[PIONEER LOGO]
Pioneer
Tax-Free
Income Fund
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ANNUAL REPORT 12/31/97
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<PAGE>
Table of Contents
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Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 20
Notes to Financial Statements 26
Report of Independent Public Accountants 30
Trustees, Officers and Service Providers 31
Programs and Services for Pioneer Shareowners 32
Retirement Programs from Pioneer 34
The Pioneer Family of Mutual Funds 36
<PAGE>
Pioneer Tax-Free Income Fund
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LETTER FROM THE CHAIRMAN 12/31/97
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Dear Shareowner,
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I am pleased to present this report for Pioneer America Income Trust, covering
its fiscal year ended December 31, 1997. On behalf of the Fund's investment
team, I thank you for your interest and this opportunity to comment briefly on
today's investing environment.
Since October, investors have shown increasing demand for U.S. bonds, as the
world's stock markets have been exceptionally volatile. Asian markets plunged in
the face of severe instability in currencies and economic growth. Here in the
United States, the Dow Jones Industrial Average experienced - in the space of
two days - both its biggest one-day point drop and its biggest one-day point
gain. Although it recovered, its pace has since been unsteady. European markets
bounced around, shaken by the drop in Asia and then heartened by the speedy U.S.
rebound. Even Latin American markets were affected, mostly in a chain reaction
from nervous investors.
After consecutive quarters of robust growth in stocks, this fast-paced change
forced individuals and institutions to rethink their investment strategy. Money
has poured into the bond market, driving prices up and yields down - to record
levels in the case of the 30-year U.S. Treasury bond. Many investors have moved
away from stocks and into high-quality U.S. fixed-income securities - like those
held by your Fund - to shelter their portfolio. We have always believed it is
important to allocate assets among both stocks and bonds, and recent market
conditions demonstrate this importance.
I encourage you to read on to learn more about your Fund. Please contact your
investment representative, or us at 1-800-225-6292, if you have questions about
Pioneer Tax-Free Income Fund.
Respectfully,
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.,
Chairman and President
1
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Pioneer Tax-Free Income Fund
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PORTFOLIO SUMMARY 12/31/97
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Portfolio Quality
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(As a percentage of total investment portfolio)
[The following table was a pie chart in the printed materials.]
AAA 50.5%
AA 24.8%
A 24.6%
Short-Term Cash Equivalents 0.1%
Portfolio Maturity
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(Effective life as a percentage of total investment portfolio)
[The following table was a pie chart in the printed materials.]
0-2 Years 1%
2-5 Years 27%
5-7 Years 13%
7-10 Years 31%
10-20 Years 22%
20+ Years 6%
10 Largest Holdings
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(As a percentage of long-term holdings)
1. Illinois Metropolitan Pier & Exposition Authority
State Tax Revenue, 8.5%, 2006 2.77%
2. South Carolina Public Service Authority Revenue, 6.625%,
Prerefunded, 2002 2.69
3. Wyoming Community Development Authority Revenue,
Series B, 7.05%, 2033 2.50
4. Texas State Turnpike Authority, 5.25%, 2023 2.11
5. Hastings Electric System Revenue, 6.3%, 2019 1.93
6. Will County, Illinois Environmental Revenue Bond, 6.4%, 2026 1.88
7. Douglas County Hospital Authority Revenue, Immanuel
Medical Center, 7.0%, 2021 1.61
8. Martin County Pollution Control Authority Revenue, 5.65%, 2023 1.53
9. Walled Lake School District General Obligation,
Series I, 5.5%, 2022 1.42
10. Hillsborough County Industrial Development Authority, 8.0%, 2022 1.40
Fund holdings will vary for other periods.
2
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Pioneer Tax-Free Income Fund
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PERFORMANCE UPDATE 12/31/97 CLASS A SHARES
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Share Prices and Distributions
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Net Asset Value
per Share 12/31/97 12/31/96
$12.17 $11.96
Distributions per Share Income Short-Term Long-Term
(12/31/96 - 12/31/97) Dividends Capital Gains Capital Gains
$0.587 $0.031 $0.209
Investment Returns
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The mountain chart on the right shows the growth of a $10,000 invest ment made
in Pioneer Tax-Free Income Fund at public offering price, compared to the growth
of the Lehman Brothers Municipal Bond Index.
[The following table was a mountain chart in the printed materials.]
Growth of $10,000
Pioneer Tax-Free Lehman Brothers
Income Fund* Municipal Bond
Index
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12/31/87 9,550 10,000
10,724 11,016
12/31/89 11,809 12,205
12,683 13,094
12/31/91 14,267 14,684
15,513 15,979
12/31/93 17,527 17,942
16,409 17,014
12/31/95 19,171 19,984
19,856 20,869
12/31/97 21,631 22,787
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[boxed text]
Average Annual Total Returns
(As of December 31, 1997)
Net Asset Public Offering
Period Value Price*
10 Years 8.52% 8.02%
5 Years 6.88 5.89
1 Year 8.94 4.07
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* Reflects deduction of the maximum 4.5% sales charge at the beginning of
the period and assumes reinvestment of distributions at net asset value.
The Lehman Brothers Municipal Bond Index is an unmanaged measure of approxi
mately 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 are calculated
monthly, assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees, expenses or sales charges. You cannot invest directly in the
Index.
A portion of the Fund's income may be subject to the Alternative Minimum Tax
(AMT).
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.
3
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Pioneer Tax-Free Income Fund
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PERFORMANCE UPDATE 12/31/97 CLASS B SHARES
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Share Prices and Distributions
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Net Asset Value
per Share 12/31/97 12/31/96
$12.09 $11.88
Distributions per Share Income Short-Term Long-Term
(12/31/96 - 12/31/97) Dividends Capital Gains Capital Gains
$0.494 $0.031 $0.209
Investment Returns
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The mountain chart on the right shows the growth of a $10,000 investment made
in Pioneer Tax-Free Income Fund, compared to the growth of the Lehman Brothers
Municipal Bond Index.
[The following table was a mountain chart in the printed materials.]
Growth of $10,000
Pioneer Tax-Free Lehman Brothers
Income Fund* Municipal Bond
Index
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4/30/95 10,000 10,000
6/30/95 10,155 10,229
10,363 10,523
12/31/95 10,794 10,957
10,580 10,825
6/30/96 10,616 10,908
10,858 11,158
12/31/96 11,080 11,443
10,994 11,415
6/30/97 11,368 11,809
11,682 12,164
12/31/97 11,685 12,494
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[boxed text]
Average Annual Total Returns
(As of December 31, 1997)
If If
Period Held Redeemed*
Life-of-Fund 6.99% 5.98%
(4/28/95)
1 Year 8.16 4.16
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* Reflects deduction of the maximum applicable contingent deferred sales
charge (CDSC) at the end of the period and assumes rein vestment of
distributions. The maximum CDSC of 4% declines over six years.
The Lehman Brothers Municipal Bond Index is an unmanaged measure of approxi
mately 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 are calculated
monthly, assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees, expenses or sales charges. You cannot invest directly in the
Index.
A portion of the Fund's income may be subject to the Alternative Minimum Tax
(AMT).
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
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Pioneer Tax-Free Income Fund
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PERFORMANCE UPDATE 12/31/97 CLASS C SHARES
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Share Prices and Distributions
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Net Asset Value
per Share 12/31/97 12/31/96
$12.11 $11.88
Distributions per Share Income Short-Term Long-Term
(12/31/96 - 12/31/97) Dividends Capital Gains Capital Gains
$0.493 $0.031 $0.209
Investment Returns
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The mountain chart on the right shows the growth of a $10,000 investment made
in Pioneer Tax-Free Income Fund, compared to the growth of the Lehman Brothers
Municipal Bond Index.
