<PAGE>
PIONEER TAX-FREE INCOME FUND
Dear Shareowner,
June 30 marked the fiscal half-year for Pioneer Tax-Free Income Fund. At the
start of the period, the bond market enjoyed favorable conditions carried over
from 1995, namely low inflation, slow economic growth and favorable interest
rates. Moving into 1996, however, investors became concerned with renewed signs
of economic strength. Volatility picked up, and most quality bonds fell in price
by the end of the six months.
HOW YOUR FUND PERFORMED
Your Fund's performance reflected the overall decline in bond prices late in the
period. For the six months ended June 30, 1996, we report the following results:
- -CLASS A SHARES -- Shareowners received a total of $0.311 per share in daily
dividends, along with a capital gains distribution of $0.0616 per share. On
June 30, the 30-day yield was 4.73%(1), and net asset value stood at $11.84 per
share, versus $12.36 on December 31. The Fund's total return was -1.19% based
on net asset value and -5.62% based on maximum public offering price. Total
return assumes reinvestment of all distributions at net asset value.
- -CLASS B SHARES -- The Fund paid shareowners daily dividends totaling $0.276 per
share, along with a capital gains distribution of $0.0616 per share. On June
30, the 30-day yield was 4.21%(1), and net asset value stood at $11.77 per
share, versus $12.31 six months ago. Your Fund's total return was -1.65%,
assuming shares were held throughout the period, and -5.47% assuming shares
were redeemed on June 30 and the maximum 4% contingent deferred sales charge
was deducted. Total return assumes reinvestment of all distributions.
Pioneer Tax-Free Income Fund introduced CLASS C SHARES to investors on January
31, 1996. Through June 30, they achieved the following results:
- - Shareowners received daily dividends totaling $0.230 per share, and a capital
gains distribution of $0.0616 per share. On June 30, the 30-day yield was
4.22%(1), and net asset value was $11.77 per share, versus $12.32 on January
31. Total return was -2.10% assuming shares were held throughout the
abbreviated period, -3.05% assuming shares were redeemed and the 1% contingent
deferred sales charge deducted on June 30. Total return assumes reinvestment
of all distributions.
By comparison, the unmanaged Lehman Brothers Municipal Bond Index returned
- -0.45% for the six months, and the 239 general municipal bond funds tracked by
Lipper Analytical Services showed an average total return of -1.38%. The
accompanying chart shows your Fund's total returns for longer time periods.
AVERAGE ANNUAL TOTAL RETURNS
(As of June 30, 1996)
<TABLE>
<CAPTION>
Net Asset Public Offering
Class A Shares Value Price*
- -------------- --------- ---------------
<S> <C> <C>
10 Years 8.07% 7.58%
5 Years 7.54 6.54
1 Year 5.48 0.76
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES IF HELD IF REDEEMED**
- -------------- ------- -------------
<S> <C> <C>
Life-of-Fund (4/28/95) 5.20% 1.84%
1 Year 4.54 0.59
</TABLE>
(1) Yield is based on a standard formula prescribed by the Securities and
Exchange Commission.
* 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.
** Reflects deduction of the maximum 4% 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. A portion of income may be subject to state and local
taxes, although the Fund intends to minimize any taxable income. The Fund
currently avoids investments that are subject to the alternative minimum
tax.
<PAGE>
<TABLE>
Because Pioneer Tax-Free Income Fund's income is free from federal taxation, its
yield compared favorably with taxable bond funds on an "after-tax" basis. The
Fund's 4.73% yield on Class A shares, 4.21% yield on Class B shares and 4.22%
yield on Class C shares would be equal to these taxable yields:
<CAPTION>
TAXABLE EQUIVALENT YIELD
1996 -------------------------------------
TAX BRACKET CLASS A CLASS B CLASS C
- ----------- ----------- ----------- -----------
<S> <C> <C> <C>
39.6% 7.83% 6.97% 6.99%
36.0 7.39 6.58 6.59
31.0 6.86 6.10 6.12
</TABLE>
A VOLATILE BOND MARKET
When the period began, the bond market was strong. Continued signs of low
inflation, falling interest rates and modest economic growth contributed to the
feeling that the bond market would generally remain strong moving into the
foreseeable future. This optimistic outlook was reinforced when the Federal
Reserve (the Fed) cut short-term interest rates in January, indicating it was
concerned that the economy might not be growing fast enough. The mood quickly
changed in February, however, when the monthly employment report, one of the
many indicators used to monitor the economy's strength, showed the biggest job
increase in 12 years. Worries about an overheated economy undermined investor
confidence in bonds, driving down bond prices and pushing interest rates higher.
For the most part, the municipal bond market continued to track the taxable bond
market, although municipal bonds as a group slightly outperformed their taxable
counterparts. Nonetheless, low demand offset low supply for much of the period,
as many investors focused their attention on the fast-moving stock market. Of
course, many bonds now are attractively priced, creating the potential for
renewed investor interest and participation. In addition, the stock market's
significant run-up could lead nervous equity investors to move to the bond
market, especially given the heightened volatility that the stock market
recently has begun to experience.
HOW PIONEER MANAGED YOUR INVESTMENT
Pioneer Tax-Free Income Fund's objective is to invest for a high level of
current income exempt from federal income taxes. At the end of the six months,
your Fund's portfolio was diversified among 170 issues from 40 states. Your Fund
has strict quality parameters; on June 30, the average quality of the Fund's
holdings stood at AA as rated by Standard & Poor's Investors Services or its
equivalent. The most significant weighting remained in the highest-rated issues.
These AAA bonds totaled 43% of the portfolio at the end of the period, the same
as six months ago.
The accompanying chart shows the Fund's quality distribution at the period's
end.
PORTFOLIO QUALITY
(As of June 30, 1996)
[PIE CHART]
A 33%
AA 23%
AAA 43%
Short-Term Cash
Equivalents 1%
During the period, your management added to the Fund's longer-term securities.
The Fund's weighting in the 20-plus-year range was 28% on June 30, up from 12%
six months ago. While more sensitive to interest rates than shorter-term issues,
long-term bonds help keep the Fund's income stream competitive. We also
addressed interest rate concerns by maintaining a sizable weighting in short-
and intermediate-term issues. At June 30, over half of the portfolio had an
average life of less than 10 years.
2
<PAGE>
To help minimize the volatility associated with long-term securities, we focused
our buying on premium bonds, since they tend to hold their value better than
"par," or face-value issues. (Although higher yielding, par bonds generally
offer more potential for their prices to fall than for their prices to rise.) In
fact, we sold some par issues during the period, adding "discount" bonds selling
under their face value to complement the premium issues. Combining discount and
premium bonds in the portfolio gives your Fund exposure to a variety of bonds,
which can be especially helpful in an uncertain interest rate environment.
