PIONEER TAX-FREE INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1999
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the related Prospectus (also dated February 1, 1999) which
covers Class A, Class B and Class C shares of beneficial interest of Pioneer
Tax-Free Income Fund ("Tax-Free Fund") to be issued in exchange for all of the
net assets of Pioneer Intermediate Tax-Free Fund ("Intermediate Fund"). Please
retain this Statement of Additional Information for further reference.
A copy of the Prospectus can be obtained free of charge by calling Shareholder
Services at 1-800-225-6292 or by written request to Pioneer Tax-Free Income Fund
at 60 State Street, Boston, Massachusetts 02109.
TABLE OF CONTENTS
Introduction
Additional Information about Intermediate Fund
General Information and History
Investment Objectives and Policies
Management of Intermediate Fund
Investment Advisory and Other Services
Brokerage Allocation and Other Practices
Shares of Beneficial Interest
Purchase, Redemption and Pricing of Intermediate Fund Shares
Principal Underwriter
Calculation of Performance Data
Financial Statements
Additional Information about Tax-Free Fund
General Information and History
Investment Objectives and Policies
Management of Tax-Free Fund
Control Persons and Principal Holders of Tax-Free Fund Shares
Investment Advisory and Other Services
Brokerage Allocation and Other Practices
Shares of Beneficial Interest
Purchase, Redemption and Pricing of Tax-Free Fund Shares
Principal Underwriter and Plans of Distribution
Calculation of Performance Data
Financial Statements
<PAGE>
EXHIBITS
A - Statement of Additional Information, dated April 30, 1998 as supplemented,
of Pioneer Intermediate Tax-Free Fund.
B - Statement of Additional Information, dated April 30, 1998 as supplemented,
of Pioneer Tax-Free Income Fund.
C - Audited Financial Statements of Pioneer Intermediate Tax-Free Fund as of
June 30, 1998 and December 31, 1997.
D - Audited Financial Statements of Pioneer Tax-Free Income Fund as of June 30,
1998 and December 31, 1997.
E - Pro Forma Combined Financial Statements at December 31, 1997 and for the
12 months then ended of Pioneer Intermediate Tax-Free Fund and Pioneer
Tax-Free Income Fund.
<PAGE>
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in a Proxy Statement and Prospectus dated February 1, 1999
(the "Proxy Statement and Prospectus"). The Proxy Statement and Prospectus has
been sent to the shareholders of Intermediate Fund in connection with the
solicitation by the management of Intermediate Fund of proxies to be voted at
the Meeting of Shareholders of Intermediate Fund to be held on March 30, 1999.
This Statement of Additional Information includes the statements of additional
information, each dated April 30, 1998 as supplemented October 30, 1998, of
Intermediate Fund (the "Intermediate Fund SAI") and Tax-Free Fund (the "Tax-Free
Fund SAI").
ADDITIONAL INFORMATION ABOUT INTERMEDIATE FUND
GENERAL INFORMATION AND HISTORY
For additional information about Intermediate Fund generally and its
history, see "Description of Shares" and "Certain Liabilities" in the
Intermediate Fund SAI.
INVESTMENT OBJECTIVES AND POLICIES
For additional information about Intermediate Fund's investment
objective and policies, see "Investment Policies and Restrictions" in the
Intermediate Fund SAI.
MANAGEMENT OF INTERMEDIATE FUND
For additional information about Intermediate Fund's Board of Trustees,
officers and management personnel, see "Management of the Fund" and "Investment
Adviser" in the Intermediate Fund SAI.
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information about Intermediate Fund's investment
adviser, custodian and independent accountants, see "Investment Adviser,"
"Underwriting Agreement and Distribution Plans," "Shareholder Servicing/Transfer
Agent," "Custodian," "Principal Underwriter" and "Independent Public
Accountants" in the Intermediate Fund SAI.
BROKERAGE ALLOCATION AND OTHER PRACTICES
For additional information about Intermediate Fund's brokerage
allocation practices, see "Portfolio Transactions" in the Intermediate Fund SAI.
<PAGE>
SHARES OF BENEFICIAL INTEREST
For additional information about the voting rights and other
characteristics of Intermediate Fund's shares, see "Description of Shares" in
the Intermediate Fund SAI.
PURCHASE, REDEMPTION AND PRICING OF INTERMEDIATE FUND SHARES
For additional information about the determination of net asset value,
see "Determination of Net Asset Value" in the Intermediate Fund SAI.
PRINCIPAL UNDERWRITER
For additional information about Intermediate Fund's principal
underwriter and the distribution contract between the principal underwriter and
Intermediate Fund, see "Principal Underwriter" in the Intermediate Fund SAI.
CALCULATION OF PERFORMANCE DATA
For additional information about the investment performance of
Intermediate Fund, see "Investment Results" in the Intermediate Fund SAI.
FINANCIAL STATEMENTS
Audited financial statements of Intermediate Fund as at June 30, 1998
and December 31, 1997 are attached as Exhibit C.
ADDITIONAL INFORMATION ABOUT TAX-FREE FUND
GENERAL INFORMATION AND HISTORY
For additional information about Tax-Free Fund generally and its
history, see "Description of Shares" in the Tax-Free Fund SAI.
INVESTMENT OBJECTIVE AND POLICIES
For additional information about Tax-Free Fund's investment objective,
policies and restrictions see "Investment Objective and Policies" and
"Investment Restrictions" in the Tax-Free Fund SAI.
MANAGEMENT OF TAX-FREE FUND
For additional information about Tax-Free Fund's Board of Trustees,
officers and management personnel, see "Management of the Fund" and "Investment
Adviser" in the Tax-Free Fund SAI.
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF TAX-FREE FUND SHARES
For additional information about control persons of Tax-Free Fund and
principal holders of shares of Tax-Free Fund see "Management of the Fund" in the
Tax-Free Fund SAI.
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information about Tax-Free Fund's investment adviser,
custodian and independent accountants, see "Investment Adviser," "Underwriting
Agreement and Distribution Plans," "Shareholder Servicing/Transfer Agent,"
"Custodian," "Principal Underwriter" and "Independent Public Accountants" in the
Tax-Free Fund SAI.
BROKERAGE ALLOCATION AND OTHER PRACTICES
For additional information about Tax-Free Fund's brokerage allocation
practices, see "Portfolio Transactions" in the Tax-Free Fund SAI.
SHARES OF BENEFICIAL INTEREST
For additional information about the voting rights and other
characteristics of shares of beneficial interest of Tax-Free Fund, see
"Description of Shares" in the Tax-Free Fund SAI.
PURCHASE, REDEMPTION AND PRICING OF TAX-FREE FUND SHARES
For additional information about the determination of net asset value,
see "Determination of Net Asset Value" in the Tax-Free Fund SAI.
PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION
For additional information about Tax-Free Fund's principal underwriter
and distribution plans, see "Principal Underwriter" and "Underwriting Agreement
and Distribution Plans" in the Tax-Free Fund SAI.
CALCULATION OF PERFORMANCE DATA
For additional information about the investment performance of Tax-Free
Fund, see "Investment Results" in the Tax-Free Fund SAI.
<PAGE>
FINANCIAL STATEMENTS
Audited financial statements of Tax-Free Fund at June 30, 1998 and
December 31, 1997 are attached as Exhibit D. Pro Forma Combined Financial
Statement at December 31, 1997 and for the 12 months then ended for Tax-Free
Fund as though a reorganization had occurred on January 1, 1997 are attached as
Exhibit E.
<PAGE>
E X H I B I T A
October 30, 1998
SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION FOR
<TABLE>
<CAPTION>
FUND DATED
<S> <C>
Pioneer World Equity Fund July 29, 1998
Pioneer II January 28, 1998
Pioneer Mid-Cap Fund January 28, 1998
Pioneer Europe Fund February 27, 1998 (as revised July 2, 1998)
Pioneer Indo-Asia Fund October 1, 1998
Pioneer Capital Growth Fund July 2, 1998
Pioneer Equity-Income Fund July 2, 1998
Pioneer Gold Shares July 1, 1998
Pioneer Small Company Fund February 27, 1998
Pioneer Short-Term Income Trust March 30, 1998 (as revised April 9, 1998)
Pioneer Emerging Markets Fund March 30, 1998 (as revised April 9, 1998)
Pioneer International Growth Fund March 30, 1998
Pioneer Micro-Cap Fund March 30, 1998
Pioneer Fund April 30, 1998 (as revised May 8, 1998)
Pioneer Intermediate Tax-Free Fund April 30, 1998
Pioneer Cash Reserves Fund April 30, 1998
Pioneer America Income Trust April 30, 1998
Pioneer Real Estate Shares April 9, 1998
Pioneer Growth Shares April 30, 1998 (as revised September 9, 1998)
Pioneer Balanced Fund April 30, 1998
Pioneer Tax-Free Income Fund April 30, 1998
(each, a "Fund" and collectively, the "Funds")
</TABLE>
A. Effective November 2, 1998, Pioneering Management Corporation ("PMC") will
change its name to Pioneer Investment Management, Inc. Wherever "Pioneering
Management Corporation" or "PMC" appears it is replaced by "Pioneer Investment
Management, Inc." or "Pioneer Investments," respectively.
B. The following is appended to the description of the Fund's Class B Plan:
The Class B Plan and underwriting agreement have been amended effective
September 30, 1998 to permit Pioneer Funds Distributor, Inc. ("PFD") to sell its
right to receive distribution fees under the Plan and CDSC's to third parties.
PFD enters into such transactions to finance the payment of commissions to
brokers at the time of sale and other distribution-related expenses. In
connection with such amendments, the Fund has agreed that the distribution fee
will not be terminated or modified (including a modification by change in the
rules relating to the conversion of Class B shares into Class A shares) with
respect to Class B shares (a) issued prior to the date of any termination or
modification or (b) attributable to Class B shares issued through one or a
series of exchanges of shares of another investment company for which PFD acts
as principal underwriter which were initially issued prior to the date of such
termination or modification or (c) issued as a dividend or distribution upon
Class B shares initially issued or attributable to Class B shares issued prior
to the date of any such termination or modification except:
(i) to the extent required by a change in the Investment Company Act of
1940 (the "1940 Act"), the rules or regulations under the 1940 Act, the
Conduct Rules of the National Association of
<PAGE>
Securities Dealers, Inc. (the "NASD") or an order of any court or
governmental agency, in each case enacted, issued or promulgated after
September 30, 1998;
(ii) in connection with a Complete Termination (as defined in the
Plan); or
(iii) on a basis, determined by the Board of Trustees acting in good
faith, so long as from and after the effective date of such
modification or termination: neither the Fund, the adviser nor certain
affiliates pay, directly or indirectly, a fee to any person for the
provision of personal and account maintenance services (as such terms
are used in the Conduct Rules of the NASD) to the holders of Class B
shares of the Fund and the termination or modification of the
distribution fee applies with equal effect to all Class B shares
outstanding from time to time.
The Class B Plan also provides that PFD shall be deemed to have performed all
services required to be performed in order to be entitled to receive the
distribution fee, if any, payable with respect to Class B shares sold through
PFD upon the settlement date of the sale of such Class B shares or in the case
of Class B shares issued through one or a series of exchanges of shares of
another investment company for which PFD acts as principal underwriter or issued
as a dividend or distribution upon Class B shares, on the settlement date of the
first sale on a commission basis of a Class B share from which such Class B
share was derived.
In the amendments to the underwriting agreement, the Fund agreed that subsequent
to the issuance of a Class B share, it would not take any action to waive or
change any CDSC (including a change in the rules applicable to conversion of
Class B shares into another class) in respect of such Class B shares, except (i)
as provided in the Fund's Prospectus or Statement of Additional Information in
effect on September 30, 1998, or (ii) as required by a change in the 1940 Act
and the rules and regulations thereunder, the Conduct Rules of the NASD or any
order of any court or governmental agency enacted, issued or promulgated after
September 30, 1998.
C. The following is a list of the holders of 5% or more of any class of a Fund's
outstanding shares as of September 30, 1998:
<TABLE>
<CAPTION>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
<S> <C> <C> <C> <C>
Pioneer America Income Trust Contra Costa Federal Credit Union A 691,406 5.53
1111 Pine Street
Martinez, CA 94553-1702
MLPF&S for the Sole Benefit of its Customers B 248,354 12.96
Mutual Fund Administration C 71,143 5.75
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pioneer Balanced Fund MLPF&S for the Sole Benefit of its Customers C 51,982 13.95
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
2
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
31,983
City of Lawrence, MA C 8.58
Trust Funds
200 Common Street
Lawrence, MA 01840-1517
Pioneer Capital Growth Fund MLPF&S for the Sole Benefit of its Customers B 5,410,006 17.08
Mutual Fund Administration C 1,204,991 43.55
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
U.S. Trust Co. of the Pacific NW, Y 110,816 52.98
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 96,475 46.12
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
Pioneer Emerging Markets Fund MLPF&S for the Sole Benefit of its Customers A 3,510,818 37.08
Mutual Fund Administration B 1,107,816 24.96
4800 Deer Lake Drive East, 2nd Floor C 486,264 45.93
Jacksonville, FL 32246-6484
U.S. Trust Co. of the Pacific NW, Y 66,572 49.91
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 66,300 49.71
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
Pioneer Equity-Income Fund MLPF&S for the Sole Benefit of its Customers B 626,486 6.23
Mutual Fund Administration C 125,467 13.86
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
3
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
52,930
U.S. Trust Co. of the Pacific NW, Y 52.41
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 43,326 42.90
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
MLPF&S for the Sole Benefit of its Customers A 2,019,493 19.24
Mutual Fund Administration B 507,740 11.29
4800 Deer Lake Drive East, 2nd Floor C 327,061 33.19
Jacksonville, FL 32246-6484
Wendel & Co. Y 163,317 63.37
One Wall Street
New York, NY 10005-2500
U.S. Trust Co. of the Pacific NW, Y 46,437 18.01
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 45,585 17.68
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
MLPF&S for the Sole Benefit of its Customers B 332,915 7.12
Mutual Fund Administration C 222,485 29.30
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Donaldson Lufkin Jenrette B 91,070 6.71
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
4
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
80,668
MLPF&S for the Sole Benefit of its Customers C 14.67
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pioneer Growth Shares Tommie D. Thompson A 3,366,071 6.20
Trustee for Mutual of Omaha 401K
Long-Term Savings Plan
Mutual of Omaha Plaza
Omaha, NE 68175-0001
MLPF&S for the Sole Benefit of its Customers B 3,566,834 13.40
Mutual Fund Administration C 2,012,575 30.52
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
U.S. Trust Co. of the Pacific NW, Y 129,463 57.73
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 92,807 41.38
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
Pioneer Indo-Asia Fund MLPF&S for the Sole Benefit of its Customers A 50,630 5.93
Mutual Fund Administration B 289,682 34.77
4800 Deer Lake Drive East, 2nd Floor C 6,644 10.16
Jacksonville, FL 32246-6484
Pioneer Funds Distributor, Inc. C 12,887 19.72
60 State Street
Boston, MA 02109-1800
Ranbir S. Sodhi & Santosh Sodhi Jt Ten C 5,061 7.74
Box 36
St. Johnsville, NY 13452-0036
BHC Securities, Inc. C 4,622 7.07
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
5
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
90,431
Pioneer Intermediate Tax-Free MLPF&S for the Sole Benefit of its Customers B 10,743 29.45
Fund Mutual Fund Administration C 32.03
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pioneer Funds Distributor, Inc. C 10,552 31.46
60 State Street
Boston, MA 02109-1800
Alice M. Latella and C 4,920 14.67
Philip A. Latella Jt Ten
1009 Beckwith Place
Utica, NY 13501-5317
Pioneer International Growth MLPF&S for the Sole Benefit of its Customers B 511,856 13.96
Fund Mutual Fund Administration C 129,089 26.32
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Prudential Securities Inc. C 62,389 12.72
For benefit of Mark J. Schneider
SEP DTD 01/01/93
345 Cedar Avenue
Highland Park, IL 60035-4139
James Schneider and Phyllis Schneider C 37,763 7.69
Trustees of the James Schneider
Family Trust DTD 03/04/83
2265 Cedar Court
Northbook, IL 60062-6927
Pioneer Micro-Cap Fund MLPF&S for the Sole Benefit of its Customers A 197,734 6.72
Mutual Fund Administration B 766,088 17.66
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Donaldson Lufkin Jenrette A 154,552 5.25
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Pioneer Mid-Cap Fund MLPF&S for the Sole Benefit of its Customers B 35,071 9.46
Mutual Fund Administration C 9,157 8.81
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
6
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
16,934
J.C. Bradford & Co., Custodian C 16.29
For benefit of DCIP Limited Partners II
330 Commerce Street
Nashville, TN 37201-1805
PGI Rollover IRA C 11,554 11.11
Custodian for Kyung Ja Lee
106 Samsung Seacho Villa
1641-10 Seacho Dong
Seacho KS, Seoul 137-071
Korea
PGI Rollover IRA C 11,554 11.11
Custodian for Won R. Lee
106 Samsung Seacho Villa
1641-10 Seacho Dong
Seacho KS, Seoul 137-071
Korea
Pioneer Real Estate Shares MLPF&S for the Sole Benefit of its Customers B 1,141,664 25.38
Mutual Fund Administration C 286,329 26.44
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-648
U.S. Trust Co. of the Pacific NW, Y 64,890 57.42
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 31,126 27.54
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
The Pioneer Group, Inc. (Serp) Y 16,981 15.02
Howard Johnson & Co.
15 Exchange Place, Suite 400
Jersey City, NJ 07302-3912
Pioneer Short-Term Income U.S. Trust Co. of the Pacific NW, Y 55,842 55.16
Trust Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
7
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
45,381
U.S. Trust Co. of the Pacific NW, Y 44.83
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
MLPF&S for the Sole Benefit of its Customers B 494,948 20.20
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-648
Pioneer Small Company Fund MLPF&S for the Sole Benefit of its Customers A 807,819 5.25
Mutual Fund Administration B 2,285,699 13.41
4800 Deer Lake Drive East, 2nd Floor C 274,808 24.51
Jacksonville, FL 32246-648
Pioneer Tax-Free Income Fund MLPF&S for the Sole Benefit of its Customers B 84,959 11.73
Mutual Fund Administration C 48,855 19.93
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Salomon Smith Barney Inc. C 90,343 36.86
388 Greenwich Street
New York, NY 10013-2375
Raffaella R. Buonocore Trustee of the C 14,139 5.76
Raffaella R. Buonocore Living
Trust Dated 04/25/97
1720 Walnut Street
Chester, PA 19013-5725
Pioneer II MLPF&S for the Sole Benefit of its Customers C 32,679 17.47
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pioneer World Equity Fund Deutsche Morgan Grenfell A 105,791 7.12
C/F Frankfurt Reinvest Account
1251 Avenue of the Americas
New York, NY 10020-1104
MLPF&S for the Sole Benefit of its Customers A 79,696 5.37
Mutual Fund Administration B 43,850 6.37
4800 Deer Lake Drive East, 2nd Floor C 13,450 14.60
Jacksonville, FL 32246-6484
</TABLE>
8
<PAGE>
D. The following performance information replaces the existing performance
information under "Investment Results" in the applicable Fund's Statement of
Additional Information.
INVESTMENT RESULTS
7-DAY YIELDS -
CASH RESERVES FUND
PERIOD ENDED 6/30/98 PERIOD ENDED 6/30/98
CLASS OF SHARES YIELD (%) EFFECTIVE YIELD (%)
Class A Shares 4.82 4.93
Class B Shares 3.88 3.96
Class C Shares 4.00 4.08
30-DAY YIELDS -
SHORT-TERM INCOME TRUST
PERIOD ENDED 5/31/98
PERIOD ENDED 5/31/98 YIELD (%)
CLASS OF SHARES YIELD (%) (ABSENT EXPENSE LIMITATIONS)
Class A Shares 4.71 4.38
Class B Shares 3.89 3.63
Class Y Shares 5.24 5.20
30-DAY YIELDS - AMERICA
INCOME TRUST AND INTERMEDIATE
TAX-FREE FUND
FUND/CLASS OF SHARES PERIOD ENDED 6/30/98
PIONEER AMERICA INCOME PERIOD ENDED 6/30/98 YIELD (%)
TRUST YIELD (%) (ABSENT EXPENSE LIMITATIONS)
Class A Shares 5.25 5.05
Class B Shares 4.77 4.59
Class C Shares 4.82 4.64
PIONEER INTERMEDIATE
TAX-FREE FUND
Class A Shares 3.31 3.30
Class B Shares 2.71 2.61
Class C Shares 2.30 2.49
9
<PAGE>
30-DAY YIELDS - REAL
ESTATE SHARES, BALANCED
FUND AND TAX-FREE INCOME FUND
FUND/CLASS OF SHARES PERIOD ENDED 6/30/98
PIONEER REAL ESTATE SHARES YIELD (%)
Class A Shares 2.97
Class B Shares 2.48
Class C Shares 2.48
Class Y Shares 3.91
PIONEER BALANCED FUND
Class A Shares 2.33
Class B Shares 1.78
Class C Shares 1.95
PIONEER TAX-FREE
INCOME FUND
Class A Shares 3.84
Class B Shares 3.29
Class C Shares 3.34
TAX-EQUIVALENT YIELDS
(39.6% FEDERAL INCOME TAX
BRACKET) - INTERMEDIATE
TAX-FREE FUND AND TAX-FREE
INCOME FUND
FUND/CLASS OF SHARES PERIOD ENDED 6/30/98
PIONEER INTERMEDIATE PERIOD ENDED 6/30/98 YIELD (%)
TAX-FREE FUND YIELD (%) (ABSENT EXPENSE LIMITATIONS)
Class A Shares 5.49 5.46
Class B Shares 4.48 4.32
Class C Shares 3.81 4.12
PIONEER TAX-FREE
INCOME FUND
Class A Shares 6.35 N/A
Class B Shares 5.45 N/A
Class C Shares 5.53 N/A
10
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
JUNE 30, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER FUND
Class A Shares 24.28 19.36 14.99 13.34 2/13/28
Class B Shares 26.69 N/A N/A 30.08 7/1/96
Class C Shares 30.68 N/A N/A 30.91 7/1/96
PIONEER INTERMEDIATE
TAX-FREE FUND
Class A Shares 2.84 3.79 6.80 5.95 10/22/86
Class B Shares 2.72 N/A N/A 4.88 4/29/94
Class C Shares 5.51 N/A N/A 3.47 1/31/96
PIONEER AMERICA INCOME
TRUST
Class A Shares 4.22 4.52 7.10 7.16 6/1/88
Class B Shares 4.31 N/A N/A 5.86 4/29/94
Class C Shares 8.32 N/A N/A 4.79 1/31/96
PIONEER REAL ESTATE SHARES
Class A Shares 0.20 N/A N/A 9.92 10/25/93
Class B Shares 1.58 N/A N/A 17.15 1/31/96
Class C Shares 5.59 N/A N/A 18.13 1/31/96
Class Y Shares N/A N/A N/A -5.57 4/9/98
PIONEER GROWTH SHARES
Class A Shares 32.82 23.61 19.92 10.59 5/17/68
Class B Shares 35.73 N/A N/A 34.92 4/28/95
Class C Shares 39.84 N/A N/A 39.27 1/31/96
Class Y Shares N/A N/A N/A 2.69 4/30/98
PIONEER BALANCED FUND
Class A Shares 7.60 8.71 9.93 8.81 5/17/68
Class B Shares 7.80 N/A N/A 12.06 4/28/95
Class C Shares 11.95 N/A N/A 11.00 1/31/96
PIONEER TAX-FREE INCOME
FUND
Class A Shares 3.58 4.83 7.70 6.60 1/18/77
Class B Shares 3.71 N/A N/A 5.74 4/28/95
Class C Shares 7.69 N/A N/A 5.20 1/31/96
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
MAY 31, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER SHORT-TERM
INCOME TRUST
Class A Shares 3.43 4.59 N/A 4.79 8/10/92
Class B Shares 3.09 N/A N/A 4.74 4/4/94
Class Y Shares N/A N/A N/A 0.53 4/9/98
PIONEER EMERGING
MARKETS FUND
Class A Shares -14.09 N/A N/A 3.45 6/23/94
Class B Shares -12.80 N/A N/A 3.59 6/23/94
Class C Shares -9.47 N/A N/A 4.16 1/31/96
Class Y Shares N/A N/A N/A -12.34 4/9/98
PIONEER INTERNATIONAL
GROWTH FUND
Class A Shares 0.17 12.93 N/A 14.09 3/25/93
Class B Shares 2.06 N/A N/A 7.27 4/4/94
Class C Shares 5.57 N/A N/A 8.38 1/31/96
PIONEER MICRO-CAP FUND
Class A Shares 5.47 N/A N/A 8.32 2/28/97
Class B Shares 7.07 N/A N/A 9.75 2/28/97
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
APRIL 30, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER EUROPE FUND
Class A Shares 42.54 22.63 N/A 16.94 4/2/91
Class B Shares 46.07 N/A N/A 24.66 4/4/94
Class C Shares 50.29 N/A N/A 33.31 1/31/96
Class Y Shares N/A N/A N/A N/A 7/2/98
PIONEER INDO-ASIA FUND
Class A Shares -10.29 N/A N/A -13.20 6/23/94
Class B Shares -9.03 N/A N/A -13.20 6/23/94
Class C Shares -5.26 N/A N/A -5.94 1/31/96
PIONEER CAPITAL GROWTH FUND
Class A Shares 24.06 18.35 N/A 17.64 7/25/90
Class B Shares 26.73 N/A N/A 19.91 4/4/94
Class C Shares 30.67 N/A N/A 17.71 1/31/96
Class Y Shares N/A N/A N/A N/A 7/2/98
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
APRIL 30, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER EQUITY-INCOME FUND
Class A Shares 31.94 16.54 N/A 16.66 7/25/90
Class B Shares 34.89 N/A N/A 21.12 4/4/94
Class C Shares 38.88 N/A N/A 23.49 1/31/96
Class Y Shares N/A N/A N/A N/A 7/2/98
PIONEER GOLD SHARES
Class A Shares -19.88 -3.69 N/A -2.74 7/25/90
Class B Shares -19.05 N/A N/A -8.98 4/4/94
Class C Shares -15.67 N/A N/A -18.80 1/31/96
PIONEER SMALL COMPANY FUND
Class A Shares 28.49 N/A N/A 22.98 11/2/95
Class B Shares 31.32 N/A N/A 24.18 11/2/95
Class C Shares 35.40 N/A N/A 22.65 1/31/96
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
MARCH 31, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER II
Class A Shares 28.19 17.10 14.35 15.23 9/30/69
Class B Shares 30.65 N/A N/A 25.96 7/1/96
Class C Shares 34.61 N/A N/A 27.79 7/1/96
PIONEER MID-CAP FUND
Class A Shares 34.78 10.92 12.99 13.40 11/19/82
Class B Shares 37.12 N/A N/A 17.02 2/1/96
Class C Shares 42.65 N/A N/A 18.90 2/1/96
</TABLE>
E. The financial statements and report of independent public
accountants thereon for the period set forth below are also incorporated by
reference into the relevant Statement of Additional Information from the Fund's
semiannual report:
<TABLE>
<CAPTION>
NAME OF FUND ACCESSION NUMBER PERIOD ENDING
<S> <C> <C>
Pioneer II 0000078758-98-000005 March 31, 1998
Pioneer Mid-Cap Fund 0000706155-98-000002 March 31, 1998
Pioneer Small Company Fund 0000949275-98-000006 April 30, 1998
Pioneer Short-Term Income Trust 0000887228-98-000007 May 31, 1998
Pioneer Emerging Markets Fund 0000921023-98-000009 May 31, 1998
Pioneer International Growth Fund 0000893660-98-000011 May 31, 1998
Pioneer Micro-Cap Fund 0001025187-98-000009 May 31, 1998
Pioneer Fund 0000078713-98-000009 June 30, 1998
Pioneer Intermediate Tax Free Fund 0000798172-98-000008 June 30, 1998
Pioneer Cash Reserves Fund 0000812195-98-000012 June 30, 1998
Pioneer America Income Trust 0000831120-98-000013 June 30, 1998
Pioneer Real Estate Shares 0000908996-98-000013 June 30, 19/98
Pioneer Balanced Fund 0000069405-98-000010 June 30, 1998
Pioneer Tax-Free Income Fund 0000202679-98-000010 June 30, 1998
</TABLE>
g:\edgar\sai\current\stickers\1098sup.doc
13
<PAGE>
E X H I B I T A
PIONEER INTERMEDIATE TAX-FREE FUND
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A, Class B and Class C Shares
APRIL 30, 1998
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus, dated April 30, 1998, of Pioneer
Intermediate Tax-Free Fund (the "Fund"). A copy of the Prospectus can be
obtained free of charge by calling Shareholder Services at 1-800-225-6292 or by
written request to the Fund at 60 State Street, Boston, Massachusetts 02109. The
most recent Annual Report to Shareholders is attached to this Statement of
Additional Information and is hereby incorporated in this Statement of
Additional Information by reference. Prior to January 3, 1994, the Fund was
known as Pioneer Municipal Bond Fund.
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions................................... 2
2. Management of the Fund................................................. 4
3. Investment Adviser..................................................... 8
4 Underwriting Agreement and Distribution Plans.......................... 9
5. Shareholder Servicing/Transfer Agent................................... 11
6. Custodian.............................................................. 12
7. Principal Underwriter.................................................. 12
8. Independent Public Accountants......................................... 13
9. Portfolio Transactions................................................. 13
10. Tax Status............................................................. 14
11. Description of Shares.................................................. 17
12. Certain Liabilities.................................................... 17
13. Determination of Net Asset Value....................................... 18
14. Systematic Withdrawal Plan............................................. 18
15. Letter of Intent....................................................... 19
16. Investment Results..................................................... 19
17. Financial Statements................................................... 23
Appendix A - Description of Municipal Bonds and
Bond Ratings........................................................... 24
Appendix B - Description of Certain Other Investments.................. 27
Appendix C - Performance and Statistics................................ 28
Appendix D - Other Pioneer Information................................. 41
-------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES AND RESTRICTIONS
The Prospectus identifies the investment objective and the principal
investment policies of the Fund. Additional investment policies and a further
description of some of the policies described in the Prospectus appear below.
This Statement of Additional Information should be read in conjunction with the
Prospectus. Capitalized terms not otherwise defined herein have the meaning
given to them in the Prospectus.
PORTFOLIO MANAGEMENT
The Fund intends to manage its portfolio fully by buying and selling
securities, as well as holding securities to maturity. In managing its portfolio
the Fund seeks to take advantage of market developments and yield disparities,
which may include use of the following strategies:
(1) shortening the average maturity of its portfolio in
anticipation of a rise in interest rates so as to minimize depreciation of
principal;
(2) lengthening the average maturity of its portfolio in
anticipation of a decline in interest rates so as to maximize tax-exempt
yield;
(3) selling one type of debt security (e.g., revenue bonds) and
buying another (e.g., general obligation bonds) when disparities arise in
the relative values of each; and
(4) changing from one debt security to an essentially similar debt
security when their respective yields appear distorted due to market
factors.
The Fund engages in portfolio trading if it believes a transaction net of
costs (including custodian charges) will help in achieving its investment
objective.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund has adopted certain
fundamental investment restrictions which may not be changed without the
affirmative vote of the holders of a majority of the Fund's outstanding shares.
As used in the Prospectus and this Statement of Additional Information, such
approval means the approval of the lesser of (i) the holders of 67% or more of
the Fund's shares represented at a meeting if the holders of more than 50% of
the outstanding shares are present in person or by proxy, or (ii) the holders of
more than 50% of the Fund's outstanding shares.
The Fund may not:
(1) Borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount not exceeding 10% of its
gross assets, or pledge, mortgage or hypothecate an amount of its assets
taken at market value which would exceed 15% of its gross assets, in each
case taken at the lower of cost or market value and subject to a 300% asset
coverage requirement;
(2) Underwrite securities issued by other persons except insofar
as the Fund may technically be deemed an underwriter under the Securities
Act of 1933 in selling a portfolio security;
(3) Purchase or sell real estate (including limited partnership
interests, but excluding Municipal Bonds secured by real estate or
interests therein), interests in oil, gas or mineral leases or
2
<PAGE>
exploration
or development programs, commodities or commodity contracts (except
contracts for the future acquisition or delivery of fixed-income
securities) in the ordinary course of its business;
(4) Make loans to other persons except through the use of
repurchase agreements. The purchase of debt securities by the Fund pursuant
to its investment objective and other investment policies shall not be
considered loans for purposes of this restriction. Not more than 10% of its
total assets will be invested in repurchase agreements maturing in more
than seven days;
(5) Purchase the securities of any issuer if such purchase, at the
time thereof, would cause more than 5% of its total assets taken at market
value to be invested in the securities of such issuer, other than
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities; or
(6) Purchase any securities or evidences of interest therein on
margin, except that the Fund may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of securities;
The Fund will not purchase securities while any borrowings are
outstanding.
Although the Fund may invest more than 25% of its assets in
industrial development revenue bonds, the Fund will not purchase a security
if, as a result, more than 25% of the Fund's assets would be in industrial
revenue bonds where payment of principal and interest is the ultimate
responsibility of issuers in the same industry.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following
restrictions have been designated as non-fundamental and may be changed by
a vote of the Fund's Board of Trustees without approval of shareholders.
The Fund may not:
(a) Sell any security which the Fund does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to obtain
securities without payment of further consideration equivalent in kind and
amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions; or
(b) Invest in any security, including any repurchase agreement maturing in
more than seven days, which is illiquid, if more than 15% of the total
assets of the Fund, taken at market value, would be invested in such
securities.
In addition, in connection with the offering of its shares in certain
jurisdictions, the Fund has agreed to adopt certain additional investment
restrictions which are not fundamental and may be changed by a vote of the
Fund's Board of Trustees. The Fund has agreed (1) that (i) short sales at any
one time shall not exceed 25% of the net equity of the Fund and (ii) the value
of any one issuer in which the Fund is short may not exceed the lesser of 2% of
the value of the Fund's net assets or 2% of the securities of any class of any
issuer; and (2) not to pledge, mortgage or hypothecate its portfolio securities
if the percentage of securities so pledged, mortgaged or hypothecated plus the
percentage of the sales charge on its shares would exceed 10%. In addition,
short sales may only be made in securities fully listed on a national stock
exchange.
3
<PAGE>
PERCENTAGE RESTRICTIONS
If a percentage restriction on investment or utilization of assets set
forth above or in the Prospectus is adhered to at the time an investment is made
or assets are so utilized, a later change in percentage resulting from changes
in the value of the Fund's portfolio securities will not be considered a
violation of a policy.
The Fund has adopted the following operating policies which are not
fundamental and which may be changed without shareholder approval. The Fund may
enter into repurchase agreements (a purchase of and a simultaneous commitment to
resell a security at an agreed upon price on an agreed upon date) with
broker-dealers and member banks of the Federal Reserve System and only if
collateralized by U.S. government securities. If the vendor of a repurchase
agreement fails to pay the sum agreed to on the agreed upon delivery date, the
Fund would have the right to sell the U.S. government securities, but might
incur a loss in so doing and in certain cases may not be permitted to sell the
U.S. government securities. As noted in Non-fundamental Investment Restriction
(b), the Fund may not invest more than 15% of its assets in illiquid securities
including repurchase agreements maturing in more than seven days. The Fund does
not anticipate investing more than 5% of its total assets in repurchase
agreements maturing in more than seven days in the foreseeable future.
For the purposes of the Fund's investment restrictions, the issuer of a
tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of the principal of, and interest on, the security.
2. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the affairs of
the Fund. The officers of the Fund are responsible for the Fund's operations.
The Trustees and executive officers of the Fund are listed below, together with
their principal occupations during the past five years. An asterisk indicates
those Trustees who are interested persons of the Fund within the meaning of the
1940 Act.
JOHN F. COGAN, JR.*, CHAIRMAN OF THE BOARD, PRESIDENT AND TRUSTEE,
DOB: JUNE 1926
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneering Management Corporation
("PMC") and Pioneer Funds Distributor, Inc. ("PFD"); Director of Pioneering
Services Corporation ("PSC"), Pioneer Capital Corporation ("PCC"), Pioneer Real
Estate Advisors, Inc., Pioneer Forest, Inc., Pioneer Explorer, Inc., Pioneer
Management (Ireland) Ltd. ("PMIL") and Closed Joint Stock Company
"Forest-Starma"; President and Director of Pioneer Metals and Technology, Inc.
("PMT"), Pioneer International Corp. ("PIntl"), Pioneer First Russia, Inc.
("First Russia") and Pioneer Omega, Inc. ("Omega"); Chairman of the Board and
Director of Pioneer Goldfields Limited ("PGL") and Teberebie Goldfields Limited;
Chairman of the Supervisory Board of Pioneer Fonds Marketing, GmbH, Pioneer
First Polish Investment Fund Joint Stock Company, S.A. and Pioneer Czech
Investment Company, A.S.; Chairman, President and Trustee of all of the Pioneer
mutual funds; Director of Pioneer Global Equity Fund Plc, Pioneer Global Bond
Fund Plc, Pioneer DM Cashfonds Plc, Pioneer European Equity Fund Plc, Pioneer
Central & Eastern Europe Fund Plc and Pioneer US Real Estate Fund Plc; and
Partner, Hale and Dorr LLP (counsel to PGI and the Fund).
MARY K. BUSH, TRUSTEE, DOB: APRIL 1948
4201 CATHEDRAL AVENUE, NW, WASHINGTON, DC 20016
President, Bush & Co., an international financial advisory firm;
Director and/or Trustee of Mortgage Guaranty Insurance Corporation, Novecon
Management Company, Hoover Institution, Folger Shakespeare Library, March of
Dimes, Project 2000, Inc. (not-for-profit educational organization), Small
Enterprise Assistance Fund and Wilberforce University; Advisory Board member,
Washington Mutual
4
<PAGE>
Investors Fund, a registered investment company; and Trustee of all of the
Pioneer mutual funds, except Pioneer Variable Contracts Trust.
RICHARD H. EGDAHL, M.D., TRUSTEE, DOB: DECEMBER 1926
BOSTON UNIVERSITY HEALTH POLICY INSTITUTE, 53 BAY STATE ROAD, BOSTON, MA 02115
Alexander Graham Bell Professor of Health Care Entrepreneurship, Boston
University; Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; University Professor, Boston
University; Director, Boston University Health Policy Institute and Boston
University Program for
Health Care Entrepreneurship; Director, CORE (management of workers'
compensation and disability costs-NASDAQ); Director, WellSpace (provider of
complementary health care); Trustee, Boston Medical Center; Honorary Trustee,
Franciscan Children's Hospital; and Trustee of all of the Pioneer mutual funds.
MARGARET B.W. GRAHAM, TRUSTEE, DOB: MAY 1947
THE KEEP, P.O. BOX 110, LITTLE DEER ISLE, ME 04650
Founding Director, The Winthrop Group, Inc. (consulting firm); Manager of
Research Operations, Xerox Palo Alto Research Center, from 1991 to 1994;
Professor of Operations Management and Management of Technology and Associate
Dean, Boston University School of Management, from 1989 to 1993; and Trustee of
all of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, TRUSTEE, DOB: JULY 1917
6363 WATERWAY DRIVE, FALLS CHURCH, VA 22044
Professor Emeritus, George Washington University; Director, American
Productivity and Quality Center; Adjunct Scholar, American Enterprise Institute;
Economic Consultant; and Trustee of all of the Pioneer mutual funds, except
Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, TRUSTEE, DOB: MAY 1948
ONE BOSTON PLACE, SUITE 2635, BOSTON, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm); Trustee
of Boston Medical Center; Member of the Board of Governors of the Investment
Company Institute; and Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, TRUSTEE AND EXECUTIVE VICE PRESIDENT, DOB: FEBRUARY 1944
Executive Vice President and a Director of PGI; President, Chief Investment
Officer and a Director of PMC; Director of PFD, PCC, PIntl, First Russia, Omega,
Pioneer SBIC Corporation ("Pioneer SBIC"), PMIL, Pioneer Global Equity Fund Plc,
Pioneer Global Bond Fund Plc, Pioneer DM Cashfonds Plc, Pioneer European Equity
Fund Plc, Pioneer Central & Eastern Europe Fund Plc and Pioneer US Real Estate
Fund Plc; and Executive Vice President and Trustee of all of the Pioneer mutual
funds.
STEPHEN K. WEST, TRUSTEE, DOB: SEPTEMBER 1928
125 BROAD STREET, NEW YORK, NY 10004
Of Counsel to Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus
Funds (mutual funds); and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, TRUSTEE, DOB: JUNE 1936
ONE NORTH ADGERS WHARF, CHARLESTON, SC 29401
President, John Winthrop & Co., Inc. (private investment firm); Director of
NUI Corp. (energy sales, services and distribution); and Trustee of all of the
Pioneer mutual funds, except Pioneer Variable Contracts Trust.
5
<PAGE>
WILLIAM H. KEOUGH, TREASURER, DOB: APRIL 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIntl, PMT, PGL, First Russia, Omega and
Pioneer SBIC; and Treasurer of all of the Pioneer mutual funds.
JOSEPH P. BARRI, SECRETARY, DOB: AUGUST 1946
Secretary of PGI and most of its subsidiaries; Secretary of all of the
Pioneer mutual funds; and Partner, Hale and Dorr LLP.
ERIC W. RECKARD, ASSISTANT TREASURER, DOB: JUNE 1956
Manager of Business Planning and Internal Audit of PMC since September
1996; Manager of Fund Accounting of PMC since May 1994; Manager of Auditing,
Compliance and Business Analysis for PGI prior to May 1994; and Assistant
Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, ASSISTANT SECRETARY, DOB: MARCH 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant
Secretary of PMC, PIntl, PGL, First Russia, Omega and all of the Pioneer mutual
funds; Assistant Clerk of PFD and PSC: and junior partner of Hale and Dorr LLP
prior to 1995.
KATHLEEN D. MCCLASKEY, VICE PRESIDENT, DOB: JANUARY 1952
Vice President of PMC.
The Fund's Amended and Restated Declaration of Trust, dated December 7,
1993 (the "Declaration"), provides that the holders of two-thirds of its
outstanding shares may vote to remove a Trustee of the Fund at any meeting of
shareholders. See "Description of Shares" below. The business address of all
officers is 60 State Street, Boston, Massachusetts 02109.
All of the outstanding capital stock of PFD, PMC and PSC is owned, directly
or indirectly, by PGI, a publicly owned Delaware corporation. PMC, the Fund's
investment adviser, serves as the investment adviser for the Pioneer mutual
funds listed below and manages the investments of certain institutional
accounts.
The table below lists all the Pioneer mutual funds currently offered to the
public and the investment adviser and principal underwriter for each fund.
Investment Principal
FUND NAME ADVISER UNDERWRITER
Pioneer World Equity Fund PMC PFD
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Mid-Cap Fund PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Small Company Fund PMC PFD
Pioneer Independence Fund PMC Note 1
Pioneer Micro-Cap Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Balanced Fund PMC PFD
6
<PAGE>
Pioneer Equity-Income Fund PMC PFD
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares PMC Note 2
Pioneer Variable Contracts Trust PMC Note 3
Note 1 This fund is available to the general public only through Pioneer
Independence Plans, a systematic investment plan sponsored by PFD.
Note 2 This fund is a closed-end fund.
Note 3 This is a series of ten separate portfolios designed to provide
investment vehicles for the variable annuity and variable life insurance
contracts of various insurance companies or for certain qualified pension
plans.
To the knowledge of the Fund, no officer or Trustee of the Fund owned 5% or
more of the issued and outstanding shares of PGI as of the date of this
Statement of Additional Information, except Mr. Cogan who then owned
approximately 14% of such shares. At March 31, 1998, the Trustees and officers
of the Fund owned beneficially in the aggregate less than 1% of the outstanding
shares of the Fund. As of such date, no shareholder owned more than 5% of the
outstanding Class A or Class B shares of the Fund; PFD, 60 State Street, Boston,
MA 02109-1800 owned approximately 70.67% (10,372) of the outstanding Class C
shares of the Fund; Mazie M. Schaackey, 421 S. Curtis Road, Boise, ID 83705-1070
owned approximately 9.38% (1,378) of the outstanding Class C shares of the Fund;
and Merrill Lynch Pierce Fenner & Smith, Inc. for the Sole Benefit of its
Customers, Mutual Fund Administration, 4800 Deer Lake Drive East, Jacksonville,
FL 32246-6486 owned approximately 6.65% (964) of the outstanding Class C shares
of the Fund.
COMPENSATION OF OFFICERS AND TRUSTEES
The Fund pays no salaries or compensation to any of its officers. The Fund
pays an annual trustees' fee to each Trustee who is not affiliated with PGI,
PMC, PFD or PSC consisting of two components: (a) a base fee of $500 and (b) a
variable fee, calculated on the basis of the average net assets of the Fund. In
addition, the Fund pays a per meeting fee of $100 to each Trustee who is not
affiliated with PGI, PMC, PFD or PSC and pays an annual trustees' fee of $500
plus expenses to each Trustee affiliated with PGI, PMC, PFD or PSC. The Fund
also pays an annual committee participation fee to Trustees who serve as members
of committees established to act on behalf of one or more of the of Pioneer
mutual funds. Committee fees will be allocated to the Fund on the basis of the
Fund's average net assets. Each Trustee who is a member of the Audit Committee
for the Pioneer mutual funds receives an annual fee equal to 10% of the
aggregate annual trustees' fee, except the Committee Chair who receives an
annual trustees' fee equal to 20% of the aggregate annual trustees' fee. Members
of the Pricing Committee for the Pioneer mutual funds, as well as any other
committee which renders material functional services to the Boards of Trustees
for the Pioneer mutual funds, receives an annual fee equal to 5% of the annual
trustees' fee, except the Committee Chair who receives an annual trustees' fee
equal to 10% of the annual trustees' fee. Each Trustee who is not affiliated
with PGI, PMC, PFD or PSC also receives $375 per meeting for
7
<PAGE>
attendance at meetings of the Non-Interested Trustees Committee, except for
the Committee Chair who receives an additional $375 per meeting. Any such fees
paid to interested Trustees are reimbursed to the Fund under its management
contract.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Fund for the year ended December 31, 1997:
<TABLE>
<CAPTION>
PENSION OR RETIREMENT TOTAL COMPENSATION FROM
BENEFITS ACCRUED AS THE FUND AND OTHER
AGGREGATE PART OF FUND EXPENSES PIONEER MUTUAL FUNDS
COMPENSATION FROM
NAME OF TRUSTEE THE FUND
<S> <C> <C> <C>
John F. Cogan, Jr. $ 500 $0 $ 12,000
Mary K. Bush 892 0 30,000
Richard H. Egdahl, M.D. 1,797 0 62,000
Margaret B.W. Graham 1,797 0 60,000
John W. Kendrick 1,667 0 55,800
Marguerite A. Piret 2,058 0 80,000
David D. Tripple 500 0 12,000
Stephen K. West 1,789 0 63,800
John Winthrop 2,016 0 69,000
------- - --------
Totals $13,015 $0 $444,600
</TABLE>
3. INVESTMENT ADVISER
The Fund has contracted with PMC, 60 State Street, Boston, Massachusetts
02109, to act as its investment adviser. The term of the contract is one year
and is renewable annually by the vote of a majority of the Board of Trustees of
the Fund (including a majority of the Board of Trustees who are not parties to
the contract or interested persons of any such parties) cast in person at a
meeting called for the purpose of voting on such renewal. This contract
terminates if assigned and may be terminated without penalty by either party by
vote of its Board of Directors or Trustees or a majority of the Fund's
outstanding voting securities and the giving of 60 days' written notice.
Pursuant to the management contract, PMC will not be liable for any error of
judgment or mistake of law or for any loss sustained by reason of the adoption
of any investment policy or the purchase, sale or retention of any securities on
the recommendation of PMC. PMC, however, is not protected against liability by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under the management contract.
As compensation for its management services and expenses incurred, PMC is
entitled to a management fee at the rate of 0.50% per annum of the Fund's
average daily net assets. The fee is normally computed daily and paid monthly.
On an interim basis, PMC has agreed not to impose all or a portion of its
management fee and to make other arrangements, if necessary, to reduce Class A
expenses to 1.00% of the average daily net assets attributable to Class A
shares. The portion of Fund-wide expenses attributable to Class B and Class C
shares will be reduced only to the extent such expenses are reduced for Class A
shares. PMC's agreement is voluntary and temporary and may be revised or
terminated at any time.
Pursuant to the expense limitation discussed above, during the fiscal years
ended December 31, 1997, 1996 and 1995, management fees were reduced by
$104,683, $87,136 and $89,114, respectively, resulting
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in actual management fees paid during those periods to PMC of $246,524,
$309, 407 and $319,383, respectively.
4. UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS
The Fund has entered into an underwriting agreement with PFD. The
underwriting agreement will continue from year to year if annually approved by
the Trustees. The underwriting agreement provides that PFD will bear any
distribution expenses not borne by the Fund.