[The following table was a mountain chart in the printed materials.]
Growth of $10,000
Pioneer Tax-Free Lehman Brothers
Income Fund* Municipal Bond
Index
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1/31/96 10,000 10,000
9,916 9,932
3/31/96 9,766 9,806
9,697 9,778
9,694 9,774
6/30/96 9,791 9,881
9,871 9,970
9,859 9,968
9/30/96 10,006 10,107
10,111 10,221
10,284 10,408
12/31/96 10,219 10,365
10,213 10,384
10,301 10,480
3/31/97 10,148 10,340
10,229 10,426
10,389 10,583
6/30/97 10,493 10,696
10,792 10,992
10,660 10,889
9/30/97 10,792 11,018
10,854 11,089
10,908 11,155
12/31/97 11,070 11,317
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[boxed text]
Average Annual Total Returns
(As of December 31, 1997)
If If
Period Held Redeemed*
Life-of-Fund 5.44% 5.44%
(1/31/96)
1 Year 8.32 8.32
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* Assumes reinvestment of distributions. The 1% contingent deferred sales
charge (CDSC) applies to redemptions made within one year of purchase.
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 are
calculated monthly, assume reinvestment of dividends and, unlike Fund returns,
do not reflect any fees, expenses or sales charges. You cannot invest directly
in the Index.
A portion of the Fund's income may be subject to the Alternative Minimum Tax
(AMT).
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
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Pioneer Tax-Free Income Fund
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PORTFOLIO MANAGEMENT DISCUSSION 12/31/97
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Pioneer Tax-Free Income Fund's 22nd fiscal year came to a close on December 31,
1997. We saw a variety of conditions in 1997: rising interest rates early in the
year were followed by declining rates. Late in the year, trouble overseas
sparked a tremendous rally in U.S. government bonds, and this positive momentum
spilled over into municipal bond markets. When all was said and done, the Fund
posted a solid return, from both price appreciation and steady income.
For this report, we offer a discussion with Mark L. Winter, portfolio manager of
Pioneer Tax-Free Income Fund. He leads the investment team responsible for
handling day-to-day management of your portfolio, and has been managing the Fund
for 11 years.
Q: How did the Fund perform over the past 12 months?
A: Municipal bond prices were strong for much of the year. As measured by the
Lehman Brothers Municipal Bond Index, munis returned 9.19% for the year,
slightly above the 9.11% average total return generated by general
municipal debt funds followed by Lipper Analytical Services. (Lipper is an
independent company that tracks fund performance.)
Your Fund's performance closely followed, with an 8.94% total return for
Class A Shares at net asset value. Importantly, at year-end your Fund
offered a tax-free 30-day yield of 3.94%. This was quite an attractive rate
- equal to a taxable yield of 6.52% for investors in the maximum 39.6% tax
bracket. We are pleased to report these competitive returns, especially
since they were achieved without sacrificing quality or taking on more than
a moderate degree of risk.
Q: What fundamental factors shaped the U.S. bond market this year?
A: Early in the year, all eyes were fixed on the economy. We experienced
substantial economic growth powered by low unemployment and producers
operating near full capacity - the traditional harbingers of inflation. The
Federal Reserve, after months of "hands-off" policing of the economy,
increased the federal funds rate by 0.25 percentage points to 5.50% on
March 25. Bond prices fell both before and after the much anticipated Fed
move.
6
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Pioneer Tax-Free Income Fund
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Although temporarily affected by the Fed's hike, municipal bonds benefited
from several positive trends throughout 1997. Moderate demand for munis was
matched with moderate supply, and with few new issues coming into the
market, prices held fairly steady. Fears of a "flat tax" evaporated,
restoring confidence in municipal bonds. Most importantly, both taxable and
tax-free bond prices prospered as the economy resumed its "Goldilocks"
condition - economic growth at a pace that was "not too hot, not too cold."
Inflationary pressures cooled, and interest rates descended. These prime
conditions gave bond prices a boost and made a vital contribution to
year-end performance.
Q: How did global troubles affect U.S. bonds?
A: In the fourth quarter, financial markets fell apart in Pacific Rim
countries such as South Korea and Indonesia. The effects reached the United
States, where stocks experienced - in the span of two October days - both
their largest point loss and gain. However, the effects were positive for
fixed-income investments, including municipal bonds, as increased
volatility in stock prices caused many investors to allocate more assets to
bonds. A "flight to quality" resulted from the demand for historically
"safer" investments, especially high-quality fixed-income securities. This
mindset spilled over into the U.S. municipal bond market, and helped drive
up prices of securities like those in your Fund.
Q: With all these changes in 1997, how did you position the Fund?
A: We kept the portfolio well diversified; it now has 170 holdings spread over
37 states. We also focused on high-quality issues. At year-end, AAA-rated
securities accounted for 51% of the portfolio, compared to 50% in December
1996. (Ratings are assigned by Standard & Poor's or Moody's Investor
Services; AAA is the highest quality rating these agencies apply to debt
issuers.) The average quality of Fund holdings remained a steady AA, as we
expect it will for the foreseeable future.
7
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Pioneer Tax-Free Income Fund
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PORTFOLIO MANAGEMENT DISCUSSION 12/31/97 (continued)
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We adjusted the maturity of Fund holdings to accommodate the changing
interest rate environment. We increased the portfolio's average effective
maturity in March to capture opportunities for appreciation created by
falling interest rates. But by year-end, the portfolio's mix of long and
short maturities provided an effective average maturity of 8.7 years, down
from 12.6 years at the end of 1996. With interest rates now at historic
lows, this more conservative risk profile should offer a level of
protection if interest rates reverse direction and climb higher.
Our dedication to quality showed in our focus on insured bonds, now 43% of
the portfolio. These securities give the Fund an extra modicum of price
stability because third-party insurers guarantee that interest and
principal payments will be made on time and in full, even if the issuer of
the debt is unable to pay. Of course this guarantee applies to individual
securities, not to the price or yield of Fund shares.
Q: What's ahead for the Fund?
A: We're still optimistic about bonds. For one, demand is helping push prices
higher. As more and more baby boomers approach retirement, we're likely to
see them shift a larger percentage of assets into the historically
lower-risk categories of fixed-income and tax-free investments. And even
after the Taxpayer Relief Act of 1997, we think investors will want to
protect income and investments from taxes.
Clearly, the effects of the Asian crisis are far reaching. We now wait to
see how deep these problems run. They have certainly put a hold on any
further interest rate intervention by the Fed, which we expect to continue
its "wait and see attitude." The U.S. economy continues to move forward at
a steady pace, even with Asia's problems in the background. Inflation still
appears to be contained. All of these factors are prime ingredients for
continued low interest rates. In fact, we could see bond prices move even
higher if rates continue to drop. But no matter which direction interest
rates take, we will continue to focus on quality to help carry your Fund
forward and help provide a solid total return while generating current
income exempt from federal taxes.
