<PAGE>
PIONEER TAX-FREE INCOME FUND
60 State Street
Boston, Massachusetts 02109
<TABLE>
<S> <C> <C>
OFFICERS TRUSTEES
JOHN F. COGAN, JR. JOHN F. COGAN, JR.
Chairman and President RICHARD H. EGDAHL, M.D.
DAVID D. TRIPPLE MARGARET B. W. GRAHAM
Executive Vice President JOHN W. KENDRICK Pioneer Logo
MARK L. WINTER MARGUERITE A. PIRET
Vice President DAVID D. TRIPPLE
WILLIAM H. KEOUGH STEPHEN K. WEST
Treasurer JOHN WINTHROP
JOSEPH P. BARRI Pioneer Tax-Free
Secretary Income Fund
ANNUAL REPORT
DECEMBER 31, 1995
INVESTMENT ADVISER LEGAL COUNSEL
PIONEERING MANAGEMENT HALE AND DORR
CORPORATION
PRINCIPAL UNDERWRITER SHAREHOLDER
PIONEER FUNDS SERVICES AND
DISTRIBUTOR, INC. TRANSFER AGENT
PIONEERING SERVICES
CUSTODIAN CORPORATION
BROWN BROTHERS 60 State Street
HARRIMAN & CO. Boston, Massachusetts
02109
INDEPENDENT PUBLIC
ACCOUNTANTS
ARTHUR ANDERSEN LLP
- ---------------------------------------------------------------------
Please call Pioneer for information on:
Existing accounts, new accounts, prospectuses,
applications, and service forms................ 1-800-225-6292
Fund yields and prices......................... 1-800-225-4321
Toll-free fax.................................. 1-800-225-4240
Retirement plans............................... 1-800-622-0176
Telecommunications Device for the Deaf (TDD)... 1-800-225-1997
- ---------------------------------------------------------------------
</TABLE>
When distributed to persons who are
not shareowners of the Fund, this
report must be accompanied by an
official prospectus, which discusses
the objectives, policies and other
information concerning the Fund.
0296-3000
[COPYRIGHT] Pioneer Funds Distributor, Inc.
<PAGE>
DEAR SHAREOWNERS,
- --------------------------------------------------------------------------------
Pioneer Tax-Free Income Fund completed its 19th fiscal year on December 31,
1995. A healthy investing environment of low inflation, slow economic growth
and favorable interest rates translated into impressive results for the bond
market throughout the year. Your Fund, too, performed well, providing
shareowners with a positive total return and competitive income stream.
HOW YOUR FUND PERFORMED
For the year ended December 31, 1995, we report the following results:
- - CLASS A SHARES -- The Fund paid shareowners daily dividends totaling $0.643
per share, and a capital gains distribution of $0.0875 per share. On December
31, 1995, the 30-day yield was 4.23%(1). Net asset value stood at $12.36 per
share, versus $11.24 a year ago. The Fund's total return for the year was
16.84% based on net asset value and 11.57% based on maximum public offering
price. Total return assumes the reinvestment of all distributions at net asset
value.
- - CLASS B SHARES -- The Fund paid shareowners daily dividends totaling $0.336
per share, and a capital gains distribution of $0.0875 per share, since its
introduction on April 28, 1995. On December 31, the 30-day yield was 3.70%(1).
Net asset value was $12.31 per share on December 31, versus its opening share
price of $11.81. Your Fund's total return was 7.94% assuming shares were held
throughout the period, and 3.94% assuming shares were redeemed on December 31
and the maximum contingent deferred sales charge of 4.0% was deducted.
In comparison, the Lehman Brothers Municipal Bond Index returned 17.46% for the
one-year period, and the 225 general municipal bond funds tracked by Lipper
Analytical Services gained an average of 16.84%.
Because Pioneer Tax-Free Income Fund's income is free from federal taxation, its
yield compares favorably with taxable bonds on an "after-tax" basis. The Fund's
4.23% yield on Class A shares, and 3.70% yield on Class B shares, would be equal
to these taxable yields:
<TABLE>
<CAPTION>
TAXABLE
EQUIVALENT YIELD
---------------------------
TAX BRACKET CLASS A CLASS B
- ----------- ------- -------
<S> <C> <C>
39.6% 7.00% 6.13%
36.0% 6.61% 5.78%
31.0% 6.13% 5.36%
</TABLE>
AN EXCEPTIONAL YEAR FOR BOND INVESTORS
Performance in the United States bond market was impressive for much of 1995,
making it an especially rewarding year. The stronger results came on the heels
of a tumultuous 1994, when concerns about inflation and the increasing pace of
economic growth caused the Federal Reserve (the Fed) to initiate a series of
hikes in short-term interest rates. This strategy of raising rates, while
triggering a severe decline in bond prices throughout 1994, ultimately proved
successful in 1995 as a number of important indicators pointed to a slower-
growing economy and inflation remained low. Even the Fed's additional increase
in February added enthusiasm to the bond market; investors saw the hike as an
indication of the Fed's resolve to keep inflation low and prevent the economy
from moving forward too quickly. Indeed, signs of a slowing economy began to
surface, sending long-term interest rates lower and creating an optimistic
climate for investing.
To keep the economy from slowing too significantly, the Fed began to lower the
federal funds rate later in the year -- on July 6 and December 19. Investors
again viewed the Fed's actions favorably, further fueling the bond market's
positive momentum. Volatility did exist, however, particularly during the
latter half of the fiscal year, due primarily to the heightening debate about
the federal budget. While events in Washington, DC show promise for a balanced
budget, concerns surfaced about how soon an agreement might be reached,
triggering some temporary declines.
(1)Yield is based on a standard formula prescribed by the Securities and
Exchange Commission.
<PAGE>
- --------------------------------------------------------------------------------
The municipal bond market also performed strongly for the year. Results
generally tracked those of the taxable bond market, although at times
municipals moved at a slower pace due to uncertainty about changes in tax rates
and credits. Of course, periods of underperformance made municipal securities
extremely inexpensive relative to Treasury investments, creating attractive
buying opportunities for investors. This, along with a 10% decline in new
issuance in 1995 versus 1994, helped demand and prices move higher.
HOW PIONEER MANAGED YOUR INVESTMENT
Pioneer Tax-Free Income Fund invests for a high level of current income exempt
from federal income taxes. All portfolio holdings have a rating of A or better;
as of December 31, the average quality rating of the Fund's investments stood
at AA. We increased the Fund's weighting in the highest-rated issues -- AAA --
during the period, to 43% of the portfolio, versus 30% one year ago. This
strategy proved beneficial; the difference narrowed between yields on bonds of
various qualities over the course of the year, which meant that investors were
not adequately rewarded in terms of yield for taking on the additional credit
risk involved with lower-quality issues. At the end of the fiscal year, your
Fund's portfolio was diversified among 173 issues from 40 states.
Throughout the year, your management selected bonds we expect will improve the
overall quality of the portfolio. We looked for issues with solid credit
ratings and focused particularly on high coupons, as opposed to bonds selling
at a deep discount. We sold a number of bonds with call provisions and replaced
them with noncallable investments that issuers cannot redeem, or "call," prior
to maturity or a pre-set date (which deprives investors of future income and
potential gains). Your management also took a conservative strategy in regard
to the Fund's average life, which shortened to 10 years on December 31, from
just under 14 years one year ago. We think the shortened average life makes
sense since it should make the Fund less sensitive to interest rate swings. We
also expect our conservative position will be successful in maintaining the
Fund's share price and income stream in the current economic and interest rate
climate. Of course, in order to keep the Fund's income stream competitive, we
plan to maintain a solid footing in longer-maturity securities.