PFD bears all expenses it incurs in providing services under the
underwriting agreement. Such expenses include compensation to its employees and
representatives and to securities dealers for distribution related services
performed for the Fund. PFD also pays certain expenses in connection with the
distribution of the Fund's shares, including the cost of preparing, printing and
distributing advertising or promotional materials, and the cost of printing and
distributing prospectuses and supplements to prospective shareholders. The Fund
bears the cost of registering its shares under federal and state securities
laws. The Fund and PFD have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Under the underwriting agreement, PFD will use its best efforts in rendering
services to the Fund.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under
the 1940 Act with respect to each class of shares (the "Class A Plan," "Class B
Plan" and "Class C Plan") (together, the "Plans").
CLASS A PLAN
Pursuant to the Class A Plan, the Fund may reimburse PFD for its
expenditures in financing any activity primarily intended to result in the sale
of Fund shares. Certain categories of such expenditures have been approved by
the Board of Trustees and are set forth in the Prospectus. See "Distribution
Plans" in the Prospectus. The expenses of the Fund pursuant to the Class A Plan
are accrued on a fiscal year basis and may not exceed, with respect to Class A
shares, the annual rate of 0.25% of the Fund's average annual net assets
attributable to Class A shares.
CLASS B PLAN
The Class B Plan provides that the Fund shall pay PFD, as the Fund's
distributor for its Class B shares, a daily distribution fee equal on an annual
basis to 0.75% of the Fund's average daily net assets attributable to Class B
shares and will pay PFD a service fee equal to 0.25% of the Fund's average daily
net assets attributable to Class B shares (which PFD will in turn pay to
securities dealers which enter into a sales agreement with PFD at a rate of up
to 0.25% of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class B shares. PFD will advance to dealers the first-year service fee at a
rate equal to 0.25% of the amount invested. As compensation therefor, PFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Dealers will become eligible for additional service
fees with respect to such shares commencing in the thirteenth month following
purchase. Dealers may from time to time be required to meet certain other
criteria in order to receive service fees. PFD or its affiliates are entitled to
retain all service fees payable under the Class B Plan for which there is no
dealer of record or for which qualification standards have not been met as
partial consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
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The purpose of distribution payments to PFD under the Class B Plan is to
compensate PFD for its distribution services with respect to Class B shares of
the Fund. PFD pays commissions to dealers as well as expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution related
expenses, including without limitation, the cost necessary to provide
distribution related services, or personnel, travel, office expenses and
equipment. The Class B Plan also provides that PFD will receive all CDSCs
attributable to Class B shares. (See "Distribution Plans" in the Prospectus.)
When a broker-dealer sells Class B shares and elects, with PFD's approval, to
waive its right to receive the commission normally paid at the time of the sale,
PFD may cause all or a portion of the distribution fees described above to be
paid to the broker-dealer.
CLASS C PLAN
The Class C Plan provides that the Fund will pay PFD, as the Fund's
distributor for its Class C shares, a distribution fee accrued daily and paid
quarterly, equal on an annual basis to 0.75% of the Fund's average daily net
assets attributable to Class C shares and will pay PFD a service fee equal to
0.25% of the Fund's average daily net assets attributable to Class C shares. PFD
will in turn pay to securities dealers which enter into a sales agreement with
PFD a distribution fee and a service fee at rates of up to 0.75% and 0.25%,
respectively, of the Fund's average daily net assets attributable to Class C
shares owned by investors for whom that securities dealer is the holder or
dealer of record. The service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. PFD will advance to dealers the first-year service fee at a
rate equal to 0.25% of the amount invested. As compensation therefor, PFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Commencing in the thirteenth month following a
purchase of Class C shares, dealers will become eligible for additional service
fees at a rate of up to 0.25% of the current value of the amount invested and
additional compensation at a rate of up to 0.75% of the net asset value of such
shares. Dealers may from time to time be required to meet certain other criteria
in order to receive service fees. PFD or its affiliates are entitled to retain
all service fees payable under the Class C Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class C Plan is to
compensate PFD for its distribution services with respect to the Class C shares
of the Fund. PFD pays commissions to dealers as well as expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution related
expenses, including, without limitation, the cost necessary to provide
distribution related services, or personnel, travel, office expenses and
equipment. The Class C Plan also provides that PFD will receive all CDSCs
attributable to Class C shares. (See "Distribution Plans" in the Prospectus.)
When a broker-dealer sells Class C shares and elects, with PFD's approval to
waive its right to receive the commission normally paid at the time of the sale,
PFD may cause all or a portion of the distribution fees described above to be
paid to the broker-dealer.
GENERAL
In accordance with the terms of the Plans, PFD provides to the Fund for
review by the Trustees a quarterly written report of the amounts expended under
the respective Plans and the purpose for which such expenditures were made. In
the Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, has any direct or indirect financial interest in
the operation of the Plans except to the extent that PFD and certain of its
employees may be deemed to have such an interest as a result of receiving a
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portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plans were adopted by a majority vote of the Board of Trustees,
including all of the Trustees who are not, and were not at the time they voted,
interested persons of the Fund, as defined in the 1940 Act (none of whom had or
have any direct or indirect financial interest in the operation of the Plans),
cast in person at a meeting called for the purpose of voting on the Plans. In
approving the Plans, the Trustees identified and considered a number of
potential benefits which the Plans may provide. The Board of Trustees believes
that there is a reasonable likelihood that the Plans will benefit the Fund and
its current and future shareholders. Under their terms, the Plans remain in
effect from year to year provided such continuance is approved annually by vote
of the Trustees in the manner described above. The Plans may not be amended to
increase materially the annual percentage limitation of average net assets which
may be spent for the services described therein without approval of the
shareholders of the Fund affected thereby, and material amendments of the Plans
must also be approved by the Trustees in the manner described above. A Plan may
be terminated at any time, without payment of any penalty, by vote of the
majority of the Trustees who are not interested persons of the Fund and who have
no direct or indirect financial interest in the operations of the Plan, or by a
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the respective class of the Fund. A Plan will automatically terminate in
the event of its assignment (as defined in the 1940 Act).
During the fiscal year ended December 31, 1997, the Fund incurred total
distribution fees pursuant to the Fund's Class A Plan, Class B Plan and Class C
Plan of $159,818, $28,341 and $2,297, respectively. Distribution fees were paid
by the Fund to PFD in reimbursement of or as compensation for expenses related
to servicing shareholder accounts and to compensate dealers and sales personnel.
Redemptions of each class of shares may be subject to a 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 four years of purchase are subject to a CDSC at declining rates beginning
at 3.0% 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%. During the fiscal year ended December 31, 1997, CDSCs in the amount of
$4,065 were paid to PFD.
5. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston, Massachusetts
02109, to act as shareholder servicing and transfer agent. This contract may be
terminated without penalty by either party upon 90 days' written notice.
Under the terms of its contract with the Fund, PSC services shareholder
accounts, and its duties include: (i) processing sales, redemptions and
exchanges of Fund shares; (ii) distributing dividends and capital gains
associated with Fund portfolio accounts; and (iii) maintaining account records
and responding to shareholder inquiries.
PSC receives an annual fee of $30.00 per Class A, Class B and Class C
shareholder account from the Fund as compensation for the services described
above. PSC is also reimbursed by the Fund for its out-of-pocket expenditures.
This fee is set at an amount determined by vote of a majority of the Trustees
(including a majority of the Trustees who are not parties to the contract with
PSC or interested persons of any such parties) to be comparable to fees for such
services being paid by other investment companies. The Fund may compensate
entities which have agreed to provide certain sub-accounting services such as
specific transaction processing and record keeping services. Any such payments
by the Fund would be in lieu of the per account fee which would otherwise be
paid by the Fund to PSC.
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6. CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, is the custodian (the "Custodian") of the Fund's assets. The Custodian's
responsibilities include safekeeping and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities, including
repurchase agreements, issued by the Custodian and may deal with the Custodian
as principal in securities transactions. Portfolio securities may be deposited
into the Federal Reserve-Treasury Department Book Entry System or the Depository
Trust Company.
7. PRINCIPAL UNDERWRITER
PFD, 60 State Street, Boston, Massachusetts 02109, serves as the principal
underwriter for the Fund in connection with the continuous offering of its
shares.
The Fund will not generally issue Fund shares for consideration other than
cash. At the Fund's sole discretion, however, it may issue Fund shares for
consideration other than cash in connection with an acquisition of portfolio
securities or a merger or other reorganization.
During the fiscal years ending December 31, 1997, 1996 and 1995, net
underwriting commissions retained by PFD were $5,138, $11,322 and $16,256,
respectively, in connection with its offering of Class A, Class B and Class C
shares. Commissions reallowed to dealers by PFD in the same periods were
$27,255, $207,180 and $116,073, respectively. See "Underwriting Agreement and
Distribution Plans" above for a description of the terms of the underwriting
agreement with PFD.
8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 225 Franklin Street, Boston, Massachusetts 02110, is
the Fund's independent public accountants, providing audit services, tax return
review, and assistance and consultation with respect to the preparation of
filings with the SEC.
9. PORTFOLIO TRANSACTIONS
Decisions relating to the purchase and sale of securities for the Fund, the
allocation of portfolio transactions and, where applicable, the negotiation of
commission rates are made by officers of PMC.
The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. PMC has complete freedom as to the
markets in and broker-dealers through which it seeks this result. Municipal
Bonds and other debt securities are traded principally in the over-the-counter
market on a net basis through dealers acting for their own accounts and not as
brokers. The cost of securities purchased from underwriters includes an
underwriter's commission or concession, and the prices at which securities are
purchased and sold from and to dealers include a dealer's markup or markdown.
PMC attempts to negotiate with underwriters to decrease the commission or
concession for the benefit of the Fund. PMC normally seeks to deal directly with
the primary market makers unless, in its opinion, better prices are available
elsewhere.
Subject to the requirement of seeking execution at the best available
price, securities may, as authorized by PMC's management contract, be bought
from or sold to dealers who furnish statistical research services and other
information or services to PMC and the Fund and/or other investment
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companies managed by PMC, or who sell shares of any of the Pioneer mutual
funds. Brokerage and research services may include advice concerning the value
of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; providing stock price quotation services; furnishing analyses,
manuals and reports concerning issuers, securities, economic factors and trends,
portfolio strategy, performance of accounts, comparative fund statistics and
credit rating service information; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). PMC
maintains a listing of broker-dealers who provide such services on a regular
basis. However, because it is anticipated that many transactions on behalf of
the Fund and other investment companies or accounts managed by PMC are placed
with broker-dealers (including broker-dealers on the listing) without regard to
the furnishing of such services, it is not possible to estimate the proportion
of such transactions directed to such dealers solely because such services were
provided.
The research received from broker-dealers may be useful to PMC in rendering
investment management services to the Fund as well as other investment companies
or other accounts managed by PMC, although not all such research may be useful
to the Fund. Conversely, such information provided by brokers or dealers who
have executed transaction orders on behalf of such other PMC clients may be
useful to PMC in carrying out its obligations to the Fund. The receipt of such
research has not reduced PMC's normal independent research activities; however,
it enables PMC to avoid the additional expenses which might otherwise be
incurred if it were to attempt to develop comparable information through its own
staff.
In addition to the Fund, PMC acts as investment adviser to other Pioneer
mutual funds and certain private accounts with investment objectives similar to
those of the Fund. As such, securities may frequently meet the investment
objectives of the Fund, such other funds and such private accounts. In such
cases, the decision to recommend a purchase to one fund or account rather than
another is based on a number of factors. The determining factors in most cases
are the amount of securities of the issuer then outstanding, the value of those
securities and the market for them. Other factors considered in the investment
recommendations include other investments which each fund or account presently
has in a particular industry and the availability of investment funds in each
fund or account.
It is possible that at times identical securities will be held by more than
one fund and/or account. However, positions in the same issue may vary and the
length of time that any fund or account may choose to hold its investment in the
same issue may likewise vary. To the extent that the Fund, another Pioneer
mutual fund or a private account managed by PMC seeks to acquire the same
security at about the same time, the Fund may not be able to acquire as large a
position in such security as it desires or it may have to pay a higher price for
the security. Similarly, the Fund may not be able to obtain as large an
execution of an order to sell or as high a price for any particular portfolio
security if PMC decides to sell on behalf of another account the same portfolio
security at the same time. On the other hand, if the same securities are bought
or sold at the same time by more than one fund or account, the resulting
participation in volume transactions could produce better executions for the
Fund or the account. In the event that more than one account purchases or sells
the same security on a given date, the purchases and sales will normally be made
as nearly as practicable on a pro rata basis in proportion to the amounts
desired to be purchased or sold by each.
The Trustees periodically review PMC's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
Fund.
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10. TAX STATUS
It is the Fund's policy to meet the requirements of Subchapter M of the
Code for qualification as a regulated investment company. These requirements
relate to the sources of the Fund's income, the diversification of its assets
and the distribution of its income to shareholders. If the Fund meets all such
requirements and distributes to its shareholders, in accordance with the Code's
timing requirements, all investment company taxable income and net capital gain,
if any, which it earns, the Fund will be relieved of the necessity of paying
federal income tax.
In order to qualify as a regulated investment company under Subchapter M,
the Fund must, among other things, derive at least 90% of its annual gross
income from interest, gains from the sale or other disposition of securities and
certain other income derived with respect to its business of investing in such
securities (the "90% income test") and satisfy certain annual distribution and
quarterly diversification requirements.
In accordance with its investment objective, the Fund invests its assets in
a manner which will provide as large a portion of tax-exempt income as is
consistent with the protection of shareholders' capital. Since the protection of
capital is an important aspect of the Fund's investment objective, the Fund may
from time to time invest a portion of its portfolio in short-term obligations
and may engage in transactions generating gains or income which is not
tax-exempt, e.G., purchase non-municipal securities, sell or lend portfolio
securities, enter into repurchase agreements, dispose of rights to when-issued
securities prior to issuance, acquire any debt obligation at a market discount,
or acquire certain stripped tax-exempt obligations or their coupons. The Fund's
distributions from such gains or income will not be "exempt-interest dividends"
and, accordingly, will be taxable.
The Code permits tax-exempt interest received by the Fund to flow through
as tax-exempt "exempt-interest dividends" to the Fund's shareholders, provided
that the Fund qualifies as a regulated investment company and at least 50% of
the value of the Fund's total assets at the close of each quarter of its taxable
year consists of tax-exempt obligations, i.e., obligations described in Section
103(a) of the Code. That part of the Fund's net investment income which is
attributable to interest from tax-exempt obligations and which is distributed to
shareholders will be designated by the Fund as an "exempt-interest dividend"
under the Code. Exempt-interest dividends are excluded from a shareholder's
gross income under the Code. The percentage of income designated as tax-exempt
is applied uniformly to all distributions made during each taxable year and may
differ from the actual tax-exempt percentage earned by the Fund during any
particular month. That portion of the Fund's dividends and distributions not
designated as tax-exempt will be taxable as described below.
Dividends from investment company taxable income, which includes taxable
net investment income and net short-term capital gain in excess of net long-term
capital loss, are taxable as ordinary income, whether received in cash or
reinvested in additional shares. Dividends from net long-term capital gain in
excess of net short-term capital loss ("net capital gain"), if any, whether
received in cash or reinvested in additional shares, are taxable to the Fund's
shareholders as capital gains for federal income tax purposes without regard to
the length of time shares of the Fund have been held. As a result of the
enactment of the Taxpayer Relief Act of 1997 (the "1997 TRA") on August 5, 1997,
gain recognized after May 6, 1997 from the sale of a capital asset is taxable to
individual (noncorporate) investors at different maximum federal income tax
rates, depending generally upon the tax holding period for the asset, the
federal income tax bracket of the taxpayer, and the dates the asset was acquired
and/or sold. The Treasury Department has issued guidance under the 1997 TRA that
(subject to possible modification by future "technical corrections" legislation)
enables the Fund to pass through to its shareholders the benefits of the capital
gains tax rates enacted in the 1997 TRA. The Fund will provide appropriate
information to its shareholders about its distributions, including the tax
rate(s) applicable to its distributions from long-term capital gains, in
accordance with this and any future guidance. Shareholders should consult their
own tax advisers on the correct application of these new rules in their
particular circumstances.
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Any dividend declared by the Fund in October, November or December as of a
record date in such a month and paid during the following January will be
treated for federal income tax purposes as received by shareholders on December
31 of the calendar year in which it is declared.
If the Fund invests in certain pay-in-kind securities ("PIKs"), zero coupon
securities, deferred interest securities or, in general, any other securities
with original issue discount (or with market discount if the Fund elects to
include market discount in income currently), the Fund must accrue income on
such investments for each taxable year, which generally will be prior to the
receipt of the corresponding cash payments. However, the Fund must distribute,
at least annually, all or substantially all of its net taxable and tax-exempt
income, including such accrued income, to shareholders to qualify as a regulated
investment company under the Code and avoid federal income and excise taxes.
Therefore, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy distribution requirements.
For federal income tax purposes, the Fund is permitted to carry forward a
net capital loss for any year to offset its capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent capital
gains are offset by such losses, they would not result in federal income tax
liability to the Fund and therefore are not expected to be distributed as such
to shareholders. As of the end of its most recent taxable year, the Fund had no
capital loss carryforwards.
At the time of an investor's purchase of Fund shares, a portion of the
purchase price may be attributable to realized or unrealized appreciation in the
Fund's portfolio. Consequently, subsequent distributions by the Fund on these
shares from such appreciation may be taxable to such investor even if the net
asset value of the investor's shares is, as a result of the distributions,
reduced below the investor's cost for such shares and the distributions
economically represent a return of a portion of the investment.
Redemptions and exchanges are taxable events for shareholders
that are subject to tax. Shareholders should consult their own tax advisers with
reference to their individual circumstances to determine whether any particular
transaction in Fund shares is properly treated as a sale for tax purposes, as
the following discussion assumes, and the character of and tax rate applicable
to any gains or losses recognized in such transactions under the new rate
structure enacted in the 1997 TRA. Any loss realized by a shareholder on the
redemption, exchange, or other disposition of shares with a tax holding period
of six months or less will be disallowed to the extent of any exempt-interest
dividends paid with respect to such shares, and any portion of such loss that
exceeds the amount disallowed will be treated as a long-term capital loss to the
extent of any distributions treated as long-term capital gain with respect to
such shares.
In addition, if Class A shares redeemed or exchanged have been held for
less than 91 days, (1) in the case of a reinvestment in the Fund at net asset
value pursuant to the reinvestment privilege, the sales charge paid on such
shares is not included in their tax basis under the Code, and (2) in the case of
an exchange, all or a portion of the sales charge paid on such shares is not
included in their tax basis under the Code, to the extent a sales charge that
would otherwise apply to the shares received is reduced pursuant to the exchange
privilege. In either case, the portion of the sales charge not included in the
tax basis of the shares redeemed or surrendered in an exchange is included in
the tax basis of the shares acquired in the reinvestment or exchange. Losses on
redemptions or other dispositions of shares may be disallowed under "wash sale"
rules in the event of other investments in the Fund (including those made
pursuant to reinvestment of dividends and/or capital gain distributions) within
a period of 61 days beginning 30 days before and ending 30 days after a
redemption or other disposition of shares. In such a case, the disallowed
portion of any loss would be included in the federal tax basis of the shares
acquired in the other investments.
The Fund's dividends and distributions will not qualify for any
dividends-received deduction that might otherwise be available for certain
dividends received by shareholders that are corporations.
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A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangible property taxes, the
value of its assets is attributable to) certain U.S. government obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. The Fund will not seek to satisfy
any threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.
The exemption of exempt-interest dividends for federal income tax purposes
does not necessarily result in exemption under the tax laws of any state or
local taxing authority, which vary with respect to the taxation of such income.
Many states will exempt from tax that portion of an exempt-interest dividend
which represents interest received by the Fund on that state's securities,
subject in some cases to compliance with concentration and/or reporting
requirements, which the Fund makes no commitment to seek to satisfy. However,
the Fund will report annually to its shareholders the percentage of interest
income received by the Fund during the preceding year on federally tax-exempt
obligations indicating, on a state-by-state basis only, the source of such
income. Each shareholder is advised to consult his own tax adviser regarding the
exemption, if any, of exempt-interest dividends under the state and local laws
applicable to the shareholder.
Interest on indebtedness incurred (directly or indirectly) by shareholders
to purchase or carry shares of the Fund will not be deductible for federal
income tax purposes to the extent it is deemed under the Code and applicable
regulations to relate to exempt-interest dividends received from the Fund.
Federal law requires that the Fund withhold (as "backup withholding") 31%
of reportable payments, including taxable dividends, capital gain dividends and
the proceeds of redemptions (including exchanges) and repurchases to
shareholders who have not complied with IRS regulations. In order to avoid this
withholding requirement, shareholders must certify on their Account
Applications, or on separate IRS Forms W-9, that the Social Security Number or
other Taxpayer Identification Number they provide is their correct number and
that they are not currently subject to backup withholding, or that they are
exempt from backup withholding. The Fund may nevertheless be required to
withhold if it receives notice from the IRS or a broker that the number provided
is incorrect or backup withholding is applicable as a result of previous
underreporting of interest or dividend income. Backup withholding may be
inapplicable for any year in which the Fund reasonably estimates that at least
95% of its dividends paid with respect to such year are exempt-interest
dividends.
If, as anticipated, the Fund continues to qualify as a regulated investment
company under the Code, it will not be required to pay any Massachusetts income,
corporate excise or franchise taxes.
The description of certain federal tax provisions above relates only to
U.S. federal income tax consequences for shareholders who are U.S. persons, i.e.
U.S. citizens or residents or U.S. corporations, partnerships, trusts or
estates, and who are subject to U.S. federal income tax. This description does
not address the special tax rules that may be applicable to particular types of
investors, such as financial institutions, insurance companies, securities
dealers, or tax-exempt or tax-deferred plans, accounts or entities. Investors
other than U.S. persons may be subject to different U.S. tax treatment,
including a possible 30% non-resident alien U.S. withholding tax (or
non-resident alien withholding tax at a lower treaty rate) on amounts treated as
ordinary dividends from the Fund and, unless an effective IRS Form W-8 or
authorized substitute for Form W-8 is on file, to 31% backup withholding on
certain other payments from the Fund. Shareholders should consult their own tax
advisers on these matters and on state, local and other applicable tax laws.
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11. DESCRIPTION OF SHARES
The Declaration permits its Board of Trustees to authorize the issuance of
an unlimited number of full and fractional shares of beneficial interest
(without par value) which may be divided into such separate series as the
Trustees may establish. The Trustees may establish additional series of shares,
and may divide or combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests in the Fund. The
Declaration further authorizes the Trustees to classify or reclassify any series
of the shares into one or more classes. Pursuant thereto, the Trustees have
authorized the issuance of three classes of shares of the Fund, Class A shares,
Class B shares and Class C shares. Each share of a class of the Fund represents
an equal proportionate interest in the assets of the Fund allocable to that
class. Upon liquidation of the Fund, shareholders of each class are entitled to
share pro rata in the Fund's net assets allocable to such class available for
distribution to shareholders. The Fund reserves the right to create and issue
additional series or classes of shares, in which case the shares of each class
of a series would participate equally in the earnings, dividends and assets
allocable to that class of the particular series.
The shares of the Fund are entitled to vote separately to approve
investment advisory agreements or changes in investment restrictions, but
shareholders of all series vote together in the election and selection of
Trustees and accountants. Shares of the Fund vote together as a class on matters
that affect the Fund in substantially the same manner. As to matters affecting a
single class, shares of such class will vote separately.
Although Trustees are not elected annually by the shareholders,
shareholders have under certain circumstances the right to remove one or more
Trustees. No material amendment may be made to the Declaration without the
affirmative vote of a majority of its shares. Shares have no pre-emptive or
conversion rights. Shares are fully paid and non-assessable by the Fund, except
as set forth below. See "Certain Liabilities."
12. CERTAIN LIABILITIES
As a Massachusetts business trust, the Fund's operations are governed by
the Declaration, a copy of which is on file with the office of the Secretary of
State of the Commonwealth of Massachusetts. Shareholders of a Massachusetts
business trust may, under certain circumstances, be held personally liable for
the obligations of the trust. However, the Declaration contains an express
disclaimer of shareholder liability for acts or obligations of the Fund and
provides that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or its Trustees. Moreover,
the Declaration provides for the indemnification out of Fund property of any
shareholders held personally liable for any obligations of the Fund or any
series of the Fund. The Declaration also provides that the Fund shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Fund and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss beyond his or her investment because
of shareholder liability would be limited to circumstances in which the Fund
itself will be unable to meet its obligations. In light of the nature of the
Fund's business and the nature and amount of its assets, the possibility of the
Fund's liabilities exceeding its assets, and therefore a shareholder's risk of
personal liability, is remote.
The Declaration further provides that the Fund shall indemnify each of its
Trustees and officers against liabilities and expenses reasonably incurred by
them, in connection with, or arising out of, any action, suit or proceeding,
threatened against or otherwise involving such Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the Fund.
The Declaration does not authorize the Fund to indemnify any Trustee or officer
against any liability to which he or she would
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<PAGE>
otherwise be subject by reason of or for willful misfeasance, bad faith,
gross negligence or reckless disregard of such person's duties.
13. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined as of
the close of regular trading on the Exchange (normally 4:00 p.m., Eastern time)
on each day on which the Exchange is open for trading. As of the date of this
Statement of Additional Information, the Exchange is open for trading every
weekday except for the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is also determined on any other day in which the level of
trading in its portfolio is sufficiently high so that the current net asset
value per share might be materially affected by changes in the value of its
portfolio securities. The net asset value per share of the Fund is not
determined on any day in which no purchase orders in good order for the shares
of the Fund are received and no shares are tendered for redemption.
The net asset value per share of each class of the Fund is computed by
taking the value of all of the Fund's assets attributable to a class, less the
Fund's liabilities attributable to that class, and dividing the result by the
number of outstanding shares of the class. For purposes of determining net asset
value, expenses of the classes of the Fund are accrued daily.
The Board of Trustees has directed that the fair market value of the Fund's
assets should be determined as follows. Ordinarily, investments in debt
securities are valued on the basis of information furnished by a pricing service
which utilizes primarily a matrix system (which reflects such factors as
security prices, yields, maturities and ratings), supplemented by dealer and
exchange quotations, to recommend valuations for normal institutional-sized
trading units of debt securities. In addition, the Board has instructed advisory
personnel not to rely exclusively on this pricing service if the fair market
value of certain securities may be more accurately determined on the basis of
information available from other sources. Temporary cash investments are valued
at amortized cost, which approximates market value.
The Fund's maximum offering price per Class A share is determined by adding
the maximum sales charge to the net asset value per Class A share. Class B and
Class C shares are offered at net asset value without the imposition of an
initial sales charge.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a convenient
method of receiving fixed payments at regular intervals from shares of the Fund
deposited by the applicant under the SWP. The applicant must deposit or purchase
for deposit with PSC shares of the Fund having a total value of not less than
$10,000. Periodic payments of $50 or more will be deposited monthly or quarterly
directly into a bank account designated by the applicant or will be sent by
check to the applicant, or any person designated by the applicant. Withdrawals
from Class B and Class C share accounts are limited to 10% of the value of the
account at the time the SWP is established. See "Waiver or Reduction of
Contingent Deferred Sales Charge" in the Prospectus. Designation of another
person to receive the payments subsequent to opening an account must be
accompanied by a signature guarantee.
Any income dividends or capital gains distributions on shares under the SWP
will be credited to the SWP account on the payment date in full and fractional
shares at the net asset value per share in effect on the record date.
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<PAGE>
SWP payments are made from the proceeds of the redemption of shares
deposited under the SWP in a SWP account. To the extent that such redemptions
for periodic withdrawals exceed dividend income reinvested in the SWP account,
such redemptions will reduce and may ultimately exhaust the number of shares
deposited in the SWP account. Redemptions are potentially taxable transactions
to shareholders. In addition, the amounts received by a shareholder cannot be
considered as an actual yield or income on his or her investment because part of
such payments may be a return of his or her investment.
The SWP may be terminated at any time (1) by written notice to PSC or from
PSC to the shareholder; (2) upon receipt by PSC of appropriate evidence of the
shareholder's death; or (3) when all shares under the SWP have been redeemed.
15. LETTER OF INTENT
A Letter of Intent ("LOI") may be established by completing the LOI
section of the Account Application. When you sign the Account Application, you
agree to irrevocably appoint PSC your attorney-in-fact to surrender for
redemption any or all shares held in escrow with full power of substitution. An
LOI is not a binding obligation upon the investor to purchase, or the Fund to
sell, the full amount indicated.
If the total purchases, less redemptions, exceed the amount specified
under the LOI and are in an amount which would qualify for a further quantity
discount, all transactions will be recomputed on the expiration date of the LOI
to effect the lower sales charge. Any difference in the sales charge resulting
from such recomputation will be either delivered to you in cash or invested in
additional shares at the lower sales charge. The dealer, by signing the Account
Application, agrees to return to PFD, as part of such retroactive adjustment,
the excess of the commission previously reallowed or paid to the dealer over
that which is applicable to the actual amount of the total purchases under the
LOI.
If the total purchases, less redemptions, are less than the amount
specified under the LOI, you must remit to PFD any difference between the sales
charge on the amount actually purchased and the amount originally specified in
the LOI section of the Account Application. When the difference is paid, the
shares held in escrow will be deposited to your account. If you do not pay the
difference in sales charge within 20 days after written request from PFD or your
dealer, PSC, after receiving instructions from PFD, will redeem the appropriate
number of shares held in escrow to realize the difference and release any
excess. See "How to Purchase Fund Shares - Letter of Intent" in the Prospectus
for more information.
16. INVESTMENT RESULTS
The Fund's yield quotations and average annual total return quotations as
they may appear in the Prospectus, this Statement of Additional Information or
in advertising are calculated by standard methods prescribed by the SEC.
QUOTATIONS, COMPARISONS, AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Fund may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to other relevant indices. For example, the Fund may compare a class' yield
and/or total return to the Lehman Brothers Municipal Bond Index, or other
comparable indices or investment vehicles.
In addition, the performance of the classes of the Fund may be compared to
alternative investment or savings vehicles (such as individual securities, bank
deposits or certificates of deposit) and/or indices or indicators of economic
activity, e.g., inflation, interest rates, or the Consumer Price Index.
Performance
19
<PAGE>
rankings and listings reported in newspapers or national business and
financial publications, such as BARRON'S, BUSINESS WEEK, CONSUMERS DIGEST,
CONSUMER REPORTS, FINANCIAL WORLD, FORBES, FORTUNE, INVESTORS BUSINESS DAILY,
KIPLINGER'S PERSONAL FINANCE MAGAZINE, MONEY MAGAZINE, NEW YORK TIMES, PERSONAL
INVESTOR, SMART MONEY, USA TODAY, U.S. NEWS AND WORLD REPORT, THE WALL STREET
JOURNAL and WORTH, may also be cited (if the Fund is listed in any such
publication) or used for comparison, as well as performance listings and
rankings from various other sources including BLOOMBERG FINANCIAL MARKETS,
CDA/WEISENBERGER, DONOGHUE'S MUTUAL FUND ALMANAC, INVESTMENT COMPANY DATA, INC.,
IBBOTSON ASSOCIATES, JOHNSON'S CHARTS, KANON BLOCH CARRE AND CO., LIPPER
ANALYTICAL SERVICES, INC., MICROPAL, INC., MORNINGSTAR, INC., SCHABACKER
INVESTMENT MANAGEMENT and TOWERS DATA SYSTEMS, INC.
Other data that may be advertised or published about a class of the Fund
include the average portfolio quality, the average portfolio maturity, and the
average portfolio duration.
STANDARDIZED YIELD QUOTATIONS
The yield of a class is computed by dividing the class' net investment
income per share during a base period of 30 days, or one month, by the maximum
offering price per share of the class on the last day of such base period in
accordance with the following formula:
YIELD = 2[(a-b+1)6[superscript]-1]
---
cd
Where: a = interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on
the last day of the period
For purposes of calculating interest earned on debt obligations as provided
in item "a" above:
(i)The yield to maturity of each obligation held by the Fund is computed
based on the market value of the obligation (including actual accrued interest,
if any) at the close of business each day during the 30-day base period, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest, if any) on settlement date, and with respect to
obligations sold during the month the sale price (plus actual accrued interest,
if any) between the trade and settlement dates;
(ii) The yield to maturity of each obligation is then divided by 360 and
the resulting quotient is multiplied by the market value of the obligation
(including actual accrued interest, if any) to determine the interest income on
the obligation for each day. The yield to maturity calculation has been made on
each obligation during the 30-day base period;
(iii) Interest earned on all debt obligations during the 30-day or one
month period is then totaled;
(iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date;
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(v) Obligations with sinking fund call provisions may be regarded as
maturing as to that portion to be retired on each sinking fund call date or
during a 12-month period; and
(vi) In the case of a tax-exempt obligation issued without original issue
discount and having a current market discount, the coupon rate of interest of
the obligation is used in lieu of yield to maturity to determine interest income
earned on the obligation. In the case of a tax-exempt obligation with original
issue discount where the discount based on the current market value of the
obligation exceeds the then remaining portion of original issue discount (i.e.
market discount), the yield to maturity used to determine interest income earned
on the obligation is the imputed rate based on the original issue discount
calculation. In the case of a tax-exempt obligation with original issue discount
where the discount based on the current market value of the obligation is less
than the then remaining portion of the original issue discount (market premium),
the yield to maturity used to determine interest income earned on the obligation
is based on the market value of the obligation.
The yields on Class A, Class B and Class C shares of the Fund for the
30-day period ended December 31, 1997 computed as above were 3.41%, 2.71% and
2.82%, respectively, except that absent expense limitations, the yields on Class
A, Class B and Class C shares of the Fund would have been 3.33%, 2.64% and
2.75%, respectively.
TAXABLE EQUIVALENT YIELD
The Fund may also from time to time advertise the taxable equivalent yield
of a class which is determined by dividing that portion of the class' yield
(calculated as described above) that is tax exempt by one minus the stated
federal income tax rate and adding the product to that portion, if any, of the
class' yield that is not tax exempt. For a description of how to compare yields
on Municipal Bonds and taxable securities, see the APPENDIX to the Prospectus.
The taxable equivalent yields for a Class A shareholder, Class B shareholder and
Class C shareholder in the 39.6% federal income tax bracket for the one-month
period ended December 31, 1997 determined in accordance with such formula were
5.65%, 4.49% and 4.67%, respectively, except that absent expense limitations,
such tax-equivalent yields on Class A shares, Class B shares and Class C shares
of the Fund would have been 5.51%, 4.37% and 4.55%, respectively.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS
One of the primary methods used to measure the performance of a class of
the Fund is "total return." Total return will normally represent the percentage
change in value of an account, or of a hypothetical investment in the class,
over any period up to the lifetime of the class. Total return calculations will
usually assume the reinvestment of all dividends and capital gains distributions
and will be expressed as a percentage increase or decrease from an initial value
for the entire period or for one or more specified periods within the entire
period. Total return percentages for periods of less than one year will usually
be annualized; total return percentages for periods longer than one year will
usually be accompanied by total return percentages for each year within the
period and/or by the average annual compounded total return for the period. The
income and capital components of a given return may be separated and portrayed
in a variety of ways in order to illustrate their relative significance.
Performance may also be portrayed in terms of cash or investment values, without
percentages or by reference to historical information depicting the value of a
hypothetical account in the Fund since the Fund's inception. Past performance
cannot guarantee any particular future result.
Average annual total return quotations for each class of shares are
computed by finding the average annual compounded rates of return that would
cause a hypothetical investment made on the first day of a designated period
(assuming all dividends and distributions are reinvested) to equal the ending
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redeemable value of such hypothetical investment on the last day of the
designated period in accordance with the following formula:
P(1+T)n[superscript] = ERV
Where: P = a hypothetical initial payment of $1,000, less the
maximum sales load of $35 for Class A shares or the
deduction of any CDSC on Class B or Class C shares at
the end of the period
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000
initial payment made at the beginning of the designated
period (or fractional portion thereof)
The computation above assumes that all dividends and distributions made by
the Fund are reinvested at net asset value during the designated period. The
average annual total return quotation is determined to the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts are
taken into consideration. For any account fees that vary with the size of the
account, the account fee used for purposes of the above computation is assumed
to be the fee that would be charged to the class' mean account size.
The average annual total returns for Class A, Class B and Class C shares of
the Fund as of December 31, 1997 are as follows:
AVERAGE ANNUAL TOTAL RETURN (%)
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION*
Class A Shares 3.16 4.78 7.23 6.06
Class B Shares 3.08 N/A N/A 4.94
Class C Shares 6.04 N/A N/A 3.75
*Inception was October 22, 1986 for Class A shares; April 29, 1994 for Class B
shares; and January 31, 1996 for Class C shares.
PMC temporarily agreed to reduce its management fee and made other
arrangements to limit certain other expenses of the Fund. Had PMC not made such
an arrangement, the total returns for the periods would have been lower.
AUTOMATED INFORMATION LINE
FactFoneSM, Pioneer's 24-hour automated information line, allows
shareholders to dial toll-free 1-800-225-4321 and hear recorded fund
information, including:
[bullet] net asset value prices for all Pioneer mutual funds;
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[bullet] annualized 30-day yields on Pioneer fixed income funds;
[bullet] annualized 7-day yields and 7-day effective (compound) yields for
Pioneer Cash Reserves Fund; and
[bullet] dividends and capital gains distributions on all Pioneer mutual
funds.
Yields are calculated in accordance with SEC mandated standard formulas.
In addition, by using a personal identification number ("PIN"),
shareholders may enter purchases, exchanges and redemptions, access their
account balances and last three transactions and may order a duplicate
statement. See "FactFoneSM" in the Prospectus for more information.
All performance numbers communicated through FactFoneSM represent past
performance and include the maximum applicable sales charge. A shareholder's
actual yield and total return will vary with changing market conditions. The
value of Class A, Class B and Class C shares (except for Pioneer Cash Reserves
Fund, which seeks to maintain a stable $1.00 share price) will also vary and may
be worth more or less at redemption than their original cost.
17. FINANCIAL STATEMENTS
The Fund's Annual Report, filed with the SEC on February 23, 1998 (Accession
No. 0000798172-98-000003), is incorporated by reference into this Statement of
Additional Information. The financial statements in the Fund's Annual Report,
including the financial highlights, for the period ended December 31, 1997,
included or incorporated by reference into the Prospectus and this Statement of
Additional Information, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect to the financial
statements, and are included in reliance upon the authority of Arthur Andersen
LLP as experts in accounting and auditing in giving their report.
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APPENDIX A
DESCRIPTION OF MUNICIPAL BONDS
Municipal Bonds include debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public facilities
such as bridges, highways, housing, mass transportation, schools, streets and
water and sewer works. Other public purposes for which Municipal Bonds may be
issued include refunding outstanding obligations, obtaining funds for general
operating expenses, and obtaining funds to loan to other public institutions.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment for
principal and interest. The payment of such bonds may be dependent upon an
appropriation by the issuer's legislative body. The characteristics and
enforcement of general obligation bonds vary according to the law applicable to
the particular issuer. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. There are, of
course, variations in the security of Municipal Bonds, both within a particular
classification and between classifications, depending on numerous factors.
The yields on Municipal Bonds are dependent on a variety of factors,
including general money market conditions, supply and demand and general
conditions of the Municipal Bond market, size of a particular offering, the
maturity of the obligation and rating of the issue. The ratings of Moody's
Investors Service, Inc. and Standard & Poor's Ratings Group represent their
opinions as to the quality of various Municipal Bonds. It should be emphasized,
however, that ratings are not absolute standards of quality. Consequently,
Municipal Bonds with the same maturity, coupon and rating may have different
yields while Municipal Bonds of the same maturity and coupon with different
ratings may have the same yield.
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<PAGE>
DESCRIPTION OF BOND RATINGS1
MOODY'S INVESTORS SERVICE, INC.
DEBT RATINGS - U.S. TAX-EXEMPT MUNICIPAL
There are nine basic rating categories for long-term obligations. They range
from Aaa (highest quality) to C (lowest quality). The Fund does not invest in
securities rated below Baa by Moody's or BBB by Standard Poor's. Moody's applies
numerical modifiers 1, 2, and 3 in each generic rating classification from Aa to
Baa. The modifier 1 indicates that the issue ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
category. Advance refunded issues that are secured by escrowed funds held in
cash, held in trust, reinvested in direct non-callable U.S. government
obligations or non-callable obligations unconditionally guaranteed by the U.S.
government are identified with a # symbol, e.g., #Aaa.
Aaa: Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present that
suggest susceptibility to impairment sometime in the future.
Baa: Bonds that are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Con. (...): Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by: (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals that begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
---------------------------------------------
1THE RATINGS INDICATED HEREIN ARE BELIEVED TO BE THE MOST RECENT RATINGS
AVAILABLE AT THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION FOR THE
SECURITIES LISTED. RATINGS ARE GENERALLY GIVEN TO SECURITIES AT THE TIME OF
ISSUANCE. WHILE THE RATING AGENCIES MAY FROM TIME TO TIME REVISE SUCH RATINGS,
THEY UNDERTAKE NO OBLIGATION TO DO SO, AND THE RATINGS INDICATED DO NOT
NECESSARILY REPRESENT RATINGS WHICH WILL BE GIVEN TO THESE SECURITIES ON THE
DATE OF THE FUND'S FISCAL YEAR-END.
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STANDARD & POOR'S RATINGS GROUP
PUBLIC FINANCE - LONG-TERM ISSUE CREDIT RATINGS
AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only
in a small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
PLUS (+) OR MINUS (-): The ratings from AA to BBB may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
p: The letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project financed by the debt being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful timely completion of the project.
L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is federally
insured and interest is adequately collateralized. In the case of certificates
of deposit, the letter "L" indicates that the deposit, combined with other
deposits being held in the same right and capacity, will be honored for
principal and pre-default interest up to the federal insurance limits within 30
days after closing of the insured institution or, in the event that the deposit
is assumed by a successor insured institution, upon maturity.
r: The "r" is attached to highlight derivatives, hybrids and certain other
obligations that Standard & Poor's believes may experience high volatility or
high variability in expected returns as a result of noncredit risks. Examples of
such obligations are securities whose principal or interest return is indexed to
equities, commodities or other instruments. The absence of an "r" symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.
NR: Not rated.
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APPENDIX B
DESCRIPTION OF CERTAIN OTHER INVESTMENTS
U.S. Government Obligations - are issued by the Treasury and include bills,
certificates of indebtedness, notes, and bonds. Agencies and instrumentalities
of the U.S. government are established under the authority of an act of Congress
and include, but are not limited to, the Government National Mortgage
Association, the Tennessee Valley Authority, the Bank for Cooperatives, the
Farmers Home Administration, Federal Home Loan Banks, Federal Intermediate
Credit Banks, Federal Land Banks, and the Federal National Mortgage Association.
Certificates of Deposit - are certificates issued against funds deposited
in a commercial bank, are for a definite period of time, earn a specified rate
of return, and are normally negotiable.
Bankers' Acceptances - are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
Repurchase Agreements - are agreements by which a person purchases a
security and simultaneously commits to resell that security to the seller (a
member bank of the Federal Reserve System or recognized securities dealer) at an
agreed upon price on an agreed upon date within a number of days (usually not
more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of interest which is unrelated to
the coupon rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security, usually
U.S. government or government agency issues. Under the 1940 Act, repurchase
agreements are considered to be loans by the Fund. The Fund's risk is limited to
the ability of the seller to pay the agreed upon amount on the delivery date. In
the opinion of the Fund's adviser this risk is not material; if the seller
defaults, the underlying security constitutes collateral for the seller's
obligation to pay although the Fund may incur certain costs in liquidating this
collateral and in certain cases may not be permitted to liquidate this
collateral.
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APPENDIX C
PIONEER INTERMEDIATE TAX-FREE
CLASS A SHARES
<TABLE>
<CAPTION>
INITIAL
DATE INITIAL OFFERING SALES CHARGE SHARES NET ASSET VALUE ASSET
INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
<S> <C> <C> <C> <C> <C> <C>
10/22/86 $10,000 $10.3600 3.50% 965.251 $10.0000 $9,650
</TABLE>
DIVIDENDS AND CAPITAL GAINS REINVESTED
VALUE OF SHARES
<TABLE>
<CAPTION>
FROM CAPITAL
GAINS
FROM INVESTMENT REINVESTED FROM DIVIDENDS
DATE REINVESTED TOTAL VALUE
<S> <C> <C> <C> <C>
12/31/86 $9,662 $0 $0 $9,662
12/31/87 $8,639 $0 $645 $9,284
12/31/88 $9,073 $0 $1,398 $10,471
12/31/89 $9,324 $0 $2,170 $11,494
12/31/90 $9,295 $0 $2,937 $12,232
12/31/91 $9,710 $0 $3,888 $13,598
12/31/92 $9,962 $0 $4,813 $14,775
12/31/93 $10,387 $181 $5,844 $16,412
12/31/94 $9,286 $165 $5,973 $15,424
12/31/95 $10,078 $179 $7,295 $17,552
12/31/96 $9,923 $177 $7,985 $18,085
12/31/97 $10,087 $332 $8,909 $19,328
</TABLE>
28
<PAGE>
PIONEER INTERMEDIATE TAX-FREE
CLASS B SHARES
<TABLE>
<CAPTION>
DATE INITIAL SHARES NET ASSET VALUE INITIAL NET ASSET
INVESTMENT OFFERING PRICE PURCHASED PER SHARE VALUE
<S> <C> <C> <C> <C> <C>
4/29/94 $10,000 $10.0700 993.049 $10.0700 $10,000
</TABLE>
DIVIDENDS AND CAPITAL GAINS REINVESTED
VALUE OF SHARES
<TABLE>
<CAPTION>
CONTINGENT
FROM CAPITAL GAINS FROM DIVIDENDS DEFERRED SALES
FROM REINVESTED REINVESTED CHARGE IF REDEEMED TOTAL VALUE CDSC
DATE INVESTMENT IF REDEEMED PERCENTAGE
<S> <C> <C> <C> <C> <C> <C>
12/31/94 $9,584 $2 $265 $288 $9,563 3.00%
12/31/95 $10,388 $2 $712 $300 $10,802 3.00%
12/31/96 $10,238 $2 $1,111 $200 $11,151 2.00%
12/31/97 $10,397 $97 $1,548 $100 $11,942 1.00%
</TABLE>
29
<PAGE>
PIONEER INTERMEDIATE TAX-FREE
CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE INITIAL NET
INITIAL OFFERING PRICE SHARES PER SHARE ASSET
DATE INVESTMENT PURCHASED VALUE
<S> <C> <C> <C> <C> <C>
1/31/96 $10,000 $10.5100 951.475 $10.5100 $10,000
</TABLE>
DIVIDENDS AND CAPITAL GAINS REINVESTED
VALUE OF SHARES
<TABLE>
<CAPTION>
CONTINGENT
FROM CAPITAL GAINS FROM DIVIDENDS DEFERRED SALES
FROM REINVESTED REINVESTED CHARGE IF REDEEMED TOTAL VALUE CDSC
DATE INVESTMENT IF REDEEMED PERCENTAGE
<S> <C> <C> <C> <C> <C> <C>
12/31/96 $9,791 $0 $331 $98 $10,024 1.00%
12/31/97 $9,972 $84 $678 $0 $10,734 0.00%
</TABLE>
30
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may also be used, if appropriate. The
indices are not available for direct investment. The data presented are not
meant to be indicative of the performance of the Fund, do not reflect past
performance and do not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P 500 includes 500 of
the largest stocks (in terms of stock market value) in the U.S.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of stocks of 30 blue chip
companies widely held by individuals and institutional investors. The 30 stocks
represent about a fifth of the $8 trillion-plus market value of all U.S. stocks
and about a fourth of the value of stocks listed on the New York Stock Exchange
(NYSE).
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the NYSE, plus stocks listed on the American Stock Exchange and over the counter
with the same or less capitalization as the upper bound of the NYSE ninth
decile.
U.S. INFLATION
THE CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S.
Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA GROWTH AND VALUE INDEXES are constructed by dividing the stocks in
the S&P 500 according to price-to-book ratios. The GROWTH INDEX contains stocks
with higher price-to-book ratios, and the VALUE INDEX contains stocks with lower
price-to-book ratios. Both indexes are market capitalization weighted.
MERRILL LYNCH MICRO-CAP INDEX
The MERRILL LYNCH MICRO-CAP INDEX represents the performance of 2,036 stocks
ranging in market capitalization from $50 million to $220 million. Index returns
are calculated monthly.
31
<PAGE>
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds after 1977 are constructed with
data from The Wall Street Journal and are calculated as the change in the flat
price or and-interest price. From 1926 to 1976, data are obtained from the
government bond file at the Center for Research in Security Prices (CRSP),
Graduate School of Business, University of Chicago. Each year, a one-bond
portfolio with a term of approximately 20 years and a reasonably current coupon
was used and whose returns did not reflect potential tax benefits, impaired
negotiability or special redemption or call privileges. Where callable bonds had
to be used, the term of the bond was assumed to be a simple average of the
maturity and first call dates minus the current date. The bond was "held" for
the calendar year and returns were computed.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of intermediate-term government bonds after 1987 are calculated
from The Wall Street Journal prices, using the change in flat price. Returns
from 1934 to 1986 are obtained from the CRSP government bond file.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than five years, and this bond is
"held" for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934 to 1942, almost all bonds
with maturities near five years were partially or fully tax-exempt and were
selected using the rules described above. Personal tax rates were generally low
in that period, so that yields on tax-exempt bonds were similar to yields on
taxable bonds. From 1926 to 1933, there are few bonds suitable for construction
of a series with a five-year maturity. For this period, five-year bond yield
estimates are used.
MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI")
MSCI's international indices are based on the share prices of approximately
1,700 companies listed on stock exchanges in the 22 countries that make up the
MSCI World Index. MSCI's emerging market indices are comprised of approximately
1000 stocks from 26 countries.
Countries in the MSCI EAFE INDEX are: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom.
Countries in the MSCI EMERGING MARKETS FREE INDEX are: Argentina, Brazil, Chile,
China Free, Czech Republic, Colombia, Greece, Hungary, India, Indonesia Free,
Israel, Jordan, Korea (at 50%), Malaysia Free, Mexico Free, Pakistan, Peru,
Philippines Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan (at 50%),
Thailand Free, Turkey and Venezuela.
6-MONTH CDS
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
Since 1969, corporate bond total returns are represented by the Salomon Brothers
Long-Term High-Grade Corporate Bond Index. As most large corporate bond
transactions take place over the counter, a major dealer is the natural source
of these data. The index includes nearly all Aaa- and Aa-rated bonds with at
least 10 years to maturity. If a bond is downgraded during a particular month,
its return for the month is included in the index before removing the bond from
future portfolios.
From 1926 to 1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946 to 1968,
Ibbotson and Sinquefield backdated the Salomon Brothers' index, using Salomon
Brothers' monthly yield data with a methodology similar to that used by Salomon
32
<PAGE>
Brothers for 1969 to 1995. Capital appreciation returns were calculated from
yields assuming (at the beginning of each monthly holding period) a 20-year
maturity, a bond price equal to par, and a coupon equal to the
beginning-of-period yield. For the period 1926 to 1945, Standard & Poor's
monthly high-grade corporate composite yield data were used, assuming a 4%
coupon and a 20-year maturity. The conventional present-value formula for bond
price for the beginning and end-of-month prices was used. (This formula is
presented in Ross, Stephen A., and Westerfield, Randolph W., Corporate Finance,
Times Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly
income return was assumed to be one-twelfth the coupon.
U.S. (30-DAY) TREASURY BILLS
For the U.S. TREASURY BILL INDEX, data from The Wall Street Journal are used
after 1977; the CRSP government bond file is the source until 1976. Each month a
one-bill portfolio containing the shortest-term bill having not less than one
month to maturity is constructed. (The bill's original term to maturity is not
relevant.) To measure holding period returns for the one-bill portfolio, the
bill is priced as of the last trading day of the previous month-end and as of
the last trading day of the current month.
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS ("NAREIT")EQUITY REIT
INDEX
All of the data are based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMEX and NASDAQ. The data are
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighting at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income. Liquidating dividends, whether full or partial,
are treated as income.
RUSSELL U.S. EQUITY INDEXES
The RUSSELL 3000(R) INDEX (the "Russell 3000") is comprised of the 3,000 largest
U.S. companies as determined by market capitalization representing approximately
98% of the U.S. equity market. The average market capitalization is
approximately $2.8 billion. The RUSSELL 2500TM INDEX measures performance of the
2,500 smallest companies in the Russell 3000. The average market capitalization
is approximately $733.4 million, and the largest company in the index has an
approximate market capitalization of $2.9 billion. The RUSSELL 2000(R) INDEX
measures performance of the 2,000 smallest stocks in the Russell 3000; the
largest company in the index has a market capitalization of approximately $1.1
billion. The RUSSELL 1000(R) INDEX (the "Russell 1000") measures the performance
of the 1,000 largest companies in the Russell 3000. The average market
capitalization is approximately $7.6 billion. The smallest company in the index
has an approximate market capitalization of $1.1 billion. The RUSSELL MIDCAPTM
INDEX measures performance of the 800 smallest companies in the Russell 1000.
The largest company in the index has an approximate market capitalization of
$8.0 billion.
The Russell indexes are reconstituted annually as of July 1, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The WILSHIRE REAL ESTATE SECURITIES INDEX is a market capitalization weighted
index of 120 publicly traded real estate securities, such as REITs, real estate
operating companies ("REOCs") and partnerships.
The index contains performance data on five major categories of property:
office, retail, industrial, apartment and miscellaneous. The companies in the
index are 91.66% equity and hybrid REITs and 8.33% REOCs.
33
<PAGE>
STANDARD & POOR'S MIDCAP 400 INDEX
The S&P 400 is a market-capitalization-weighted index. The performance data for
the index were calculated by taking the stocks presently in the index and
tracking them backwards in time as long as there were prices reported. No
attempt was made to determine what stocks "might have been" in the S&P 400 five
or ten years ago had it existed. Dividends are reinvested on a monthly basis
prior to June 30, 1991, and are reinvested daily thereafter.
LIPPER BALANCED FUNDS INDEX
This index represents equally weighted performance, adjusted for capital gains
distributions and income dividends, of approximately 30 of the largest funds
with a primary objective of conserving principal by maintaining at all times a
balanced portfolio of stocks and bonds. Typically, the stock/bond ratio ranges
around 60%/40%.
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963 to 1987; and The Wall Street Journal thereafter.
Sources: Ibbotson Associates, Towers Data Systems, Lipper Analytical Services,
Inc., Merrill Lynch and PGI
34
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
DOW S&P/ S&P/
S&P JONES U.S. SMALL BARRA BARRA MERRILL LYNCH
500 INDUSTRIAL STOCK U.S. 500 500 MICRO-CAP
AVERAGE INDEX INFLATION GROWTH VALUE INDEX
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 11.62 N/A 0.28 -1.49 N/A N/A N/A
Dec 1927 37.49 N/A 22.10 -2.08 N/A N/A N/A
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A N/A
Dec 1931 -43.34 -49.02 -49.75 -9.52 N/A N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A N/A
Dec 1933 53.99 73.72 142.87 0.51 N/A N/A N/A
Dec 1934 -1.44 8.08 24.22 2.03 N/A N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A N/A
Dec 1942 20.34 14.13 44.51 9.29 N/A N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A N/A
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
DOW S&P/ S&P/
S&P JONES U.S. SMALL BARRA 500 BARRA MERRILL LYNCH
500 INDUSTRIAL STOCK U.S. GROWTH 500 MICRO-CAP
AVERAGE INDEX INFLATION VALUE INDEX
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38 N/A
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93 N/A
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57 N/A
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16 27.76
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16 43.18
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59 32.32
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02 9.18
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04 33.62
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89 42.44
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52 -14.97
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68 22.89
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67 3.45
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68 -13.84
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67 22.76
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13 8.06
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85 -29.55
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56 57.44
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53 36.62
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60 31.32
Dec 1994 1.31 5.06 3.11 2.67 3.13 -0.64 1.81
Dec 1995 37.43 36.84 34.46 2.54 38.13 36.99 30.70
Dec 1996 23.07 28.84 17.62 3.32 23.96 21.99 13.88
Dec 1997 33.36 24.88 22.78 1.92 36.52 29.98 24.61
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
LONG- INTERMEDIATE- MSCI LONG-
TERM TERM U.S. EAFE 6- TERM U.S. U.S.
U.S. GOV'T GOVERNMENT (Net of MONTH CORPORATE T-BILL
BONDS BONDS Taxes) CDS BONDS (30-Day)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.10 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
LONG- INTERMEDIATE- MSCI LONG-
TERM TERM U.S. EAFE 6- TERM U.S. U.S.
U.S. GOV'T GOVERNMENT (Net of MONTH CORPORATE T-BILL
BONDS BONDS Taxes) CDS BONDS (30-Day)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.17 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
Dec 1966 3.65 4.69 N/A 5.76 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.47 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.45 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.70 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.39 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.11 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.10 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.59 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.30 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.80 11.21 5.21 27.20 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
Dec 1997 15.85 8.38 1.78 5.71 12.95 5.26
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
NAREIT LIPPER MSCI
EQUITY RUSSELL WILSHIRE BALANCED EMERGING BANK
REIT 2000 REAL ESTATE S&P FUND MARKETS SAVINGS
INDEX INDEX SECURITIES 400 INDEX FREE INDEX ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
NAREIT LIPPER MSCI
EQUITY RUSSELL WILSHIRE BALANCED EMERGING BANK
REIT 2000 REAL ESTATE S&P FUND MARKETS SAVINGS
INDEX INDEX SECURITIES 400 INDEX FREE INDEX ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 -10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 -7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 -5.21 5.24
Dec 1996 35.26 16.53 36.87 19.20 13.01 6.03 4.95
Dec 1997 20.29 22.36 19.80 32.26 20.05 -11.59 5.17
</TABLE>
40
<PAGE>
APPENDIX C
OTHER PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the creation of
Pioneer Fund. Pioneer is one of the oldest and most experienced money managers
in the United States.
As of December 31, 1997, PMC employed a professional investment staff of 58,
with a combined average of 12 years' experience in the financial services
industry.
Total assets of all Pioneer mutual funds at December 31, 1997, were
approximately $19.8 billion representing 1,177,148 shareholder accounts, 791,468
non-retirement accounts and 385,680 retirement accounts.
g:\edgar\sai\current\it498sai.doc
41
<PAGE>
E X H I B I T B
October 30, 1998
SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION FOR
<TABLE>
<CAPTION>
FUND DATED
<S> <C>
Pioneer World Equity Fund July 29, 1998
Pioneer II January 28, 1998
Pioneer Mid-Cap Fund January 28, 1998
Pioneer Europe Fund February 27, 1998 (as revised July 2, 1998)
Pioneer Indo-Asia Fund October 1, 1998
Pioneer Capital Growth Fund July 2, 1998
Pioneer Equity-Income Fund July 2, 1998
Pioneer Gold Shares July 1, 1998
Pioneer Small Company Fund February 27, 1998
Pioneer Short-Term Income Trust March 30, 1998 (as revised April 9, 1998)
Pioneer Emerging Markets Fund March 30, 1998 (as revised April 9, 1998)
Pioneer International Growth Fund March 30, 1998
Pioneer Micro-Cap Fund March 30, 1998
Pioneer Fund April 30, 1998 (as revised May 8, 1998)
Pioneer Intermediate Tax-Free Fund April 30, 1998
Pioneer Cash Reserves Fund April 30, 1998
Pioneer America Income Trust April 30, 1998
Pioneer Real Estate Shares April 9, 1998
Pioneer Growth Shares April 30, 1998 (as revised September 9, 1998)
Pioneer Balanced Fund April 30, 1998
Pioneer Tax-Free Income Fund April 30, 1998
(each, a "Fund" and collectively, the "Funds")
</TABLE>
A. Effective November 2, 1998, Pioneering Management Corporation ("PMC") will
change its name to Pioneer Investment Management, Inc. Wherever "Pioneering
Management Corporation" or "PMC" appears it is replaced by "Pioneer Investment
Management, Inc." or "Pioneer Investments," respectively.
B. The following is appended to the description of the Fund's Class B Plan:
The Class B Plan and underwriting agreement have been amended effective
September 30, 1998 to permit Pioneer Funds Distributor, Inc. ("PFD") to sell its
right to receive distribution fees under the Plan and CDSC's to third parties.
PFD enters into such transactions to finance the payment of commissions to
brokers at the time of sale and other distribution-related expenses. In
connection with such amendments, the Fund has agreed that the distribution fee
will not be terminated or modified (including a modification by change in the
rules relating to the conversion of Class B shares into Class A shares) with
respect to Class B shares (a) issued prior to the date of any termination or
modification or (b) attributable to Class B shares issued through one or a
series of exchanges of shares of another investment company for which PFD acts
as principal underwriter which were initially issued prior to the date of such
termination or modification or (c) issued as a dividend or distribution upon
Class B shares initially issued or attributable to Class B shares issued prior
to the date of any such termination or modification except:
(i) to the extent required by a change in the Investment Company Act of
1940 (the "1940 Act"), the rules or regulations under the 1940 Act, the
Conduct Rules of the National Association of
<PAGE>
Securities Dealers, Inc. (the "NASD") or an order of any court or
governmental agency, in each case enacted, issued or promulgated after
September 30, 1998;
(ii) in connection with a Complete Termination (as defined in the
Plan); or
(iii) on a basis, determined by the Board of Trustees acting in good
faith, so long as from and after the effective date of such
modification or termination: neither the Fund, the adviser nor certain
affiliates pay, directly or indirectly, a fee to any person for the
provision of personal and account maintenance services (as such terms
are used in the Conduct Rules of the NASD) to the holders of Class B
shares of the Fund and the termination or modification of the
distribution fee applies with equal effect to all Class B shares
outstanding from time to time.
The Class B Plan also provides that PFD shall be deemed to have performed all
services required to be performed in order to be entitled to receive the
distribution fee, if any, payable with respect to Class B shares sold through
PFD upon the settlement date of the sale of such Class B shares or in the case
of Class B shares issued through one or a series of exchanges of shares of
another investment company for which PFD acts as principal underwriter or issued
as a dividend or distribution upon Class B shares, on the settlement date of the
first sale on a commission basis of a Class B share from which such Class B
share was derived.
In the amendments to the underwriting agreement, the Fund agreed that subsequent
to the issuance of a Class B share, it would not take any action to waive or
change any CDSC (including a change in the rules applicable to conversion of
Class B shares into another class) in respect of such Class B shares, except (i)
as provided in the Fund's Prospectus or Statement of Additional Information in
effect on September 30, 1998, or (ii) as required by a change in the 1940 Act
and the rules and regulations thereunder, the Conduct Rules of the NASD or any
order of any court or governmental agency enacted, issued or promulgated after
September 30, 1998.
C. The following is a list of the holders of 5% or more of any class of a Fund's
outstanding shares as of September 30, 1998:
<TABLE>
<CAPTION>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
<S> <C> <C> <C> <C>
Pioneer America Income Trust Contra Costa Federal Credit Union A 691,406 5.53
1111 Pine Street
Martinez, CA 94553-1702
MLPF&S for the Sole Benefit of its Customers B 248,354 12.96
Mutual Fund Administration C 71,143 5.75
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pioneer Balanced Fund MLPF&S for the Sole Benefit of its Customers C 51,982 13.95
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
2
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
31,983
City of Lawrence, MA C 8.58
Trust Funds
200 Common Street
Lawrence, MA 01840-1517
Pioneer Capital Growth Fund MLPF&S for the Sole Benefit of its Customers B 5,410,006 17.08
Mutual Fund Administration C 1,204,991 43.55
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
U.S. Trust Co. of the Pacific NW, Y 110,816 52.98
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 96,475 46.12
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
Pioneer Emerging Markets Fund MLPF&S for the Sole Benefit of its Customers A 3,510,818 37.08
Mutual Fund Administration B 1,107,816 24.96
4800 Deer Lake Drive East, 2nd Floor C 486,264 45.93
Jacksonville, FL 32246-6484
U.S. Trust Co. of the Pacific NW, Y 66,572 49.91
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 66,300 49.71
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
Pioneer Equity-Income Fund MLPF&S for the Sole Benefit of its Customers B 626,486 6.23
Mutual Fund Administration C 125,467 13.86
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
3
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
52,930
U.S. Trust Co. of the Pacific NW, Y 52.41
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 43,326 42.90
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
MLPF&S for the Sole Benefit of its Customers A 2,019,493 19.24
Mutual Fund Administration B 507,740 11.29
4800 Deer Lake Drive East, 2nd Floor C 327,061 33.19
Jacksonville, FL 32246-6484
Wendel & Co. Y 163,317 63.37
One Wall Street
New York, NY 10005-2500
U.S. Trust Co. of the Pacific NW, Y 46,437 18.01
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 45,585 17.68
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
MLPF&S for the Sole Benefit of its Customers B 332,915 7.12
Mutual Fund Administration C 222,485 29.30
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Donaldson Lufkin Jenrette B 91,070 6.71
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
4
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
80,668
MLPF&S for the Sole Benefit of its Customers C 14.67
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pioneer Growth Shares Tommie D. Thompson A 3,366,071 6.20
Trustee for Mutual of Omaha 401K
Long-Term Savings Plan
Mutual of Omaha Plaza
Omaha, NE 68175-0001
MLPF&S for the Sole Benefit of its Customers B 3,566,834 13.40
Mutual Fund Administration C 2,012,575 30.52
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
U.S. Trust Co. of the Pacific NW, Y 129,463 57.73
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 92,807 41.38
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
Pioneer Indo-Asia Fund MLPF&S for the Sole Benefit of its Customers A 50,630 5.93
Mutual Fund Administration B 289,682 34.77
4800 Deer Lake Drive East, 2nd Floor C 6,644 10.16
Jacksonville, FL 32246-6484
Pioneer Funds Distributor, Inc. C 12,887 19.72
60 State Street
Boston, MA 02109-1800
Ranbir S. Sodhi & Santosh Sodhi Jt Ten C 5,061 7.74
Box 36
St. Johnsville, NY 13452-0036
BHC Securities, Inc. C 4,622 7.07
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
5
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
90,431
Pioneer Intermediate Tax-Free MLPF&S for the Sole Benefit of its Customers B 10,743 29.45
Fund Mutual Fund Administration C 32.03
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pioneer Funds Distributor, Inc. C 10,552 31.46
60 State Street
Boston, MA 02109-1800
Alice M. Latella and C 4,920 14.67
Philip A. Latella Jt Ten
1009 Beckwith Place
Utica, NY 13501-5317
Pioneer International Growth MLPF&S for the Sole Benefit of its Customers B 511,856 13.96
Fund Mutual Fund Administration C 129,089 26.32
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Prudential Securities Inc. C 62,389 12.72
For benefit of Mark J. Schneider
SEP DTD 01/01/93
345 Cedar Avenue
Highland Park, IL 60035-4139
James Schneider and Phyllis Schneider C 37,763 7.69
Trustees of the James Schneider
Family Trust DTD 03/04/83
2265 Cedar Court
Northbook, IL 60062-6927
Pioneer Micro-Cap Fund MLPF&S for the Sole Benefit of its Customers A 197,734 6.72
Mutual Fund Administration B 766,088 17.66
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Donaldson Lufkin Jenrette A 154,552 5.25
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Pioneer Mid-Cap Fund MLPF&S for the Sole Benefit of its Customers B 35,071 9.46
Mutual Fund Administration C 9,157 8.81
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
6
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
16,934
J.C. Bradford & Co., Custodian C 16.29
For benefit of DCIP Limited Partners II
330 Commerce Street
Nashville, TN 37201-1805
PGI Rollover IRA C 11,554 11.11
Custodian for Kyung Ja Lee
106 Samsung Seacho Villa
1641-10 Seacho Dong
Seacho KS, Seoul 137-071
Korea
PGI Rollover IRA C 11,554 11.11
Custodian for Won R. Lee
106 Samsung Seacho Villa
1641-10 Seacho Dong
Seacho KS, Seoul 137-071
Korea
Pioneer Real Estate Shares MLPF&S for the Sole Benefit of its Customers B 1,141,664 25.38
Mutual Fund Administration C 286,329 26.44
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-648
U.S. Trust Co. of the Pacific NW, Y 64,890 57.42
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
U.S. Trust Co. of the Pacific NW, Y 31,126 27.54
Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
The Pioneer Group, Inc. (Serp) Y 16,981 15.02
Howard Johnson & Co.
15 Exchange Place, Suite 400
Jersey City, NJ 07302-3912
Pioneer Short-Term Income U.S. Trust Co. of the Pacific NW, Y 55,842 55.16
Trust Trustee
Pioneer Savings & Investment Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
7
<PAGE>
SHARE NUMBER OF SHARES % OF
NAME OF FUND RECORD HOLDER CLASS CLASS
45,381
U.S. Trust Co. of the Pacific NW, Y 44.83
Trustee
Pioneer Retirement Benefit Plan
U.S. Trust Co. of the Pacific Northwest
4380 SW MacAdam Avenue, Suite 450
Portland, OR 97201-6407
MLPF&S for the Sole Benefit of its Customers B 494,948 20.20
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-648
Pioneer Small Company Fund MLPF&S for the Sole Benefit of its Customers A 807,819 5.25
Mutual Fund Administration B 2,285,699 13.41
4800 Deer Lake Drive East, 2nd Floor C 274,808 24.51
Jacksonville, FL 32246-648
Pioneer Tax-Free Income Fund MLPF&S for the Sole Benefit of its Customers B 84,959 11.73
Mutual Fund Administration C 48,855 19.93
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Salomon Smith Barney Inc. C 90,343 36.86
388 Greenwich Street
New York, NY 10013-2375
Raffaella R. Buonocore Trustee of the C 14,139 5.76
Raffaella R. Buonocore Living
Trust Dated 04/25/97
1720 Walnut Street
Chester, PA 19013-5725
Pioneer II MLPF&S for the Sole Benefit of its Customers C 32,679 17.47
Mutual Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pioneer World Equity Fund Deutsche Morgan Grenfell A 105,791 7.12
C/F Frankfurt Reinvest Account
1251 Avenue of the Americas
New York, NY 10020-1104
MLPF&S for the Sole Benefit of its Customers A 79,696 5.37
Mutual Fund Administration B 43,850 6.37
4800 Deer Lake Drive East, 2nd Floor C 13,450 14.60
Jacksonville, FL 32246-6484
</TABLE>
8
<PAGE>
D. The following performance information replaces the existing performance
information under "Investment Results" in the applicable Fund's Statement of
Additional Information.
INVESTMENT RESULTS
7-DAY YIELDS -
CASH RESERVES FUND
PERIOD ENDED 6/30/98 PERIOD ENDED 6/30/98
CLASS OF SHARES YIELD (%) EFFECTIVE YIELD (%)
Class A Shares 4.82 4.93
Class B Shares 3.88 3.96
Class C Shares 4.00 4.08
30-DAY YIELDS -
SHORT-TERM INCOME TRUST
PERIOD ENDED 5/31/98
PERIOD ENDED 5/31/98 YIELD (%)
CLASS OF SHARES YIELD (%) (ABSENT EXPENSE LIMITATIONS)
Class A Shares 4.71 4.38
Class B Shares 3.89 3.63
Class Y Shares 5.24 5.20
30-DAY YIELDS - AMERICA
INCOME TRUST AND INTERMEDIATE
TAX-FREE FUND
FUND/CLASS OF SHARES PERIOD ENDED 6/30/98
PIONEER AMERICA INCOME PERIOD ENDED 6/30/98 YIELD (%)
TRUST YIELD (%) (ABSENT EXPENSE LIMITATIONS)
Class A Shares 5.25 5.05
Class B Shares 4.77 4.59
Class C Shares 4.82 4.64
PIONEER INTERMEDIATE
TAX-FREE FUND
Class A Shares 3.31 3.30
Class B Shares 2.71 2.61
Class C Shares 2.30 2.49
9
<PAGE>
30-DAY YIELDS - REAL
ESTATE SHARES, BALANCED
FUND AND TAX-FREE INCOME FUND
FUND/CLASS OF SHARES PERIOD ENDED 6/30/98
PIONEER REAL ESTATE SHARES YIELD (%)
Class A Shares 2.97
Class B Shares 2.48
Class C Shares 2.48
Class Y Shares 3.91
PIONEER BALANCED FUND
Class A Shares 2.33
Class B Shares 1.78
Class C Shares 1.95
PIONEER TAX-FREE
INCOME FUND
Class A Shares 3.84
Class B Shares 3.29
Class C Shares 3.34
TAX-EQUIVALENT YIELDS
(39.6% FEDERAL INCOME TAX
BRACKET) - INTERMEDIATE
TAX-FREE FUND AND TAX-FREE
INCOME FUND
FUND/CLASS OF SHARES PERIOD ENDED 6/30/98
PIONEER INTERMEDIATE PERIOD ENDED 6/30/98 YIELD (%)
TAX-FREE FUND YIELD (%) (ABSENT EXPENSE LIMITATIONS)
Class A Shares 5.49 5.46
Class B Shares 4.48 4.32
Class C Shares 3.81 4.12
PIONEER TAX-FREE
INCOME FUND
Class A Shares 6.35 N/A
Class B Shares 5.45 N/A
Class C Shares 5.53 N/A
10
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
JUNE 30, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER FUND
Class A Shares 24.28 19.36 14.99 13.34 2/13/28
Class B Shares 26.69 N/A N/A 30.08 7/1/96
Class C Shares 30.68 N/A N/A 30.91 7/1/96
PIONEER INTERMEDIATE
TAX-FREE FUND
Class A Shares 2.84 3.79 6.80 5.95 10/22/86
Class B Shares 2.72 N/A N/A 4.88 4/29/94
Class C Shares 5.51 N/A N/A 3.47 1/31/96
PIONEER AMERICA INCOME
TRUST
Class A Shares 4.22 4.52 7.10 7.16 6/1/88
Class B Shares 4.31 N/A N/A 5.86 4/29/94
Class C Shares 8.32 N/A N/A 4.79 1/31/96
PIONEER REAL ESTATE SHARES
Class A Shares 0.20 N/A N/A 9.92 10/25/93
Class B Shares 1.58 N/A N/A 17.15 1/31/96
Class C Shares 5.59 N/A N/A 18.13 1/31/96
Class Y Shares N/A N/A N/A -5.57 4/9/98
PIONEER GROWTH SHARES
Class A Shares 32.82 23.61 19.92 10.59 5/17/68
Class B Shares 35.73 N/A N/A 34.92 4/28/95
Class C Shares 39.84 N/A N/A 39.27 1/31/96
Class Y Shares N/A N/A N/A 2.69 4/30/98
PIONEER BALANCED FUND
Class A Shares 7.60 8.71 9.93 8.81 5/17/68
Class B Shares 7.80 N/A N/A 12.06 4/28/95
Class C Shares 11.95 N/A N/A 11.00 1/31/96
PIONEER TAX-FREE INCOME
FUND
Class A Shares 3.58 4.83 7.70 6.60 1/18/77
Class B Shares 3.71 N/A N/A 5.74 4/28/95
Class C Shares 7.69 N/A N/A 5.20 1/31/96
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
MAY 31, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER SHORT-TERM
INCOME TRUST
Class A Shares 3.43 4.59 N/A 4.79 8/10/92
Class B Shares 3.09 N/A N/A 4.74 4/4/94
Class Y Shares N/A N/A N/A 0.53 4/9/98
PIONEER EMERGING
MARKETS FUND
Class A Shares -14.09 N/A N/A 3.45 6/23/94
Class B Shares -12.80 N/A N/A 3.59 6/23/94
Class C Shares -9.47 N/A N/A 4.16 1/31/96
Class Y Shares N/A N/A N/A -12.34 4/9/98
PIONEER INTERNATIONAL
GROWTH FUND
Class A Shares 0.17 12.93 N/A 14.09 3/25/93
Class B Shares 2.06 N/A N/A 7.27 4/4/94
Class C Shares 5.57 N/A N/A 8.38 1/31/96
PIONEER MICRO-CAP FUND
Class A Shares 5.47 N/A N/A 8.32 2/28/97
Class B Shares 7.07 N/A N/A 9.75 2/28/97
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
APRIL 30, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER EUROPE FUND
Class A Shares 42.54 22.63 N/A 16.94 4/2/91
Class B Shares 46.07 N/A N/A 24.66 4/4/94
Class C Shares 50.29 N/A N/A 33.31 1/31/96
Class Y Shares N/A N/A N/A N/A 7/2/98
PIONEER INDO-ASIA FUND
Class A Shares -10.29 N/A N/A -13.20 6/23/94
Class B Shares -9.03 N/A N/A -13.20 6/23/94
Class C Shares -5.26 N/A N/A -5.94 1/31/96
PIONEER CAPITAL GROWTH FUND
Class A Shares 24.06 18.35 N/A 17.64 7/25/90
Class B Shares 26.73 N/A N/A 19.91 4/4/94
Class C Shares 30.67 N/A N/A 17.71 1/31/96
Class Y Shares N/A N/A N/A N/A 7/2/98
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
APRIL 30, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER EQUITY-INCOME FUND
Class A Shares 31.94 16.54 N/A 16.66 7/25/90
Class B Shares 34.89 N/A N/A 21.12 4/4/94
Class C Shares 38.88 N/A N/A 23.49 1/31/96
Class Y Shares N/A N/A N/A N/A 7/2/98
PIONEER GOLD SHARES
Class A Shares -19.88 -3.69 N/A -2.74 7/25/90
Class B Shares -19.05 N/A N/A -8.98 4/4/94
Class C Shares -15.67 N/A N/A -18.80 1/31/96
PIONEER SMALL COMPANY FUND
Class A Shares 28.49 N/A N/A 22.98 11/2/95
Class B Shares 31.32 N/A N/A 24.18 11/2/95
Class C Shares 35.40 N/A N/A 22.65 1/31/96
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
MARCH 31, 1998
SINCE INCEPTION
FUND/CLASS OF SHARES ONE YEAR FIVE YEARS TEN YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
PIONEER II
Class A Shares 28.19 17.10 14.35 15.23 9/30/69
Class B Shares 30.65 N/A N/A 25.96 7/1/96
Class C Shares 34.61 N/A N/A 27.79 7/1/96
PIONEER MID-CAP FUND
Class A Shares 34.78 10.92 12.99 13.40 11/19/82
Class B Shares 37.12 N/A N/A 17.02 2/1/96
Class C Shares 42.65 N/A N/A 18.90 2/1/96
</TABLE>
E. The financial statements and report of independent public
accountants thereon for the period set forth below are also incorporated by
reference into the relevant Statement of Additional Information from the Fund's
semiannual report:
<TABLE>
<CAPTION>
NAME OF FUND ACCESSION NUMBER PERIOD ENDING
<S> <C> <C>
Pioneer II 0000078758-98-000005 March 31, 1998
Pioneer Mid-Cap Fund 0000706155-98-000002 March 31, 1998
Pioneer Small Company Fund 0000949275-98-000006 April 30, 1998
Pioneer Short-Term Income Trust 0000887228-98-000007 May 31, 1998
Pioneer Emerging Markets Fund 0000921023-98-000009 May 31, 1998
Pioneer International Growth Fund 0000893660-98-000011 May 31, 1998
Pioneer Micro-Cap Fund 0001025187-98-000009 May 31, 1998
Pioneer Fund 0000078713-98-000009 June 30, 1998
Pioneer Intermediate Tax Free Fund 0000798172-98-000008 June 30, 1998
Pioneer Cash Reserves Fund 0000812195-98-000012 June 30, 1998
Pioneer America Income Trust 0000831120-98-000013 June 30, 1998
Pioneer Real Estate Shares 0000908996-98-000013 June 30, 19/98
Pioneer Balanced Fund 0000069405-98-000010 June 30, 1998
Pioneer Tax-Free Income Fund 0000202679-98-000010 June 30, 1998
</TABLE>
g:\edgar\sai\current\stickers\1098sup.doc
13
<PAGE>
PIONEER TAX-FREE INCOME FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A, Class B and Class C Shares
April 30, 1998
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus dated April 30, 1998 (the "Prospectus") of
Pioneer Tax-Free Income Fund (the "Fund") as amended and/or supplemented from
time to time. A copy of the Prospectus can be obtained free of charge by calling
Shareholder Services at 1-800-225-6292 or by written request to the Fund at 60
State Street, Boston, Massachusetts 02109. The most recent Annual Report to
Shareholders is attached to this Statement of Additional Information and is
hereby incorporated into this Statement of Additional Information by reference.
TABLE OF CONTENTS
Page
1. Investment Objective and Policies.........................2
2. Investment Restrictions...................................8
3. Management of the Fund....................................9
4. Investment Adviser........................................13
5. Underwriting Agreement and Distribution Plans.............14
6. Shareholder Servicing/Transfer Agent......................17
7. Custodian.................................................17
8. Principal Underwriter.....................................17
9. Independent Public Accountant.............................18
10. Portfolio Transactions....................................18
11. Tax Status................................................19
12. Description of Shares.....................................22
13. Determination of Net Asset Value..........................24
14. Systematic Withdrawal Plan................................24
15. Letter of Intent..........................................25
16. Investment Results........................................25
17. General Information.......................................29
18. Financial Statements......................................29
Appendix A - Description of Tax Exempt Bond Ratings.......30
Appendix B - Performance Statistics.......................31
Appendix C - Other Pioneer Information....................44
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
<PAGE>
1. INVESTMENT OBJECTIVE AND POLICIES
The Prospectus identifies the investment objective and the principal
investment policies of the Fund. Other investment policies of the Fund are set
forth below. Capitalized terms not otherwise defined herein have the meaning
given to them in the Prospectus.
The investment objective of the Fund is to seek as high a level of
income exempt from federal income tax as possible, consistent with preservation
of capital. To achieve this objective, the Fund intends to invest in a
diversified portfolio of obligations issued by or on behalf of states, counties
and municipalities of the U.S. and their authorities and political subdivisions
("Tax-Exempt Bonds"), the interest on which is excluded from gross income for
federal income tax purposes. All of the Fund's assets will consist of: (1)
Tax-Exempt Bonds which are rated at the time of purchase within the three
highest grades assigned by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa
or A) or Standard & Poor's Ratings Group ("S&P") (AAA, AA, A); (2) temporary
investments as described in the Prospectus; and (3) cash. While ratings at the
time of purchase will determine which securities may be acquired, a subsequent
reduction in rating will not require the Fund to dispose of the securities.
Investment in lower-quality securities may provide higher yields than
higher-rated securities; however, the added risk of investing in lower quality
securities might not be consistent with preservation of capital. The ratings of
Moody's and S&P represent their opinions as to the quality of the Tax-Exempt
Bonds which they undertake to rate. It should be emphasized, however, that
ratings are general and are not absolute standards of quality. Consequently,
Tax-Exempt Bonds with the same maturity, coupon and rating may have different
yields while Bonds of the same maturity and coupon with different ratings may
have the same yield. There is no assurance the Fund will attain its investment
objective. For a description of the ratings of commercial paper and the other
debt securities permitted as temporary investments, see Appendix A.
Municipal Lease Obligations
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with other Tax-Exempt Bonds (as set forth in the
Prospectus). Although lease obligations do not constitute general obligations of
the municipality for which the municipality's taxing power is pledged, a lease
obligation ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligations. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not yet developed the
depth of marketability associated with more conventional bonds. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove difficult.
The Fund will seek to minimize these risks.
In determining the liquidity of municipal lease obligations, the Fund's
officers, under guidelines established by the Fund's Board of Trustees, will
consider: (1) the essential nature of the leased property; and (2) the
likelihood that the municipality will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to the
operation of the municipality.
If leased property is determined not to be essential in nature or if
there is a likelihood that the municipality will discontinue appropriating
funding, then the following factors will also be considered in determining
liquidity:
2
<PAGE>
(1) any relevant factors related to the general credit quality of the
municipality, which may include: (a) whether the lease can be canceled; (b) what
assurance there is that the assets represented by the lease can be sold; (c) the
strength of the lessee's general credit (e.g., its debt, administrative,
economic and financial characteristics); and (d) the legal recourse in the event
of failure to appropriate.
(2) any relevant factors related to the marketability of the municipal
lease obligation which may include: (a) the frequency of trades and quotes for
the obligation; (b) the number of dealers willing to purchase or sell the
obligation and the number of other potential purchasers; (c) the willingness of
dealers to undertake to make a market in the obligation; and (d) the nature of
the marketplace trades, including the time needed to dispose of the obligation,
the method of soliciting offers, and the mechanics of transfer.
Zero Coupon and Deferred Interest Bonds
Tax-Exempt Bonds in which the Fund may invest also include zero coupon
bonds and deferred interest bonds. Zero coupon bonds and deferred interest bonds
are debt obligations which are issued at a significant discount from face value.
While zero coupon bonds do not require the periodic payment of interest,
deferred interest bonds provide for a period of delay before the regular payment
of interest begins. The discount approximates the total amount of interest the
bonds will accrue and compound over the period until maturity or the first
interest payment date at a rate of interest reflecting the market rate of the
security at the time of issuance. Zero coupon bonds and deferred interest bonds
benefit the issuer by mitigating its need for cash to meet debt service, but
also require a higher rate of return to attract investors who are willing to
defer receipt of such cash. Such investments may experience greater volatility
in value than debt obligations which make regular payments of interest. The Fund
will accrue income on such investments for tax and accounting purposes, which is
distributable to shareholders. Since no cash is received at the time of accrual,
the Fund may be required to liquidate other portfolio securities to satisfy its
distribution obligations.
Residual Interests in Municipal Securities
Certain municipal securities are divided into short-term and long-term
components. The short-term component has a long-term maturity, but pays interest
at a short-term rate that is reset by means of a "dutch auction" or similar
method at specified intervals (typically 35 days). The long-term component or
"residual interest" pays interest at a rate that is determined by subtracting
the interest paid on the short-term component from the coupon rate on the
municipal securities themselves. Consequently, the interest rate paid on
residual interests will increase when short-term interest rates are declining,
and will decrease when short-term interest rates are increasing. This interest
rate adjustment formula results in the market value of residual interests being
significantly more volatile than that of ordinary municipal securities. In a
declining interest rate environment, residual interests can provide the Fund
with a means of increasing or maintaining the level of tax-exempt interest paid
to shareholders. However, because of the market volatility associated with
residual interests, the Fund will not invest more than 10% of its total assets
in residual interests in municipal securities.
Options
The Fund can write (sell) "covered" put and call options on
fixed-income securities. Call options written by the Fund give the holder the
right to buy the underlying securities from the Fund at a fixed exercise price
up to a stated expiration date or, in the case of certain options, on such date.
Put options written by the Fund give the holder the right to sell the securities
to the Fund during the term of the option at a fixed exercise price up to a
stated expiration date or, in the case of certain options, on such date. Call
options are "covered" by the Fund, for example, when it owns the underlying
securities which the option
3
<PAGE>
holder has the right to purchase, and put options are "covered" by the
Fund, for example, when it has established a segregated account of cash or
short-term money market instruments which can be liquidated promptly to satisfy
any obligation of the Fund to purchase the underlying securities. The Fund will
receive a premium from writing a put or call option, which increases the Fund's
gross income in the event the option expires unexercised or is closed out at a
profit.
By writing a call option, the Fund limits its opportunity to profit
from any increase in the market value of the underlying security above the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security subsequently appreciates in value.
The Fund could terminate an option that it has written prior to its
expiration by entering into a "closing purchase transaction" in which it
purchases an option having the same terms as the option written. It is possible,
however, that illiquidity in the options markets may make it difficult from time
to time for the Fund to close out its written option positions. The Fund could
also purchase put or call options in anticipation of changes in interest rates
which may adversely affect the value of its portfolio or the prices of
securities that the Fund wants to purchase at a later date. The premium paid for
a put or call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option, and, unless the price of the
underlying security changes sufficiently, the option may expire without value to
the Fund.
The Fund intends to write and purchase options on securities primarily
for hedging purposes and also in an effort to increase current income. Options
on securities that are written or purchased by the Fund will be entered into on
U.S. securities exchanges regulated by the Securities and Exchange Commission
("SEC") and in the over-the-counter market. Over-the-counter transactions
involve certain risks which may not be present in an exchange environment. The
staff of the SEC has taken the position that purchased over-the-counter options
and assets used to cover written over-the-counter options are illiquid and,
therefore, together with other illiquid securities, cannot exceed 15% of a
Fund's net assets.
Futures Contracts and Options on Futures Contracts
To hedge against changes in interest rates and securities prices or for
non-hedging purposes, the Fund may purchase and write (sell) various kinds of
futures contracts, and purchase and write (sell) call and put options on any of
such futures contracts. The Fund may also enter into closing purchase and sale
transactions with respect to any of such contracts and options. The futures
contracts may be based on various securities (such as U.S. Government
securities), securities indices and other financial instruments and indices. The
Fund will engage in futures and related options transactions for bona fide
hedging and non-hedging purposes as described below. All futures contracts
entered into by the Fund are traded on U.S. exchanges or boards of trade that
are licensed and regulated by the Commodity Futures Trading Commission (the
"CFTC") or on foreign exchanges.
Futures Contracts. A futures contract may generally be described as an
agreement between two parties to buy and sell particular financial instruments
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, the
Fund can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
falling or securities prices are rising, the Fund, through the purchase of
futures contracts, can attempt to
4
<PAGE>
secure better rates or prices than might later be available in the market
when it effects anticipated purchases.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting transactions which may
result in a profit or a loss. A clearing corporation associated with the
exchange on which futures on securities are traded guarantees that, if still
open, the sale or purchase will be performed on the settlement date.
Hedging Strategies. Hedging, by use of futures contracts, seeks to
establish with more certainty the effective price and rate of return on
portfolio securities and securities that the Fund owns or proposes to acquire.
The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in order to hedge against an anticipated rise in
interest rates that would adversely affect the value of the Fund's portfolio
securities. Such futures contracts may include contracts for the future delivery
of securities held by the Fund or securities with characteristics similar to
those of the Fund's portfolio securities. If, in the opinion of the Fund's
investment adviser, there is a sufficient degree of correlation between price
trends for the Fund's portfolio securities and futures contracts based on other
financial instruments, securities indices or other indices, the Fund may also
enter into such futures contracts as part of its hedging strategy. Although
under some circumstances prices of securities in the Fund's portfolio may be
more or less volatile than prices of such futures contracts, the Fund's
investment adviser will attempt to estimate the extent of this volatility
difference based on historical patterns and compensate for any such differential
by having the Fund enter into a greater or lesser number of futures contracts or
by attempting to achieve only a partial hedge against price changes affecting
the Fund's securities portfolio. When hedging of this character is successful,
any depreciation in the value of portfolio securities will be substantially
offset by appreciation in the value of the futures position. On the other hand,
any unanticipated appreciation in the value of the Fund's portfolio securities
would be substantially offset by a decline in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing
futures contracts. This would be done, for example, when the Fund anticipates
the subsequent purchase of particular securities when it has the necessary cash,
but expects the prices or interest rates then available in the applicable market
to be less favorable than prices or rates that are currently available.
Options on Futures Contracts. The acquisition of put and call options
on futures contracts will give the Fund the right (but not the obligation) for a
specified price to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, the Fund obtains the benefit of the futures position if
prices move in a favorable direction but limits its risk of loss in the event of
an unfavorable price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium
which may partially offset a decline in the value of the Fund's assets. By
writing a call option, the Fund becomes obligated, in exchange for the premium,
to sell (if the option is exercised) a futures contract, which may have a value
higher than the exercise price. Conversely, the writing of a put option on a
futures contract generates a premium which may partially offset an increase in
the price of securities that the Fund intends to purchase. However, the Fund
becomes obligated to purchase (if the option is exercised) a futures contract
which may have a value lower than the exercise price. Thus, the loss incurred by
the Fund in writing options on futures is potentially unlimited and may exceed
the amount of the premium received. The Fund will incur transaction costs in
connection with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option on the same
securities. There is no guarantee that such closing
5
<PAGE>
transactions can be effected. The Fund's ability to establish and close out
positions on such options will be subject to the development and maintenance of
a liquid market.
The Fund may use options on futures contracts for bona fide hedging or
non-hedging purposes as discussed below.
Other Considerations. The Fund will engage in futures and related
options transactions only for bona fide hedging or non-hedging purposes in
accordance with CFTC regulations which permit principals of an investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), to engage in such transactions without registering as commodity
pool operators. The Fund is not permitted to engage in speculative futures
trading. The Fund will determine that the price fluctuations in the futures
contracts and options on futures used for hedging purposes are substantially
related to price fluctuations in securities held by the Fund or which it expects
to purchase. Except as stated below, the Fund's futures transactions will be
entered into for traditional hedging purposes -- i.e., futures contracts will be
sold to protect against a decline in the price of securities that the Fund owns,
or futures contracts will be purchased to protect the Fund against an increase
in the price of securities it intends to purchase. As evidence of this hedging
intent, the Fund expects that on 75% or more of the occasions on which it takes
a long futures or option position (involving the purchase of futures contracts),
the Fund will have purchased, or will be in the process of purchasing,
equivalent amounts of related securities in the cash market at the time when the
futures or option position is closed out. However, in particular cases, when it
is economically advantageous for the Fund to do so, a long futures position may
be terminated or an option may expire without the corresponding purchase of
securities or other assets.
As an alternative to literal compliance with the bona fide hedging
definition, a CFTC regulation permits the Fund to elect to comply with a
different test, under which the sum of the amounts of initial margin deposits on
the Fund's existing non-hedging futures contracts and premiums paid for
non-hedging options on futures (net of the amount the positions are "in the
money") would not exceed 5% of the market value of the Fund's net assets. The
Fund will engage in transactions in futures contracts and options only to the
extent such transactions are consistent with the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for maintaining its qualification
as a regulated investment company for federal income tax purposes.
Transaction costs associated with futures contracts and related options
involve brokerage costs, require margin deposits and, in the case of contracts
and options obligating the Fund to purchase securities, require the Fund to
segregate assets to cover such contracts and options.
While transactions in futures contracts and options on futures may
reduce certain risks, such transactions themselves entail certain other risks.
Thus, while the Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates or securities prices may result in a
poorer overall performance for the Fund than if it had not entered into any
futures contracts or options transactions. In the event of an imperfect
correlation between a futures position and a portfolio position which is
intended to be protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss. The only futures contracts available to
hedge the Fund's portfolio are various futures on U.S. Government securities,
futures on a municipal securities index and stock index futures.
Tax-Exempt Bonds
Tax-Exempt Bonds include debt obligations issued to obtain funds for
various public purposes, including the construction of a wide range of public
facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets, and water and sewer works. Other public
purposes for which Tax-Exempt Bonds may be issued include the refunding of
outstanding obligations,
6
<PAGE>
obtaining funds for general operating expenses, and the obtaining of funds
to loan to other public institutions and facilities. In addition, certain types
of industrial development bonds are, or have been under prior law, issued by or
on behalf of public authorities to obtain funds to provide privately-operated
housing facilities, sports facilities, convention or trade show facilities,
airports, mass transit, port or parking facilities, air or water pollution
control facilities, and certain local facilities for water supply, gas,
electricity, or sewage or solid waste disposal. Such obligations are included
within the term Tax-Exempt Bonds if the interest paid thereon qualifies as
excluded from gross income for federal income tax purposes. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Tax-Exempt Bonds, although the current
federal tax laws place substantial limitations on the size of such issues.
The two principal classifications of Tax-Exempt Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. Industrial
development bonds which are Tax-Exempt Bonds are in most cases revenue bonds and
do not generally constitute the pledge of the credit of the issuer of such
bonds. There are, of course, variations in security of Tax-Exempt Bonds, both
within a particular classification and between classifications, depending on
numerous factors.
The Fund may invest more than 25% of its total assets in securities of
companies in the gas, electric, telephone, sewer and water, public and private
utility sectors of the municipal bond market. In view of this, an investment in
the Fund should be made with an understanding of the characteristics of these
economic sectors and the potential risks of such an investment. Sector-wide
problems include the effects of fluctuating economic conditions, energy
conservation practices on levels of usage, difficulties in obtaining timely and
adequate rate relief, compliance with environmental regulations, increasing
capital expenditures and uncertainties with respect to fuel availability at
reasonable prices. The Fund does not consider broader economic sectors of the
municipal bond market such as the utilities sector to be a single industry and
will not purchase securities if more than 25% of its total assets would be
invested in any one industry. For purposes of this limitation, Tax-Exempt Bonds,
except those issued for the benefit of non-governmental users, are not
considered to be part of an industry. The Fund may invest 25% or more of its
total assets in Tax-Exempt Bonds of issuers in any one state or it may invest
25% or more of its total assets in industrial development bonds.
The yields on Tax-Exempt Bonds are dependent on a variety of factors,
including general money market conditions, general conditions of the Tax-Exempt
Bond market, the size of a particular offering, the maturity of the obligation,
and the rating of the issue. The value of outstanding Tax-Exempt Bonds will vary
as a result of changing evaluations of the ability of their issuers to meet the
interest and principal payments. Such values will also change in response to
changes in the interest rates payable on new issues of Tax-Exempt Bonds; should
such interest rates rise, the values of outstanding bonds, including those held
in the Fund's portfolio, will decline and (if purchased at principal amount)
would sell at a discount, and, if such interest rates fall, the values of
outstanding bonds will increase and (if purchased at principal amount) would
sell at a premium. Changes in the value of the Tax-Exempt Bonds held in the
Fund's portfolio arising from these or other factors will cause changes in the
net asset value per share of the Fund.
From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on Tax-Exempt Bonds. It can be expected that similar proposals may be
introduced in the future. If such a proposal were enacted, the availability of
Tax-Exempt Bonds for investment by the Fund and the value of the Fund's
portfolio would be affected.
7
<PAGE>
Additionally, the Fund would reevaluate its investment objective and
policies and consider changes in the structure of the Fund.
The Fund will limit portfolio turnover to the extent practicable and
consistent with its investment objective and policies. While it does not intend
to engage in short-term trading, the Fund will not preclude itself from taking
advantage of short-term trends and yield disparities that might occur from time
to time. A higher portfolio turnover rate will result in correspondingly higher
transaction costs.
2. INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The Fund has adopted certain
investment restrictions which may not be changed without the affirmative vote of
the holders of a "majority of the outstanding voting securities" ( as defined in
the 1940 Act) of the Fund. The Fund may not:
1. Purchase any security (other than obligations of the U.S. Government, its
agencies or instrumentalities), if as a result: (a) more than 25% of the value
of the Fund's total assets would then be invested in securities of any single
issuer; or (b) as to 75% of the value of the Fund's total assets, more than 5%
of the value of the Fund's total assets would then be invested in securities of
any single issuer. For the purpose of this limitation, the Fund will regard each
state and each political subdivision, agency or instrumentality of such state
and each multi-state agency of which such state is a member as a separate
issuer;
2. Borrow money, except from a bank for temporary or emergency purposes and not
for investment purposes, and then only in an amount not exceeding 5% of the
value of the Fund's total assets at the time of borrowing;
3. Pledge, mortgage or hypothecate its assets, except that, to secure borrowings
permitted by subparagraph (2) above, it may pledge securities having a market
value at the time of pledge not exceeding 5% of the value of the Fund's total
assets;
4. Knowingly purchase or otherwise acquire any securities which are subject to
legal or contractual restrictions on resale or which are not readily marketable,
or purchase the securities of any other investment company, except that it may
make purchases of securities of investment companies in accordance with its
investment objective, policies, and restrictions or as part of a merger,
consolidation or acquisition of assets;
5. Underwrite any issue of securities, except in connection with the purchase of
securities in accordance with its investment objective, policies and
limitations, or participate on a joint or joint-and-several basis in any
securities trading account;
6. Purchase or sell real estate (or real estate limited partnerships), but this
shall not prevent the Fund from investing in Tax-Exempt Bonds or other permitted
obligations secured by real estate or interests therein;
7. Purchase or sell commodities or commodity contracts except options, financial
futures or options on financial futures contracts in accordance with its
investment objective, policies, and restrictions, or invest in oil, gas or other
mineral leases, exploration or development programs, or write or purchase puts,
calls, straddles, spreads or any combination thereof;
8. Make loans, except through the purchase of securities, including repurchase
agreements, in accordance with its investment objective, policies and
limitations;
8
<PAGE>
9. Make short sales of securities or purchase any securities on margin, except
for such short-term credits as are necessary for the clearance of transactions
and margin payments in connection with options, financial futures contracts and
options on financial futures contracts; or
10. Purchase or retain the securities of any issuer other than the securities of
the Fund, if, to the Fund's knowledge, those officers and trustees of the Fund,
or of the investment adviser or underwriter, who own individually or
beneficially more than 1/2 of 1% of the outstanding securities of such issuer
together own beneficially more than 5% of such outstanding securities.
If a percentage restriction on investment or utilization of assets set
forth in any of the above is adhered to at the time an investment is made, a
later change in percentage resulting from changing values or a change in the
rating of a portfolio security will not be considered a violation of policy.
2. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the
affairs of the Fund. The officers of the Fund are responsible for the Fund's
operations. The Trustees and executive officers of the Fund are listed below,
together with their principal occupations during the past five years. An
asterisk indicates those Trustees who are interested persons of the Fund within
the meaning of the 1940 Act.
JOHN F. COGAN, JR.*, Chairman of the Board, President and Trustee, DOB:
June 1926 President, Chief Executive Officer and a Director of The Pioneer
Group, Inc. ("PGI"); Chairman and a Director of Pioneering Management
Corporation ("PMC") and Pioneer Funds Distributor, Inc. ("PFD"); Director of
Pioneering Services Corporation ("PSC"), Pioneer Capital Corporation ("PCC"),
Pioneer Real Estate Advisors, Inc., Pioneer Forest, Inc., Pioneer Explorer,
Inc., Pioneer Management (Ireland) Ltd. ("PMIL") and Closed Joint Stock Company
"Forest-Starma"; President and Director of Pioneer Metals and Technology, Inc.
("PMT"), Pioneer International Corp. ("PIntl"), Pioneer First Russia, Inc.
("First Russia") and Pioneer Omega, Inc. ("Omega"); Chairman of the Board and
Director of Pioneer Goldfields Limited ("PGL") and Teberebie Goldfields Limited;
Chairman of the Supervisory Board of Pioneer Fonds Marketing, GmbH, Pioneer
First Polish Investment Fund Joint Stock Company, S.A. and Pioneer Czech
Investment Company, A.S.; Chairman, President and Trustee of all of the Pioneer
mutual funds; Director of Pioneer Global Equity Fund Plc, Pioneer Global Bond
Fund Plc, Pioneer DM Cashfonds Plc, Pioneer European Equity Fund Plc, Pioneer
Central & Eastern Europe Fund Plc and Pioneer US Real Estate Fund Plc; and
Partner, Hale and Dorr LLP (counsel to PGI and the Trust).
MARY K. BUSH, Trustee, DOB: April 1948
4201 Cathedral Avenue, NW, Washington, DC 20016
President, Bush & Co., an international financial advisory firm; Director and
Trustee of Mortgage Guaranty Insurance Corporation, Novecon Management Company,
Hoover Institution, Folger Shakespeare Library, March of Dimes, Project 2000,
Inc. (not-for-profit educational organization), Small Enterprise Assistance Fund
and Wilberforce University; Advisory Board Member, Washington Mutual Investors
Fund, a registered investment company; and Trustee of all of the Pioneer mutual
funds, except Pioneer Variable Contracts Trust.
RICHARD H. EGDAHL, M.D.,Trustee, DOB: December 1926
Boston University Health Policy Institute, 53 Bay State Road, Boston, MA 02115
Alexander Graham Bell Professor of Health Care Entrepreneurship, Boston
University; Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; University Professor, Boston
University; Director, Boston University Health Policy Institute and Boston
University
9
<PAGE>
Program for Health Care Entrepreneurship; Director, CORE (management of
workers' compensation and disability costs - NASDAQ); Director, WellSpace
(provider of complementary health care); Trustee, Boston Medical Center;
Honorary Trustee, Franciscan Children's Hospital; and Trustee of all of the
Pioneer mutual funds.
MARGARET B.W. GRAHAM, Trustee, DOB: May 1947
The Keep, P.O. Box 110, Little Deer Isle, ME 04650
Founding Director, The Winthrop Group, Inc. (consulting firm); Manager of
Research Operations, Xerox Palo Alto Research Center, from 1991 to 1994;
Professor of Operations Management and Management of Technology and Associate
Dean, Boston University School of Management, from 1989 to 1993; and Trustee of
all of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, Trustee, DOB: July 1917
6363 Waterway Drive, Falls Church, VA 22044
Professor Emeritus, George Washington University; Director, American
Productivity and Quality Center; Adjunct Scholar, American Enterprise Institute;
Economic Consultant; and Trustee of all of the Pioneer mutual funds, except
Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, Trustee, DOB: May 1948 One Boston Place, Suite 2635,
Boston, MA 02108 President, Newbury, Piret & Company, Inc. (merchant banking
firm); Trustee of Boston Medical Center; Member of the Board of Governors of the
Investment Company Institute; and Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, Trustee and Executive Vice President, DOB: February 1944
Executive Vice President and a Director of PGI; President, Chief Investment
Officer and a Director of PMC; Director of PFD, PCC, PIntl, First Russia, Omega,
Pioneer SBIC Corporation ("Pioneer SBIC"), PMIL, Pioneer Global Equity Fund Plc,
Pioneer Global Bond Fund Plc, Pioneer DM Cashfonds Plc, Pioneer European Equity
Fund Plc, Pioneer Central & Eastern Europe Fund Plc and Pioneer US Real Estate
Fund Plc; and Executive Vice President and Trustee of all of the Pioneer mutual
funds.
STEPHEN K. WEST, Trustee, DOB: September 1928
125 Broad Street, New York, NY 10004
Of Counsel to Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus Funds
(mutual funds); and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, Trustee, DOB: June 1936 One North Adgers Wharf, Charleston,
SC 29401 President, John Winthrop & Co., Inc. (private investment firm);
Director of NUI Corp. (energy sales, services and distribution); and Trustee of
all of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
WILLIAM H. KEOUGH, Treasurer, DOB: April 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI; Treasurer
of PFD, PMC, PSC, PCC, PIntl, PMT, PGL, First Russia, Omega and Pioneer SBIC;
and Treasurer of all of the Pioneer mutual funds.
JOSEPH P. BARRI, Secretary, DOB: August 1946
Corporate Secretary of PGI and most of its subsidiaries; Secretary of all of the
Pioneer mutual funds; and Partner, Hale and Dorr LLP.
10
<PAGE>
ERIC W. RECKARD, Assistant Treasurer, DOB: June 1956
Manager of Business Planning and Internal Audit of PMC since September 1998;
Manager of Fund Accounting of PMC since May 1994; Manager of Auditing,
Compliance and Business Analysis for PGI prior to May 1994; and Assistant
Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, Assistant Secretary, DOB: March 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant Secretary
of PMC, PIntl, PGL, First Russia, Omega and all of the Pioneer mutual funds;
Assistant Clerk of PFD and PSC; and junior partner of Hale and Dorr LLP prior to
1995.
MARK L. WINTER, Vice President, DOB: May 1951
Vice President of the Fund since 1993; formerly, Portfolio Manager, Mutual
of Omaha Fund Management Company (until 1993.)
The Fund's Agreement and Declaration of Trust (the "Declaration of
Trust") provides that the holders of two-thirds of its outstanding shares may
vote to remove a Trustee of the Fund at any meeting of shareholders. See
"Description of Shares" below. The business address of all officers is 60 State
Street, Boston, Massachusetts 02109.
All of the outstanding capital stock of PFD, PMC and PSC is owned, directly
or indirectly, by PGI, a publicly owned Delaware corporation. PMC, the Fund's
investment adviser, serves as the investment adviser for the Pioneer mutual
funds listed below and manages the investments of certain institutional
accounts.
The table below lists all the Pioneer U. S. mutual funds currently offered
to the public and the investment adviser and principal underwriter for each
fund.
Investment Principal
Fund Name Adviser Underwriter
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer World Equity Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Mid-Cap Fund PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Small Company Fund PMC PFD
Pioneer Independence Fund PMC Note 1
Pioneer Micro-Cap Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Balanced Fund PMC PFD
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
11
<PAGE>
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares PMC Note 2
Pioneer Variable Contracts Trust PMC Note 3
Note 1 This fund is available to the general public only through Pioneer
Independence Plans, a systematic investment plan sponsored by PFD.
Note 2 This fund is a closed-end fund.
Note 3 This is a series of ten separate portfolios designed to provide
investment vehicles for the variable annuity and variable life insurance
contracts of various insurance companies or for certain qualified pension plans.
To the knowledge of the Fund, no officer or Trustee of the Fund owned
5% or more of the issued and outstanding shares of PGI as of March 31, 1998,,
except Mr. Cogan who then owned approximately 14% of such shares.
As of March 31, 1998, the Trustees and Officers of the Fund owned
beneficially in the aggregate less than 1% of the outstanding shares of the
Fund. As of such date Merrill Lynch Pierce Fenner & Smith Inc., for the sole
benefit of its customers, 4800 Deer Lake Drive East 3rd Fl, Jacksonville, FL
32246-6484 owned approximately 8.94% (47,673.331) of the outstanding Class B
shares and 12.60% (19,252.781) of the outstanding Class C shares; Smith Barney
Inc., 388 Greenwich Street, New York, NY 10013-2375 owned approximately 11.45%
(17,499.482), 9.72% (14,852.486), 5.56% (8,505.367) and 5.38% (8,226.504) of the
outstanding Class C shares; Raffaella R. Buonocore TTEE of the Raffaella R.
Buonocore Living Trust owned approximately 9.08% (13,877.874) of the outstanding
Class C shares; and Pioneer Funds Distributor, Inc., 60 State Street, Boston, MA
02109-1800 owned approximately 6.07% (9,283.320) of the outstanding Class C
shares;
Compensation of Officers and Trustees
The Fund pays no salaries or compensation to any of its
officers. The Fund will pay an annual trustee's fee to each Trustee who is not
affiliated with PMC, PGI, PFD or PSC consisting of two components: (a) a base
fee of $500 and (b) a variable fee, calculated on the basis of the average net
assets of the Fund. In addition, the Fund will pay a per meeting fee of $100 to
each Trustee who is not affiliated with PMC, PGI, PFD or PSC. The Fund also pays
an annual committee participation fee to trustees who serve as members of
committees established to act on behalf of one or more of the Pioneer mutual
funds. Committee fees are allocated to the Fund on the basis of the Fund's
average net assets. Each Trustee who is a member of the Audit Committee for the
Pioneer mutual funds receives an annual fee equal to 10% of the aggregate annual
trustee's fee, except the Committee Chair who receives an annual trustee's fee
equal to 20% of the aggregate annual trustee's fee. Members of the Pricing
Committee for the Pioneer mutual funds, as well as any other committee which
renders material functional services to the Board of Trustees for the Pioneer
mutual funds, receive an annual fee equal to 5% of the annual trustee's fee,
except the Committee Chair who receives an annual trustee's fee equal to 10% of
the annual trustee's fee. Each Trustee who is not affiliated with PMC, PGI, PFD
or PSC also receives $375 per meeting for attendance at meetings of the
Non-Interested Trustees Committee, except for the Committee Chairperson who will
receive an additional $375 per meeting. Any such fees paid to affiliates or
interested persons of PMC, PGI, PFD or PSC are reimbursed to the Fund under its
management contract.
The following table provides information regarding the compensation paid by the
Fund and other Pioneer mutual funds to the Trustees for their services.
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pension or Total
Retirement Compensation
Benefits from the Fund
Aggregate Accrued and all other
Compensation as Part of Pioneer
TrusteeFrom the Fund* the Fund's Expenses Mutual Funds**
John F. Cogan, Jr. $ 500 $0 $12,000
Mary K. Bush + 1,106 $0 $30,000
Richard H. Egdahl, M.D. $2,283 $0 $62,000
Margaret B.W. Graham $2,283 $0 $60,000
John W. Kendrick $2,118 $0 $55,800
MargueriA. Piret $2,838 $0 $80,000
David D. Tripple $ 500 $0 $12,000
Stephen K. West $2,319 $0 $63,800
John Winthrop $2,601 $0 $69,000
Totals $16,548 $0 $444,600
======= == ========
* As of December 31, 1997, the Fund's fiscal year end.
** As of December 31, 1997
+ Mary K. Bush became a Trustee on June 23, 1997.
</TABLE>
4. INVESTMENT ADVISER
As stated in the Prospectus, PMC, 60 State Street, Boston, Massachusetts
02109, serves as the Fund's investment adviser. PMC became the Fund's investment
adviser on December 1, 1993. Prior to that date, Mutual of Omaha Fund Management
Company ("FMC") served as the Fund's investment adviser. The management contract
is renewable annually by the vote of a majority of the Board of Trustees of the
Fund (including a majority of the Board of Trustees who are not parties to the
contract or interested persons of any such parties) cast in person at a meeting
called for the purpose of voting on such renewal. This contract terminates if
assigned and may be terminated without penalty by either party by vote of its
Board of Trustees or a majority of its outstanding voting securities and the
giving of 60 days' written notice.
As compensation for its management services and expenses incurred, PMC
is entitled to a management fee at the following rates per annum of the Fund's
average daily net assets. The fee is computed and accrued daily and paid
monthly.
Net Assets Annual Rate
For assets up to $250,000,000 0.50%
For assets in excess of $250,000,000
to $300,000,000 0.48%
Over $300,000,000 0.45%
PMC agreed that until December 1, 1995, its fee would not exceed the
fee that would have been payable under the previous management contract with
FMC, without giving effect to any expense limitation. Under the previous
management contract with FMC, which was terminated on December 1, 1993, the Fund
paid FMC a management fee at an annual rate equal to the following percentages
of the Fund's average daily net assets:
13
<PAGE>
Net Assets Annual Rate
For assets up to and including $100,000,000 .50%
For assets in excess of $100,000,000
to $200,000,000 .48%
For assets in excess of $200,000,000
to $300,000,000 .46%
For assets in excess of $300,000,000
to $400,000,000 .44%
For assets in excess of $400,000,000
to $500,000,000 .42%
For assets of $500,000,000 and over .40%
During the fiscal years ended December 31, 1995, December 31, 1996 and December
31, 1997the Fund incurred management fees of $2,153,083, and $2,196,607and
$2,063,785, respectively.
5. UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS
The Fund has entered into an Underwriting Agreement with PFD. The
Underwriting Agreement will continue from year to year if annually approved by
the Trustees. The Underwriting Agreement provides that PFD will bear certain
distribution expenses not borne by the Fund.
PFD bears all expenses it incurs in providing services under the
Underwriting Agreement. Such expenses include compensation to its employees and
representatives and to securities dealers for distribution related services
performed for the Fund. PFD also pays certain expenses in connection with the
distribution of the Fund's shares, including the cost of preparing, printing and
distributing advertising or promotional materials, and the cost of printing and
distributing prospectuses and supplements to prospective shareholders. The Fund
bears the cost of registering its shares under federal and state securities law.
The Fund and PFD have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Under the Underwriting Agreement, PFD will use its best efforts in rendering
services to the Fund.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1
under the 1940 Act with respect to each Class of shares (the "Class A Plan",
"Class B Plan" and "Class C Plan") (together, the "Plans").
Class A Plan
Pursuant to the Class A Plan, the Fund may reimburse PFD for its
expenditures in financing any activity primarily intended to result in the sale
of the Class A shares. Certain categories of such expenditures have been
approved by the Board of Trustees and are set forth in the Prospectus under the
caption "Distribution Plans." The expenses of the Fund pursuant to the Class A
Plan are accrued on a fiscal year basis and may not exceed, with respect to the
Class A shares, the annual rate of 0.25% of the Fund's average daily net assets
attributable to Class A shares.
14
<PAGE>
Class B Plan
The Class B Plan provides that the Fund shall pay PFD, as the Fund's
distributor for its Class B shares, a daily distribution fee equal on an annual
basis to 0.75% of the Fund's average daily net assets attributable to Class B
shares and will pay PFD a service fee equal to 0.25% of the Fund's average daily
net assets attributable to Class B shares (which PFD will in turn pay to
securities dealers which enter into a sales agreement with PFD at a rate of up
to 0.25% of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class B shares. PFD will advance to dealers the first-year service fee at a
rate equal to 0.25% of the amount invested. As compensation therefor, PFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Dealers will become eligible for additional service
fees with respect to such shares commencing in the thirteenth month following
purchase. Dealers may from time to time be required to meet certain other
criteria in order to receive service fees. PFD or its affiliates are entitled to
retain all service fees payable under the Class B Plan for which there is no
dealer of record or for which qualification standards have not been met as
partial consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class B Plan is
to compensate PFD for its distribution services with respect to Class B shares
of the Fund. PFD pays commissions to dealers as well as expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution related
expenses, including, without limitation, the cost necessary to provide
distribution-related services, or personnel, travel office expenses and
equipment. The Class B Plan also provides that PFD will receive all CDSCs
attributable to Class B shares. See "Distribution Plans" in the Prospectus. When
a broker-dealer sells Class B shares and elects, with PFD's approval, to waive
its right to receive the commission normally paid at the time of the sale, PFD
may cause all or a portion of the distribution fees described above to be paid
to the broker-dealer.
Class C Plan
The Class C Plan provides that the Fund will pay PFD, as the Fund's
distributor for its Class C shares, a distribution fee accrued daily and paid
quarterly, equal on an annual basis to 0.75% of the Fund's average daily net
assets attributable to Class C shares and will pay PFD a service fee equal to
0.25% of the Fund's average daily net assets attributable to Class C shares. PFD
will in turn pay to securities dealers which enter into a sales agreement with
PFD a distribution fee and a service fee at rates of up to 0.75% and 0.25%,
respectively, of the Fund's average daily net assets attributable to Class C
shares owned by investors for whom that securities dealer is the holder or
dealer of record. The service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. PFD will advance to dealers the first-year service fee at a
rate equal to 0.25% of the amount invested. As compensation therefor, PFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Commencing in the thirteenth month following a
purchase of Class C shares, dealers will become eligible for additional service
fees at a rate of up to 0.25% and additional compensation at a rate of up to
0.75% of the net asset value of such shares. Dealers may from time to time be
required to meet certain other criteria in order to receive service fees. PFD or
its affiliates are entitled to retain all service fees payable under the Class C
Plan for which there is no dealer of record or for which qualification standards
have not been met as partial consideration for personal services and/or account
maintenance services performed by PFD or its affiliates for shareholder
accounts.
15
<PAGE>
The purpose of distribution payments to PFD under the Class C Plan is
to compensate PFD for its distribution services with respect to the Class C
shares of the Fund. PFD pays commissions to dealers as well as expenses of
printing prospectuses and reports used for sales purposes, expenses with respect
to the preparation and printing of sales literature and other
distribution-related expenses, including, without limitation, the cost necessary
to provide distribution-related services, or personnel, travel office expenses
and equipment. The Class C Plan also provides that PFD will receive all CDSCs
attributable to Class C shares. (See "Distribution Plans" in the Prospectus.)
When a broker-dealer sells Class C shares and elects, with PFD's approval, to
waive its right to receive the commission normally paid at the time of the sale,
PFD may cause all or a portion of the distribution fees described above to be
paid to the broker-dealer.
General
In accordance with the terms of the Plans, PFD provides to the Fund for
review by the Trustees a quarterly written report of the amounts expended under
the respective Plan and the purpose for which such expenditures were made. In
the Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is
not an interested person of the Fund, has any direct or indirect financial
interest in the operation of the Plans except to the extent that PFD and certain
of its employees may be deemed to have such an interest as a result of receiving
a portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plans were adopted by a majority vote of the Board of Trustees,
including all of the Trustees who are not, and were not at the time they voted,
interested persons, as defined in the 1940 Act (none of whom had or have any
direct or indirect financial interest in the operation of the Plan) of the Fund,
cast in person at a meeting called for the purpose of voting on the Plans. In
approving the Plans, the Trustees identified and considered a number of
potential benefits which the Plans may provide. The Board of Trustees believes
that there is a reasonable likelihood that the Plans will benefit the Fund and
its current and future shareholders. Under their terms, the Plans remain in
effect from year to year provided such continuance is approved annually by vote
of the Trustees in the manner described above. The Plans may not be amended to
increase materially the annual percentage limitation of average net assets which
may be spent for the services described therein without approval of the
shareholders of the Fund affected thereby, and material amendments to the Plans
must also be approved by the Trustees in the manner described above. A Plan may
be terminated at any time, without payment of any penalty, by vote of the
majority of the Trustees who are not interested persons of the Fund and have no
direct or indirect financial interest in the operations of the Plan, or by a
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the respective Class of the Fund. A Plan will automatically terminate in
the event of its assignment (as defined in the 1940 Act). In the Trustees'
quarterly review of the Plans, they will consider a Plan's continued
appropriateness and the level of compensation it provides.
During the fiscal year ended December 31, 1997, the Fund incurred total
distribution fees pursuant to the Fund's Class A Plan, Class B Plan and Class C
Plan of $1,052,278,, $50,451 and $9,515, respectively. Upon redemption, Class A
shares may be subject to a 1% CDSC, Class B shares are subject to a CDSC at a
rate declining from a maximum of 4% of the lower of the cost or market value of
the shares and Class C shares are subject to a 1% CDSC. During the fiscal year
ended December 31, 1997, CDSCs, in the amount of approximately $24,904 were paid
to PFD.
16
<PAGE>
6. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston,
Massachusetts 02109, to act as shareholder servicing agent and transfer agent
for the Fund. This contract terminates if assigned and may be terminated without
penalty by either party upon 90 days' written notice.
Under the terms of its contract with the Fund, PSC will service
shareholder accounts, and its duties will include: (i) processing sales,
redemptions and exchanges of shares of the Fund; (ii) distributing dividends and
capital gains associated with Fund portfolio accounts; and (iii) maintaining
account records and responding to routine shareholder inquiries.
PSC receives an annual fee of $30.00 per Class A, Class B and Class C
shareholder account from the Fund as compensation for the services described
above. PSC is also reimbursed by the Fund for its out-of-pocket expenditures.
This fee is set at an amount determined by vote of a majority of the Trustees
(including a majority of the Trustees who are not parties to the contract with
PSC or interested persons of any such parties) to be comparable to fees for such
services being paid by other investment companies. The Fund may compensate
entities which have agreed to provide certain sub-accounting services, such as
specific transaction processing and recordkeeping services. Any such payments by
the Fund would be in lieu of the per account fee which would otherwise be paid
by the Fund to PSC.
7. CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, is the custodian (the "Custodian") of the Fund's assets. The Custodian's
responsibilities include safekeeping and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments. The Custodian also provides
fund accounting, bookkeeping and pricing assistance to the Fund.
The Custodian does not determine the investment policies of the Fund or
decide which securities it will buy or sell. The Fund may invest in securities
issued by the Custodian, deposit cash in the Custodian and deal with the
Custodian as a principal in securities transactions. Portfolio securities may be
deposited into the Federal Reserve-Treasury Department Book Entry System or the
Depository Trust Company.
8. PRINCIPAL UNDERWRITER
PFD, 60 State Street, Boston, Massachusetts 02109, serves as the
principal underwriter for the Fund in connection with the continuous offering of
the Class A, Class B and Class C shares of the Fund.
During the Fund's fiscal years ending December 31, 1995,1996 and 1997
net underwriting commissions retained by PFD in connection with the offering of
Fund shares were $99,407, $77,023 and $50,526, respectively. Commissions
reallowed to dealers by PFD in those periods were $754,315, $531,201 and
$348,767, respectively.
The Fund will not generally issue Fund shares for consideration other
than cash. At the Fund's sole discretion, however, it may issue Fund shares for
consideration other than cash in connection with a reorganization, statutory
merger, or other acquisition of portfolio securities.
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9. INDEPENDENT PUBLIC ACCOUNTANT
Effective January 1, 1994, Arthur Andersen LLP 225 Franklin Street,
Boston, Massachusetts 02110, was selected as the independent public accountant
for the Fund, providing audit services, tax return review, and assistance and
consultation with respect to the preparation of filings with the SEC.
Previously, Coopers & Lybrand had served as independent public accountant to the
Fund. Arthur Andersen's election as independent public accountant was approved,
at a meeting called for the purpose of voting on such approval, by the vote of a
majority of those Trustees on the Board of Trustees who are not interested
persons of the Fund.
10. PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the Fund by PMC pursuant to authority contained in the Fund's
Management Contract. In selecting broker-dealers, PMC will consider various
relevant factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to be
purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer; the broker-dealer's execution services
rendered on a continuing basis; and the reasonableness of any broker-dealer
spreads.
PMC may select broker-dealers which provide brokerage and/or research
services to the Fund and/or other investment companies managed by PMC or who
sell shares of the Pioneer mutual funds. In addition, if PMC determines in good
faith that the amount of commissions charged by a broker-dealer is reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, the Fund may pay commissions to such broker-dealer in an amount
greater than the amount another firm may charge. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). PMC
maintains a listing of broker-dealers who provide such services on a regular
basis. However, because it is anticipated that many transactions on behalf of
the Fund and other investment companies managed by PMC are placed with
broker-dealers (including broker-dealers on the listing) without regard to the
furnishing of such services, it is not possible to estimate the proportion of
such transactions directed to such broker-dealers solely because such services
were provided.
The research received from broker-dealers may be useful to PMC in
rendering investment management services to the Fund as well as other investment
companies managed by PMC, although not all such research may be useful to the
Fund. Conversely, such information provided by broker-dealers who have executed
transaction orders on behalf of such other PMC clients may be useful to PMC in
carrying out its obligations to the Fund. The receipt of such research has not
reduced PMC's normal independent research activities; however, it enables PMC to
avoid the additional expenses which might otherwise be incurred if it were to
attempt to develop comparable information through its own staff.
The Board of Trustees periodically reviews PMC's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund.
In circumstances where two or more broker-dealers offer comparable
prices and executions, preference may be given to a broker-dealer which has sold
shares of the Fund as well as shares of other investment companies or accounts
managed by PMC. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the Fund.
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In addition to the Fund, PMC acts as investment adviser or subadviser
to the other Pioneer mutual funds, Pioneer Interest Shares and certain private
accounts with investment objectives similar to that of the Fund. Securities
frequently meet the investment objective of the Fund, such other funds and such
private accounts. In such cases, the decision to recommend a purchase to one
fund or account rather than another is based on a number of factors. The
determining factors in most cases are the amount of securities of the issuer
then outstanding, the value of those securities and the market for them. Other
factors considered in the investment recommendations include other investments
which each mutual fund or account presently has in a particular industry and the
availability of investment funds in each mutual fund or account.
It is possible that at times identical securities will be held by more
than one mutual fund and/or account. However, positions in the same issue may
vary and the length of time that any mutual fund or account may choose to hold
its investment in the same issue may likewise vary. To the extent that the Fund,
another Pioneer mutual fund, Pioneer Interest Shares or a private account
managed by PMC may not be able to acquire as large a position in such security
as it desires, it may have to pay a higher price for the security. Similarly,
the Fund may not be able to obtain as large an execution of an order to sell or
as high a price for any particular portfolio security if PMC decides to sell on
behalf of another account the same portfolio security at the same time. On the
other hand, if the same securities are bought or sold at the same time by more
than one mutual fund or account, the resulting participation in volume
transactions could produce better executions for the Fund or the account. In the
event more than one account purchases or sells the same security on a given
date, the purchases and sales will normally be made as nearly as practicable on
a pro rata basis in proportion to the amounts desired to be purchased or sold by
each.
The Fund paid no brokerage commissions for the fiscal years ended
December 31, 1994, 1995 and 1996.
11. TAX STATUS
It is the Fund's policy to meet the requirements of Subchapter M of the Code,
for qualification as a regulated investment company. These requirements relate
to the sources of the Fund's income, the diversification of its assets and the
distribution of its income to shareholders. If the Fund meets all such
requirements and distributes to its shareholders, in accordance with the Code's
timing requirements, all investment company taxable income and net capital gain,
if any, which it earns, the Fund will be relieved of the necessity of paying
federal income tax.
In order to qualify as a regulated investment company under Subchapter M, the
Fund must, among other things, derive at least 90% of its annual gross income
from interest, payments with respect to securities loans, gains from the sale or
other disposition of securities or other income (including gains from options
and futures contracts) derived with respect to its business of investing in such
securities (the "90% income test")and satisfy certain annual distribution and
quarterly diversification requirements.
In accordance with its investment objectives, the Fund invests its assets in a
manner which will provide as large a portion of tax-exempt income as is
consistent with the protection of shareholders' capital. Since the protection of
capital is an important aspect of the Fund's investment objectives, the Fund may
from time to time invest a portion of its portfolio in short-term obligations
and may engage in transactions generating gains or income which is not
tax-exempt, e.g., purchase non-municipal securities, sell or lend portfolio
securities, enter into repurchase agreements, dispose of rights to when-issued
securities prior to issuance, acquire any debt obligation at a market discount,
acquire certain stripped tax-exempt obligations or their coupons or enter into
options and futures transactions. The Fund's distributions from such gains or
income will not be "exempt-interest dividends" and, accordingly, will be
taxable.
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The Code permits tax-exempt interest received by the Fund to flow through as
tax-exempt "exempt-interest dividends" to the Fund's shareholders, provided that
the Fund qualifies as a regulated investment company and at least 50% of the
value of the Fund's total assets at the close of each quarter of its taxable
year consists of tax-exempt obligations, i.e., obligations described in Section
103(a) of the Code. That part of the Fund's net investment income which is
attributable to interest from tax-exempt obligations and which is distributed to
shareholders will be designated by the Fund as an "exempt-interest dividend"
under the Code. Exempt-interest dividends are excluded from a shareholder's
gross income under the Code. The percentage of income designated as tax-exempt
is applied uniformly to all distributions made during each taxable year and may
differ from the actual tax-exempt percentage earned by the Fund during any
particular month. That portion of the Fund's dividends and distributions not
designated as tax-exempt will be taxable as described below.
Dividends from investment company taxable income, which includes taxable net
investment income and net short-term capital gain in excess of net long-term
capital loss, are taxable as ordinary income, whether received in cash or
reinvested in additional shares. Dividends from net long-term capital gain in
excess of net short-term capital loss ("net capital gain"), if any, whether
received in cash or reinvested in additional shares, are taxable to the Fund's
shareholders as long-term capital gains for federal income tax purposes without
regard to the length of time shares of the Fund have been held. As a result of
the enactment of the Taxpayer Relief Act of 1997 (the "1997 TRA") on August 5,
1997, gain recognized after May 6, 1997 from the sale of a capital asset is
taxable to individual (noncorporate) investors at different maximum federal
income tax rates, depending generally upon the tax holding period for the asset,
the federal income tax bracket of the taxpayer, and the dates the asset was
acquired and/or sold. The Treasury Department has issued guidance under the 1997
TRA that (subject to possible modification by future "technical corrections"
legislation) enable the Fund to pass through to its shareholders the benefits of
the capital gains tax rates enacted in the 1997 TRA. The Fund will provide
appropriate information to its shareholders about its distributions, including
the tax rate(s) applicable to its distributions from its long-term capital
gains, in accordance with this and any future guidance. Shareholders should
consult their own tax advisers on the correct application of these new rules in
their particular circumstances. Any dividend declared by the Fund in October,
November or December as of a record date in such a month and paid during the
following January will be treated for federal income tax purposes as received by
shareholders on December 31 of the calendar year in which it is declared.
If the Fund invests in certain pay-in-kind securities ("PIKs"), zero coupon
securities, deferred interest securities or, in general, any other securities
with original issue discount (or with market discount if the Fund elects to
include market discount in income currently), the Fund must accrue income on
such investments for each taxable year, which generally will be prior to the
receipt of the corresponding cash payments. However, the Fund must distribute,
at least annually, all or substantially all of its net taxable and tax-exempt
income, including such accrued income, to shareholders to qualify as a regulated
investment company under the Code and avoid Federal income and excise taxes.
Therefore, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy distribution requirements.
For federal income tax purposes, the Fund is permitted to carry forward a net
capital loss for any year to offset its capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent capital gains are
offset by such losses, they would not result in federal income tax liability to
the Fund and therefore are not expected to be distributed as such to
shareholders. As of the end of its most recent taxable year, the Fund had no
capital loss carryforwards.
At the time of an investor's purchase of Fund shares, a portion of the purchase
price may be attributable to realized or unrealized appreciation in the Fund's
portfolio. Consequently, subsequent distributions by the Fund on these shares
from such appreciation may be taxable to such investor even if the net asset
value of the investor's shares is, as a result of the distributions, reduced
below the investor's cost for such shares and the distributions economically
represent a return of a portion of the investment.
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Redemptions and exchanges are taxable events for shareholders that are subject
to tax. Shareholders should consult their own tax advisers with reference to
their individual circumstances to determine whether any particular transaction
in Fund shares is properly treated as a sale for tax purposes, as the following
discussion assumes, and the character of and tax rate applicable to any gains or
losses recognized in such transactions under the new rate structure enacted in
the 1997 TRA. Any loss realized by a shareholder on the redemption, exchange, or
other disposition of shares with a tax holding period of six months or less will
be disallowed to the extent of any exempt-interest dividends paid with respect
to such shares, and any portion of such loss that exceeds the amount disallowed
will be treated as a long-term capital loss to the extent of any distributions
treated as long-term capital gain with respect to such shares.
In addition, if Class A shares redeemed or exchanged have been held for less
than 91 days, (1) in the case of a reinvestment in the Fund at net asset value
pursuant to the reinvestment privilege, the sales charge paid on such shares is
not included in their tax basis under the Code, and (2) in the case of an
exchange, all or a portion of the sales charge paid on such shares is not
included in their tax basis under the Code, to the extent a sales charge that
would otherwise apply to the shares received is reduced pursuant to the exchange
privilege. In either case, the portion of the sales charge not included in the
tax basis of the shares redeemed or surrendered in an exchange is included in
the tax basis of the shares acquired in the reinvestment or exchange. Losses on
redemptions or other dispositions of shares may be disallowed under "wash sale"
rules in the event of other investments in the Fund (including those made
pursuant to reinvestment of dividends and/or capital gain distributions) within
a period of 61 days beginning 30 days before and ending 30 days after a
redemption or other disposition of shares. In such a case, the disallowed
portion of any loss would be included in the federal tax basis of the shares
acquired in the other investments.
Options written or purchased and futures contracts entered into by the Fund on
certain securities or indices may cause the Fund to recognize gains or losses
from marking-to-market even though such options may not have lapsed, been closed
out, or exercised or such futures contracts may not have been performed or
closed out. The tax rules applicable to these contracts may affect the
characterization as long-term or short-term of some capital gains and losses
realized by the Fund. Additionally, the Fund may be required to recognize gain
if an option, futures contract or other transaction that is not subject to the
mark to market rules is treated as a "constructive sale" of an "appreciated
financial position" held by the Fund under Section 1259 of the Code. Any net
mark to market gains and/or gains from constructive sales may also have to be
distributed to satisfy the distribution requirements referred to above even
though no corresponding cash amounts may concurrently be received, possibly
requiring the disposition of portfolio securities or borrowing to obtain the
necessary cash. Losses on certain options or futures contracts and/or offsetting
positions (portfolio securities or other positions with respect to which the
Fund's risk of loss is substantially diminished by one or more options or
futures contracts) may also be deferred under the tax straddle rules of the
Code, which may also affect the characterization of capital gains or losses from
straddle positions and certain successor positions as long-term or short-term.
Certain tax elections may be available that would enable the Fund to ameliorate
some adverse effects of the tax rules described in this paragraph. The tax rules
applicable to options, futures contracts and straddles may affect the amount,
timing and character of the Fund's income and losses and hence of its
distributions to shareholders.
The Fund's dividends and distributions will not qualify for any
dividends-received deduction that might otherwise be available for certain
dividends received by shareholders that are corporations.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangible property taxes, the
value of its assets is attributable to) certain U.S. Government obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. The Fund will not seek to satisfy
any threshold or reporting requirements that
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may apply in particular taxing jurisdictions, although the Fund may in its
sole discretion provide relevant information to shareholders.
The exemption of exempt-interest dividends for federal income tax purposes does
not necessarily result in exemption under the tax laws of any state or local
taxing authority, which vary with respect to the taxation of such income. Many
states will exempt from tax that portion of an exempt-interest dividend which
represents interest received by the Fund on that state's securities, subject in
some cases to compliance with concentration and/or reporting requirements, which
the Fund makes no commitment to seek to satisfy. However, the Fund will report
annually to its shareholders the percentage of interest income received by the
Fund during the preceding year on federally tax-exempt obligations indicating,
on a state-by-state basis only, the source of such income. Each shareholder is
advised to consult his own tax adviser regarding the exemption, if any, of
exempt-interest dividends under the state and local laws applicable to the
shareholder.
Interest on indebtedness incurred (directly or indirectly) by shareholders to
purchase or carry shares of the Fund will not be deductible for federal income
tax purposes to the extent it is deemed under the Code and applicable
regulations to relate to exempt-interest dividends received from the Fund.
Federal law requires that the Fund withhold (as "backup withholding") 31% of
reportable payments, including taxable dividends, capital gain dividends and the
proceeds of redemptions (including exchanges) and repurchases to shareholders
who have not complied with IRS regulations. In order to avoid this withholding
requirement, shareholders must certify on their Account Applications, or on
separate IRS Forms W-9, that the Social Security Number or other Taxpayer
Identification Number they provide is their correct number and that they are not
currently subject to backup withholding, or that they are exempt from backup
withholding. The Fund may nevertheless be required to withhold if it receives
notice from the IRS or a broker that the number provided is incorrect or backup
withholding is applicable as a result of previous underreporting of interest or
dividend income. Backup withholding may be inapplicable for any year in which
the Fund reasonably estimates that at least 95% of its dividends paid with
respect to such year are exempt-interest dividends.
If, as anticipated, the Fund continues to qualify as a regulated investment
company under the Code, it will not be required to pay any Massachusetts income,
corporate excise or franchise taxes or any Delaware corporation income tax.
The description of certain federal tax provisions above relates only to U.S.
federal income tax consequences for shareholders who are U.S. persons, i.e. U.S.
citizens or residents or U.S. corporations, partnerships, trusts or estates, and
who are subject to U.S. federal income tax. This description does not address
the special tax rules that may be applicable to particular types of investors,
such as financial institutions, insurance companies, securities dealers, or
tax-exempt or tax-deferred plans, accounts or entities. Investors other than
U.S. persons may be subject to different U.S. tax treatment, including a
possible 30% non-resident alien U.S. withholding tax (or non-resident alien
withholding tax at a lower treaty rate) on amounts treated as ordinary dividends
from the Fund and, unless an effective IRS Form W-8 or authorized substitute for
Form W-8 is on file, to 31% backup withholding on certain other payments from
the Fund. Shareholders should consult their own tax advisers on these matters
and on state, local and other applicable tax laws.
12. DESCRIPTION OF SHARES
General
The Fund is an open-end investment company established as a Nebraska
corporation in 1968 and reorganized as a Delaware business trust in June 1994.
Prior to December 1, 1993 the Fund was called Mutual of Omaha Tax-Free Income
Fund, Inc. and prior to June 30, 1994 was called Pioneer Tax-Free
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Income Fund, Inc. Reference to the Fund includes both the Delaware business
trust and the Nebraska corporation. The Board of Trustees, as of the date of
this Statement of Additional Information, has authorized the issuance of three
classes of shares, Class A, Class B and Class C.
Unless otherwise required by the 1940 Act or the Declaration of Trust,
the Fund has no intention of holding annual meetings of shareholders.
Shareholders may remove a Trustee by the affirmative vote of at least two-thirds
of the Fund's outstanding shares and the Trustees shall promptly call a meeting
for such purpose when requested to do so in writing by the record holders of not
less than 10% of the outstanding shares of the Fund. Shareholders may, under
certain circumstances communicate with other shareholders in connection with
requesting a special meeting of shareholders. However, at any time that less
than a majority of the Trustees holding office were elected by the shareholders,
the Trustees will call a special meeting of shareholders for the purpose of
electing Trustees.
The Declaration of Trust permits the issuance of series of shares in
addition to the Fund which would represent interests in separate portfolios of
investments. No series would be entitled to share in the assets of any other
series or be liable for the expenses or liabilities of any other series.
In addition to the requirements under Delaware law, the Declaration of
Trust provides that shareholders of the Fund may bring a derivative action on
behalf of the Fund only if the following conditions are met: (a) shareholders
eligible to bring such derivative action under Delaware law who hold at least
10% of the outstanding shares of the Fund, or 10% of the outstanding shares of
the series or class to which such action relates, shall join in the request for
the Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and to
investigate the basis of such claim. The Trustees shall be entitled to retain
counsel or other advisers in considering the merits of the request and shall
require an undertaking by the shareholders making such request to reimburse the
Fund for the expense of any such advisers in the event that the Trustees
determine not to bring such action.
Shareholder and Trustee Liability
The Fund is organized as a Delaware business trust, and, under Delaware
law, the shareholders of such a trust are not generally subject to liability for
the debts or obligations of the trust. Similarly, Delaware law provides that the
Fund will not be liable for the debts or obligations of any other series of the
trust. However, no similar statutory or other authority limiting business trust
shareholder liability exists in many other states. As a result, to the extent
that a Delaware business trust or a shareholder is subject to the jurisdiction
of courts in such other states, the courts may not apply Delaware law and may
thereby subject the Delaware business trust shareholders to liability. To guard
against this risk, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund. Notice of such
disclaimer will normally be given in each agreement, obligation or instrument
entered into or executed by the Fund or a Trustee. The Declaration of Trust
provides for indemnification by the Fund for any loss suffered by a shareholder
as a result of an obligation of the Fund. The Declaration of Trust also provides
that the Fund shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Fund and satisfy any judgment
thereon. The Trustees believe that, in view of the above, the risk of personal
liability of shareholders is remote.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
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13. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined
as of the close of regular trading on the Exchange (normally 4:00 p.m., Eastern
time) on each day the Exchange is open for business. As of the date of this
Statement of Additional Information, the Exchange is open for business every
weekday except for the following holidays: New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is also determined on any other day in which the level of
trading in its portfolio securities is sufficiently high that the current net
asset value per share might be materially affected by changes in the value of
its portfolio securities. On any day in which no purchase orders for the shares
of the Fund become effective and no shares are tendered for redemption, the
Fund's net asset value per share may not be determined.
The net asset value per share of each class of the Fund is computed by
taking the value of all of the Fund's assets attributable to a class, less its
liabilities attributable to that class, and dividing the result by the number of
outstanding shares of the class. For purposes of determining net asset value,
expenses of the classes of the Fund are accrued daily and taken into account.
In determining the value of the assets of the Fund for the purpose of
obtaining the net asset value, securities for which reliable quotations are
readily available shall be valued on the basis of valuations furnished by
pricing services which utilize electronic data processing techniques to
determine the valuations for normal institutional-size trading units of such
securities. Securities not valued by the pricing service for which reliable
quotations are readily available, shall be valued at market values furnished by
recognized dealers in such securities. Short-term obligations with remaining
maturities of 60 days or less shall be valued at amortized cost. Securities and
other assets for which reliable quotations are not readily available, shall be
valued at their fair value as determined in good faith under consistently
applied guidelines established by and under the general supervision of the Board
of Trustees of the Fund, although the actual calculations may be made by persons
acting pursuant to the direction of the Board.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a
convenient method of receiving fixed payments at regular intervals from shares
of the Fund deposited by the applicant under this SWP. The applicant must
deposit or purchase for deposit with PSC shares of the Fund having a total value
of not less than $10,000. Periodic checks of $50 or more will be deposited
monthly or quarterly directly into a bank account designated by the applicant,
or will be sent by check to the applicant, or to any person designated by the
applicant. A designation of a third party to receive payments requires an
acceptable signature guarantee. SWPs for Class B and C share accounts will be
limited to 10% of the value of the account at the time the SWP is implemented as
described in the Prospectus. See "Waiver or Reduction of Contingent Deferred
Sales Charge" in the Prospectus.
Any income dividends or capital gains distributions on shares under the
SWP will be credited to the SWP account on the payment date in full and
fractional shares at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares
deposited under the SWP in a SWP account. Redemptions are taxable transactions
to shareholders. To the extent that such redemptions for periodic withdrawals
exceed dividend income reinvested in the SWP account, such redemptions will
reduce and may ultimately exhaust the number of shares deposited in the SWP
account. In addition, the amounts received by a shareholder cannot be considered
as an actual yield or income on his or her investment because part of such
payments may be a return of his or her investment.
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The SWP may be terminated at any time (1) by written notice to PSC or
from PSC to the shareholder; (2) upon receipt by PSC of appropriate evidence of
the shareholder's death; or (3) when all shares under the SWP have been
redeemed.
15. LETTER OF INTENT (Class A only)
A Letter of Intent ("LOI") may be established by completing the LOI section of
the Account Application. When you sign the Account Application, you agree to
irrevocably appoint PSC your attorney-in-fact to surrender for redemption any or
all shares held in escrow with full power of substitution. An LOI is not a
binding obligation upon the investor to purchase, or the Fund to sell, the full
amount indicated.
If the total purchases, less redemptions, exceed the amount specified under the
LOI and are in an amount which would qualify for a further quantity discount,
all transactions will be recomputed on the expiration date of the LOI to effect
the lower sales charge. Any difference in the sales charge resulting from such
recomputation will be either delivered to you in cash or invested in additional
shares at the lower sales charge. The dealer, by signing the Account
Application, agrees to return to PFD, as part of such retroactive adjustment,
the excess of the commission previously reallowed or paid to the dealer over
that which is applicable to the actual amount of the total purchases under the
LOI.
If the total purchases, less redemptions, are less than the amount specified
under the LOI, you must remit to PFD any difference between the sales charge on
the amount actually purchased and the amount originally specified in the LOI
section of the Account Application. When the difference is paid, the shares held
in escrow will be deposited to your account. If you do not pay the difference in
sales charge within 20 days after written request from PFD or your dealer, PSC,
after receiving instructions from PFD, will redeem the appropriate number of
shares held in escrow to realize the difference and release any excess. See "How
to Purchase Fund Shares - Letter of Intent" in the Prospectus for more
information.
16. INVESTMENT RESULTS
Other Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in
reports to shareholders, the past performance of the Fund may be illustrated
and/or compared with that of other mutual funds with similar investment
objectives, and to other relevant indices. For example, the Fund may compare its
yield and total return to the Shearson Lehman Hutton Municipal Bond Index, or
other comparable indices or investment vehicles. In addition, the performance of
the Fund may be compared to alternative investment or savings vehicles (such as
individual securities, bank deposits, or certificates of deposit) and/or indices
or indicators of economic activity, e.g., inflation, interest rates, or the
Consumer Price Index, performance rankings and listings reported in newspapers
or national business and financial publications, such as Barron's, Business
Week, Consumers Digest, Consumer Reports, Financial World, Forbes, Fortune,
Investors Business Daily, Kiplinger's Personal Finance Magazine, Money Magazine,
New York Times, Personal Investor, Smart Money, USA Today, U.S. News and World
Report, the Wall Street Journal, and Worth may also be cited (if the Fund is
listed in any such publication) or used for comparison, as well as performance
listings and rankings from various other sources including CDA Weisenberger,
Donoghue's Mutual Fund Almanac, Investment Company Data, Inc., Ibbotson
Associates, Johnson's Charts, Kanon Bloch Carre and Company, Lipper Analytical
Services, Inc., Micropal, Inc., Morningstar, Inc., Schabacker Investment
Management and Towers Data Systems, Inc.