8
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Pioneer Tax-Free Income Fund
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SCHEDULE OF INVESTMENTS 12/31/97
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<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
TAX-EXEMPT OBLIGATIONS - 99.9%
Alaska - 0.6%
$ 2,330,000 AAA/Aaa Alaska Muni Bond Bank, 7.0%, 2005 $ 2,715,056
-------------
Arizona - 2.1%
1,500,000 AAA/Aaa Kyrene School District, 6.0%, 2014 $ 1,609,440
1,000,000 AAA/Aaa Maricopa County School District, 7.0%, 2007 1,191,200
1,000,000 AAA/Aaa Maricopa County School District, 7.0%, 2008 1,178,710
2,200,000 AAA/Aaa Tempe School District, 7.0%, 2008 2,672,714
1,900,000 A+/A1 Tucson Water Revenue, 6.5%, 2016 2,056,883
-------------
$ 8,708,947
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Colorado - 3.8%
500,000 AA/Aa Colorado Housing Finance Authority,
Series A-3, 7.0%, 2016 $ 561,130
895,000 AA/Aa Colorado Housing Finance Authority,
Series C-2, 7.45%, 2017 + 1,017,740
3,490,000 NR/Aa Colorado Housing Finance Authority,
Series A-1, 7.4%, 2027 3,944,049
1,500,000 NR/Aa Colorado Housing Finance Authority,
Series B-2, 7.45%, 2027 1,720,425
2,250,000 AAA/Aaa Colorado Public Highway Revenue, 5.0%, 2021 2,200,972
500,000 AAA/Aaa Colorado Housing Finance Authority,
Series C-1, 7.55%, 2027 566,530
1,450,000 AA/Aa Denver Colorado City and County, 5.5%, 2025 1,495,414
3,575,000 AAA/Aaa Douglas County School District Region 1,
7.0%, 2013 4,430,998
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$ 15,937,258
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Delaware - 0.4%
1,635,000 NR/A1 State of Delaware Housing Authority
Revenue, 6.45%, 2013 + $ 1,741,618
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Florida - 3.9%
3,000,000 AAA/Aaa Dade County Water & Sewer Revenue,
5.25%, 2026 $ 3,002,340
5,000,000 AA/Aa3 Hillsborough County Industrial Development
Authority, 8.0%, 2022 5,813,900
4,000,000 AA+/NR Jacksonville Health Facilities Authority
Hospital Revenue, 6.75%, 2013 4,388,120
785,000 AAA/Aaa Manatee County Housing Revenue, 7.2%, 2028 888,008
2,015,000 AAA/NR Pace Property Financial Authority, Hospital
Revenue, 5.375%, 2020 2,043,633
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$ 16,136,001
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
Pioneer Tax-Free Income Fund
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SCHEDULE OF INVESTMENTS 12/31/97 (continued)
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<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Georgia - 0.8%
$ 2,150,000 AAA/Aaa Appling County Development Authority
Revenue, 7.15%, 2021 $ 2,424,490
1,000,000 AAA/Aaa Richmond Water & Sewer Authority Revenue,
5.25%, 2022 1,000,730
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$ 3,425,220
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Illinois - 10.2%
5,000,000 AAA/Aaa Chicago Board of Education, 5.75%, 2027 $ 5,291,900
3,700,000 AA-/Aa3 Chicago Gas Supply Revenue, 8.1%, 2020 4,068,705
2,250,000 NR/A2 Illinois Development Finance Authority,
6.75%, 2016 2,450,250
1,145,000 A+/A1 Illinois Housing Development Authority
Revenue Multi-Family Housing,
7.0%, Prerefunded, 2023* 1,379,118
9,000,000 A+/A Illinois Metropolitan Pier & Exposition
Authority State Tax Revenue, 8.5%, 2006 11,464,650
4,015,000 A+/A Illinois Metropolitan Pier & Exposition
Authority State Tax Revenue, 6.5%, 2027,
Prerefunded, 2003* 4,514,506
5,000,000 AAA/Aaa Illinois State General Obligation, 5.75%, 2021 5,270,450
7,185,000 AA/Aa2 Will County, Illinois Environmental Revenue
Bond, 6.4%, 2026 7,795,222
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$ 42,234,801
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Indiana - 4.2%
1,000,000 AAA/Aaa Goshen School Building Corp., 5.6%, 2016 $ 1,044,580
750,000 A/NR Indiana Bond Bank State Revolving Fund,
6.75%, 2017 851,505
3,500,000 AA3/Aa Indiana Health Facilities Authority, 5.5%,
2016 3,575,740
1,000,000 NR/Aaa Indiana State Housing Finance Authority, Single
Family Mortgage Revenue, 5.95%, 2013 1,044,430
1,890,000 A+/A1 Indiana State Office Building Commission
Correctional Facilities Revenue, 6.4%, 2011 2,049,308
1,400,000 A+/NR Indianapolis Local Public Improvement Board
Revenue, 6.75%, 2014 1,678,880
1,000,000 A+/A Lawrence Township Metropolitan School District
Revenue, 6.75%, 2013 1,184,900
3,200,000 AA-/AA2 Petersburg Indiana Pollution and Control
Revenue, 5.4%, 2017 3,305,824
2,740,000 AAA/NR Sarah Scott Middle School Revenue, 5.75%, 2019 2,898,345
-------------
$ 17,633,512
-------------
</TABLE>
10 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
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<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Iowa - 0.3%
$ 1,000,000 NR/A Iowa Finance Authority Revenue Bond,
Correctional Facility Program, 5.55%, 2010 $ 1,060,460
-------------
Kentucky - 0.9%
1,095,000 AAA/Aaa Kenton County Water District #1, 5.8%, 2015 $ 1,176,610
2,010,000 AAA/Aaa Kenton County Water District #1, 5.875%, 2019 2,157,976
495,000 AA-/A University of Kentucky Community College
Building Revenue, Series I, 6.4%, 2011 536,818
-------------
$ 3,871,404
-------------
Louisiana - 0.8%
3,000,000 AAA/Aaa New Orleans Home Mortgage Authority, 6.25%,
Prerefunded, 2011* $ 3,371,340
-------------
Massachusetts - 7.7%
1,415,000 A-/A1 Massachusetts Bay Transportation Authority
Revenue, Series B, 5.875%, 2014 $ 1,513,710
4,000,000 A+/A1 Massachusetts Bay Transportation Authority
Revenue, Series B, 5.875%, 2019 4,218,280
5,000,000 A+/A1 Massachusetts Health & Educational Facilities
Authority Revenue, Boston College, Series K,
5.25%, 2023 4,923,900
1,205,000 AAA/Aaa Massachusetts Housing Finance Agency,
5.95%, 2018 1,262,491
3,000,000 AAA/Aaa Massachusetts State General Obligation,
6.5%, 2007 3,409,800
250,000 AAA/NR Massachusetts State Health &Educational
Facilities Revenue, 5.0%, 2017 248,182
250,000 AAA/NR Massachusetts State Health &Educational
Facilities Revenue, 5.0%, 2018 247,432
4,390,000 A+/A1 Massachusetts State Turnpike Authority
Revenue, Series A, 5.0%, 2020 4,442,768
2,000,000 A/A Massachusetts Water Resources Revenue,
6.25%, 2010 2,169,880
2,000,000 AAA/Aaa South Essex Massachusetts Sewer District,
