<PAGE>
[Pioneer Logo]
Pioneer
Tax-Free
Income Fund
ANNUAL REPORT 12/31/99
<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 24
Notes to Financial Statements 31
Report of Independent Public Accountants 36
Trustees, Officers and Service Providers 37
<PAGE>
Pioneer Tax-Free Income Fund
LETTER FROM THE CHAIRMAN 12/31/99
Dear Shareowner,
- --------------------------------------------------------------------------------
In an ever-changing investment environment, it can sometimes be difficult to be
disciplined enough to adhere to your investment goals. We are bombarded every
day with information and advice from a variety of sources. Magazine and
newspaper headlines create a frenzy by shouting - "Top 10 stocks for the year
2000" - sending many investors scrambling to adjust their holdings. But as
history often shows us, yesterday's winners are in no way tomorrow's sure thing.
We know it's challenging to digest all this information. But no one can know
with absolute certainty which stocks or bonds will have good performance from
day to day. It is important to keep sight of your own investment goals and to
stick to them. Jumping from one investment to another based upon the latest hot
trend may not help you to reach the financial goals for which you are aiming. We
think a well reasoned investment plan will.
As in any other year, the first few months of this year are a practical time to
take a step back to revisit your investment goals and make appropriate
adjustments in your personal portfolio. Scheduling a review session with your
financial professional is a good starting point. A professional acquainted with
your individual circumstances can help you to distill information, examine your
current strategy and make informed decisions that can effectively satisfy your
long-term investment needs.
Among the key topics to cover with your advisor is your retirement - including
the IRA options available to you. Now is the time to think about making a 1999
contribution to an IRA, if you haven't already. This year, you'll have until
April 17 to make your prior-year IRA contribution because April 15 falls on a
Saturday. And, to begin taking advantage of tax-deferred growth, you might want
to get a head start on your year 2000 contribution.
I encourage you to read on to learn more about Pioneer Tax-Free Income Fund. If
you have questions, please contact your investment professional. Visit our web
site at www.pioneerfunds.com for more information about your fund or Pioneer.
Respectfully,
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.
Chairman and President
1
<PAGE>
Pioneer Tax-Free Income Fund
PORTFOLIO SUMMARY 12/31/99
Portfolio Quality
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[Pie Chart]
AAA 64%
AA 23%
A 11%
Short-Term Cash Equivalents 2%
[End Pie Chart]
Portfolio Maturity
- --------------------------------------------------------------------------------
(Effective life as a percentage of total investment portfolio)
[Pie Chart]
0-2 Years 2.4%
2-5 Years 15.1%
5-7 Years 13.4%
7-10 Years 12.5%
10-20 Years 42.7%
20+ Years 13.9%
[End Pie Chart]
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of debt holdings)
<TABLE>
<S> <C> <C>
1. South Carolina Public Service Authority Revenue, 6.625%,
Prerefunded, 7/1/02 2.87%
2. Metropolitan Pier & Exposition Authority Dedicated State Tax
Revenue, 8.5%, 6/15/06 2.66
3. McGee Creek Authority Water Revenue, 6.0%, 1/1/23 2.09
4. Hastings Electric System Revenue, 6.3%, 1/1/19 2.06
5. Will County, Illinois Environmental Revenue, 6.4%, 4/1/26 1.94
6. District of Columbia Water & Sewer Authority, 5.5%, 10/1/23 1.64
7. South East Public Service Authority, 5.0%, 7/1/15 1.62
8. Oklahoma State Turnpike Authority Revenue, 6.125%, 1/1/20 1.43
9. Walled Lake School District General Obligation, Series I, 5.5%, 5/1/22 1.43
10. Grand Island Sanitation Sewer Revenue, 6.0%, 4/1/14 1.36
</TABLE>
Fund holdings will vary for other periods.
