price and execution
for each transaction. In circumstances in which two or more broker-dealers
are in a position to offer comparable prices and execution, consideration may
be given by the Indian Adviser or PMC to whether the broker-dealer provides
investment research or brokerage services or sells shares of the Fund or
other funds for which PMC or any affiliate or subsidiary serves as investment
adviser or manager. See the Statement of Additional Information for a further
description of PMC's and Indian Adviser's brokerage allocation practices.
As compensation for its management services and certain expenses which PMC
incurs, PMC is entitled to a management fee equal to 1.25% per annum of the
Fund's average daily net assets. While this fee, which is computed daily and
paid monthly, is higher than most management fees, the costs of managing the
Fund are significantly greater than the costs of managing a domestic fund.
PMC has agreed not to impose a portion of its management fee and to make
other arrangements, if necessary, to limit certain other expenses of the Fund
to the extent necessary to limit Class A expenses to 2.25% of the average
daily net assets attributable to Class A shares; the portion of the Fund-wide
expenses attributable to Class B and Class C shares will be reduced only to
the extent such expenses are reduced for Class A shares. This agreement is
voluntary and temporary and may be revised or terminated by PMC at any time.
John F. Cogan, Jr., Chairman and President of the Fund, Chairman of PFD
and PMC and President and a Director of PGI, beneficially owned 14% of the
outstanding capital stock of PGI as of the date of this Prospectus.
The Indian Adviser
ITI Pioneer AMC Ltd., the Indian investment adviser to the Fund, is
responsible for investing the Fund's assets in the Indian securities markets
and providing certain related services to PMC, subject to the supervision of
PMC, which, in turn, is subject to the supervision of the Fund's Board of
Trustees. The Indian Adviser is a joint venture of PMC, a Delaware
corporation, and Investment Trust of India Limited ("ITI"), a corporation
organized under the laws of India. ITI was established in 1946 and is one of
India's leading providers of financial services. The Indian Adviser was the
first institution in India to establish locally-registered private sector
mutual funds in India. PMC and ITI currently own approximately 46% and 49%,
respectively, of the Indian Adviser's total equity capital.
All investment decisions made by the Indian Adviser are made by an
investment committee comprised of certain of the Indian Adviser's directors
and officers, including Ravi Mehrotra, Chief Investment Officer, and R.
Sukumar, Fund Manager. Prior to joining ITI Pioneer in 1993, Mr. Mehrotra
worked in the financial services and banking industries in India. Mr. Sukumar
joined ITI Pioneer in 1994 after working in the financial services industry.
As compensation for its services under its Subadvisory Agreement with PMC,
the Indian Adviser receives a subadvisory fee at an annual rate from 0.10% to
0.60% of the Fund's average gross assets invested in India's securities
markets, including assets invested in Depositary Receipts for securities
traded in India's securities markets. The fee, which is paid by PMC, accrues
monthly and is paid quarterly.
V. FUND SHARE ALTERNATIVES
The Fund continuously offers three Classes of shares designated as Class
A, Class B and Class C shares, as described more fully in "How to Buy Fund
Shares." If you do not specify in your instructions to the Fund which Class
of shares you wish to purchase, exchange or redeem, the Fund will assume that
your instructions apply to Class A shares.
Class A Shares. If you invest less than $1 million in Class A shares, you
will pay an initial sales charge. Certain purchases may qualify for reduced
initial sales charges. If you invest $1 million or more in Class A shares, no
sales charge will be imposed at the time of purchase; however, shares
redeemed within 12 months of purchase may be subject to a CDSC. Class A
shares are subject to distribution and service fees at a combined annual rate
of up to 0.25% of the Fund's average daily net assets attributable to Class A
shares.
Class B Shares. If you plan to invest up to $250,000, Class B shares are
available to you. Class B shares are sold without an initial sales charge,
but are subject to a CDSC of up to 4% if redeemed within six years. Class B
shares are subject to distribution and service fees at a combined annual rate
of 1% of the Fund's average daily net assets attributable to Class B shares.
Your entire investment in Class B shares is available to work for you from
the time you make your investment, but the higher distribution fee paid by
Class B shares will cause your Class B shares (until conversion) to have a
higher expense ratio and to pay lower per share dividends, to the extent
dividends are paid, than Class A shares. Class B shares will automatically
convert to Class A shares, based on relative net asset value, eight years
after the initial purchase.
Class C Shares. Class C shares are sold without an initial sales charge,
but are subject to a 1% CDSC if they are redeemed within the first year after
purchase. Class C shares are subject to distribution and service fees at a
combined
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annual rate of up to 1% of the Fund's average daily net assets attributable
to Class C shares. Your entire investment in Class C shares is available to
work for you from the time you make your investment, but the higher
distribution fee paid by Class C shares will cause your Class C shares to
have a higher expense ratio and to pay lower dividends, to the extent
dividends are paid, than Class A shares. Class C shares have no conversion
feature.
Selecting a Class of Shares. The decision as to which Class to purchase
depends on the amount you invest, the intended length of the investment and
your personal situation. If you are making an investment that qualifies for
reduced sales charges, you might consider Class A shares. If you prefer not
to pay an initial sales charge on an investment of $250,000 or less and you
plan to hold the investment for at least six years, you might consider Class
B shares. If you prefer not to pay an initial sales charge and you plan to
hold your investment for one to eight years, you may prefer Class C shares.
Investment dealers or their representatives may receive different
compensation depending on which Class of shares they sell. Shares may be
exchanged only for shares of the same Class of another Pioneer mutual fund
and shares acquired in the exchange will continue to be subject to any CDSC
applicable to the shares of the Fund originally purchased. Shares sold
outside the U.S. to persons who are not U.S. citizens may be subject to
different sales charges, CDSCs and dealer compensation arrangements in
accordance with local laws and business practices.
VI. SHARE PRICE
Shares of the Fund are sold at the public offering price, which is the net
asset value per share, plus the applicable sales charge. The net asset value
per share of each Class of Fund shares is determined by dividing the fair
market value of its assets, less liabilities attributable to that Class, by
the number of shares of that Class outstanding. The net asset value is
computed once daily, on each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading on the Exchange.
Securities are valued at the last sale price on the principal exchange or
market where they are traded. Securities which have not traded on the date of
valuation, or securities for which sales prices are not generally reported,
are valued at the mean between the current bid and asked prices. Securities
quoted in international currencies are converted to U.S. dollars utilizing
foreign exchange rates employed by the Fund's independent pricing services.
Generally, trading in international securities is substantially completed
each day at various times prior to the close of regular trading on the
Exchange. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of regular
trading on the Exchange. Occasionally, events which affect the values of such
securities and such exchange rates may occur between the times at which they
are determined and the close of regular trading on the Exchange and will
therefore not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities are valued at their fair value as determined in
good faith by the Trustees. All assets of the Fund for which there is no
other readily available valuation method are valued at their fair value as
determined in good faith by the Trustees.
VII. HOW TO BUY FUND SHARES
You may buy Fund shares from any securities broker-dealer which has a
sales agreement with PFD. If you do not have a securities broker-dealer,
please call 1-800-225-6292. Shares will be purchased at the public offering
price, that is, the net asset value per share plus any applicable sales
charge, next computed after receipt of a purchase order, except as set forth
below.
The minimum initial investment is $1,000 for Class A, Class B and Class C
shares except as specified below. The minimum initial investment is $50 for
Class A accounts being established to utilize monthly bank drafts, government
allotments, payroll deduction and other similar automatic investment plans.
Separate minimum investment requirements apply to retirement plans and to
telephone and wire orders placed by broker-dealers; no sales charges or
minimum requirements apply to the reinvestment of dividends or capital gains
distributions. The minimum subsequent investment is $50 for Class A shares
and $500 for Class B and Class C shares except that the subsequent minimum
investment amount for Class B and Class C share accounts may be as little as
$50 if an automatic investment plan (see "Automatic Investment Plans") is
established.
Telephone Purchases. Your account is automatically authorized to have the
telephone purchase privilege unless you indicate otherwise on your Account
Application or by writing to Pioneering Services Corporation ("PSC"). The
telephone purchase option may be used to purchase additional shares for an
existing Pioneer mutual fund account; it may not be used to establish a new
account. Proper account identification will be required for each telephone
purchase. A maximum of $25,000 per account may be purchased by telephone each
day. The telephone purchase privilege is available to Individual Retirement
Accounts ("IRAs") but may not be available to other types of retirement plan
accounts. Call PSC for more information.
You are strongly urged to consult with your financial representative prior
to requesting a telephone purchase. To purchase shares by telephone, you must
establish your bank account of record by completing the appropriate section
of your Account Application or an Account Options Form. PSC will
electronically debit the amount of each purchase from this predesignated bank
account. Telephone purchases may not be made for 30 days after the
establishment of your bank of record or any change to your bank information.
Telephone purchases will be priced at the net asset value plus any
applicable sales charge next determined after PSC's
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receipt of a telephone purchase instruction and receipt of good funds
(usually three days after the purchase instruction). You may always elect to
deliver purchases to PSC by mail. See "Telephone Transactions and Related
Liabilities" for additional information.
Class A Shares
You may buy Class A shares at the public offering price, including a sales
charge, as follows:
Sales Charge as a Dealer
Percentage of Allowance
-------------------- as a
Net Percentage of
Offering Amount Offering
Amount of Purchase Price Invested Price
----------------------- -------- --------- --------------
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than
$100,000 4.50 4.71 4.00
$100,000 but less than
$250,000 3.50 3.63 3.00
$250,000 but less than
$500,000 2.50 2.56 2.00
$500,000 but less than
$1,000,000 2.00 2.04 1.75
$1,000,000 or more -0- -0- See below
The schedule of sales charges above is applicable to purchases of Class A
shares of the Fund by (i) an individual, (ii) an individual and his or her
spouse and children under the age of 21 and (iii) a trustee or other
fiduciary of a trust estate or fiduciary account or related trusts or
accounts including pension, profit-sharing and other employee benefit trusts
qualified under Section 401 or 408 of the Code, although more than one
beneficiary is involved. The sales charges applicable to a current purchase
of Class A shares of the Fund by a person listed above is determined by
adding the value of shares to be purchased to the aggregate value (at the
then current offering price) of shares of any of the other Pioneer mutual
funds previously purchased and then owned, provided PFD is notified by such
person or his or her broker-dealer each time a purchase is made which would
qualify. Pioneer mutual funds include all mutual funds for which PFD serves
as principal underwriter. At the sole discretion of PFD, holdings of funds
domiciled outside the U.S., but which are managed by affiliates of PMC, may
be included for this purpose.
No sales charge is payable at the time of purchase on investments of $1
million or more or for purchases by participants in certain group plans
(described below) subject to a CDSC of 1% which may be imposed in the event
of a redemption of Class A shares within 12 months of purchase. See "How to
Sell Fund Shares." PFD may, in its discretion, pay a commission to
broker-dealers who initiate and are responsible for such purchases as
follows: 1% on the first $5 million invested; 0.50% on the next $45 million;
and 0.25% on the excess over $50 million. These commissions will not be paid
if the purchaser is affiliated with the broker-dealer or if the purchase
represents the reinvestment of a redemption made during the previous 12
calendar months. Broker-dealers who receive a commission in connection with
Class A share purchases at net asset value by 401(a) or 401(k) retirement
plans with 1,000 or more eligible participants or with at least $10 million
in plan assets will be required to return any commission paid or a pro rata
portion thereof if the retirement plan redeems its shares within 12 months of
purchase. See also "See How to Sell Fund Shares." In connection with PGI's
acquisition of Mutual of Omaha Fund Management Company and contingent upon
the achievement of certain sales objectives, PFD may pay to Mutual of Omaha
Investor Services, Inc. 50% of PFD's retention of any sales commission on
sales of the Fund's Class A shares through such dealer. From time to time,
PFD may elect to reallow the entire initial sales charge to participating
dealers for all Class A sales with respect to which orders are placed during
a particular period. Dealers to whom substantially the entire sales charge is
reallowed may be deemed to be underwriters under the federal securities laws.
Qualifying for a Reduced Sales Charge. Class A shares of the Fund may be
sold at a reduced or eliminated sales charge to certain group plans ("Group
Plans") under which a sponsoring organization makes recommendations to,
permits group solicitation of, or otherwise facilitates purchases by, its
employees, members or participants. Class A shares of the Fund may be sold at
net asset value without a sales charge to 401(k) retirement plans with 100 or
more participants or at least $500,000 in plan assets. Information about such
arrangements is available from PFD.
Class A shares of the Fund may be sold at net asset value per share
without a sales charge to: (a) current or former Trustees and officers of the
Fund and partners and employees of its legal counsel; (b) current or former
directors, officers, employees or sales representatives of PGI or its
subsidiaries; (c) current or former directors, officers, employees or sales
representatives of any subadviser or predecessor investment adviser to any
investment company for which PMC serves as investment adviser, and the
subsidiaries or affiliates of such persons; (d) current or former officers,
partners, employees or registered representatives of broker-dealers which
have entered into sales agreements with PFD; (e) members of the immediate
families of any of the persons above; (f) any trust, custodian, pension,
profit-sharing or other benefit plan of the foregoing persons; (g) insurance
company separate accounts; (h) certain "wrap accounts" for the benefit of
clients of financial planners adhering to standards established by PFD; (i)
other funds and accounts for which PMC or any of its affiliates serves as
investment adviser or manager; and (j) certain unit investment trusts. Shares
so purchased are purchased for investment purposes and may not be resold
except through redemption or repurchase by or on behalf of the Fund. The
availability of this privilege is conditioned upon the receipt by PFD of
written notification of eligibility. Class A shares of the Fund may be sold
at net asset value per share without a sales charge to Optional Retirement
Program (the "Program") participants if (i) the employer has authorized a
limited number of investment company providers for the Program, (ii) all
authorized investment company providers offer their shares to Program
participants at net asset value, (iii) the employer has agreed in writing to
actively promote the authorized investment company providers to Pro-
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<PAGE>
gram participants and (iv) the Program provides for a matching contribution
for each participant contribution. Class A shares may also be sold at net
asset value in connection with certain reorganization, liquidation, or
acquisition transactions involving other investment companies or personal
holding companies.
Reduced sales charges are available for purchases of $50,000 or more of
Class A shares (excluding any reinvestments of dividends and capital gains
distributions) made within a 13-month period pursuant to a Letter of Intent
("LOI") which may be established by completing the Letter of Intent section
of the Account Application. The reduced sales charge will be the charge that
would be applicable to the purchase of the specified amount of Class A shares
as if the shares had all been purchased at the same time. A purchase not made
pursuant to an LOI may be included if the LOI is submitted to PSC within 90
days of such purchase. You may also obtain the reduced sales charge by
including the value (at current offering price) of all your Class A shares in
the Fund and all other Pioneer mutual funds held of record as of the date of
your LOI in the amount used to determine the applicable sales charge for the
Class A shares to be purchased under the LOI. Five percent of your total
intended purchase amount will be held in escrow by PSC, registered in your
name, until the terms of the LOI are fulfilled.
You are not obligated to purchase the amount specified in your LOI. If,
however, the amount actually purchased during the 13-month period is more or
less than that indicated in your LOI, an adjustment in the sales charge will
be made. If a payment to cover actual sales charges is due, it must be paid
to PFD within 20 days after PFD or your dealer sends you a written request or
PFD will direct PSC to liquidate sufficient shares from your escrow account
to cover the amount due. See the Statement of Additional Information for more
information.
Investors who are clients of a broker-dealer with a current sales
agreement with PFD may purchase Class A shares of the Fund at net asset
value, without a sales charge, to the extent that the purchase price is paid
out of proceeds from one or more redemptions by the investor of shares of
certain other mutual funds. In order for a purchase to qualify for this
privilege, the investor must document to the broker-dealer that the
redemption occurred within the 60 days immediately preceding the purchase of
Class A shares; that the client paid a sales charge on the original purchase
of the shares redeemed; and that the mutual fund whose shares were redeemed
also offers net asset value purchases to redeeming shareholders of any of the
Pioneer mutual funds. Further details may be obtained from PFD.
Class B Shares
You may buy Class B shares at the net asset value next computed after
receipt of a purchase order without the imposition of an initial sales
charge. However, Class B shares redeemed within six years of purchase will be
subject to a CDSC at the rates shown in the table below. The charge will be
assessed on the amount equal to the lesser of the current market value or the
original purchase cost of the shares being redeemed. No CDSC will be imposed
on increases in account value above the initial purchase price, including
shares derived from the reinvestment of dividends or capital gains
distributions.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a quarter will be aggregated and deemed to have been made
on the first day of that quarter. In processing redemptions of Class B
shares, the Fund will first redeem shares not subject to any CDSC, and then
shares held longest during the six-year-period. As a result, you will pay the
lowest possible CDSC.