Series B, 5.25%, 2018 2,012,740
1,000,000 AAA/Aaa South Essex Massachusetts Sewer District,
Series B, 6.75%, 2013 1,151,660
1,325,000 AAA/Aaa Worcester General Obligation,
Series A, 6.15%, 2009 1,469,186
1,440,000 AAA/Aaa Worcester General Obligation, 6.2%, 2010 1,593,058
</TABLE>
The accompanying notes are an integral part of these financial statements. 11
<PAGE>
Pioneer Tax-Free Income Fund
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SCHEDULE OF INVESTMENTS 12/31/97 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Massachusetts - (continued)
$1,460,000 AAA/Aaa Worcester General Obligation,
Series A, 6.25%, 2011 $ 1,619,666
1,450,000 AAA/Aaa Worcester General Obligation,
Series A, 6.3%, 2012 1,613,024
-------------
$ 31,895,777
-------------
Michigan - 2.9%
1,455,000 AAA/Aaa Grand Rapids Community, 5.375%, 2016 $ 1,489,425
2,175,000 AAA/Aaa Holly Michigan Area School District,
5.625%, 2015 2,276,268
750,000 AAA/Aaa Rockford Public Schools General Obligation,
5.25%, 2022 750,495
5,715,000 AA/Aa Walled Lake School District General
Obligation, Series I, 5.5%, 2022 5,869,819
1,500,000 AAA/Aaa Wayne County Building Authority Capital
Improvement, 5.25%, 2016 1,519,395
-------------
$ 11,905,402
-------------
Minnesota - 1.9%
750,000 NR/A1 Minnesota State Higher Education Facilities
Authority Revenue, 5.625%, 2016 $ 774,772
1,895,000 AA+/Aa Minnesota State Housing Finance Agency,
Series H, 6.55%, 2011 2,026,911
990,000 AA/A1 Minnesota State Housing Finance Agency,
Series A, 6.9%, 2012 1,055,875
1,000,000 AA/Aa3 Minnesota University, Series A, 5.0%, 2010 1,104,390
2,750,000 AAA/Aaa Spring Lake Park Independent School District
#16 General Obligation, 5.25%, 2017 2,769,113
-------------
$ 7,731,061
-------------
Missouri - 2.9%
1,000,000 AAA/Aaa Carthage Waterworks & Wastewater Treatment
System Revenue, 6.5%, 2016 $ 1,111,960
1,010,000 NR/AA Lexington School District Revenue, 5.55%, 2017 1,050,370
2,100,000 AAA/Aaa Missouri Environmental Improvement and
Energy Resources Authority, 6.05%, 2016 2,275,959
2,500,000 AAA/Aaa Poplar Bluff School District, 5.8%, 2011 2,662,625
5,000,000 AAA/Aaa Sikeston, Missouri Electric Revenue, 5.0%, 2022 4,903,050
-------------
$ 12,003,964
-------------
</TABLE>
12 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Montana - 3.5%
$3,250,000 AAA/Aaa Forsyth Pollution Control Revenue, Puget Sound
Power & Light Project, 7.05%, 2021 $ 3,565,347
3,000,000 AAA/Aaa Forsyth Pollution Control Revenue, Puget Sound
Water Power Project, 6.8%, 2022 3,285,060
1,495,000 AAA/Aaa Forsyth Pollution Control Revenue, Washington
Water Power Project, 7.125%, 2013 1,597,961
3,250,000 AAA/Aaa Montana State Board of Investments Workers
Compensation Program, 6.875%, 2020 3,720,210
2,200,000 AAA/Aaa University of Montana Revenue, Series C,
5.375%, 2021 2,225,388
-------------
$ 14,393,966
-------------
Nebraska - 8.4%
2,350,000 AAA/NR Douglas County Hospital Authority Revenue,
5.10%, 2011 $ 2,391,853
3,675,000 AAA/NR Douglas County Hospital Authority Revenue,
5.125%, 2017 3,632,113
6,000,000 AAA/Aaa Douglas County Hospital Authority Revenue,
Immanuel Medical Center, 7.0%, 2021 6,681,000
5,000,000 NR/A Grand Island Sanitation Sewer Revenue,
6.0%, 2014 5,307,050
7,500,000 A/A Hastings Electric System Revenue, 6.3%, 2019 8,016,300
1,325,000 AAA/Aaa Municipal Energy Agency of Nebraska Revenue,
6.0%, 2008 1,423,872
1,500,000 AAA/Aaa Municipal Energy Agency of Nebraska Revenue,
6.0%, 2017 1,605,435
1,690,000 A+/A1 Nebraska Public Power District Revenue,
6.125%, 2015 1,808,925
750,000 A+/A1 Nebraska Public Power District Revenue,
5.75%, 2020 771,735
1,850,000 A+/A1 Nebraska Public Power District Revenue,
6.25%, 2022 1,971,601
1,460,000 AA/Aa1 Omaha Tax Allocation, 5.25%, 2017 1,470,176
-------------
$ 35,080,060
-------------
New Jersey - 0.3%
1,000,000 AA/A1 Rutgers State University Revenue, 6.4%, 2009 $ 1,089,640
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/97 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
New Mexico - 1.9%
$2,600,000 AA/Aa Bernalillo County Gross Receipts Tax
Revenue, 5.75%, 2021 $ 2,699,996
1,815,000 AA/Aa New Mexico Mortgage Finance Authority,
6.85%, 2012 + 1,929,490
2,000,000 AAA/Aaa Santa Fe Gross Receipts, 5.75%, 2021 2,103,800
1,200,000 AAA/Aaa University of New Mexico Revenue,
6.55%, 2025 1,348,500
-------------
$ 8,081,786
-------------
New York - 0.4%
1,500,000 AAA/Aaa New York State Dormatory Authority,
5.25%, 2022 $ 1,501,290
-------------
North Carolina - 3.1%
1,250,000 AA/Aa1 Charlotte Law Enforcement Project,
6.1%, 2015 $ 1,338,600
970,000 AA/Aa Charlotte-Mecklenburg Hospital Authority
Revenue, 6.25%, 2020 1,046,630
1,250,000 AAA/Aaa Cumberland County Civic Center Project,
Series A, 6.4%, 2024 1,390,750
1,000,000 AAA/Aaa Franklin County Certificate Participation,
6.625%, 2014 1,116,230
6,250,000 A/A2 Martin County Pollution Control Authority
Revenue, 5.65%, 2023 6,334,813
1,320,000 A/NR North Carolina Hospital, 6.25%,
Prerefunded, 2002* 1,445,136
-------------
$ 12,672,159
-------------
North Dakota - 0.7%
1,705,000 NR/Aa3 North Dakota State Housing Finance
Agency Revenue, 6.0%, 2018 $ 1,754,036
1,000,000 AAA/Aaa State Water Community Revenue, 5.75%, 2027 1,052,310
-------------
$ 2,806,346
-------------
Ohio - 1.0%
1,050,000 AAA/Aaa Bedford, Ohio County School District,
6.25%, 2013 $ 1,152,543
2,500,000 AAA/Aaa Cleveland Stadium Revenue, 5.25%, 2027 2,502,025
500,000 A+/A1 Ohio State Building Authority Revenue,
6.0%, 2008 565,380
-------------
$ 4,219,948
-------------
</TABLE>
14 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Oklahoma - 3.4%
$2,520,000 AAA/Aaa Grand River Dam Authority Revenue,
6.25%, 2011 $ 2,899,890
4,700,000 AAA/Aaa McGee Creek Authority Water Revenue,
6.0%, 2023 5,359,175
5,300,000 A+/A1 Oklahoma State Turnpike Authority Revenue,
6.125%, 2020 5,691,405
-------------
$ 13,950,470
-------------
Oregon - 1.3%
550,000 AAA/Aaa Portland International Airport Revenue,
6.75%, 2015 $ 597,163
1,000,000 A+/A1 Portland Sewer System, Series A,
6.2%, 2012 1,111,110
390,000 A/A1 Washington County Unified Sewer Agency
Revenue, 6.2%, 2010 428,431
2,860,000 A/NR Washington County Unified Sewer Agency