In addition, from time to time quotations from articles from financial
publications such as those listed above may be used in advertisements in sales
literature, or in reports to shareholders of the Fund.
25
<PAGE>
The Fund may also present, from time to time, historical information
depicting the value of a hypothetical account in one or more classes of the Fund
since the Fund's inception.
In presenting investment results, the Fund may also include references
to certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
to invest; and (c) his need to analyze his time frame for future capital needs
to determine how long to invest. The investor controls these three factors, all
of which affect the use of investments in building assets.
One of the methods used to measure the Fund's performance is "total
return." "Total return" will normally represent the percentage change in value
of an account, or of a hypothetical investment in the Fund, over any period up
to the lifetime of the Fund. Total return calculations will usually assume the
reinvestment of all dividends and capital gains distributions and will be
expressed as a percentage increase or decrease from an initial value, for the
entire period or for one or more specified periods within the entire period.
Total return percentages for periods of less than one year will usually be
annualized; total return percentages for periods longer than one year will
usually be accompanied by total return percentages for each year within the
period and/or by the average annual compounded total return for the period. The
income and capital components of a given return may be separated and portrayed
in a variety of ways in order to illustrate their relative significance.
Performance may also be portrayed in terms of cash or investment values, without
percentages. Past performance cannot guarantee any particular future result.
Other data that may be advertised or published about the Fund include
the average portfolio quality, the average portfolio maturity, and the average
portfolio duration.
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts are
taken into consideration. For any account fees that vary with the size of the
account, the account fee used for purposes of the above computation is assumed
to be the fee that would be charged to the Fund's mean account size.
The Fund's yield quotations and average annual total return quotations
as they may appear in the Prospectus, this Statement of Additional Information
or in advertising are calculated by standard methods prescribed by the SEC.
Standardized Yield Quotations
Yield quotations for Class A, Class B and Class C shares are computed
by dividing the net investment income per share attributable to a class during a
base period of 30 days, or one month, by the maximum offering price per share of
that class of the Fund on the last day of such base period in accordance with
the following formula:
a-b
YIELD = 2[( ----- +1)6[superscript] - 1]
cd
Where: a = interest earned during the period
b = net expenses accrued for the period
26
<PAGE>
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the
last day of the period
For purposes of calculating interest earned on debt obligations as provided in
item "a" above:
(i) The yield to maturity of each obligation held by the Fund is
computed based on the market value of the obligation (including actual accrued
interest, if any) at the close of business each day during the 30-day base
period, or, with respect to obligations purchased during the month, the purchase
price (plus actual accrued interest, if any) on settlement date, and with
respect to obligations sold during the month the sale price (plus actual accrued
interest, if any) between the trade and settlement dates;
(ii) The yield to maturity of each obligation is then divided by 360
and the resulting quotient is multiplied by the market value of the obligation
(including actual accrued interest, if any) to determine the interest income on
the obligation for each day. The yield to maturity calculation has been made on
each obligation during the 30 day base period;
(iii) Interest earned on all debt obligations during the 30-day or one
month period is then totaled;
(iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date;
(v) Obligations with sinking fund call provisions may be regarded as
maturing as to that portion to be retired on each sinking fund call date or
during a twelve-month period; and
(vi) In the case of a tax exempt obligation issued without original
issue discount and having a current market discount, the coupon rate of interest
of the obligation is used in lieu of yield to maturity to determine interest
income earned on the obligation. In the case of a tax exempt obligation with
original issue discount where the discount based on the current market value of
the obligation exceeds the then remaining portion of original issue discount
(i.e. market discount), the yield to maturity used to determine interest income
earned on the obligation is the imputed rate based on the original issue
discount calculation. In the case of a tax exempt obligation with original issue
discount where the discount based on the current market value of the obligation
is less than the then remaining portion of the original issue discount (market
premium), the yield to maturity used to determine interest income earned on the
obligation is based on the market value of the obligation.
The Fund's 30-day SEC yield for Class A shares, Class B shares and
Class C shares on December 31, 1997, determined in accordance with the formula
above, was 3.94%, 3.32% and 3.17%, respectively.
Taxable Equivalent Yield
The Fund may also from time to time advertise its taxable equivalent
yield which is determined by dividing that portion of the Fund's yield
(calculated as described above) that is tax exempt by one minus the stated
federal income tax rate and adding the product to that portion, if any, of the
Fund's yield that is not tax exempt. The Fund's tax-equivalent yield assuming a
39.6% tax rate for the period ended December 31, 1997 was 6.52%, 5.50%and 5.25%
for Class A shares, Class B shares, and Class C shares, respectively. For a
description of how to compare yields on municipal bonds and taxable securities,
see the Taxable Equivalent Formula set forth in Appendix A to the Prospectus.
27
<PAGE>
Standardized Average Annual Total Return Quotations
Average annual total return quotations are computed by finding the
average annual compounded rates of return that would cause a hypothetical
investment made on the first day of a designated period to equal the ending
redeemable value of such hypothetical investment on the last day of the
designated period in accordance with the following formula:
P(1+T)n [superscript] = ERV
Where: P = a hypothetical initial payment of $1000, less the
maximum sales load for Class A shares or the
deduction of the CDSC on Class B or Class C shares
at the end of the period.
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1000
initial payment made at the beginning of the
designated period (or fractional portion thereof)
For purposes of the above computation, it is assumed that all dividends
and distributions made by the Fund are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts of
a particular Class are taken into consideration. For any account fees that vary
with the size of the account, the account fee used for purposes of the above
computation is assumed to be the fee that would be charged to the Class' mean
account size.
The average annual total returns for period ending December 31, 1997
were:
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Life-of-Fund
------ ------- -------- ------------
<S> <C> <C> <C> <C>
Class A Shares* 4.07% 5.89 8.02 6.64%
Class B Shares** 4.16)% N/A N/A 5.98%
Class C Shares*** 8.32 N/A N/A 5.44%
* Commencement of operations, January 18, 1977.
** Class B shares were first offered on April 28, 1995.
*** Class C shares were first offered on January 31, 1996
</TABLE>
Class A share results reflect the maximum sales charge of 4.50%. Class
B share results reflect the deduction of the maximum applicable CDSC at the end
of the period; the maximum CDSC of 4% declines over six years. Class C share
results reflect a deduction of the 1% CDSC at the end of the period.
Automated Information Line
FactFoneSM, Pioneer's 24-hour automated information line, allows
shareholders to dial toll-free 1-800-225-4321 and hear recorded fund
information, including:
28
<PAGE>
o net asset value prices for all Pioneer mutual funds;
o annualized 30-day yields on Pioneer's bond funds;
o annualized 7-day yields and 7-day effective
(compound) yields for Pioneer Cash
Reserves Fund; and
o dividends and capital gains distributions on all
Pioneer mutual funds.
Yields are calculated in accordance with SEC mandated standard
formulas.
In addition, by using a personal identification number ("PIN"),
shareholders may access their account balance and last three transactions and
may order a duplicate statement. See "FactFoneSM" in the Prospectus for more
information.
All performance numbers communicated through FactFoneSM represent past
performance and include the maximum applicable sales charge. A shareholder's
actual yield and total return will vary with changing market conditions. The
value of Class A, Class B and Class C shares (except for Pioneer Cash Reserves
Fund, which seeks to maintain a stable $1.00 share price) will also vary, and
such shares may be worth more or less at redemption than their original cost.
17. GENERAL INFORMATION
The Fund is registered with the SEC as a diversified open-end
management investment company. Such registration does not involve supervision by
the SEC of the management or policies of the Fund. For further information with
respect to the Fund and the securities offered hereby, reference is made to the
registration statement filed with the SEC, including all exhibits thereto.
Annual and semiannual reports of the Fund are mailed to each shareholder.
18. FINANCIAL STATEMENTS
The Fund's Annual Report, filed with the SEC on February 23, 1998
(Accession No. 0000202679-98-000004) is incorporated by reference into this
Statement of Additional Information. The financial statements in the Fund's
Annual Report, including the financial highlights, for the period ended December
31, 1997, included or incorporated by reference into the Prospectus and this
Statement of Additional Information, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect to the
financial statements, and are included in reliance upon the authority of Arthur
Andersen LLP as experts in accounting and auditing in giving their report.
29
<PAGE>
APPENDIX A
The three highest ratings of Moody's for Tax-Exempt Bonds are Aaa, Aa
and A. Tax-Exempt Bonds rated Aaa are judged to be of the "best quality." The
rating of Aa is assigned to Tax-Exempt Bonds which are of "high quality by all
standards," but as to which margins of protection or other elements make
long-term risks appear somewhat larger than Aaa rated Tax-Exempt Bonds. The Aaa
and Aa rated Tax-Exempt Bonds comprise what are generally known as "high grade
bonds." Tax-Exempt Bonds which are rated A by Moody's possess many favorable
investment attributes and are considered "upper medium grade obligations."
Factors giving security to principal and interest of A rated Tax-Exempt bonds
are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future. Bonds in the A group which
offer the maximum security are rated A-1.
The three highest ratings of S&P for Tax-Exempt Bonds are AAA (Prime),
AA (High Grade) and A (Good Grade). Tax-Exempt Bonds rated AAA are "obligations
of the highest quality." The rating of AA is accorded issues with investment
characteristics "only slightly less marked than those of the prime quality
issues." The category of A describes the "third strongest capacity for payment
of debt service." Principal and interest payments on bonds in this category are
regarded as safe. It differs from the two higher ratings because: with respect
to general obligation bonds, there is some weakness either in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date. With respect to revenue bonds, debt service coverage is good, but
not exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate. AA and A rated bonds may be modified with a (+) or
(-) when appropriate to provide more detailed indications on credit quality.
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligation rated AAA,
AA or A by S&P or Aaa, Aa or A by Moody's. Corporate debt obligations rated AAA
by S&P are "highest grade obligations." Obligations bearing the rating of AA
also qualify as "high grade obligations" and "in the majority of instances
differ from AAA issues only in small degree." Corporate debt obligations rates A
by S&P are regarded as "upper medium grade" and have "considerable investment
strength, but are not entirely free from adverse effects of changes in economic
and trade conditions." The Moody's corporate debt ratings of Aaa, Aa and A do
not differ materially from those set forth above for Tax-Exempt Bonds.
The commercial paper ratings of A-1 by S&P and P-1 by Moody's are the
highest commercial paper ratings of the respective agencies. The issuer's
earnings, quality of long-term debt, management and industry position are among
the factors considered in assigning such ratings.
Subsequent to its purchase by the Fund, an issue of Tax-Exempt Bonds or
a temporary investment may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Fund. Neither event requires the
elimination of such obligation from the Fund's portfolio, but PMC will consider
such an event in its determination of whether the Fund should continue to hold
such obligation in its portfolio. To the extent that the ratings accorded by S&P
and Moody's for Tax-Exempt Bonds or temporary investments may change as a result
of changes in such organizations, or changes in their ratings systems, the Fund
will attempt to use comparable ratings as standards for its investments in
Tax-Exempt Bonds or temporary investments in accordance with the investment
policies contained herein.
30
<PAGE>
APPENDIX B
PERFORMANCE STATISTICS
Pioneer Tax-Free Income Fund
Class A Shares
<TABLE>
<CAPTION>
Net Asset Value
Initial Offering Price Sales Charge Shares Purchased Per Share Initial Net
Date Investment Included Asset Value
<S> <C> <C> <C> <C> <C> <C>
1/18/77 $10,000 $15.7900 4.50% 633.312 $15.08 $9550
Dividends and Capital Gains Reinvested
Value of Shares
Date From Investment From Cap. Gains From Dividends Total Value
Reinvested Reinvested
12/31/86 $7,403 $887 $8,951 $17,241
12/31/87 $6,776 $812 $9,384 $16,972
12/31/88 $7,074 $848 $11,129 $19,051
12/31/89 $7,263 $871 $12,845 $20,979
12/31/90 $7,296 $884 $14,352 $22,532
12/31/91 $7,593 $1,302 $16,451 $25,346
12/31/92 $7,650 $1,800 $18,108 $27,558
12/31/93 $8,031 $2,534 $20,571 $31,136
12/31/94 $7,119 $2,254 $19,778 $29,151
12/31/95 $7,828 $2,719 $23,511 $34,058
12/31/96 $7,574 $3,188 $24,512 $35,274
12/31/97 $7,707 $3,987 $26,733 $38,427
31
<PAGE>
Pioneer Tax-Free Income Fund
Class B Shares
Net Asset Value
Initial Offering Price Sales Charge Shares Purchased Per Share Initial Net
Date Investment Included Asset Value
4/28/95 $10,000 $11.8100 4.00% 846.740 $11.8100 $10,000
Dividends and Capital Gains Reinvested
Value of Shares
Date From Investment From Cap. Gains From Dividends Contingent Deferred Sales Total Value CDSC Percentage
Charge if Redeemed
Reinvested Reinvested
12/31/95 $10,423 $77 $294 $400 $10,394 4.00%
12/31/96 $10,059 $250 $771 $400 $10,680 4.00%
12/31/97 $10,237 $488 $1,260 $300 $11,685 3.00%
32
<PAGE>
Pioneer Tax-Free Income Fund
Class C Shares
Net Asset Value
Initial Offering Price Sales Charge Shares Purchased Per Share Initial Net
Date Investment Included Asset Value
1/31/96 $10,000 $12.320 1.00% $ 811.688 $12.32 $10,000
Dividends and Capital Gains Reinvested
Value of Shares
Date From Investment From Cap. Gains From Dividends Contingent Deferred Sales Total Value CDSC Percentage
Charge if Redeemed
Reinvested Reinvested
12/31/96 $9,642 $163 $414 $96 $10,123 1.00%
12/31/97 $9,830 $381 $859 $0 $11,070 0.00%
</TABLE>
33
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may also be used, if appropriate. The
indices are not available for direct investment. The data presented are not
meant to be indicative of the performance of the Fund, do not reflect past
performance and do not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P 500 includes 500 of
the largest stocks (in terms of stock market value) in the U.S.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of stocks of 30 blue chip
companies widely held by individuals and institutional investors. The 30 stocks
represent about a fifth of the $8 trillion-plus market value of all U.S. stocks
and about a fourth of the value of stocks listed on the New York Stock Exchange
(NYSE).
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the NYSE, plus stocks listed on the American Stock Exchange and over the counter
with the same or less capitalization as the upper bound of the NYSE ninth
decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 according to price-to-book ratios. The Growth Index contains stocks
with higher price-to-book ratios, and the Value Index contains stocks with lower
price-to-book ratios. Both indexes are market capitalization weighted.
MERRILL LYNCH MICRO-CAP INDEX
The Merrill Lynch Micro-Cap Index represents the performance of 2,036 stocks
ranging in market capitalization from $50 million to $220 million. Index returns
are calculated monthly.
34
<PAGE>
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds after 1977 are constructed with
data from The Wall Street Journal and are calculated as the change in the flat
price or and-interest price. From 1926 to 1976, data are obtained from the
government bond file at the Center for Research in Security Prices (CRSP),
Graduate School of Business, University of Chicago. Each year, a one-bond
portfolio with a term of approximately 20 years and a reasonably current coupon
was used and whose returns did not reflect potential tax benefits, impaired
negotiability or special redemption or call privileges. Where callable bonds had
to be used, the term of the bond was assumed to be a simple average of the
maturity and first call dates minus the current date. The bond was "held" for
the calendar year and returns were computed.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of intermediate-term government bonds after 1987 are calculated
from The Wall Street Journal prices, using the change in flat price. Returns
from 1934 to 1986 are obtained from the CRSP government bond file.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than five years, and this bond is
"held" for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934 to 1942, almost all bonds
with maturities near five years were partially or fully tax-exempt and were
selected using the rules described above. Personal tax rates were generally low
in that period, so that yields on tax-exempt bonds were similar to yields on
taxable bonds. From 1926 to 1933, there are few bonds suitable for construction
of a series with a five-year maturity. For this period, five-year bond yield
estimates are used.
MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI")
MSCI's international indices are based on the share prices of approximately
1,700 companies listed on stock exchanges in the 22 countries that make up the
MSCI World Index. MSCI's emerging market indices are comprised of approximately
1000 stocks from 26 countries.
Countries in the MSCI EAFE Index are: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom.
Countries in the MSCI Emerging Markets Free Index are: Argentina, Brazil, Chile,
China Free, Czech Republic, Colombia, Greece, Hungary, India, Indonesia Free,
Israel, Jordan, Korea (at 50%), Malaysia Free, Mexico Free, Pakistan, Peru,
Philippines Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan (at 50%),
Thailand Free, Turkey and Venezuela.
6-MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
Since 1969, corporate bond total returns are represented by the Salomon Brothers
Long-Term High-Grade Corporate Bond Index. As most large corporate bond
transactions take place over the counter, a major dealer is the natural source
of these data. The index includes nearly all Aaa- and Aa-rated bonds with at
least 10 years to maturity. If a bond is downgraded during a particular month,
its return for the month is included in the index before removing the bond from
future portfolios.
From 1926 to 1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946 to 1968,
Ibbotson and Sinquefield backdated the Salomon Brothers' index, using Salomon
Brothers' monthly yield data with a methodology similar to that used by Salomon
35
<PAGE>
Brothers for 1969 to 1995. Capital appreciation returns were calculated from
yields assuming (at the beginning of each monthly holding period) a 20-year
maturity, a bond price equal to par, and a coupon equal to the
beginning-of-period yield. For the period 1926 to 1945, Standard & Poor's
monthly high-grade corporate composite yield data were used, assuming a 4%
coupon and a 20-year maturity. The conventional present-value formula for bond
price for the beginning and end-of-month prices was used. (This formula is
presented in Ross, Stephen A., and Westerfield, Randolph W. Corporate Finance,
Times Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly
income return was assumed to be one-twelfth the coupon.
U.S. (30-DAY) TREASURY BILLS
For the U.S. Treasury Bill Index, data from The Wall Street Journal are used
after 1977; the CRSP government bond file is the source until 1976. Each month a
one-bill portfolio containing the shortest-term bill having not less than one
month to maturity is constructed. (The bill's original term to maturity is not
relevant.) To measure holding period returns for the one-bill portfolio, the
bill is priced as of the last trading day of the previous month-end and as of
the last trading day of the current month.
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS
("NAREIT")EQUITY REIT INDEX
All of the data are based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMEX and NASDAQ. The data are
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighting at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income. Liquidating dividends, whether full or partial,
are treated as income.
RUSSELL U.S. EQUITY INDEXES
The Russell 3000(R) Index (the "Russell 3000") is comprised of the 3,000 largest
U.S. companies as determined by market capitalization representing approximately
98% of the U.S. equity market. The average market capitalization is
approximately $2.8 billion. The Russell 2500TM Index measures performance of the
2,500 smallest companies in the Russell 3000. The average market capitalization
is approximately $733.4 million, and the largest company in the index has an
approximate market capitalization of $2.9 billion. The Russell 2000(R) Index
measures performance of the 2,000 smallest stocks in the Russell 3000; the
largest company in the index has a market capitalization of approximately $1.1
billion. The Russell 1000(R) Index (the "Russell 1000") measures the performance
of the 1,000 largest companies in the Russell 3000. The average market
capitalization is approximately $7.6 billion. The smallest company in the index
has an approximate market capitalization of $1.1 billion. The Russell MidcapTM
Index measures performance of the 800 smallest companies in the Russell 1000.
The largest company in the index has an approximate market capitalization of
$8.0 billion.
The Russell indexes are reconstituted annually as of July 1, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization weighted
index of 120 publicly traded real estate securities, such as REITs, real estate
operating companies ("REOCs") and partnerships.
36
<PAGE>
The index contains performance data on five major categories of property:
office, retail, industrial, apartment and miscellaneous. The companies in the
index are 91.66% equity and hybrid REITs and 8.33% REOCs.
STANDARD & POOR'S MIDCAP 400 INDEX
The S&P 400 is a market-capitalization-weighted index. The performance data for
the index were calculated by taking the stocks presently in the index and
tracking them backwards in time as long as there were prices reported. No
attempt was made to determine what stocks "might have been" in the S&P 400 five
or ten years ago had it existed. Dividends are reinvested on a monthly basis
prior to June 30, 1991, and are reinvested daily thereafter.
LIPPER BALANCED FUNDS INDEX
This index represents equally weighted performance, adjusted for capital gains
distributions and income dividends, of approximately 30 of the largest funds
with a primary objective of conserving principal by maintaining at all times a
balanced portfolio of stocks and bonds. Typically, the stock/bond ratio ranges
around 60%/40%.
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963 to 1987; and The Wall Street Journal thereafter.
Sources: Ibbotson Associates, Towers Data Systems,
Lipper Analytical Services, Inc., Merrill Lynch and PGI
37
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA BARRA Merrill Lynch
500 Industrial Stock U.S. 500 500 Micro-Cap
Average Index Inflation Growth Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 11.62 N/A 0.28 -1.49 N/A N/A N/A
Dec 1927 37.49 N/A 22.10 -2.08 N/A N/A N/A
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A N/A
Dec 1931 -43.34 -49.02 -49.75 -9.52 N/A N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A N/A
Dec 1933 53.99 73.72 142.87 0.51 N/A N/A N/A
Dec 1934 -1.44 8.08 24.22 2.03 N/A N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A N/A
Dec 1942 20.34 14.12 44.51 9.29 N/A N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A N/A
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA 500 BARRA Merrill Lynch
500 Industrial Stock U.S. Growth 500 Micro-Cap
Average Index Inflation Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38 N/A
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93 N/A
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57 N/A
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16 27.76
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16 43.18
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59 32.32
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02 9.18
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04 33.62
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89 42.44
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52 -14.97
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68 22.89
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67 3.45
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68 -13.84
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67 22.76
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13 8.06
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85 -29.55
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56 57.44
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53 36.62
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60 31.32
Dec 1994 1.31 5.06 3.11 2.67 3.13 -0.64 1.81
Dec 1995 37.43 36.84 34.46 2.54 38.13 36.99 30.70
Dec 1996 23.07 28.84 17.62 3.32 23.96 21.99 13.88
Dec 1997 33.36 24.88 22.78 1.92 36.52 29.98 24.61
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.10 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.17 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
Dec 1966 3.65 4.69 N/A 5.76 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.47 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.45 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.70 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.39 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.11 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.10 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.59 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.30 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.80 11.21 5.21 27.20 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
Dec 1997 15.85 8.38 1.78 5.71 12.95 5.26
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 -10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 -7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 -5.21 5.24
Dec 1996 35.26 16.53 36.87 19.20 13.01 6.03 4.95
Dec 1997 20.29 22.36 19.80 32.26 20.05 -11.59 5.17
</TABLE>
43
<PAGE>
APPENDIX C
OTHER PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the creation of
Pioneer Fund. Pioneer is one of the oldest and most experienced money managers
in the United States.
As of December 31, 1997, PMC employed a professional investment staff of 58,
with a combined average of 12 years' experience in the financial services
industry.
Total assets of all Pioneer mutual funds at December 31, 1997, were
approximately $19.8 billion representing 1,177,148 shareholder accounts, 791,468
non-retirement accounts and 385,680 retirement accounts.
44
<PAGE>
E X H I B I T C
[LOGO]
Pioneer
Intermediate Tax-Free Fund
SEMIANNUAL REPORT 6/30/98
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 16
Notes to Financial Statements 22
Report of Independent Public Accountants 26
Trustees, Officers and Service Providers 27
Programs and Services for Pioneer Shareowners 28
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN 6/30/98
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
While the Taxpayer Relief Act of 1997 provided lower rates on capital gains, it
did not ease the tax burden on investment income. As a result, municipal bonds
remain one of the few effective ways for investors to protect themselves from
taxes. We are happy to offer Pioneer Interme-diate Tax-Free Fund as a choice for
conservative, tax-sensitive investors. The Fund's professional management and
diversified portfolio make tax-free investing affordable and accessible, an
important point since municipal bonds can be difficult for individuals to buy
and sell directly. Although municipal bonds did not keep pace with the snappy
gains posted by taxable U.S. government and corporate bonds over the past six
months, they generated solid returns and attractive after-tax dividends.
We have always recommended that investors diversify their portfolios among
different types of both stocks and bonds. Recent market volatility has
underscored this point. What can you as an investor do? I encourage you to
periodically review your financial goals and strategy with your investment
professional. It's a simple step to make sure you will be better prepared to
weather the inevitable swings in the market.
Please read on to learn more about how your Fund is being managed. If you have
questions about Pioneer Intermediate Tax-Free Fund, please contact your
investment professional, or Pioneer at 1-800-225-6292.
Respectfully,
/s/ John F. Cogan, Jr.,
- --------------------------------
John F. Cogan, Jr.,
Chairman and President
1
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 6/30/98
- --------------------------------------------------------------------------------
Portfolio Quality
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[The following data was represented as a pie chart in the printed material.]
Short-Term Cash Equivalents .. 2%
A ............................ 8%
AA ........................... 52%
AAA .......................... 38%
Portfolio Maturity
- --------------------------------------------------------------------------------
(Effective life as a percentage of total investment portfolio)
[The following data was represented as a pie chart in the printed material.]
0-2 Years ................... 6%
2-5 Years ................... 10%
5-7 Years .................... 14%
7-10 Years .................. 31%
10-15 Years ................. 32%
15+ Years .................... 7%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of long-term holdings)
1. Kansas State Department of Transportation Highway
Revenue, 6.125%, 9/1/09 2.81%
2. Grand River Dam Authority Electric Revenue,
5.75%, 6/1/06 2.67
3. Texas State General Obligation, 5.8%, 10/1/04 2.67
4. University of Maryland System Auxiliary Facility
and Tuition Revenue, 5.4%, 4/1/06 2.63
5. Maine State General Obligation, 5.375%, 5/15/06 2.63
6. Phoenix Civic Improvement Corporation Water
Revenue, 6.5%, 7/1/06 1.87
7. California State General Obligation, 6.0%, 9/1/09 1.85
8. Arizona State Transportation Board Highway
Revenue, 6.0%, 7/1/08 1.85
9. Greenville Waterworks Revenue, 6.0%, 2/1/08 1.84
10. Ohio State Water Development Authority, 6.0%, 12/1/06 1.83
Fund holdings will vary for other periods.
2
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/98 CLASS A SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 6/30/98 12/31/97
$10.41 $10.45
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
$0.215 -- --
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made in
Pioneer Intermediate Tax-Free Fund at public offering price, compared to the
growth of the Lehman Brothers Municipal Bond Index.
- -------------------------------------
Average Annual Total Returns
(As of June 30, 1998)
Net Asset Public Offering
Period Value Price*
10 Years 7.19% 6.80%
5 Years 4.53 3.79
1 Year 6.55 2.84
- -------------------------------------
* Reflects deduction of the maximum 3.5% sales charge at the beginning of
the period and assumes reinvestment of distributions at net asset value.
[mountain chart]
Pioneer Intermediate
Tax-Free Lehman Brothers
Fund* Municipal Bond Index
------- --------------------
6/88 9,650 10,000
10,980 11,139
6/90 11,575 11,898
12,536 12,970
6/92 13,941 14,497
15,447 16,231
6/94 15,382 16,263
16,454 17,692
6/96 17,120 18,864
18,128 20,422
6/98 19,316 22,188
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.
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
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/98 CLASS B SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 6/30/98 12/31/97
$10.45 $10.47
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
$0.154 -- --
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made in
Pioneer Intermediate Tax-Free Fund, compared to the growth of the Lehman
Brothers Municipal Bond Index.
- --------------------------------------
Average Annual Total Returns
(As of June 30, 1998)
If If
Period Held Redeemed*
Life-of-Fund 4.88% 4.88%
(4/29/94)
1 Year 5.72 2.72
- --------------------------------------
* Reflects deduction of the maximum applicable contingent deferred sales
charge (CDSC) at the end of the period and assumes reinvestment of
distributions. The maximum CDSC of 3% declines over four years.
[mountain chart]
Pioneer Intermediate
Tax-Free Lehman Brothers
Fund* Municipal Bond Index
-------- --------------------
4/94 10,000 10,000
6/94 10,038 10,028
10,046 10,094
9,851 9,949
10,420 10,653
6/95 10,636 10,909
10,832 11,223
11,102 11,686
11,980 11,543
6/96 10,976 11,631
11,133 11,899
11,351 12,202
11,255 12,173
6/97 11,537 12,592
11,799 12,972
12,042 13,324
12,098 13,477
6/98 12,197 13,682
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.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
4
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/98 CLASS C SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 6/30/98 12/31/97
$10.42 $10.48
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
$0.179 -- --
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made in
Pioneer Intermediate Tax-Free Fund, compared to the growth of the Lehman
Brothers Municipal Bond Index.
- --------------------------------------
Average Annual Total Returns
(As of June 30, 1998)
If If
Period Held Redeemed*
Life-of-Fund 3.47% 3.47%
(1/31/96)
1 Year 5.51 5.51
- --------------------------------------
* Assumes reinvestment of distributions. The 1% contingent deferred sales
charge (CDSC) applies to redemptions made within one year of purchase.
[mountain chart]
Pioneer Intermediate
Tax-Free Lehman Brothers
Fund* Municipal Bond Index
-------- --------------------
1/96 10,000 10,000
9,813 9,804
6/96 9,809 9,879
9,930 10,106
10,122 10,363
10,037 10,338
6/97 10,289 10,695
10,524 10,017
10,734 11,316
10,753 11,446
6/98 10,857 11,620
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.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
5
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
- --------------------------------------------------------------------------------
Dear Shareowner,
Pioneer Intermediate Tax-Free Fund closed the first half of its fiscal year on
June 30, 1998. During that time, favorable economic conditions in the United
States and a "flight to quality" in the U.S. Treasury market pushed taxable bond
prices higher and long-term interest rates to historic lows. Even so, an
increased supply of municipal bonds combined with weak demand to restrain the
performance of munis, especially when compared to taxable bonds.
Kathleen D. McClaskey has managed Pioneer Intermediate Tax-Free Fund for the
past 11 years, leading the investment team responsible for the Fund's daily
management. In the following discussion, Ms. McClaskey reviews the investment
environment and the strategies that affected your Fund's performance and
provides her outlook for the second half of 1998.
Q: How did the Fund perform?
A: For the six month period ended June 30, the Fund's Class A shares returned
1.69%, Class B 1.29% and Class C 1.15%, all at net asset value. In
comparison, the 151 intermediate municipal debt funds followed by Lipper
Analytical Services returned 2.05% for the same period. (Returns do not
reflect sales charges.) We attribute your Fund's slight lag in performance
to its investment standards. Over the past six months, the Fund maintained
an emphasis on higher-rated bonds. Other funds in this category often
invest in lower-rated bonds, which often provide higher returns since they
involve greater risk.
The Fund's class A shares provided a tax-free 30-day yield of 3.31% on
June 30. That translated into an attractive taxable-equivalent yield of
5.49% for an investor in the maximum 39.6% tax bracket.
Q: Did the situation in Asia affect U.S. interest rates and bonds?
A: The uncertainty of the Asian crisis kept interest rates, and bond prices,
within a narrow range for most of the period. It also sparked a "flight to
quality." Generally, investors waited for new developments and evidence
of the situation's effect on the U.S. economy.
6
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
When the crisis worsened this spring, investors sought the safety and
security of U.S. Treasurys. This demand again pushed up prices of taxable
bonds and lowered interest rates.
Asia's problems held down U.S. interest rates for another reason, too.
Many investors were concerned that our strong economy eventually might
stimulate inflation and lead the Federal Reserve to raise interest rates.
But, because the United States and Asia are active trading partners,
slowing Asian economies could lessen U.S. economic growth. That would ease
inflationary pressures and reduce the Fed's impetus to change rates.
Q: What was the environment like for municipal bonds over the past six
months?
A: Basically it was a case of supply and demand. The supply of municipal
bonds increased dramatically during the first half of 1998, as many state
and local governments took advantage of lower interest rates to refinance
existing bonds or to finance new projects. In fact, this period included
the largest transaction ever to occur in the tax-exempt market - Long
Island Power Authority's $6.5 billion issue. Ironically, all this good
news for municipalities didn't help municipal bond investors much, since
the flood of supply kept prices from rising. In addition, the continuing
economic problems in Asia increased the popularity of U.S. Treasury bonds,
particularly among foreign investors. Municipal bond prices rose, but not
as fast or far as Treasurys.
The yield on the benchmark 30-year U.S. Treasury fell from 5.92% on
December 31, 1997 to 5.63% on June 30. In comparison, the yield on the
Lehman Brothers Municipal Bond Index - a good indicator of the municipal
bond market - only fell from 4.70% on December 31 to 4.65% on June 30.
Q: What strategies did you use to manage the Fund?
A: We sought to maximize income and total return by maintaining high
standards of quality and emphasizing relative value. During the period,
lower-quality bonds provided little yield advantage over higher rated
bonds. In that scenario, we believed higher-quality bonds represented
better relative value.
7
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98 (continued)
- --------------------------------------------------------------------------------
As of June 30, 90% of the Fund's holdings were rated AA or above,
translating into an average rating of "AA." (Ratings apply to underlying
securities, not Fund shares.) The portfolio remained well diversified with
57 holdings spread over 32 states.
We increased total return potential by maintaining the portfolio's
duration - it rose slightly from 6.63 years on December 31 to 6.68 years
on June 30. Duration measures a Fund's sensitivity to changes in interest
rates. Generally, an investment's price will change 1% for every 1% change
in interest rates. Higher durations mean more potential for both price
appreciation when interest rates fall and price declines when interest
rates rise; shorter durations reduce interest rate sensitivity.
We implemented this strategy by selling bonds with nearing "call dates"
and reinvesting in bonds with 15 - to 20 - year non-callable maturities.
Call provisions set a predetermined date for an issuer to repurchase a
bond from its holder. Often, this happens when interest rates decline so
that an issuer can refinance the bonds at lower rates. Selling callable
bonds improved the Fund's potential for both price appreciation and
long-term income generation for several reasons. Bonds with longer
maturities offer better potential for price appreciation when interest
rates decline, and longer streams of predictable income.
Q: What is your outlook for municipal bonds over the next six months?
A: Over the near-term, we expect many of the trends that were positive for
municipal bonds during the past six months to continue through the end of
1998. We believe solid economic growth and minimal inflation in the United
States can spur ongoing improvement in the financial health of
municipalities. After the recent flood of offerings, we think issuers are
taking a breather, which should give tax-exempt bond prices a lift.
Looking out further, we expect Asia to have a powerful influence on
interest rates. If there is a significant spillover into the U.S. economy,
interest rates could remain stable or move moderately lower.
8
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98
- --------------------------------------------------------------------------------
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
TAX-EXEMPT OBLIGATIONS - 98.4%
Arizona - 5.4%
$1,000,000 A/Aa Arizona State Transportation Board
Highway Revenue, 6.0%, 7/1/08 $ 1,125,760
1,000,000 AA-/Aa Phoenix Civic Improvement Corporation
Water Revenue, 6.5%, 7/1/06 1,136,760
1,000,000 AA/Aa2 Salt River Project Agricultural Improvement
and Power District, 5.75%, 1/1/07 1,092,680
-----------
$ 3,355,200
-----------
California - 1.8%
1,000,000 A+/A1 California State General Obligation,
6.0%, 9/1/09 $ 1,125,800
-----------
Colorado - 1.7%
1,000,000 AA/Aa2 Denver, Colorado City and County
General Obligation, 5.0%, 8/1/07 $ 1,042,220
-----------
Connecticut - 3.5%
1,000,000 AA-/Aa3 Connecticut State General
Obligation, 6.0%, 10/1/04 $ 1,096,860
1,000,000 AAA/Aaa Connecticut State Special Tax
Obligation, 5.25%, 10/1/09 1,066,490
-----------
$ 2,163,350
-----------
Delaware - 1.7%
1,000,000 AA/A1 Delaware Transportation Authority,
Transportation System Revenue,
5.2%, 07/1/01 $ 1,032,210
-----------
Florida - 5.3%
1,000,000 AA/Aa3 Gainsville Utilities Revenue, 5.75%, 10/1/06 $ 1,099,040
1,000,000 AA/Aa1 Orlando Utilities, Community Water & Electric
Revenue, 5.6%, 10/1/03 1,069,200
1,000,000 AAA/Aaa Palm Beach County Criminal Justice
Revenue, 5.75%, 6/1/13 1,103,720
-----------
$ 3,271,960
-----------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
Georgia - 6.8%
$1,000,000 AA/Aa3 Clayton County Water Authority, 5.1%, 5/1/14 $ 1,029,580
1,000,000 AAA/Aaa Georgia Municipal Electric Authority
Power Revenue, 5.5%, 1/1/12 1,067,940
1,000,000 AAA/Aaa Georgia State Tollway Authority, 5.0%, 7/1/10 1,038,450
1,000,000 AA/Aa1 Private Colleges & Universities
Revenue, 5.5%, 11/1/05 1,076,710
-----------
$ 4,212,680
-----------
Hawaii - 1.7%
1,000,000 AAA/Aaa Honolulu, Hawaii City and County
General Obligation, 5.5%, 11/1/09$ 1,080,580
-----------
Illinois - 5.1%
1,000,000 AA+/Aa1 Illinois Education Facilities Authority
Northwestern University Revenue,
5.5%, 12/1/13 $ 1,071,090
1,000,000 AAA/Aa2 Illinois State Sales Tax Revenue, 5.25%, 6/5/10 1,055,480
1,000,000 A+/A2 Metropolitan Pier and Exposition Authority,
Dedicated State Tax Revenue, 5.75%, 6/15/02 1,057,080
-----------
$ 3,183,650
-----------
Indiana - 3.5%
1,000,000 AAA/Aaa Indiana University Revenue, 5.8%, 11/15/10 $ 1,110,220
1,000,000 AA/Aa2 Purdue University Revenue, 5.75%, 7/1/04 1,076,550
-----------
$ 2,186,770
-----------
Kansas - 2.8%
1,500,000 AA+/Aa2 Kansas State Department of Transportation
Highway Revenue, 6.125%, 9/1/09 $ 1,712,040
-----------
Kentucky - 3.0%
1,000,000 AAA/Aaa Kentucky State Turnpike Authority, Economic
Development Revenue, 5.25%, 7/1/05 $ 1,055,680
750,000 AAA/A1 Lexington-Fayette Urban County Government
Revenue, 7.0%, 6/1/06 805,298
-----------
$ 1,860,978
-----------
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
Maine - 4.4%
$1,500,000 AA+/Aa2 Maine State General Obligation,
5.375%, 5/15/06 $ 1,599,450
1,000,000 AAA/Aaa Maine State Turnpike Authority Revenue,
6.0%, 7/1/05 1,098,690
-----------
$ 2,698,140
-----------
Maryland - 2.6%
1,500,000 AA+/Aa3 University of Maryland System Auxiliary Facility
and Tuition Revenue, 5.4%, 4/1/06 $ 1,599,555
-----------
Massachusetts - 5.3%
1,000,000 AAA/Aaa Commonwealth of Massachusetts Consolidated
Loan General Obligation, 5.5%, 6/1/03 $ 1,058,570
1,000,000 AA-/Aa3 Massachusetts Bay Transportation Authority
Revenue, 5.5%, 3/1/09 1,080,410
1,000,000 AAA/Aaa Massachusetts Water Pollution Abatement
Trust Sewer Revenue, 6.0%, 2/1/07 1,109,570
-----------
$ 3,248,550
-----------
Michigan - 1.8%
1,000,000 AAA/Aaa Detroit Michigan Water Supply Revenue,
5.75%, 7/1/11 $ 1,100,270
-----------
Minnesota - 4.7%
1,000,000 AAA/Aaa Minnesota Public Facilities Authority Water
Pollution Control Revenue, 5.0%, 3/1/06 $ 1,043,930
750,000 AAA/Aaa Minnesota Public Facilities Authority Water
Pollution Control Revenue, 7.0%, 3/1/09 781,447
1,000,000 AA/Aa2 University of Minnesota Revenue,
5.75%, 7/1/18 1,090,150
-----------
$ 2,915,527
-----------
Missouri - 1.7%
1,000,000 AA/Aa3 Kansas City, Missouri Water Revenue,
5.0%, 12/1/08 $ 1,040,340
-----------
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
Nebraska - 1.8%
$1,000,000 AAA/NR Omaha Public Power District Electric System
Revenue, 6.5%, Prerefunded, 2/1/02* $ 1,093,010
-----------
Nevada - 0.1%
60,000 AA/Aa2 Nevada Housing Division Single Family
Program Revenue, 8.0%, 4/1/09 $ 60,812
-----------
New Jersey - 1.8%
1,000,000 AA+/Aa1 New Jersey Sales Tax General Obligation,
5.8%, 2/15/07 $ 1,103,300
-----------
New Mexico - 1.6%
1,000,000 AA/Aa Bernalillo County, New Mexico, Gross
Receipts Tax Revenue, 5.0%, 4/1/13 $ 1,020,900
-----------
New York - 3.5%
1,000,000 AAA/Aaa Long Island Power Authority New York
Electric System Revenue, 5.5%, 12/1/10 $ 1,079,470
1,000,000 A+/A3 New York State Local Government Assistance
Corp. Revenue, 5.5%, 4/1/17 1,064,080
-----------
$ 2,143,550
-----------
Ohio - 1.8%
1,000,000 AAA/Aaa Ohio State Water Development Authority,
6.0%, 12/1/06 $ 1,111,520
-----------
Oklahoma - 2.6%
1,500,000 A-/A2 Grand River Dam Authority Electric Revenue,
5.75%, 6/1/06 $ 1,627,860
-----------
Pennsylvania - 1.7%
1,000,000 AA-/Aa3 Pennsylvania State Turnpike Commission
Highway Revenue, 5.45%, 12/1/02 $ 1,049,780
-----------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
South Carolina - 5.3%
$1,000,000 AA/Aa2 Columbia Waterworks and Sewer System
Revenue, 5.5%, 2/1/09 $ 1,082,560
1,000,000 AA/Aa1 Greenville Waterworks Revenue, 6.0%, 2/1/08 1,119,020
1,000,000 AAA/Aaa South Carolina General Obligation,
5.75%, 8/1/03 1,075,020
-----------
$ 3,276,600
-----------
Texas - 7.8%
1,000,000 AA/Aa2 Port Houston Authority Revenue,
5.0%, 10/1/05 $ 1,038,730
750,000 AAA/Aaa San Antonio Prior Lien Water Revenue,
7.125%, Prerefunded, 5/1/99* 782,452
1,000,000 AAA/Aaa Texas Dallas-Fort Worth Regional
Airport Revenue, 5.5%, 11/1/04 1,066,450
1,500,000 AA/Aa2 Texas State General Obligation, 5.8%, 10/1/04 1,626,375
250,000 AAA/Aaa University of Texas Permanent University
Fund, Escrowed to Maturity in Government
Securities, 8.0%, 7/1/04 299,213
-----------
$ 4,813,220
-----------
Vermont - 0.8%
500,000 AAA/Aaa Vermont Municipal Bond Bank, 7.9%,
Prerefunded, 12/1/98* $ 518,830
-----------
Virginia - 3.4%
1,000,000 AAA/Aaa Virginia Metro Authority Expressway,
5.25%, 7/15/22 $ 1,034,720
1,000,000 AA/Aa Virginia State Public School Authority,
Special Obligation, 5.4%, 6/1/04 1,059,590
-----------
$ 2,094,310
-----------
Washington - 1.7%
1,000,000 AA+/Aa1 Washington State General Obligation,
6.0%, 5/1/02 $ 1,066,020
-----------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
Wisconsin - 1.7%
$1,000,000 AA/Aa2 Wisconsin State General Obligation,
5.3%, 11/1/12 $ 1,056,650
-----------
TOTAL TAX-EXEMPT OBLIGATIONS
(Cost $58,641,468)(a) $60,866,182
-----------
TEMPORARY CASH INVESTMENTS - 1.6%
100,000 Jackson County, Mississippi Pollution Control
Revenue, 3.65%, 12/1/16** $ 100,000
400,000 Jackson County, Mississippi Pollution Control
Revenue, 2.65%, 6/1/23** 400,000
500,000 Uinta County, Wyoming Pollution Control
Revenue, 3.0%, 12/1/22** 500,000
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $1,000,000) $ 1,000,000
-----------
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $59,641,468)(b) $61,866,182
-----------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
NR Not rated.
* Prerefunded bond has been collateralized by U.S. Treasury securities which
are held in escrow and used to pay principal and interest in the
tax-exempt issue and to retire the bond in full at the earliest refunding
date.
** Security with daily "put" feature with resetting interest rates. Coupon
rate disclosed is as of June 30, 1998.
(a) The concentration of securities, by type of obligation/market sector, is
as follows:
General Obligation 19.4%
Escrowed in U.S. Government Securities 7.0
Insured 23.1
Revenue Bonds:
Education 11.5
Housing 0.1
Pollution Control 3.6
Power 8.0
Sales Tax 6.9
Transportation 11.6
Water & Sewer 8.8
(b) At June 30, 1998, the net unrealized gain on
investments based on cost for federal income
tax purposes of $59,641,468 was as follows:
Aggregate gross unrealized gain for all
investments in which there is an excess
of value over tax cost $2,267,396
Aggregate gross unrealized loss for all
investments in which there is an excess
of tax cost over value (42,682)
----------
Net unrealized gain $2,224,714
----------
Purchases and sales of securities (excluding temporary cash investments) for the
six months ended June 30, 1998 aggregated $11,547,090 and $17,572,945,
respectively.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
BALANCE SHEET 6/30/98
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including temporary cash
investments of $1,000,000) (cost $59,641,468) $61,866,182
Receivables -
Fund shares sold 9,955
Interest 881,214
Other 2,561
-----------
Total assets $62,759,912
-----------
LIABILITIES:
Payables -
Fund shares repurchased $ 2,010
Dividends 72,342
Due to bank 6,515
Due to affiliates 73,651
Accrued expenses 39,282
-----------
Total liabilities $ 193,800
-----------
NET ASSETS:
Paid-in capital $59,339,992
Distributions in excess of net investment income (30,017)
Accumulated undistributed net realized gain on investments 1,031,423
Net unrealized gain on investments 2,224,714
-----------
Total net assets $62,566,112
-----------
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Class A (based on $59,728,553/5,736,667 shares) $ 10.41
-----------
Class B (based on $2,667,081/255,150 shares) $ 10.45
-----------
Class C (based on $170,478/16,366 shares) $ 10.42
-----------
Maximum Offering Price:
Class A $ 10.79
-----------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended 6/30/98
INVESTMENT INCOME:
Interest $ 1,637,913
-----------
EXPENSES:
Management fees $ 161,698
Transfer agent fees
Class A 35,446
Class B 2,293
Class C 313
Distribution fees
Class A 72,102
Class B 13,211
Class C 1,133
Accounting 33,767
Custodian fees 5,212
Registration fees 16,428
Professional fees 22,673
Printing 6,270
Fees and expenses of nonaffiliated trustees 9,922
Miscellaneous 27,329
-----------
Total expenses $ 407,797
Less management fees waived by
Pioneering Management Corporation (70,193)
Less fees paid indirectly (2,285)
-----------
Net expenses $ 335,319
-----------
Net investment income $ 1,302,594
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments $ 948,694
Change in net unrealized gain on investments (1,186,933)
-----------
Net loss on investments $ (238,239)
-----------
Net increase in net assets resulting from operations $ 1,064,355
-----------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Six Months Ended 6/30/98 and the Year Ended 12/31/97
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
6/30/98 12/31/97
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 1,302,594 $ 2,963,928
Net realized gain on investments 948,694 1,112,008
Change in net unrealized gain on investments (1,186,933) 579,896
------------ ------------
Net increase in net assets resulting from operations $ 1,064,355 $ 4,655,832
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ($0.22 and $0.44 per share, respectively) $ (1,291,265) $ (2,841,400)
Class B ($0.15 and $0.37 per share, respectively) (39,456) (101,513)
Class C ($0.18 and $0.34 per share, respectively) (3,973) (7,472)
Net realized gain:
Class A ($0.00 and $0.08 per share, respectively) -- (511,871)
Class B ($0.00 and $0.08 per share, respectively) -- (22,707)
Class C ($0.00 and $0.08 per share, respectively) -- (2,343)
------------ ------------
Total distributions to shareholders $ (1,334,694) $ (3,487,306)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 3,324,797 $ 3,967,917
Reinvestment of distributions 854,355 2,280,319
Cost of shares repurchased (9,877,697) (15,334,302)
------------ ------------
Net decrease in net assets resulting from
fund share transactions $ (5,698,545) $ (9,086,066)
------------ ------------
Net decrease in net assets $ (5,968,884) $ (7,917,540)
NET ASSETS:
Beginning of period 68,534,996 76,452,536
------------ ------------
End of period (including (distributions in excess
of)/accumulated undistributed net investment
income of $(30,017) and $2,083, respectively) $ 62,566,112 $ 68,534,996
------------ ------------
</TABLE>
<TABLE>
Class A '98 Shares '98 Amount '97 Shares '97 Amount
<S> <C> <C> <C> <C>
Shares sold 124,322 $ 1,298,771 290,169 $ 3,000,480
Reinvestment of distributions 79,206 825,150 212,121 2,189,076
Less shares repurchased (706,733) (7,359,135) (1,404,597) (14,465,457)
-------- ---------- --------- ----------
Net decrease (503,205) $ (5,235,214) (902,307) $(9,275,901)
-------- ---------- ------- --------
Shares sold 153,103 $ 1,602,440 85,716 $ 882,162
Reinvestment of distributions 2,505 26,185 7,998 82,765
Less shares repurchased (187,993) (1,964,022) (84,079) (868,240)
-------- ---------- ------- --------
Net increase (decrease) (32,385) $ (335,397) 9,635 $ 96,687
-------- ---------- --------- ----------
Class C
Shares sold 40,900 $ 423,586 8,221 $ 85,275
Reinvestment of distributions 289 3,020 819 8,478
Less shares repurchased (53,403) (554,540) (58) (605)
-------- ---------- --------- ----------
Net increase (decrease) (12,214) $ (127,934) 8,982 $ 93,148
-------- ---------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 6/30/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
CLASS A 6/30/98 12/31/97 12/31/96 12/31/95 12/31/94(a) 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.45 $10.28 $ 10.44 $ 9.62 $ 10.76 $ 10.32
------- ------ ------- ------- ------- -------
Increase (decrease) from investment
operations:
Net investment income $ 0.21 $ 0.44 $ 0.46 $ 0.49 $ 0.49 $ 0.56
Net realized and unrealized
gain (loss) on investments (0.03) 0.25 (0.15) 0.82 (1.13) 0.56
------- ------ ------- ------- ------- -------
Net increase (decrease) from
investment operations $ 0.18 $ 0.69 $ 0.31 $ 1.31 $ (0.64) $ 1.12
Distributions to shareholders:
Net investment income (0.22) (0.44) (0.47) (0.49) (0.49) (0.56)
Net realized gain -- (0.08) -- -- (0.01) (0.12)
------- ------ ------- ------- ------- -------
Net increase (decrease) in net
asset value $ (0.04) $ 0.17 $ (0.16) $ 0.82 $ (1.14) $ 0.44
------- ------ ------- ------- ------- -------
Net asset value, end of period $ 10.41 $10.45 $ 10.28 $ 10.44 $ 9.62 $ 10.76
------- ------ ------- ------- ------- -------
Total return* 1.69% 6.87% 3.03% 13.80% (6.02)% 11.08%
Ratio of net expenses to
average net assets 1.01%**+ 1.02%+ 1.03%+ 1.02%+ 1.00% 0.85%
Ratio of net investment income
to average net assets 4.06%**+ 4.23%+ 4.47%+ 4.77%+ 4.89% 5.23%
Portfolio turnover rate 36%** 35% 34% 29% 39% 14%
Net assets, end of period (in
thousands) $59,729 $65,225 $73,387 $79,432 $76,674 $82,907
Ratios assuming no waiver of
management fees by PMC and
no reduction for fees
paid indirectly:
Net expenses 1.23%** 1.17% 1.14% 1.12% 1.22% 1.12%
Net investment income 3.84%** 4.08% 4.36% 4.67% 4.67% 4.97%
Ratios assuming waiver of
management fees by PMC and
reduction for fees paid
indirectly:
Net expenses 1.00%** 1.00% 1.00% 1.00% -- --
Net investment income 4.07%** 4.25% 4.50% 4.79% -- --
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* 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.