The accompanying chart shows the Fund's maturity structure at the period's end.
PORTFOLIO MATURITY
(As of June 30, 1996)
[PIE CHART]
0-2 Years 7%
2-5 Years 8%
5-7 Years 14%
7-10 Years 24%
10-20 Years 19%
20+ Years 28%
LOOKING AHEAD
The bond market of late has been more volatile than what most investors -- and
your management -- would consider typical. Whether daily turbulence will
continue is uncertain; what is certain is that long-term investing does work to
minimize short-term fluctuations. On a positive note, we think inflation will
remain subdued in the second half of the year. Since February, the economy has
shown sustainable and good growth, but with low inflation. At this point it is
uncertain what action -- if any -- the Fed will take in the coming months. In
this election year, the Fed may be hesitant to act in the absence of evidence of
extreme inflation or economic growth.
For municipal bond investors, the shifting of tax rates remains an open dilemma
- -- and one that most likely will not be settled anytime soon. While this topic
clearly requires monitoring, we have confidence that tax-exempt bonds will
continue to play a unique and significant role for investors and
municipalities.Your management keeps a close eye on potential changes in the tax
system as we work to maintain the Fund's goal of providing attractive income
exempt from federal taxes. We believe our conservative strategy and focus on
high-quality issues will offer shareowners solid long-term performance.
One final note. We are pleased to announce that we are giving semiannual and
annual reports a facelift, including easy-to-find and use graphic summaries.
Your annual report dated December 31, 1996, will reflect these improvements. We
wish to thank all of you who took the time to respond to our questions about
what you want to see in fund reports.
Please read on through the following pages, which provide the Fund's audited
Schedule of Investments and financial statements as of June 30, 1996. 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>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
June 30, 1996
<TABLE>
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT IN TAX-EXEMPT SECURITIES -- 99.4%+
ALABAMA -- 1.7%
$ 8,900,000 AA/Aa Alabama Special Care Facilities Finance Authority Revenue, 5.0%,
2025............................................................... $ 7,565,000
------------
ALASKA - 1.6%
2,330,000 AAA/Aaa Alaska Muni Bond Bank, 7.0%, 2005.................................... $ 2,618,338
5,000,000 AAA/Aaa Alaska State Housing Finance Corp., Series A, 5.875%, 2030........... 4,768,750
------------
$ 7,387,088
------------
ARIZONA -- 0.3%
1,500,000 AAA/Aaa Kyrene School District, 6.0%, 2014................................... $ 1,518,750
------------
COLORADO -- 1.9%
1,450,000 AAA/Aaa Adams County School District #12 General Obligation, Series A, 0%,
2009............................................................... $ 661,563
1,000,000 AA/Aa Colorado Housing Finance Authority, Series C-2, 7.45%, 2017++........ 1,102,500
3,500,000 NR/Aa Colorado Housing Finance Authority, Series A-1, 7.4%, 2028**......... 3,836,875
1,500,000 NR/Aa Colorado Housing Finance Authority, Series B-2, 7.45%, 2027.......... 1,638,750
1,250,000 AA/Aa Colorado Water Resource Power Development, 5.8%, 2012................ 1,267,187
------------
$ 8,506,875
------------
DELAWARE -- 0.8%
1,865,000 AAA/Aaa State of Delaware Economic Development Authority Revenue, 7.3%,
2014............................................................... $ 2,030,519
1,685,000 NR/A1 State of Delaware Housing Authority Revenue, 6.45%, 2013++........... 1,725,019
------------
$ 3,755,538
------------
FLORIDA -- 5.6%
5,000,000 AAA/Aaa Dade County General Obligation, 12.0%, 2001.......................... $ 6,662,500
2,000,000 AAA/Aaa Dade County, 5.125%, 2016............................................ 1,835,000
2,320,000 AAA/Aaa Dade County Water & Sewer System Revenue, 5.5%, 2015................. 2,233,000
3,520,000 AAA/Aaa Florida State Board of Education General Obligation, 5.6%, 2025...... 3,388,000
5,000,000 AA/Aa3 Hillsborough County Industrial Development Authority, 8.0%, 2022..... 5,781,250
4,000,000 AA+/NR Jacksonville Health Facilities Authority Hospital Revenue, 6.75%,
2013............................................................... 4,250,000
1,000,000 AAA/Aaa Panama City Water & Sewer Authority Revenue, 5.625%, 2019............ 970,000
------------
$ 25,119,750
------------
GEORGIA -- 0.8%
2,150,000 AAA/Aaa Appling County Development Authority Revenue, 7.15%, 2021............ $ 2,332,750
1,000,000 A+/A3 Monroe County Development Authority Pollution Control Revenue, 6.8%,
2012............................................................... 1,078,750
------------
$ 3,411,500
------------
IDAHO -- 0.6%
2,500,000 NR/A University of Idaho Revenue, Series B, 6.625%, 2016.................. $ 2,684,375
------------
ILLINOIS -- 10.3%
3,700,000 AA-/Aa3 Chicago Gas Supply Revenue, 8.1%, 2020............................... $ 4,079,250
1,065,000 AAA/Aaa Cicero, Illinois, General Obligation, 6.0%, 2005..................... 1,114,256
2,250,000 NR/A2 Illinois Development Finance Authority, 6.75%, 2016.................. 2,334,375
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
June 30, 1996 (Continued)
<TABLE>
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
ILLINOIS -- (CONTINUED)
$ 2,125,000 AA/Aa1 Illinois Education Facilities Authority Revenue, Northwestern
University, 5.375%, 2021........................................... $ 1,933,750
1,145,000 A+/A1 Illinois Housing Development Authority Revenue Multi-Family Housing,
Series A, 7.0%, Prerefunded, 2023*................................. 1,282,400
9,000,000 A+/A Illinois Metropolitan Pier & Exposition Authority State Tax Revenue,
8.5%, 2006......................................................... 11,115,000
4,100,000 A+/A Illinois Metropolitan Pier & Exposition Authority State Tax Revenue,
6.5%, 2027......................................................... 4,141,000
6,000,000 A+/A1 Illinois State Toll Highway Authortiy Revenue, Series A, 5.75%,
2017............................................................... 5,797,500
8,000,000 AAA/Aaa Illinois State, General Obligation, 5.75%, 2021...................... 7,700,000
7,185,000 AA/Aa2 Will County, Illinois Environmental Revenue Bond, 6.4% 2026.......... 7,247,869
------------
$ 46,745,400