The accompanying charts show the Fund's maturity structure and quality
distribution at the period's end.
<TABLE>
EFFECTIVE PORTFOLIO MATURITY
(as of December 31, 1995)
<CAPTION>
Years Percent
----- -------
<S> <C>
20+ 12%
10-20 16%
7-10 28%
5- 7 15%
2- 5 19%
0- 2 10%
</TABLE>
<TABLE>
PORTFOLIO QUALITY
(as of December 31, 1995)
<S> <C>
A 33%
AA 23%
AAA 43%
Short-Term
Cash Equivalents 1%
</TABLE>
LOOKING AHEAD
Bond investors will not soon forget the past year. The strong results in 1995
came as a huge relief to those who were in the market in 1994. While the past
two years' extreme
2
<PAGE>
- --------------------------------------------------------------------------------
results -- both negative and positive -- are unusual, they nonetheless
illustrate how investing for the long term can help one ride out market
turbulence.
Moving into 1996, concerns exist about the ability of politicians to put
together and pass a credible, balanced budget. For municipal bond investors, an
additional topic remains the so-called flat tax. While such an initiative may
not be enacted, some shifting of tax rates could occur. Discussions and debate
undoubtedly will remain in the forefront given the election year, although it's
unlikely that any definitive action will be taken on tax reform before
November. Naturally, we will continue to monitor progress on these issues.
Tax reform aside, with slow economic growth expected over the near term, the
overall bond market looks quite healthy to us. We are confident that municipal
bonds will continue to play a significant role for investors, especially given
their recent value and limited supply. We think the Fund's conservative
positioning not only should help minimize the effects of interest rate changes,
but its high-quality holdings should be better able to cope with a weaker
economy than lower-quality investments. We are confident our strategy will
offer shareowners solid long-term performance.
Please read on through the following pages, which provide the Fund's audited
Schedule of Investments and financial statements as of December 31, 1995. If
you have any questions about your investment in Pioneer Tax-Free Income Fund,
contact your investment representative, or call Pioneer at 1-800-225-6292.
Respectfully,
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.
Chairman and President,
Pioneer Tax-Free Income Fund
3
<PAGE>
GROWTH OF A $10,000 INVESTMENT*
<TABLE>
This chart shows the growth of a $10,000 investment made in Pioneer Tax-Free
Income Fund Class A shares at public offering price, compared to the growth of
the Lehman Brothers Municipal Bond Index.
PIONEER TAX-FREE INCOME FUND CLASS A:
AVERAGE ANNUAL TOTAL RETURNS
(AS OF DECEMBER 31, 1995)
<CAPTION>
Class A Shares Net Asset Value Public Offering Price*
-------------- --------------- ----------------------
<S> <C> <C>
Life-of-fund(1/18/77) 6.94% 6.68%
10 Years 9.25 8.75
5 Years 8.61 7.62
1 Year 16.84 11.57
[ Line Graph included ]
Pioneer Tax Free Income Lehman Municipal Bond
Fund A Index
1/1/86 $9,550 $10,000
$10,519 $10,945
12/31/86 $11,714 $11,932
$11,297 $11,889
12/31/87 $11,531 $12,111
$12,174 $12,770
12/31/88 $12,944 $13,342
$13,831 $14,226
12/31/89 $14,254 $14,782
$14,634 $15,194
12/31/90 $15,309 $15,859
$15,901 $16,564
12/31/91 $17,221 $17,784
$17,938 $18,513
12/31/92 $18,724 $19,352
$20,175 $20,728
12/31/93 $21,155 $21,729
$20,065 $20,768
12/31/94 $19,806 $20,606
$21,676 $22,594
12/31/95 $23,140 $24,203
</TABLE>
The Lehman Brothers Municipal Bond Index is an unmanaged measure of
approximately 15,000 municipal bonds. Bonds in the Index have a minimum
credit rating of BBB, were part of at least a $50 million issuance made
within the past five years and have a maturity of at least two years. Index
returns assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees, expenses or sales charges. You cannot invest directly in
the Index.
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the
period and assumes reinvestment of all distributions at net asset value.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than
their original cost.
4
<PAGE>
GROWTH OF A $10,000 INVESTMENT*
<TABLE>
This chart shows the growth of a $10,000 investment made in Pioneer Tax-Free
Income Fund Class B shares, compared to the growth of the Lehman Brothers
Municipal Bond Index.
PIONEER TAX-FREE INCOME FUND CLASS B:
AVERAGE ANNUAL TOTAL RETURNS
(AS OF DECEMBER 31, 1995)
<CAPTION>
Class B Shares If Held If Redeemed*
-------------- ------- ------------
<S> <C> <C>
Life-of-fund(4/28/95) 7.94% 3.94%
[ Line Graph included ]
Pioneer Tax Free Income Lehman Municipal Bond
Fund B Index
4/28/95 $10,000 $10,000
$10,230 $10,319
6/30/95 $10,155 $10,229
$10,198 $10,326
$10,302 $10,457
9/30/95 $10,363 $10,523
$10,501 $10,676
$10,677 $10,853
12/31/95 $10,394 $10,957
</TABLE>
The Lehman Brothers Municipal Bond Index is an unmanaged measure of
approximately 15,000 municipal bonds. Bonds in the Index have a minimum
credit rating of BBB, were part of at least a $50 million issuance made
within the past five years and have a maturity of at least two years. Index
returns assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees, expenses or sales charges. You cannot invest directly in
the Index.
* Reflects deduction of the maximum 4.0% contingent deferred sales charge at
the end of the period and assumes reinvestment of all distributions.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than
their original cost.