The CDSC for Class B shares subject to a CDSC upon redemption will be
determined as follows:
Year Since CDSC as a Percentage of Dollar
Purchase Amount Subject to CDSC
--------------------------- -----------------------------------
First 4.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter none
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to
the Fund in connection with the sale of Class B shares, including the payment
of compensation to broker-dealers.
Class B shares will automatically convert into Class A shares at the end
of the calendar quarter that is eight years after the purchase date, except
as noted below. Class B shares acquired by exchange from Class B shares of
another Pioneer mutual fund will convert into Class A shares based on the
date of the initial purchase and the applicable CDSC. Class B shares acquired
through reinvestment of distributions will convert into Class A shares based
on the date of the initial purchase of the shares to which such shares
relate. For this purpose, Class B shares acquired through reinvestment of
distributions will be attributed to particular purchases of Class B shares in
accordance with such procedures as the Trustees may determine from time to
time. The conversion of Class B shares to Class A shares is subject to the
continuing availability of a ruling from the Internal Revenue Service
("IRS"), for which the Fund is applying, or an opinion of counsel that such
conversions will not constitute taxable events for federal tax purposes.
There can be no assurance that such ruling or opinion will be available. The
conversion of Class B shares to Class A shares will not occur if such ruling
or opinion is not available and, therefore, Class B shares would continue to
be subject to higher expenses than Class A shares for an indeterminate
period.
Class C Shares
You may buy Class C shares at the net asset value next computed after
receipt of a purchase order without the impo-
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<PAGE>
sition of an initial sales charge; however, Class C shares redeemed within
one year of purchase will be subject to a CDSC of 1%. The charge will be
assessed on the amount equal to the lesser of the current market value or the
original purchase cost of the shares being redeemed. No CDSC will be imposed
on increases in account value above the initial purchase price, including
shares derived from the reinvestment of dividends or capital gains
distributions. Class C shares do not convert to any other Class of Fund
shares.
For the purpose of determining the time of any purchase, all payments
during a quarter will be aggregated and deemed to have been made on the first
day of that quarter. In processing redemptions of Class C shares, the Fund
will first redeem shares not subject to any CDSC, and then shares held for
the shortest period of time during the one-year period. As a result, you will
pay the lowest possible CDSC.
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to
the Fund in connection with the sale of Class C shares, including the payment
of compensation to broker-dealers.
Waiver or Reduction of Contingent Deferred Sales Charge. The CDSC on Class
B shares may be waived or reduced for non-retirement accounts if: (a) the
redemption results from the death of all registered owners of an account (in
the case of UGMAs, UTMAs and trust accounts, waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase
of the shares being redeemed or (b) the redemption is made in connection with
limited automatic redemptions as set forth in "Systematic Withdrawal Plans"
(limited in any year to 10% of the value of the account in the Fund at the
time the withdrawal plan is established).
The CDSC on Class B shares may be waived or reduced for retirement plan
accounts if: (a) the redemption results from the death or a total and
permanent disability (as defined in Section 72 of the Code) occurring after
the purchase of the shares being redeemed of a shareholder or participant in
an employer-sponsored retirement plan; (b) the distribution is to a
participant in an IRA, 403(b) or employer-sponsored retirement plan, is part
of a series of substantially equal payments made over the life expectancy of
the participant or the joint life expectancy of the participant and his or
her beneficiary or as scheduled periodic payments to a participant (limited
in any year to 10% of the value of the participant's account at the time the
distribution amount is established; a required minimum distribution due to
the participant's attainment of age 70-1/2 may exceed the 10% limit only if
the distribution amount is based on plan assets held by Pioneer); (c) the
distribution is from a 401(a) or 401(k) retirement plan and is a return of
excess employee deferrals or employee contributions or a qualifying hardship
distribution as defined by the Code or results from a termination of
employment (limited with respect to a termination to 10% per year of the
value of the plan's assets in the Fund as of the later of the prior December
31 or the date the account was established unless the plan's assets are being
rolled over to or reinvested in the same class of shares of a Pioneer mutual
fund subject to the CDSC of the shares originally held); (d) the distribution
is from an IRA, 403(b) or employer-sponsored retirement plan and is to be
rolled over to or reinvested in the same class of shares in a Pioneer mutual
fund and which will be subject to the applicable CDSC upon redemption; (e)
the distribution is in the form of a loan to a participant in a plan which
permits loans (each repayment of the loan will constitute a new sale which
will be subject to the applicable CDSC upon redemption); or (f) the
distribution is from a qualified defined contribution plan and represents a
participant's directed transfer (provided that this privilege has been
pre-authorized through a prior agreement with PFD regarding participant
directed transfers).
The CDSC on Class C shares and on any Class A shares subject to a CDSC may
be waived or reduced as follows: (a) for automatic redemptions as described
in "Systematic Withdrawal Plans" (limited to 10% of the value of the
account); (b) if the redemption results from the death or a total and
permanent disability (as defined in Section 72 of the Code) occurring after
the purchase of the shares being redeemed of a shareholder or participant in
an employer-sponsored retirement plan; (c) if the distribution is part of a
series of substantially equal payments made over the life expectancy of the
participant or the joint life expectancy of the participant and his or her
beneficiary; or (d) if the distribution is to a participant in an
employer-sponsored retirement plan and is (i) a return of excess employee
deferrals or contributions, (ii) a qualifying hardship as defined by the
Code, (iii) from a termination of employment, (iv) in the form of a loan to a
participant in a plan which permits loans, or (v) from a qualified defined
contribution plan and represents a participant's directed transfer (provided
that this privilege has been pre-authorized through a prior agreement with
PFD regarding participant directed transfers).
The CDSC on any shares subject to a CDSC may be waived or reduced for
either non-retirement or retirement plan accounts if: (a) the redemption is
made by any state, county, or city, or any instrumentality, department,
authority, or agency thereof, which is prohibited by applicable laws from
paying a CDSC in connection with the acquisition of shares of any registered
investment management company; or (b) the redemption is made pursuant to the
Fund's right to liquidate or involuntarily redeem shares in a shareholder's
account. The CDSC on any shares subject to a CDSC will not be applicable if
the selling broker-dealer elects, with PFD's approval, to waive receipt of
the commission normally paid at the time of the sale.
Broker-Dealers
An order for any Class of Fund shares received by PFD from a broker-dealer
prior to the close of regular trading on the Exchange is confirmed at the
price appropriate for that Class as determined at the close of regular
trading on the Exchange on the day the order is received, provided the order
is received by PFD prior to PFD's close of business (usually, 5:30 p.m.
Eastern Time). It is the responsibility of broker-
14
<PAGE>
dealers to transmit orders so that they will be received by PFD prior to its
close of business. PFD or its affiliates may provide additional compensation
to certain dealers or such dealers' affiliates based on certain objective
criteria established from time to time by PFD. All such payments are made out
of PFD's or the affiliate's own assets. These payments will not change the
price an investor will pay for shares or the amount that the Fund will
receive from such sale.
General
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering of shares when, in the judgment of the Fund's
management, such withdrawal is in the best interest of the Fund. An order to
purchase shares is not binding on, and may be rejected by, PFD until it has
been confirmed in writing by PFD and payment has been received.
VIII. HOW TO SELL FUND SHARES
You can arrange to sell (redeem) Fund shares on any day the Exchange is
open by selling either some or all of your shares to the Fund.
You may sell your shares either through your broker-dealer or directly to
the Fund. Please note the following:
(bullet) If you are selling shares from a retirement account, other than
an IRA, you must make your request in writing (except for
exchanges to other Pioneer mutual funds which can be requested by
phone or in writing). Call 1-800-622-0176 for more information.
(bullet) If you are selling shares from a non-retirement or IRA account,
you may use any of the methods described below.
Your shares will be sold at the share price next calculated after your
order is received in good order less any applicable CDSC. Sale proceeds
generally will be sent to you in cash, normally within seven days after your
order is received in good order. The Fund reserves the right to withhold
payment of the sale proceeds until checks received by the Fund in payment for
the shares being sold have cleared, which may take up to 15 calendar days
from the purchase date.
In Writing. You may sell your shares by delivering a written request,
signed by all registered owners, in good order to PSC, however, you must use
a written request, including a signature guarantee, to sell your shares if
any of the following applies:
(bullet) you wish to sell over $50,000 worth of shares,
(bullet) your account registration or address has changed within the last
30 days,
(bullet) the check is not being mailed to the address on your account
(address of record),
(bullet) the check is not being made out to the account owners, or
(bullet) the sale proceeds are being transferred to a Pioneer mutual fund
account with a different registration.
Your request should include your name, the Fund's name, your fund account
number, the Class of shares to be redeemed, the dollar amount or number of
shares to be redeemed, and any other applicable requirements as described
below. Unless instructed otherwise, PSC will send the proceeds of the sale to
the address of record. Fiduciaries and corporations are required to submit
additional documents. For more information, contact PSC at 1-800-225-6292.
Written requests will not be processed until they are received in good
order by PSC. Good order means that there are no outstanding claims or
requests to hold redemptions on the account, any certificates are endorsed by
the record owner(s) exactly as the shares are registered and the signature(s)
are guaranteed by an eligible guarantor. You should be able to obtain a
signature guarantee from a bank, broker, dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency or
savings association. A notary public cannot provide a signature guarantee.
Signature guarantees are not accepted by facsimile ("fax"). For additional
information about the necessary documentation for redemption by mail, please
contact PSC at 1-800-225-6292.
By Telephone or by Fax. Your account is automatically authorized to have
the telephone redemption privilege unless you indicate otherwise on your
Account Application or by writing to PSC. Proper account identification will
be required for each telephone redemption. The telephone redemption option is
not available to retirement plan accounts, except IRAs. A maximum of $50,000
per account per day may be redeemed by telephone or fax and the proceeds may
be received by check or bank wire or electronic funds transfer. To receive
the proceeds by check: the check must be made payable exactly as the account
is registered and the check must be sent to the address of record which must
not have changed in the last 30 days. To receive the proceeds by bank wire or
electronic funds transfer: the proceeds must be sent to your bank address of
record which must have been properly predesignated either on your Account
Application or on an Account Options Form and which must not have changed in
the last 30 days. To redeem by fax send your redemption request to
1-800-225-4240. You may always elect to deliver redemption instructions to
PSC by mail. See "Telephone Transactions and Related Liabilities" below.
Telephone and fax redemptions will be priced as described above. You are
strongly urged to consult with your financial representative prior to
requesting a telephone redemption.
Selling Shares Through Your Broker-Dealer. The Fund has authorized PFD to
act as its agent in the repurchase of shares of the Fund from qualified
broker-dealers and reserves the right to terminate this procedure at any
time. Your broker-dealer must receive your request before the close of
business on the Exchange and transmit it to PFD before PFD's close of
business to receive that day's redemption price. Your broker-dealer is
responsible for providing all necessary documentation to PFD and may charge
you for its services.
15
<PAGE>
Small Accounts. The minimum account value is $500. If you hold shares of
the Fund in an account with a net asset value of less than the minimum
required amount due to redemptions or exchanges, the Fund may redeem the
shares held in this account at net asset value if you have not increased the
net asset value of the account to at least the minimum required amount within
six months of notice by the Fund to you of the Fund's intention to redeem the
shares.
CDSC on Class A Shares. Purchases of Class A shares of $1 million or more,
or by participants in a Group Plan which were not subject to an initial sales
charge, may be subject to a CDSC upon redemption. A CDSC is payable to PFD on
these investments in the event of a share redemption within 12 months
following the share purchase, at the rate of 1% of the lesser of the value of
the shares redeemed (exclusive of reinvested dividend and capital gain
distributions) or the total cost of such shares. Shares subject to the CDSC
which are exchanged into another Pioneer mutual fund will continue to be
subject to the CDSC until the original 12-month period expires. However, no
CDSC is payable upon redemption with respect to Class A shares purchased by
401(a) or 401(k) retirement plans with 1,000 or more eligible participants or
with at least $10 million in plan assets.
General. Redemptions may be suspended or payment postponed during any
period in which any of the following conditions exist: the Exchange or BSE is
closed or trading on either exchange is restricted; an emergency exists as a
result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund to
fairly determine the value of the net assets of its portfolio; or the SEC, by
order, so permits.
Redemptions and repurchases are taxable transactions to shareholders. The
net asset value per share received upon redemption or repurchase may be more
or less than the cost of shares to an investor, depending on the market value
of the portfolio at the time of redemption or repurchase.
IX. HOW TO EXCHANGE FUND SHARES
Written Exchanges. You may exchange your shares by sending a letter of
instruction to PSC. Your letter should include your name, the name of the
Pioneer mutual fund out of which you wish to exchange and the name of the
Pioneer mutual fund into which you wish to exchange, your fund account
number(s), the Class of shares to be exchanged and the dollar amount or
number of shares to be exchanged. Written exchange requests must be signed by
all record owner(s) exactly as the shares are registered.
Telephone Exchanges. Your account is automatically authorized to have the
telephone exchange privilege unless you indicate otherwise on your Account
Application or by writing to PSC. Proper account identification will be
required for each telephone exchange. Telephone exchanges may not exceed
$500,000 per account per day. Each telephone exchange request, whether by
voice or by FactFone(SM), will be recorded. You are strongly urged to consult
with your financial representative prior to requesting a telephone exchange.
See "Telephone Transactions and Related Liabilities" below.
Automatic Exchanges. You may automatically exchange shares from one
Pioneer mutual fund account for shares of the same Class in another Pioneer
mutual fund account on a monthly or quarterly basis. The accounts must have
identical registrations and the originating account must have a minimum
balance of $5,000. The exchange will be effective on the day of the month
designated on your Account Application or Account Options Form.
General. Exchanges must be at least $1,000. You may exchange your
investment from one Class of Fund shares at net asset value, without a sales
charge, for shares of the same Class of any other Pioneer mutual fund. Not
all Pioneer mutual funds offer more than one Class of shares. A new Pioneer
mutual fund account opened through an exchange must have a registration
identical to that on the original account.
Shares which would normally be subject to a CDSC upon redemption will not
be charged the applicable CDSC at the time of the exchange. Shares acquired
in an exchange will be subject to the CDSC of the shares originally held. For
purposes of determining the amount of any applicable CDSC, the length of time
you have owned shares acquired by exchange will be measured from the date you
acquired the original shares and will not be affected by any subsequent
exchange.
Exchange requests received by PSC before 4:00 p.m. Eastern Time will be
effective on that day if the requirements above have been met, otherwise,
they will be effective on the next business day. PSC will process exchanges
only after receiving an exchange request in good order. There are currently
no fees or sales charges imposed at the time of an exchange. An exchange of
shares may be made only in states where legally permitted. For federal and
(generally) state income tax purposes, an exchange is considered to be a sale
of the shares of the fund exchanged and a purchase of shares in another
Pioneer mutual fund. Therefore, an exchange could result in a gain or loss on
the shares sold, depending on the tax basis of these shares and the timing of
the transaction, and special tax rules may apply.
You should consider the differences in objectives and policies of the
Pioneer mutual funds, as described in each fund's current prospectus, before
making any exchange. For the protection of the Fund's performance and
shareholders, the Fund and PFD reserve the right to refuse any exchange
request or restrict, at any time without notice, the number and/or frequency
of exchanges to prevent abuses of the exchange privilege. Such abuses may
arise from frequent trading in response to short-term market fluctuations, a
pattern of trading by an individual or group that appears to be an attempt to
"time the market" or any other exchange request which, in the view of
management, will have a detrimental effect on the Fund's portfolio management
strategy or its operations. In addition, the Fund and PFD reserve the right
to charge a fee for exchanges or to modify, limit, suspend or
16
<PAGE>
discontinue the exchange privilege with notice to shareholders as required by
law.
X. DISTRIBUTION PLANS
The Fund has adopted a Plan of Distribution for each Class of shares (the
"Class A Plan," "Class B Plan," and "Class C Plan") in accordance with Rule
12b-1 under the 1940 Act pursuant to which certain distribution and service
fees are paid.