Revenue, 6.2%, Prerefunded 2004* 3,175,572
-------------
$ 5,312,276
-------------
Pennsylvania - 2.9%
3,000,000 AAA/Aaa Allegheny County Sanitary Authority Revenue,
5.375%, 2024 $ 3,043,380
1,300,000 AAA/Aaa Lycoming County General Obligation,
5.8%, 2022 1,377,051
1,000,000 AA/Aa New Kingston School District, 5.5%, 2017 1,031,700
2,500,000 A/A1 Pennsylvania State Turnpike Commission
Revenue, 6.5%, 2013 2,724,325
1,000,000 AAA/Aaa Pennsylvania Transportation Authority,
5.375%, 2022 1,013,760
1,100,000 AA/Aa3 Philadelphia Authority For Industrial
Development Revenue, 5.0%, 2027 1,071,840
2,000,000 AAA/NR Wallingford-Swarthmore General Obligation,
Series A, 5.25%, 2017 2,019,040
-------------
$ 12,281,096
-------------
Rhode Island - 0.2%
945,000 AA+/Aa Rhode Island Housing & Mortgage Finance,
6.75%, 2017 $ 1,009,477
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/97 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
South Carolina - 4.3%
$1,790,000 AAA/Aaa Beaufort Water & Sewer Revenue, 6.5%, 2013 $ 1,954,250
2,400,000 A/A1 Fairfield County Pollution Control, 6.5%, 2014 2,631,600
1,250,000 AAA/Aaa South Carolina Grand Strand Water & Sewer
Authority, 6.375%, 2012 1,455,938
10,000,000 AAA/Aaa South Carolina Public Service Authority
Revenue, 6.625%, Prerefunded, 2002* 11,164,000
750,000 NR/Aa South Carolina State Housing Finance &
Development Authority Revenue, 6.2%, 2009 787,860
-------------
$ 17,993,648
-------------
South Dakota - 0.7%
1,235,000 NR/A1 South Dakota Conservancy District Revenue,
Series A, 5.625%, 2017 $ 1,265,727
1,255,000 AAA/Aaa South Dakota State Lease Revenue,
Series B, 8.0%, 2005 1,538,592
-------------
$ 2,804,319
-------------
Tennessee - 1.5%
1,300,000 AAA/Aaa Madison Suburban Utility District, 5.0%, 2019 $ 1,278,316
1,000,000 AAA/Aaa Metropolitan Government Nashville & Davidson
County Sports Authority, 5.75%, 2017 1,061,560
1,565,000 AAA/Aaa Metropolitan Government Nashville & Davidson
County Water & Sewer Authority, 6.0%, 2007 1,749,435
2,000,000 AA+/Aa2 Shelby County General Obligation, 6.0%, 2019 2,154,340
-------------
$ 6,243,651
-------------
Texas - 8.4%
2,145,000 NR/AAA Castleberry Independent School District
General Obligation, 5.7%, 2021 $ 2,227,690
2,310,000 AAA/Aaa Clear Creek Independent School District
General Obligation, 7.0%, 2010 1,283,944
1,305,000 NR/Aaa Comal Independent School District General
Obligation, 7.0%, 2007 1,529,760
1,500,000 NR/A Houston, Texas Housing Authority, 8.0%, 2014 1,652,790
2,050,000 AA/Aa Keller Independent School District General
Obligation, 0%, 2010 1,109,973
2,000,000 AAA/NR Kingsbridge Utility Systems Revenue,
5.375%, 2015 2,030,640
2,350,000 AAA/Aaa Nueces River Authority Water Supply
Revenues, 5.5%, 2027 2,424,965
1,595,000 AAA/Aaa Port Lavaca Utility Systems Revenue,
5.75%, 2022 1,673,330
</TABLE>
16 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Texas - (continued)
$3,500,000 AAA/Aaa San Antonio, Texas Water Revenue,
5.6%, 2021 $ 3,639,370
3,000,000 AAA/Aaa Texas Public Finance Authority Building
Revenue, 0%, 2007 1,974,240
5,500,000 AAA/Aaa Texas Public Finance Authority Building
Revenue, 0%, 2008 3,436,125
2,750,000 AAA/Aaa Texas Public Finance Authority Building
Revenue, 0%, 2010 1,528,505
1,400,000 AA/Aa Texas State General Obligation, 6.125%, 2008 1,493,072
8,750,000 AAA/Aa1 Texas State Turnpike Authority, 5.25%, 2023 8,756,738
-------------
$ 34,761,142
-------------
Utah - 3.0%
2,500,000 AAA/Aaa St. George Water Revenue,
5.85%, 2020 $ 2,647,550
505,000 NR/Aa Utah Housing Finance Agency Revenue,
5.95%, 2011+ 527,639
1,270,000 AA/Aa Utah Intermountain Power Agency Revenue,
5.0%, 2016 1,225,423
3,010,000 A+/Aa Utah Intermountain Power Agency Revenue,
5.0%, 2018 2,894,296
3,480,000 AA/NR Weber County Municipal Building Authority
Revenue, 5.75%, 2019 3,575,422
1,250,000 AAA/NR White County General Obligation, 5.85%, 2026 1,324,875
455,000 AAA/NR White County Water Revenue, 5.9%, 2022 484,579
-------------
$ 12,679,784
-------------
Virginia - 3.2%
1,000,000 AA1/NR Arlington County Industrial Development
Revenue, 5.45%, 2027 $ 1,028,420
750,000 AAA/Aaa Chesapeake Industrial Development Authority,
5.25%, 2017 755,093
1,750,000 A+/A1 Chesapeake Water & Sewer System Revenue,
6.5%, 2012 1,910,055
4,685,000 A+/A1 Chesapeake Water & Sewer System Revenue,
6.4%, 2017 5,023,398
1,750,000 NR/A Harrisonburg Redevelopment & Housing
Authority Revenue, 6.5%, 2014 1,836,800
2,500,000 AA2/AA Norfolk Virginia Industrial Development
Revenue, 5.625%, 2017 2,598,675
-------------
$ 13,152,441
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/97 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Washington - 4.1%
$2,820,000 AAA/Aaa Clark County Public Utility District #1 Water
Revenue, 5.5%, 2015 $ 2,923,268
1,655,000 AA+/AA1 King County General Obligation, 6.625%, 2015 1,906,014
1,000,000 NR/Aaa King & Snohomish Counties, Washington
School District, 5.75%, 2014 1,065,370
3,500,000 A+/Aaa Snohomish County Public Utility District
Revenue, 6.8%, Prerefunded, 2020* 4,347,840
2,250,000 AAA/Aaa Snohomish County School District General
Obligation, 5.7%, 2011 2,475,405
4,000,000 AA/Aa Washington State Public Power Supply System
Revenue, 6.5%, 2015 4,429,600
-------------
$ 17,147,497
-------------
West Virginia - 0.3%
1,000,000 A+/Aa1 West Virginia State Housing Development,
7.05%, 2024 $ 1,064,780
-------------
Wisconsin - 1.4%
1,430,000 AAA/Aaa Adams-Friendship School District, 6.5%, 2016 $ 1,687,128
3,600,000 AA+/Aa2 Milwaukee Local District Heating Facility
Revenue, 6.85%, 2021 3,929,940
-------------
$ 5,617,068
-------------
Wyoming - 2.5%
9,750,000 AA/Aa Wyoming Community Development Authority
Revenue, Series B, 7.05%, 2033 $ 10,365,810
-------------
TOTAL INVESTMENT IN TAX-EXEMPT OBLIGATIONS
(Cost $381,219,460) (a) $ 414,600,475
-------------
TAX-EXEMPT MONEY MARKET MUTUAL FUND - 0.1%
425,279 Lehman Brothers Munifund $ 425,279
-------------
TOTAL TAX-EXEMPT MONEY MARKET MUTUAL FUND
(Cost $425,279) $ 425,279
-------------
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $381,644,739) (b) $ 415,025,754
=============
</TABLE>
18 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
+ A portion of the bond was called on January 1, 1998.