------------
INDIANA -- 3.4%
2,000,000 A+/A1 Fisher Economic Development Water Facilities Revenue, 7.875%, 2019... $ 2,105,000
750,000 A/NR Indiana Bond Bank State Revolving Fund, 6.75%, 2017.................. 795,937
325,000 NR/Aaa Indiana Housing Finance Authority Revenue, Series A, 8.5%, 2012++.... 334,941
1,000,000 NR/Aaa Indiana State Housing Finance Authority, Single Family Mortgage
Revenue, 5.95%, 2013............................................... 985,000
1,890,000 A+/A1 Indiana State Office Building Commission Correctional Facilities
Revenue, 6.4%, 2011................................................ 1,963,237
6,055,000 A+/A1 Indianapolis Economic Development Water Facilities Revenue, 7.875%,
2019............................................................... 6,365,319
1,400,000 A+/NR Indianapolis Local Public Improvement Board Revenue, 6.75%, 2014..... 1,492,750
1,000,000 A+/A Lawrence Township Metropolitan School District Revenue, 6.75%,
2013............................................................... 1,097,500
------------
$ 15,139,684
------------
IOWA -- 0.7%
1,500,000 AAA/Aaa Iowa Finance Authority Revenue Bond, Private College, 5.4%, 2021..... $ 1,387,500
1,000,000 NR/A Iowa Finance Authority Revenue Bond, Correctional Facility Program,
5.5%, 2009......................................................... 971,250
1,000,000 NR/A Iowa Finance Authority Revenue Bond, Correctional Facility Program,
5.55%, 2010........................................................ 970,000
------------
$ 3,328,750
------------
KENTUCKY -- 1.0%
660,000 A/A Kenton County Airport Board Revenue, 8.75%, 2015..................... $ 689,304
1,095,000 AAA/Aaa Kenton County Water District #1, 5.8%, 2015.......................... 1,095,000
2,010,000 AAA/Aaa Kenton County Water District #1, 5.875, 2019......................... 2,015,025
495,000 AA-/A University of Kentucky Community College Building Revenue, Series I,
6.4%, 2011......................................................... 514,800
------------
$ 4,314,129
------------
LOUISIANA -- 0.7%
3,000,000 AAA/Aaa New Orleans Home Mortgage Authority, 6.25%, Prerefunded, 2011*....... $ 3,157,500
------------
MARYLAND -- 0.2%
1,000,000 AAA/Aaa Maryland State Health & Higher Educational Facilities Authority
Revenue, 5.75%, 2026............................................... $ 977,500
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
June 30, 1996 (Continued)
<TABLE>
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS -- 4.9%
$ 1,415,000 A-/A1 Massachusetts Bay Transportation Authority Revenue, Series B, 5.875%,
2014............................................................... $ 1,416,769
4,000,000 A+/A1 Massachusetts Bay Transportation Authority Revenue, Series B, 5.875%,
2019............................................................... 3,960,000
3,000,000 AAA/Aaa Massachusetts State General Obligation, 6.5%, 2007................... 3,292,500
5,000,000 A+/A1 Massachusetts Health & Educational Facilities Authority Revenue,
Boston College, Series K, 5.25%, 2023.............................. 4,506,250
2,000,000 A+/A1 Massachusetts State Turnpike Authority Revenue, Series A, 5.0%,
2020............................................................... 1,742,500
1,000,000 AAA/Aaa South Essex Massachusetts Sewer District, Series B, 6.75%, 2013...... 1,130,000
1,325,000 AAA/Aaa Worcester General Obligation, Series A, 6.15%, 2009.................. 1,387,937
1,440,000 AAA/Aaa Worcester General Obligation, Series A, 6.20%, 2010.................. 1,503,000
1,460,000 AAA/Aaa Worcester General Obligation, Series A, 6.25%, 2011.................. 1,522,050
1,450,000 AAA/Aaa Worcester General Obligation, Series A, 6.3%, 2012................... 1,544,250
------------
$ 22,005,256
------------
MICHIGAN -- 2.3%
5,150,000 AAA/Aaa Detroit, Michigan Water Supply Systems, 5.5%, 2025................... $ 4,898,937
2,000,000 AAA/Aaa Lake Orion Schools General Obligation, 5.5%, 2020.................... 1,887,500
2,175,000 AAA/Aaa Holly Michigan Area School District, 5.625%, 2015.................... 2,120,625
1,500,000 AA/Aa Walled Lake School District General Obligation, Series I, 6.5%,
2003............................................................... 1,576,875
------------
$ 10,483,937
------------
MINNESOTA -- 3.9%
1,290,000 NR/A1 Minnesota State Higher Education Facilities Authority Revenue,
5.625%, 2016....................................................... $ 1,243,238
2,000,000 AA+/Aa Minnesota State Housing Finance Agency, Series H, 6.55%, 2011........ 2,100,000
990,000 AA/A1 Minnesota State Housing Finance Agency, Series A, 6.9%, 2012......... 1,033,312
5,000,000 A/A Northern Municipal Power Agency Revenue, Series A, 7.25%, 2016....... 5,275,000
3,000,000 NR/A Northfield St. Olaf College Revenue, 8.0%, Prerefunded, 1998*........ 3,236,250
4,000,000 AAA/Aaa Spring Lake Park Independent School District #16 General Obligation,
5.25%, 2017........................................................ 3,750,000
1,000,000 AAA/Aaa St. Cloud, Minnesota Hospital Facilities Revenue, 5.0%, 2020......... 878,750
------------
$ 17,516,550
------------
MISSOURI -- 2.4%
1,000,000 NR/NR Carthage Waterworks & Wastewater Treatment System Revenue, 6.5%,
2016............................................................... $ 1,035,000
2,100,000 AAA/Aaa Missouri Environmental Improvement and Energy Resources Authority,
6.05%, 2016........................................................ 2,142,000
2,500,000 AAA/Aaa Poplar Bluff School District, 5.8%, 2011............................. 2,518,750
6,000,000 AAA/Aaa Sikeston, Missouri Electric Revenue, 5.0%, 2022...................... 5,310,000
------------
$ 11,005,750
------------
MONTANA -- 3.8%
1,495,000 AAA/Aaa Forsyth Pollution Control Revenue, Washington Water Power Project,
7.125%, 2013....................................................... $ 1,618,337
2,250,000 AAA/Aaa Forsyth Pollution Control Revenue, Puget Sound Power & Light Project,
7.25%, 2021........................................................ 2,463,750
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
June 30, 1996 (Continued)
<TABLE>
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
MONTANA -- (CONTINUED)
$ 3,000,000 AAA/Aaa Forsyth Pollution Control Revenue, Puget Sound Power & Light Project,
6.8%, 2022......................................................... $ 3,213,750
3,250,000 AAA/Aaa Forsyth Pollution Control Revenue, Puget Sound Power & Light Project,
