PIONEER FUNDS DISTRIBUTOR, INC.
-------------------------------
CONSOLIDATED BALANCE SHEET - SEPTEMBER 30, 1997
-----------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
ASSETS
Cash and temporary investments, at cost
which approximates value . . . . . . . . . . . . . . . . . . . $ 4,759
Investments in marketable securities, at value . . . . . . . . . 6,470
Receivables:
From securities brokers and
dealers for sales of mutual fund shares . . . . . . . . . . 12,232
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,219
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,659
Furniture, equipment and leasehold improvements,
at cost (net of accumulated depreciation
and amortization of $622) . . . . . . . . . . . . . . . . . 489
Dealer advances (net of accumulated amortization of $15,756) . . 40,006
Deferred cost of restricted stock plan . . . . . . . . . . . . . 705
--------
$70,539
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Payable to funds for shares sold . . . . . . . . . . . . . . . . $ 12,212
Accrued expenses and accounts payable . . . . . . . . . . . . . 5,520
Deferred income taxes, net . . . . . . . . . . . . . . . . . . . 16,393
--------
Total liabilities . . . . . . . . . . . . . . . . . . 34,125
--------
STOCKHOLDER'S EQUITY:
Common stock, $0.10 par value
Authorized - 100,000 shares
Issued and outstanding - 100 shares . . . . . . . . . . . . . -
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 111,175
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (74,602)
Cumulative translation adjustment . . . . . . . . . . . . . . . (159)
--------
Total stockholder's equity . . . . . . . . . . . . . . 36,414
--------
$ 70,539
PIONEER FUNDS DISTRIBUTOR, INC.
-------------------------------
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
REVENUES AND OTHER INCOME:
Underwriting commissions . . . . . . . . . . . . . . . . $ 5,151
Distribution and service fees . . . . . . . . . . . . . 9,440
Other income . . . . . . . . . . . . . . . . . . . . . . 1,991
-------
16,582
DISTRIBUTION AND ADMINISTRATIVE EXPENSES:
Sales and marketing . . . . . . . . . . . . . . . . . . 12,652
Salaries and related benefits . . . . . . . . . . . . . 6,281
Amortization of dealer advances . . . . . . . . . . . . 6,828
Other . . . . . . . . . . . . . . . . . . . . . . . . . 5,874
-------
31,635
-------
Loss before benefit for income taxes . . . . . . . . . . (15,053)
-------
BENEFIT (PROVISION) FOR INCOME TAXES:
State . . . . . . . . . . . . . . . . . . . . . . . . . 819
Federal . . . . . . . . . . . . . . . . . . . . . . . . 5,092
Foreign . . . . . . . . . . . . . . . . . . . . . . . . (377)
-------
5,534
-------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . $(9,519)
=======
A R T H U R A N D E R S E N L L P
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Pioneer Funds Distributor, Inc.:
We have audited the accompanying consolidated balance sheet of Pioneer
Funds Distributor, Inc. (a Massachusetts corporation and a wholly owned
subsidiary of Pioneering Management Corporation) as of December 31, 1996, and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for the year then ended. These consolidated financial statements
and the schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pioneer Funds
Distributor, Inc. as of December 31, 1996, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The information contained in
Schedules I and II [intentionally omitted] is presented for the purposes of
additional analysis and is not a required part of the consolidated financial
statements, but is supplementary information required by Rule 17a-5 of the
Securities and Exchange Commission. Such information has been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.
/s/ Arthur Andersen LLP
Boston, Massachusetts
February 21, 1997
PIONEER FUNDS DISTRIBUTOR, INC.