* 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.
NR Not rated.
(a) The concentration of investments by type of obligation / market sector is
as follows:
General Obligation 8.9%
Escrowed in U.S. Government Securities 7.1
Revenue Bonds:
Education Revenue 10.8
Water & Sewer Revenue 14.3
Hospital Revenue 5.2
Housing Revenue 8.0
Pollution Control Revenue 9.2
Power Revenue 11.8
Transportation Revenue 7.5
Other 17.2
(b) At December 31, 1997, the net unrealized gain on investments based on cost
for federal income tax purposes of $381,644,739 was as follows:
Aggregate gross unrealized gain for all
investments in which there is an excess of
value over tax cost $ 33,381,015
Aggregate gross unrealized loss for all
investments in which there is an
excess of tax cost over value --
-------------
Net unrealized gain $ 33,381,015
=============
Purchase and sales of securities (excluding temporary cash investments) for the
year ended December 31, 1997 aggregated $93,427,811 and $138,223,491,
respectively.
The accompanying notes are an integral part of these financial statements. 19
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
BALANCE SHEET 12/31/97
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value
(including temporary cash
investment of $425,279) (cost $381,644,739) $ 415,025,754
Receivables -
Fund shares sold 217,287
Interest 6,946,017
Other 46,011
-------------
Total assets $ 422,235,069
-------------
LIABILITIES:
Payables -
Fund shares repurchased $ 87,038
Dividends 480,019
Due to affiliates 493,104
Accrued expenses 87,696
-------------
Total liabilities $ 1,147,857
-------------
NET ASSETS:
Paid-in capital $ 387,708,414
Accumulated net realized loss on investments (2,217)
Net unrealized gain on investments 33,381,015
-------------
Total net assets $ 421,087,212
=============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $413,856,196/34,002,418 shares) $ 12.17
=============
Class B (based on $5,588,385/462,174 shares) $ 12.09
=============
Class C (based on $1,642,631/135,697 shares) $ 12.11
=============
MAXIMUM OFFERING PRICE:
Class A $ 12.74
=============
20 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/97
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 24,819,037
------------
EXPENSES:
Management fees $ 2,063,785
Transfer agent fees
Class A 475,795
Class B 5,647
Class C 1,256
Distribution fees
Class A 1,052,278
Class B 50,451
Class C 9,515
Accounting 95,345
Custodian fees 60,112
Registration fees 53,050
Professional fees 70,422
Printing 19,003
Fees and expenses of nonaffiliated trustees 20,672
Miscellaneous 55,561
-----------
Total expenses $ 4,032,892
Less fees paid indirectly (82,267)
------------
Net expenses $ 3,950,625
------------
Net investment income $ 20,868,412
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $ 5,728,646
Change in net unrealized gain on investments 9,973,302
------------
Net gain on investments $ 15,701,948
------------
Net increase in net assets resulting from operations $ 36,570,360
============
</TABLE>
The accompanying notes are an integral part of these financial statements. 21
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/97 and 12/31/96
<TABLE>
<CAPTION>
Year Ended Year Ended
FROM OPERATIONS: 12/31/97 12/31/96
<S> <C> <C>
Net investment income $ 20,868,412 $ 23,614,361
Net realized gain on investments 5,728,646 7,202,137
Change in net unrealized gain on investments 9,973,302 (15,506,855)
------------- -------------
Net increase in net assets resulting from operations $ 36,570,360 $ 15,309,643
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A ($0.59 and $0.62 per share, respectively) $ (20,562,056) $ (23,535,318)
Class B ($0.49 and $0.53 per share, respectively) (207,988) (150,311)
Class C ($0.49 and $0.49 per share, respectively) (38,610) (10,503)
In excess of net investment income
Class A ($0.00 and $0.00 per share, respectively) -- (25,684)
Class B ($0.00 and $0.02 per share, respectively) -- (2,502)
Class C ($0.00 and $0.01 per share, respectively) -- (387)
Net realized gain
Class A ($0.24 and $0.19 per share, respectively) (8,029,783) (7,100,936)
Class B ($0.24 and $0.19 per share, respectively) (108,291) (65,933)
Class C ($0.24 and $0.19 per share, respectively) (32,012) (5,475)
------------- -------------
Total distributions to shareholders $ (28,978,740) $ (30,897,049)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 37,149,298 $ 35,328,631
Reinvestment of distributions 21,258,845 22,894,661
Cost of shares repurchased (91,820,025) (74,380,885)
------------- -------------
Net decrease in net assets resulting from
fund share transactions $ (33,411,882) $ (16,157,593)
------------- -------------
Net decrease in net assets $ (25,820,262) $ (31,744,999)
NET ASSETS:
Beginning of year 446,907,474 478,652,473
------------- -------------
End of year (including accumulated undistributed
net investment income of $0 and $0, respectively) $ 421,087,212 $ 446,907,474
============= =============
<CAPTION>
CLASS A `97 Shares `97 Amount `96 Shares `96 Amount
<S> <C> <C> <C> <C>
Shares sold 2,922,958 $ 34,002,852 2,624,795 $ 31,528,578
Reinvestment of distributions 1,653,875 20,992,773 1,900,488 22,723,038
Less shares repurchased (7,521,806) (90,352,716) (6,137,421) (73,605,519)
---------- ------------ ---------- ------------
Net decrease (2,944,973) $(35,357,091) (1,612,138) $(19,353,903)
========== ============ ========== ============
CLASS B
Shares sold 161,072 $ 1,928,069 286,510 $ 3,418,543
Reinvestment of distributions 17,761 213,098 13,070 155,278
Less shares repurchased (119,956) (1,440,745) (64,400) (766,599)
---------- ------------ ---------- ------------
Net increase 58,877 $ 700,422 235,180 $ 2,807,222
========== ============ ========== ============
CLASS C*
Shares sold 101,254 $ 1,218,377 31,562 $ 381,510
Reinvestment of distributions 4,406 52,974 1,380 16,345
Less shares repurchased (2,176) (26,564) (729) (8,767)
---------- ------------ ---------- ------------
Net increase 103,484 $ 1,244,787 32,213 $ 389,088
========== ============ ========== ============
</TABLE>
* Class C shares were first publicly offered on January 31, 1996
22 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
CLASS A 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.96 $ 12.36 $ 11.24 $ 12.68 $ 12.08
--------- --------- --------- --------- ---------
Increase (decrease) from investment operations:
Net investment income $ 0.59 $ 0.62 $ 0.64 $ 0.64 $ 0.67
Net realized and unrealized gain (loss) on investments 0.45 (0.21) 1.21 (1.44) 0.87
--------- --------- --------- --------- ---------
Net increase (decrease) from investment operations $ 1.04 $ 0.41 $ 1.85 $ (0.80) $ 1.54
Distributions to shareholders:
Net investment income (0.59) (0.62) (0.64) (0.64) (0.67)
Net realized gain (0.24) (0.19) (0.09) -- (0.27)
--------- --------- --------- --------- ---------
Net increase (decrease) in net asset value $ 0.21 $ (0.40) $ 1.12 $ (1.44) $ 0.60
--------- --------- --------- --------- ---------
Net asset value, end of year $ 12.17 $ 11.96 $ 12.36 $ 11.24 $ 12.68
========= ========= ========= ========= =========
Total return* 8.94% 3.57% 16.84% (6.38)% 12.98%
Ratio of net expenses to average net assets 0.93%+ 0.92%+ 0.91%+ 0.91% 0.86%
Ratio of net investment income to average net assets 4.87%+ 5.16%+ 5.37%+ 5.37% 5.37%
Portfolio turnover rate 22% 44% 35% 55% 58%
Net assets, end of year (in thousands) $ 413,856 $ 441,733 $ 476,584 $ 452,661 $ 532,491
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.91% 0.90% 0.89% -- --
Net investment income 4.89% 5.18% 5.39% -- --
</TABLE>
(a) Prior to assumption of the management agreement on December 1, 1993 by
Pioneering Management Corporation, the Fund was advised by Mutual of Omaha
Management Company.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of 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.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 23
<PAGE>
Pioneer Tax-Free Income Fund
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/97
- ------------------------------------------------------------------------------------------