5
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
SCHEDULE OF INVESTMENTS
December 31, 1995
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT IN TAX-EXEMPT
SECURITIES -- 99.3%+
ALABAMA -- 0.4%
$2,250,000 AA/Aa Alabama Special Care Facilities
Finance Authority Revenue, 5.0%, 2025..... $ 2,070,000
-----------
ALASKA -- 1.6%
2,330,000 AAA/Aaa Alaska Muni Bond Bank, 7.0%, 2005........... $ 2,702,800
5,000,000 AAA/Aaa Alaska State Housting Finance Corp.,
Series A, 5.875%, 2030.................... 5,118,750
-----------
$ 7,821,550
-----------
ARIZONA -- 1.4%
5,000,000 AA/A1 Arizona State University Revenue,
Series A, 5.5%, 2019...................... $ 5,031,250
1,500,000 AAA/Aaa Kyrene School District, 6.0%, 2014.......... 1,560,000
-----------
$ 6,591,250
-----------
COLORADO -- 0.9%
1,500,000 AAA/Aaa Adams County School District #12
General Obligation, Series A, 0%, 2009.... $ 693,750
1,000,000 NR/Aa Colorado Housing Finance Authority,
Series C-2, 7.45%, 2017................... 1,087,500
1,275,000 AA/Aa Colorado Springs Utilities Revenue,
6.0%, 2020................................ 1,337,156
1,250,000 AA/Aa Colorado Water Resources, 5.8%, 2012........ 1,326,562
-----------
$ 4,444,968
-----------
DELAWARE -- 1.2%
1,590,000 AAA/Aaa# Dover Electric Authority Revenue,
7.0%, Prerefunded, 2000*.................. $ 1,792,725
1,865,000 AAA/Aaa State of Delaware Economic Development
Authority Revenue, 7.3%, 2014............. 2,074,812
1,710,000 NR/A1 State of Delaware Housing Authority
Revenue, 6.45%, 2013++.................... 1,805,063
-----------
$ 5,672,600
-----------
FLORIDA -- 5.0%
5,000,000 AAA/Aaa Dade County General Obligation,
12.0%, 2001............................... $ 6,918,750
2,320,000 AAA/Aaa Dade County Water & Sewer System
Revenue, 5.5%, 2015....................... 2,349,000
2,000,000 AAA/Aaa Hillsborough County Airport Revenue,
5.375%, 2023.............................. 1,942,500
5,000,000 AA/Aa3 Hillsborough County Industrial
Development Authority, 8.0%, 2022......... 6,000,000
4,000,000 AA+/NR Jacksonville Health Facilities
Authority Hospital Revenue, 6.75%, 2013... 4,350,000
2,250,000 AAA/Aaa St. John's River Management District
Land Acquisition Revenue, 5.125%, 2012 ... 2,213,438
-----------
$23,773,688
-----------
GEORGIA -- 1.9%
2,150,000 AAA/Aaa Appling County Development Authority
Revenue, 7.15%, 2021...................... $ 2,399,937
1,000,000 A+/A3 Monroe County Development Authority
Pollution Control Revenue, 6.8%, 2012..... 1,133,750
5,300,000 AAA/Aaa Monroe County Development Authority
Pollution Control Revenue, 6.25%, 2019.... 5,538,500
-----------
$ 9,072,187
-----------
IDAHO -- 0.6%
2,500,000 NR/A University of Idaho Revenue,
Series B, 6.625%, 2016.................... $ 2,765,625
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued)
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
ILLINOIS -- 8.7%
$6,400,000 AA-/Aa2 Bryant Illinois Pollution Control
Revenue, 5.9%, 2023....................... $ 6,600,000
3,700,000 AA-/Aa3 Chicago Gas Supply Revenue, 8.1%, 2020 4,204,125
2,250,000 NR/A2 Illinois Development Finance Authority,
6.75%, 2016............................... 2,410,312
5,125,000 AA/Aa1 Illinois Education Facilities Authority
Revenue, Northwestern University,
5.375%, 2021.............................. 5,118,594
1,145,000 A+/A1 Illinois Housing Development Authority
Revenue Multi-Family Housing,
Series A, 7.0%, Prerefunded, 2021*........ 1,368,275
9,000,000 A+/A Illinois Metropolitan Pier & Exposition
Authority State Tax Revenue,8.5%, 2006.... 11,531,250
4,100,000 A+/A Illinois Metropolitan Pier & Exposition
Authority State Tax Revenue,6.5%, 2027.... 4,330,625
6,000,000 A+/A1 Illinois State Toll Highway Authority
Revenue, Series A, 5.75%, 2017............ 6,075,000
-----------
$41,638,181
-----------
INDIANA -- 3.4%
2,000,000 A+/A1 Fisher Economic Development Water
Facilities Revenue, 7.875%, 2019.......... $ 2,150,000
750,000 A/NR Indiana Bond Bank State Revolving Fund,
6.75%, 2017............................... 827,813
345,000 NR/Aaa Indiana Housing Finance Authority
Revenue, Series A, 8.5%, 2012............. 356,133
1,890,000 A+/A1 Indiana State Office Building
Commission Correctional Facilities
Revenue, 6.4%, 2011....................... 2,017,575
6,055,000 A+/A1 Indianapolis Economic Development Water
Facilities Revenue, 7.875%, 2019.......... 6,486,419
1,400,000 A+/NR Indianapolis Local Public Improvement
Board Revenue, 6.75%, 2014................ 1,578,500
1,000,000 A+/A Lawrence Township Metropolitan School
District Revenue, 6.75%, 2013............. 1,153,750
2,000,000 AAA/Aaa Marion County Convention & Recreational
Facilities Authority Revenue,
5.5%, 2021................................ 1,995,000
-----------
$16,565,190
-----------
IOWA -- 0.4%
1,000,000 NR/A Iowa Finance Authority Revenue,
5.5%, 2009................................ $ 1,051,250
1,000,000 NR/A Iowa Finance Authority Revenue,
5.55%, 2010............................... 1,055,000
-----------
$ 2,106,250
-----------
KENTUCKY -- 1.4%
1,000,000 AA/Aa2 Jefferson County Pollution Control
Revenue, 5.625%, 2019..................... $ 1,008,750
660,000 A/A Kenton County Airport Board Revenue,
8.75%, 2015............................... 704,550
1,095,000 AAA/Aaa Kenton County Water District #1,
5.8%, 2015................................ 1,145,644
2,010,000 AAA/Aaa Kenton County Water District #1,
5.875%, 2019.............................. 2,105,475
1,085,000 AAA/Aaa Louisville & Jefferson County Sewer
District Revenue, Series B,
5.5%, 2023................................ 1,087,712
495,000 AA-/A University of Kentucky Community
College Building Revenue, Series I,
6.4%, 2011................................ 528,413
----------
$6,580,544
----------
LOUISIANA -- 0.7%
3,000,000 AAA/Aaa New Orleans Home Mortgage Authority,
6.25%, Prerefunded, 2011*................. $3,273,750
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued)
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
MASSACHUSETTS -- 4.9%
$1,415,000 A-/A1 Massachusetts Bay Transportation
Authority Revenue, Series B,
5.875%, 2014............................ $ 1,460,987
3,000,000 AAA/Aaa Massachusetts General Obligation,
6.5%, 2007.............................. 3,397,500
5,000,000 A+/A1 Massachusetts Health & Educational
Facilities Authority Revenue,
Boston College, Series K, 5.25%, 2023... 4,887,500
2,000,000 A+/A1 Massachusetts Turnpike Authority
Revenue, Series A, 5.0%, 2020........... 1,875,000
5,000,000 AAA/Aaa Massachusetts Water Resources
Authority Series B, 5.0%, 2025.......... 4,762,500
1,000,000 AAA/Aaa South Essex Massachusetts Sewer
District Series B, 6.75%, 2013.......... 1,120,000
1,325,000 AAA/Aaa Worcester General Obligation,
Series A, 6.15%, 2009................... 1,432,656
1,440,000 AAA/Aaa Worcester General Obligation,
Series A, 6.20%, 2010................... 1,549,800
1,460,000 AAA/Aaa Worcester General Obligation,
Series A, 6.25%, 2011................... 1,571,325
1,450,000 AAA/Aaa Worcester General Obligation,
Series A, 6.3%, 2012.................... 1,560,563
-----------
$23,617,831
-----------
MICHIGAN -- 0.8%
2,000,000 AAA/Aaa Lake Orion Schools General Obligation,
5.5%, 2020.............................. $ 2,010,000
1,500,000 AA/Aa Walled Lake School District General
Obligation, Series I, 6.5%, 2003........ 1,606,875
-----------
$ 3,616,875
-----------
MINNESOTA -- 3.5%
2,000,000 AA+/Aa Minnesota State Housing Finance Agency,
Series H, 6.55%, 2011................... $ 2,157,500