19
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 6/30/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Year Year 4/29/94
Ended Ended Ended Ended to
CLASS B 6/30/98 12/31/97 12/31/96 12/31/95 12/31/94(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.47 $10.31 $10.46 $ 9.65 $10.07
------ ------ ------ ------ ------
Increase (decrease) from investment
operations:
Net investment income $ 0.17 $ 0.36 $ 0.38 $ 0.41 $ 0.27
Net realized and unrealized gain
(loss) on investments (0.04) 0.25 (0.15) 0.80 (0.42)
------ ------ ------ ------ ------
Net increase (decrease) from
investment operations $ 0.13 $ 0.61 $ 0.23 $ 1.21 $(0.15)
Distributions to shareholders:
Net investment income (0.15) (0.37) (0.38) (0.40) (0.27)
Net realized gain -- (0.08) -- -- --
Net increase (decrease) in net
asset value $(0.02) $ 0.16 $(0.15) $ 0.81 $(0.42)
------ ------ ------ ------ ------
Net asset value, end of period $10.45 $10.47 $10.31 $10.46 $ 9.65
------ ------ ------ ------ ------
Total return* 1.29% 6.08% 2.25% 12.71% (1.49)%
Ratio of net expenses to average
net assets 1.84%**+ 1.81%+ 1.81%+ 1.86%+ 1.84%**
Ratio of net investment income to
average net assets 3.23%**+ 3.44%+ 3.68%+ 3.90%+ 4.17%**
Portfolio turnover rate 36%** 35% 34% 29% 39%
Net assets, end of period
(in thousands) $2,667 $3,010 $2,864 $2,553 $1,529
Ratios assuming no waiver of management
fees by PMC and no reduction for fees
paid indirectly:
Net expenses 2.05%** 1.96% 1.91% 1.96% 2.14%**
Net investment income 3.02%** 3.29% 3.58% 3.80% 3.87%**
Ratios assuming waiver of management
fees by PMC and reduction for fees
paid indirectly:
Net expenses 1.83%** 1.79% 1.76% 1.82% --
Net investment income 3.24%** 3.46% 3.73% 3.94% --
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* 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.
20
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 6/30/98
- --------------------------------------------------------------------------------
Six Months
Ended Year Ended 1/31/96 to
SCLASS C 6/30/98 12/31/97 12/31/96
Net asset value, beginning of period $10.48 $10.29 $10.51
------ ------ ------
Increase (decrease) from investment
operations:
Net investment income $ 0.16 $ 0.35 $ 0.33
Net realized and unrealized
gain (loss) on investments (0.04) 0.26 (0.21)
------ ------ ------
Net increase from investment
operations $ 0.12 $ 0.61 $ 0.12
Distributions to shareholders:
Net investment income (0.18) (0.34) (0.33)
In excess of net investment income -- -- (0.01)
Net realized gain -- (0.08) --
------ ------ ------
Net increase (decrease) in net asset
value $(0.06) $ 0.19 $(0.22)
------ ------ ------
Net asset value, end of period $10.42 $10.48 $10.29
------ ------ ------
Total return* 1.15% 6.04% 1.22%
Ratio of net expenses to average net
assets 1.95%**+ 1.84%+ 1.97%**+
Ratio of net investment income to average
net assets 3.21%**+ 3.41%+ 3.51%**+
Portfolio turnover rate 36%** 35% 34%
Net assets, end of period (in thousands) $ 170 $ 300 $ 202
Ratios assuming no waiver of management
fees by PMC and no reduction for fees
paid indirectly:
Net expenses 2.17%** 1.99% 2.08%**
Net investment income 2.99%** 3.26% 3.40%**
Ratios assuming waiver of management
fees by PMC and reduction for fees paid
indirectly:
Net expenses 1.94%** 1.82% 1.89%**
Net investment income 3.22%** 3.43% 3.59%**
* 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.
21
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 6/30/98
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Intermediate Tax-Free Fund (the Fund) is a Massachusetts 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 current income exempt from federal income taxes.
The Fund offers three classes of shares - Class A, Class B, and Class C shares.
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 liquidation, except that each class of shares can
bear different transfer agent and distribution fees and has 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 at
prices supplied by independent pricing services, which consider such
factors as Treasury spreads, yields, maturities and ratings, and
valuations may be supplemented by dealers and 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.
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.
22
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
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 income 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 its 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 $1,984 in
underwriting commissions on the sale of the fund shares during the six
months ended June 30, 1998.
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.
23
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
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.
PMC has agreed not to impose a portion of its management fee and to assume other
operating expenses of the Fund to the extent necessary to limit Class A expenses
to 1.00% of the average daily net assets attributable to Class A shares; the
portion of the Fund-wide expenses attributable to Class B and Class C shares
will be reduced only to the extent that such expenses are reduced for Class A
shares. PMC's agreement is voluntary and temporary and may be revised or
terminated at any time.
In addition, under the management agreement, certain other services and costs,
including accounting, regulatory reporting and insurance premiums, are paid by
the Fund. At June 30, 1998, $18,225 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 $16,298 in transfer agent fees payable to PSC at June 30, 1998.
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 $39,128 in distribution fees payable to
PFD at June 30, 1998.
24
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
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 four years of purchase are subject to a
CDSC at declining rates beginning at 3.0%, 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 CDSCs are paid to
PFD. For the six months ended June 30, 1998, CDSCs in the amount of $2,171 were
paid to PFD.
5. Expense Offsets
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, 1998,
the Fund's expenses were reduced by $2,285 under such arrangements.
6. Line of Credit Facility
Effective April 14, 1998, the Fund, along with certain others in the Pioneer
Family of Funds (the "Funds"), collectively participate in a $50 million
committed, unsecured revolving line of credit facility. Borrowings are used
solely for temporary or emergency purposes. The Fund may borrow up to the lesser
of $50 million or the limits set by its prospectus for borrowings. Interest on
collective borrowings of up to $25 million is payable at the Federal Funds Rate
plus 3/8% on an annualized basis, or at the Federal Funds Rate plus 1/2% if the
borrowings exceed $25 million at any one time. The Funds pay an annual
commitment fee for this facility. The commitment fee is allocated among such
Funds based on their respective borrowing limits.
The average daily amount of borrowings outstanding during the period from April
14, 1998 through June 30, 1998 was $23,252. The average daily shares outstanding
during the period were 6,105,687, resulting in an average borrowing of less than
one cent per share. The related weighted average annualized interest rate for
the period was 5.91%, and the total interest expense on such borrowings was
$298.
25
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and the Board of Trustees
of Pioneer Intermediate Tax-Free Fund:
We have audited the accompanying balance sheet, including the schedule of
investments, of Pioneer Intermediate Tax-Free Fund, as of June 30, 1998, and the
related statement of operations, the statements of changes in net assets, and
the financial highlights for the periods presented. 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.
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, 1998 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 Intermediate Tax-Free Fund as of June 30, 1998, the results of its
operations, the changes in its net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 7, 1998
26
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
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. Kathleen D. McClaskey, 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
27
<PAGE>
- --------------------------------------------------------------------------------
PROGRAMS AND SERVICES FOR PIONEER SHAREOWNERS
- --------------------------------------------------------------------------------
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.
28
<PAGE>
- --------------------------------------------------------------------------------
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 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 distributions 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 for accounts with a value of $10,000 or more.)
29
<PAGE>
- --------------------------------------------------------------------------------
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, prospectuses, 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. 0898-5428
60 State Street (c) Pioneer Funds Distributor, Inc.
Boston, Massachusetts 02109 Printed on Recycled Paper
www.pioneerfunds.com
<PAGE>
E X H I B I T C
Pioneer [LOGO]
Pioneer
Intermediate Tax-Free
Fund
- ------------------------------
ANNUAL REPORT 12/31/97
- ------------------------------
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 16
Notes to Financial Statements 22
Report of Independent Public Accountants 26
Trustees, Officers and Service Providers 27
Programs and Services for Pioneer Shareowners 28
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN 12/31/97
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
I am pleased to present this report for Pioneer Intermediate Tax-Free Fund,
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, with demand spilling over into tax-free
markets. These positive conditions are driving prices up and yields down. 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 Intermediate Tax-Free Fund.
Respectfully,
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.,
Chairman and President
1
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/97
- --------------------------------------------------------------------------------
Portfolio Quality
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[The following table was a pie chart in the printed materials.]
AAA 36%
AA 46%
A 16%
Short-Term Cash Equivalents 2%
Portfolio Maturity
- --------------------------------------------------------------------------------
(Effective life as a percentage of total investment portfolio)
[The following table was a pie chart in the printed materials.]
0-2 Years 8%
2-5 Years 9%
5-7 Years 14%
7-10 Years 32%
10-15 Years 31%
15+ Years 6%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of long-term holdings)
- --------------------------------------------------------------------------------
1. Pennsylvania State General Obligation, 6.25%, 2010 2.57%
- --------------------------------------------------------------------------------
2. Kansas State Department of Transportation Highway
Revenue, 6.125%, 2009 2.55
- --------------------------------------------------------------------------------
3. Indiana Municipal Power Agency, Power Supply System
Revenue, 6.0%, 2012 2.51
- --------------------------------------------------------------------------------
4. Connecticut State Special Tax Obligation Revenue, 6.0%, 2006 2.50
- --------------------------------------------------------------------------------
5. Grand River Dam Authority Electric Revenue, 5.75%, 2006 2.44
- --------------------------------------------------------------------------------
6. Texas State General Obligation, 5.8%, 2004 2.44
- --------------------------------------------------------------------------------
7. Georgia State General Obligation, 5.5%, 2006 2.42
- --------------------------------------------------------------------------------
8. Maine State General Obligation, 5.375%, 2006 2.40
- --------------------------------------------------------------------------------
9. University of Maryland System Auxiliary Facility and Tuition
Revenue, 5.4%, 2006 2.39
- --------------------------------------------------------------------------------
10. Maryland Community Development Administration Single Family
Mortgage Revenue, 5.95%, 2006 2.33
Fund holdings will vary for other periods.
2
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/97 CLASS A SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 12/31/97 12/31/96
$10.45 $10.28
Distributions per Share Income Short-Term Long-Term
(12/31/96 - 12/31/97) Dividends Capital Gains Capital Gains
$0.435 $0.0019 $0.0809
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made in
Pioneer Intermediate Tax-Free 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 Intermediate Lehman Brothers
Tax-Free Fund* Municipal Bond
Index
- --------------------------------------------------------------------------------
12/31/87 9,650 10,000
10,889 11,016
12/31/89 11,953 12,205
12,721 13,094
12/31/91 14,141 14,684
15,364 15,979
12/31/93 17,067 17,942
16,039 17,014
12/31/95 18,253 19,984
18,806 20,869
12/31/97 20,099 22,787
- -------------------------------------------------
[boxed text]
Average Annual Total Returns
(As of December 31, 1997)
Net Asset Public Offering
Period Value Price*
10 Years 7.61% 7.23%
5 Years 5.52 4.78
1 Year 6.87 3.16
- -------------------------------------------------
* Reflects deduction of the maximum 3.5% 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
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.
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
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/97 CLASS B SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 12/31/97 12/31/96
$10.47 $10.31
Distributions per Share Income Short-Term Long-Term
(12/31/96 - 12/31/97) Dividends Capital Gains Capital Gains
$0.370 $0.0019 $0.0809
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made
in Pioneer Intermediate Tax-Free 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 Intermediate Lehman Brothers
Tax-Free Fund* Municipal Bond
Index
- --------------------------------------------------------------------------------
4/30/94 10,000 10,000
6/30/94 10,038 10,025
10,046 10,094
12/31/94 9,851 9,949
10,420 10,653
6/30/95 10,636 10,909
10,832 11,223
12/31/95 11,102 11,686
10,980 11,545
6/30/96 10,976 11,634
11,133 11,900
12/31/95 11,351 12,204
11,255 12,174
6/30/97 11,537 12,594
11,799 12,973
12/31/97 11,942 13,325
- -------------------------------------------------
[boxed text]
Average Annual Total Returns
(As of December 31, 1997)
If If
Period Held Redeemed*
Life-of-Fund 5.18% 4.94%
(4/29/94)
1 Year 6.08 3.08
- -------------------------------------------------
* Reflects deduction of the maximum appli cable contingent deferred sales
charge (CDSC) at the end of the period and assumes rein vestment of
distributions. The maximum CDSC of 3% declines over four years.
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.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
4
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/97 CLASS C SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 12/31/97 12/31/96
$10.48 $10.29
Distributions per Share Income Short-Term Long-Term
(12/31/96 - 12/31/97) Dividends Capital Gains Capital Gains
$0.336 $0.0019 $0.0809
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made
in Pioneer Intermediate Tax-Free 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 Intermediate Lehman Brothers
Tax-Free Fund* Municipal Bond
Index
- --------------------------------------------------------------------------------
1/31/96 10,000 10,000
9,964 9,932
3/31/96 9,813 9,806
9,786 9,778
9,759 9,774
6/30/96 9,809 9,881
9,889 9,970
9,872 9,968
9/30/96 9,930 10,107
10,026 10,221
10,172 10,408
12/31/96 10,122 10,365
10,130 10,384
10,187 10,480
3/31/97 10,037 10,340
10,074 10,426
10,202 10,583
6/30/97 10,289 10,696
10,547 10,992
10,405 10,889
9/30/97 10,524 11,018
10,552 11,089
10,580 11,155
12/31/97 10,734 11,317
- -------------------------------------------------
[boxed text]
Average Annual Total Returns
(As of December 31, 1997)
If If
Period Held Redeemed*
Life-of-Fund 3.75% 3.75%
(1/31/96)
1 Year 6.04 6.04
- -------------------------------------------------
* 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.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
5
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/97
- --------------------------------------------------------------------------------
Pioneer Intermediate Tax-Free Fund's fiscal year came to a close on December 31,
1997. We saw a variety of conditions in the bond market in 1997. Interest rates
rose early on then moved to historic lows when trouble overseas sparked a
tremendous year-end rally in taxable bonds. Happily, this positive momentum
spilled over into municipal bond markets. When all was said and done, the Fund
posted a solid return, both from price appreciation and paying steady income.
For this report, we offer a discussion with Kathleen D. McClaskey, portfolio
manager of Pioneer Intermediate Tax-Free Fund. She 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,
above the 7.16% average return generated by intermediate municipal debt
funds followed by Lipper Analytical Services. (Lipper is an independent
company that tracks fund performance.)
Your Fund's total return of 6.87% for Class A Shares at net asset value
was close to that of other funds. Of course, by design your Fund is more
conservative than longer-term bond funds, and you should not expect it to
match their performance when long-term interest rates fall. Importantly,
at year-end your Fund offered a tax-free 30-day yield of 3.41%. This was
quite an attractive rate - equal to a taxable yield of 5.65% for investors
in the maximum 39.6% tax bracket. We are pleased to report these
competitive returns, especially since they were achieved with a moderate
amount of risk and without sacrificing quality.
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 - a traditional
harbinger 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
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 con ditions 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-ever point loss and gain. However, the effects were
positive for fixed-income investments, including municipal bonds.
Increased volatility in stocks caused many investors to allocate more
assets to bonds. A "flight to quality" resulted as investors demanded
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 63 holdings spread over
33 states. We also focused on high-quality issues. At year-end, AAA-rated
securities accounted for 36% of the portfolio, and AA securities were 46%.
(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.
With interest rates at historic lows, a wave of refinancing is taking
place and bonds with plump coupon rates are being "called" by their
issuers. (When interest rates fall, issuers "call" existing debt, buying
7
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/97 (continued)
- --------------------------------------------------------------------------------
it back from investors and replacing it with a new issue tied to lower
interest rates.) In response, we searched diligently for other investment
options. One effective strategy was to continue buying non-callable bonds
throughout the year. These pay interest for the life of the bond, and if
interest rates continue to decline, your Fund will benefit from a set
income stream. This approach also slightly increased the Fund's effective
average maturity. At year-end, average maturity was 8.89 years, up from
8.06 years at the end of 1996. This is still solidly medium range and, we
think, strikes a good balance between risk and reward.
Our dedication to quality showed in our focus on insured bonds, now 19.7%
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 municipal bonds. For one thing, 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 their income and investments from taxes.
Clearly, the effects of the Asian crisis are far reaching. 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. eco nomy
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 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 a
portfolio of quality bonds with an overall intermediate maturity to help
carry your Fund through 1998.
8
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <C> <S> <C>
TAX-EXEMPT OBLIGATIONS - 98.0%
Arizona - 4.9%
$1,000,000 AA/Aa Arizona Transportation Board Highway Revenue,
6.0%, 2008 $1,131,590
1,000,000 AA-/Aa Phoenix Civic Improvement Corporation
Water Revenue, 6.5%, 2006 1,152,950
1,000,000 AA/Aa Salt River Project Agricultural Improvement and
Power District, 5.75%, 2007 1,101,000
----------
$3,385,540
----------
California - 1.6%
1,000,000 A+/A1 California State General Obligation, 6.0%, 2009 $1,132,980
----------
Connecticut - 4.0%
1,000,000 AA-/Aa3 Connecticut State General Obligation,
6.0%, 2004 $1,101,810
1,500,000 AAA/Aaa Connecticut State Special Tax
Obligation, 6.0%, 2006 1,680,150
----------
$2,781,960
----------
District of Columbia - 0.8%
500,000 A+/A1 Georgetown University General Obligation
Revenue, 8.125%, 2008 $ 515,115
----------
Delaware - 1.5%
1,000,000 AA/A1 Delaware Transportation Authority, Transportation
System Revenue, 5.2%, 2001 $1,037,510
----------
Florida - 4.8%
1,000,000 AA/Aa Gainesville Utilities Revenue, 5.75%, 2006 $1,103,590
1,000,000 AA/Aa1 Orlando Utilities, Community Water & Electric
Revenue, 5.6%, 2003 1,071,320
1,000,000 AAA/Aaa Palm Beach County Criminal Justice Revenue,
5.75%, 2013 1,104,920
----------
$3,279,830
----------
</TABLE>
The accompanying footnotes are an integral
part of these financial statements. 9
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/97 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <C> <S> <C>
Georgia - 6.2%
$ 400,000 A/A3 Georgia Municipal Electric Authority Power
Revenue, 7.65%, 1998 $ 408,000
1,000,000 A/A3 Georgia Municipal Electric Authority Power
Revenue, 6.2%, 2010 1,114,010
1,500,000 AA+/Aaa Georgia State General Obligation, 5.5%, 2006 1,628,445
1,000,000 AA/Aa1 Private Colleges &Universities Revenue,
5.5%, 2005 1,079,170
----------
$4,229,625
----------
Illinois - 6.3%
1,000,000 AA/Aa1 Illinois Education Facilities Authority
Northwestern University Revenue, 5.5%, 2013 $1,062,320
1,000,000 AAA/Aa3 Illinois State Sales Tax Revenue, 5.25%, 2000 1,056,220
1,000,000 A+/A1 Illinois State Toll Highway Authority Revenue,
6.3%, 2012 1,143,920
1,000,000 A+/A2 Metropolitan Pier and Exposition Authority,
Dedicated State Tax Revenue, 5.75%, 2002 1,059,870
----------
$4,322,330
----------
Indiana - 6.4%
1,500,000 AAA/Aaa Indiana Municipal Power Agency, Power Supply
System Revenue, 6.0%, 2012 $1,683,600
500,000 A+/A1 Indiana Transportation Finance Authority Highway
Revenue, 8.0%, Prerefunded, 2008* 518,570
1,000,000 AAA/Aaa Indiana University Revenue, 5.8%, 2010 1,113,470
1,000,000 AA-/Aa2 Purdue University Revenue, 5.75%, 2004 1,082,650
----------
$4,398,290
----------
Kansas - 2.5%
1,500,000 AA/Aa Kansas State Department of Transportation
Highway Revenue, 6.125%, 2009 $1,716,315
----------
Kentucky - 2.7%
1,000,000 AAA/Aaa Kentucky State Turnpike Authority, Economic
Development Revenue, 5.25%, 2005 $1,061,670
750,000 AAA/A1 Lexington-Fayette Urban County Government
Revenue, 7.0%, 2006 812,813
----------
$1,874,483
----------
</TABLE>
The accompanying footnotes are an integral
10 part of these financial statements.
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <C> <S> <C>
Maine - 4.0%
$1,500,000 AA+/Aa3 Maine State General Obligation, 5.375%, 2006 $1,610,430
1,000,000 AAA/Aaa Maine State Turnpike Authority Revenue,
6.0%, 2005 1,107,330
----------
$2,717,760
----------
Maryland - 4.6%
1,500,000 NR/Aa2 Maryland Community Development Administration,
Single Family Mortgage Revenue, 5.95%, 2006 $1,563,720
1,500,000 AA+/Aa3 University of Maryland System Auxiliary Facility
and Tuition Revenue, 5.4%, 2006 1,608,960
----------
$3,172,680
----------
Massachusetts - 4.7%
1,000,000 AAA/Aaa Commonwealth of Massachusetts Consolidated
Loan General Obligation, 5.5%, 2003 $1,063,210
1,000,000 A+/A1 Massachusetts Bay Transportation Revenue,
5.5%, 2009 1,079,660
1,000,000 AAA/Aaa Massachusetts Water Pollution Abatement Trust
Sewer Revenue, 6.0%, 2007 1,119,490
----------
$3,262,360
----------
Michigan - 3.2%
1,000,000 AAA/Aaa Detroit Michigan Water Supply Revenue,
5.75%, 2011 $1,097,770
1,000,000 AA-/A1 Michigan State Trunk Line Sales Tax Revenue,
5.625%, 2003 1,068,890
----------
$2,166,660
----------
Minnesota - 4.3%
750,000 AAA/Aaa Minnesota Public Facilities Authority Water
Pollution Control Revenue, 7.0%, 2009 $ 791,677
1,000,000 AAA/Aaa Minnesota Public Facilities Authority Water
Pollution Control Revenue, 5.0%, 2006 1,046,110
1,000,000 AA/Aa3 University of Minnesota Revenue, 5.75%, 2018 1,091,440
----------
$2,929,227
----------
</TABLE>
The accompanying footnotes are an integral
part of these financial statements. 11
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/97 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <C> <S> <C>
Nebraska - 1.6%
$1,000,000 AAA/NR Omaha Public Power District Electric System
Revenue, 6.5%, Prerefunded, 2002* $1,100,590
----------
Nevada - 0.1%
65,000 AA/Aa2 Nevada Housing Division Single Family Program
Revenue, 8.0%, 2009 $ 66,528
----------
New Hampshire - 0.8%
500,000 AAA/Aaa New Hampshire Turnpike System Revenue,
7.375%, Prerefunded, 2000* $ 545,070
----------
New Jersey - 2.8%
750,000 AA-/Aaa New Jersey Highway Authority Garden State
Parkway Senior Revenue, 7.25%,
Prerefunded, 1999* $ 790,358
1,000,000 AA+/Aa1 New Jersey Sales Tax Revenue, 5.8%, 2007 1,104,200
----------
$1,894,558
----------
New Mexico - 1.5%
1,000,000 AA/Aa Bernalillo County, New Mexico, Gross Receipts
Tax Revenue, 5.0%, 2013 $1,019,210
----------
New York - 1.5%
1,000,000 A/A3 New York State Local Government Assistance
Corp. Revenue, 5.5%, 2017 $1,066,390
----------
Ohio - 1.6%
1,000,000 AAA/Aaa Ohio State Water Development Authority,
6.0%, 2006 $1,120,200
----------
Oklahoma - 2.4%
1,500,000 A-/A Grand River Dam Authority Electric Revenue,
5.75%, 2006 $1,638,015
----------
</TABLE>
The accompanying footnotes are an integral
12 part of these financial statements.
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <C> <S> <C>
Pennsylvania - 4.1%
$1,500,000 AA-/A1 Pennsylvania State General Obligation,
6.25%, 2010 $1,730,205
1,000,000 A/A1 Pennsylvania State Turnpike Commission Highway
Revenue, 5.45%, 2002 1,054,520
----------
$2,784,725
----------
Puerto Rico - 1.7%
1,000,000 AAA/Aaa University of Puerto Rico
Revenue, MBIA Insured, 6.25%, 2008 $1,150,680
----------
South Carolina - 4.8%
1,000,000 AA/Aa Columbia Waterworks & Sewer System
Revenue, 5.5%, 2009 $1,083,750
1,000,000 AA/Aa1 Greenville Waterworks Revenue, 6.0%, 2008 1,126,520
1,000,000 AAA/Aaa South Carolina General Obligation, 5.75%, 2003 1,079,490
----------
$3,289,760
----------
Texas - 7.1%
1,000,000 AA/Aa2 Port Houston Authority Revenue, 5.0%, 2005 $1,041,980
750,000 AAA/Aaa San Antonio Prior Lien Water
Revenue, 7.125%, Prerefunded, 1999* 792,307
1,000,000 AAA/Aaa Texas Municipal Power Revenue, 5.5%, 2010 1,086,610
1,500,000 AA/Aa2 Texas State General Obligation, 5.8%, 2004 1,637,385
250,000 AAA/Aaa University of Texas Permanent University Fund,
Escrowed to Maturity in Government
Securities, 8.0%, 2004 302,050
----------
$4,860,332
----------
Utah - 0.0%
25,000 AA/Aa Utah Housing Finance Agency,
Single Family Mortgage Purchase Revenue,
7.3%, 2003 $ 25,395
----------
Vermont - 0.8%
500,000 AAA/Aaa Vermont Municipal Bond Bank, 7.9%,
Prerefunded, 1998* $ 528,465
----------
</TABLE>
The accompanying footnotes are an integral
part of these financial statements. 13
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/97 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (Unaudited) Value
<C> <C> <S> <C>
Virginia - 1.6%
$1,000,000 AA/Aa Virginia State Public School Authority, Special
Obligation, 5.4%, 2004 $ 1,064,650
-----------
Washington - 1.6%
1,000,000 AA/Aa1 Washington State General Obligation,
6.0%, 2002 $ 1,074,130
-----------
Wisconsin - 1.5%
1,000,000 AA/Aa2 Wisconsin State General Obligation,
5.3%, 2012 $ 1,054,730
-----------
TOTAL TAX-EXEMPT OBLIGATIONS
(Cost $63,794,446)(a) $67,206,093
-----------
TEMPORARY CASH INVESTMENTS - 2.0%
100,000 California Pollution Control Revenue,
4.9%, 2000** $ 100,000
100,000 California Pollution Control Revenue,
4.9%, 2011** 100,000
500,000 Jackson County, Mississippi Pollution Control
Revenue, 3.55%, 2023** 500,000
200,000 Uinta County, Wyoming Pollution Control Revenue,
3.8%, 2010** 200,000
200,000 Uinta County, Wyoming Pollution Control Revenue,
3.55%, 2020** 200,000
300,000 Uinta County, Wyoming Pollution Control Revenue,
5.0%, 2022** 300,000
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $1,400,000) $ 1,400,000
-----------
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $65,194,446)(b) $68,606,093
===========
</TABLE>
The accompanying footnotes are an integral
14 part of these financial statements.
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NR Not rated.
* Prerefunded bond has been collateralized by U.S. Treasury securities which
are held in escrow and used to pay principal and interest in the
tax-exempt issue and to retire the bond in full at the earliest refunding
date.
** Security with daily "put" feature with resetting interest rates. Coupon
rate disclosed is as of December 31, 1997.
(a) The concentration of securities, by type of obligation/market sector, is
as follows:
General Obligation 21.1%
Escrowed in U.S. Government Securities 9.0
Revenue Bonds:
Education 11.9
Housing 5.7
Insured 19.8
Power 9.0
Sales Tax 6.3
Transportation 12.2
Water 5.0
(b) At December 31, 1997, the net unrealized gain on investments based on cost
for federal income tax purposes of $65,194,446 was as follows:
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $ 3,411,647
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value --
------------
Net unrealized gain $ 3,411,647
============
Purchases and sales of securities (excluding temporary cash investments) for the
year ended December 31, 1997 aggregated $23,834,960 and $33,755,948,
respectively.
The accompanying footnotes are an integral
part of these financial statements. 15
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
BALANCE SHEET 12/31/97
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including temporary cash
investments of $1,400,000) (cost $65,194,446) $68,606,093
Cash 15,121
Receivables -
Fund shares sold 60,542
Interest 1,094,565
Other 7,688
-----------
Total assets $69,784,009
-----------
LIABILITIES:
Payables -
Investment securities purchased $ 1,046,994
Dividends 77,788
Due to affiliates 76,326
Accrued expenses 47,905
-----------
Total liabilities $ 1,249,013
-----------
NET ASSETS:
Paid-in capital $65,038,537
Accumulated undistributed net investment income 2,083
Accumulated undistributed net realized gain on investments 82,729
Net unrealized gain on investments 3,411,647
-----------
Total net assets $68,534,996
===========
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $65,225,339/6,239,872 shares) $ 10.45
===========
Class B (based on $3,010,001/287,535 shares) $ 10.47
===========
Class C (based on $299,656/28,580 shares) $ 10.48
===========
MAXIMUM OFFERING PRICE:
Class A $ 10.83
===========
16 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/97
INVESTMENT INCOME:
Interest $3,690,600
----------
Total investment income $3,690,600
----------
EXPENSES:
Management fees $ 351,207
Transfer agent fees
Class A 71,832
Class B 3,720
Class C 367
Distribution fees
Class A 159,818
Class B 28,341
Class C 2,297
Accounting 72,885
Custodian fees 19,244
Registration fees 37,173
Professional fees 40,350
Printing 10,676
Fees and expenses of nonaffiliated trustees 13,311
Miscellaneous 34,459
----------
Total expenses $ 845,680
Less management fees waived by
Pioneering Management Corporation (104,683)
Less fees paid indirectly (14,325)
----------
Net expenses $ 726,672
----------
Net investment income $2,963,928
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $1,112,008
Change in net unrealized gain on investments 579,896
----------
Net gain on investments $1,691,904
----------
Net increase in net assets resulting from operations $4,655,832
==========
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
Pioneer Intermediate Tax-Free 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 $ 2,963,928 $ 3,540,782
Net realized gain on investments 1,112,008 196,137
Change in net unrealized gain on investments 579,896 (1,494,178)
------------ ------------
Net increase in net assets resulting from operations $ 4,655,832 $ 2,242,741
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ($0.44 and $0.47 per share, respectively) $ (2,841,400) $ (3,461,175)
Class B ($0.37 and $0.38 per share, respectively) (101,513) (105,009)
Class C ($0.34 and $0.33 per share, respectively) (7,472) (6,042)
In excess of net investment income:
Class A ($0.00 and $0.00 per share, respectively) - (5,392)
Class C ($0.00 and $0.01 per share, respectively) - (238)
Net realized gain:
Class A ($0.08 and $0.00 per share, respectively) (511,871) -
Class B ($0.08 and $0.00 per share, respectively) (22,707) -
Class C ($0.08 and $0.00 per share, respectively) (2,343) -
------------ ------------
Total distributions to shareholders $ (3,487,306) $ (3,577,856)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 3,967,917 $ 8,160,271
Reinvestment of distributions 2,280,319 2,196,836
Cost of shares repurchased (15,334,302) (14,554,121)
------------ ------------
Net decrease in net assets resulting from
fund share transactions $ (9,086,066) $ (4,197,014)
------------ ------------
Net decrease in net assets $ (7,917,540) $ (5,532,129)
------------ ------------
NET ASSETS:
Beginning of year 76,452,536 81,984,665
------------ ------------
End of year (including accumulated undistributed
net investment income of $2,083 and $0, respectively) $ 68,534,996 $ 76,452,536
============ ============
<CAPTION>
CLASS A '97 Shares '97 Amount '96 Shares '96 Amount
<S> <C> <C> <C> <C>
Shares sold 290,169 $ 3,000,480 678,298 $ 6,961,860
Reinvestment of distributions 212,121 2,189,076 206,717 2,116,538
Less shares repurchased (1,404,597) (14,465,457) (1,352,057) (13,837,542)
---------- ------------ ---------- ------------
Net decrease (902,307) $ (9,275,901) (467,042) $ (4,759,144)
========== ============ ========== ============
CLASS B
Shares sold 85,716 $ 882,162 95,563 $ 984,982
Reinvestment of distributions 7,998 82,765 7,217 74,044
Less shares repurchased (84,079) (868,240) (68,872) (701,579)
---------- ------------ ---------- ------------
Net increase 9,635 $ 96,687 33,908 $ 357,447
========== ============ ========== ============
CLASS C*
Shares sold 8,221 $ 85,275 20,459 $ 213,429
Reinvestment of distributions 819 8,478 611 6,254
Less shares repurchased (58) (605) (1,472) (15,000)
---------- ------------ ---------- ------------
Net increase 8,982 $ 93,148 19,598 $ 204,683
========== ============ ========== ============
</TABLE>
* Class C shares were first publicly offered on January 31, 1996.
18 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
CLASS A 12/31/97 12/31/96 12/31/95 12/31/94(a) 12/31/93
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.28 $ 10.44 $ 9.62 $ 10.76 $ 10.32
------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.44 $ 0.46 $ 0.49 $ 0.49 $ 0.56
Net realized and unrealized gain (loss) on investments 0.25 (0.15) 0.82 (1.13) 0.56
------- ------- ------- ------- -------
Net increase (decrease) from investment operations $ 0.69 $ 0.31 $ 1.31 $ (0.64) $ 1.12
Distributions to shareholders:
Net investment income (0.44) (0.47) (0.49) (0.49) (0.56)
Net realized gain (0.08) - - (0.01) (0.12)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 0.17 $ (0.16) $ 0.82 $ (1.14) $ 0.44
------- ------- ------- ------- -------
Net asset value, end of year $ 10.45 $ 10.28 $ 10.44 $ 9.62 $ 10.76
======= ======= ======= ======= =======
Total return* 6.87% 3.03% 13.80% (6.02)% 11.08%
Ratio of net expenses to average net assets 1.02%+ 1.03%+ 1.02%+ 1.00% 0.85%
Ratio of net investment income to average net assets 4.23%+ 4.47%+ 4.77%+ 4.89% 5.23%
Portfolio turnover rate 35% 34% 29% 39% 14%
Net assets, end of year (in thousands) $65,225 $73,387 $79,432 $76,674 $82,907
Ratios assuming no waiver of management fees by PMC and
no reduction for fees paid indirectly:
Net expenses 1.17% 1.14% 1.12% 1.22% 1.12%
Net investment income 4.08% 4.36% 4.67% 4.67% 4.97%
Ratios assuming waiver of management fees by PMC
and reduction for fees paid indirectly:
Net expenses 1.00% 1.00% 1.00% -- --
Net investment income 4.25% 4.50% 4.79% -- --
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* 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. 19
<PAGE>
Pioneer Intermediate Tax-Free Fund
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/97
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year Year 4/29/94
Ended Ended Ended to
CLASS B 12/31/97 12/31/96 12/31/95 12/31/94(a)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.31 $10.46 $ 9.65 $10.07
------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.36 $ 0.38 $ 0.41 $ 0.27
Net realized and unrealized gain (loss) on investments 0.25 (0.15) 0.80 (0.42)
------- ------- ------- -------
Net increase (decrease) from investment operations $ 0.61 $ 0.23 $ 1.21 $(0.15)
Distributions to shareholders:
Net investment income (0.37) (0.38) (0.40) (0.27)
Net realized gain (0.08) -- -- --
------- ------- ------- -------
Net increase (decrease) in net asset value $ 0.16 $(0.15) $ 0.81 $(0.42)
------- ------- ------- -------
Net asset value, end of period $10.47 $10.31 $10.46 $ 9.65
======= ======= ======= =======
Total return* 6.08% 2.25% 12.71% (1.49)%
Ratio of net expenses to average net assets 1.81%+ 1.81%+ 1.86%+ 1.84%**
Ratio of net investment income to average net assets 3.44%+ 3.68%+ 3.90%+ 4.17%**
Portfolio turnover rate 35% 34% 29% 39%
Net assets, end of period (in thousands) $3,010 $2,864 $2,553 $1,529
Ratios assuming no waiver of management fees by PMC and
no reduction for fees paid indirectly:
Net expenses 1.96% 1.91% 1.96% 2.14%**
Net investment income 3.29% 3.58% 3.80% 3.87%**
Ratios assuming waiver of management fees by PMC
and reduction for fees paid indirectly:
Net expenses 1.79% 1.76% 1.82% --
Net investment income 3.46% 3.73% 3.94% --
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* 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.
20 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Intermediate Tax-Free Fund
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/97
- -------------------------------------------------------------------------------
Year Ended 1/31/96 to
CLASS C 12/31/97 12/31/96
Net asset value, beginning of period $ 10.29 $ 10.51
------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.35 $ 0.33
Net realized and unrealized gain (loss)
on investments 0.26 (0.21)
------- -------
Net increase from investment operations $ 0.61 $ 0.12
Distributions to shareholders:
Net investment income (0.34) (0.33)
In excess of net investment income -- (0.01)
Net realized gain (0.08) --
------- -------
Net increase (decrease) in net asset value $ 0.19 $ (0.22)
------- -------
Net asset value, end of period $10.48 $ 10.29
======= =======
Total return* 6.04% 1.22%
Ratio of net expenses to average net assets 1.84%+ 1.97%**+
Ratio of net investment income to average net assets 3.41%+ 3.51%**+
Portfolio turnover rate 35% 34%
Net assets, end of period (in thousands) $ 300 $ 202
Ratios assuming no waiver of management fees by PMC
and no reduction for fees
paid indirectly:
Net expenses 1.99% 2.08%**
Net investment income 3.26% 3.40%**
Ratios assuming waiver of management fees by PMC
and reduction for fees paid
indirectly:
Net expenses 1.82% 1.89%**
Net investment income 3.43% 3.59%**
* 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. 21
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/97
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Intermediate Tax-Free Fund (the Fund) is a Massachusetts 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 current income exempt from federal income taxes.
The Fund offers three classes of shares - Class A, Class B, and Class C shares.
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 liquidation, except that each class of shares can
bear different transfer agent and distribution fees and have exclusive voting
rights with respect to the distribution plans that have been adopted by Class A,
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.
22
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 $11,460 from accumulated
undistributed net investment income to accumulated undistributed net
realized gain 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
des-ignated $608,190 as a capital gain dividend for the purposes of the
dividend paid deduction. Of this amount, $90,367 and $517,823 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 $2,952,468 as tax-exempt interest dividends. For purposes of
the dividend exclusion, none of the distributions per share qualify for
the exclusion.
23
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/97 (continued)
- --------------------------------------------------------------------------------
C. Fund Shares
The Fund records sales and repurchases of its 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 $5,138 in
underwriting commissions on the sale of the fund shares 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.
PMC has agreed not to impose a portion of its management fee and to assume other
operating expenses of the Fund to the extent necessary to limit Class A expenses
to 1.00% of the average daily net assets attributable to Class A shares; the
portion of the Fund-wide expenses attributable to Class B and Class C shares
will be reduced only to the extent that such expenses are reduced for Class A
shares. PMC's agreement is voluntary and temporary and may be revised or
terminated at any time.
24
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, $25,667 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 $7,965 in transfer agent fees payable to PSC at December 31, 1997.
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 $42,694 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 3%, 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 $4,065 were paid to
PFD.
5. Expense Reductions
The Fund has entered into certain expense offset arrangements resulting in a
reduction in the Fund's total expenses. For the year ended December 31, 1997,
the Fund's expenses were reduced by $14,325 under such arrangements.
25
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and the Board of Trustees of Pioneer Intermediate Tax-Free
Fund:
We have audited the accompanying balance sheet, including the schedule of
investments, of Pioneer Intermediate Tax-Free Fund, as of December 31, 1997, and
the related statement of operations, the state ments of changes in net assets,
and the financial highlights for the periods presented. 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.
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 Intermediate Tax-Free Fund as of December 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 2, 1998
26
<PAGE>
Pioneer Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
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. Kathleen D. McClaskey, 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
27
<PAGE>
- --------------------------------------------------------------------------------
PROGRAMS AND SERVICES FOR PIONEER SHAREOWNERS
- --------------------------------------------------------------------------------
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.
28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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.)
29
<PAGE>
- --------------------------------------------------------------------------------
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, prospectuses, 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.
[PIONEER LOGO] Pioneer Funds Distributor, Inc.
60 State Street
Boston, Massachusetts 02109
www.pioneerfunds.com
0298-4807
(C) Pioneer Funds Distributor, Inc.
[RECYCLE LOGO] Printed on Recycled Paper
<PAGE>
E X H I B I T D
[LOGO]
Pioneer
Tax-Free
Income Fund
SEMIANNUAL REPORT 6/30/98
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
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 Plans from Pioneer 34
The Pioneer Family of Mutual Funds 36
<PAGE>
Pioneer Tax-Free Income Fund
LETTER FROM THE CHAIRMAN 6/30/98
Dear Shareowner,
- --------------------------------------------------------------------------------
While the Taxpayer Relief Act of 1997 provided lower rates on capital gains, it
did not ease the tax burden on investment income. As a result, municipal bonds
remain one of the few effective ways for investors to protect themselves from
taxes. We are happy to offer Pioneer Intermediate Tax-Free Fund as a choice for
conservative, tax-sensitive investors. The Fund's professional management and
diversified portfolio make tax-free investing affordable and accessible, an
important point since municipal bonds can be difficult for individuals to buy
and sell directly. Although municipal bonds did not keep pace with the snappy
gains posted by taxable U.S. government and corporate bonds over the past six
months, they generated solid returns and attractive after-tax dividends.
We have always recommended that investors diversify their portfolios among both
stocks and bonds, and recent market volatility has underscored this point. What
can you as an investor do? I encourage you to periodically review your financial
goals and strategy with your investment professional. It's a simple step to make
sure you will be better prepared to weather the inevitable swings in the market.
Please read on to learn more about how your Fund is being managed. If you have
questions about Pioneer Tax-Free Income Fund, please contact your investment
professional, or Pioneer at 1-800-225-6292.
Respectfully,
/s/ John F. Cogan, Jr.
- --------------------------------
John F. Cogan, Jr.,
Chairman and President
1
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 6/30/98
- --------------------------------------------------------------------------------
Portfolio Quality
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[The following data was represented as a pie chart in the printed material.]
Short-Term Cash Equivalents .. 1%
A ............................ 14%
AA ........................... 19%
AAA .......................... 66%
Portfolio Maturity
- --------------------------------------------------------------------------------
(Effective life as a percentage of total investment portfolio)
[The following data was represented as a pie chart in the printed material.]
0-2 Years ................... 1%
2-5 Years ................... 18%
5-7 Years .................... 12%
7-10 Years .................. 28%
10-20 Years ................. 32%
20+ Years .................... 9%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of debt holdings)
1. Illinois Metropolitan Pier & Exposition Authority
State Tax Revenue, 8.5%, 6/15/06 2.85%
2. South Carolina Public Service Authority Revenue,
6.625%, Prerefunded, 7/1/02 2.77
3. Wyoming Community Development Authority Revenue,
Series B, 7.05%, 6/1/33 2.58
4. Hastings Electric System Revenue, 6.3%, 1/1/19 2.01
5. Will County, llinois Environmental
Revenue Bond, 6.4%, 4/1/26 1.96
6. South East Public Service Authority, 5.0%, 7/1/15 1.64
7. Walled Lake School District General Obligation,
Series I, 5.5%, 5/1/22 1.47
8. Oklahoma State Turnpike Authority Revenue, 6.125%, 1/1/20 1.42
9. District of Columbia Water & Sewer Authority, 5.5%, 10/1/23 1.33
10. McGee Creek Authority Water Revenue, 6.0%, 1/1/23 1.33
Fund holdings will vary for other periods.
2
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/98 CLASS A SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
Net Asset Value
per Share 6/30/98 12/31/97
$12.19 $12.17
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
$0.276 -- --
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made in
Pioneer Tax-Free Income Fund at public offering price, compared to the growth of
the Lehman Brothers Municipal Bond Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of June 30, 1998)
Net Asset Public Offering
Period Value Price*
10 Years 8.19% 7.70%
5 Years 5.81 4.83
1 Year 8.51 3.58
- --------------------------------------------------------------------------------
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
[mountain chart]
Pioneer Tax-Free Lehman Brothers
Income Fund* Municipal Bond Index
------------ --------------------
6/88 9,550 10,000
10,853 11,139
6/90 11,483 11,898
12,477 12,970
6/92 14,076 14,497
15,831 16,231
6/94 15,745 16,263
17,009 17,692
6/96 17,942 18,864
19,346 20,422
6/98 20,991 22,188
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.
3
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/98 CLASS B SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 6/30/98 12/31/97
$12.11 $12.09
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
$0.239 -- --
Investment Returns
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of June 30, 1998)
If If
Period Held Redeemed*
Life-of-Fund 6.57% 5.74%
(4/28/95)
1 Year 7.71 3.71
- --------------------------------------------------------------------------------
* Reflects deduction of the maximum applicable contingent deferred sales charge
(CDSC) at the end of the period and assumes reinvestment of distributions. The
maximum CDSC of 4% declines over six years.
[mountain chart]
Pioneer Tax-Free Lehman Brothers
Income Fund* Municipal Bond Index
------------ --------------------
4/95 10,000 10,000
6/95 10,155 10,229
10,363 10,523
10,794 10,957
10,580 10,824
6/96 10,616 10,906
10,858 11,157
11,080 11,441
10,994 11,414
6/97 11,368 11,807
11,682 12,163
11,985 12,493
12,078 12,637
6/98 11,944 12,828
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.
4
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/98 CLASS C SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 6/30/98 12/31/97
$12.12 $12.11
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
$0.239 -- --
Investment Returns
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of June 30, 1998)
If If
Period Held Redeemed*
Life-of-Fund 5.20% 5.20%
(1/31/96)
1 Year 7.69 7.69
- --------------------------------------------------------------------------------
* Assumes reinvestment of distributions. The 1% contingent deferred sales
charge (CDSC) applies to redemptions made within one year of purchase.