2
<PAGE>
Pioneer Tax-Free Income Fund
PERFORMANCE UPDATE 12/31/99 CLASS A SHARES
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 12/31/99 12/31/98
$10.98 $12.02
Distributions per Share Income Short-Term Long-Term
(12/31/98 - 12/31/99) Dividends Capital Gains Capital Gains
$0.514 $0.011 $0.013
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 December 31, 1999)
Net Asset Public Offering
Period Value Price*
10 Years 6.41% 5.92%
5 Years 6.02 5.05
1 Year -4.29 -8.63
- -----------------------------------------
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
Growth of $10,000
[Mountain Chart]
Pioneer Tax-Free Income Fund* Lehman Brothers Municipal Bond Index
12/89 9550 10000
10257 10729
12/91 11538 12032
12545 13094
12/93 14174 14702
13270 13941
12/95 15504 16376
16057 17101
12/97 17492 18676
18576 19887
12/99 17779 19449
[End Mountain Chart]
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 12/31/99 CLASS B SHARES
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 12/31/99 12/31/98
$10.90 $11.93
Distributions per Share Income Short-Term Long-Term
(12/31/98 - 12/31/99) Dividends Capital Gains Capital Gains
$0.421 $0.011 $0.013
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 December 31, 1999)
If If
Period Held Redeemed*
Life of Fund
(4/28/95) 3.97% 3.63%
1 Year -5.01 -8.66
- ----------------------------------------
* 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.
Growth of $10,000
[Mountain Chart]
Pioneer Tax-Free Income Fund* Lehman Brothers Municipal Bond Index
4/95 10000 10000
10155 10229
10360 10523
12/95 10794 10957
10580 10825
10616 10908
10858 11158
12/96 11080 11443
10993 11416
11367 11811
11682 12167
12/97 11984 12497
12077 12641
12243 12832
12652 13227
12/98 12634 13307
12639 13406
12330 13169
12152 13116
12/99 11817 13013
[End Mountain Chart]
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 12/31/99 CLASS C SHARES
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value
per Share 12/31/99 12/31/98
$10.91 $11.94
Distributions per Share Income Short-Term Long-Term
(12/31/98 - 12/31/99) Dividends Capital Gains Capital Gains
$0.431 $0.011 $0.013
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 December 31, 1999)
If If
Period Held Redeemed*
Life of Fund
(1/31/96) 2.66% 2.66%
1 Year -4.93 -4.93
- ---------------------------------------
* Assumes reinvestment of distributions. The 1% contingent deferred sales
charge (CDSC) applies to redemptions made within one year of purchase.
Growth of $10,000
[Mountain Chart]
Pioneer Tax-Free Income Fund* Lehman Brothers Municipal Bond Index
1/96 10000 10000
9766 9805
6/96 9791 9880
10006 10107
12/96 10219 10364
10148 10340
6/97 10493 10697
10792 11020
12/97 11070 11319
11137 11449
6/98 11300 11623
11667 11980
12/98 11660 12052
11665 12142
6/99 11379 11928
11226 11880
12/99 11086 11787
[End Mountain Chart]
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 12/31/99
December 31, 1999 ended a difficult year for most fixed-income securities as the
Federal Reserve Board raised short-term interest rates in an attempt to slow
economic activity. In the following discussion, Sherman B. Russ, co-head of
Pioneer's fixed-income management team, discusses some of the factors affecting
municipal bonds and how your Fund responded.
Q: Considering the rough market conditions in 1999, how did Pioneer Tax-Free
Income Fund weather the storm?
A: For the 12 months that ended December 31, 1999, the Fund's Class A shares
suffered a negative total return based on a net asset value of 4.29%,
slightly ahead of the average return of the 265 general municipal debt funds
followed by Lipper Inc., which registered a negative return of 4.63%. (Lipper
is an independent firm that tracks fund performance.) The Fund's Class B and
Class C shares had posted returns based on net asset value of -5.01% and
-4.93%, respectively.
From an income perspective, the Fund produced an attractive level of tax-free
returns while maintaining its high standards of credit quality. (Quality
ratings apply to underlying portfolio securities and not to fund shares.)
Class A shares provided a 30-day tax-free yield of 4.86%, as of December 31,
1999. That matches a taxable yield of 8.04% for investors in the 39.6%
maximum federal tax bracket.
Q: The path of interest rates changed course during the period, resulting in an
erosion of bond values. Why were conditions so challenging?