990,000 AA/A1 Minnesota State Housing Finance Agency,
Series A, 6.9%, 2012.................... 1,058,063
5,000,000 A/A Northern Municipal Power Agency
Revenue, Series A, 7.25%, 2016.......... 5,381,250
3,000,000 NR/A Northfield St. Olaf College
Revenue, 8.0%, Prerefunded, 1998*....... 3,296,250
1,000,000 A+/A Southern Municipal Power Agency
Revenue, 5.0%, 2018..................... 933,750
4,000,000 AAA/Aaa Spring Lake Park Independent School
District #16 General Obligation,
5.25%, 2017............................. 3,930,000
-----------
$16,756,813
-----------
MISSOURI -- 0.7%
500,000 AAA/Aaa Missouri Environmental Improvement and
Energy Resources Authority,
6.05%, 2016............................. $ 529,375
2,500,000 AAA/Aaa Poplar Bluff School District, 5.8%,
2011.................................... 2,584,375
-----------
$ 3,113,750
-----------
MONTANA -- 4.1%
1,495,000 AAA/Aaa Forsyth Pollution Control Revenue,
Washington Water Power Project,
7.125%, 2013............................ $ 1,622,075
2,250,000 AAA/Aaa Forsyth Pollution Control Revenue,
Puget Sound Power & Light Project,
7.25%, 2021............................. 2,494,687
3,000,000 AAA/Aaa Forsyth Pollution Control Revenue,
Puget Sound Power & LightProject,
6.8%, 2022.............................. 3,277,500
3,250,000 AAA/Aaa Forsyth Pollution Control Revenue,
Puget Sound Power & Light Project,
7.05%, 2021............................. 3,591,250
1,690,000 AAA/Aaa Montana State Board of Investments
Revenue, Workers Compensation Program,
6.875%, 2020............................ 1,930,825
4,310,000 AAA/Aaa Montana State Board of Investments
Revenue, Workers Compensation Program,
6.875%, 2020............................ 4,746,388
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued)
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
MONTANA -- (CONTINUED)
$1,000,000 AAA/Aaa University of Montana Revenue,
Series C, 5.0%, 2014................... $ 961,250
1,000,000 AAA/Aaa University of Montana Revenue,
Series C, 5.0%, 2017................... 951,250
-----------
$19,575,225
-----------
NEBRASKA -- 8.4%
7,850,000 A+/A1 Douglas County Hospital Authority
Revenue, Catholic Health Facilities,
7.25%, 2021............................ $ 9,086,375
6,000,000 AAA/Aaa Douglas County Hospital Authority
Revenue, Immanuel Medical Center,
7.0%, 2021............................. 6,690,000
5,000,000 NR/A Grand Island Sanitation Sewer Revenue,
6.0%, 2014............................. 5,256,250
7,500,000 A/A Hastings Electric System Revenue,
6.3%, 2019............................. 7,893,750
1,000,000 AA+/Aa Lincoln Electric System Revenue,
5.75%, 2016............................ 1,018,750
1,325,000 AAA/Aaa Municipal Energy Agency of Nebraska
Revenue, 6.0%, 2008.................... 1,432,656
1,500,000 AAA/Aaa Municipal Energy Agency of Nebraska
Revenue, 6.0%, 2017.................... 1,560,000
1,850,000 A+/A1 Nebraska Public Power District
Revenue, 6.25%, 2022................... 1,933,250
890,000 A+/A1 Nebraska Public Power District
Revenue, 6.125%, 2015.................. 932,275
3,935,000 A+/A1 Nebraska Public Power District
Revenue, 5.75%, 2020................... 4,003,862
-----------
$39,807,168
-----------
NEVADA -- 1.7%
2,500,000 AAA/Aaa Clark County Passenger Facility
Revenue, 5.75%, 2023................... $ 2,512,500
3,660,000 AAA/Aaa Lyon County School District
General Obligation, 6.875%, 2015**..... 4,085,475
1,260,000 AAA/Aaa Lyon County School District
General Obligation, 6.8%, 2012**....... 1,409,625
-----------
$ 8,007,600
-----------
NEW HAMPSHIRE -- 1.1%
5,505,000 AA+/Aaa New Hampshire Higher Education Revenue,
Dartmouth College, 5.375%, 2023........ $ 5,449,950
-----------
NEW JERSEY -- 1.2%
1,000,000 A/A3 New Jersey Economic Development
Authority Revenue, Natural Gas Project,
9.0%, 2017............................. $ 1,106,250
1,000,000 AA/A1 Rutgers State University Revenue,
6.4%, 2009............................. 1,091,250
2,985,000 AAA/Aaa Rutgers State University Revenue,
8.0%, Prerefunded, 1998*............... 3,298,425
-----------
$ 5,495,925
-----------
NEW MEXICO -- 2.8%
5,450,000 AAA/NR Albuquerque Water & Sewer System Revenue,
Series A, 6.0%, Prerefunded, 2000*..... $ 5,838,312
1,000,000 AAA/A1 Albuquerque Airport Revenue,
Series B, 8.75%, 2019.................. 1,071,250
2,000,000 A+/A2 Farmington Pollution Control Revenue,
7.2%, 2021............................. 2,207,500
2,180,000 AA/Aa New Mexico Mortgage Finance Authority,
6.85%, 2012++.......................... 2,307,188
600,000 AA/A1 University of New Mexico Revenue,
5.0%, 2018............................. 576,750
1,200,000 AAA/Aaa University of New Mexico Revenue,
6.55%, 2025............................ 1,306,500
-----------
$13,307,500
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued)
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NORTH CAROLINA -- 3.8%
$1,000,000 NR/AAA Buncombe County Sewer District Revenue, 6.75%, Prerefunded, 2002*... $ 1,146,250
4,500,000 A+/A Buncombe County Sewer District Revenue, 6.75%, Prerefunded, 2002*... 5,146,875
2,000,000 AA/Aa Charlotte-Mecklenburg Hospital Authority Revenue, 6.25%, 2020....... 2,090,000
1,250,000 AA/Aa1 Charlotte Law Enforcement Project, 6.1%, 2015....................... 1,340,625
1,250,000 AAA/Aaa Cumberland County Civic Center Project, Series A, 6.4%, 2024........ 1,359,375
1,000,000 AAA/Aaa Franklin County Certificate Participation, 6.625%, 2014............. 1,098,750
5,980,000 A/A2 Martin County Pollution Control Authority Revenue, 5.65%, 2023...... 5,905,250
-----------
$18,087,125
-----------
OHIO -- 0.8%
500,000 A+/A1 Ohio State Building Authority Revenue, 6.0%, 2008................... $ 545,625
2,900,000 AAA/Aaa# Solon School District General Obligation, 7.15%, Prerefunded,
2001*............................................................. 3,364,000
-----------
$ 3,909,625
-----------
OKLAHOMA -- 3.5%
2,520,000 AAA/Aaa Grand River Dam Authority Revenue, 6.25%, 2011...................... $ 2,866,500
4,700,000 AAA/Aaa McGee Creek Authority Water Revenue, 6.0%, 2023..................... 5,158,250
5,300,000 A+/A1 Oklahoma State Turnpike Authority Revenue, 6.125%, 2020............. 5,558,375
2,700,000 AAA/Aaa Sapulpa Municipal Authority Utility Revenue, 7.4%, 2010............. 2,983,500
-----------
$16,566,625
-----------
OREGON -- 1.6%
2,000,000 AAA/Aaa Oregon Metropolitan Service District Revenue Headquarters Building,
6.75%, Prerefunded, 1999*......................................... $ 2,205,000
1,000,000 A+/A1 Portland Sewer System, Series A, 6.2%, 2012......................... 1,083,750
550,000 AAA/Aaa Portland International Airport Revenue, 6.75%, 2015................. 605,000
3,250,000 A/A1 Washington County Unified Sewerage Agency Revenue, 6.2%, 2010....... 3,514,062
-----------
$ 7,407,812
-----------
PENNSYLVANIA -- 1.9%
2,500,000 AAA/Aaa Bucks County Water & Sewer Authority, 0%, 2012...................... $ 1,021,875
1,000,000 AA/Aa Pennsylvania Housing Finance Agency Revenue, 8.1%, 2010............. 1,047,500
2,500,000 AAA/Aaa Pennsylvania State Industrial Development Revenue, 5.5%, 2014....... 2,525,000
2,500,000 A/A1 Pennsylvania State Turnpike Commission Revenue, 6.5%, 2013.......... 2,687,500
1,500,000 AAA/Aaa University of Pittsburgh Capital Project, Series A, 6.125%, 2021.... 1,580,625
-----------
$ 8,862,500
-----------
RHODE ISLAND -- 0.9%
3,000,000 AA/Aa1 Rhode Island Health & Educational Building Corp. Revenue, Brown