7.05%, 2021........................................................ 3,530,313
1,060,000 AAA/Aaa Montana State Board of Investments Revenue, Workers Compensation
Program, 6.875%, Prerefunded, 1996*................................ 1,143,475
3,250,000 AAA/Aaa Montana State Board of Investments Revenue, Workers Compensation
Program, 6.875%, 2020.............................................. 3,505,938
1,000,000 AAA/Aaa University of Montana Revenue, Series C, 5.0%, 2014.................. 906,250
1,000,000 AAA/Aaa University of Montana Revenue, Series C, 5.0%, 2017.................. 892,500
------------
$ 17,274,313
------------
NEBRASKA -- 8.1%
7,850,000 A+/A1 Douglas County Hospital Authority Revenue, Catholic Health
Facilities, 7.25%, 2021............................................ $ 8,850,875
6,000,000 AAA/Aaa Douglas County Hospital Authority Revenue, Immanuel Medical Center,
7.0%, 2021......................................................... 6,525,000
5,000,000 NR/A Grand Island Sanitation Sewer Revenue, 6.0%, 2014.................... 5,018,750
7,500,000 A/A Hastings Electric System Revenue, 6.3%, 2019......................... 7,650,000
1,325,000 AAA/Aaa Municipal Energy Agency of Nebraska Revenue, 6.0%, 2008.............. 1,379,656
1,500,000 AAA/Aaa Municipal Energy Agency of Nebraska Revenue, 6.0%, 2017.............. 1,518,750
1,850,000 A+/A1 Nebraska Public Power District Revenue, 6.25%, 2022.................. 1,875,438
890,000 A+/A1 Nebraska Public Power District Revenue, 6.125%, 2015................. 902,237
3,000,000 A+/A1 Nebraska Public Power District Revenue, 5.75%, 2020.................. 2,921,250
------------
$ 36,641,956
------------
NEW HAMPSHIRE -- 0.7%
3,500,000 AA+/Aaa New Hampshire Higher Education Revenue, Dartmouth College, 5.375%,
2023............................................................... $ 3,237,500
------------
NEW JERSEY -- 1.2%
1,000,000 A/A3 New Jersey Economic Development Authority Revenue, Natural Gas
Project, 9.0%, 2017................................................ $ 1,077,500
1,000,000 AA/A1 Rutgers State University Revenue, 6.4%, 2009......................... 1,067,500
2,985,000 AAA/Aaa Rutgers State University Revenue, 8.0%, Prerefunded, 1998*........... 3,238,725
------------
$ 5,383,725
------------
NEW MEXICO -- 1.4%
1,000,000 AAA/A1 Albuquerque Airport Revenue, Series B, 8.75%, 2019................... $ 1,046,750
1,500,000 AA/Aa Bernalillo County Gross Receipts Tax Revenue, 5.75%, 2021**.......... 1,470,000
2,035,000 AA/Aa New Mexico Mortgage Finance Authority, 6.85%, 2012 ++................ 2,111,313
600,000 AA/A1 University of New Mexico Revenue, 5.0%, 2018......................... 531,000
1,200,000 AAA/Aaa University of New Mexico Revenue, 6.55%, 2025........................ 1,306,500
------------
$ 6,465,563
------------
NORTH CAROLINA -- 4.6%
1,000,000 NR/AAA Buncombe County Sewer District Revenue, 6.75%, Prerefunded, 2002*.... $ 1,112,500
4,500,000 A+/A Buncombe County Sewer District Revenue, 6.75%, Prerefunded, 2002*.... 4,995,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
June 30, 1996 (Continued)
<TABLE>
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA -- (CONTINUED)
$ 2,000,000 AA/Aa Charlotte-Mecklenburg Hospital Authority Revenue, 6.25%, 2020........ $ 2,045,000
1,250,000 AA/Aa1 Charlotte Law Enforcement Project, 6.1%, 2015........................ 1,267,188
1,250,000 AAA/Aaa Cumberland County Civic Center Project, Series A, 6.4%, 2024......... 1,301,562
1,000,000 AAA/Aaa Franklin County Certificate Participation, 6.625%, 2014.............. 1,061,250
9,480,000 A/A2 Martin County Pollution Control Authority Revenue, 5.65%, 2023....... 8,792,700
------------
$ 20,575,200
------------
OHIO -- 1.0%
500,000 A+/A1 Ohio State Building Authority Revenue, 6.0%, 2008.................... $ 525,625
4,000,000 AAA/Aaa Ohio State Turnpike Revenue, 5.5%, 2026.............................. 3,815,000
------------
$ 4,340,625
------------
OKLAHOMA -- 2.9%
2,520,000 AAA/Aaa Grand River Dam Authority Revenue, 6.25%, 2011....................... $ 2,721,600
4,700,000 AAA/Aaa McGee Creek Authority Water Revenue, 6.0%, 2023...................... 4,776,375
5,300,000 A+/A1 Oklahoma State Turnpike Authority Revenue, 6.125%, 2020.............. 5,399,375
------------
$ 12,897,350
------------
OREGON -- 1.6%
2,000,000 AAA/Aaa Oregon Metropolitan Service District Revenue, Headquarters Building,
6.75%, Prerefunded, 1999*.......................................... $ 2,167,500
1,000,000 A+/A1 Portland Sewer System, Series A, 6.2%, 2012.......................... 1,037,500
550,000 AAA/Aaa Portland International Airport Revenue, 6.75%, 2015.................. 592,625
3,250,000 A/A1 Washington County Unified Sewerage Agency Revenue, 6.2%, 2010........ 3,396,250
------------
$ 7,193,875
------------
PENNSYLVANIA -- 1.6%
2,500,000 AAA/Aaa Bucks County Water & Sewer Authority, 0%, 2012....................... $ 978,125
1,000,000 AAA/Aaa Pennsylvania Intergovernment Cooperative Authority, 5.5%, 2016....... 960,000
1,000,000 AA/Aa Pennsylvania Housing Finance Agency Revenue, 8.1%, 2010.............. 1,026,250
2,500,000 A/A1 Pennsylvania State Turnpike Commission Revenue, 6.5%, 2013........... 2,618,750
1,500,000 AAA/Aaa University of Pittsburgh Capital Project, Series A, 6.125%, 2021..... 1,535,625
------------
$ 7,118,750
------------
RHODE ISLAND -- 0.2%
1,000,000 AA+/Aa Rhode Island Housing & Mortgage Finance, 6.75%, 2017................. $ 1,035,000
------------
SOUTH CAROLINA -- 4.5%
2,400,000 A/A1 Fairfield County Pollution Control, 6.5%, 2014....................... $ 2,532,000
3,000,000 A-/A1 Richland County Solid Waste Disposal Facilities Revenue, Union Camp
Project, 7.45%, 2021............................................... 3,236,250
1,400,000 AAA/Aaa Richland Lexington Airport District Revenue, 5.6%, 2017.............. 1,428,000
1,000,000 AAA/Aaa South Carolina Grand Strand Water & Sewer Authority, 6.375%, 2012.... 1,081,250
10,000,000 AAA/Aaa South Carolina Public Service Authority Revenue, 6.625%, Prerefunded,
2002*.............................................................. 11,062,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
June 30, 1996 (Continued)
<TABLE>
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA -- (CONTINUED)
$ 750,000 NR/Aa South Carolina State Housing Finance & Development Authority Revenue,
6.2%, 2009......................................................... $ 771,563