A: There were two primary reasons. First, interest rates rose sharply because of
a dramatic turnaround in investor expectations. As the year began, interest
rates were at extraordinarily low levels in the aftermath of 1998's
international financial crisis. The Federal Reserve Board had cut short-term
rates in the final months of 1998 to keep the U.S. economy strong enough to
help stimulate economies worldwide. Instead of faltering, however, the U.S.
economy remained vibrant; and many foreign economies - especially in Asia -
recovered faster and hardier than investors expected. By mid-year, worries
about excessive economic growth and a revival of inflation prompted investors
to push yields higher and bond prices lower. Meanwhile, the Federal Reserve
Board
6
<PAGE>
Pioneer Tax-Free Income Fund
raised short-term interest rates three times in 1999, bringing levels back to
where they were prior to the international crisis. The yield on long-term
bonds, as measured by the 30-year U.S. Treasury bond, rose to 6.48% from
5.09% during the course of 1999. The result: long-term Treasury bonds
generated a return of -8.96% in 1999, which stood in stark contrast to the
13.06% return produced only one year earlier as interest rates fell.
The second challenge, which was specific to municipal bonds, was an increase
in the supply of municipal debt securities at a time when there was a lack of
new money flowing into the demand side of the market. Liquidity, especially
in the long maturity sector of the market, was problematic as tax-free bond
funds sustained outflows for the first time in many years. In addition,
insurance companies - typically active buyers of municipal bonds - had little
cash to invest. The heavy storms of 1999 caused the firms to use their cash
to pay claims instead. The combination of events was particularly hard on the
municipal bond market.
Q: How did you limit the effects of these developments on the Fund?
A: We continued to emphasize income to help offset some of the price declines.
We sold bonds with lower coupons (stated rate of interest) and reinvested
proceeds in bonds with higher coupons to help boost the Fund's income stream.
We also worked to shorten duration as a means to help cushion the price
declines triggered by rising rates. Expressed in years, duration measures a
bond's price sensitivity to changes in interest rates. Shortening duration
reduces sensitivity to changes in interest rates - enhancing price stability.
Conversely, lengthening duration causes greater sensitivity - and greater
price movement - as interest rates change. However, the rough market
conditions and the way most municipal bonds are structured limited the degree
to which we could shorten duration.
Early in 1999, your Fund's assets merged with those of Pioneer Intermediate
Tax-Free Fund, helping to improve the portfolio's overall liquidity and
management efficiency. Specifically, we consolidated positions by selling
smaller investments and directing proceeds into larger existing positions. We
also emphasized investments in larger-sized bond offerings, which typically
provide greater market liquidity.
7
<PAGE>
Pioneer Tax-Free Income Fund
PORTFOLIO MANAGEMENT DISCUSSION 12/31/99 (continued)
As always, credit quality remained a chief focus of the Fund. At the end of
1999, the Fund's average quality was AAA. In addition, consistent with the
Fund's conservative mandate, the portfolio was broadly diversified across 179
issues representing 45 states.
Q: What is your outlook for municipal bonds and the Fund?
A: We're watching the direction of interest rates and continuing to monitor cash
flows in the municipal bond market. We think the Federal Reserve Board will
stay on top of potential inflation by raising short-term interest rates until
economic growth shows signs of braking. As concerns of inflation abate, we
would expect market conditions to become far more hospitable to bond
investors.
Meanwhile, we see some positive developments. Much of the bad news about
interest rate hikes seem to be built into investor expectations and,
consequently, into current price levels. The same factors also should provide
some stability to municipal bond prices. Further, the start of each year is
generally a good seasonal period for municipal bonds. Typically, many
interest payments and dividend distributions are paid to investors in
January. Historically, municipal bonds have been a destination for this cash,
pushing up demand for the securities. At the same time, supply tends to
dwindle in January because many municipalities aim to issue their bonds
before year end. The combination of stronger demand and lower supply works in
favor of municipal bond values.
At current prices, we think municipal bonds offer attractive longer-term
value. Typically, tax-free yields have offered 80%-85% of the taxable yields
of U.S. Treasury securities with comparable maturities. At the end of
December 1999, however, municipal bond yields rivaled their taxable
counterparts, generating between 90% and 95% of the yields of U.S. Treasurys.
In other words, municipal bond investors received nearly the same yield as
investors in U.S. Treasurys - only the municipal bond yields are generally
tax free.
Although market conditions were challenging in 1999, short-term disruptions
often lay the groundwork for longer-term opportunity. We think that is the
case with municipal bonds. At current prices and yields, we believe your Fund
can offer attractive long-term value for investors seeking tax-advantaged
income from a high quality portfolio of municipal bonds.