University, 6.0%, 2020............................................ $ 3,168,750
1,000,000 AA+/Aa Rhode Island Housing & Mortgage Finance, 6.75%, 2017................ 1,063,750
-----------
$ 4,232,500
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued)
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SOUTH CAROLINA -- 4.5%
$ 2,400,000 A/A1 Fairfield County Pollution Control, 6.5%, 2014...................... $ 2,619,000
2,105,000 AAA/Aaa Hilton Head Island Public Facilities Corp., 5.75%, 2014............. 2,168,150
3,000,000 A-/A1 Richland County Solid Waste Disposal Facilities Revenue, Union Camp
Project, 7.45%, 2021.............................................. 3,307,500
1,000,000 AAA/Aaa South Carolina Grand Strand Water & Sewer Authority, 6.375%, 2012... 1,136,250
10,000,000 AAA/Aaa South Carolina Public Service Authority Revenue, 6.625%,
Prerefunded, 2002*................................................ 11,400,000
750,000 NR/Aa South Carolina State Housing Finance & Development Authority
Revenue, 6.2%, 2009............................................... 794,063
-----------
$21,424,963
-----------
SOUTH DAKOTA -- 3.1%
5,000,000 AA+/Aa1 South Dakota Housing Development Authority, 6.0%, 2012.............. $ 5,093,750
5,000,000 A+/A1 South Dakota State Building Authority Certificate Participation,
Series A, 7.5%, 2016.............................................. 5,251,200
1,255,000 AAA/Aaa South Dakota State Lease Revenue, Series B, 8.0%, 2005.............. 1,531,100
2,730,000 A+/NR South Dakota Student Loan Finance Corporation Revenue, 7.7%, 2007... 2,948,400
-----------
$14,824,450
-----------
TENNESSEE -- 0.3%
1,300,000 AAA/Aaa Madison Suburban Utility District, 5.0%, 2019....................... $ 1,226,875
-----------
TEXAS -- 3.9%
2,310,000 AAA/Aaa Clear Creek Independent School District General Obligation, 0%,
2010.............................................................. $ 1,053,937
5,000,000 AAA/Aaa Clear Creek Independent School District General Obligation, 0%,
2011.............................................................. 2,143,750
1,400,000 AAA/Aa1 Dallas General Obligation, 6.125%, 2008............................. 1,498,000
3,995,000 AAA/Aaa Euless General Obligation, 5.9%, 2027............................... 4,074,900
5,000,000 AAA/Aaa Harris County General Obligation, 0%, 2007.......................... 2,775,000
2,050,000 NR/Aaa Keller Independent School District General Obligation, 0%, 2010..... 927,625
3,000,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0%, 2007........... 1,706,250
5,500,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0%, 2008........... 2,935,625
2,750,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0%, 2010........... 1,302,813
60,000 AA/Aa Texas State General Obligation, 6.6%, 2008.......................... 60,000
-----------
$18,477,900
------------
UTAH -- 4.7%
2,500,000 AAA/Aaa St. George Water Revenue, Series A, 5.85%, 2020..................... $ 2,578,125
460,000 AA/Aa Utah Housing Finance Agency Revenue, 8.625%, 2014++................. 476,460
910,000 NR/Aa Utah Housing Finance Agency Revenue, 5.95%, 2011++.................. 926,400
1,000,000 AA-/Aa Utah Intermountain Power Agency Revenue, 7.5%, 2021................. 1,080,000
1,270,000 AA/Aa Utah Intermountain Power Agency Revenue, 5.0%, 2016................. 1,185,863
3,010,000 A+/Aa Utah Intermountain Power Agency Revenue, 5.0%, 2018................. 2,784,250
8,940,000 AA-/Aa Utah Intermountain Power Agency Revenue, 7.75%, 2020................ 9,789,300
3,480,000 AA/NR Weber County Municipal Building Authority Revenue, 5.75%, 2019...... 3,497,400
-----------
$22,317,798
-----------
VERMONT -- 0.4%
2,000,000 AAA/Aaa Vermont Muni Bond Bank, 5.5%, 2025.................................. $ 1,997,500
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued)
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VIRGINIA -- 4.5%
$2,700,000 AA/Aa Chesapeake Water & Sewer General Obligation, Series A, 5.375%,
2014.............................................................. $ 2,720,250
1,750,000 A+/A1 Chesapeake Water & Sewer System Revenue, 6.5%, 2012................. 1,903,125
4,685,000 A+/A1 Chesapeake Water & Sewer System Revenue, 6.4%, 2017................. 5,036,375
1,750,000 NR/A Harrisonburg Redevelopment & Housing Authority Revenue, 6.5%,
2014.............................................................. 1,848,437
4,485,000 AAA/Aaa Norfolk Water Revenue, 5.9%, 2025................................... 4,658,794
1,180,000 AAA/Aaa Virginia Housing Development Authority, Series D, 5.6%, 2012........ 1,184,425
1,000,000 AA/Aa Virginia State Resources Authority Water System Revenue, 5.25%,
2013.............................................................. 980,000
1,255,000 AA/Aa Virginia State Resources Authority Water & Sewer System Revenue,
5.25%, 2013....................................................... 1,229,900
2,000,000 AA/Aa Virginia State Transportation Board Revenue, U.S. Route 58
Corridor, 5.25%, 2012............................................. 1,995,000
------------
$ 21,556,306
------------
WASHINGTON -- 5.4%
2,000,000 A+/A1 Chelan County Public Utility District Revenue, 9.3%, 2062........... $ 2,187,500
2,820,000 AAA/Aaa Clark County Public Utility District #1 Water Revenue, 5.5%, 2015... 2,841,150
3,235,000 NR/A King County Vashon Island School District General Obligation,
6.65%, 2012....................................................... 3,518,063
1,000,000 AAA/Aaa King & Snohomish County School District #417 Northshore General
Obligation, 5.75%, 2014........................................... 1,015,000
5,000,000 NR/A Lynnwood Water & Sewer Revenue, 7.7%, 2013.......................... 5,450,000
3,500,000 A+/Aaa Snohomish County Public Utility District Revenue,
6.8%, Prerefunded, 2020*.......................................... 4,178,125
2,250,000 AAA/Aaa Snohomish County School District #6 General Obligation, 5.7%,
2011.............................................................. 2,373,750
4,000,000 AA/Aa Washington State Public Power Supply System Revenue, Series A,
6.5%, 2015........................................................ 4,230,000
------------
$ 25,793,588
------------
WEST VIRGINIA -- 0.2%
1,000,000 A+/Aa1 West Virginia State Housing Development, 7.05%, 2024................ $ 1,058,750
------------
WISCONSIN -- 0.8%
3,600,000 AA+/Aa2 Milwaukee Local District Heating Facility Revenue, 6.85%, 2021...... $ 3,933,000
------------
WYOMING -- 2.2%
9,750,000 AA/Aa Wyoming Community Development Authority Revenue, Series B, 7.05%,
2033.............................................................. $ 10,335,000
------------
TOTAL INVESTMENT IN TAX-EXEMPT SECURITIES
(Cost $434,222,169)(a).......................................... $473,136,737
------------
TAX-EXEMPT MONEY MARKET MUTUAL FUND -- 0.7%
3,377,712 Lehman Brothers Munifund (Cost $3,377,712).......................... $ 3,388,530
------------
TOTAL INVESTMENT IN SECURITIES -- 100% (Cost $437,599,881).......... $476,525,267
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued)
+ The concentration of investments by type of obligation / market sector is as follows:
<S> <C>
General Obligation 11.1%
Escrowed in U.S. Government Securities 9.8%
Revenue Bonds:
Education Revenue 8.8%
Water & Sewer Revenue 14.5%
Hospital Revenue 5.1%
Housing Revenue 7.5%
Miscellaneous 13.9%
Pollution Control Revenue 9.0%
Power Revenue 14.7%
Transportation Revenue 5.6%
<FN>
++ A portion of the bond was called on January 2, 1996.