------------
$ 20,111,563
------------
SOUTH DAKOTA -- 1.4%
2,000,000 AAA/Aaa South Dakota State Health and Educational Facility Authority, 5.5%,
2021............................................................... $ 1,865,000
1,255,000 AAA/Aaa South Dakota State Lease Revenue, Series B, 8.0%, 2005............... 1,477,762
2,730,000 A+/NR South Dakota Student Loan Finance Corporation Revenue, 7.7%, 2007.... 2,890,388
------------
$ 6,233,150
------------
TENNESSEE -- 0.6%
1,300,000 AAA/Aaa Madison Suburban Utility District, 5.0%, 2019........................ $ 1,171,625
1,565,000 AAA/Aaa Metropolitan Government Nashville & Davidson County, Water & Sewer,
6.0%, 2007......................................................... 1,656,944
------------
$ 2,828,569
------------
TEXAS -- 6.7%
2,145,000 NR/AAA Castleberry Independent School District General Obligation, 5.7%,
2021............................................................... $ 2,096,737
2,310,000 AAA/Aaa Clear Creek Independent School District General Obligation, 0%,
2010............................................................... 1,030,838
5,000,000 AAA/Aaa Clear Creek Independent School District General Obligation, 0%,
2011............................................................... 2,087,500
1,305,000 NR/Aaa Comal Independent School District General Obligation, 7.0%, 2007..... 1,443,656
2,500,000 AAA/Aaa Conroe Independent School District General Obligation, 5.5%, 2021.... 2,356,250
5,000,000 AAA/Aaa Harris County General Obligation, 0%, 2007........................... 2,718,750
2,050,000 NR/Aaa Keller Independent School District General Obligation, 0%, 2010...... 909,687
1,000,000 AAA/Aaa Sabine River Authority, Texas Pollution Control Revenue, 6.1%,
2018............................................................... 1,006,250
3,000,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0%, 2007............ 1,668,750
5,500,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0%, 2008............ 2,866,875
2,750,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0%, 2010............ 1,254,687
1,400,000 AA/Aa Texas State General Obligation, 6.125%, 2008......................... 1,454,250
8,750,000 AAA/Aa1 Texas State Turnpike Authority, 5.25%, 2023.......................... 8,017,188
1,755,000 AA/Aa Texas State Water Development, 5.4%, 2021............................ 1,618,988
------------
$ 30,530,406
------------
UTAH -- 5.1%
2,500,000 AAA/Aaa St. George Water Revenue, Series A, 5.85%, 2020...................... $ 2,465,625
430,000 AA/Aa Utah Housing Finance Agency Revenue, 8.625%, 2014++.................. 442,900
820,000 NR/Aa Utah Housing Finance Agency Revenue, 5.95%, 2011++................... 814,875
1,000,000 AA-/Aa Utah Intermountain Power Agency Revenue, 7.50%, 2021................. 1,065,000
1,270,000 AA/Aa Utah Intermountain Power Agency Revenue, 5.0%, 2016.................. 1,122,363
3,010,000 A+/Aa Utah Intermountain Power Agency Revenue, 5.0%, 2018.................. 2,626,225
2,000,000 AA-/Aa Utah Intermountain Power Agency Revenue, 5.0%, 2023.................. 1,732,500
8,940,000 AA-/Aa Utah Intermountain Power Agency Revenue, 7.75%, 2020................. 9,576,975
3,480,000 AA/NR Weber County Municipal Building Authority Revenue, 5.75%, 2019....... 3,306,000
------------
$ 23,152,463
------------
VERMONT -- 0.4%
2,000,000 AAA/Aaa Vermont Muni Bond Bank, 5.5%, 2025................................... $ 1,857,500
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
June 30, 1996 (Continued)
<TABLE>
<CAPTION>
S & P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
VIRGINIA -- 2.6%
$ 2,700,000 AA/Aa Chesapeake Water & Sewer General Obligation, Series A, 5.375%,
2014............................................................... $ 2,571,750
1,750,000 A+/A1 Chesapeake Water & Sewer System Revenue, 6.5%, 2012.................. 1,844,062
4,685,000 A+/A1 Chesapeake Water & Sewer System Revenue, 6.4%, 2017.................. 4,843,119
1,750,000 NR/A Harrisonburg Redevelopment & Housing Authority Revenue, 6.5%, 2014... 1,800,313
1,000,000 AA/Aa Virginia State Resources Authority Water System Revenue, 5.25%,
2013............................................................... 932,500
------------
$ 11,991,744
------------
WASHINGTON -- 4.7%
2,000,000 A+/A1 Chelan County Public Utility District Revenue, 9.3%, 2062............ $ 2,137,500
2,820,000 AAA/Aaa Clark County Public Utility District #1 Water Revenue, 5.5%, 2015.... 2,707,200
1,000,000 NR/Aaa King & Snohomish Counties, Washington School District, 5.75%, 2014... 967,500
5,000,000 NR/A Lynnwood Water & Sewer Revenue, 7.7%, 2013........................... 5,312,500
2,250,000 AAA/Aaa Snohomish County School District General Obligation, 5.7%, 2011...... 2,275,312
3,500,000 A+/Aaa Snohomish County Public Utility District Revenue, 6.8%, Prerefunded,
2020*.............................................................. 3,893,750
4,000,000 AA/Aa Washington State Public Power Supply System Revenue, Series A, 6.5%,
2015............................................................... 4,110,000
------------
$ 21,403,762
------------
WEST VIRGINIA -- 0.2%
1,000,000 A+/Aa1 West Virginia State Housing Development, 7.05%, 2024................. $ 1,046,250
------------
WISCONSIN -- 0.8%
3,600,000 AA+/Aa2 Milwaukee Local District Heating Facility Revenue, 6.85%, 2021....... $ 3,825,000
------------
WYOMING -- 2.2%
9,750,000 AA/Aa Wyoming Community Development Authority Revenue, Series B, 7.05%,
2033............................................................... $ 10,091,250
------------
TOTAL INVESTMENT IN TAX-EXEMPT SECURITIES (Cost $432,085,593)........ $449,858,846
------------
TAX-EXEMPT MONEY MARKET MUTUAL FUND -- 0.6%
2,836,728 Lehman Brothers Munifund (Cost $2,836,728)........................... $ 2,836,728
------------
TOTAL INVESTMENT IN SECURITIES -- 100% (Cost $434,922,321)(a)........ $452,695,574
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
June 30, 1996 (Continued)
<TABLE>
+ The concentration of investments by type of obligation / market sector is
as follows:
<S> <C>
General Obligation 11.7%
Escrowed in U.S. Government Securities 9.8%
Revenue Bonds:
Education Revenue 7.8%
Water & Sewer Revenue 14.2%
Hospital Revenue 5.4%
Housing Revenue 7.8%
Pollution Control Revenue 7.6%
Power Revenue 15.7%
Transportation Revenue 8.5%
Other 11.5%
</TABLE>
++ A portion of the bond was called on July 1, 1996.