Year Ended Year Ended 4/28/95 to
CLASS B 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.88 $ 12.31 $ 11.81
--------- --------- ---------
Increase (decrease) from investment operations:
Net investment income $ 0.50 $ 0.53 $ 0.35
Net realized and unrealized gain
(loss) on investments 0.44 (0.22) 0.58
--------- --------- ---------
Net increase from investment operations $ 0.94 $ 0.31 $ 0.93
Distributions to shareholders:
Net investment income (0.49) (0.53) (0.34)
In excess of net investment income -- (0.02) --
Net realized gain (0.24) (0.19) (0.09)
--------- --------- ---------
Net increase (decrease) in net asset value $ 0.21 $ (0.43) $ 0.50
--------- --------- ---------
Net asset value, end of period $ 12.09 $ 11.88 $ 12.31
========= ========= =========
Total return* 8.16% 2.66% 7.94%
Ratio of net expenses to average net assets 1.68%+ 1.67%+ 1.72%**+
Ratio of net investment income to
average net assets 4.12%+ 4.38%+ 4.38%**+
Portfolio turnover rate 22% 44% 35%
Net assets, end of period (in thousands) $ 5,588 $ 4,792 $ 2,069
Ratios assuming reduction for fees paid
indirectly:
Net expenses 1.66% 1.65% 1.65%**
Net investment income 4.14% 4.40% 4.45%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of 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.
+ Ratio assuming no reduction for fees paid indirectly.
24 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended 1/31/96 to
CLASS C 12/31/97 12/31/96
<S> <C> <C>
Net asset value, beginning of period $ 11.88 $ 12.32
--------- ---------
Increase (decrease) from investment operations:
Net investment income $ 0.49 $ 0.49
Net realized and unrealized gain (loss) on
investments 0.47 (0.24)
--------- ---------
Net increase from investment operations $ 0.96 $ 0.25
Distributions to shareholders:
Net investment income (0.49) (0.49)
In excess of net investment income - (0.01)
Net realized gain (0.24) (0.19)
--------- ---------
Net increase (decrease) in net asset value $ 0.23 $ (0.44)
--------- ---------
Net asset value, end of period $ 12.11 $ 11.88
========= =========
Total return* 8.32% 2.19%
Ratio of net expenses to average net assets 1.70%+ 1.71%**+
Ratio of net investment income to average net assets 4.04%+ 4.34%**+
Portfolio turnover rate 22% 44%
Net assets, end of period (in thousands) $ 1,643 $ 383
Ratios assuming reduction for fees paid indirectly:
Net expenses 1.67% 1.69%**
Net investment income 4.07% 4.36%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of 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.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 25
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Pioneer Tax-Free Income Fund
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NOTES TO FINANCIAL STATEMENTS 12/31/97
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1. Organization and Significant Accounting Policies
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 a high level
of income exempt from federal income tax, consistent with preservation of
capital.
The Fund offers three classes of shares - Class A, Class B and Class C shares.
The shares of Class A, Class B and Class C each 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 independent pricing services that utilize matrix
systems. These matrix systems reflect such factors as security prices,
yields, maturities, and ratings and are 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. Interest income is recorded on the accrual basis.
Temporary cash investments are valued at amortized cost.
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Pioneer Tax-Free Income Fund
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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.
At December 31, 1997, the Fund reclassified $59,758 and $113,545 from
accumulated undistributed net investment income and paid-in capital,
respectively, to accumulated net realized loss on investments. 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.
In order to comply with federal income tax regulations, the Fund has
designated $5,067,940 as a capital gain dividend for the purposes of the
dividend paid deduction. Of this amount, $1,659,676 and $3,408,264 are
subject to the maximum 28% and 20% federal income tax rates, respectively.
In order to comply with federal income tax regulations, the Fund has
designated $20,799,469 as tax-exempt interest dividends. For pur-poses of the
dividends exclusion, none of the distributions per share qualify for the
exclusion.
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 $50,526 in
underwriting commissions on the sale of fund shares
27
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Pioneer Tax-Free Income Fund
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NOTES TO FINANCIAL STATEMENTS 12/31/97 (continued)
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during the year ended December 31, 1997.
D. Class Allocations
Distribution fees 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.
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.
Distributions to shareholders are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time, and in the same amount,
except that Class A, Class B and Class C shares can bear different transfer
agent and distribution fees.
2. Management Agreement
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. At December 31, 1997, $186,896 was payable to PMC related to
management fees and certain other services.
3. Transfer Agent
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 $39,034 in transfer agent fees payable to PSC at December 31,
1997.
28
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Pioneer Tax-Free Income Fund
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4. Distribution Plans
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 the 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 the Class B Plan and the 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 $267,174 in distribution fees payable
to PFD at December 31, 1997.
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 redemptions of
certain net asset value purchases of Class A shares 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 year ended December 31, 1997, CDSCs in the amount of $24,904 were paid
to PFD.
5. Expense Reductions
The Fund has entered into certain expense offset arrangements result-ing in a
reduction in the Fund's total expenses. For the year ended December 31, 1997,
the Fund's expenses were reduced by $82,267 under such arrangements.
29
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Pioneer Tax-Free Income Fund
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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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, 1997, and the related
statement of operations, and the statements of changes in net assets for the
periods presented and financial highlights for each of the four years ended
December 31, 1997. These financial statements and financial highlights are the
respon- si bility 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 the year 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, 1997, 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, 1997, the results of its
operations and the changes in its net assets for the periods presented and
financial highlights for each of the four years ended December 31, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 2, 1998
30
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Pioneer Tax-Free Income Fund
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TRUSTEES, OFFICERS AND SERVICE PROVIDERS
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Trustees Officers
John F. Cogan, Jr. John F. Cogan, Jr., Chairman and President
Mary K. Bush David D. Tripple, Executive Vice President
Richard H. Egdahl, M.D. Mark L. Winter, Vice President
Margaret B.W. Graham William H. Keough, Treasurer
John W. Kendrick Joseph P. Barri, Secretary
Marguerite A. Piret
David D. Tripple
Stephen K. West
John Winthrop
Investment Adviser
Pioneering Management Corporation
Custodian
Brown Brothers Harriman & Co.