* Prerefunded bonds have been collateralized by U.S. Treasury securities, which are held in escrow and used to
pay principal and interest on the tax-exempt issue and to retire the bonds in full at the earliest refunding
date.
** When-issued securities.
# Represents ratings assigned by the investment adviser.
NR Not rated.
</FN>
</TABLE>
<TABLE>
(a) At December 31, 1995, the net unrealized gain on investments based on cost for federal income tax purposes of
$434,222,169 was as follows:
<S> <C>
Aggregate gross unrealized gain for all investments in which there is an excess of value over
tax cost........................................................................................ $38,922,887
Aggregate gross unrealized loss for all investments in which there is an excess of tax cost over
value........................................................................................... (8,319)
-----------
Net unrealized gain............................................................................. $38,914,568
===========
Purchase and sales of securities (excluding temporary cash investments) for the year ended December 31, 1995
aggregated $161,397,349 and $177,753,081, respectively.
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
BALANCE SHEET
December 31, 1995
<S> <C>
ASSETS:
Investment in securities, at value (including temporary cash investment of $3,388,530)
(Cost $437,599,881; see Schedule of Investments and Note 1)...................................... $476,525,267
Cash............................................................................................... 184,241
Receivables --
Investment securities sold....................................................................... 4,997,054
Trust shares sold................................................................................ 353,211
Interest......................................................................................... 8,260,113
Other.............................................................................................. 46,791
------------
Total assets............................................................................... $490,366,677
------------
LIABILITIES:
Payables --
Investment securities purchased.................................................................. $ 10,372,599
Trust shares repurchased......................................................................... 322,700
Dividends........................................................................................ 556,637
Due to affiliates (Notes 2, 3 and 4)............................................................... 415,821
Accrued expenses................................................................................... 46,447
------------
Total liabilities.......................................................................... $ 11,714,204
------------
NET ASSETS:
Paid-in capital (Note 1)........................................................................... $437,309,664
Accumulated undistributed net investment income (Note 1)........................................... 81,771
Accumulated net realized gain on investments (Note 1).............................................. 2,346,470
Net unrealized gain on investments (Note 1)........................................................ 38,914,568
------------
Total net assets........................................................................... $478,652,473
============
NET ASSET VALUE PER SHARE:
Class A -- (based on $476,583,687 / 38,559,529 shares of beneficial interest outstanding --
unlimited number of shares authorized)........................................................... $ 12.36
============
Class B -- (based on $2,068,786 / 168,117 shares of beneficial interest outstanding --
unlimited number of shares authorized)........................................................... $ 12.31
============
MAXIMUM OFFERING PRICE:
Class A.......................................................................................... $ 12.94
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<S> <C>
INVESTMENT INCOME (NOTE 1):
Interest.......................................................................................... $29,364,669
-----------
EXPENSES:
Management fees (Note 2).......................................................................... $ 2,153,083
Distribution fees (Note 4)
Class A......................................................................................... 1,164,136
Class B......................................................................................... 6,465
Transfer agent fees (Note 3)
Class A......................................................................................... 563,188
Class B......................................................................................... 1,228
Registration fees................................................................................. 15,443
Professional fees................................................................................. 75,080
Accounting (Note 2)............................................................................... 120,610
Custodian fees.................................................................................... 64,953
Printing.......................................................................................... 21,675
Fees and expenses of nonaffiliated trustees....................................................... 32,030
Miscellaneous..................................................................................... 31,829
-----------
Total expenses.................................................................................. $ 4,249,720
Less fees paid indirectly (Note 5).............................................................. (74,253)
-----------
Net expenses.................................................................................... $ 4,175,467
-----------
Net investment income......................................................................... $25,189,202
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments (Note 1)......................................................... $ 6,422,224
Change in net unrealized gain on investments...................................................... 40,976,623
-----------
Net gain on investments......................................................................... $47,398,847
-----------
Net increase in net assets resulting from operations.......................................... $72,588,049
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1995 and 1994
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.......................................................... $ 25,189,202 $ 26,381,175
Net realized gain (loss) on investments........................................ 6,422,224 (714,287)
Change in net unrealized gain (loss) on investments............................ 40,976,623 (59,207,615)
------------ ------------
Net increase (decrease) in net assets resulting from operations.............. $ 72,588,049 $(33,540,727)
------------ ------------
EQUALIZATION:
Net undistributed investment income included in price of shares sold,
net of shares repurchased.................................................... $ -- $ 11,837
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ($0.64 and $0.64 per share, respectively)............................ $(25,080,462) $(26,474,942)
Class B ($0.34 and $0.00 per share, respectively)............................ (26,969) --
In excess of net investment income
Class A ($0.00 and $0.00 per share, respectively)............................ -- (46,964)
From net realized gain on investments
Class A ($0.09 and $0.00 per share, respectively)............................ (3,347,799) (131,360)
Class B ($0.09 and $0.00 per share, respectively)............................ (13,668) --
------------ ------------
Decrease in net assets resulting from distributions to shareholders............ $(28,468,898) $(26,653,266)
------------ ------------
FROM TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares............................................... $ 28,103,875 $ 38,464,474
Net asset value of shares issued to shareholders in reinvestment of
dividends.................................................................... 21,206,358 19,611,787
Cost of shares repurchased..................................................... (67,438,178) (77,723,460)
------------ ------------
Decrease in net assets resulting from trust share transactions................. $(18,127,945) $(19,647,199)
------------ ------------
Net increase (decrease) in net assets.......................................... $ 25,991,206 $(79,829,355)
NET ASSETS:
Beginning of year.............................................................. 452,661,267 532,490,622
------------ ------------
End of year (including accumulated undistributed/(distributions in excess of)
net investment income of $81,771 and $(46,964), respectively)................ $478,652,473 $452,661,267
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
Year Ended Year Ended
December 31, 1995 December 31, 1994
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold............................................ 2,167,447 $ 25,951,665 3,231,068 $ 38,464,474
Shares issued to shareholders in reinvestment
of distributions..................................... 1,760,794 21,173,125 1,674,702 19,611,787