-------------------------------
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1996
----------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNT)
ASSETS
Cash and temporary investments, at cost
which approximates value (Note 2) . . . . . . . . . . . . . . . $ 4,217
Investments in marketable securities, at value . . . . . . . . . . 4,958
Receivables:
From securities brokers and
dealers for sales of mutual fund shares . . . . . . . . . . . 9,010
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,301
Due from affiliates, net . . . . . . . . . . . . . . . . . . . . . 267
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,830
Furniture, equipment and leasehold improvements,
at cost (net of accumulated depreciation and
amortization of $1,239) (Note 2) . . . . . . . . . . . . . . . 592
Dealer advances (net of accumulated amortization
of $8,928) (Note 9) . . . . . . . . . . . . . . . . . . . . . . 34,588
Deferred cost of restricted stock plan (Note 5) . . . . . . . . . 501
-------
$59,264
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
Payable to funds for shares sold . . . . . . . . . . . . . . . . . $ 8,996
Accrued expenses and accounts payable . . . . . . . . . . . . . . 4,284
Deferred income taxes, net (Note 4) . . . . . . . . . . . . . . . 13,867
-------
Total liabilities . . . . . . . . . . . . . . . . . . . . . 27,147
COMMITMENTS (NOTE 8)
STOCKHOLDER'S EQUITY:
Common stock, $0.10 par value
Authorized - 100,000 shares
Issued and outstanding - 100 shares . . . . . . . . . . . . . . -
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 97,200
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . (65,083)
-------
Total stockholder's equity . . . . . . . . . . . . . . . . . 32,117
-------
$59,264
=======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
PIONEER FUNDS DISTRIBUTOR, INC.
-------------------------------
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
(DOLLARS IN THOUSANDS)
REVENUES AND OTHER INCOME (NOTE 2):
Underwriting commissions . . . . . . . . . . . . . . . . . . . . $ 6,781
Distribution and service fees . . . . . . . . . . . . . . . . . 7,746
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . 2,348
---------
16,875
DISTRIBUTION AND ADMINISTRATIVE EXPENSES:
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . 16,867
Salaries and related benefits . . . . . . . . . . . . . . . . . 7,735
Amortization of dealer advances . . . . . . . . . . . . . . . . 6,365
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,275
--------
39,242
--------
Loss before benefit for income taxes . . . . . . . . . . . . . . (22,367)
--------
BENEFIT (PROVISION) FOR INCOME TAXES (NOTE 4):
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,042
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,808
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88)
--------
8,762
--------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(13,605)
========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
PIONEER FUNDS DISTRIBUTOR, INC.
-------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
(DOLLARS IN THOUSANDS)
Common Stock
--------------- Total
Shares Paid-in Accumulated Stockholder's
Issued Amount Capital Deficit Equity
------ ------ ------- ------- ------
December 31, 1995 100 --- $71,700 ($51,478) $20,222
Net loss --- --- --- (13,605) (13,605)
Capital
contributions (Note 7) --- --- 25,500 --- 25,500
------ ------ ------- -------- -------
December 31, 1996 100 --- $97,200 ($65,083) $32,117
====== ====== ======= ======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
PIONEER FUNDS DISTRIBUTOR, INC.
-------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(13,605)
--------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 6,737
Unrealized and realized gains on marketable securities, net . . (176)
Restricted stock plan expense . . . . . . . . . . . . . . . . . 199
Changes in operating assets and liabilities:
Receivable from securities brokers and dealers
for sales of mutual fund shares . . . . . . . . . . . . . . . 3,375
Other receivables . . . . . . . . . . . . . . . . . . . . . . . (1,013)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (812)
Dealer advances . . . . . . . . . . . . . . . . . . . . . . . . (23,858)
Payable to funds for shares sold . . . . . . . . . . . . . . . . (3,372)
Accrued expenses and accounts payable . . . . . . . . . . . . . 1,241
Accrued foreign income taxes . . . . . . . . . . . . . . . . . . 16
Deferred cost of restricted stock plan . . . . . . . . . . . . . (276)
Deferred income taxes, net . . . . . . . . . . . . . . . . . . . 6,749
--------
TOTAL ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . (11,190)
--------
NET CASH USED IN OPERATING ACTIVITIES . . . . . . . . . . . . (24,795)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to furniture, equipment and leasehold improvements . . 21
Investment in marketable securities . . . . . . . . . . . . . . (6,167)
Proceeds from sale of marketable securities . . . . . . . . . . 5,667
--------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . (479)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution . . . . . . . . . . . . . . . . . . . . . . 25,500
Due to affiliates, net . . . . . . . . . . . . . . . . . . . . . 2,034
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . . 27,534
--------
NET INCREASE IN CASH AND TEMPORARY INVESTMENTS . . . . . . . . . . 2,260
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF YEAR . . . . . . . 1,957
--------
CASH AND TEMPORARY INVESTMENTS AT END OF YEAR . . . . . . . . . . $ 4,217
========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
NOTE (1) NATURE OF OPERATIONS AND ORGANIZATION
NATURE OF OPERATIONS
Pioneer Funds Distributor, Inc. (the Company [or PFD]) serves as the
principal underwriter of shares of the Pioneer Family of Mutual Funds, utilizing
a large network of independent broker-dealers. In addition, the Company serves
as the exclusive distributor [for] Pioneer [] Variable [] Contracts Trust.