Pursuant to the Class A Plan, the Fund reimburses PFD for its actual
expenditures to finance any activity primarily intended to result in the sale
of Class A shares or to provide services to holders of Class A shares,
provided the categories of expenses for which reimbursement is made are
approved by the Fund's Board of Trustees. As of the date of this Prospectus,
the Board of Trustees has approved the following categories of expenses for
Class A shares of the Fund: (i) a service fee to be paid to qualified
broker-dealers in an amount not to exceed 0.25% per annum of the Fund's
average daily net assets attributable to Class A shares; (ii) reimbursement
to PFD for its expenditures for broker-dealer commissions and employee
compensation on certain sales of the Fund's Class A shares with no initial
sales charge (see "How to Buy Fund Shares"); and (iii) reimbursement to PFD
for expenses incurred in providing services to Class A shareholders and
supporting broker-dealers and other organizations (such as banks and trust
companies) in their efforts to provide such services. Banks are currently
prohibited under the Glass-Steagall Act from providing certain underwriting
or distribution services. If a bank was prohibited from acting in any
capacity or providing any of the described services, management would
consider what action, if any, would be appropriate.
Expenditures of the Fund pursuant to the Class A Plan are accrued daily
and may not exceed 0.25% of the Fund's average daily net assets attributable
to Class A shares. Distribution expenses of PFD are expected to substantially
exceed the distribution fees paid by the Fund in a given year. The Class A
Plan may not be amended to increase materially the annual percentage
limitation of average net assets which may be spent for the services
described therein without approval of the Fund's Class A shareholders. The
Class A Plan does not provide for the carryover of reimbursable expenses
beyond 12 months from the time the Fund is first invoiced for an expense. The
limited carryover provision in the Class A Plan may result in an expense
invoiced to the Fund in one fiscal year being paid in the subsequent fiscal
year and thus being treated for purposes of calculating the maximum
expenditures of the Fund as having been incurred in the subsequent fiscal
year. In the event of termination or non-continuance of the Class A Plan, the
Fund has 12 months to reimburse any expense which it incurs prior to such
termination or non-continuance, provided that payments by the Fund during
such twelve-month period shall not exceed 0.25% of the Fund's average daily
net assets attributable to the Class A shares during such period. For the
calendar year ended December 31, 1996, there was an allowable carryover of
distribution expenses reimbursable to PFD of $10,575 (less than .09% of the
average net assets attributable to the Class A shares of the Fund).
Both the Class B and the Class C Plan provide that the Fund will pay a
distribution fee at the annual rate of 0.75% of the Fund's average daily net
assets attributable to the applicable Class of shares and will pay PFD a
service fee at the annual rate of 0.25% of the Fund's average daily net
assets attributable to that Class of shares. The distribution fee is intended
to compensate PFD for its distribution services to the Fund. The service fee
is intended to be additional compensation for personal services and/or
account maintenance services with respect to Class B or Class C shares. PFD
also receives the proceeds of any CDSC imposed on the redemption of Class B
or Class C shares.
Commissions of 4%, equal to 3.75% of the amount invested and a first
year's service fee equal to 0.25% of the amount invested in Class B shares,
are paid to broker-dealers who have selling agreements with PFD. PFD may
advance to dealers the first year service fee at a rate up to 0.25% of the
purchase price of such shares and, as compensation therefor, PFD may retain
the service fee paid by the Fund with respect to such shares for the first
year after purchase. Dealers will become eligible for additional service fees
with respect to such shares commencing in the 13th month following the
purchase.
Commissions of up to 1% of the amount invested in Class C shares,
consisting of 0.75% of the amount invested and a first year's service fee of
0.25% of the amount invested, are paid to broker-dealers who have selling
agreements with PFD. PFD may advance to dealers the first year service fee at
a rate up to 0.25% of the purchase price of such shares and, as compensation
therefore, PFD may retain the service fee paid by the Fund with respect to
such shares for the first year after purchase. Commencing in the 13th month
following the purchase of Class C shares, dealers will become eligible for
additional annual distribution fees and service fees of up to 0.75% and
0.25%, respectively, of the net asset value of such shares.
When a broker-dealer sells Class B or Class C shares and elects, with
PFD's approval, to waive its right to receive the commission normally paid at
the time of the sale, PFD may cause all or a portion of the distribution fees
described above to be paid to the broker-dealer.
Dealers may from time to time be required to meet certain criteria in
order to receive service fees. PFD or its affiliates are entitled to retain
all service fees payable under the Class B Plan or the Class C Plan for which
there is no dealer of record or for which qualification standards have not
been met as partial consideration for personal services and/or account
maintenance services performed by PFD or its affiliates for shareholder
accounts.
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION
The Fund has elected to be treated, has qualified and intends to qualify
each year as a "regulated investment company" under Subchapter M of the Code,
so that it will not pay federal income tax on income and capital gains
distributed to shareholders at least annually as required under the Code.
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Under the Code, the Fund will be subject to a nondeductible 4% excise tax
on a portion of its undistributed ordinary income and capital gains if it
fails to meet certain distribution requirements with respect to each calendar
year. The Fund intends to make distributions in a timely manner and,
accordingly, does not expect to be subject to the excise tax.
The Fund's policy is to pay to shareholders dividends from net investment
income, if any, and to make distributions from net long-term capital gains,
if any, annually, usually in December. Distributions from net short-term
capital gains, if any, may be paid with such dividends; dividends from income
and/or capital gains may also be paid at such other times as may be necessary
for the Fund to avoid federal income or excise tax. Generally, dividends from
the Fund's net investment income, market discount income, certain net foreign
exchange gains and net short-term capital gains are taxable under the Code as
ordinary income, and dividends from the Fund's net long-term capital gains
are taxable as long-term capital gains.
Unless shareholders specify otherwise, all distributions will be
automatically reinvested in additional full and fractional shares of the
Fund. For federal income tax purposes, all dividends are taxable as described
above whether a shareholder takes them in cash or reinvests them in
additional shares of the Fund. Information as to the federal tax status of
dividends and distributions will be provided to shareholders annually. For
further information on the distribution options available to shareholders,
see "Distribution Options" and "Directed Dividends" below.
The Fund's dividends and distributions generally will not qualify for any
dividends-received deduction available to corporate shareholders.
The Fund will be subject to foreign withholding taxes or other foreign
taxes on income (including interest, dividend and capital gains taxes imposed
by India and possibly other countries) from certain of its foreign
investments, which will reduce the yield on or return from those investments.
In any year in which the Fund qualifies, it may make an election that will
permit certain of its shareholders to take a credit or, a deduction for all
or a portion of foreign income or other qualified taxes, including Indian
income taxes on interest, dividends and capital gains, paid by the Fund. Each
shareholder would then include in gross income (in addition to dividends
actually received) his or her share of the amount of qualified foreign taxes
paid by the Fund. If this election is made, the Fund will notify its
shareholders annually as to their share of the amount of qualified foreign
taxes paid and the foreign source income of the Fund. Certain shareholders,
including shareholders not subject to U.S. federal income taxation, will not
be entitled to the benefit of a deduction or credit with respect to foreign
income taxes paid by the Fund. As a result of certain limitations under the
Code on foreign tax credits, which have different effects depending upon a
shareholder's particular tax situation, shareholders may be able to claim a
credit only for less than the full amount of their proportionate share of the
foreign taxes paid by the Fund. Further, the creditable portion may be
smaller to the extent the Fund's income consists of U.S.-source income,
generally including capital gains from the sale of both U.S. and foreign
stocks and securities and certain foreign currency gains, rather than
foreign-source income such as interest and dividends on foreign stocks and
securities.
Dividends and other distributions and the proceeds of redemptions,
exchanges or repurchases of Fund shares paid to individuals and other
non-exempt payees will be subject to 31% backup withholding of federal income
tax if the Fund is not provided with the shareholder's correct taxpayer
identification number and certification that the number is correct and that
the shareholder is not subject to backup withholding or the Fund receives
notice from the IRS or a broker that such withholding applies. Please refer
to the Account Application for additional information.
The description above relates only to U.S. federal income tax consequences
for shareholders who are U.S. persons, i.e., U.S. citizens or residents or
U.S. corporations, partnerships, trusts or estates, and who are subject to
U.S. federal income tax. Non-U.S. shareholders and tax-exempt shareholders
are subject to different tax treatment that is not described above.
Shareholders should consult their own tax advisors regarding state, local and
other applicable tax laws.
XII. SHAREHOLDER SERVICES
PSC is the shareholder services and transfer agent for shares of the Fund.
PSC, a Massachusetts corporation, is a wholly owned subsidiary of PGI. PSC's
offices are located at 60 State Street, Boston, Massachusetts 02109, and
inquiries to PSC should be mailed to Pioneering Services Corporation, P.O.
Box 9014, Boston, Massachusetts 02205-9014. Brown Brothers Harriman & Co.
(the "Custodian") serves as the custodian of the Fund's portfolio securities
and other assets. The principal business address of the Mutual Fund Division
of the Custodian is 40 Water Street, Boston, Massachusetts 02109. The
Custodian oversees a network of subcustodians and depositories in the
countries in which the Fund may invest. The Custodian has appointed Standard
Chartered Bank as subcustodian to hold investments purchased by the Fund in
India.
Account and Confirmation Statements
PSC maintains an account for each shareholder and all transactions of the
shareholder are recorded in this account. Confirmation statements showing
details of transactions are sent to shareholders as transactions occur except
Automatic Investment Plan transactions which are confirmed quarterly. The
Pioneer Combined Account Statement, mailed quarterly, is available to all
shareholders who have more than one Pioneer mutual fund account.
Shareholders whose shares are held in the name of an investment
broker-dealer or other party will not normally have an account with the Fund
and might not be able to utilize some of the services available to
shareholders of record. Examples of services which might not be available are
pur-
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chases, exchanges or redemptions by mail or telephone, automatic reinvestment
of dividends and capital gains distributions, withdrawal plans, Letters of
Intention, Rights of Accumulation and newsletters.
Additional Investments
You may add to your account by sending a check (minimum of $50 for Class A
shares and $500 for Class B and Class C shares) to PSC (account number and
Class of shares should be clearly indicated). The bottom portion of a
confirmation statement may be used as a remittance slip to make additional
investments.
Additions to your account, whether by check or through a Pioneer
Investomatic Plan, are invested in full and fractional shares of the Fund at
the applicable offering price in effect as of the close of regular trading on
the Exchange on the day of receipt.
Automatic Investment Plans
You may arrange for regular automatic investments of $50 or more through
government/military allotments, payroll deduction or through a Pioneer
Investomatic Plan. A Pioneer Investomatic Plan provides for a monthly or
quarterly investment by means of a preauthorized electronic funds transfer or
draft drawn on a checking account. Pioneer Investomatic Plan investments are
voluntary, and you may discontinue the Plan at any time without penalty upon
30 days' written notice to PSC. PSC acts as agent for the purchaser, the
broker-dealer and PFD in maintaining these plans.
Financial Reports and Tax Information
As a shareholder, you will receive financial reports at least
semiannually. In January of each year, the Fund will mail to you information
about the tax status of dividends and distributions.
Distribution Options
Dividends and capital gains distributions, if any, will automatically be
invested in additional shares of the Fund, at the applicable net asset value
per share, unless you indicate another option on the Account Application. Two
other options available are (a) dividends in cash and capital gains
distributions in additional shares; and (b) all dividends and capital gains
distributions in cash. These two options are not available, however, for
retirement plans or for an account with a net asset value of less than $500.
Changes in your distribution options may be made by written request to PSC.
If you elect to receive either dividends or capital gains or both in cash
and a distribution check issued to you is returned by the U.S. Postal Service
as not deliverable or a distribution check remains uncashed for six months or
more, the amount of the check may be reinvested in your account. Such
additional shares will be purchased at the then current net asset value.
Furthermore, the distribution option on the account will automatically be
changed to the reinvestment option until such time as you request a different
option by writing to PSC.
Directed Dividends
You may elect (in writing) to have the dividends paid by one Pioneer
mutual fund account invested in a second Pioneer mutual fund account. The
value of this second account must be at least $1,000 ($500 for Pioneer Fund
or Pioneer II). Invested dividends may be in any amount, and there are no
fees or charges for this service. Retirement plan shareholders may only
direct dividends to accounts with identical registrations, i.e., PGA IRA Cust
for John Smith may only go into another account registered PGA IRA Cust for
John Smith.
Direct Deposit
If you have elected to take distributions, whether dividends or dividends
and capital gains, in cash, or have established a Systematic Withdrawal Plan,
you may choose to have those cash payments deposited directly into your
savings, checking, or NOW bank account. You may establish this service by
completing the appropriate section on the Account Application when opening a
new account or the Account Options Form for an existing account.
Voluntary Tax Withholding
You may request (in writing) that PSC withhold 28% of the dividends and
capital gains distributions paid from an account (before any reinvestment)
and forward the amount withheld to the IRS as a credit against your federal
income taxes. This option is not available for retirement plan accounts or
for accounts subject to backup withholding.
Telephone Transactions and Related Liabilities
Your account is automatically authorized to have telephone transaction
privileges unless you indicate otherwise on your Account Application or by
writing to PSC. You may purchase, sell or exchange Fund shares by telephone.
See "How to Buy Fund Shares," "How to Sell Fund Shares" and "How to Exchange
Fund Shares" for more information. For personal assistance, call
1-800-225-6292 between 8:00 a.m. and 9:00 p.m. Eastern Time on weekdays.
Computer-assisted transactions may be available to shareholders who have pre-
recorded certain bank information (see "FactFone(SM)"). You are strongly
urged to consult with your financial representative prior to requesting any
telephone transaction. To confirm that each transaction instruction received
by telephone is genuine, PSC will record each telephone transaction, require
the caller to provide the personal identification number ("PIN") for the
account and send you a written confirmation of each telephone transaction.
Different procedures may apply to accounts that are registered to non-U.S.
citizens or that are held in the name of an institution or in the name of an
investment broker-dealer or other third-party. If reasonable procedures, such
as those described above, are not followed, the Fund may be liable for any
loss due to unauthorized or fraudulent instructions. The Fund may implement
other procedures from time to time. In all other cases, neither the Fund nor
PSC nor PFD will be responsible for the authenticity of instructions received
by telephone; therefore, you bear the risk of loss for unauthorized or
fraudulent telephone transactions.
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During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund
by telephone to institute a redemption or exchange. You should communicate
with the Fund in writing if you are unable to reach the Fund by telephone.
FactFone(SM)
FactFone(SM) is an automated inquiry and telephone transaction system
available to Pioneer mutual fund shareholders by dialing 1-800-225-4321.
FactFone(SM) allows you to obtain current information on your Pioneer mutual
fund accounts and to inquire about the prices and yields of all publicly
available Pioneer mutual funds. In addition, you may use FactFone(SM) to make
computer-assisted telephone purchases, exchanges and redemptions from your
Pioneer mutual fund accounts if you have activated your PIN. Telephone
purchases and redemptions require the establishment of a bank account of
record. You are strongly urged to consult with your financial representative
prior to requesting any telephone transaction. Shareholders whose accounts
are registered in the name of a broker-dealer or other third party may not be
able to use FactFone(SM). See "How to Buy Fund Shares," "How to Exchange Fund
Shares," "How to Sell Fund Shares" and "Telephone Transactions and Related
Liabilities." Call PSC for assistance.
Retirement Plans
You should contact the Retirement Plans Department of PSC at
1-800-622-0176 for information relating to retirement plans for business,
age-weighted profit sharing plans, Simplified Employee Pension Plans, IRAs
and Section 403(b) retirement plans for employees of certain non-profit
organizations and public school systems, all of which are available in
conjunction with investments in the Fund. The Account Application
accompanying this Prospectus should not be used to establish any of these
plans. Separate applications are required.
Telecommunications Device for the Deaf (TDD)
If you have a hearing disability and access to TDD keyboard equipment, you
can call our TDD number toll-free at 1-800-225-1997, weekdays from 8:30 a.m.
to 5:30 p.m. Eastern Time, to contact our telephone representatives with
questions about your account.
Systematic Withdrawal Plans
If your account has a total value of at least $10,000, you may establish a
Systematic Withdrawal Plan ("SWP") providing for fixed payments at regular
intervals. Withdrawals from Class B and Class C share accounts are limited to
10% of the value of the account at the time the SWP is implemented. See
"Waiver or Reduction of Contingent Deferred Sales Charge" for more
information. Periodic checks of $50 or more will be sent to you, or any
person designated by you, monthly or quarterly, and your periodic redemptions
of shares may be taxable to you. Payments can be made either by check or
electronic transfer to a bank account designated by you. If you direct that
withdrawal checks be paid to another person after you have opened your
account, a signature guarantee must accompany your instructions. Purchases of
Class A shares of the Fund at a time when you have a SWP in effect may result
in the payment of unnecessary sales charges and may therefore be
disadvantageous.