Independent Public Accountants
Arthur Andersen LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneering Services Corporation
31
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PROGRAMS AND SERVICES FOR PIONEER SHAREOWNERS
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Your investment professional can give you additional information on
Pioneer's programs and services. If you want to order literature on any of the
following items directly, simply call Pioneer at 1-8O0-225-6292.
FactFone(SM)
Our automated account information service, available to you 24 hours a day,
seven days a week. FactFone gives you a quick and easy way to check fund share
prices, yields, dividends and distributions, as well as information about your
own account. Simply call 1-800-225-4321. For specific account information,
have your 13-digit account number and four-digit personal identification
number at hand.
9O-Day Reinstatement Privilege (for Class A Shares)
Enables you to reinvest all or a portion of the money you redeem from your
Pioneer account - without paying a sales charge within 90 days of your
redemption. You have the choice of investing in any Pioneer fund, as long as
you meet its minimum investment requirement.
Investomatic Plan
An easy and convenient way for you to invest on a regular basis. All you need
to do is authorize a set amount of money to be moved out of your bank account
into the Pioneer fund of your choice. Investomatic also allows you to change
the dollar amount, frequency and investment date right over the phone. By
putting aside affordable amounts of money regularly, you can build a long-term
investment - without sacrificing your current standard of living.
Payroll Investment Program (PIP)
Lets you invest in a Pioneer fund directly through your paycheck. All that's
involved is for your employer to fill out an authorization form allowing
Pioneer to deduct from participating employees' paychecks. You specify the
dollar amount you want to invest into the Pioneer fund(s) of your choice.
32
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Automatic Exchange Program
A simple way to move money from one Pioneer fund to another over a period of
time. Just invest a lump sum in one fund, and select the other Pioneer funds
you wish to invest in. You choose the amounts and dates for Pioneer to sell
shares of your original fund and use the proceeds to buy shares of the other
funds you have chosen. Over time, your investment will be shifted out of the
original fund. (Automatic Exchange is available for originating accounts with
a balance of $5,000 or more.)
Directed Dividends
Lets you invest cash dividends from one Pioneer fund to an account in
another Pioneer fund with no sales charge or fee. Simply fill out the
applicable information on a Pioneer Account Options Form. (This program is
available for dividend payments only; capital gains distri butions are not
eligible at this time.)
Direct Deposit
Lets you move money into your bank account using electronic funds transfer
(EFT). EFT moves your money faster than you would receive a check, eliminates
unnecessary paper and mail, and avoids lost checks. Simply fill out a Pioneer
Direct Deposit Form, giving your instructions.
Systematic Withdrawal Plan (SWP)
Lets you establish automatic withdrawals from your account at set intervals.
You decide the frequency and the day of the month you want. Pioneer will send
the proceeds by check to the address you designate, or electronically to your
bank account. You also can authorize Pioneer to make the redemptions payable
to someone else. (SWPs are available only for accounts with a value of $10,000
or more.)
33
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RETIREMENT PROGRAMS FROM PIONEER
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Pioneer has a long history of helping people work toward their retirement
goals, offering plans suited to the individual investor and businesses of all
sizes. For more information on Pioneer retirement plans, contact your
investment professional, or call Pioneer at
1-800-622-0176.
Individual Retirement Account (IRA)
An IRA is a tax-favored account that allows anyone under age 701/2 with earned
income to contribute up to $2,000 annually. Spouses may contribute up to
$2,000 annually into a separate IRA, for a total of $4,000 per year for a
married couple. Earnings are tax-deferred, and contributions may be
tax-deductible.
Roth IRA
The Roth IRA came about as part of the Taxpayer Relief Act of 1997 and is
available to investors in 1998. Contributions, up to $2,000 a year, are not
tax-deductible, but earnings are tax-free for qualified withdrawals.
401(k) Plan
The traditional 401(k) plan allows employees to make pre-tax contributions
through payroll deduction, up to $9,500 per year or 25% of pay, whichever is
less. Employers may contribute.
SIMPLE (Savings Incentive Match PLan for Employees)
401(k) or IRA Plan
Businesses with 100 or fewer eligible employees can establish either plan;
both resemble the traditional 401(k), but with less testing and lower
administration costs. Employees can make pre-tax contributions of up to $6,000
per year, and an employer contribution is required.
Most retirement plan withdrawals must meet specific conditions to avoid
penalties.
34
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403(b) Plan
Also known as a Tax-Sheltered Account (TSA), a 403(b) plan is available
only to employees of public schools, not-for-profit hospitals
and other tax-exempt organizations. A 403(b) plan lets employees set aside a
portion of their salary, before taxes, through payroll deduction.
Simplified Employee Pension Plan (SEP)
SEPs let self-employed people and small-business owners make tax-deductible
contributions of up to 15% of their income. Generally, employers must
contribute the same percentage of pay for themselves and any eligible
employees; contributions are made directly to employees' IRAs. SEPs are easy
to administer and can be an especially good choice for firms with few or no
employees.
Profit Sharing Plan
Profit sharing plans offer companies considerable flexibility, allowing them
to decide each year whether a contribution will be made and how much, up to
15% of each participant's pay. These plans can include provisions for loans
and vesting schedules.
Age-Weighted Profit Sharing Plan
Like traditional profit sharing plans, employer contributions are flexible,
but age-weighted plans allocate contributions based on both age and salary.
Age-weighted plans are designed for employers who want to maximize their own
contributions while keeping contributions to employees affordable.
Money Purchase Pension Plan (MPP)
Money purchase plans are similar to profit sharing plans, but allow for higher
annual contributions -- up to 25% of pay. MPPs aren't as flexible as profit
sharing plans; a fixed percentage of pay must be contributed each year,
determined when the plan is established. Businesses often set up both MPPs and
profit sharing plans.
Most retirement plan withdrawals must meet specific conditions to avoid
penalties.
35
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THE PIONEER FAMILY OF MUTUAL FUNDS
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For information about any Pioneer mutual fund, please contact your investment
professional, or call Pioneer at 1-800-225-6292. Ask for a free fund information
kit, which includes a fund prospectus. Please read the prospectus carefully
before you invest or send money.
Growth Funds Income Funds
Global/International Taxable
Pioneer Emerging Markets Fund Pioneer America Income Trust
Pioneer Europe Fund Pioneer Bond Fund
Pioneer Gold Shares Pioneer Short-Term Income Trust*
Pioneer India Fund
Pioneer International Growth Fund Tax-Exempt
Pioneer World Equity Fund Pioneer Intermediate Tax-Free Fund
Pioneer Tax-Free Income Fund
United States
Pioneer Capital Growth Fund Money Market Fund
Pioneer Growth Shares Pioneer Cash Reserves Fund
Pioneer Micro-Cap Fund*
Pioneer Mid-Cap Fund
Pioneer Small Company Fund
Growth and Income Funds
Pioneer Balanced Fund
Pioneer Equity-Income Fund
Pioneer Fund
Pioneer Real Estate Shares
Pioneer II
*0ffers Class A and B Shares only
36
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This page for your notes.
<PAGE>
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HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us
for assistance or information.
Call us for:
Account Information, including existing accounts,
new accounts, propectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
Pioneering Services Corporation
60 State Street
Boston, Massachusetts 02109
Our toll-free fax 1-800-225-4240
Our Internet e-mail address [email protected]
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
This report must be preceded or accompanied by a current Fund prospectus.
[LOGO] Pioneer Funds Distributor, Inc. 0298-4808
60 State Street (C) Pioneer Funds Distributor, Inc.
Boston, Massachusetts 02109 [LOGO] Printed on Recycled Paper
www.pioneerfunds.com