8
<PAGE>
Pioneer Tax-Free Income Fund
SCHEDULE OF INVESTMENTS 12/31/99
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
TAX-EXEMPT OBLIGATIONS - 97.7%
Alabama - 0.2%
$1,000,000 AAA/Aaa Jefferson County Alabama Sewer
Revenue, 5.0%, 2/1/33 $ 824,860
-----------
Arizona - 3.1%
1,000,000 AA/Aa2 Arizona State Transportation Board
Highway Revenue, 6.0%, 7/1/08 $ 1,063,580
1,500,000 AAA/Aaa Kyrene School District, 6.0%, 7/1/14 1,537,335
1,000,000 AAA/Aaa Maricopa County School District,
7.0%, 7/1/07 1,112,970
1,000,000 AAA/Aaa Maricopa County School District,
7.0%, 7/1/08 1,107,120
1,000,000 AA-/Aa3 Phoenix Civic Improvement
Corporation Water System
Revenue, 6.5%, 7/1/06 1,080,650
1,000,000 AA/Aa2 Salt River Project Agricultural
Improvement and Power District
Revenue, 5.75%, 1/1/07 1,043,240
2,400,000 AAA/Aaa Scottsdale Memorial Hospital, 5.5%,
9/1/12 2,428,200
2,200,000 AAA/Aaa Tempe School District, 7.0%, 7/1/08 2,485,406
-----------
$11,858,501
-----------
California - 0.5%
1,000,000 AA-/Aa3 California State General Obligation,
6.0%, 9/1/09 $ 1,067,380
1,000,000 AAA/Aaa California State General Obligation,
4.625%, 4/1/14 889,700
-----------
$ 1,957,080
-----------
Colorado - 2.6%
535,000 NR/Aa2 Colorado Housing Finance Authority,
Series C-2, 7.45%, 6/1/17 $ 567,335
2,755,000 NR/Aa2 Colorado Housing Finance Authority,
Series A-1, 7.4%, 11/1/27 2,966,694
1,140,000 NR/Aa2 Colorado Housing Finance Authority,
Series B-2, 7.45%, 11/1/27 1,240,263
</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
Pioneer Tax-Free Income Fund
SCHEDULE OF INVESTMENTS 12/31/99 (continued)
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Colorado - (continued)
$ 500,000 NR/Aa2 Colorado Housing Finance Authority,
Series A-3, 7.0%, 11/1/16 $ 530,560
500,000 NR/Aa2 Colorado Housing Finance Authority,
Series C-1, 7.55%, 11/1/27 539,035
3,575,000 AAA/Aaa Douglas County School District
Region 1, 7.0%, 12/15/13 4,100,168
----------
$9,944,055
----------
Connecticut - 1.3%
1,000,000 AA/Aa3 Connecticut State General Obligation,
6.0%, 10/1/04 $1,054,250
3,700,000 AA/Aa3 Connecticut State General Obligation,
6.0%, 3/15/12 3,926,847
----------
$4,981,097
----------
Delaware - 0.4%
1,395,000 NR/Aa3 State of Delaware Housing Authority
Revenue, 6.45%, 7/1/13 $1,415,660
----------
District of Columbia - 1.6%
6,550,000 AAA/Aaa District of Columbia Water & Sewer
Authority, 5.5%, 10/1/23 $6,098,443
----------
Florida - 2.3%
1,275,000 A/NR Clearwater Housing Authority, 5.4%,
5/1/13 $1,227,991
1,000,000 AA/Aa3 Gainesville Florida Utilities System
Revenue, 5.75%, 10/1/06 1,047,390
4,370,000 AAA/Aaa Hillsborough County Revenue, 5.5%,
7/1/14 4,344,130
770,000 NR/Aaa Manatee County Housing Revenue,
7.2%, 5/1/28 819,727
1,500,000 NR/Aaa Martin County Florida Utilities
Revenue, 5.0%, 10/1/18 1,340,145
----------
$8,779,383
----------
Georgia - 0.3%
1,000,000 AA/Aa1 Georgia Private Colleges &
Universities Revenue, 5.5%,
11/1/05 $1,031,590
----------
</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>
Illinois - 12.9%