You may obtain additional information by calling PSC at 1-800-225-6292 or
by referring to the Statement of Additional Information.
Reinvestment Privilege (Class A Shares Only)
If you redeem all or part of your Class A shares of the Fund, you may
reinvest all or part of the redemption proceeds without a sales charge in
Class A shares of the Fund if you send a written request to PSC not more than
90 days after your shares were redeemed. Your redemption proceeds will be
reinvested at the next determined net asset value of the Class A shares of
the Fund immediately after receipt of the written request for reinstatement.
You may realize a gain or loss for federal income tax purposes as a result of
the redemption, and special tax rules may apply if a reinstatement occurs. In
addition, if a redemption resulted in a loss and an investment is made in
shares of the Fund within 30 days before or after the redemption, you may not
be able to recognize the loss for federal income tax purposes. Subject to the
provisions outlined under "How to Exchange Fund Shares" above, you may also
reinvest in Class A shares of other Pioneer mutual funds; in this case you
must meet the minimum investment requirement for each fund you enter.
The 90-day reinstatement period may be extended by PFD for periods of up
to one year for shareholders living in areas that have experienced a natural
disaster, such as a flood, hurricane, tornado, or earthquake.
The options and services available to shareholders, including the terms of
the Exchange Privilege and the Pioneer Investomatic Plan, may be revised,
suspended, or terminated at any time by PFD or by the Fund. You may establish
the services described in this section when you open your account. You may
also establish or revise many of them on an existing account by completing an
Account Options Form, which you may request by calling 1-800-225-6292.
XIII. THE FUND
Pioneer India Fund is an open-end, diversified management investment
company (commonly referred to as a mutual fund) organized as a Delaware
business trust on April 4, 1994. The Fund has authorized an unlimited number
of shares of beneficial interest. As an open-end management investment
company, the Fund continuously offers its shares to the public and under
normal conditions must redeem its shares upon the demand of any shareholder
at the then current net asset value per share, less any applicable CDSC. See
"How to Sell Fund Shares." The Fund is not required, and does not intend, to
hold annual shareholder meetings, although special meetings may be called for
the purpose of electing or removing Trustees, changing fundamental investment
restrictions or approving a management or subadvisory contract.
The Trustees have the authority, without further shareholder approval, to
classify and reclassify the shares of the
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Fund, or any additional series of the Fund, into one or more classes. As of
the date of this Prospectus, the Trustees have authorized the issuance of
three classes of shares, designated Class A, Class B and Class C. The shares
of each class represent an interest in the same portfolio of investments of
the Fund. Each class has equal rights as to voting, redemption, dividends and
liquidation, except that each class bears different distribution and transfer
agent fees and may bear other expenses properly attributable to the
particular class. Class A, Class B and Class C shareholders have exclusive
voting rights with respect to the Rule 12b-1 distribution plans adopted by
holders of those shares in connection with the distribution of shares. The
Fund reserves the right to create and issue additional series of shares.
In addition to the requirements under Delaware law, the Declaration of
Trust provides that a shareholder of the Fund may bring a derivative action
on behalf of the Fund only if the following conditions are met: (a)
shareholders eligible to bring such derivative action under Delaware law who
hold at least 10% of the outstanding shares of the Fund, or 10% of the
outstanding shares of the series or class to which such action relates, shall
join in the request for the Trustees to commence such action; and (b) the
Trustees must be afforded a reasonable amount of time to consider such
shareholder request and investigate the basis of such claim. The Trustees
shall be entitled to retain counsel or other advisers in considering the
merits of the request and shall require an undertaking by the shareholders
making such request to reimburse the Fund for the expense of any such
advisers in the event that the Trustees determine not to bring such action.
When issued and paid for in accordance with the terms of the Prospectus
and Statement of Additional Information, shares of the Fund are fully paid
and non-assessable by the Fund. Shares will remain on deposit with the Fund's
transfer agent and certificates will not normally be issued. The Fund
reserves the right to charge a fee for the issuance of certificates.
XIV. INVESTMENT RESULTS
The average annual total return (for a designated period of time) on an
investment in the Fund may be included in advertisements, and furnished to
existing or prospective shareholders. The average annual total return for
each Class is computed in accordance with the SEC's standardized formula. The
calculation for all Classes assumes the reinvestment of all dividends and
distributions at net asset value and does not reflect the impact of federal
or state income tax. In addition, for Class A shares the calculation assumes
the deduction of the maximum sales charge of 5.75%; for Class B and Class C
shares the calculation reflects the deduction of any applicable CDSC. The
periods illustrated would normally include one, five and ten years (or since
the commencement of the public offering of the shares of a Class, if shorter)
through the most recent calendar quarter.
One or more additional measures and assumptions, including but not limited
to historical total returns; distribution returns; results of actual or
hypothetical investments; changes in dividends, distributions or share
values; or any graphic illustration of such data may also be used. These data
may cover any period of the Fund's existence and may or may not include the
impact of sales charges, taxes or other factors.
Other investments or savings vehicles and/or unmanaged market indices,
indicators of economic activity or averages of mutual fund performance may be
cited or compared with the investment results of the Fund. Rankings or
listings by magazines, newspapers or independent statistical or rating
services, such as Lipper Analytical Services, Inc., may also be referenced.
The Fund's investment results will vary from time to time depending on
market conditions, the composition of the Fund's portfolio and operating
expenses of the Fund. All quoted investment results are historical and should
not be considered representative of what an investment in the Fund may earn
in any future period. For further information about the calculation methods
and uses of the Fund's investment results, see the Statement of Additional
Information.
APPENDIX A
INDIA
The information set forth in this Appendix is based on various publicly
available sources. No representation is made that any correlation exists or
will exist between India or its economy in general and the performance of the
Fund.
I. THE COUNTRY OF INDIA
Geography and Population
India is the seventh largest country in the world, covering an area of
approximately 3,300,000 square kilometers. It is situated in South Asia and
is bordered by Nepal, Bhutan and China in the north, Myanmar and Bangladesh
in the east, Pakistan in the west and Sri Lanka in the south.
India is the world's second most populous country in the world. In 1995,
India's total population was estimated to be 911 million. Although migration
from rural to urban centers has been increasing steadily, India's population
remains predominantly rural; the 1991 census reported that 74.3% of the total
population still lives in the countryside. India's total population is
projected to exceed 1 billion by the year 2000.
Hindi is the official national language and is spoken by approximately 30%
of India's population. English is widely used in India as the language of
jurisprudence, commercial transactions and higher and technical education.
Government
India became independent from the United Kingdom in 1947. India is a
federal republic and is governed by a parliamentary democracy under the
Constitution of India. The executive, legislative and judicial functions of
India's Government are separated and certain powers are reserved to India's
25 States and 7 Union Territories.
In general, the federal Parliament has jurisdiction over banking, customs,
currency and communication laws, national defense and foreign affairs. The
States have jurisdiction over
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public health, education, local law and order and agricultural affairs. The
federal and state governments have concurrent legislative authority over a
variety of economic and social matters, although federal law is superior to
state law in these areas.
International Relations
With the exception of Pakistan, India's foreign relations are generally
stable. In 1993, India renegotiated its foreign debt to Russia and undertook
to rebuild its trade ties with the Central Asian states emerging from the
break-up of the former Soviet Union. In addition, in September 1993 India and
China agreed to pursue a negotiated settlement of the two countries'
longstanding border dispute. Although relations with the U.S. have generally
improved following the breakup of the former Soviet Union, important
differences persist between the U.S. and India regarding relations with
Pakistan, protection of intellectual property rights and India's refusal to
become a signatory to the Nuclear Non-Proliferation Treaty. More than one
million persons of Indian origin live in the United States.
India's relations with Pakistan remain tense. The principal dispute
between the two countries relates to Pakistan's claim to the Indian border
state of Jammu and Kashmir, which was created in connection with the
partition of India at the time of independence.
Ethnic and Cultural Diversity and Conflict
India has a diverse mix of ethnic and cultural groups. The major line of
distinction, however, tends to be religion, which in some areas closely
mirrors cultural or ethnic divisions as well. There are a large number of
religions practiced in India, with Hinduism being the major religion,
followed by an estimated 82% of the total population.
Religious and ethnic differences have been a recurring source of conflict
in India throughout the post-independence era and on several occasions have
erupted in violence. Terrorists bombings have occurred from time to time in a
number of Indian cities.
Overview of India's Economy and Recent Developments
Modern economic development in India began in the mid-1940s with the
publication of the Bombay Plan. The Planning Commission was established in
1950 to assess the country's available resources and to identify growth
areas. A centrally planned economic model was adopted, and in order to
control the direction of private investment, all investment and major
economic decisions required government approval. Foreign investment was
allowed only selectively. This protectionist regime held back development of
India's economy until the mid-1980s when there began to be some move towards
liberalization and market orientation of the economy. With the measures
introduced in the budget of 1985, the annual growth of the country's real
gross domestic product ("GDP") rose from an average 3-4 percent since the
1940s to an average 6.1 percent between 1986 and 1990.
In 1991, faced with a rising oil import bill, an adverse balance of
payments and a large foreign debt, India had reached a position where it was
unable to obtain further commercial borrowings. At this time, the government
of Prime Minister Narasimha Rao took office and has since moved to
significantly reform the structure of India's economic system. The
Government's reforms generally have been supported by consensus among India's
other main political parties, including the BJP.
In July 1991, the Government's Finance Minister, Dr. Manmohan Singh,
presented the Government's first budget and announced a new industrial
policy. Consequently, for many industrial sectors, it became no longer
necessary to obtain government approval for new investments. Foreign
companies can now hold up to 51 percent of an Indian company as opposed to 40
percent previously. As a result of these policies and other factors, foreign
investment in India has greatly increased in recent years. For example, U.S.
private sector investment in India during 1992 and 1993 exceeded the total
amount of money invested in India by U.S. companies during the previous 40
years.
The process of liberalization was taken further with the budget of
February 1992 when the rupee was made partially convertible and import
tariffs were reduced. Personal tax rates were brought down and it was
announced that foreign institutional investors would be able to invest
directly in the Indian capital markets. In September 1992, the guidelines for
foreign institutional investors were published and a number of foreign
institutional investors have been registered by the Securities and Exchange
Board of India ("SEBI").
While political instability and communal violence have led to a slowdown
in India's economic growth and the implementation of reforms, PMC and the
Indian Adviser believe that the prospects for economic growth and
liberalization remain sound.
The budgets of February 1993 and 1994 continued to demonstrate the
Government of India's commitment to economic reform. In particular, the rupee
was allowed to float freely, interest rates were reduced and major reductions
were made in customs and excise duties. Tax holidays were given to encourage
new investment in industrially backward areas and in new power projects. In
order to stimulate capital investment a system for computing long-term
capital gains tax was introduced, which favors those whose gains accrue over
a longer period. Further, the proposed Finance Bill 1994 proposes to reduce
tax rates for certain corporations and withdraw a surcharge applicable to
individual tax rates.
The Government of India continued to focus on its efforts on financial
reform in its 1995 and 1996 budgets. The Government's fiscal deficit had been
reduced progressively from 8.4% of GDP in 1992 to 6.7% in 1996 due to
decreases in tax reforms, greater control in government expenditure,
reduction in subsidies and the sale of certain equity stakes in companies or
undertakings owned by the Government. In its effort to simplify tax systems,
the Government of India reduced corporate tax rates from 50% to 40% for 1995
and 1996.
II. INDIA'S SECURITIES MARKET
There currently are 25 recognized stock exchanges in India (including the
Over The Counter Exchange of India). Activity
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and broad interest in the market have increased in recent years compared to
historical norms. This increase reflects the growth of the private sector's
role in the Indian economy and greater participation in the market by
individual investors and foreign institutional investors. In addition, the
Government of India has actively promoted expanded capital market activity by
both foreign and domestic investors and has adopted policies designed to
increase domestic companies' reliance on the capital markets as a source of
financing.
In 1991, the Government of India introduced a program of economic
structural reforms, including certain measures to stimulate growth and
activity in India's capital markets. These reforms included the grant of
statutory authority to the SEBI as an independent agency to promulgate and
enforce rules governing India's capital markets. The SEBI has undertaken a
number of initiatives to reform the Indian securities market and regulate the
activities of securities professionals. The SEBI has occasionally encountered
resistance to its reforms from portions of India's community of securities
brokers.
A and B Shares
Equity securities that are traded in the Indian securities markets are
divided into two groups, A shares (also known as "specified shares") and B
shares (also known as "non-specified shares"). A shares are actively traded,
listed equity shares of companies which have a large equity base, and which
meet certain other requirements. All other listed equity shares traded in
India's securities markets are B shares.
The distinction between A shares and B shares is important because the
trade settlement practices for these two classes of securities are different.
While B shares trade only on a cash basis, trades in A shares may be effected
on either a cash basis or a "squared-up" basis. Squaring up a position
involves effecting a trade which is the opposite of an earlier trade. On the
settlement date for such a trade, only the net cash from the offsetting or
squared-up trades is transferred. Transactions in A shares are settled once
every 14 days through the Bombay Stock Exchange's clearing house.
Transactions involving B shares are settled once every 7 days among exchange
members.
The Bombay Stock Exchange
Shares listed on the Bombay Stock Exchange ("BSE") account for over 90% of
the market capitalization of securities listed on India's 25 stock exchanges.
The BSE was established in 1875 and is a self-regulatory organization owned
by its members and governed by a Board of Governors. The BSE at present
consists of over 560 member brokers. The BSE has a high daily trading volume,
both in terms of the number of transactions and their value. Active trading
on the BSE and other Indian stock exchanges is concentrated in shares of
relatively few issuers and only a limited portion of many companies' shares
are part of the public float. However, compared to the securities markets of
many other emerging countries, India's securities market is broad-based and
unconcentrated in that the ten largest issuers represent a relatively small
portion of total market capitalization.
The BSE is officially open Monday through Friday. Trading is normally
conducted from 10:00 a.m. to 3:30 p.m. each day using a screen-based trading
system. The BSE is closed on bank holidays and certain religious holidays.
Special trading sessions are held outside normal trading hours simultaneously
with the annual Government budget announcements and on the commencement of
the BSE's financial year. A special trading session for odd lots is held for
an hour on Saturdays.
Orders executed on the BSE are transmitted from the offices of brokers to
the trading floor for execution by an open outcry auction. There are separate
trading posts for different groups of securities. Spreads may vary
considerably. A computerized system is used for settling daily transactions.
The BSE clearing house is managed by the State Bank of India and receives
payments and deliveries on behalf of members of the BSE in respect of A
shares. For B shares, delivery and payment is made outside the clearing house
directly among members. There is usually a lag of a few days between delivery
of securities by sellers and receipt of payment.
The following table shows performance information for the periods
indicated for the Bombay Stock Exchange, as represented by the BSE Sensitive
Index, which is comprised of securities of large capitalization issuers.
BSE SENSITIVE INDEX
[Base Year = 1979-80 = 100]
Period-End Index Level
------------ -------------
1982 235.83
1983 252.92
1984 271.87
1985 527.36
1986 524.45
1987 442.17
1988 666.26
1989 778.64
1990 1048.29
1991 1908.85
1992 2615.37
1993 3362.60
1994 3929.90
1995 3110.49
1996 3085.20
The Over the Counter Exchange of India
The Over the Counter Exchange of India ("OTCEI") was built along the lines
of the U.S. Nasdaq National Market and began operations in mid-1992. Trading
on this exchange is fully automated. The OTCEI is a "quote driven market"
with a network of market makers and dealers. The OTCEI is operated only in
Bombay at present, and it intends to commence trading in Delhi and Madras.
The OTCEI mainly provides an avenue for raising funds for small companies
having a capital float between 300,000 rupees and 250 million rupees.
Creation of the National Stock Exchange
The NSE was created by the Government of India in part to increase the
interconnectivity among India's several stock exchanges and thereby to reduce
interexchange arbitrage opportunities (i.e., to increase the transparency of
India's
23
<PAGE>
securities exchanges). NSE commenced trading in late 1994 with fully
computerized trading, settlement and information dissemination systems.
Financial institutions own the NSE but they must apply and qualify for
trading on the same basis as others wishing to trade. Qualifications for
membership include capital adequacy standards and educational training.
Equity trading is open to both institutional and individual investors.
Trading volumes on the NSE have been increasing steadily, at time exceeding
the BSE's volume. Debt and equity trading will eventually be book-entry with
a central depositary. Futures and option trading began in 1995.