* Prerefunded bonds have been collaterized 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 security.
NR Not rated.
<TABLE>
<S> <C> <C>
(a) At June 30, 1996, the net unrealized gain on investments based on cost for federal income tax
purposes of $434,922,321 was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of value over
tax cost........................................................................................ $19,429,624
Aggregate gross unrealized loss for all investments in which there is an excess of tax cost over
value........................................................................................... (1,656,371)
-----------
Net unrealized gain............................................................................. $17,773,253
===========
Purchase and sales of securities (excluding temporary cash investments) for the six months ended June
30, 1996 aggregated $118,268,426 and $124,407,315, respectively.
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
PIONEER TAX-FREE INCOME FUND
BALANCE SHEET
June 30, 1996
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (including temporary cash investment of $2,836,728) (Cost
$434,922,321; see Schedule of Investments and Note 1)............................................ $452,695,574
Receivables --
Investment securities sold....................................................................... 8,826,548
Fund shares sold................................................................................. 74,505
Interest......................................................................................... 7,985,785
Other.............................................................................................. 39,368
------------
Total assets............................................................................... $469,621,780
------------
LIABILITIES:
Payables --
Investment securities purchased.................................................................. $ 14,482,497
Fund shares repurchased.......................................................................... 273,304
Dividends........................................................................................ 517,464
Due to Bank...................................................................................... 43,531
Due to affiliates (Notes 2, 3 and 4)............................................................... 512,960
Accrued expenses................................................................................... 55,948
------------
Total liabilities.......................................................................... $ 15,885,704
------------
NET ASSETS:
Paid-in capital (Note 1)........................................................................... $432,277,572
Accumulated undistributed net investment income (Note 1)........................................... 45,451
Accumulated undistributed net realized gain on investments (Note 1)................................ 3,639,800
Net unrealized gain on investments (Note 1)........................................................ 17,773,253
------------
Total net assets........................................................................... $453,736,076
============
NET ASSET VALUE PER SHARE:
Class A -- (based on $450,195,428 / 38,008,393 shares of beneficial interest outstanding --
unlimited number of shares authorized)........................................................... $ 11.84
============
Class B -- (based on $3,272,776 / 277,966 shares of beneficial interest outstanding -- unlimited
number of shares authorized)..................................................................... $ 11.77
============
Class C -- (based on $267,872 / 22,751 shares of beneficial interest outstanding -- unlimited
number of shares authorized)..................................................................... $ 11.77
============
MAXIMUM OFFERING PRICE:
Class A.......................................................................................... $ 12.40
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
PIONEER TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME (NOTE 1):
Interest......................................................................................... $ 14,038,956
------------
EXPENSES:
Management fees (Note 2)......................................................................... $ 1,101,023
Distribution fees (Note 4)
Class A........................................................................................ 569,618
Class B........................................................................................ 13,333
Class C........................................................................................ 887
Transfer agent fees (Note 3)
Class A........................................................................................ 294,993
Class B........................................................................................ 1,970
Class C........................................................................................ 228
Registration fees................................................................................ 38,550
Professional fees................................................................................ 21,710
Accounting (Note 2).............................................................................. 47,125
Custodian fees................................................................................... 30,636
Printing......................................................................................... 21,350
Fees and expenses of nonaffiliated trustees...................................................... 4,771
Miscellaneous.................................................................................... 16,724
------------
Total expenses................................................................................. $ 2,162,918
Less fees paid indirectly (Note 5)............................................................. (47,509)
------------
Net expenses................................................................................... $ 2,115,409
------------
Net investment income...................................................................... $ 11,923,547
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments (Note 1)........................................................ $ 3,645,093
Change in net unrealized gain on investments..................................................... (21,141,315)
------------
Net loss on investments........................................................................ $(17,496,222)
------------
Net decrease in net assets resulting from operations....................................... $ (5,572,675)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
PIONEER TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
---------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................................... $ 11,923,547 $ 25,189,202
Net realized gain on investments................................................ 3,645,093 6,422,224
Change in net unrealized gain on investments.................................... (21,141,315) 40,976,623
------------- ------------
Net increase (decrease) in net assets resulting from operations............... $ (5,572,675) $ 72,588,049
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A ($0.31 and $0.64 per share, respectively)............................. $(11,893,565) $(25,080,462)
Class B ($0.28 and $0.34 per share, respectively)............................. (61,414) (26,969)
Class C ($0.22 and $0.00 per share, respectively)............................. (3,847) --
In excess of net investment income
Class B ($0.00 and $0.00 per share, respectively)............................. (795) --
Class C ($0.01 and $0.00 per share, respectively)............................. (246) --
From net realized gain on investments
Class A ($0.06 and $0.09 per share, respectively)............................. (2,333,765) (3,347,799)
Class B ($0.06 and $0.09 per share, respectively)............................. (16,609) (13,668)
Class C ($0.06 and $0.00 per share, respectively)............................. (1,389) --
------------ ------------