ORGANIZATION
PFD is a wholly owned subsidiary of Pioneering Management Corporation
(PMC). Pioneer Fonds Marketing GmbH (PFM) is a wholly owned subsidiary of PFD
and performs marketing and distributor services in Germany.
NOTE (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles. Consolidated
financial statements prepared in accordance with U.S. generally accepted
accounting principles requires the use of management estimates.
The accompanying consolidated financial statements include the accounts of
the Company and [PFM]. All intercompany balances and transactions between the
Company and its subsidiary have been eliminated in consolidation.
RECOGNITION OF REVENUE
Underwriting commissions earned from the distribution of mutual fund shares
are recorded as income on the trade (execution) date. Distribution fees and
service fees are earned based on 0.75% and 0.25%, respectively, of certain
mutual fund net assets (see Note 9).
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
NOTE (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
VALUATION OF FINANCIAL INSTRUMENTS
The Company considers the liquid nature and ready availability of market
quotations when estimating fair value of financial instruments.
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash and temporary investments consist primarily of cash on deposit in
banks and amounts invested in the Pioneer Money Market Trust (PMMT). Generally,
PMMT invests in securities with remaining lives to maturity of three months or
less.
The Company's net benefit for state and federal income taxes of
approximately $8,850,000 in 1996 is reflected as a reduction of amounts due to
affiliates.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Depreciation and amortization are provided for financial reporting purposes
on a straight-line basis over the following estimated useful lives: furniture
and equipment, 3-5 years; and leasehold improvements, over the term of the
lease, not exceeding 10 years. In the event of retirement or other disposition
of fixed assets, the cost of the assets and the related accumulated depreciation
and amortization amounts are removed from the accounts, and any resulting gains
or losses are reflected in earnings.
NOTE (3) NET CAPITAL
As a broker-dealer, the Company is subject to the Securities and Exchange
Commission's regulations and operating guidelines, which require the Company to
maintain a specified amount of net capital, as defined, and a ratio of aggregate
indebtedness to net capital, as defined, not exceeding 15 to 1. Net capital and
the related ratio of aggregate indebtedness to net capital may fluctuate on a
daily basis. The Company's net capital, as computed under Rule 15c3-1, was
$3,793,302 at December 31, 1996, which exceeded required net capital of $830,909
by $2,962,393. The ratio of aggregate indebtedness to net capital at
December 31, 1996 was 3.29 to 1.
The Company is exempt from the reserve requirements of Rule 15c3-3 since
its broker-dealer transactions are limited to the purchase, sale and redemption
of redeemable securities of registered investment companies. The Company
promptly transmits all customer funds and delivers all securities received in
connection with activities as a broker-dealer, and does not otherwise hold funds
or securities for, or owe money or securities to, customers.
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
NOTE (4) INCOME TAXES
[The Pioneer Group, Inc. (PGI)] files a consolidated federal income tax
return with its direct and indirect subsidiaries, including the Company.
Consolidated income tax benefits (provisions) are allocated among the companies
based on the income taxes that would have been benefited (accrued) had separate
returns been filed for each entity or when subsidiary losses are utilized in
consolidation.
The 1996 overall income tax benefit rate differs from the statutory federal
income tax rate primarily due to the benefit for state income taxes.