APPENDIX B
CERTAIN INVESTMENT PRACTICES
Forward Foreign Currency Exchange Contracts
The Fund has the ability to hold a portion of its assets in foreign
currencies and to enter into forward foreign currency exchange contracts to
facilitate settlement of foreign securities transactions or to protect
against changes in foreign currency exchange rates. The Fund might sell a
foreign currency on either a spot or forward basis to hedge against an
anticipated decline in the U.S. dollar value of securities in its portfolio
or securities it intends or has contracted to sell or to preserve the U.S.
dollar value of dividends, interest or other amounts it expects to receive.
Although this strategy could minimize the risk of loss due to a decline in
the value of the hedged foreign currency, it could also limit any potential
gain which might result from an increase in the value of the currency.
Alternatively, the Fund might purchase a foreign currency or enter into a
forward purchase contract for the currency to preserve the U.S. dollar price
of securities it is authorized to purchase or has contracted to purchase.
If the Fund enters into a forward contract to buy foreign currency for any
purpose, the Fund will be required to place cash or liquid, high grade debt
securities in a segregated account of the Fund maintained by the Fund's
custodian in an amount equal to the value of the Fund's total assets
committed to the consummation of the forward contract.
The use of forward foreign currency exchange contracts is a highly
specialized activity which involves investment techniques and risks that are
different from those associated with ordinary portfolio transactions. The use
of forward foreign currency exchange contracts involves (1) liquidity risk
that contractual positions cannot be easily closed out in the event of market
changes or generally in the absence of a liquid secondary market, (2)
correlation risk that changes in the value of a hedging position may not
match the foreign currency fluctuations intended to be hedged, and (3) market
risk that an incorrect prediction of exchange rates by PMC or the Indian
Adviser may cause the Fund to perform less favorably than if such position
had not been entered. The loss that may be incurred by the Fund in entering
into forward foreign currency exchange contracts is potentially unlimited.
There is no limit on the percentage of the Fund's assets that may be invested
in forward foreign currency exchange contracts.
There currently is no market, or only a limited market, for forward
foreign currency exchange contracts with respect to the rupee and the
currencies of certain other foreign countries in which the Fund may invest.
Consequently, there can be no assurance that such contracts will be available
for hedging currency risks at the times when the Fund wishes to use them. In
addition, the Fund's transactions in forward foreign currency exchange
contracts may be limited by the requirements for qualification of the Fund as
a regulated investment company for tax purposes. See "Tax Status" in the
Statement of Additional Information.
Repurchase Agreements
The Fund may enter into repurchase agreements not exceeding seven days in
duration. In a repurchase agreement, an investor (e.g., the Fund) purchases a
debt security from a seller which undertakes to repurchase the security at a
specified resale price on an agreed future date (ordinarily a week or less).
The resale price generally exceeds the purchase price by an amount which
reflects an agreed-upon market interest rate for the term of the repurchase
agreement. Repurchase agreements entered into by the Fund will be fully
collateralized with U.S. Treasury and/or U.S. Government agency obligations
with a market value of not less than 100% of the obligation, valued daily.
Collateral will be held in a segregated, safekeeping account for the benefit
of the Fund. In the event that a repurchase agreement is not fulfilled, the
Fund could suffer a loss to the extent that the value of the collateral falls
below the repurchase price or if the Fund is prevented from realizing the
value of the collateral by reason of an order of a court with jurisdiction
over an insolvency proceeding with respect to the other party to the
repurchase agreement.
Borrowing
The Fund may borrow money only from banks and only for temporary emergency
purposes such as in connection with the redemption of Fund shares or in
connection with the clearance of portfolio transactions. The aggregate amount
of the Fund's borrowings may not exceed 33-1/3% of the Fund's total assets
(including the amount borrowed) taken at market value. In addition, the Fund
will not purchase securities for its portfolio while the Fund's outstanding
borrowings exceed 5% of its total assets. The Fund will incur interest and
other expenses in connection with its borrowings.
Restricted and Illiquid Securities
The Fund may invest in restricted securities (i.e., securities that would
be required to be registered prior to distribution to the public), including
restricted securities eligible for resale to certain institutional investors
pursuant to Rule 144A under the Securities Act of 1933. In addition, the Fund
may invest up to 15% of its net assets in illiquid securities, including
restricted securities sold and offered under Rule 144A that are illiquid
either as a result of legal or contractual restrictions or the absence of a
trading market.
The Board of Trustees of the Fund may adopt guidelines and delegate to PMC
the daily function of determining and monitoring the liquidity of restricted
securities. The Board,
24
<PAGE>
however, will retain sufficient oversight and be ultimately responsible for
the determinations. Since it is not possible to predict with assurance
exactly how the market for restricted securities sold and offered under Rule
144A will develop, the Board will carefully monitor the Fund's investments in
these securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information. This investment
practice could have the effect of increasing the level of illiquidity in the
Fund to the extent that qualified institutional buyers become for a time
uninterested in purchasing these restricted securities. Securities of
non-U.S. issuers that the Fund acquires in Rule 144A transactions, but which
the Fund may resell publicly in a non-U.S. securities market, are not
considered restricted securities.
When-Issued Securities and Forward Commitments
The Fund may purchase securities on a when-issued, delayed delivery or
forward commitment basis. When these transactions are negotiated, the price
of the securities is fixed at the time of the commitment, but delivery and
payment take place after the date of the commitment. When-issued securities
and forward commitments involve a risk of loss if the value of the security
to be purchased declines prior to the settlement date. When the Fund
purchases securities on a when-issued, delayed delivery or forward commitment
basis, the Fund's custodian will maintain in a segregated account cash or
liquid, high grade debt securities having a value (determined daily) at least
equal to the amount of the Fund's purchase commitment.
25
<PAGE>
THE PIONEER FAMILY OF MUTUAL FUNDS
Growth Funds
Global/International
Pioneer Emerging Markets Fund
Pioneer Europe Fund
Pioneer Gold Shares
Pioneer India Fund
Pioneer International Growth Fund
Pioneer World Equity Fund
United States
Pioneer Capital Growth Fund
Pioneer Growth Shares
Pioneer Mid-Cap Fund
Pioneer Small Company Fund
Pioneer Micro-Cap Fund*
Growth and Income Funds
Pioneer Balanced Fund
Pioneer Equity-Income Fund
Pioneer Fund
Pioneer Real Estate Shares
Pioneer II
Income Funds
Taxable
Pioneer America Income Trust
Pioneer Bond Fund
Pioneer Short-Term Income Trust*
Tax-Exempt
Pioneer Intermediate Tax-Free Fund**
Pioneer Tax-Free Income Fund**
Money Market Fund
Pioneer Cash Reserves Fund
*Offers Class A and B Shares only
**Not suitable for retirement accounts
26
<PAGE>
Notes
<PAGE>
[Pioneer logo]
Pioneer India Fund
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
JASKARAN S. TEJA, Vice President
NORMAN KURLAND, Ph.D., Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
INVESTMENT MANAGER
PIONEERING MANAGEMENT CORPORATION
INDIAN INVESTMENT ADVISER
ITI PIONEER AMC LTD.
PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANT
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR LLP
SHAREHOLDER SERVICES AND TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
Telephone: 1-800-225-6292
SERVICE INFORMATION
If you would like information on the following, please call:
Existing and new accounts, prospectuses,
applications and service forms
and telephone transactions 1-800-225-6292
FactFone(SM)
Automated fund yields, automated prices and
account information 1-800-225-4321
Retirement plans 1-800-622-0176
Toll-free fax 1-800-225-4240
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
0297-4020
(c)Pioneer Funds Distributor, Inc.
<PAGE>
PIONEER SMALL COMPANY FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A Class B and Class C Shares
February 28, 1997
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 February 28, 1997. 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 Annual Report to Shareholders 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 19
11. Description of Shares 21
12. Certain Liabilities 24
13. Letter of Intention 25
14. Systematic Withdrawal Plan 26
15. Determination of Net Asset Value 26
16. Investment Results 27
17. Financial Statements 28
Appendix A 31
Appendix B 36
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES 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 (the "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
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.
-2-
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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,
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.
-3-
<PAGE>
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
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.
-4-
<PAGE>
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
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
-5-
<PAGE>
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 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.
REAL ESTATE INVESTMENT TRUSTS
The Fund may invest in shares of REITs as described in the Prospectus. REITs are
pooled investment vehicles which invest primarily in income producing real
estate or real estate related loans or interests.
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REITs are generally classified as equity REITs, mortgage REITs or a combination
of equity and mortgage REITs. Equity REITs invest the majority of their assets
directly in real property and derive income primarily from the collection of
rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. Like investment companies such as the Fund, REITs are not taxed on
income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The
Fund will indirectly bear its proportionate share of any expenses paid by REITs
in which it invests in addition to the expenses paid by the Fund.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, and the possibilities
of failing to qualify for the exemption from tax for distributed income under
the Code and failing to maintain their exemptions from the Investment Company
Act of 1940, as amended (the "1940 Act"). REITs whose underlying assets include
long-term health care properties, such as nursing, retirement and assisted
living homes, may be impacted by federal regulations concerning the health care
industry.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the Standard & Poor's Index of 500
Common Stocks.
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
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
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<PAGE>
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
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.
-8-
<PAGE>
(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.
(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 a fundamental policy of the Fund not to concentrate its investments in
securities of companies in any particular industry. Following the current
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;
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(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
(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 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. The Trustees and executive officers of the Fund are listed below,
together with their principal occupations during the past five years. An
asterisk indicates those Trustees who are "interested persons" of the Fund
within the meaning of the 1940 Act.
JOHN F. COGAN, JR.*, CHAIRMAN OF THE BOARD, PRESIDENT AND TRUSTEE, DOB: JUNE
1926
President, Chief Executive Officer and a Director of The Pioneer Group, Inc.
("PGI"); Chairman and a Director of Pioneering Management Corporation ("PMC")
and Pioneer Funds Distributor, Inc. ("PFD"); Director of Pioneering Services
Corporation ("PSC"), Pioneer Capital Corporation ("PCC") and Forest-Starma (a
Russian timber joint venture); 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") and Pioneer Omega, Inc. ("Omega")
and Theta Enterpiscs, Inc.; Chairman of the Board and Director of Pioneer
Goldfields Limited ("PGL") and Teberebie Goldfields Limited; 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, President and Trustee of all of the Pioneer mutual funds;
and Partner, Hale and Dorr LLP (counsel to the Fund).
RICHARD H. EGDAHL, M.D., TRUSTEE, DOB: DECEMBER 1926
Boston University Health Policy Institute, 53 Bay State Rd., Boston, MA 02115
Professor of Management, Boston University School of Management, since 1988;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; Director, Boston University
Health Policy Institute and Boston University Medical Center; Executive Vice
President and Vice Chairman of the Board, University Hospital; Academic Vice
President for Health Affairs, Boston University; Director, Essex Investment
Management Company, Inc. (investment adviser), Health Payment Review, Inc.
(health care containment software firm), Mediplex Group, Inc. (nursing care
facilities firm), Peer Review Analysis, Inc. (health care facilities firm) and
Springer-Verlag New York, Inc. (publisher); Honorary Trustee, Franciscan
Children's Hospital; and Trustee of all of the Pioneer mutual funds.
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MARGARET B.W. GRAHAM, TRUSTEE, DOB: MAY 1947
The Keep, P.O. Box 110. Little Deer Isle, ME 04650
Founding Director, Winthrop Group, Inc., (consulting firm); Manager of Research
Operations, Xerox Palo Alto Research Center, from 1991 to 1994; Professor of
Operations Management and Management of Technology, Boston University School of
Management ("BUSM"), from 1989 to 1993; and Trustee of all of the Pioneer mutual
funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, TRUSTEE, DOB: JULY 1917
6363 Waterway Drive, Falls Church, VA 22044
Professor Emeritus and Adjunct Scholar, George Washington University; Economic
Consultant and Director, American Productivity and Quality Center; American
Enterprise Institute; and Trustee of all of the Pioneer mutual funds, except
Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, TRUSTEE, DOB: MAY 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm) and Trustee of
all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, TRUSTEE AND EXECUTIVE VICE PRESIDENT, DOB: FEBRUARY 1944
Executive Vice President and a Director of PGI; President, Chief Investment
Officer and a Director of PMC; Director of PFD, PCC, PIC, PIntl, First Russia,
Omega and Pioneer SBIC Corporation; and Executive Vice President and Trustee of
all of the Pioneer mutual funds.
STEPHEN K. WEST, TRUSTEE, DOB: SEPTEMBER 1928
125 Broad Street, New York, NY 10004
Partner, Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus Funds
(mutual funds) and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, TRUSTEE, DOB: JUNE 1936
One North Adgers Wharf, Charleston, SC 29401
President, John Winthrop & Co., Inc. (private investment firm); Director of NUI
Corp.; Trustee of Alliance Capital Reserves, Alliance Government Reserves and
Alliance Tax Exempt Reserves; and Trustee of all of the Pioneer mutual funds,
except Pioneer Variable Contracts Trust.
WILLIAM H. KEOUGH, TREASURER, DOB: APRIL 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI; Treasurer
of PFD, PMC, PSC, PCC, PIC, PIntl, PMT, PGL, First Russia, Omega and Pioneer
SBIC Corporation; Treasurer and Director of PPC; and Treasurer of all of the
Pioneer mutual funds.
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JOSEPH P. BARRI, SECRETARY, DOB: AUGUST 1946
Secretary of PGI, PMC, PPC, PIC, PIntl, PMT, First Russia, Omega and PCC; Clerk
of PFD and PSC; Partner, Hale and Dorr LLP (counsel to the Fund); and Secretary
of all of the Pioneer mutual funds.
ERIC W. RECKARD, ASSISTANT TREASURER, DOB: JUNE 1956
Manager of Fund Accounting and Compliance of PMC since May 1994; Manager of
Auditing, Compliance and Business Analysis for PGI prior to May 1994; and
Assistant Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, ASSISTANT SECRETARY, DOB: MARCH 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant Secretary
of PMC, PIntl, PGL, First Russia, Omega and all of the Pioneer mutual funds;
Assistant Clerk of PFD and PSC; and formerly of Hale and Dorr LLP (counsel to
the Fund) where he most recently served as junior partner.
TODD GRADY, VICE PRESIDENT, DOB: MARCH 1958
Vice President of PMC.
Each of the above 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.
All of the outstanding capital stock of PFD, PMC and PSC is owned, directly or
indirectly, by PGI, a publicly-owned Delaware corporation. PMC, the Fund's
investment adviser, serves as the investment adviser for the Pioneer mutual
funds listed below and manages the investments of certain institutional
accounts.
The table below lists all the Pioneer mutual funds currently offered to the
public and the investment adviser and principal underwriter for each fund.
Investment Principal
Fund Name Adviser Underwriter
- --------- ------- -----------
Pioneer World Equity Fund PMC PFD
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Mid-Cap Fund PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Small Company Fund PMC PFD
Pioneer Micro-Cap Fund PMC PFD
Pioneer Gold Shares PMC PFD
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Investment Principal
Fund Name Adviser Underwriter
- --------- ------- -----------
Pioneer Equity-Income Fund PMC PFD
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Balanced Fund PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares PMC Note 1
Pioneer Variable Contracts Trust PMC Note 2
Note 1 This fund is a closed-end fund.
Note 2 This is a series of eight separate portfolios designed to provide
investment vehicles for the variable annuity and variable life
insurance contracts of various insurance companies or for certain
qualified pension plans.
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 14% of
such shares. As of the date of this Statement of Additional Information, the
Trustees and officers of the Fund owned beneficially in the aggregate less than
1% of the outstanding shares of the Fund. As of January 31, 1997, MLPF&S For the
Sole Benefit of its Customers, 4800 Deer Lake Drive East 3rd Floor,
Jacksonville, FL, 32246-6484 owned approximately 6.13% (1,164,582) of the
outstanding Class A shares of the Fund; 13.28% (2,462,090) of the outstanding
Class B shares of the Fund and; and approximately 26.31% (360,018) of the
outstanding Class C shares of the Fund.
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
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
compensation of each Trustee of the Fund:
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 11,083
Richard H. Egdahl, M.D. 2,204 0 59,858
Margaret B.W. Graham 2,244 0 59,858
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John W. Kendrick 2,244 0 59,858
Marguerite A. Piret 2,658 0 79,842
David D. Tripple 500 0 11,083
Stephen K. West 2,403 0 67,850
John Winthrop 2,473 0 66,442
------------- - -------
15,230 0 417,0520
- ------------------------------------------------------------------------------
* As of October 31, 1996 the Fund's fiscal year end.