Decrease in net assets resulting from distributions to shareholders............. $(14,311,630) $(28,468,898)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares................................................ $ 18,167,265 $ 28,103,875
Net asset value of shares issued to shareholders in reinvestment of
distributions................................................................. 10,629,172 21,206,358
Cost of shares repurchased...................................................... (33,828,529) (67,438,178)
------------ -----------
Net decrease in net assets resulting from fund share transactions........... $ (5,032,092) $(18,127,945)
------------ ------------
Net increase (decrease) in net assets........................................ $(24,916,397) $ 25,991,206
NET ASSETS:
Beginning of period............................................................. 478,652,473 452,661,267
------------ ------------
End of period (including accumulated undistributed net investment income of
$45,451 and $81,771, respectively)............................................ $453,736,076 $478,652,473
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
PIONEER TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold............................................ 1,353,646 $ 16,307,798 2,167,447 $ 25,951,665
Shares issued to shareholders in reinvestment of
distributions........................................ 883,078 10,562,742 1,760,794 21,173,125
Less shares repurchased................................ (2,787,860) (33,494,370) (5,649,088) (67,282,382)
---------- ------------ ---------- ------------
Net decrease........................................... (551,136) $ (6,623,830) (1,720,847) $(20,157,592)
========== ============ ========== ============
CLASS B*
Shares sold............................................ 132,950 $ 1,589,666 178,241 $ 2,152,210
Shares issued to shareholders in reinvestment of
distributions........................................ 5,129 60,948 2,730 33,233
Less shares repurchased................................ (28,230) (334,159) (12,854) (155,796)
---------- ------------ ---------- ------------
Net increase........................................... 109,849 $ 1,316,455 168,117 $ 2,029,647
========== ============ ========== ============
CLASS C**
Shares sold............................................ 22,287 $ 269,801
Shares issued to shareholders in reinvestment of
distributions........................................ 464 5,482
Less shares repurchased................................ -- --
---------- ------------
Net increase........................................... 22,751 $ 275,283
========== ============
<FN>
*Class B shares were first publicly offered on April 28, 1995.
**Class C shares were first publicly offered on January 31, 1996.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
PIONEER TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS -- SELECTED DATA FOR A SHARE OUTSTANDING
For the Periods Presented
<TABLE>
<CAPTION>
Six Months For the Years Ended December 31,
Ended -----------------------------------------
June 30, 1996 1995 1994 1993(a) 1992
---------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
Net asset value, beginning of period............................... $ 12.36 $ 11.24 $ 12.68 $ 12.08 $ 11.99
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income............................................ $ 0.31 $ 0.64 $ 0.64 $ 0.67 $ 0.71
Net realized and unrealized gain (loss) on investments........... (0.46) 1.21 (1.44) 0.87 0.31
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations............ $ (0.15) $ 1.85 $ (0.80) $ 1.54 $ 1.02
Distribution to shareholders from:
Net investment income............................................ (0.31) (0.64) (0.64) (0.67) (0.71)
Net realized gain................................................ (0.06) (0.09) 0.00 (0.27) (0.22)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value......................... $ (0.52) $ 1.12 $ (1.44) $ 0.60 $ 0.09
-------- -------- -------- -------- --------
Net asset value, end of period..................................... $ 11.84 $ 12.36 $ 11.24 $ 12.68 $ 12.08
======== ======== ======== ======== ========
Total return*...................................................... (1.19%) 16.84% (6.38%) 12.98% 8.73%
Ratio of net expenses to average net assets........................ 0.93%**+ 0.91%+ 0.91% 0.86% 0.87%
Ratio of net investment income to average net assets............... 5.16%**+ 5.37%+ 5.37% 5.37% 5.80%
Portfolio turnover rate............................................ 52%** 35% 55% 58% 62%
Net assets, end of period (in thousands)........................... $450,195 $476,584 $452,661 $532,491 $466,586
Ratios assuming reduction for fees paid indirectly:
Net expenses.................................................. 0.91%** 0.89%
Net investment income......................................... 5.18%** 5.39%
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Net asset value, beginning of period.............................. $ 11.52 $ 11.47 $ 11.17 $ 10.70 $ 11.69 $ 10.81
-------- -------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income........................................... $ 0.74 $ 0.76 $ 0.79 $ 0.80 $ 0.80 $ 0.86
Net realized and unrealized gain (loss) on investments.......... 0.65 0.06 0.31 0.47 (0.98) 1.52
-------- -------- -------- -------- -------- --------
Net increase (decrease) from investment operations........... $ 1.39 $ 0.82 $ 1.10 $ 1.27 $ (0.18) $ 2.38
Distribution to shareholders from:
Net investment income........................................... (0.74) (0.76) (0.80) (0.80) (0.81) (0.86)
Net realized gain............................................... (0.18) (0.01) -- -- -- (0.64)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value........................ $ 0.47 $ 0.05 $ 0.30 $ 0.47 $ (0.99) $ 0.88
-------- -------- -------- -------- -------- --------
Net asset value, end of period.................................... $ 11.99 $ 11.52 $ 11.47 $ 11.17 $ 10.70 $ 11.69
======== ======== ======== ======== ======== ========
Total return*..................................................... 12.49% 7.40% 10.12% 12.25% (1.56%) 22.67%
Ratio of net expenses to average net assets....................... 0.87% 0.78% 0.63% 0.64% 0.63% 0.61%
Ratio of net investment income to average net assets.............. 6.26% 6.69% 6.96% 7.26% 7.24% 7.30%
Portfolio turnover rate........................................... 56% 40% 54% 73% 89% 153%
Net assets, end of period (in thousands).......................... $408,990 $362,887 $357,388 $324,116 $307,266 $307,266
Ratios assuming reduction for fees paid indirectly:
Net expenses.................................................
Net investment income........................................
</TABLE>
<TABLE>
<CAPTION>
April
28,
Six Months 1995 to
Ended December
June 30, 1996 31, 1995
------------- --------
<S> <C> <C>
CLASS B
Net asset value, beginning of period............................... $12.31 $11.81
------ ------
Increase (decrease) from investment operations:
Net investment income............................................ $ 0.27 $ 0.35
Net realized and unrealized gain (loss) on investments........... (0.47) 0.58
------ ------
Net increase (decrease) from investment operations............ $(0.20) $ 0.93
Distribution to shareholders:
From net investment income....................................... (0.28) (0.34)
From net realized gain........................................... (0.06) (0.09)
------ ------
Net increase (decrease) in net asset value......................... $(0.54) $ 0.50
------ ------
Net asset value, end of period..................................... $11.77 $12.31
====== ======
Total return*...................................................... (1.65%) 7.94%
Ratio of net expenses to average net assets........................ 1.69%**+ 1.72%**+
Ratio of net investment income to average net assets............... 4.39%**+ 4.38%**+
Portfolio turnover rate............................................ 52%** 35%
Net assets, end of period (in thousands)........................... $3,273 $2,069
Ratios assuming reduction for fees paid indirectly:
Net expenses.................................................. 1.65%** 1.65%**
Net investment income......................................... 4.43%** 4.45%**
<FN>
+ 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 charge.