[mountain chart]
Pioneer Tax-Free Lehman Brothers
Income Fund* Municipal Bond Index
------------ --------------------
1/96 10,000 10,000
9,766 9,804
6/96 9,791 9,879
10,006 10,106
10,219 10,363
10,148 10,338
6/97 10,493 10,695
10,792 11,017
11,070 11,316
11,138 11,446
6/98 11,300 11,620
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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
Pioneer Tax-Free Income Fund closed the first half of its fiscal year on June
30, 1998. During that time, favorable economic conditions in the United States
and a "flight to quality" in the U.S. Treasury market pushed taxable bond prices
higher and long-term interest rates to historic lows. Even so, an increased
supply of municipal bonds combined with weak demand, hurt the performance of
munis, especially when compared to taxable bonds.
Mark L. Winter has managed Pioneer Tax-Free Income Fund for the past 12 years,
leading the investment team responsible for the Fund's daily activities. The
following discussion with Mr. Winter details the investment environment and the
strategies that affected your Fund's performance, and provides his outlook for
the second half of 1998.
Q: How did the Fund perform in the first half of 1998?
A: Pioneer Tax-Free Income Fund delivered competitive returns. For the six
months, Class A Shares returned 2.46%, Class B Shares 2.16% and Class C
Shares 2.08%, all at net asset value. In comparison, the 246 general
municipal debt funds followed by Lipper Analytical Services returned 2.26%
for the same period. (Returns do not reflect sales charges.) Lipper
Analytical Services is an independent company that tracks fund performance.
The Fund's Class A Shares also provided a tax-free 30-day yield of 3.84% on
June 30. That translated into an attractive taxable- equivalent yield of
6.35% for an investor in the 39.6% maximum federal tax bracket.
Q: Did the situation in Asia affect U.S. interest rates and bonds?
A: The uncertainty of the Asian crisis kept interest rates, and bond prices,
within a narrow range for most of the period. It also sparked a "flight to
quality." Generally, investors waited for new developments and evidence of
the situation's effect on the U.S. economy. When the crisis worsened this
spring, investors sought the safety and security
6
<PAGE>
Pioneer Tax-Free Income Fund
of U.S. Treasuries. This demand again pushed up prices of taxable bonds and
lowered interest rates.
Asia's problems held down U.S. interest rates for another reason, too. Many
investors were concerned that our strong economy eventually might stimulate
inflation and lead the Federal Reserve to raise interest rates. But, because
the United States and Asia are active trading partners, slowing Asian
economies could lessen U.S. economic growth. That would ease inflationary
pressures and reduce the Fed's impetus to change rates.
Q: What was the environment like for municipal bonds over the past six months?
A: Basically it was a case of supply and demand. The supply of municipal bonds
increased dramatically during the first quarter of 1998, as many state and
local governments took advantage of lower interest rates to refinance
higher-cost bonds or to finance new projects. In fact, this period included
the largest transaction ever to occur in the tax-exempt market - Long Island
Power Authority's $6.5 billion issue. Ironically, all this good news for
municipalities didn't help municipal bond investors much since the flood of
supply kept prices from rising. In addition, the continuing economic
problems in Asia increased the popularity of U.S. Treasury bonds,
particularly among foreign investors. Municipal bond prices rose but not as
fast or far as Treasurys.
The yield on the benchmark 30-year U.S. Treasury fell from 5.92% on December
31, 1997 to 5.63% on June 30. In comparison, the yield on the Lehman
Brothers Municipal Bond Index - a good indicator of the municipal bond
market - only fell from 4.70% on December 31 to 4.65% on June 30.
Q: What strategies did you use to manage the Fund?
A: We emphasized total return and income by adjusting the Fund's sensitivity to
interest rate changes. We also maintained the Fund's high
7
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98 (continued)
- --------------------------------------------------------------------------------
standards of quality and focused on attractive relative value. As of June
30, 54% of the Fund's holdings were insured AAA-rated bonds, translating
into an average rating of "AA+." (Ratings apply to underlying securities,
not Fund shares.) The portfolio remained well diversified with 178 holdings
spread over 41 states.
We increased total return potential by increasing the portfolio's duration
from 6.44 years on December 31 to 7.70 years on June 30. Duration measures a
Fund's sensitivity to changes in interest rates. Generally, an investment's
price will change 1% for every 1% change in interest rates. Higher durations
mean more potential for both price appreciation when interest rates fall and
price declines when interest rates rise; shorter durations reduce interest
rate sensitivity.
We implemented this strategy by selling bonds with nearing "call dates" and
reinvesting in bonds with 15 to 20 year maturities because "call" provisions
relate to a predetermined date for an issuer to repurchase a bond from its
holder. Often, this happens when interest rates decline so that an issuer
can refinance the bonds at lower rates. Selling callable bonds improved the
Fund's potential for both price appreciation and long-term income generation
for several reasons. Bonds with longer maturities offer better potential for
price appreciation when interest rates decline, and longer streams of
predictable income.
Q: What is your outlook for municipal bonds over the next six months?
A: Over the near-term, we expect many of the trends that were positive for
municipal bonds during the past six months to continue through the end of
1998. We believe solid economic growth and minimal inflation in the United
States can spur ongoing improvement in the financial health of
municipalities. After the recent flood of offerings, we think issuers are
taking a breather, which should give tax-exempt bond prices a lift. Looking
out further, we expect Asia to have a powerful influence on interest rates.
If there is a significant spillover into the U.S. economy, interest rates
could remain stable or move moderately lower.
8
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
TAX-EXEMPT OBLIGATIONS - 98.7%
Arizona - 3.1%
<S> <C> <C> <C>
$ 1,500,000 AAA/Aaa Kyrene School District, 6.0%, 7/1/14 $ 1,614,765
2,765,000 AAA/Aaa Maricopa County Revenue, 5.50%, 1/1/18 2,900,651
1,000,000 AAA/Aaa Maricopa County School District, 7.0%, 7/1/07 1,174,930
1,000,000 AAA/Aaa Maricopa County School District, 7.0%, 7/1/08 1,175,670
3,500,000 AAA/Aaa Mesa Utilitiy System Revenue, 4.5%, 7/1/18 3,209,815
2,200,000 AAA/Aaa Tempe School District, 7.0%, 7/1/08 2,648,954
-------------
$ 12,724,785
-------------
Colorado - 3.1%
500,000 NR/Aa2 Colorado Housing Finance Authority,
Series A-3, 7.0%, 11/1/16 $ 558,035
845,000 NR/Aa2 Colorado Housing Finance Authority,
Series C-2, 7.45%, 6/1/17 954,174
3,490,000 NR/Aa2 Colorado Housing Finance Authority,
Series A-1, 7.4%, 11/1/27 3,933,265
1,500,000 NR/Aa2 Colorado Housing Finance Authority,
Series B-2, 7.45%, 11/1/27 1,716,315
500,000 NR/Aa2 Colorado Housing Finance Authority,
Series C-1, 7.55%, 11/1/27 565,895
500,000 NR/Aa2 Colorado Housing Finance Authority,
Series B-1, 6.5%, 11/1/29 553,880
3,575,000 AAA/Aaa Douglas County School District Region 1,
7.0%, 12/15/13 4,421,882
-------------
$ 12,703,446
-------------
Delaware - 0.4%
1,630,000 NR/Aa3 State of Delaware Housing Authority
Revenue, 6.45%, 7/1/13 $ 1,733,505
-------------
District of Columbia - 1.3%
5,050,000 AAA/Aaa District of Columbia Water & Sewer Authority,
5.5%, 10/1/23 $ 5,342,042
-------------
Florida - 4.1%
1,275,000 A/NR Clearwater Housing Authority, 5.4%, 5/1/13 $ 1,302,374
4,370,000 AAA/Aaa Hillsborough County Revenue, 5.5%, 7/1/14 4,683,635
770,000 NR/Aaa Manatee County Housing Revenue, 7.2%, 5/1/28 869,061
1,500,000 NR/Aaa Martin County Florida Utilities, 5.0%, 10/1/18 1,479,210
1,025,000 AAA/Aaa Northern Palm Beach, 4.80%, 8/1/12 1,029,971
1,250,000 AAA/Aaa Northern Palm Beach, 4.90%, 8/1/13 1,265,938
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Florida - (continued)
$ 1,300,000 AAA/Aaa Palm Beach County Water & Wastewater
Revenue, 5.0%, 10/1/17 $ 1,287,221
1,250,000 AAA/Aaa Peace River Water Authority, 5.0%, 10/1/23 1,223,575
2,000,000 AAA/Aaa Tampa Revenue, 4.875%, 11/15/18 1,926,100
1,440,000 AAA/NR Tampa Utility Tax, 5.0%, 10/1/19 1,419,494
-------------
$ 16,486,579
-------------
Georgia - 0.7%
1,000,000 AA/Aa3 Clayton County Water & Sewer Authority
Revenue, 5.0%, 5/1/12 $ 1,025,080
2,000,000 AAA/Aaa Fulton County Water & Sewer Revenue,
4.75%, 1/1/28 1,876,440
-------------
$ 2,901,520
-------------
Idaho - 0.2%
1,000,000 AAA/NR Idaho State Building Authority, 4.75%,
9/1/25 $ 944,560
-------------
Illinois - 9.8%
5,000,000 AAA/Aaa Chicago Board of Education, 5.75%, 6/1/27 $ 5,278,450
1,750,000 NR/Aaa Chicago Family Mortgage, 6.45%, 9/1/29 1,910,107
2,000,000 AAA/Aaa Chicago Lakefront Millenium Parking
Facilities, 5.125%, 1/1/28 1,962,700
1,145,000 A+/A1 Illinois Housing Development Authority
Revenue Multi-Family Housing, 7.0%,
Prerefunded, 7/1/21* 1,439,025
9,000,000 A+/A2 Illinois Metropolitan Pier & Exposition Authority
State Tax Revenue, 8.5%, 6/15/06 11,427,030
4,015,000 A+/Aaa Illinois Metropolitan Pier & Exposition Authority
State Tax Revenue, 6.5%, 6/15/27 4,499,329
5,000,000 AAA/Aaa Illinois State General Obligation, 5.75%, 5/1/21 5,248,550
7,185,000 AA/Aa2 Will County, Illinois Environmental Revenue Bond,
6.4%, 4/1/26 7,878,353
-------------
$ 39,643,544
-------------
Indiana - 4.4%
1,000,000 AAA/Aaa Goshen School Building Corp., 5.6%, 1/15/16 $ 1,042,240
750,000 AAA/NR Indiana Bond Bank State Revolving Fund,
6.75%, 2/1/17 850,433
3,500,000 AA/Aa3 Indiana Health Facilities Authority,
5.5%, 2/15/16 3,607,730
1,000,000 NR/Aaa Indiana State Housing Finance Authority, Single
Family Mortgage Revenue, 5.95%, 7/1/13 1,045,760
1,400,000 AA/NR Indianapolis Local Public Improvement Board
Revenue, 6.75%, 2/1/14 1,671,432
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
Pioneer Tax-Free Income Fund
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Indiana - (continued)
$ 1,000,000 A+/A Lawrence Township Metropolitan School District
Revenue, 6.75%, 7/5/13 $ 1,197,390
2,300,000 A/NR Mishawaka School District, 5.625%, 1/15/23 2,385,997
3,200,000 AA-/AA2 Petersburg Indiana Pollution and Control
Revenue, 5.4%, 8/1/17 3,336,032
2,740,000 AAA/Aaa Sarah Scott Middle School Revenue,
5.75%, 1/15/19 2,888,343
-------------
$ 18,025,357
Iowa - 0.3%
1,000,000 NR/A Iowa Finance Authority Revenue Bond, Correctional
Facility Program, 5.55%, 6/15/10 $ 1,060,520
-------------
Kansas - 1.0%
3,500,000 AAA/Aaa Kansas State Development Financial Authority,
5.0%, 12/1/25 $ 3,408,160
500,000 AAA/NR Wellington Electric, 5.2%, 5/1/23 500,725
-------------
$ 3,908,885
-------------
Kentucky - 1.0%
1,095,000 AAA/Aaa Kenton County Water District #1, 5.8%, 2/1/15 $ 1,172,844
2,010,000 AAA/Aaa Kenton County Water District #1, 5.875%, 2/1/19 2,153,313
495,000 AA-/A University of Kentucky Community College
Building Revenue, Series I, 6.4%, 5/1/11 537,966
-------------
$ 3,864,123
-------------
Louisiana - 0.8%
3,000,000 AAA/Aaa New Orleans Home Mortgage Authority,
6.25%, 1/15/11 $ 3,394,140
-------------
Maine - 0.2%
1,000,000 AAA/Aaa Maine Financial Authority, 5.0%, 7/1/18 $ 976,530
-------------
Maryland - 0.3%
1,060,000 AAA/Aaa Baltimore Revenue, 5.25%, 7/1/17 $ 1,101,531
-------------
Massachusetts - 4.5%
1,000,000 AAA/Aaa Massachusetts Health & Education Facilities,
5.0%, 10/1/22 $ 973,880
1,205,000 AAA/Aaa Massachusetts Housing Finance Agency,
5.95%, 7/1/18 1,269,455
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Massachusetts - (continued)
$ 3,000,000 AAA/Aaa Massachusetts State General Obligation,
6.5%, 11/1/07 $ 3,397,830
4,390,000 NR/Aaa Massachusetts State Turnpike Authority
Revenue, 5.0%, 1/1/20 4,389,693
2,000,000 AAA/Aaa South Essex Massachusetts Sewer District,
5.25%, 6/15/18 2,015,380
1,325,000 AAA/Aaa Worcester General Obligation, 6.15%, 5/1/09 1,490,254
1,440,000 AAA/Aaa Worcester General Obligation, 6.20%, 5/1/10 1,623,830
1,460,000 AAA/Aaa Worcester General Obligation, 6.25%, 5/1/11 1,650,676
1,450,000 AAA/Aaa Worcester General Obligation, 6.3%, 5/1/12 1,643,619
-------------
$ 18,454,617
-------------
Michigan - 3.4%
1,455,000 AAA/Aaa Grand Rapids Community College,
5.375%, 5/1/16 $ 1,488,930
2,175,000 AAA/Aaa Holly Michigan Area School District,
5.625%, 5/1/15 2,270,809
2,500,000 AA+/Aa1 Michigan Municipal Bond Authority,
5.63%, 10/1/19 2,644,950
5,715,000 AAA/Aaa Walled Lake School District General Obligation,
Series I, 5.5%, 5/1/22 5,887,879
1,500,000 AAA/Aaa Wayne County Building Authority Capital
Improvement, 5.25%, 6/1/16 1,518,450
-------------
$ 13,811,018
-------------
Minnesota - 1.2%
750,000 NR/A2 Minnesota State Higher Education Facilities
Authority Revenue, 5.625%, 10/1/16 $ 785,445
1,895,000 AA+/Aa2 Minnesota State Housing Finance Agency,
Series H, 6.55%, 7/11/11 2,022,079
990,000 AA/Aa2 Minnesota State Housing Finance Agency,
Series A, 6.9%, 8/1/12 1,055,459
1,000,000 AA/Aa2 Minnesota University, Series A, 5.75%, 7/1/10 1,102,250
-------------
$ 4,965,233
-------------
Missouri - 3.3%
1,000,000 AA/Aa2 Joplin Missouri Industrial Development,
5.0%, 12/1/18 $ 978,670
1,010,000 AA/NR Lexington School District Revenue,
5.55%, 3/1/17 1,055,843
2,100,000 AAA/Aaa Missouri Environmental Improvement and Energy
Resources Authority, 6.05%, 7/1/16 2,295,909
1,000,000 AAA/NR Missouri Housing Development Series B-2,
6.4%, 3/1/29 1,094,050
5,000,000 NR/Aaa Northwest Missouri University, 4.7%, 6/1/18 4,718,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Pioneer Tax-Free Income Fund
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Missouri - (continued)
$ 2,500,000 AAA/Aaa Poplar Bluff School District, 5.8%, 3/1/11 $ 2,657,275
650,000 AAA/Aaa Sikeston, Missouri Electric Revenue,
5.0%, 6/1/22 634,030
-------------
$ 13,433,777
-------------
Montana - 1.8%
3,000,000 AAA/Aaa Forsyth Pollution Control Revenue, Puget Sound
Power & Light Project, 6.8%, 3/1/22 $ 3,275,310
1,000,000 AAA/Aaa Montana State Health Facilities,
5.125%, 12/1/18 991,830
1,000,000 AAA/Aaa Montana State Health Facilities, 5.0%, 12/1/24 971,400
2,200,000 AAA/Aaa University of Montana Revenue, Series C,
5.375%, 11/15/21 2,242,174
--------------
$ 7,480,714
--------------
Nebraska - 7.0%
2,350,000 AAA/NR Douglas County Hospital Authority Revenue,
5.10%, 9/1/11 $ 2,397,611
3,675,000 AAA/NR Douglas County Hospital Authority Revenue,
5.125%, 9/1/17 3,632,738
5,000,000 NR/A Grand Island Sanitation Sewer Revenue,
6.0%, 4/1/14 5,324,100
7,500,000 A/A Hastings Electric System Revenue, 6.3%, 1/1/19 8,056,050
1,325,000 AAA/Aaa Municipal Energy Agency of Nebraska Revenue,
6.0%, 4/1/08 1,442,183
1,500,000 AAA/Aaa Municipal Energy Agency of Nebraska Revenue,
6.0%, 4/1/17 1,604,310
1,690,000 A+/A1 Nebraska Public Power District Revenue,
6.125%, 1/1/15 1,815,567
750,000 A+/A1 Nebraska Public Power District Revenue,
5.75%, 1/1/20 775,980
1,850,000 A+/A1 Nebraska Public Power District Revenue,
6.25%, 1/1/22 1,986,123
1,460,000 AA/Aa1 Omaha Tax Allocation, 5.25%, 11/15/17 1,477,374
-------------
$ 28,512,036
-------------
New Jersey - 0.6%
2,400,000 AAA/Aaa Bergen County Revenue, 4.75%, 12/15/15 $ 2,317,056
-------------
New Mexico - 2.5%
2,600,000 AA/Aa3 Bernalillo County Gross Receipts Tax Revenue,
5.75%, 4/1/21 $ 2,835,404
2,000,000 NR/Aaa Dona Ana County Revenue, 5.5%, 6/1/14 2,138,360
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
New Mexico - (continued)
$ 1,780,000 AA/Aa1 New Mexico Mortgage Finance Authority,
6.85%, 7/1/12 $ 1,889,968
2,000,000 AAA/Aaa Santa Fe Gross Receipts, 5.75%, 6/1/21 2,109,740
1,200,000 AAA/Aaa University of New Mexico Revenue,
6.55%, 8/15/25 1,349,304
-------------
$ 10,322,776
-------------
New York - 0.6%
1,500,000 AAA/Aaa New York State Dormitory Authority,
5.25%, 7/1/22 $ 1,503,735
1,000,000 A+/Aa3 Triborough Bridge & Tunnel Authority,
4.75%, 1/1/14 989,190
-------------
$ 2,492,925
-------------
North Carolina - 1.5%
1,250,000 AA/Aa1 Charlotte Law Enforcement Project,
6.1%, 12/1/15 $ 1,357,250
970,000 AA/Aa3 Charlotte-Mecklenburg Hospital Authority
Revenue, 6.25%, 1/1/20 1,044,651
1,000,000 AAA/Aaa Concord Utilities, 5.0%, 12/1/22 981,970
1,250,000 AAA/Aaa Cumberland County Civic Center Project,
6.4%, 12/1/24 1,389,500
1,000,000 AAA/Aaa Franklin County Certificate Participation,
6.625%, 6/1/14 1,114,160
-------------
$ 5,887,531
-------------
North Dakota - 1.2%
2,000,000 AAA/Aaa Grand Forks Health Care Systems,
5.6%, 8/15/17 $ 2,070,900
1,705,000 NR/Aa3 North Dakota State Housing Finance Agency
Revenue, 5.8%, 7/1/18 1,768,784
1,000,000 AAA/Aaa State Water Community Revenue, 5.75%, 7/1/27 1,055,320
-------------
$ 4,895,004
-------------
Ohio - 0.9%
1,050,000 AAA/Aaa Bedford, Ohio County School District,
6.25%, 12/1/13 $ 1,150,475
1,750,000 AAA/Aaa Cleveland Stadium Revenue, 5.25%, 11/15/27 1,752,870
500,000 AA-/Aa3 Ohio State Building Authority Revenue,
6.0%, 10/1/08 561,890
-------------
$ 3,465,235
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Pioneer Tax-Free Income Fund
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Oklahoma - 3.6%
$ 2,520,000 AAA/Aaa Grand River Dam Authority Revenue,
6.25%, 6/1/11 $ 2,905,535
4,700,000 AAA/Aaa McGee Creek Authority Water Revenue,
6.0%, 1/1/23 5,338,025
5,300,000 A+/A1 Oklahoma State Turnpike Authority Revenue,
6.125%, 1/1/20 5,707,040
500,000 NR/Aaa Oklahoma Agricultural & Mechanical Colleges,
4.9%, 8/1/18+ 486,275
-------------
$ 14,436,875
-------------
Oregon - 1.1%
1,000,000 A+/A1 Portland Sewer System, 6.2%, 10/1/12 $ 1,107,760
2,860,000 A/Aaa Washington County Unified Sewer Agency
Revenue, 6.2%, Prerefunded, 10/1/04* 3,166,506
-------------
$ 4,274,266
-------------
Pennsylvania - 4.1%
2,750,000 AAA/Aaa Allegheny County Sanitary Authority Revenue,
5.375%, 12/1/24 $ 2,807,558
4,190,000 AAA/NR Butler Area School, 4.75%, 10/1/22 3,953,516
2,375,000 AAA/Aaa Cambria County General Obligation,
5.5%, 8/15/26 2,467,008
3,000,000 NR/Aaa Lower Merion Township School District,
5.0%, 5/15/23 2,928,900
1,300,000 AAA/Aaa Lycoming County General Obligation,
5.8%, 11/15/22 1,441,673
1,000,000 AAA/Aaa New Kensington School District, 5.5%, 5/15/17 1,033,970
2,000,000 AAA/NR Wallingford-Swarthmore General Obligation,
5.25%, 5/15/17 2,018,240
-------------
$ 16,650,865
-------------
RHODE ISLAND - 0.3%
945,000 AA+/Aa Rhode Island Housing & Mortgage Finance,
6.75%, 10/1/17 $ 1,007,597
-------------
South Carolina - 4.7%
1,790,000 AAA/Aaa Beaufort Water & Sewer Revenue,
6.5%, 3/1/13 $ 1,949,024
2,400,000 A/A1 Fairfield County Pollution Control,
6.5%, 9/1/14 2,624,808
1,250,000 AAA/Aaa Hilton Head Public Service,
5.0%, 12/1/23 1,216,625
1,250,000 AAA/Aaa South Carolina Grand Strand Water & Sewer
Authority, 6.375%, 6/1/12 1,455,088
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
South Carolina - (continued)
$ 10,000,000 AAA/Aaa South Carolina Public Service Authority Revenue,
6.625%, Prerefunded, 7/1/02* $ 11,105,200
750,000 NR/Aa2 South Carolina State Housing Finance &
Development Authority Revenue, 6.2%, 7/1/09 788,077
-------------
$ 19,138,822
-------------
South Dakota - 0.8%
1,235,000 NR/Aa3 South Dakota Conservancy District Revenue,
5.625%, 8/1/17 $ 1,277,076
500,000 AAA/Aaa South Dakota Conservancy District Revenue,
5.0%, 8/1/19 485,390
1,255,000 AAA/Aaa South Dakota State Lease Revenue,
8.0%, 9/1/05 1,521,512
-------------
$ 3,283,978
-------------
Tennessee - 1.2%
2,000,000 AA/NR Chattanooga General Obligation,
5.25%, 9/1/17 $ 2,063,560
1,000,000 AAA/Aaa Metropolitan Government Nashville & Davidson
County Sports Authority, 5.75%, 7/1/17 1,060,460
1,565,000 AAA/Aaa Metropolitan Government Nashville & Davidson
County Water & Sewer Authority, 6.0%, 1/1/07 1,734,004
-------------
$ 4,858,024
-------------
Texas - 8.4%
600,000 AAA/Aaa Brownsville Texas General Obligation,
5.0%, 2/15/18 $ 582,438
2,145,000 AAA/Aaa Castleberry Independent School District
General Obligation, 5.7%, 8/15/21 2,248,496
2,310,000 AAA/Aaa Clear Creek Independent School District
General Obligation, 0%, 2/1/10 1,330,329
1,305,000 NR/Aaa Comal Independent School District General
Obligation, 7.0%, 2/1/07 1,512,652
5,000,000 AAA/Aaa Harris County, 5.5%, 6/1/14 5,294,600
1,500,000 A/NR Houston, Texas Housing Authority, 8.0%, 6/1/14 1,614,810
2,050,000 NR/Aaa Keller Independent School District General
Obligation, 0%, 8/15/10 1,150,665
1,000,000 AAA/Aaa Keller Independent School District General
Obligation, 4.75%, 8/15/20 947,490
2,000,000 NR/Aaa Kingsbridge Utility Systems Revenue,
5.375%, 3/1/15 2,032,400
1,100,000 AAA/Aaa North Forest School, 6.0%, 8/15/11 1,227,369
2,350,000 AAA/Aaa Nueces River Authority Water Supply Revenue,
5.50%, 3/1/27 2,434,577
1,595,000 AAA/Aaa Port Lavaca Utility Systems Revenue,
5.75%, 2/15/22 1,679,025
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<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%, 5/15/21 $ 3,650,780
3,000,000 AAA/Aaa Texas Public Finance Authority Building
Revenue, 0%, 2/1/07 2,026,770
5,500,000 AAA/Aaa Texas Public Finance Authority Building
Revenue, 0%, 2/1/08 3,526,655
2,750,000 AAA/Aaa Texas Public Finance Authority Building
Revenue, 0%, 2/1/10 1,583,724
1,400,000 AAA/Aaa Texas State General Obligation,
6.125%, 2/15/08 1,504,832
-------------
$ 34,347,612
-------------
Utah - 2.1%
2,500,000 AAA/Aaa St. George Water Revenue, 5.85%, 6/1/20 $ 2,642,150
385,000 NR/Aa1 Utah Housing Finance Agency Revenue,
5.95%, 7/1/11 402,225
3,480,000 AA/NR Weber County Municipal Building Authority
Revenue, 5.75%, 12/15/19 3,611,962
1,250,000 AAA/Aaa White County General Obligation, 5.85%, 2/1/26 1,323,375
455,000 NR/Aaa White County Water Revenue, 5.9%, 2/1/22 483,278
-------------
$ 8,462,990
-------------
Virginia - 5.7%
1,000,000 NR/Aa1 Arlington County Industrial Development
Revenue, 5.45%, 7/1/27 $ 1,029,190
1,750,000 A+/A1 Chesapeake Water & Sewer System Revenue,
6.5%, 7/1/12 1,907,535
3,685,000 A+/A1 Chesapeake Water & Sewer System Revenue,
6.4%, 7/1/17 3,954,189
2,000,000 AAA/Aaa Danville Virginia Industrial Authority,
5.2%, 10/1/18 2,040,160
2,000,000 AAA/Aaa Metro Expressway Authority, 5.25%, 7/15/17 2,073,400
3,000,000 AAA/Aaa Metro Expressway Authority, 5.25%, 7/15/22 3,104,160
2,500,000 AA/Aa2 Norfolk Virginia Industrial Development
Revenue, 5.625%, 9/15/17 2,619,450
6,525,000 AAA/Aaa South East Public Service Authority,
5.0%, 7/1/15 6,584,639
-------------
$ 23,312,723
-------------
Washington - 3.6%
2,820,000 AAA/Aaa Clark County Public Utility District #1 Water
Revenue, 5.5%, 1/1/15 $ 2,916,698
1,655,000 AA+/AA1 King County General Obligation,
6.625%, 12/1/15 1,920,661
1,000,000 NR/Aaa King & Snohomish Counties, Washington School
District, 5.75%, 12/1/14 1,059,310
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Washington - (continued)
$3,500,000 NR/Aaa Snohomish County Public Utility District Revenue,
6.8%, 1/1/20 $ 4,299,855
2,250,000 AAA/Aaa Snohomish County School District General
Obligation, 5.7%, 12/1/11 2,481,434
2,000,000 A/NR Vancouver Housing, 5.5%, 3/1/28 2,004,300
-------------
$ 14,682,258
-------------
West Virginia - 0.3%
1,000,000 A+/Aa1 West Virginia State Housing Development,
7.05%, 11/1/24 $ 1,076,770
-------------
Wisconsin - 0.4%
1,430,000 AAA/Aaa Adams-Friendship School District, 6.5%, 4/1/16 $ 1,681,264
-------------
Wyoming - 3.2%
2,590,000 AA/NR Wyoming Cheyenne General Obligation,
5.25%, 12/1/11 $ 2,717,324
9,750,000 AA/Aa Wyoming Community Development Authority
Revenue, Series B, 7.05%, 6/1/33 10,358,790
-------------
$ 13,076,114
-------------
TOTAL TAX-EXEMPT OBLIGATIONS
(Cost $376,643,382) (a) $ 401,139,147
-------------
TAX-EXEMPT MONEY MARKET MUTUAL FUND - 1.3%
5,416,047 Lehman Brothers Munifund $ 5,416,047
-------------
TOTAL TAX-EXEMPT MONEY MARKET MUTUAL FUND
(Cost $5,416,047) $ 5,416,047
-------------
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $382,059,429) (b) $ 406,555,194
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Pioneer Tax-Free Income Fund
* 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.
(a) The concentration of investments by type of obligation/market sector is as
follows:
General Obligation 5.2%
Escrowed in U.S. Government Securities 11.2
Insured 54.1
Revenue Bonds:
Education 0.6
Hospital 1.4
Housing 10.0
Pollution Control 2.6
Power 2.8
Transportation 1.7
Water & Sewer 3.3
Other 7.1
(b) At June 30, 1998, the net unrealized gain on investments based on cost for
federal income tax purposes of $382,059,429 was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 24,780,088
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (284,323)
------------
Net unrealized gain $ 24,495,765
============
Purchase and sales of securities (excluding temporary cash investments) for the
six months ended June 30, 1998 aggregated $133,065,564 and $147,485,287,
respectively.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
BALANCE SHEET 6/30/98
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including
temporary cash investment of $5,416,047)
(cost $382,059,429) $ 406,555,194
Cash 165
Receivables -
Investments securities sold 1,489,077
Fund shares sold 156,034
Interest 5,953,649
Other 849
-------------
Total assets $ 414,154,968
-------------
LIABILITIES:
Payables -
Investment securities purchased $ 5,049,516
Fund shares repurchased 263,203
Dividends 403,541
Due to affiliates 509,897
Accrued expenses 49,528
-------------
Total liabilities $ 6,275,685
-------------
NET ASSETS:
Paid-in capital $ 373,745,877
Distributions in excess of net investment income (67,749)
Accumulated undistributed net realized gain on investments 9,705,390
Net unrealized gain on investments 24,495,765
-------------
Total net assets $ 407,879,283
-------------
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $398,002,581/32,640,563 shares) $ 12.19
-------------
Class B (based on $7,283,507/601,466 shares) $ 12.11
-------------
Class C (based on $2,593,195/214,011 shares) $ 12.12
-------------
MAXIMUM OFFERING PRICE:
Class A $ 12.76
-------------
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended 6/30/98
INVESTMENT INCOME:
Interest $ 11,225,464
------------
EXPENSES:
Management fees $ 990,278
Transfer agent fees
Class A 213,918
Class B 2,496
Class C 358
Distribution fees
Class A 501,353
Class B 31,674
Class C 10,108
Accounting 44,257
Custodian fees 29,088
Registration fees 22,364
Professional fees 15,401
Printing 16,985
Fees and expenses of nonaffiliated trustees 9,035
Miscellaneous 21,793
------------
Total expenses $ 1,909,108
Less fees paid indirectly (1,629)
------------
Net expenses $ 1,907,479
------------
Net investment income $ 9,317,985
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments $ 9,707,607
Change in net unrealized gain on investments (8,885,250)
------------
Net gain on investments $ 822,357
------------
Net increase in net assets resulting from operations $ 10,140,342
------------
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 Six Months Ended 6/30/98 and the Year Ended 12/31/97
<TABLE>
<CAPTION>
Six Months Ended Year Ended
6/30/98 12/31/97
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 9,317,985 $ 20,868,412
Net realized gain on investments 9,707,607 5,728,646
Change in net unrealized gain on investments (8,885,250) 9,973,302
------------- ------------
Net increase in net assets resulting
from operations $ 10,140,342 $36,570,360
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A ($0.28 and $0.59 per share, respectively) $ (9,219,397) $ (20,562,056)
Class B ($0.24 and $0.49 per share, respectively) (126,290) (207,988)
Class C ($0.24 and $0.49 per share, respectively) (40,047) (38,610)
Net realized gain
Class A ($0.00 and $0.24 per share, respectively) - (8,029,783)
Class B ($0.00 and $0.24 per share, respectively) - (108,291)
Class C ($0.00 and $0.24 per share, respectively) - (32,012)
------------- ------------
Total distributions to shareholders $ (9,385,734) $ (28,978,740)
------------- ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 17,727,857 $ 37,149,298
Reinvestment of distributions 6,797,875 21,258,845
Cost of shares repurchased (38,488,269) (91,820,025)
------------- ------------
Net decrease in net assets resulting from
fund share transactions $ (13,962,537) $ (33,411,882)
------------- ------------
Net decrease in net assets $ (13,207,929) $ (25,820,262)
NET ASSETS:
Beginning of period 421,087,212 446,907,474
------------- ------------
End of period (including distributions in
excess of net investment income of $67,749
and $0, respectively) $ 407,879,283 $421,087,212
------------- ------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A '98 Shares '98 Amount '97 Shares '97 Amount
<S> <C> <C> <C> <C>
Shares sold 1,187,157 $ 14,451,644 2,922,958 $ 34,002,852
Reinvestment of distributions 550,443 6,694,199 1,653,875 20,992,773
Less shares repurchased (3,099,455) (37,738,684) (7,521,806) (90,352,716)
---------- ------------ ---------- ------------
Net decrease (1,361,855) $(16,592,841) (2,944,973) $(35,357,091)
---------- ------------ ---------- ------------
CLASS B
Shares sold 165,009 $ 1,993,633 161,072 $ 1,928,069
Reinvestment of distributions 7,049 85,167 17,76 213,098
Less shares repurchased (32,766) (396,319) (119,956) (1,440,745)
---------- ------------ ---------- ------------
Net increase 139,292 $ 1,682,481 58,877 $ 700,422
---------- ------------ ---------- ------------
CLASS C
Shares sold 106,006 $ 1,282,580 101,254 $ 1,218,377
Reinvestment of distributions 1,531 18,509 4,406 52,974
Less shares repurchased (29,223) (353,266) (2,176) (26,564)
---------- ------------ ---------- ------------
Net increase 78,314 $ 947,823 103,484 $ 1,244,787
---------- ------------ ---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
FINANACIAL HIGHLIGHTS 6/30/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
CLASS A 6/30/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93(a)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.17 $ 11.96 $ 12.36 $ 11.24 $ 12.68 $ 12.08
Increase (decrease) from investment operations:
Net investment income $ 0.27 $ 0.59 $ 0.62 $ 0.64 $ 0.64 $ 0.67
Net realized and unrealized gain (loss)
on investments 0.03 0.45 (0.21) 1.21 (1.44) 0.87
-------- -------- -------- -------- -------- --------
Net increase (decrease) from
investment operations $ 0.30 $ 1.04 $ 0.41 $ 1.85 $ (0.80) $ 1.54
Distributions to shareholders:
Net investment income (0.28) (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 $ 0.02 $ 0.21 $ (0.40) $ 1.12 $ (1.44) $ 0.60
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.19 $ 12.17 $ 11.96 $ 12.36 $ 11.24 $ 12.68
-------- -------- -------- -------- -------- --------
Total return* 2.46% 8.94% 3.57% 16.84% (6.38)% 12.98%
Ratio of net expenses to average net assets 0.92%**+ 0.93%+ 0.92%+ 0.91%+ 0.91% 0.86%
Ratio of net investment income to average net assets 4.57%**+ 4.87%+ 5.16%+ 5.37%+ 5.37% 5.37%
Portfolio turnover rate 66%** 22% 44% 35% 55% 58%
Net assets, end of period (in thousands) $398,003 $413,856 $441,733 $476,584 $452,661 $532,491
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.92%** 0.91% 0.90% 0.89% -- --
Net investment income 4.57%** 4.89% 5.18% 5.39% -- --
</TABLE>
(a) Prior to assumption of management agreement on December 1, 1993 by
Pioneering Management Company, 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.
** Annualized.
+ 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
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 6/30/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Year 4/28/95
Ended Ended Ended to
CLASS B 6/30/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.09 $ 11.88 $ 12.31 $ 11.81
---------- ---------- ---------- ---------
Increase (decrease) from investment operations:
Net investment income $ 0.23 $ 0.50 $ 0.53 $ 0.35
Net realized and unrealized gain
(loss) on investments 0.03 0.44 (0.22) 0.58
---------- ---------- ---------- ---------
Net increase from investment operations $ 0.26 $ 0.94 $ 0.31 $ 0.93
Distributions to shareholders:
Net investment income (0.24) (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 $ 0.02 $ 0.21 $ (0.43) $ 0.50
---------- ---------- ---------- ---------
Net asset value, end of period $ 12.11 $ 12.09 $ 11.88 $ 12.31
---------- ---------- ---------- ---------
Total return* 2.16% 8.16% 2.66% 7.94%
Ratio of net expenses to average net assets 1.64%**+ 1.68%+ 1.67%+ 1.72%**+
Ratio of net investment income to
average net assets 3.83%**+ 4.12%+ 4.38%+ 4.38%**+
Portfolio turnover rate 66%** 22% 44% 35%
Net assets, end of period (in thousands) $ 7,284 $ 5,588 $ 4,792 $ 2,069
Ratios assuming reduction for fees paid
indirectly:
Net expenses 1.64%** 1.66% 1.65% 1.65%**
Net investment income 3.83%** 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.
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 6/30/98
- --------------------------------------------------------------------------------
Six Months Year 1/31/96
Ended Ended to
CLASS C 6/30/98 12/31/97 12/31/96
Net asset value, beginning of period $ 12.11 $ 11.88 $ 12.32
-------- -------- --------
Increase (decrease) from investment
operations:
Net investment income $ 0.23 $ 0.49 $ 0.49
Net realized and unrealized gain
(loss) on investments 0.02 0.47 (0.24)
-------- -------- --------
Net increase from investment
operations $ 0.25 $ 0.96 $ 0.25
Distributions to shareholders:
Net investment income (0.24) (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 $ 0.01 $ 0.23 $ (0.44)
-------- -------- --------
Net asset value, end of period $ 12.12 $ 12.11 $ 11.88
-------- -------- --------
Total return* 2.08% 8.32% 2.19%
Ratio of net expenses to average
net assets 1.59%**+ 1.70%+ 1.71%**+
Ratio of net investment income to
average net assets 3.84%**+ 4.04%+ 4.34%**+
Portfolio turnover rate 66%** 22% 44%
Net assets, end of period (in
thousands) $ 2,593 $ 1,643 $ 383
Ratios assuming reduction for
fees paid indirectly:
Net expenses 1.59%** 1.67% 1.69%**
Net investment income 3.84%** 4.07% 4.36%**
* 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 intergral part of these financial statements.
25
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 6/30/98
- --------------------------------------------------------------------------------
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 has 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 at
prices supplied by independent pricing services, which consider such factors
as Treasury spreads, yields, maturities and ratings, and valuations may be
supplemented by dealers and 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.
26
<PAGE>
Pioneer Tax-Free Income Fund
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 income 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 $25,068 in
underwriting commissions on the sale of fund shares during the six months
ended June 30, 1998.
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.
27
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 6/30/98 (continued)
- --------------------------------------------------------------------------------
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 June 30, 1998, $170,799 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 $84,106 in transfer agent fees payable to PSC at June 30, 1998.
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 ser-
28
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
vices or distribution services with regard to Class B and Class C shares.
Included in due to affiliates is $254,992 in distribution fees payable to PFD at
June 30, 1998.
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 CDSCs are paid to
PFD. For the six months ended June 30, 1998, CDSCs in the amount of $6,843 were
paid to PFD.
5. Expense Offsets
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, 1998,
the Fund's expenses were reduced by $1,629 under such arrangements.
6. Line of Credit Facility
Effective April 14, 1998, the Fund, along with certain others in the Pioneer
Family of Funds (the "Funds"), collectively participate in a $50 million
committed, unsecured revolving line of credit facility. Borrowings are used
solely for temporary or emergency purposes. The Fund may borrow up to the lesser
of $50 million or the limits set by its prospectus for borrowings. Interest on
collective borrowings of up to $25 million is payable at the Federal Funds Rate
plus 3/8% on an annualized basis, or at the Federal Funds Rate plus 1/2% if the
borrowings exceed $25 million at any one time. The Funds pay an annual
commitment fee for this facility. The commitment fee is allocated among such
Funds based on their respective borrowing limits. For the period ended June 30,
1998, the Fund had no borrowings under this agreement.
29
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
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, 1998, and the related
statement of operations and the statements of changes in net assets for the
periods presented and financial highlights for the six months ended June 30,
1998 and for each of the four years ended December 31, 1997. 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 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 June
30, 1998 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, 1998, the results of its operations
and the changes in its net assets for the periods presented and financial
highlights for the six months ended June 30, 1998 and for each of the four years
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 7, 1998
30
<PAGE>
Pioneer Tax-Free Income Fund
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TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Trustees
John F. Cogan, Jr.
Mary K. Bush
Richard H. Egdahl, M.D.
Margaret B.W. Graham
John W. Kendrick
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
Officers
John F. Cogan, Jr., Chairman and President
David D. Tripple, Executive Vice President
Mark L. Winter, Vice President
William H. Keough, Treasurer
Joseph P. Barri, Secretary
31
<PAGE>
- --------------------------------------------------------------------------------
PROGRAMS AND SERVICES FOR PIONEER SHAREOWNERS
- --------------------------------------------------------------------------------
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
<PAGE>
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 distributions 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 for accounts with a value of $10,000 or more.)
33
<PAGE>
- --------------------------------------------------------------------------------
RETIREMENT PLANS FROM PIONEER
- --------------------------------------------------------------------------------
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
problems.
34
<PAGE>
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
problems.
35
<PAGE>
- --------------------------------------------------------------------------------
THE PIONEER FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
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 International Growth Fund
Pioneer World Equity Fund Tax-Exempt
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
36
<PAGE>
This page for your notes.
<PAGE>
- --------------------------------------------------------------------------------
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. 0898-5429
60 State Street (c) Pioneer Funds Distributor, Inc.
Boston, Massachussetts 02109
www.pioneerfunds.com Printed on Recycled Paper
<PAGE>
E X H I B I T D
[PIONEER LOGO]
Pioneer
Tax-Free
Income Fund
- ----------------------
ANNUAL REPORT 12/31/97
- ----------------------
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN 12/31/97
- --------------------------------------------------------------------------------
Dear Shareowner,
- --------------------------------------------------------------------------------
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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/97
- --------------------------------------------------------------------------------
Portfolio Quality
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/97 CLASS A SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- -----------------------------------------
[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
- -----------------------------------------
* 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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/97 CLASS B SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- -----------------------------------------
[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
- -----------------------------------------
* 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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/97 CLASS C SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- -----------------------------------------
[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
- -----------------------------------------
* 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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/97
- --------------------------------------------------------------------------------
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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/97 (continued)
- --------------------------------------------------------------------------------
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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/97
- --------------------------------------------------------------------------------
<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
-------------
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
-------------
$ 15,937,258
-------------
Delaware - 0.4%
1,635,000 NR/A1 State of Delaware Housing Authority
Revenue, 6.45%, 2013 + $ 1,741,618
-------------
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
-------------
$ 16,136,001
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<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>
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
-------------
$ 3,425,220
-------------
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
-------------
$ 42,234,801
-------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/97
- --------------------------------------------------------------------------------
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.