** As of December 31, 1996 (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.
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.
During the fiscal year ended October 31, 1996, the fund paid PMC $2,493,161 in
management fees, reflecting an expense limitation then in effect. In the absence
of the expense limitation, the Fund would have paid $2,518,176 in management
fees for this period
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,
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<PAGE>
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, Class B and Class C shares (the "Class A
Plan, the "Class B Plan" and the "Class C Plan") (together, the "Plans").
CLASS A PLAN
Pursuant to the Class A Plan the Fund 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.
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.)
When the broker-dealer effecting the sale of Class B shares waives its right to
receive commissions on such sales, PFD may cause the distribution fees described
above to be paid to that broker-dealer.
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CLASS C PLAN
The Class C Plan provides that a Fund will pay PFD, as the Fund's distributor
for its Class C shares, a distribution fee accrued daily and paid quarterly,
equal on an annual basis to 0.75% of the Fund's average daily net assets
attributable to Class C shares and will pay PFD a service fee equal to 0.25% of
the Fund's average daily net assets attributable to Class C shares. PFD will in
turn pay to securities dealers which enter into a sales agreement with PFD a
distribution fee and a service fee at rates of up to 0.75% and 0.25%,
respectively, of the Fund's average daily net assets attributable to Class C
shares owned by investors for whom that securities dealer is the holder or
dealer of record. The service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. PFD will advance to dealers the first-year service fee at a
rate equal to 0.25% of the amount invested. As compensation therefor, PFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Commencing in the thirteenth month following a
purchase of Class C shares, dealers will become eligible for additional service
fees at a rate of up to 0.25% of the amount invested and additional compensation
at a rate of up to 0.75% of the net asset value with respect to such shares.
Dealers may from time to time be required to meet certain other criteria in
order to receive service fees. PFD or its affiliates are entitled to retain all
service fees payable under the Class C Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class C Plan is to
compensate PFD for its distribution services with respect to the Class C shares
of the Fund. PFD pays commissions to dealers as well as expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution-related
expenses, including, without limitation, the cost necessary to provide
distribution-related services, or personnel, travel office expenses and
equipment. The Class C Plan also provides that PFD will receive all CDSCs
attributable to Class C shares. (See "Distribution Plans" in the Prospectus.)
When the broker-dealer effecting the sale of Class B shares waives its right to
receive commissions on such sales, PFD may cause the distribution fees described
above to be paid to that broker-dealer.
GENERAL
In accordance with the terms of the Plans, PFD provides to the Fund for review
by the Trustees a quarterly written report of the amounts expended under the
respective Plan and the purpose for which such expenditures were made. In the
Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, has any direct or indirect financial interest in
the operation of the Plans except to the extent that PFD and certain of its
employees may be deemed to have such an interest as a result of receiving a
portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plans were adopted by a majority vote of the Board of Trustees, including
all of the Trustees who are not, and were not at the time they voted, interested
persons of the Fund, as defined in the 1940 Act (none of whom 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
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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).
During the fiscal year ended October 31,1996, the Fund incurred total
distribution fees pursuant to the Fund's Class A Plan, Class B Plan, and Class C
Plan respectively, as follows: $340,582, $1,345,241 and $87,546, respectively.
The distribution fees were paid by the Fund to PFD in reimbursement of expenses
related to servicing of shareholder accounts and to compensating dealers and
sales personnel.
Upon redemption, Class A shares may be subject to a 1% CDSC, Class B shares are
subject to a CDSC at a rate declining from a maximum of 4% of the lower of the
cost or market value of the shares and Class C shares are subject to a 1% CDSC.
During the fiscal year ended October 31, 1996, CDSCs, in the amount of
approximately $183,322 were paid to PFD in reimbursement of expenses related to
servicing of shareholders' accounts and compensation paid to dealers and sales
personnel.
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 $22.75 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. The Fund may compensate
entities which have agreed to provide certain sub-accounting services such as
specific transaction processing and record keeping services. Any such payments
by the Fund would be in lieu of the per account fee which would otherwise be
paid by the Fund to PSC.
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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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. During the
Fund's 1996 fiscal year, net underwriting commissions retained by PFD in
connection with its offering of Fund shares were approximately $771,640.
Commissions reallowed to dealers by PFD were approximately $8,609,629. See
"Underwriting Agreement and Distribution Plan" above for a description of the
terms of the Underwriting Agreement with PFD.
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, 225 Franklin Street, Boston, Massachusetts 02110, 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
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.
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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
be made as nearly as practicable on a pro rata basis in proportion to the
amounts desired to be purchased or sold by each.
During the fiscal year ended October 31, 1996, the Fund paid aggregate brokerage
and underwriting commissions of approximately $1,018,000.
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 distribution of its income to
shareholders. If the Fund meets all such requirements and distributes to its
shareholders, in accordance with the Code's timing requirements, all investment
company taxable income and net capital gain, if any, which it earns, the Fund
will be relieved of the necessity of paying federal income tax.
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In order to qualify as a regulated investment company under Subchapter M, the
Fund must, among other things, derive at least 90% of its annual gross income
from dividends, interest, 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 and forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies (the "90% income test"), limit its gains from the sale of stock,
securities and certain other positions held for less than three months to less
than 30% of its annual gross income (the "30% test") and satisfy certain annual
distribution and quarterly diversification requirements.
Dividends from 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 reinvested 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 reinvested in 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, foreign
currency forward 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
investments in stock or securities (or its options or futures contracts with
respect to stock or securities) may need to be limited in order to enable the
Fund to satisfy the limitations described in the second paragraph above that are
applicable to the income or gains recognized by a regulated investment company.
If the net foreign exchange loss for a year were to exceed the Fund's investment
company taxable income (computed without regard to such loss), the resulting
ordinary loss for such year would not be deductible by the Fund or its
shareholders in future years.
If the Fund acquires any equity interest (under proposed regulations, generally
including not only stock but also an option to acquire stock) in certain foreign
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.
If the Fund invests in certain pay-in-kind securities ("PIKs"), zero coupon
securities, deferred interest securities or, in general, any other securities
with original issue discount (or with market discount if the Fund elects to
include market discount in income currently), the Fund
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must accrue income on such investments for each taxable year, which generally
will be prior to the receipt of the corresponding cash payments. However, the
Fund must distribute, at least annually, all or substantially all of its net
income, including such accrued income, to shareholders to qualify as a regulated
investment company under the Code and avoid Federal income and excise taxes.
Therefore, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy distribution requirements.
For federal income tax purposes, the Fund is permitted to carry forward a net
capital loss for any year to offset its capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent capital gains are
offset by such losses, they would not result in federal income tax liability to
the Fund and therefore are not expected to be distributed as such to
shareholders. As of the end of its most recent taxable year, the Fund had no
capital loss carryforwards.
At the time of an investor's purchase of Fund shares, a portion of the purchase
price may be attributable to realized or unrealized appreciation in the Fund's
portfolio or undistributed taxable income of the Fund. Consequently, subsequent
distributions on these shares 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 economically represent a return of a portion of the
investment.
Redemptions and exchanges are taxable events. Any loss realized by a shareholder
upon the redemption, exchange or other disposition 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 pursuant to
the reinvestment privilege, the sales charge paid on such shares is not included
in their tax basis under the Code, and (2) in the case of an exchange, all or a
portion of the sales charge paid on such shares is not included in their tax
basis under the Code, to the extent a sales charge that would otherwise apply to
the shares received is reduced pursuant to the exchange privilege. In either
case, the portion of the sales charge not included in the tax basis of the
shares redeemed or surrendered in an exchange is included in the tax basis of
the shares acquired in the reinvestment or exchange. Losses on redemptions or
other dispositions of shares may be disallowed under "wash sale" rules in the
event of other investments in the Fund (including those made pursuant to
reinvestment of dividends and/or capital gain distributions) within a period of
61 days beginning 30 days before and ending 30 days after a redemption or other
disposition of shares. In such a case, the disallowed portion of any loss would
be included in the federal tax basis of the shares acquired in the other
investments.
Options written or purchased and futures contracts entered into by the Fund on
certain securities, indices and foreign currencies, as well as certain foreign
currency forward contracts, may cause the Fund to recognize gains or losses from
marking-to-market at the end of its taxable year even though such options may
not have lapsed, been closed out, or exercised or such futures or forward
contracts may not have been performed or closed out. The tax rules applicable to
these contracts 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 relating to foreign currency may be subject to Section 988, as
described above, and may 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
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also affect the characterization of capital gains or losses from straddle
positions and certain successor positions as long-term or short-term. Certain
tax elections may be available that would enable the Fund to ameliorate some
adverse effects of the tax rules described in this paragraph. The tax rules
applicable to options, futures or forward contracts and straddles may affect the
amount, timing and character of the Fund's income and losses and hence of its
distributions to shareholders.
For purposes of the 70% dividends-received deduction generally available to
corporations under the Code, dividends received by the Fund 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
advisor 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. In order to qualify for the deduction,
corporate shareholders must meet the minimum holding period requirement stated
above with respect to their Fund shares, taking into account any holding period
reductions from certain hedging or other transactions or positions that diminish
their risk of loss with respect to their Fund shares, and, if they borrow to
acquire Fund shares, they 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, including taxes on interest, dividends and capital gains, with
respect to its investments in those countries. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes in some cases. The
Fund does not expect to satisfy the requirements for passing through to its
shareholders their pro rata shares of qualified foreign taxes paid by the Fund,
with the result that 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.
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 IRS Forms W-9, that the Social Security
Number or other Taxpayer Identification Number they provide is their correct
number and that they are not currently subject to backup withholding, or that
they are exempt from backup withholding. The Fund may nevertheless be required
to withhold if it receives notice from the IRS or a broker that the number
provided is incorrect or backup withholding is applicable as a result of
previous underreporting of interest or dividend income.
If, as anticipated, the Fund qualifies as a regulated investment company under
the Code, it will not be required to pay any Massachusetts income, corporate
excise or franchise taxes or any Delaware corporation income tax.
The description of certain federal tax provisions above relates only to U.S.
federal income tax consequences for shareholders who are U.S. persons, i.e. U.S.
citizens or residents or U.S.
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corporations, partnerships, trusts or estates, and who are subject to U.S.
federal income tax. This description does not address the special tax rules that
may be applicable to particular types of investors, such as financial
institutions, insurance companies, securities dealers, or tax-exempt or
tax-deferred plans, accounts or entities. Investors other than U.S. persons may
be subject to different U.S. tax treatment, including a possible 30%
non-resident alien U.S. withholding tax (or non-resident alien 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 for Form W-8 is
on file, to 31% backup withholding on certain other payments from the Fund.
Shareholders should consult their own tax advisers on these matters and on
state, local and other applicable tax laws.
11. DESCRIPTION OF SHARES
The Fund's 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 three classes of shares of the Fund, designated as
Class A shares, Class B shares and Class C shares. Each share of a class of the
Fund represents an equal proportionate interest in the assets of the Fund
allocable to that class. Upon liquidation of the Fund, shareholders of each
class of the Fund are entitled to share pro rata in the Fund's net assets
allocable to such class available for distribution to shareholders. The Fund
reserves the right to create and issue additional series or classes of shares,
in which case the shares of each class of a series would participate equally in
the earnings, dividends and assets allocable to that class of the particular
series.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to 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 [Be 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
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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,
threatened against or otherwise involving such Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the Fund.
The Declaration of Trust does not authorize the Fund to indemnify any Trustee or
officer against any liability to which he or she would otherwise be subject by
reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
13. LETTER OF INTENTION
Purchases in the 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.
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<PAGE>
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a convenient
method of receiving fixed payments at regular intervals from shares of the Fund
deposited by the applicant under this SWP. The applicant must deposit or
purchase for deposit with PSC shares of the Fund having a total value of not
less than $10,000. Periodic checks of $50 or more will be 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 the applicant.
Withdrawals from Class B and Class C share accounts are limited to 10% of the
value of the account at the time the SWP is implemented. See "Waiver or
Reduction of Contingent Deferred Sales Charge" in the Prospectus. Designation of
another person to receive the checks subsequent to opening an account must be
accompanied by a signature guarantee.
Any income dividends or capital gains distributions on shares under the SWP will
be credited to the SWP account on the payment date in full and fractional shares
at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares deposited
under the SWP in a SWP account. To the extent that such redemptions for periodic
withdrawals exceed dividend income reinvested in the SWP account, such
redemptions will reduce and may ultimately exhaust the number of shares
deposited in the SWP account. 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 SWP have been redeemed.
15. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined as of the
close of regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 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.
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<PAGE>
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
and Class C are offered at net asset value without the imposition of an initial
sales charge.
16. INVESTMENT RESULTS
QUOTATIONS, COMPARISONS, AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Fund may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, total return of the Fund's
classes may be compared to 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 indices 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
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
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<PAGE>
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 a class of 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 or Class C
shares at the end of the period.
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $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
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.
The total returns for each Class of shares of the Fund as of October 31, 1996,
are as follows:
Average Annual Total Return (%)
One Year Five Years Ten Years Since Inception*
-------- ---------- --------- ----------------
Class A Shares N/A N/A N/A 19.58
Class B Shares N/A N/A N/A 22.09
Class C Shares N/A N/A N/A 13.35
* Inception was November 1, 1995 for Class A shares and Class B shares. Class C
Shares were first offered January 31, 1996.
AUTOMATED INFORMATION LINE
FactFoneSM, Pioneer's 24-hour automated information line, allows shareholders to
dial toll-free 1-800-225-4321 and hear recorded fund information, including:
o net asset value prices for all Pioneer mutual funds;
o annualized 30-day yields on Pioneer's fixed income funds;
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<PAGE>
o annualized 7-day yields and 7-day effective (compound) yields for
Pioneer's money market fund; and 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, Class B and Class C
shares (except for Pioneer's money market fund, which seeks 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 Annual Report dated October 31, 1996 is incorporated by reference
into and is attached to this Statement of Additional Information in reliance
upon the report of Arthur Anderson LLP, independent public accountants, as
experts. A copy of the Fund's Annual Report may be obtained without charge by
calling Shareholder Services at 1-800-225-6292 or by written request to the Fund
at 60 State Street, Boston, Massachusetts 02109.
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<PAGE>
APPENDIX A
PIONEER SMALL COMPANY FUND
CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET INITIAL NET
INITIAL OFFERING SALES CHARGE SHARES VALUE ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
<S> <C> <C> <C> <C> <C> <C>
11/2/95 $10,000 $10.61 5.75% 942.507 $10.00 $9,425
VALUE OF SHARES
DIVIDENDS AND CAPITAL GAINS REINVESTED
FROM INVESTMENT FROM CAPITAL FROM DIVIDENDS TOTAL
DATE GAINS REINVESTED REINVESTED VALUE
<S> <C> <C> <C> <C>
12/31/95 $10,094 $0 $22 $10,116
12/31/96 $11,669 $865 $25 $12,559
</TABLE>
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<PAGE>
PIONEER SMALL COMPANY FUND
CLASS B SHARES
<TABLE>
<CAPTION>
NET ASSET INITIAL NET
INITIAL OFFERING SALES CHARGE SHARES VALUE ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
<S> <C> <C> <C> <C> <C> <C>
11/2/95 $10,000 $10.00 0.00% 1,000 $10.00 $10,000
VALUE OF SHARES
DIVIDENDS AND CAPITAL GAINS REINVESTED
CONTINGENT
DEFERRED SALES
DATE FROM INVESTMENT FROM CAPITAL FROM DIVIDENDS CHARGE IF TOTAL CDSC
---- --------------- ------------- --------------- ---------- -----
GAINS REINVESTED REINVESTED REDEEMED VALUE PERCENTAGE
---------------- ----------- -------- ----- ----------
<S> <C> <C> <C> <C>
12/31/95 $10,710 $0 $17 $400 $10,327 4.00%
12/31/96 $12,280 $917 $19 $400 $12,816 4.00%
</TABLE>
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<PAGE>
PIONEER SMALL COMPANY FUND
CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET INITIAL NET
INITIAL OFFERING SALES CHARGE SHARES VALUE ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
<S> <C> <C> <C> <C> <C> <C>
1/31/96 $10,000 $11.01 0.00% 908.265 $11.01 $10,000
VALUE OF SHARES
DIVIDENDS AND CAPITAL GAINS REINVESTED
CONTINGENT
DEFERRED SALES
DATE FROM INVESTMENT FROM CAPITAL FROM DIVIDENDS CHARGE IF TOTAL CDSC
---- --------------- ------------- --------------- ---------- -----
GAINS REINVESTED REINVESTED REDEEMED VALUE PERCENTAGE
---------------- ----------- -------- ----- ----------
<S> <C> <C> <C> <C>
12/31/96 $11,154 $831 $0 $100 $11,885 1.00%
</TABLE>
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<PAGE>
APPENDIX A
MOODY'S CORPORATE BOND RATINGS
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 greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A posses many favorable investment attributes are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
other good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
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<PAGE>
Ca
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicated that the security ranks in the higher end of its generic
rating category; the modifier 2 indicated a mid-range ranking and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
STANDARD AND POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA
Debt rated AAA has the highest rating assigned by Standard and Poor's. Capacity
to pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay principal and
differs from the higher rated issues only in small degree.