Less shares repurchased................................ (5,649,088) (67,282,382) (6,630,251) (77,723,460)
---------- ------------ ---------- ------------
Net decrease........................................... (1,720,847) $(20,157,592) (1,724,481) $(19,647,199)
========== ============ ========== ============
CLASS B*
Shares sold............................................ 178,241 $ 2,152,210
Shares issued to shareholders in reinvestment
of distributions..................................... 2,730 33,233
Less shares repurchased................................ (12,854) (155,796)
---------- ------------
Net increase........................................... 168,117 $ 2,029,647
========== ============
<FN>
*Class B shares were first publicly offered on April 28, 1995.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
FINANCIAL HIGHLIGHTS -- SELECTED DATA FOR A SHARE OUTSTANDING
For the Periods Presented
<CAPTION>
For the Years Ended December 31
------------------------------------------------------------------------------
1995 1994 1993(a) 1992 1991 1990 1989
------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Net asset value, beginning of year................ $ 11.24 $ 12.68 $ 12.08 $ 11.99 $ 11.52 $ 11.47 $ 11.17
-------- -------- -------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income............................ $ 0.64 $ 0.64 $ 0.67 $ 0.71 $ 0.74 $ 0.76 $ 0.79
Net realized and unrealized gain (loss) on
investments.................................... 1.21 (1.44) 0.87 0.31 0.65 0.06 0.31
-------- -------- -------- -------- -------- -------- --------
Total increase (decrease) from investment
operations.................................... $ 1.85 $ (0.80) $ 1.54 $ 1.02 $ 1.39 $ 0.82 $ 1.10
Distributions to shareholders from:
Net investment income............................ (0.64) (0.64) (0.67) (0.71) (0.74) (0.76) (0.80)
Net realized gain................................ (0.09) 0.00 (0.27) (0.22) (0.18) (0.01) --
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value........ $ 1.12 $ (1.44) $ 0.60 $ 0.09 $ 0.47 $ 0.05 $ 0.30
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of year...................... $ 12.36 $ 11.24 $ 12.68 $ 12.08 $ 11.99 $ 11.52 $ 11.47
======== ======== ======== ======== ======== ======== ========
Total return*..................................... 16.84% (6.38%) 12.98% 8.73% 12.49% 7.40% 10.12%
Ratio of net operating expenses to average net
assets........................................... 0.91%+ 0.91% 0.86% 0.87% 0.87% 0.78% 0.63%
Ratio of net investment income to average net
assets........................................... 5.37%+ 5.37% 5.37% 5.80% 6.26% 6.69% 6.96%
Portfolio turnover rate........................... 35.06% 55% 58% 62% 56% 40% 54%
Net assets, end of year (in thousands)............ $476,584 $452,661 $532,491 $466,586 $408,990 $362,887 $357,388
Ratios assuming reduction for fees paid
indirectly:
Net operating expenses........................... 0.89% -- -- -- -- -- --
Net investment income............................ 5.39% -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended December 31
----------------------------------
1988 1987 1986
------------ -------- --------
<S> <C> <C> <C>
CLASS A
Net asset value, beginning of year................ $ 10.70 $ 11.69 $ 10.81
-------- -------- --------
Increase (decrease) from investment operations:
Net investment income............................ $ 0.80 $ 0.80 $ 0.86
Net realized and unrealized gain (loss) on
investments.................................... 0.47 (0.98) 1.52
-------- -------- --------
Total increase (decrease) from investment
operations.................................... $ 1.27 $ (0.18) $ 2.38
Distributions to shareholders from:
Net investment income............................ (0.80) (0.81) (0.86)
Net realized gain................................ -- -- (0.64)
-------- -------- --------
Net increase (decrease) in net asset value........ $ 0.47 $ (0.99) $ 0.88
-------- -------- --------
Net asset value, end of year...................... $ 11.17 $ 10.70 $ 11.69
======== ======== ========
Total return*..................................... 12.25% (1.56%) 22.67%
Ratio of net operating expenses to average net
assets........................................... 0.64% 0.63% 0.61%
Ratio of net investment income to average net
assets........................................... 7.26% 7.24% 7.30%
Portfolio turnover rate........................... 73% 89% 153%
Net assets, end of year (in thousands)............ $324,116 $307,266 $307,266
Ratios assuming reduction for fees paid
indirectly:
Net operating expenses........................... -- -- --
Net investment income............................ -- -- --
</TABLE>
<TABLE>
<CAPTION>
April 28,
1995 to
December 31,
1995
------------
<S> <C>
CLASS B***
Net asset value, beginning of period............. $ 11.81
Increase from investment operations: --------
Net investment income............................ $ 0.35
Net realized and unrealized gain on
investments.................................... 0.58
--------
Total increase from investment operations...... $ 0.93
Distributions to shareholders from:
Net investment income............................ (0.34)
Net realized gain................................ (0.09)
--------
Net increase in net asset value................... $ 0.50
--------
Net asset value, end of period.................... $ 12.31
========
Total return*..................................... 7.94%
Ratio of net operating expenses to average net
assets........................................... 1.72%**+
Ratio of net investment income to average net
assets........................................... 4.38%**+
Portfolio turnover rate........................... 35.06%
Net assets, end of period (in thousands).......... $ 2,069
Ratios assuming reduction for fees paid
indirectly:
Net operating expenses........................... 1.65%**
Net investment income............................ 4.45%**
<FN>
(a) Prior to the assumption of the management agreement on December 1, 1993 by
Pioneering Management Corporation, the Fund was advised by Mutual of Omaha
Fund Management Company.
+ Ratios assuming no reduction for fees paid indirectly.
* 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 each period and no sales charges.
Total return would be reduced if sales charges were taken into account.
** Annualized.
*** Class B shares were first publicly offered on April 28, 1995.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. Pioneer Tax-Free Income Fund (the Fund) is a Delaware business trust
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The investment objective of the Fund is to seek
as high a level of income exempt from regular federal income tax as possible,
consistent with preservation of capital.
The Board of Trustees has authorized the issuance of two share classes of
the Fund, designated as Class A and Class B shares. Class B shares were first
publicly offered on April 28, 1995. Shares issued and outstanding prior to April
28, 1995 were designated as Class A shares. The shares of each class represent
an interest in the same portfolio of investments of the Fund and have equal
rights to voting, redemptions, dividends and liquidation, except that each class
of shares can bear different transfer agent and distribution fees and have
exclusive voting rights with respect to the distribution plans that have been
adopted by Class A and Class B shareholders, respectively.
The Fund's financial statements have been prepared in conformity with
generally accepted accounting principles that require the management of the Fund
to, among other things, make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies consistently followed by the Fund, which are in conformity with those
generally accepted in the investment company industry:
A. Security Valuation -- Security transactions are recorded on trade date.
Securities are valued based on valuations furnished by an independent pricing
service that utilizes a matrix system. This matrix system reflects such factors
as security prices, yields, maturities and ratings and is supplemented by dealer
and exchange quotations and fair market value information from other sources, as
required. Market discount and premium are accreted or amortized daily on a
straight-line basis. Original issue discount is accreted daily into interest
income on a yield-to-maturity basis. Temporary cash investments are valued at
amortized cost plus accrued interest, which approximates value. Interest income
is recorded on the accrual basis.
Gains and losses on sales of investments are calculated on the "identified
cost" method for both financial reporting and federal income tax purposes. It is
the Fund's practice to first select for sale those securities that have the
highest cost and also qualify for long-term capital gain or loss treatment for
tax purposes.
B. Federal Income Taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income and net realized capital
gains, if any, to its shareholders. Therefore, no federal tax provision is
required.
The characterization of distributions to shareholders for financial
reporting purposes is determined in accordance with federal income tax rules.
Therefore, the source of the Fund's distributions may be shown in the
accompanying financial statements as either from or in excess of net investment
income or net realized gain on investment transactions, or from paid-in capital,
depending on the type of book/tax differences that may exist.