Total return would be reduced if sales charges were taken into account.
** Annualized.
(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.
</FN>
</TABLE>
16
<PAGE>
PIONEER TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS -- SELECTED DATA FOR A SHARE OUTSTANDING
For the Periods Presented (Continued)
<TABLE>
<CAPTION>
January 31, 1996
to
June 30, 1996
----------------
<S> <C>
CLASS C***
Net asset value, beginning of period........................................ $12.32
------
Increase (decrease) from investment operations:
Net investment income..................................................... $ 0.22
Net realized and unrealized loss on investments .......................... (0.48)
------
Net decrease from investment operations................................ $(0.26)
Distribution to shareholders:
From net investment income................................................ (0.22)
In excess of net investment income........................................ (0.01)
From net realized gains................................................... (0.06)
------
Net increase (decrease) in net asset value.................................. $(0.55)
------
Net asset value, end of period.............................................. $11.77
======
Total return*............................................................... (2.10%)
Ratio of net expenses to average net assets................................. 1.79%**+
Ratio of net investment income to average net assets........................ 4.26%**+
Portfolio turnover rate..................................................... 52%**
Net assets, end of period (in thousands).................................... $ 268
Ratios assuming reduction for fees paid indirectly:
Net expenses........................................................... 1.74%**
Net investment income.................................................. 4.31%**
<FN>
+ 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 charge.
Total return would be reduced if sales charges were taken into account.
** Annualized.
*** Class C shares were first publicly offered on January 31, 1996.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
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 Fund offers three classes of shares -- Class A, Class B and Class C
shares. Class C shares were first publicly offered on January 31, 1996. The
shares of Class A, Class B and Class C represent an interest in the same
portfolio of investments of the Fund and have equal rights to voting,
redemptions, dividends and liquidations, 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,
Class B and Class C 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 with a corresponding increase in
the cost basis of the security. Temporary cash investments are valued at
amortized cost. 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.
C. Fund Shares -- The Fund records sales and repurchases of shares on trade
date. 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 $48,842 in
underwriting commissions on the sale of fund shares during the six months ended
June 30, 1996. The Fund declares as daily dividends substantially all of its net
18
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Continued)
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, Class B and Class C shares bear different transfer agent
and distribution fees.
D. Class Allocations -- Distribution expenses are calculated based on the
average daily net asset value attributable to Class A, Class B and Class C
shares of the Fund, respectively. Shareholders of each class share all expenses
and fees paid to the transfer agent, Pioneering Services Corporation (PSC), for
their services, which are allocated based on the number of accounts in each
class and the ratable allocation of related out-of-pocket expense (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.
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 $165,487 and $6,382 in
management and accounting fees, respectively, payable to PMC at June 30, 1996.
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 $53,338 in transfer agent fees payable to PSC at June 30, 1996.
4. The Fund adopted a Plan of Distribution for each Class of shares (Class A
Plan, Class B Plan and Class C Plan) in accordance with Rule 12b-1 of the
Investment Company Act of 1940. Pursuant to Class A Plan, the Fund pays PFD a
service fee of up to 0.25% of the Fund's average daily net assets in
reimbursement of its actual expenditures to finance activities primarily
intended to result in the sale of Class A shares. Pursuant to Class B Plan and
Class C Plan, the Fund pays PFD 1.00% of the average daily net assets
attributable to each class of shares. The fee consists of a 0.25% service fee
and a 0.75% distribution fee paid as compensation for personal services and/or
account maintenance services or distribution services with regard to Class B and
Class C shares. Included in due to affiliates is $287,753 in distribution fees
payable to PFD at June 30, 1996.
In addition, redemptions of each class of shares may be subject to a
contingent deferred sales charge (CDSC). A CDSC of 1.00% may be imposed on
certain net asset value purchases of Class A shares that are redeemed within one
year of purchase. Class B shares that are redeemed within six years of purchase
are subject to a CDSC at declining rates beginning at 4.0%, based on the lower
of cost or market value of shares being redeemed. Redemptions of Class C shares
within one year of purchase are subject to a CDSC of 1.00%. Proceeds from the
CDSC are paid to PFD. For the six months ended June 30, 1996, CDSCs in the
amount of $3,856 were 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 six months ended June 30, 1996,
the Fund's expenses were reduced by $47,509 under such arrangements.
19
<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 June 30, 1996, and the
related statement of operations for the period then ended, and statements of
changes in net assets for the periods presented and financial highlights for the
periods ended June 30, 1996, December 31, 1995 and December 31, 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 June
30, 1996 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 June 30, 1996, the results of its operations
for the period then ended, and the changes in its net assets for the periods
presented, and financial highlights for the periods ended June 30, 1996,
December 31, 1995 and December 31, 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 1, 1996
20
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
60 State Street
Boston, Massachusetts 02109
<S> <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
MARK L. WINTER MARGUERITE A. PIRET
Vice President DAVID D. TRIPPLE
WILLIAM H. KEOUGH STEPHEN K. WEST
Treasurer JOHN WINTHROP
JOSEPH P. BARRI
Secretary
INVESTMENT ADVISER LEGAL COUNSEL
PIONEERING MANAGEMENT HALE AND DORR
CORPORATION
PRINCIPAL UNDERWRITER SHAREHOLDER
SERVICES AND
PIONEER FUNDS TRANSFER AGENT
DISTRIBUTOR, INC.
PIONEERING SERVICES
CUSTODIAN CORPORATION
60 State Street
BROWN BROTHERS Boston, Massachusetts
HARRIMAN & CO. 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
- -----------------------------------------------------------
When distributed to persons who are not shareowners of the
Fund, this report must be accompanied by a current
prospectus, which discusses the objectives, policies and
other information concerning the Fund.
0896-3595
[Copyright]Pioneer Funds Distributor, Inc.
</TABLE>
[LOGO]
Pioneer Tax-Free
Income Fund
SEMIANNUAL REPORT
JUNE 30, 1996