A
Debt rated A has a strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB
Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions of changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
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<PAGE>
BB
Debt rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied BBB-rating.
B
Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC
Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC
The rating CC is typically applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C
The C rating is typically applied to debt subordinated to senior debt which is
assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI
The rating CI is reserved for income bonds on which no interest is being paid.
D
Debt rated D is in payment default. The D rating category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-)
The rating from AAA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major categories.
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well-known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may be used, if appropriate. The indices
are not available for direct investment. The data presented is not meant to be
indicative of the performance of the Fund, reflects past performance and does
not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the
United States; prior to March 1957 it consisted of 90 of the largest stocks.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of 30 blue chip stocks.
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the New York Stock Exchange (NYSE), plus stocks listed on the American Stock
Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization
as the upper bound of the NYSE ninth decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 Index according to price-to-book ratios. The Growth Index contains
stocks with higher price-to-book ratios, and the Value Index contains stocks
with lower price-to-book ratios. Both indexes are market capitalization
weighted.
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds from 1977 to 1991 are
constructed with data from The Wall Street Journal. Over 1926-1976, data are
obtained from the Government bond file at the Center for Research in Security
Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a
one-bond portfolio with a term of approximately 20 years and a reasonably
current coupon was used, and whose returns did not reflect potential tax
benefits, impaired negotiability, or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates minus the current date. The
bond was "held" for the calendar year and returns were computed. Total returns
for 1977-1991 are calculated as the change in the flat price or and-interest
price.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of the intermediate-term government bonds for 1977-1991 are
calculated from The Wall Street Journal prices, using the change in flat price.
Returns from 1934-1986 are obtained from the CRSP Government Bond File.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than 5 years, and this bond is "held"
for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934-1942, almost all bonds
with maturities near 5 years were partially or full tax-exempt and were selected
using the rules described above. Personal tax rates were generally low in that
period, so that yields on tax-exempt bonds were similar to yields on taxable
bonds. From 1926-1933, there are few bonds suitable for construction of a series
with a 5-year maturity. For this period, five year bond yield estimates are
used.
MSCI
Morgan Stanley Capital International Indices, developed by the Capital
International S.A., are based on share prices of some 1470 companies listed on
the stock exchanges around the world.
Countries in the MSCI EAFE Portfolio are:
Australia; Austria; Belgium; Denmark; Finland; France; Germany; Hong Kong;
Italy; Japan; Netherlands; N. Zealand; Norway; Singapore/Malaysia; Spain;
Sweden; Switzerland; United Kingdom.
Countries in the MSCI EMERGING MARKET FREE INDEX are: Argentina, Brazil, Chile,
China, Czech Republic, Colombia, Greece, Hungary, India, Indonesia, Israel,
Jordan, Korea Free (at 50%), Malaysia, Mexico Free, Pakistan, Peru, Philippines
Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan, Thailand, Turkey,
Venezuela Free
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
6 MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
For 1969-1991, corporate bond total returns are represented by the Salomon
Brothers Long-Term High-Grade Corporate Bond Index. Since most large corporate
bond transactions take place over the counter, a major dealer is the natural
source of these data. The index includes nearly all Aaa- and Aa-rated bonds. If
a bond is downgraded during a particular month, its return for the month is
included in the index before removing the bond from future portfolios.
Over 1926-1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946-1968, Ibbotson
and Sinquefield backdated the Salomon Brothers' index, using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon for
1969-1991. Capital appreciation returns were calculated from yields assuming (at
the beginning of each monthly holding period) a 20-year maturity, a bond price
equal to par, and a coupon equal to the beginning-of-period yield. For the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite
yield data were used, assuming a 4 percent coupon and a 20-year maturity. The
conventional present-value formula for bond price for the beginning and
end-of-month prices was used. (This formula is presented in Ross, Stephen A.,
and Randolph W. Westerfield, Corporate Finance, Times Mirror/Mosby, St. Louis,
1990, p. 97 ["Level-Coupon Bonds"].) The monthly income return was assumed to be
one-twelfth the coupon.
U.S. (30 DAY) TREASURY BILLS
For the U.S. Treasury bill index, data from The Wall Street Journal are used for
1977-1991; the CRSP U.S. Government Bond File is the source until 1976. Each
month a one-bill portfolio containing the shortest-term bill having not less
than one month to maturity is constructed. (The bill's original term to maturity
is not relevant.) To measure holding period returns for the one-bill portfolio,
the bill is priced as of the last trading day of the previous month-end and as
of the last trading day of the current month.
NAREIT-EQUITY INDEX
All of the data is based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMSE and the NASDAQ. The data is
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 Newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighing at the beginning of the period.
Only those REITs listed for the entire period are
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
used in the total return calculation. Dividends are included in the month based
upon their payment date. There is no smoothing of income. Liquidating dividends,
whether full or partial, are treated as income.
RUSSELL 2000 SMALL STOCK INDEX
Index of the 2,000 smallest stocks in the Russell 3000 Index (TM); the smallest
company has a market capitalization of approximately $13 million. The Russell
3000 is comprised of the 3,000 largest US companies as determined by market
capitalization representing approximately 98% of the US equity market. The
largest company in the index has a market capitalization of $67 billion. The
Russell Indexes (TM) are reconstituted annually as of June 1st, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization-weighted
index which measures the performance of more than 85 securities.
The index contains performance data on five major categories of property;
office, retail, industrial, apartment and miscellaneous. Additionally, the Index
has real estate portfolio encumbered by 16% third party mortgages. The companies
in the WRESEC are 79% equity and hybrid REIT's and 21% real estate operating
companies. The capitalization is 47% NYSE, 33% AMEX and 20% OTC."
STANDARD & POOR'S MIDCAP 400 INDEX
The Standard and Poor's MidCap 400 Index is a market-value-weighted index. The
performance data for the MidCap 400 Index were calculated by taking the stocks
presently in the MidCap 400 Index and tracking them backwards in time as long as
there were prices reported. No attempt was made to determine what stocks "might
have been" in the MidCap 400 Index five or ten years ago had it existed.
Dividends are reinvested on a monthly basis prior to June 30, 1991, and are
reinvested daily thereafter.
The S&P MidCap 400 Index and the S&P 500 together represent approximately 85% of
the total market capitalization of stocks traded in the United States.
LIPPER BALANCED FUNDS INDEX
Equally-weighted performance indices, adjusted for capital gains distributions
and income dividends of approximately 30 of the largest funds with a primary
objective of conserving principal by maintaining at all times a balanced
portfolio of stocks and bonds. Typically, the stock/bond ratio ranges around
60%/40%.
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963-1987 and The Wall Street Journal for the years 1988-1994.
Source: Ibbotson Associates
-39-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
- --------------------------------------------------------------------------------
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A
Dec 1931 -43.34 -49.03 -49.75 -9.52 N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A
Dec 1933 53.99 73.71 142.87 0.51 N/A N/A
Dec 1934 -1.44 8.07 24.22 2.03 N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A
Dec 1942 20.34 14.12 44.51 9.29 N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A
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
-40-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
- --------------------------------------------------------------------------------
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60
Dec 1994 1.31 5.06 3.11 2.78 3.13 -0.64
Dec 1995 37.43 36.84 34.46 2.74 38.13 36.99
Dec 1996 23.07 28.84 17.62 3.58 23.96 21.99
-41-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
- --------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.1 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.18 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
-42-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
- --------------------------------------------------------------------------------
Dec 1966 3.65 4.69 N/A 5.75 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.48 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.44 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.71 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.38 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.12 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.1 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.58 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.3 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.8 11.21 5.21 26.39 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
-43-
<PAGE>
<TABLE>
<CAPTION>
RUSSELL LIPPER MSCI EMERGING
2000 WILSHIRE REAL S&P MIDCAP BALANCED MARKETS FREE BANK
NAREIT-EQUITY INDEX ESTATE 400 FUND INDEX SAVINGS ACCOUNT
SECURITIES INDEX INDEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
-44-
<PAGE>
RUSSELL LIPPER MSCI EMERGING
2000 WILSHIRE REAL S&P MIDCAP BALANCED MARKETS FREE BANK
NAREIT-EQUITY INDEX ESTATE 400 FUND INDEX SAVINGS ACCOUNT
SECURITIES INDEX INDEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 5.21 5.24
Dec 1996 35.26 16.53 36.87 19.20 13.01 6.03 4.95
</TABLE>
Source: Lipper
-45-
<PAGE>
APPENDIX B
ADDITIONAL PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest and most experienced
money managers in the United States.
As of December 31, 1996, PMC employed a professional investment staff of
53, with a combined average of twelve years' experience in the financial
services industry.
Total assets of all Pioneer mutual funds at December 31, 1996, were
approximately $15.8 billion representing 1,086,554 shareholder accounts, 722,661
non-retirement accounts and 363,893 retirement accounts.
-46-
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The financial highlights of the Registrant for the
fiscal year ended October 31, 1996 are included in
Part A of the Registration Statement and the
financial statements of the Registrant are
incorporated by reference into Part B of the
Registration Statement from the 1996 Annual Report to
Shareholders for the year ended October 31, 1996
(filed electronically on December 26, 1996 file nos.
33-61869 and 811-7339 accession number
0000949275-96-000018).
(b) Exhibits:
1.1. Agreement and Declaration of Trust.*
1.2. Certificate of Trust.*
1.3. Certificate of Amendment of the Certificate
of Trust.**
2. By-Laws.*
3. None.
4.1. Form of Class A Share Certificate.**
4.2. Form of Class B Share Certificate.**
5. Form of Management Contract between the
Registrant and Pioneering Management
Corporation.*
6.1. Form of Underwriting Agreement between the
Registrant and Pioneer Funds Distributor,
Inc.**
6.2. Form of Dealer Sales Agreement.**
7. None.
8. Form of Custodian Agreement between the
Registrant and Brown Brothers Harriman &
Co.*
C-1
<PAGE>
9. Form of Investment Company Service Agreement
between the Registrant and Pioneering
Services Corporation.**
10. Opinion and Consent of Counsel.**
11. Consent of Independent Public Accountants.+
12. None.
13. Share Purchase Agreement.**
14. None.
15.1. Form of Class A Shares Distribution Plan.**
15.2. Form of Class B Shares Distribution Plan.**
15.3. Form of Class C Shares Distribution Plan.+
16. Not applicable.
17. Financial Data Schedules.
18. Form of 18f-3 Plan.+
19. Powers of Attorney.**
- --------------
+ Filed herewith.
* Filed with the initial Registration Statement on August 16, 1995 and
incorporated herein by reference.
** Filed with Pre-Effective Amendment No. 1 to the Registration Statement on
November 2, 1995 and incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL WITH REGISTRANT.
PERCENT STATE/COUNTRY
OF OF
COMPANY OWNED BY SHARES INCORPORATION
Pioneering Management Corp. (PMC) PGI 100% DE
Pioneering Services Corp. (PSC) PGI 100% MA
Pioneer Capital Corp. (PCC) PGI 100% MA
Pioneer Fonds Marketing GmbH (GmbH) PGI 100% MA
C-2
<PAGE>
Pioneer SBIC Corp. (SBIC) PGI 100% MA
Pioneer Associates, Inc. (PAI) PGI 100% MA
Pioneer International Corp. (Pint) PGI 100% MA
Pioneer Plans Corp. (PPC) PGI 100% MA
Pioneer Goldfields Ltd (PGL) PGI 100% MA
Pioneer Investments Corp. (PIC) PGI 100% MA
Pioneer Metals and Technology,
Inc. (PMT) PGI 100% DE
Pioneer First Polish Trust Fund
Joint Stock Co. (First Polish) PGI 100% Poland
Teberebie Goldfields Ltd. (TGL) PGI 90% Ghana
Pioneer Funds Distributor, Inc.
(PFD) PMC 100% MA
SBIC's outstanding capital stock PCC 100% MA
THE FUNDS: All are parties to management contracts with PMC.
BUSINESS
FUND TRUST
Pioneer International Growth Fund MA
Pioneer Europe Fund MA
Pioneer World Equity Fund DE
Pioneer Emerging Markets Fund DE
Pioneer India Fund DE
Pioneer Mid-Cap Fund DE
Pioneer Growth Shares DE
Pioneer Growth Trust MA
Pioneer Micro-Cap Fund DE
Pioneer Fund DE
Pioneer II DE
Pioneer Real Estate Shares DE
Pioneer Short-Term Income Fund MA
Pioneer America Income Trust MA
Pioneer Bond Fund MA
Pioneer Balanced Fund DE
Pioneer Intermediate Tax-Free Fund MA
Pioneer Tax-Free Income Fund DE
Pioneer Money Market Trust DE
Pioneer Variable Contracts Trust DE
Pioneer Interest Shares DE
OTHER:
. SBIC is the sole general partner of Pioneer Ventures Limited
Partnership, a Massachusetts limited partnership.
. ITI Pioneer AMC Ltd. (ITI Pioneer) (Indian Corp.), is a joint venture
between PMC and Investment Trust of India Ltd. (ITI) (Indian Corp.)
C-3
<PAGE>
. ITI and PMC own approximately 46% and 49%, respectively, of the total
equity capital of ITI Pioneer.
JOHN F. COGAN, JR.
OWNS APPROXIMATELY 14% OF THE OUTSTANDING SHARES OF PGI.
TRUSTEE/
ENTITY CHAIRMAN PRESIDENT DIRECTOR OTHER
------ -------- --------- -------- -----
Pioneer Family of
Mutual Funds X X X
PGL X X X
PGI X X X
PPC X X
PIC X X
Pintl X X
PMT X X
PCC X
PSC X
PMC X X
PFD X X
TGL X X
First Polish X Member of
Supervisory Board
Hale and Dorr LLP Partner
GmbH Chairman of
Supervisory Board
C-4
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following table sets forth the approximate number of
record holders of each class of securities of the Registrant as of January 31,
1997:
Number of
Record Holders
--------------
Class A Class B Class C
43,137 7,826 5,414
14,984 1,634 5,225
2,694 159
ITEM 27. INDEMNIFICATION.
Except for the Agreement and Declaration of Trust dated August
8, 1995, establishing the Registrant as a Trust under Delaware law, there is no
contract, arrangement or statute under which any Trustee, officer, underwriter
or affiliated person of the Registrant is insured or indemnified. The Agreement
and Declaration of Trust provides that no Trustee or officer will be indemnified
against any liability to which the Registrant would otherwise be subject by
reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "Act"), may be available to Trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
All of the information required by this item is set forth in
the Form ADV, as amended, of Pioneering Management Corporation. The following
sections of such Form ADV are incorporated herein by reference:
C-5
<PAGE>
(a) Items 1 and 2 of Part 2;
(b) Section 6, Business Background, of each Schedule D.
ITEM 29. PRINCIPAL UNDERWRITER
(a) See Item 25 above.
(b) Directors and Officers of PFD:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
John F. Cogan, Jr. Director and Chairman Chairman of the Board,
President and Trustee
Robert L. Butler Director and President None
David D. Tripple Director Executive Vice
President and Trustee
Steven M. Graziano Senior Vice President None
Stephen W. Long Senior Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Constance D. Spiros Vice President None
John W. Drachman Vice President None
Marcy L. Supovitz Vice President None
Barry G. Knight Vice President None
Mary Kleeman Vice President None
Elizabeth B. Rice Vice President None
Gail A. Smyth Vice President None
Steven R. Berke Assistant None
Vice President
Mary Sue Hoban Assistant None
Vice President
William H. Keough Treasurer Treasurer
Roy P. Rossi Assistant Treasurer None
C-6
<PAGE>
Joseph P. Barri Clerk Secretary
Robert P. Nault Assistant Clerk Assistant Secretary
- ---------------
* The principal business address of each is 60 State Street, Boston,
Massachusetts 02109.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records are maintained at the Registrant's
office at 60 State Street, Boston, Massachusetts; contact the Treasurer.