The benefit for income taxes, as stated as a percentage of loss before
income taxes, is comprised of the following:
Federal statutory rate 34.0%
Increases (decreases) in tax rate resulting from:
State income tax, net of federal effect 6.3
Foreign income taxes (1.1)
----
Effective tax rate 39.2%
====
The components of deferred income taxes recognized in the accompanying
consolidated balance sheet are comprised of deferred tax assets of approximately
$129,000 and deferred tax liabilities of approximately $13,996,000. The
approximate income tax effect of each type of temporary difference
is as follows:
Dealer advances $(13,810,000)
Other (net) (57,000)
------------
Total deferred income taxes $(13,867,000)
============
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
NOTE (5) STOCK PLANS
PGI has a restricted stock plan (the 1995 Plan) designed to provide
incentives to certain employees who have contributed and are expected to
contribute materially to the success of PGI and its subsidiaries. An aggregate
total of 600,000 shares of PGI common stock may be awarded to participants under
this Plan at a price to be determined by PGI's Board of Directors, generally
$.10 per share. The cost of the 1995 Plan is borne by the entity employing the
participant. Total shares awarded, net of forfeitures, under the 1995 Plan were
76,322 at December 31, 1996. The 1995 Plan expires in January 2000.
PGI's 1990 restricted stock plan (the 1990 Plan) expired in 1995. Total
shares awarded, net of forfeitures, under the 1990 Plan were 745,499 at
December 31, 1996.
The participant's right to resell the awarded stock is restricted to 100%
of the shares awarded during the first two years following the award, 60% during
the third year and 20% less each year thereafter. PGI may repurchase restricted
shares at $.10 per share upon termination of the participant's employment.
In 1996, certain employees of the Company were awarded 11,590 shares of PGI
common stock under the 1995 Plan, with a fair market value on the award date of
approximately $316,000. Total shares awarded to certain employees of the
Company, net of forfeitures, under the 1995 Plan and 1990 Plan were 11,340 and
120,893, respectively, at December 31, 1996.
Awards under these restricted stock plans are compensatory, and
accordingly, the difference between the award price and market price of the
shares under the plan on the award date, less the applicable tax benefit, is
being amortized on a straight-line basis over a five-year period.
Under PGI's 1988 Stock Option Plan (the Option Plan), options may be
granted to key employees of PGI and its subsidiaries. PGI has reserved an
aggregate of 2,400,000 shares for issuance under the Option Plan. Both
incentive stock options intended to qualify under Section 422A of the Internal
Revenue Code of 1986 (incentive stock options) and non-statutory options not
intended to qualify for incentive stock option treatment (non-statutory options)
may be granted under the Option Plan. The Option Plan is administered by the
Board of Directors of PGI (the Board) or a committee of disinterested directors
designated by the Board (the Committee), and unless the Option Plan is
terminated earlier, no option may be granted after August 1, 1998.
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
NOTE (5) STOCK PLANS (CONTINUED)
The option price per share is determined by the Board or the Committee but
(i) in the case of incentive stock options, may not be less than 100% of the
fair market value of such shares on the date of option grant, and (ii) in the
case of non-statutory options, may not be less than 90% of the fair market value
on the date of option grant. Options issuable under the Option Plan become
exercisable, as determined by the Board or the Committee, not to exceed ten
years from the date of grant. During 1996, 17,500 stock options were granted at
an exercise price of $24.25. As of December 31, 1996, non-statutory options to
purchase 367,500 shares of PGI common stock at exercise prices ranging from
$4.188 to $27.50, equal to fair market value at the dates of the grants, were
granted to certain employees of the Company under the Option Plan. Of such
options, 48,000 shares were exercised at $4.188, and 12,000 shares were
forfeited as of December 31, 1996.
On May 4, 1995, PGI adopted the 1995 Employee Stock Purchase Plan (the
"1995 Purchase Plan"), which qualifies as an "Employee Stock Purchase Plan"
within the meaning of Section 423 of the Internal Revenue Code of 1986. An
aggregate total of 500,000 shares of common stock have been authorized for
issuance under the 1995 Purchase Plan, to be implemented through one or more
offerings, each approximately six months in length beginning on the first
business day of each January and July. The price at which shares may be
purchased during each offering will be the lower of (i) 85% of the closing
price of the common stock as reported on the NASDAQ National Market (the
"closing price") on the date that the offering commences or (ii) 85% of the
closing price of the common stock on the date the offering terminates. In 1996,
employees of the Company purchased 6,894 shares under the 1995 Purchase Plan.