19
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 (CONTINUED)
The Fund has reclassified $46,964 from paid-in capital to accumulated
undistributed net investment income. The reclassification has no impact on the
net asset value of the Fund and is designed to present the Fund's capital
accounts on a tax basis.
C. Trust Shares -- The Fund records sales and repurchases of trust shares on
trade date. Shares are sold and redeemed on a continuous basis at net asset
value per share. Net losses, if any, as a result of cancellations, are absorbed
by Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Fund
and an indirect subsidiary of The Pioneer Group, Inc. (PGI). PFD earned $186,259
in underwriting commissions on the sale of the Fund's trust shares during the
year ended December 31, 1995. The Fund declares as daily dividends substantially
all of its net investment income. All dividends are paid on a monthly basis.
Short-term capital gain distributions, if any, may be declared with the daily
dividends. Dividends paid by the Fund, if any, with respect to each class of
shares are calculated in the same manner, at the same time, on the same day and
in the same amount, except that Class A and Class B shares bear different
transfer agent and distribution fees.
D. Class Allocations -- Distribution fees are calculated based on the
average daily net asset value attributable to Class A and Class B shares of the
Fund, respectively. Shareholders of Class A and Class B share all expenses and
fees paid to the transfer agent, Pioneering Services Corporation (PSC), for
their services, which are allocated based on number of accounts in each class
and the ratable allocation of related out-of-pocket expenses (see Note 3).
Income, common expenses and realized and unrealized gains and losses are
calculated at the Fund level and allocated daily to each class of shares based
on the respective percentage of adjusted net assets at the beginning of the day.
2. Pioneering Management Corporation (PMC), the Fund's investment adviser,
manages the Fund's portfolio, and is a wholly owned subsidiary of PGI.
Management fees are calculated daily at the annual rate of 0.50% of the Fund's
average daily net assets up to $250 million; 0.48% of the next $50 million; and
0.45% of the excess over $300 million.
Prior to December 1, 1995, management fees were calculated at annual rates
of 0.50% of the Fund's average daily net assets up to $100 million; 0.48% of the
next $100 million; 0.46% of the next $100 million; 0.44% of the next $100
million; 0.42% of the next $100 million; and 0.40% of the excess over $500
million.
In addition, under the management agreement, certain other services and
costs, including accounting, regulatory reporting and insurance premiums, are
paid by the Fund. Included in due to affiliates is $37,534 and $18,152 in
management and accounting fees, respectively, payable to PMC at December 31,
1995.
3. PSC, a wholly owned subsidiary of PGI, provides substantially all transfer
agent and shareholder services to the Fund at negotiated rates. Included in due
to affiliates is $54,329 in transfer agent fees payable to PSC at December 31,
1995.
4. The Fund adopted a Plan of Distribution for Class A shares (Class A Plan) and
Class B shares (Class B Plan) in accordance with Rule 12b-1 of the Investment
Company Act of 1940. These plans allow for Class A shares and Class B shares to
reimburse and compensate, respectively, PFD for providing varying levels of
distribution services and other account maintenance services. The Class A Plan
and Class B Plan provide for reimbursement of PFD's distribution services in an
amount up to 0.25% and 0.75%, respectively, of the average daily net assets of
the respective classes of shares. The Fund may also compensate PFD for
additional services in an amount up to 0.25% of the Fund's average daily net
assets attributa-
20
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 (CONTINUED)
ble to Class B shares. Included in due to affiliates is $305,806 in distribution
fees payable to PFD at December 31, 1995.
In addition, Class B shares that are redeemed within six years of purchase
are subject to a contingent deferred sales charge (CDSC) at declining rates
beginning at 4.0% based on the lower of cost or market value of shares being
redeemed. Proceeds from the CDSC are paid to PFD. For the year ended December
31, 1995, CDSC in the amount of $275 was paid to PFD.
5. The Fund has entered into certain expense offset arrangements resulting in a
reduction in the Fund's total expenses. For the year ended December 31, 1995,
the Fund's expenses were reduced by $74,253 under such arrangements.
21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF PIONEER TAX-FREE INCOME FUND:
We have audited the accompanying balance sheet of Pioneer Tax-Free Income
Fund, including the schedule of investments, as of December 31, 1995, and the
related statement of operations for the year then ended, statements of changes
in net assets and financial highlights for the years ended December 31, 1995 and
1994. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for each of the eight years ended December 31, 1993 were audited by
other auditors whose report dated February 22, 1994 expressed an unqualified
opinion.
We conducted our audits 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 and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. 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 that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Tax-Free Income Fund as of December 31, 1995, the results of its
operations for the year then ended, and the changes in its net assets and
financial highlights for the years ended December 31, 1995 and 1994, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 2, 1996
22
<PAGE>
PIONEER TAX-FREE INCOME FUND
<TABLE>
TAX TREATMENT OF DISTRIBUTIONS MADE DURING THE YEAR ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTIONS PER SHARE FROM:
------------------------------------
NET INVESTMENT NET REALIZED
INCOME GAIN
----------------- --------------
CLASS CLASS
PAYMENT DATE A B
------------ ------ ------
<S> <C> <C> <C>
Jan. 31, 1995................................... $0.060 $ -- $ --
Feb. 28, 1995................................... 0.060 -- --
Mar. 31, 1995................................... 0.056 -- --
Apr. 28, 1995................................... 0.054 -- --
May 31, 1995.................................... 0.053 0.042 --
June 30, 1995................................... 0.051 0.041 --
July 31, 1995................................... 0.051 0.041 --
Aug. 31, 1995................................... 0.051 0.041 --
Sept. 29, 1995.................................. 0.051 0.041 --
Oct. 31, 1995................................... 0.051 0.041 --
Nov. 30, 1995................................... 0.051 0.043 --
Dec. 31, 1995................................... 0.054 0.046 0.0875
------ ------ -------
TOTAL....................................... $0.643 $0.336 $0.0875
====== ====== =======
</TABLE>
Of the $0.643 per share distributed by Class A, 99.37% is tax-exempt.
Of the $0.336 per share distributed by Class B, 97.63% is tax-exempt.
For purposes of the dividend exclusion, none of the $0.643 and $0.336 per share
for Class A and Class B, respectively, qualifies for the exclusion.
The Fund hereby designates $4,944,621 as a capital gain dividend for the
purposes of the dividend paid deduction.
PIONEER TAX-FREE INCOME FUND
TRUSTEES' FEES, PRINCIPAL SHAREHOLDERS AND SHARE OWNERSHIP OF TRUSTEES AND
OFFICERS (UNAUDITED)
- --------------------------------------------------------------------------------
The aggregate direct remuneration paid by the Fund to nonaffiliated trustees
and officers during the year ended December 31, 1995 was approximately $25,000,
plus expenses incurred in attending trustees meetings of approximately $6,700.
Fees of trustees who are affiliated with or "interested persons" of Pioneering
Management Corporation and Pioneer Funds Distributor, Inc., investment adviser
and principal underwriter, respectively, of the Fund ($1,000 in 1995) are
reimbursed to the Fund by Pioneering Management Corporation in accordance with
the management agreement with the Fund. At December 31, 1995, the trustees and
officers of the Fund owned beneficially 1,921 Class A shares of the Fund
(approximately 0% of the outstanding Class A shares). The Pioneer Group, Inc.,
the parent company of Pioneering Management Corporation and Pioneer Funds
Distributor, Inc., is a publicly held corporation of which Mr. Cogan, Chairman
and President of the Fund, owned approximately 15% of the outstanding shares of
capital stock at December 31, 1995.
23