26
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/97 (continued)
- --------------------------------------------------------------------------------
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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and the Board of Trustees of Pioneer Tax-Free Income Fund:
We have audited the accompanying balance sheet of Pioneer Tax-Free Income Fund,
including the schedule of investments, as of December 31, 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
<PAGE>
Pioneer Tax-Free Income Fund
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
PROGRAMS AND SERVICES FOR PIONEER SHAREOWNERS
- --------------------------------------------------------------------------------
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
<PAGE>
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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
<PAGE>
- --------------------------------------------------------------------------------
RETIREMENT PROGRAMS FROM PIONEER
- --------------------------------------------------------------------------------
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
<PAGE>
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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
<PAGE>
- --------------------------------------------------------------------------------
THE PIONEER FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
E X H I B I T E
Pioneer Tax-Free Income Fund
PRO FORMA SCHEDULE OF INVESTMENTS 12/31/97
(unaudited)
<TABLE>
<CAPTION>
Principal Amount
Pioneer Pioneer S & P/
Tax-Free Intermediate Pro Forma Moody's
Income Fund Tax-Free Fund Combined Ratings
TAX-EXEMPT OBLIGATIONS
<S> <C> <C> <C> <C>
Alaska
$ 2,330,000 $ - $ 2,330,000 AAA/Aaa Alaska Muni Bond Bank, 7.0%, 2005
Arizona
- 1,000,000 1,000,000 AA/Aa Arizona Transportation Board Highway Revenue, 6.0%, 2008
1,500,000 - 1,500,000 AAA/Aaa Kyrene School District, 6.0%, 2014
1,000,000 - 1,000,000 AAA/Aaa Maricopa County School District, 7.0%, 2007
1,000,000 - 1,000,000 AAA/Aaa Maricopa County School District, 7.0%, 2008
- 1,000,000 1,000,000 AA-/Aa Phoenix Civic Improvement Corporation Water Revenue, 6.5%, 2006
- 1,000,000 1,000,000 AA/Aa Salt River Project Agricultural Improvement and Power
District, 5.75%, 2007
2,200,000 - 2,200,000 AAA/Aaa Tempe School District, 7.0%, 2008
1,900,000 - 1,900,000 A+/A1 Tucson Water Revenue, 6.5%, 2016
California
- 1,000,000 1,000,000 A+/A1 California State General Obligation, 6.0%, 2009
Colorado
500,000 - 500,000 AA/Aa Colorado Housing Finance Authority, Series A-3, 7.0%, 2016
3,490,000 - 3,490,000 NR/Aa Colorado Housing Finance Authority, Series A-1, 7.4%, 2027
895,000 - 895,000 AA/Aa Colorado Housing Finance Authority, Series C-2, 7.45%, 2017 +
1,500,000 - 1,500,000 NR/Aa Colorado Housing Finance Authority, Series B-2, 7.45%, 2027
500,000 - 500,000 AAA/Aaa Colorado Housing Finance Authority, Series C-1, 7.55%, 2027
2,250,000 - 2,250,000 AAA/Aaa Colorado Public Highway Revenue, 5.0%, 2021
1,450,000 - 1,450,000 AA/Aa Denver Colorado City and County, 5.5%, 2025
3,575,000 - 3,575,000 AAA/Aaa Douglas County School District Region 1, 7.0%, 2013
Connecticut
- 1,000,000 1,000,000 AA-/Aa3 Connecticut State General Obligation, 6.0%, 2004
- 1,500,000 1,500,000 AAA/Aaa Connecticut State Special Tax Obligation, 6.0%, 2006
Delaware
- 1,000,000 1,000,000 AA/A1 Delaware Transportation Authority, Transportation
System Revenue, 5.2%, 2001
1,635,000 - 1,635,000 NR/A1 State of Delaware Housing Authority Revenue, 6.45%, 2013 +
District of Columbia
- 500,000 500,000 A+/A1 Georgetown University General Obligation Revenue, 8.125%, 2008
Florida
3,000,000 - 3,000,000 AAA/Aaa Dade County Water & Sewer Revenue, 5.25%, 2026
- 1,000,000 1,000,000 AA/Aa Gainsville Utilities Revenue, 5.75%, 2006
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Pioneer Pioneer
Tax-Free Intermediate Pro Forma
Income Fund Tax-Free Fund Combined
<S> <C> <C>
$ 2,715,056 $ - $ 2,715,056
- ------------------------------------------------
$ - $ 1,131,590 $ 1,131,590
1,609,440 - 1,609,440
1,191,200 - 1,191,200
1,178,710 - 1,178,710
- 1,152,950 1,152,950
- 1,101,000 1,101,000
2,672,714 - 2,672,714
2,056,883 - 2,056,883
- ------------------------------------------------
$ 8,708,947 $ 3,385,540 $ 12,094,487
- ------------------------------------------------
$ - $ 1,132,980 $ 1,132,980
- ------------------------------------------------
$ 561,130 $ - $ 561,130
3,944,049 - 3,944,049
1,017,740 - 1,017,740
1,720,425 - 1,720,425
566,530 - 566,530
2,200,972 - 2,200,972
1,495,414 - 1,495,414
4,430,998 - 4,430,998
- ------------------------------------------------
$ 15,937,258 $ - $ 15,937,258
- ------------------------------------------------
$ - $ 1,101,810 $ 1,101,810
- 1,680,150 1,680,150
- ------------------------------------------------
$ - $ 2,781,960 $ 2,781,960
- ------------------------------------------------
$ - $ 1,037,510 $ 1,037,510
1,741,618 - 1,741,618
- ------------------------------------------------
$ 1,741,618 $ 1,037,510 $ 2,779,128
- ------------------------------------------------
$ - $ 515,115 $ 515,115
- ------------------------------------------------
$ 3,002,340 $ - $ 3,002,340
- 1,103,590 1,103,590
See accompanying notes to pro forma financial statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Pioneer Pioneer S & P/
Tax-Free Intermediate Pro Forma Moody's
Income Fund Tax-Free Fund Combined Ratings
<S> <C> <C> <C> <C>
Florida (continued)
$ 5,000,000 $ - $ 5,000,000 AA/Aa3 Hillsborough County Industrial Development Authority, 8.0%, 2022
4,000,000 - 4,000,000 AA+/NR Jacksonville Health Facilities Authority Hospital
Revenue, 6.75%, 2013
785,000 - 785,000 AAA/Aaa Manatee County Housing Revenue, 7.2%, 2028
- 1,000,000 1,000,000 AA/Aa1 Orlando Utilities, Community Water & Electric Revenue, 5.6%, 2003
2,015,000 - 2,015,000 AAA/NR Pace Property Financial Authority, Hospital Revenue, 5.375%, 2020
- 1,000,000 1,000,000 AAA/Aaa Palm Beach County Criminal Justice Revenue, 5.75%, 2013
Georgia
2,150,000 - 2,150,000 AAA/Aaa Appling County Development Authority Revenue, 7.15%, 2021
- 1,000,000 1,000,000 A/A3 Georgia Municipal Electric Authority Power Revenue, 6.2%, 2010
- 400,000 400,000 A/A3 Georgia Municipal Electric Authority Power, Revenue, 7.65%, 1998
- 1,500,000 1,500,000 AA+/Aaa Georgia State General Obligation, 5.5%, 2006
- 1,000,000 1,000,000 AA/Aa1 Private Colleges & Universities Revenue, 5.5%, 2005
1,000,000 - 1,000,000 AAA/Aaa Richmond Water & Sewer Authority Revenue, 5.25%, 2022
Illinois
5,000,000 - 5,000,000 AAA/Aaa Chicago Board of Education, 5.75%, 2027
3,700,000 - 3,700,000 AA-/Aa3 Chicago Gas Supply Revenue, 8.1%, 2020
2,250,000 - 2,250,000 NR/A2 Illinois Development Finance Authority, 6.75%, 2016
- 1,000,000 1,000,000 AA/Aa1 Illinois Education Facilities Authority Northwestern
University Revenue, 5.5%, 2013
1,145,000 - 1,145,000 A+/A1 Illinois Housing Development Authority Revenue Multi-
Family Housing, 7.0%, Prerefunded, 2023*
4,015,000 - 4,015,000 A+/A Illinois Metropolitan Pier & Exposition Authority State
Tax Revenue, 6.5%, Prerefunded, 2003*
9,000,000 - 9,000,000 A+/A Illinois Metropolitan Pier & Exposition Authority State
Tax Revenue, 8.5%, 2006
5,000,000 - 5,000,000 AAA/Aaa Illinois State General Obligation, 5.75%, 2021
- 1,000,000 1,000,000 AAA/Aa3 Illinois State Sales Tax Revenue, 5.25%, 2000
- 1,000,000 1,000,000 A+/A1 Illinois State Toll Highway Authority Revenue, 6.3%, 2012
- 1,000,000 1,000,000 A+/A2 Metropolitan Pier and Exposition Authority, Dedicated State
Tax Revenue, 5.75%, 2002
7,185,000 - 7,185,000 AA/Aa2 Will County, Illinois Environmental Revenue Bond, 6.4%, 2026
Indiana
1,000,000 - 1,000,000 AAA/Aaa Goshen School Building Corp., 5.6%, 2016
750,000 - 750,000 A/NR Indiana Bond Bank State Revolving Fund, 6.75%, 2017
3,500,000 - 3,500,000 AA3/Aa Indiana Health Facilities Authority, 5.5%, 2016
- 1,500,000 1,500,000 AAA/Aaa Indiana Municipal Power Agency, Power Supply System
Revenue, 6.0%, 2012
1,000,000 - 1,000,000 NR/Aaa Indiana State Housing Finance Authority, Single Family
Mortgage Revenue, 5.95%, 2013
1,890,000 - 1,890,000 A+/A1 Indiana State Office Building Commission Correctional
Facilities Revenue, 6.4%, 2011
- 500,000 500,000 A+/A1 Indiana Transportation Finance Authority Highway
Revenue, 8.0%, Prerefunded, 2008*
- 1,000,000 1,000,000 AAA/Aaa Indiana University Revenue, 5.8%, 2010
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Pioneer Pioneer
Tax-Free Intermediate Pro Forma
Income Fund Tax-Free Fund Combined
<S> <C> <C>
$ 5,813,900 $ - $ 5,813,900
4,388,120 - 4,388,120
888,008 - 888,008
- 1,071,320 1,071,320
2,043,633 - 2,043,633
- 1,104,920 1,104,920
- ------------------------------------------------
$ 16,136,001 $ 3,279,830 $ 19,415,831
- ------------------------------------------------
$ 2,424,490 $ - $ 2,424,490
- 408,000 408,000
- 1,114,010 1,114,010
- 1,628,445 1,628,445
- 1,079,170 1,079,170
1,000,730 - 1,000,730
- ------------------------------------------------
$ 3,425,220 $ 4,229,625 $ 7,654,845
- ------------------------------------------------
$ 5,291,900 $ - $ 5,291,900
4,068,705 - 4,068,705
2,450,250 - 2,450,250
- 1,062,320 1,062,320
1,379,118 - 1,379,118
4,514,506 - 4,514,506
11,464,650 - 11,464,650
5,270,450 - 5,270,450
- 1,056,220 1,056,220
- 1,143,920 1,143,920
- 1,059,870 1,059,870
7,795,222 - 7,795,222
- ------------------------------------------------
$ 42,234,801 $ 4,322,330 $ 46,557,131
- ------------------------------------------------
$ 1,044,580 $ - $ 1,044,580
851,505 - 851,505
3,575,740 - 3,575,740
- 1,683,600 1,683,600
1,044,430 - 1,044,430
2,049,308 - 2,049,308
- 518,570 518,570
- 1,113,470 1,113,470
See accompanying notes to pro forma financial statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Pioneer Pioneer S & P/
Tax-Free Intermediate Pro Forma Moody's
Income Fund Tax-Free Fund Combined Ratings
<S> <C> <C> <C> <C>
Indiana (continued)
$ 1,400,000 $ - $ 1,400,000 A+/NR Indianapolis Local Public Improvement Board Revenue, 6.75%, 2014
1,000,000 - 1,000,000 A+/A Lawrence Township Metropolitan School District Revenue, 6.75%, 2013
3,200,000 - 3,200,000 AA-/AA2 Petersburg Indiana Pollution and Control Revenue, 5.4%, 2017
- 1,000,000 1,000,000 AA-/Aa2 Purdue University Revenue, 5.75%, 2004
2,740,000 - 2,740,000 AAA/NR Sarah Scott Middle School Revenue, 5.75%, 2019
Iowa
1,000,000 - 1,000,000 NR/A Iowa Finance Authority Revenue Bond, Correctional Facility
Program, 5.5$%, 2010
Kansas
- 1,500,000 1,500,000 AA/Aa Kansas State Department of Transportation Highway
Revenue, 6.125%, 2009
Kentucky
1,095,000 - 1,095,000 AAA/Aaa Kenton County Water District #1, 5.8%, 2015
2,010,000 - 2,010,000 AAA/Aaa Kenton County Water District #1, 5.875, 2019
- 1,000,000 1,000,000 AAA/Aaa Kentucky State Turnpike Authority, Economic Development
Revenue, 5.25%, 2005
- 750,000 750,000 AAA/A1 Lexington-Fayette Urban County Government Revenue, 7.0%, 2006
495,000 - 495,000 AA-/A University of Kentucky Community College Building
Revenue, Series I, 6.4%, 2011
Louisiana
3,000,000 - 3,000,000 AAA/Aaa New Orleans Home Mortgage Authority, 6.25%, Prerefunded, 2011 *
Maine
- 1,500,000 1,500,000 AA+/Aa3 Maine State General Obligation, 5.375%, 2006
- 1,000,000 1,000,000 AAA/Aaa Maine State Turnpike Authority Revenue, 6.0%, 2005
Maryland
- 1,500,000 1,500,000 NR/Aa2 Maryland Community Development Administration, Single Family
Mortgage Revenue, 5.95%, 2006
- 1,500,000 1,500,000 AA+/Aa3 University of Maryland System Auxiliary Facility and
Tuition Revenue, 5.4%, 2006
Massachusetts
- 1,000,000 1,000,000 AAA/Aaa Commonwealth of Massachusetts Consolidated Loan
General Obligation, 5.5%, 2003
- 1,000,000 1,000,000 A+/A1 Massachusetts Bay Transportation Authority Revenue, 5.5%, 2009
1,415,000 - 1,415,000 A-/A1 Massachusetts Bay Transportation Authority Revenue,
Series B, 5.875%, 2014
4,000,000 - 4,000,000 A+/A1 Massachusetts Bay Transportation Authority Revenue,
Series B, 5.875%, 2019
5,000,000 - 5,000,000 A+/A1 Massachusetts Health & Educational Facilities Authority
Revenue, Boston College, Series K, 5.25%, 2023
1,205,000 - 1,205,000 AAA/Aaa Massachusetts Housing Finance Agency, 5.95%, 2018
3,000,000 - 3,000,000 AAA/Aaa Massachusetts State General Obligation, 6.5%, 2007
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Pioneer Pioneer
Tax-Free Intermediate Pro Forma
Income Fund Tax-Free Fund Combined
<S> <C> <C>
$ 1,678,880 $ - $ 1,678,880
1,184,900 - 1,184,900
3,305,824 - 3,305,824
- 1,082,650 1,082,650
2,898,345 - 2,898,345
- ------------------------------------------------
$ 17,633,512 $ 4,398,290 $ 22,031,802
- ------------------------------------------------
$ 1,060,460 $ - $ 1,060,460
- ------------------------------------------------
$ - $ 1,716,315 $ 1,716,315
- ------------------------------------------------
$ 1,176,610 $ - $ 1,176,610
2,157,976 - 2,157,976
- 1,061,670 1,061,670
- 812,813 812,813
536,818 - 536,818
- ------------------------------------------------
$ 3,871,404 $ 1,874,483 $ 5,745,887
- ------------------------------------------------
$ 3,371,340 $ - $ 3,371,340
- ------------------------------------------------
$ - $ 1,610,430 $ 1,610,430
- 1,107,330 1,107,330
- ------------------------------------------------
$ - $ 2,717,760 $ 2,717,760
- ------------------------------------------------
$ - $ 1,563,720 $ 1,563,720
- 1,608,960 1,608,960
- ------------------------------------------------
$ - $ 3,172,680 $ 3,172,680
- ------------------------------------------------
$ - $ 1,063,210 $ 1,063,210
- 1,079,660 1,079,660
1,513,710 - 1,513,710
4,218,280 - 4,218,280
4,923,900 - 4,923,900
1,262,491 - 1,262,491
3,409,800 - 3,409,800
See accompanying notes to pro forma financial statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Pioneer Pioneer S & P/
Tax-Free Intermediate Pro Forma Moody's
Income Fund Tax-Free Fund Combined Ratings
<S> <C> <C> <C> <C>
Massachusetts (continued)
$ 250,000 $ - $ 250,000 AAA/NR Massachusetts State Health & Educational Facilities
Revenue, 5.0%, 2017
250,000 - 250,000 AAA/NR Massachusetts State Health & Educational Facilities
Revenue, 5.0%, 2018
4,390,000 - 4,390,000 A+/A1 Massachusetts State Turnpike Authority Revenue, 5.0%, 2020
- 1,000,000 1,000,000 AAA/Aaa Massachusetts Water Pollution Abatement Trust Sewer
Revenue, 6.0%, 2007
2,000,000 - 2,000,000 A/A Massachusetts Water Resources Revenue, 6.25%, 2010
2,000,000 - 2,000,000 AAA/Aaa South Essex Massachusetts Sewer District, Series B,5.25%, 2018
1,000,000 - 1,000,000 AAA/Aaa South Essex Massachusetts Sewer District, Series B, 6.75%, 2013
1,325,000 - 1,325,000 AAA/Aaa Worcester General Obligation, 6.15%, 2009
1,440,000 - 1,440,000 AAA/Aaa Worcester General Obligation, 6.20%, 2010
1,460,000 - 1,460,000 AAA/Aaa Worcester General Obligation, 6.25%, 2011
1,450,000 - 1,450,000 AAA/Aaa Worcester General Obligation, 6.3%, 2012
Michigan
- 1,000,000 1,000,000 AAA/Aaa Detroit Michigan Water Supply Revenue, 5.75%, 2011
1,455,000 - 1,455,000 AAA/Aaa Grand Rapids Community, 5.375%, 2016
2,175,000 - 2,175,000 AAA/Aaa Holly Michigan Area School District, 5.625%, 2015
- 1,000,000 1,000,000 AA-/A1 Michigan State Truck Line Sales Tax Revenue, 5.625%, 2003
750,000 - 750,000 AAA/Aaa Rockford Public Schools General Obligation, 5.25%, 2022
5,715,000 - 5,715,000 AA/Aa Walled Lake School District General Obligation, Series I, 5.5%, 2022
1,500,000 - 1,500,000 AAA/Aaa Wayne County Building Authority Capital Improvement, 5.25%, 2016
Minnesota
- 1,000,000 1,000,000 AAA/Aaa Minnesota Public Facilities Authority, Water Pollution
Control Revenue,$5.0%, 2006
- 750,000 750,000 AAA/Aaa Minnesota Public Facilities Authority Water Pollution
Control Revenue, 7.0%, 2009
750,000 - 750,000 NR/A1 Minnesota State Higher Education Facilities Authority
Revenue, 5.625%, 2016
1,895,000 - 1,895,000 AA+/Aa Minnesota State Housing Finance Agency, Series H, 6.55%, 2011
990,000 - 990,000 AA/A1 Minnesota State Housing Finance Agency, 6.9%, 2012
1,000,000 - 1,000,000 AA/Aa3 Minnesota University, Series A, 5.0%, 2010
2,750,000 - 2,750,000 AAA/Aaa Spring Lake Park Independent School District #16 General
Obligation, 5.25%, 2017
- 1,000,000 1,000,000 AA/Aa3 University of Minnesota Revenue, 5.75%, 2018
Missouri
1,000,000 - 1,000,000 AAA/Aaa Carthage Waterworks & Wastewater Treatment System
Revenue, 6.5%, 2016
1,010,000 - 1,010,000 NR/Aa Lexington School District Revenue, 5.55%, 2017
2,100,000 - 2,100,000 AAA/Aaa Missouri Environmental Improvement and Energy Resources
Authority, 6.05%, 2016
2,500,000 - 2,500,000 AAA/Aaa Poplar Bluff School District, 5.8%, 2011
5,000,000 - 5,000,000 AAA/Aaa Sikeston, Missouri Electric Revenue, 5.0%, 2022
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Pioneer Pioneer
Tax-Free Intermediate Pro Forma
Income Fund Tax-Free Fund Combined
<S> <C> <C>
$ 248,182 $ - $ 248,182
247,432 - 247,432
4,442,768 - 4,442,768
- 1,119,490 1,119,490
2,169,880 - 2,169,880
2,012,740 - 2,012,740
1,151,660 - 1,151,660
1,469,186 - 1,469,186
1,593,058 - 1,593,058
1,619,666 - 1,619,666
1,613,024 - 1,613,024
- ------------------------------------------------
$ 31,895,777 $ 3,262,360 $ 35,158,137
- ------------------------------------------------
$ - $ 1,097,770 $ 1,097,770
1,489,425 - 1,489,425
2,276,268 - 2,276,268
- 1,068,890 1,068,890
750,495 - 750,495
5,869,819 - 5,869,819
1,519,395 - 1,519,395
- ------------------------------------------------
$ 11,905,402 $ 2,166,660 $ 14,072,062
- ------------------------------------------------
$ - $ 1,046,110 $ 1,046,110
- 791,677 791,677
774,772 - 774,772
2,026,911 - 2,026,911
1,055,875 - 1,055,875
1,104,390 - 1,104,390
2,769,113 - 2,769,113
- 1,091,440 1,091,440
- ------------------------------------------------
$ 7,731,061 $ 2,929,227 $ 10,660,288
- ------------------------------------------------
$ 1,111,960 $ - $ 1,111,960
1,050,370 - 1,050,370
2,275,959 - 2,275,959
2,662,625 - 2,662,625
4,903,050 - 4,903,050
- ------------------------------------------------
$ 12,003,964 $ - $ 12,003,964
- ------------------------------------------------
See accompanying notes to pro forma financial statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Pioneer Pioneer S & P/
Tax-Free Intermediate Pro Forma Moody's
Income Fund Tax-Free Fund Combined Ratings
<S> <C> <C> <C> <C>
Montana
$ 3,000,000 $ - $ 3,000,000 AAA/Aaa Forsyth Pollution Control Revenue, Puget Sound Power &
Light Project, 6.8%, 2022
3,250,000 - 3,250,000 AAA/Aaa Forsyth Pollution Control Revenue, Puget Sound Power &
Light Project, 7.05%, 2021
1,495,000 - 1,495,000 AAA/Aaa Forsyth Pollution Control Revenue, Washington Water
Power Project, 7.125%, 2013
3,250,000 - 3,250,000 AAA/Aaa Montana State Board of Investments Workers Compensation
Program, 6.875%, 2020
2,200,000 - 2,200,000 AAA/Aaa University of Montana Revenue, Series C, 5.375%, 2021
Nebraska
2,350,000 - 2,350,000 AAA/NR Douglas County Hospital Authority Revenue, 5.10%, 2011
3,675,000 - 3,675,000 AAA/NR Douglas County Hospital Authority Revenue, 5.125%, 2017
6,000,000 - 6,000,000 AAA/Aaa Douglas County Hospital Authority Revenue, Immanuel
Medical Center, 7.0%, 2021
5,000,000 - 5,000,000 NR/A Grand Island Sanitation Sewer Revenue, 6.0%, 2014
7,500,000 - 7,500,000 A/A Hastings Electric System Revenue, 6.3%, 2019
1,325,000 - 1,325,000 AAA/Aaa Municipal Energy Agency of Nebraska Revenue, 6.0%, 2008
1,500,000 - 1,500,000 AAA/Aaa Municipal Energy Agency of Nebraska Revenue, 6.0%, 2017
750,000 - 750,000 A+/A1 Nebraska Public Power District Revenue, 5.75%, 2020
1,690,000 - 1,690,000 A+/A1 Nebraska Public Power District Revenue, 6.125%, 2015
1,850,000 - 1,850,000 A+/A1 Nebraska Public Power District Revenue, 6.25%, 2022
- 1,000,000 1,000,000 AAA/NR Omaha Public Power District Electric System Revenue, 6.5%,
Prerefunded, 2002*
1,460,000 - 1,460,000 AA/Aa1 Omaha Tax Allocation, 5.25%, 2017
Nevada
- 65,000 65,000 AA/Aa2 Nevada Housing Division Single Family Program Revenue, 8.0%, 2009
New Hampshire
- 500,000 500,000 AAA/Aaa New Hampshire Turnpike System Revenue, 7.375%, Prerefunded, 2000*
New Jersey
750,000 750,000 AA-/Aaa New Jersey Highway Authority Garden State Parkway
Senior Revenue, 7.25%, Prerefunded, 1999*
- 1,000,000 1,000,000 AA+/Aa1 New Jersey Sales Tax Revenue, 5.8%, 2007
1,000,000 - 1,000,000 AA/A1 Rutgers State University Revenue, 6.4%, 2009
New Mexico
- 1,000,000 1,000,000 AA/Aa Bernalillo County Gross Receipts Tax Revenue, 5.0%, 2013
2,600,000 - 2,600,000 AA/Aa Bernalillo County Gross Receipts Tax Revenue, 5.75%, 2021
1,815,000 - 1,815,000 AA/Aa New Mexico Mortgage Finance Authority, 6.85%, 2012 +
2,000,000 - 2,000,000 AAA/Aaa Santa Fe Gross Receipts, 5.75%, 2021
1,200,000 - 1,200,000 AAA/Aaa University of New Mexico Revenue, 6.55%, 2025
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Pioneer Pioneer
Tax-Free Intermediate Pro Forma
Income Fund Tax-Free Fund Combined
<S> <C> <C>
$ 3,285,060 $ - $ 3,285,060
3,565,347 - 3,565,347
1,597,961 - 1,597,961
3,720,210 - 3,720,210
2,225,388 - 2,225,388
- ------------------------------------------------
$ 14,393,966 $ - $ 14,393,966
- ------------------------------------------------
$ 2,391,853 $ - $ 2,391,853
3,632,113 - 3,632,113
6,681,000 - 6,681,000
5,307,050 - 5,307,050
8,016,300 - 8,016,300
1,423,872 - 1,423,872
1,605,435 - 1,605,435
771,735 - 771,735
1,808,925 - 1,808,925
1,971,601 - 1,971,601
- 1,100,590 1,100,590
1,470,176 - 1,470,176
- ------------------------------------------------
$ 35,080,060 $ 1,100,590 $ 36,180,650
- ------------------------------------------------
$ - $ 66,528 $ 66,528
- ------------------------------------------------
$ - $ 545,070 $ 545,070
- ------------------------------------------------
$ - $ 790,358 $ 790,358
- 1,104,200 1,104,200
1,089,640 - 1,089,640
- ------------------------------------------------
$ 1,089,640 $ 1,894,558 $ 2,984,198
- ------------------------------------------------
$ - $ 1,019,210 $ 1,019,210
2,699,996 - 2,699,996
1,929,490 - 1,929,490
2,103,800 - 2,103,800
1,348,500 - 1,348,500
- ------------------------------------------------
$ 8,081,786 $ 1,019,210 $ 9,100,996
- ------------------------------------------------
See accompanying notes to pro forma financial statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Pioneer Pioneer S & P/
Tax-Free Intermediate Pro Forma Moody's
Income Fund Tax-Free Fund Combined Ratings
<S> <C> <C> <C> <C>
New York
$ 1,500,000 $ - $ 1,500,000 AAA/Aaa New York State Dormatory Authority, 5.25%, 2022
- 1,000,000 1,000,000 A/A3 New York State Local Government Assistance Corp. Revenue, 5.5%, 2017
North Carolina
1,250,000 - 1,250,000 AA/Aa1 Charlotte Law Enforcement Project, 6.1%, 2015
970,000 - 970,000 AA/Aa Charlotte-Mecklenburg Hospital Authority Revenue, 6.25%, 2020
1,250,000 - 1,250,000 AAA/Aaa Cumberland County Civic Center Project, 6.4%, 2024
1,000,000 - 1,000,000 AAA/Aaa Franklin County Certificate Participation, 6.625%, 2014
6,250,000 - 6,250,000 A/A2 Martin County Pollution Control Authority Revenue, 5.65%, 2023
1,320,000 - 1,320,000 A/NR North Carolina Hospital, 6.25%, Prerefunded, 2002*
North Dakota
1,705,000 - 1,705,000 NR/Aa3 North Dakota State Housing Finance Agency Revenue, 6.0%, 2018
1,000,000 - 1,000,000 AAA/Aaa State Water Community Revenue, 5.75%, 2027
Ohio
1,050,000 - 1,050,000 AAA/Aaa Bedford, Ohio County School District, 6.25%, 2013
2,500,000 - 2,500,000 AAA/Aaa Cleveland Stadium Revenue, 5.25%, 2027
500,000 - 500,000 A+/A1 Ohio State Building Authority Revenue, 6.0%, 2008
- 1,000,000 1,000,000 AAA/Aaa Ohio State Water Development Authority, 6.0%, 2006
Oklahoma
- 1,500,000 1,500,000 A-/A Grand River Dam Authority Electric Revenue, 5.75%, 2006
2,520,000 - 2,520,000 AAA/Aaa Grand River Dam Authority Electric Revenue, 6.25%, 2011
4,700,000 - 4,700,000 AAA/Aaa McGee Creek Authority Water Revenue, 6.0%, 2023
5,300,000 - 5,300,000 A+/A1 Oklahoma State Turnpike Authority Revenue, 6.125%, 2020
Oregon
550,000 - 550,000 AAA/Aaa Portland International Airport Revenue, 6.75%, 2015
1,000,000 - 1,000,000 A+/A1 Portland Sewer System, 6.2%, 2012
2,860,000 - 2,860,000 A/NR Washington County Unified Sewer Agency Revenue, 6.2%,
Prerefunded, 2004*
390,000 - 390,000 A/A1 Washington County Unified Sewer Agency Revenue, 6.2%, 2010
Pennsylvania
3,000,000 - 3,000,000 AAA/Aaa Allegheny County Sanitary Authority Revenue, 5.375%, 2024
1,300,000 - 1,300,000 AAA/Aaa Lycoming County General Obligation, 5.8%, 2022
1,000,000 - 1,000,000 AA/Aa New Kingston School District, 5.5%, 2017
- 1,500,000 1,500,000 AA-/A1 Pennsylvania State General Obligation, 6.25%, 2010
- 1,000,000 1,000,000 A/A1 Pennsylvania State Turnpike Commission Highway Revenue, 5.45%, 2002
2,500,000 - 2,500,000 A/A1 Pennsylvania State Turnpike Commission Highway Revenue, 6.5%, 2013
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Pioneer Pioneer
Tax-Free Intermediate Pro Forma
Income Fund Tax-Free Fund Combined
<S> <C> <C>
$ 1,501,290 $ - $ 1,501,290
- 1,066,390 1,066,390
------------------------------------------------
$ 1,501,290 $ 1,066,390 $ 2,567,680
------------------------------------------------
$ 1,338,600 $ - $ 1,338,600
1,046,630 - 1,046,630
1,390,750 - 1,390,750
1,116,230 - 1,116,230
6,334,813 - 6,334,813
1,445,136 - 1,445,136
------------------------------------------------
$ 12,672,159 $ - $ 12,672,159
------------------------------------------------
$ 1,754,036 $ - $ 1,754,036
1,052,310 - 1,052,310
------------------------------------------------
$ 2,806,346 $ - $ 2,806,346
------------------------------------------------
$ 1,152,543 $ - $ 1,152,543
2,502,025 - 2,502,025
565,380 - 565,380
- 1,120,200 1,120,200
------------------------------------------------
$ 4,219,948 $ 1,120,200 $ 5,340,148
------------------------------------------------
$ - $ 1,638,015 $ 1,638,015
2,899,890 - 2,899,890
5,359,175 - 5,359,175
5,691,405 - 5,691,405
------------------------------------------------
$ 13,950,470 $ 1,638,015 $ 15,588,485
------------------------------------------------
$ 597,163 $ - $ 597,163
1,111,110 - 1,111,110
3,175,572 - 3,175,572
428,431 - 428,431
------------------------------------------------
$ 5,312,276 $ - $ 5,312,276
------------------------------------------------
$ 3,043,380 $ - $ 3,043,380
1,377,051 - 1,377,051
1,031,700 - 1,031,700
- 1,730,205 1,730,205
- 1,054,520 1,054,520
2,724,325 - 2,724,325
See accompanying notes to pro forma financial statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Pioneer Pioneer S & P/
Tax-Free Intermediate Pro Forma Moody's
Income Fund Tax-Free Fund Combined Ratings
<S> <C> <C> <C> <C>
Pennsylvania (continued)
$ 1,000,000 $ - $ 1,000,000 AAA/Aaa Pennsylvania Transportation Authority, 5.375%, 2022
1,100,000 - 1,100,000 AA/Aa3 Philadelphia Authority For Industrial Development
Revenue, 5.0%, 2027
2,000,000 - 2,000,000 AAA/NR Wallingford-Swarthmore General Obligation, 5.25%, 2017
Puerto Rico
- 1,000,000 1,000,000 AAA/Aaa University of Puerto Rico Revenue, MBIA Insured, 6.25%, 2008
Rhode Island
945,000 - 945,000 AA+/Aa Rhode Island Housing & Mortgage Finance, 6.75%, 2017
South Carolina
1,790,000 - 1,790,000 AAA/Aaa Beaufort Water & Sewer Revenue, 6.5%, 2013
- 1,000,000 1,000,000 AA/Aa Columbia Waterworks & Sewer System Revenue, 5.5%, 2009
- 1,000,000 1,000,000 AA/Aa1 Greenville Waterworks Revenue, 6.0%, 2008
2,400,000 - 2,400,000 A/A1 Fairfield County Pollution Control, 6.5%, 2014
- 1,000,000 1,000,000 AAA/Aaa South Carolina General Obligation, 5.75%, 2003
1,250,000 - 1,250,000 AAA/Aaa South Carolina Grand Strand Water & Sewer Authority, 6.375%, 2012
10,000,000 - 10,000,000 AAA/Aaa South Carolina Public Service Authority Revenue, 6.625%,
Prerefunded, 2002 *
750,000 - 750,000 NR/Aa South Carolina State Housing Finance & Development
Authority Revenue, 6.2%, 2009
South Dakota
1,235,000 - 1,235,000 NR/A1 South Dakota Conservancy District Revenue, 5.625%, 2017
1,255,000 - 1,255,000 AAA/Aaa South Dakota State Lease Revenue, Series B, 8.0%, 2005
Tennessee
1,300,000 - 1,300,000 AAA/Aaa Madison Suburban Utility District, 5.0%, 2019
1,000,000 - 1,000,000 AAA/Aaa Metropolitan Government Nashville & Davidson County
Sports Authority, 5.75%, 2017
1,565,000 - 1,565,000 AAA/Aaa Metropolitan Government Nashville & Davidson County
Water & Sewer Authority, 6.0%, 2007
2,000,000 - 2,000,000 AA+/Aa2 Shelby County General Obligation, 6.0%, 2019
Texas
2,145,000 - 2,145,000 NR/Aaa Castleberry Independent School District General
Obligation, 5.7%, 2021
2,310,000 - 2,310,000 AAA/Aaa Clear Creek Independent School District General
Obligation, 7.0%, 2010
1,305,000 - 1,305,000 NR/Aaa Comal Independent School District General Obligation, 7.0%, 2007
1,500,000 - 1,500,000 NR/A Houston, Texas Housing Authority, 8.0%, 2014
2,050,000 - 2,050,000 AA/Aa Keller Independent School District General Obligation, 0%, 2010
2,000,000 - 2,000,000 AAA/NR Kingsbridge Utility Systems Revenue, 5.375%, 2015
2,350,000 - 2,350,000 AAA/Aaa Nueces River Authority Water Supply Revenue, 5.5%, 2027
- 1,000,000 1,000,000 AA/Aa2 Port Houston Authority Revenue, 5.0%, 2005
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Pioneer Pioneer
Tax-Free Intermediate Pro Forma
Income Fund Tax-Free Fund Combined
<S> <C> <C>
$ 1,013,760 $ - $ 1,013,760
1,071,840 - 1,071,840
2,019,040 - 2,019,040
- ------------------------------------------------
$ 12,281,096 $ 2,784,725 $ 15,065,821
- ------------------------------------------------
$ - $ 1,150,680 $ 1,150,680
- ------------------------------------------------
$ 1,009,477 $ - $ 1,009,477
- ------------------------------------------------
$ 1,954,250 $ - $ 1,954,250
- 1,083,750 1,083,750
- 1,126,520 1,126,520
2,631,600 - 2,631,600
- 1,079,490 1,079,490
1,455,938 - 1,455,938
11,164,000 - 11,164,000
787,860 - 787,860
- ------------------------------------------------
$ 17,993,648 $ 3,289,760 $ 21,283,408
- ------------------------------------------------
$ 1,265,727 $ - $ 1,265,727
1,538,592 - 1,538,592
- ------------------------------------------------
$ 2,804,319 $ - $ 2,804,319
- ------------------------------------------------
$ 1,278,316 $ - $ 1,278,316
1,061,560 - 1,061,560
1,749,435 - 1,749,435
2,154,340 - 2,154,340
- ------------------------------------------------
$ 6,243,651 $ - $ 6,243,651
- ------------------------------------------------
$ 2,227,690 $ - $ 2,227,690
1,283,944 - 1,283,944
1,529,760 - 1,529,760
1,652,790 - 1,652,790
1,109,973 - 1,109,973
2,030,640 - 2,030,640
2,424,965 - 2,424,965
- 1,041,980 1,041,980
See accompanying notes to pro forma financial statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Pioneer Pioneer S & P/
Tax-Free Intermediate Pro Forma Moody's
Income Fund Tax-Free Fund Combined Ratings
<S> <C> <C> <C> <C>
Texas (continued)
$ 1,595,000 $ - $ 1,595,000 AAA/Aaa Port Lavaca Utility Systems Revenue, 5.75%, 2022
- 750,000 750,000 AAA/Aaa San Antonio Prior Lien Water Revenue, 7.125%, Prerefunded, 1999*
3,500,000 - 3,500,000 AAA/Aaa San Antonio, Texas Water Revenue, 5.6%, 2021
- 1,000,000 1,000,000 AAA/Aaa Texas Municipal Power Revenue, 5.5%, 2010
3,000,000 - 3,000,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0%, 2007
5,500,000 - 5,500,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0%, 2008
2,750,000 - 2,750,000 AAA/Aaa Texas Public Finance Authority Building Revenue, 0%, 2010
- 1,500,000 1,500,000 AA/Aa2 Texas State General Obligation, 5.8%, 2004
1,400,000 - 1,400,000 AA/Aa Texas State General Obligation, 6.125%, 2008
8,750,000 - 8,750,000 AAA/Aa1 Texas State Turnpike Authority, 5.25%, 2023
- 250,000 250,000 AAA/Aaa University of Texas Permanent University Fund, Escrowed to
Maturity in Government Securities, 8.0%, 2004
Utah
2,500,000 - 2,500,000 AAA/Aaa St. George Water Revenue, 5.85%, 2020
505,000 - 505,000 NR/Aa Utah Housing Finance Agency Revenue, 5.95%, 2011+
- 25,000 25,000 AA/Aa Utah Housing Finance Agency, Single Family Mortgage
Purchase Revenue, 7.3%, 2003
1,270,000 - 1,270,000 AA/Aa Utah Intermountain Power Agency Revenue, 5.0%, 2016
3,010,000 - 3,010,000 A+/Aa Utah Intermountain Power Agency Revenue, 5.0%, 2018
3,480,000 - 3,480,000 AA/NR Weber County Municipal Building Authority Revenue, 5.75%, 2019
1,250,000 - 1,250,000 AAA/NR White County General Obligation, 5.85%, 2026
455,000 - 455,000 AAA/NR White County Water Revenue, 5.9%, 2022
Vermont
- 500,000 500,000 AAA/Aaa Vermont Municipal Bond Bank, 7.9%, Prerefunded, 1998*
Virginia
1,000,000 - 1,000,000 AA1/NR Arlington County Industrial Development Revenue, 5.45%, 2027
750,000 - 750,000 AAA/Aaa Chesapeake Industrial Development Authority, 5.25%, 2017
4,685,000 - 4,685,000 A+/A1 Chesapeake Water & Sewer System Revenue, 6.4%, 2017
1,750,000 - 1,750,000 A+/A1 Chesapeake Water & Sewer System Revenue, 6.5%, 2012
1,750,000 - 1,750,000 NR/A Harrisonburg Redevelopment & Housing Authority Revenue, 6.5%, 2014
2,500,000 - 2,500,000 AA2/Aa Norfolk Virginia Industrial Development Revenue, 5.625%, 2017
- 1,000,000 1,000,000 AA/Aa Virginia State Public School Authority, Special
Obligation, 5.4%, 2004
Washington
2,820,000 - 2,820,000 AAA/Aaa Clark County Public Utility District #1 Water Revenue, 5.5%, 2015
1,655,000 - 1,655,000 AA+/AA1 King County General Obligation, 6.625%, 2015
1,000,000 - 1,000,000 NR/Aaa King & Snohomish Counties, Washington School District, 5.75%, 2014
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Pioneer Pioneer
Tax-Free Intermediate Pro Forma
Income Fund Tax-Free Fund Combined
<S> <C> <C>
$ 1,673,330 $ - $ 1,673,330
- 792,307 792,307
3,639,370 - 3,639,370
- 1,086,610 1,086,610
1,974,240 - 1,974,240
3,436,125 - 3,436,125
1,528,505 - 1,528,505
- 1,637,385 1,637,385
1,493,072 - 1,493,072
8,756,738 - 8,756,738
- 302,050 302,050
- ------------------------------------------------
$ 34,761,142 $ 4,860,332 $ 39,621,474
- ------------------------------------------------
$ 2,647,550 $ - $ 2,647,550
527,639 - 527,639
- 25,395 25,395
1,225,423 - 1,225,423
2,894,296 - 2,894,296
3,575,422 - 3,575,422
1,324,875 - 1,324,875
484,579 - 484,579
- ------------------------------------------------
$ 12,679,784 $ 25,395 $ 12,705,179
- ------------------------------------------------
$ - $ 528,465 $ 528,465
- ------------------------------------------------
$ 1,028,420 $ - $ 1,028,420
755,093 - 755,093
5,023,398 - 5,023,398
1,910,055 - 1,910,055
1,836,800 - 1,836,800
2,598,675 - 2,598,675
- 1,064,650 1,064,650
- ------------------------------------------------
$ 13,152,441 $ 1,064,650 $ 14,217,091
- ------------------------------------------------
$ 2,923,268 $ - $ 2,923,268
1,906,014 - 1,906,014
1,065,370 - 1,065,370
See accompanying notes to pro forma financial statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Pioneer Pioneer S & P/
Tax-Free Intermediate Pro Forma Moody's
Income Fund Tax-Free Fund Combined Ratings
<S> <C> <C> <C> <C>
Washington (continued)
$ 3,500,000 $ - $ 3,500,000 A+/Aaa Snohomish County Public Utility District Revenue, 6.8%,
Prerefunded, 2020 *
2,250,000 - 2,250,000 AAA/Aaa Snohomish County School District General Obligation, 5.7%, 2011
- 1,000,000 1,000,000 AA/Aa1 Washington State General Obligation, 6.0%, 2002
4,000,000 - 4,000,000 AA/Aa Washington State Public Power Supply System Revenue, 6.5%, 2015
West Virginia
1,000,000 - 1,000,000 A+/Aa1 West Virginia State Housing Development, 7.05%, 2024
Wisconsin
1,430,000 - 1,430,000 AAA/Aaa Adams-Friendship School District, 6.5%, 2016
3,600,000 - 3,600,000 AA+/Aa2 Milwaukee Local District Heating Facility Revenue, 6.85%, 2021
- 1,000,000 1,000,000 AA/Aa2 Wisconsin State General Obligation, 5.3%, 2012
Wyoming
9,750,000 - 9,750,000 AA/Aa Wyoming Community Development Authority Revenue,
Series B, 7.05%, 2033
TOTAL INVESTMENT IN TAX-EXEMPT OBLIGATIONS
TEMPORARY CASH INVESTMENTS
- 100,000 100,000 California Pollution Control Revenue, 4.9%, 2000**
- 100,000 100,000 California Pollution Control Revenue, 4.9%, 2011**
- 500,000 500,000 Jackson County, Mississippi Pollution Control Revenue, 3.55%, 2023**
425,279 - 425,279 Lehman Brothers Munifund
- 200,000 200,000 Uinta County Wyoming Pollution Control Revenue, 3.8%, 2010**
- 200,000 200,000 Uinta County, Wyoming Pollution Control Revenue, 3.55%, 2020**
- 300,000 300,000 Unita County, Wyoming Polution Control Revenue, 5.0%, 2022**
TOTAL TEMPORARY CASH INVESTMENTS
TOTAL INVESTMENT IN SECURITIES
COST OF SECURITIES
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Pioneer Pioneer
Tax-Free Intermediate Pro Forma
Income Fund Tax-Free Fund Combined
<S> <C> <C>
$ 4,347,840 $ - $ 4,347,840
2,475,405 - 2,475,405
- 1,074,130 1,074,130
4,429,600 - 4,429,600
- ------------------------------------------------
$ 17,147,497 $ 1,074,130 $ 18,221,627
- ------------------------------------------------
$ 1,064,780 $ - $ 1,064,780
- ------------------------------------------------
$ 1,687,128 $ - $ 1,687,128
3,929,940 - 3,929,940
- 1,054,730 1,054,730
- ------------------------------------------------
$ 5,617,068 $ 1,054,730 $ 6,671,798
- ------------------------------------------------
$ 10,365,810 $ - $ 10,365,810
- ------------------------------------------------
$ 414,600,475 $ 67,206,093 $ 481,806,568
- ------------------------------------------------
$ - $ 100,000 $ 100,000
- 100,000 100,000
- 500,000 500,000
425,279 - 425,279
- 200,000 200,000
- 200,000 200,000
- 300,000 300,000
- ------------------------------------------------
$ 425,279 $ 1,400,000 $ 1,825,279
- ------------------------------------------------
$ 415,025,754 $ 68,606,093 $ 483,631,847
================================================
$ 381,644,739 $ 65,194,446 $ 446,839,185
================================================
NR Not rated.
* Prerefunded bonds have been collateralized by U.S. Treasury securities which
are held in escrow and used to pay principal and interest on the tax exempt
issue and to retire the bonds in full at the earliest refunding date.
** Security with daily "put" feature with resetting interest rates. Coupon rate
disclosed is as of December 31, 1997.
+ A portion of the bond was called on January 1, 1998.
See accompanying notes to pro forma financial statement.
</TABLE>
<PAGE>
PIONEER TAX-FREE INCOME FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PIONEER PIONEER
TAX-FREE INCOME INTERMEDIATE PRO FORMA PRO FORMA
FUND TAX-FREE FUND ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities, at value $415,025,754 $68,606,093 $483,631,847
Cash - 15,121 15,121
Receivables -
Fund shares sold 217,287 60,542 277,829
Interest 6,946,017 1,094,565 8,040,582
Other 46,011 7,688 53,699
------------ ----------- ------------
Total assets $422,235,069 $69,784,009 $492,019,078
------------ ----------- ------------
LIABILITIES:
Payables -
Investment securities purchased $ - $ 1,046,994 $ 1,046,994
Fund shares repurchased 87,038 - 87,038
Dividends 480,019 77,788 557,807
Due to affiliates 493,104 76,326 (69,399) (b) 500,031
Accrued expenses 87,696 47,905 (53,661) (a) 81,940
------------ ----------- ------------
Total liabilities $ 1,147,857 $ 1,249,013 $ 2,273,810
------------ ----------- ------------
NET ASSETS:
Paid-in capital $387,708,414 $65,038,537 $452,746,951
Accumulated undistributed net
investment income - 2,083 2,083
Accumulated net realized gain/(loss)
on investments (2,217) 82,729 80,512
Net unrealized gain on investments 33,381,015 3,411,647 36,792,662
------------ ----------- ------------
Total net assets $421,087,212 $68,534,996 $489,622,208
============ =========== ============
OUTSTANDING SHARES:
(Unlimited number of shares authorized)
Class A 34,002,418 6,239,872 (876,511) (c) 39,365,779
============ =========== ============
Class B 462,174 287,535 (38,511) (c) 711,198
============ =========== ============
Class C 135,697 28,580 (3,890) (c) 160,387
============ =========== ============
NET ASSET VALUE PER SHARE:
Class A $ 12.17 $ 10.45 $ 12.17
============ =========== ============
Class B $ 12.09 $ 10.47 $ 12.09
============ =========== ============
Class C $ 12.11 $ 10.48 $ 12.11
============ =========== ============
MAXIMUM OFFERING PRICE:
Class A $ 12.74 $ 10.83 $ 12.74
=========== =========== ============
</TABLE>
(a) Reflects reduction in expenses due to elimination of duplicate services.
(b) Management fees conformed to Pioneer Tax-Free Income Fund's management
contract.
(c) Reflects net shares retired.
See accompanying notes to pro forma financial statement.
<PAGE>
PIONEER TAX-FREE INCOME FUND
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PIONEER PIONEER
TAX-FREE INCOME INTERMEDIATE PRO FORMA PRO FORMA
FUND TAX-FREE FUND ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $24,819,037 $3,690,600 $28,509,637
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EXPENSES:
Management fees $ 2,063,785 $ 351,207 (35,284)(b) $ 2,379,708
Transfer agent fees
Class A 475,795 71,832 547,627
Class B 5,647 3,720 9,367
Class C 1,256 367 1,623
Distribution fees
Class A 1,052,278 159,818 1,212,096
Class B 50,451 28,341 78,792
Class C 9,515 2,297 11,812
Accounting 95,345 72,885 168,230
Custodian fees 60,112 19,244 79,356
Registration fees 53,050 37,173 90,223
Professional fees 70,422 40,350 (40,350)(a) 70,422
Printing 19,003 10,676 29,679
Fees and expenses of nonaffiliated trustees 20,672 13,311 (13,311)(a) 20,672
Miscellaneous 55,561 34,459 90,020
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Total expenses $ 4,032,892 $ 845,680 $ 4,789,627
Less management fees waived by Pioneer
Investment Management, Inc. - (104,683) 104,683 (b) -
Less fees paid indirectly (82,267) (14,325) (96,592)
----------- ---------- -----------
Net expenses $ 3,950,625 $ 726,672 $ 4,693,035
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Net investment income $20,868,412 $2,963,928 $23,816,602
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $ 5,728,646 $1,112,008 $ 6,840,654
Change in net unrealized gain on investments 9,973,302 579,896 10,553,198
----------- ---------- -----------
Net gain on investments 15,701,948 1,691,904 17,393,852
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Net increase in net assets resulting
from operations $36,570,360 $4,655,832 $41,210,454
=========== ========== ===========
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(a) Reflects reduction in expenses due to elimination of duplicate services.
(b) Management fees conformed to Pioneer Tax-Free Income Fund's management
contract.
See accompanying notes to pro forma financial statement.
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS 12/31/97
(UNAUDITED)
1. GENERAL
The accompanying pro forma financial statements are presented to show the effect
of the proposed acquisition of Pioneer Intermediate Tax-Free Fund by Pioneer
Tax-Free Income Fund, as if such acquisition had taken place on January 1, 1997.
Under the terms of an Agreement and Plan of Reorganization, the combination
of Pioneer Tax-Free Income Fund and Pioneer Intermediate Tax-Free Fund will be
treated as a tax-free business combination and accordingly will be accounted for
by a method of accounting for tax-free mergers of investment companies
(sometimes referred to as the pooling without restatement method). The
acquisition would be accomplished by an acquisition of the net assets of Pioneer
Intermediate Tax-Free Fund in exchange for shares of Pioneer Tax-Free Income
Fund at net asset value. The statement of assets and liabilities and the related
statement of operations of Pioneer Tax-Free Income Fund and Pioneer Intermediate
Tax-Free Fund have been combined as of and for the year ended December 31, 1997.
The following notes refer to the accompanying pro forma financial statements as
if the above mentioned merger of Pioneer Tax-Free Income Fund and Pioneer
Intermediate Tax-Free Fund had taken place as of January 1, 1997.
2. 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 as high a
level of current income exempt from federal income taxes as possible consistent
with the 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:
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS 12/31/97 (CONTINUED)
(UNAUDITED)
A. SECURITY VALUATION
Security transactions are recorded on trade date. Securities are valued at
prices supplied by independent pricing services, which consider such
factors as Treasury spreads, yields, maturities and ratings, and valuations
may be supplemented by dealers and 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.
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.
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 $55,664 in
underwriting commissions on the sale of fund shares 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
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS 12/31/97 (CONTINUED)
(UNAUDITED)
same amount, except that Class A, Class B and Class C shares can bear
different transfer agent and distribution fees.
3. PRO FORMA ADJUSTMENTS
The accompanying pro forma financial statements reflect changes in fund shares
as if the merger had taken place on January 1, 1997. Adjustments have been made
to expenses for duplicated services that would not have been incurred if the
merger took place on January 1, 1997. In addition, adjustments have been made to
expenses to reflect management fees and management fees waived as if the merger
had taken place on January 1, 1997.
4. MANAGEMENT AGREEMENT
Pioneer Investment Management, Inc. (PIM), 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, $143,164 was payable to PIM related to
management fees and certain other services.
5. 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 $46,999 in transfer agent fees payable to PSC at December 31,
1997.
6. 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 $309,868 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.
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS 12/31/97 (CONTINUED)
(UNAUDITED)
Redemptions of Class C shares within one year of purchase are subject to a
CDSC of 1.00%. Proceeds from the CDSCs are paid to PFD. For the year ended
December 31, 1997, CDSCs in the amount of $28,969 were paid to PFD.
7. EXPENSE OFFSETS
The Fund has entered into certain expense offset arrangements resulting in a
reduction in the Fund's total expenses. For the year ended December 31, 1997,
the Fund's expenses were reduced by $96,592 under such arrangements.