ITEM 31. MANAGEMENT SERVICES
The Registrant is not a party to any management-related
service contract, except as described in the Prospectus and the Statement of
Additional Information.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to deliver, or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given a copy of the Registrant's report to shareholders furnished pursuant to
and meeting the requirements of Rule 30d-1 from which the specified information
is incorporated by reference, unless such person currently holds securities of
the Registrant and otherwise has received a copy of such report, in which case
the Registrant shall state in the Prospectus that it will furnish, without
charge, a copy of such report on request, and the name, address and telephone
number of the person to whom such a request should be directed.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 1 to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston and Commonwealth of Massachusetts, on 26th day of February, 1997.
PIONEER SMALL COMPANY FUND
By: /s/John F. Cogan, Jr.,
John F. Cogan, Jr.,
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registrant's Registration Statement on
Form N-1A has been signed below by the following persons in the capacities and
on the date indicated:
Signature Title
--------- -----
/s/John F. Cogan, Jr. Chairman of the Board )
John F. Cogan, Jr. and President (Principal )
Executive Officer )
)
)
)
)
)
)
/s/William H. Keough* Treasurer (Principal )
William H. Keough Financial and Accounting )
Officer) )
C-8
<PAGE>
Trustees:
)
John F. Cogan, Jr. Trustee )
)
/s/Richard H. Egdahl, M.D.* )
Richard H. Egdahl, M.D. Trustee )
)
/s/Margaret B.W. Graham* )
Margaret B.W. Graham Trustee )
)
/s/John W. Kendrick* )
John W. Kendrick Trustee )
/s/Marguerite A. Piret* )
Marguerite A. Piret Trustee )
)
/s/David D. Tripple* )
David D. Tripple Trustee )
)
/s/Stephen K. West* )
Stephen K. West Trustee )
)
/s/John Winthrop* )
John Winthrop Trustee )
*By: Dated: February 26, 1997
/s/Joseph P. Barri
Joseph P. Barri
Attorney-in-Fact
C-9
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Document Title Number
- ------ -------------- ------
11. Consent of Independent Public Accountants.
15.3. Form of Class C Shares Distribution Plan.
17. Financial Data Schedules.
18. Form of 18f-3 Plan.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report on Pioneer Small Company Fund dated December 4, 1996 (and to all
references to our firm) included in or made a part of Post-Effective Amendment
No. 1 and Amendment No. 2 to Registration Statement File Nos. 33-61869 and
811-7339, respectively.
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 24, 1997
CLASS C SHARES DISTRIBUTION PLAN
PIONEER SMALL COMPANY FUND
CLASS C SHARES DISTRIBUTION PLAN, dated as of January 29, 1996, of
PIONEER SMALL COMPANY FUND, a Delaware business trust (the "Trust").
WITNESSETH
WHEREAS, the Trust is engaged in business as an open-end, diversified,
management investment company and is registered under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act");
WHEREAS, the Trust intends to distribute shares of beneficial interest
(the "Class C Shares") of the Trust in accordance with Rule 12b-1 promulgated by
the Securities and Exchange Commission under the 1940 Act ("Rule 12b-1"), and
desires to adopt this Class C Shares distribution plan (the "Class C Plan") as a
plan of distribution pursuant to such Rule;
WHEREAS, the Trust desires that Pioneer Funds Distributor, Inc., a
Massachusetts corporation ("PFD"), provide certain distribution services for the
Trust's Class C Shares in connection with the Class C Plan;
WHEREAS, the Trust has entered into an underwriting agreement (in a
form approved by the Trust's Board of Trustees in a manner specified in such
Rule 12b-1) with PFD, whereby PFD provides facilities and personnel and renders
services to the Trust in connection with the offering and distribution of Class
C Shares (the "Underwriting Agreement");
WHEREAS, the Trust also recognizes and agrees that (a) PFD may retain
the services of firms or individuals to act as dealers or wholesalers
(collectively, the "Dealers") of the Class C Shares in connection with the
offering of Class C Shares, (b) PFD may compensate any Dealer that sells Class C
Shares in the manner and at the rate or rates to be set forth in an agreement
between PFD and such Dealer and (c) PFD may make such payments to the Dealers
for distribution services out of the fee paid to PFD hereunder, any deferred
sales charges imposed by PFD in connection with the repurchase of Class C
shares, its profits or any other source available to it;
WHEREAS, the Trust recognizes and agrees that PFD may impose certain
deferred sales charges in connection with the repurchase
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<PAGE>
of Class C Shares by the Trust, and PFD may retain (or receive from the Trust,
as the case may be) all such deferred sales charges; and
WHEREAS, the Board of Trustees of the Trust, in considering whether the
Trust should adopt and implement this Class C Plan, has evaluated such
information as it deemed necessary to an informed determination whether this
Class C Plan should be adopted and implemented and has considered such pertinent
factors as it deemed necessary to form the basis for a decision to use assets of
the Trust for such purposes, and has determined that there is a reasonable
likelihood that the adoption and implementation of this Class C Plan will
benefit the Trust and its Class C shareholders;
NOW, THEREFORE, the Board of Trustees of the Trust hereby adopts this
Class C Plan for the Trust as a plan of distribution of Class C Shares in
accordance with Rule 12b-1, on the following terms and conditions:
(a) The Trust is authorized to compensate
PFD for (1) distribution services and (2) personal and account
maintenance services performed and expenses incurred by PFD in
connection with the Trust's Class C Shares. Such compensation
shall be calculated and accrued daily and paid monthly or at
such other intervals as the Board of Trustees may determine.
(b) The amount of compensation paid during
any one year for distribution services with respect to Class C
Shares shall be .75% of the Trust's average daily net assets
attributable to Class C Shares for such year.
(c) Distribution services and expenses for
which PFD may be compensated pursuant to this Plan include,
without limitation: compensation to and expenses (including
allocable overhead, travel and telephone expenses) of (i)
Dealers, brokers and other dealers who are members of the
National Association of Securities Dealers, Inc. ("NASD") or
their officers, sales representatives and employees, (ii) PFD
and any of its affiliates and any of their respective
officers, sales representatives and employees, (iii) banks and
their officers, sales representatives and employees, who
engage in or support distribution of the Trust's Class C
Shares; printing of reports and prospectuses for other than
existing shareholders; and preparation, printing and
distribution of sales literature and advertising materials.
-2-
<PAGE>
(d) The amount of compensation paid during
any one year for personal and account maintenance services and
expenses shall be .25% of the Trust's average daily net assets
attributable to Class C Shares for such year. As partial
consideration for personal services and/or account maintenance
services provided by PFD to the Class C Shares, PFD shall be
entitled to be paid any fees payable under this clause (d)
with respect to Class C shares for which no dealer of record
exists, where less than all consideration has been paid to a
dealer of record or where qualification standards have not
been met.
(e) Personal and account maintenance
services for which PFD or any of its affiliates, banks or
Dealers may be compensated pursuant to this Plan include,
without limitation: payments made to or on account of PFD or
any of its affiliates, banks, other brokers and dealers who
are members of the NASD, or their officers, sales
representatives and employees, who respond to inquiries of,
and furnish assistance to, shareholders regarding their
ownership of Class C Shares or their accounts or who provide
similar services not otherwise provided by or on behalf of the
Trust.
(f) PFD may impose certain deferred sales
charges in connection with the repurchase of Class C Shares by
the Trust and PFD may retain (or receive from the Trust as the
case may be) all such deferred sales charges.
(g) Appropriate adjustments to payments made
pursuant to clauses (b) and (d) of this paragraph 1 shall be
made whenever necessary to ensure that no payment is made by
the Trust in excess of the applicable maximum cap imposed on
asset based, front-end and deferred sales charges by
subsection (d) of Section 26 of Article III of the Rules of
Fair Practice of the NASD.
2. The Trust understands that agreements between PFD and
Dealers may provide for payment of fees to Dealers in connection with the sale
of Class C Shares and the provision of services to shareholders of the Trust.
Nothing in this Class C Plan shall be construed as requiring the Trust to make
any payment to any Dealer or to have any obligations to any Dealer in connection
with services as a dealer of the Class C Shares. PFD shall agree and undertake
that any agreement entered into between PFD and any Dealer shall provide that
such Dealer shall look solely to PFD for compensation for its services
thereunder and that in no event shall such Dealer seek any payment from the
Trust.
-3-
<PAGE>
3. Nothing herein contained shall be deemed to require the
Trust to take any action contrary to its Declaration of Trust, as it may be
amended or restated from time to time, or By-Laws or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound, or to
relieve or deprive the Trust's Board of Trustees of the responsibility for and
control of the conduct of the affairs of the Trust.
4. This Class C Plan shall become effective upon approval by
(i) a "majority of the outstanding voting securities" of Class C of the Trust,
(ii) a vote of the Board of Trustees, and (iii) a vote of a majority of the
Trustees who are not "interested persons" of the Trust and who have no direct or
indirect financial interest in the operation of the Class C Plan or in any
agreements related to the Class C Plan (the "Qualified Trustees"), such votes
with respect to (ii) and (iii) above to be cast in person at a meeting called
for the purpose of voting on this Class C Plan.
5. This Class C Plan will remain in effect indefinitely,
provided that such continuance is "specifically approved at least annually" by a
vote of both a majority of the Trustees of the Trust and a majority of the
Qualified Trustees. If such annual approval is not obtained, this Class C Plan
shall expire on May 31, 1997.
6. This Class C Plan may be amended at any time by the Board
of Trustees, provided that this Class C Plan may not be amended to increase
materially the limitations on the annual percentage of average net assets which
may be expended hereunder without the approval of holders of a "majority of the
outstanding voting securities" of Class C of the Trust and may not be materially
amended in any case without a vote of a majority of both the Trustees and the
Qualified Trustees. This Class C Plan may be terminated at any time by a vote of
a majority of the Qualified Trustees or by a vote of the holders of a "majority
of the outstanding voting securities" of Class C of the Trust.
7. The Trust and PFD shall provide to the Trust's Board of
Trustees, and the Board of Trustees shall review, at least quarterly, a written
report of the amounts expended under this Class C Plan and the purposes for
which such expenditures were made.
8. While this Class C Plan is in effect, the selection and
nomination of Qualified Trustees shall be committed to the discretion of the
Trustees who are not "interested persons" of the Trust.
-4-
<PAGE>
9. For the purposes of this Class C Plan, the terms
"assignment," "interested persons," "majority of the outstanding voting
securities" and "specifically approved at least annually" are used as defined in
the 1940 Act.
10. The Trust shall preserve copies of this Class C Plan, and
each agreement related hereto and each report referred to in Paragraph 7 hereof
(collectively, the "Records"), for a period of not less than six (6) years from
the end of the fiscal year in which such Records were made and, for a period of
two (2) years, each of such Records shall be kept in an easily accessible place.
11. This Class C Plan shall be construed in accordance with
the laws of The Commonwealth of Massachusetts and the applicable provisions of
the 1940 Act.
12. If any provision of this Class C Plan shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
the Class C Plan shall not be affected thereby.
-5-
PIONEER SMALL COMPANY FUND
ON BEHALF OF
PIONEER SMALL COMPANY FUND
MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES
JANUARY 29, 1996
Each class of shares of Pioneer Small Company Fund (the "Fund"), a
series of Pioneer Small Company Fund (the "Trust"), will have the same relative
rights and privileges and be subject to the same sales charges, fees and
expenses, except as set forth below. The Board of Trustees may determine in the
future that other distribution arrangements, allocations of expenses (whether
ordinary or extraordinary) or services to be provided to a class of shares are
appropriate and amend this Plan accordingly without the approval of shareholders
of any class. Except as set forth in the Fund's prospectus, shares may be
exchanged only for shares of the same class of another Pioneer mutual fund.
ARTICLE I. CLASS A SHARES
Class A Shares are sold at net asset value and subject to the initial
sales charge schedule or contingent deferred sales charge ("CDSC") and minimum
purchase requirements as set forth in the Fund's prospectus. Class A Shares
shall be entitled to the shareholder services set forth from time to time in the
Fund's prospectus with respect to Class A Shares. Class A Shares are subject to
fees calculated as a stated percentage of the net assets attributable to Class A
shares under the Fund's Class A Rule 12b-1 Distribution Plan as set forth in
such Distribution Plan. The Class A Shareholders have exclusive voting rights,
if any, with respect to the Class A Rule 12b-1 Distribution Plan. Transfer
agency fees are allocated to Class A Shares on a per account basis except to the
extent, if any, such an allocation would cause the Fund to fail to satisfy any
requirement necessary to obtain or rely on a private letter ruling from the
Internal Revenue Service ("IRS") relating to the issuance of multiple classes of
shares. Class A shares shall bear the costs and expenses associated with
conducting a shareholder meeting for matters relating to Class A shares.
ARTICLE II. CLASS B SHARES
Class B Shares are sold at net asset value per share without the
imposition of an initial sales charge. However, Class B
<PAGE>
shares redeemed within a specified number of years of purchase will be subject
to a CDSC as set forth in the Fund's prospectus. Class B Shares are sold subject
to the minimum purchase requirements set forth in the Fund's prospectus. Class B
Shares shall be entitled to the shareholder services set forth from time to time
in the Fund's prospectus with respect to Class B Shares. Class B Shares are
subject to fees calculated as a stated percentage of the net assets attributable
to Class B shares under the Class B Rule 12b-1 Distribution Plan as set forth in
such Distribution Plan. The Class B Shareholders of the Fund have exclusive
voting rights, if any, with respect to the Fund's Class B Rule 12b-1
Distribution Plan. Transfer agency fees are allocated to Class B Shares on a per
account basis except to the extent, if any, such an allocation would cause the
Fund to fail to satisfy any requirement necessary to obtain or rely on a private
letter ruling from the IRS relating to the issuance of multiple classes of
shares. Class B shares shall bear the costs and expenses associated with
conducting a shareholder meeting for matters relating to Class B shares.
Class B Shares will automatically convert to Class A Shares of the Fund
at the end of a specified number of years after the initial purchase date of
Class B shares, except as provided in the Fund's prospectus. Such conversion
will occur at the relative net asset value per share of each class without the
imposition of any sales charge, fee or other charge. The conversion of Class B
Shares to Class A Shares may be suspended if it is determined that the
conversion constitutes or is likely to constitute a taxable event under federal
income tax law.
The initial purchase date for Class B shares acquired through (i)
reinvestment of dividends on Class B Shares or (ii) exchange from another
Pioneer mutual fund will be deemed to be the date on which the original Class B
shares were purchased.
ARTICLE III. CLASS C SHARES
Class C Shares are sold at net asset value per share without the
imposition of an initial sales charge. However, Class C shares redeemed within
one year of purchase will be subject to a CDSC as set forth in the Fund's
prospectus. Class C Shares are sold subject to the minimum purchase requirements
set forth in the Fund's prospectus. Class C Shares shall be entitled to the
shareholder services set forth from time to time in the Fund's prospectus with
respect to Class C Shares. Class C Shares are subject to fees calculated as a
stated percentage of the net assets attributable to Class C shares under the
Class C Rule 12b-1 Distribution Plan as set forth in such Distribution Plan. The
Class C Shareholders of the Fund have exclusive voting rights, if any, with
respect to the Fund's Class C Rule 12b-1 Distribution Plan. Transfer agency fees
are allocated to Class C Shares on a
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<PAGE>
per account basis except to the extent, if any, such an allocation would cause
the Fund to fail to satisfy any requirement necessary to obtain or rely on a
private letter ruling from the IRS relating to the issuance of multiple classes
of shares. Class C shares shall bear the costs and expenses associated with
conducting a shareholder meeting for matters relating to Class C shares.
The initial purchase date for Class C shares acquired through (i)
reinvestment of dividends on Class C Shares or (ii) exchange from another
Pioneer mutual fund will be deemed to be the date on which the original Class C
shares were purchased.
ARTICLE IV. APPROVAL BY BOARD OF TRUSTEES
This Plan shall not take effect until it has been approved by the vote
of a majority (or whatever greater percentage may, from time to time, be
required under Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "Act")) of (a) all of the Trustees of the Trust, on behalf of the Fund, and
(b) those of the Trustees who are not "interested persons" of the Trust, as such
term may be from time to time defined under the Act.
ARTICLE V. AMENDMENTS
No material amendment to the Plan shall be effective unless it is
approved by the Board of Trustees in the same manner as is provided for approval
of this Plan in Article IV.
-3-