The Company has determined based on the analysis and assumptions prepared
by management that the disclosure requirements pursuant to Statement of
Financial Accounting Standards No. 123 (Accounting for Stock-Based Compensation)
are immaterial to these financial statements taken as a whole.
NOTE (6) BENEFIT PLANS
PGI and its subsidiaries have two defined contribution benefit plans for
eligible employees: a retirement benefit plan and a savings and investment plan
(collectively, the Plans) qualified under section 401 of the Internal Revenue
Code. PGI makes contributions to a trustee, on behalf of eligible employees, to
fund both Plans. The Company's expenses under the Plans amounted to
approximately $522,000 in 1996.
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
NOTE (6) BENEFIT PLANS (CONTINUED)
Both of the Company's Plans described above cover all full-time employees
who have met certain age and length-of-service requirements. Regarding the
retirement benefit plan, the Company contributes an amount that would purchase
a certain targeted monthly pension benefit at the participant's normal
retirement date. In connection with the savings and investment plan,
participants may voluntarily contribute up to 10% of their compensation, and the
Company will match this contribution up to 2%.
NOTE (7) RELATED PARTY TRANSACTIONS
Certain officers and/or directors of the Company are partners of Hale and
Dorr, the Company's legal counsel. Amounts paid by the Company for legal
services of Hale and Dorr amounted to approximately $11,000 in 1996.
During 1996, the Company was charged by PGI for office rental, equipment
expense, salaries and other operating expenses. These charges represent
expenses directly attributable to the Company's operations or an allocation of
its proportionate share of these expenses using formulas that management
believes are reasonable.
During 1996, obligations in the amount of $24 million owed by the Company
to PMC were canceled. The forgiveness of debt was accounted for as a capital
contribution in the accompanying consolidated financial statements. PMC also
contributed an additional $1.5 million in cash, which was also accounted for as
a capital contribution.
Included in Other income is approximately $270,000 which the Company
earned from an affiliate, Pioneer Management Ireland Limited, for underwriting
fees on mutual funds.
NOTE (8) COMMITMENTS
In 1992, PGI entered into a 10 year lease agreement. In 1994, PGI entered
into a direct lease agreement for office space rental on an additional floor.
Future minimum payments under these agreements, which are expected to be
allocated to the Company, amount to $469,000 in 1997, $481,000 in 1998, $500,000
in 1999, $513,000 in 2000, $525,000 in 2001 and $321,000, thereafter. These
future minimum rental payments include estimated annual operating expenses of
approximately $218,000.
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
NOTE (9) DEALER ADVANCES
Certain of the Pioneer Family of Mutual Funds maintain a multi-class share
structure, whereby the participating funds offer both the traditional front-end
load shares (Class A shares) and back-end load shares (Class B and Class C
shares). Back-end load shares do not require the investor to pay any sales
charge unless there is a redemption before the expiration of the minimum holding
period which ranges from three to six years in the case of Class B shares and is
one year in the case of Class C shares. However, the Company pays upfront sales
commissions (dealer advances) to broker-dealers ranging from 2% to 4% of the
sales transaction amount on Class B shares and 1% on Class C shares. The
participating Funds pay the Company distribution fees of 0.75% and service
fees of 0.25%, per annum of their net assets invested in Class B and Class C
shares, subject to annual renewal by the participating Fund's Board of
Trustees. In addition, the Company is paid a contingent deferred sales charge
(CDSC) on Class B and C[]shares redeemed within the minimum holding period. The
CDSC is paid based on declining rates ranging from 2% to 4% on the purchases of
Class B shares and 1% for Class C shares.
The Company capitalizes and amortizes Class B share dealer advances for
financial statement purposes over periods which range from three to six years
depending on the participating Fund. The Company capitalizes and amortizes
Class C share dealer advances for financial statement purposes over a twelve
month period. The Company deducts the dealer advances in full for tax purposes
in the year such advances are paid. Distribution and service fees received by
the Company from participating Funds are recorded in income as earned. CDSC
received by the Company from redeeming shareholders reduce unamortized dealer
advances directly.