$5,000,000 AAA/Aaa Chicago Board of Education, 5.75%,
12/1/27 $ 4,728,100
1,500,000 AAA/Aaa Chicago Lakefront Millennium Parking
Facilities, 5.125%, 1/1/28 1,274,880
3,830,000 AAA/Aaa Chicago Illinois Board of Education
School Reform Board, 5.25%,
12/1/17 3,540,797
5,000,000 AAA/Aaa Chicago Illinois Public Building
Commercial Building Revenue,
5.25%, 12/1/15 4,721,400
1,490,000 NR/Aaa Chicago Illinois Single Family
Mortgage, 6.3%, 9/1/29 1,504,677
1,730,000 NR/Aaa Chicago Illinois Single Family
Mortgage, 6.45%, 9/1/29 1,754,929
1,000,000 AA/Aa1 Illinois Educational Facilities Authority,
Northwestern University Revenue,
5.5%, 12/1/13 996,420
1,145,000 A+/A1 Illinois Housing Development
Authority Revenue Multi-Family
Housing, 7.0%, Prerefunded,
7/1/21+* 1,292,785
5,000,000 AAA/Aaa Illinois State General Obligation,
5.75%, 5/1/21 4,792,250
8,355,000 AA-/Aa3 Metropolitan Pier & Exposition
Authority Dedicated State Tax
Revenue, 8.5%, 6/15/06+ 9,881,488
4,015,000 AA-/Aa3 Metropolitan Pier & Exposition
Authority Dedicated State Tax
Revenue, 6.5%, 6/15/27+ 4,306,248
3,000,000 AAA/Aaa University of Illinois Revenue, 5.75%,
1/15/16 2,965,890
7,185,000 AAA/Aaa Will County, Illinois Environmental
Revenue, 6.4%, 4/1/26 7,216,973
-----------
$48,976,837
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements. 11
<PAGE>
Pioneer Tax-Free Income Fund
SCHEDULE OF INVESTMENTS 12/31/99 (continued)
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Indiana - 5.0%
$1,000,000 AAA/Aaa Goshen Multi-School Building Corp.,
5.6%, Prerefunded, 7/15/07** $ 1,019,838
750,000 AAA/NR Indiana Bond Bank State Revolving
Fund, 6.75%, 2/1/17 802,905
3,500,000 AA/Aa3 Indiana Health Facilities Authority,
5.5%, 2/15/16 3,248,875
965,000 NR/Aaa Indiana State Housing Finance
Authority, Single Family Mortgage
Revenue, 5.95%, 7/1/13 972,566
1,000,000 AAA/Aaa Indiana University Revenue, 5.8%,
11/15/10 1,043,370
1,400,000 AA/NR Indianapolis Local Public
Improvement Board Revenue,
6.75%, 2/1/14 1,546,874
3,400,000 AA/Aa Indianapolis Local Public
Improvement Board Revenue,
6.0%, 1/10/20 3,450,898
1,000,000 A+/A2 Lawrence Township Metropolitan
School District Revenue, 6.75%,
7/5/13 1,107,730
3,200,000 AA-/Aa2 Petersburg Indiana Pollution and
Control Revenue, 5.4%, 8/1/17 3,024,864
2,740,000 AAA/Aaa Sarah Scott Middle School Revenue,
5.75%, 1/15/19 2,650,731
-----------
$18,868,651
-----------
Iowa - 0.3%
1,000,000 NR/A Iowa Finance Authority Revenue
Correctional Facility Program,
5.55%, 6/15/10 $ 1,012,390
-----------
Kansas - 0.4%
1,500,000 AA+/Aa2 Kansas State Department
Transportation Highway Revenue,
6.125%, 9/1/09 $ 1,611,090
-----------
</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>
Kentucky - 0.6%
$1,095,000 AAA/Aaa Kenton County Water District #1,
5.8%, 2/1/15 $1,112,487
1,000,000 AAA/Aaa Kentucky State Turnpike Authority,
Economic Development Revenue,
5.25%, 7/1/05 1,017,660
----------
$2,130,147
----------
Louisiana - 0.8%
3,000,000 NR/Aaa New Orleans Home Mortgage
Authority, 6.25%, 1/15/11+ $3,229,500
----------
Maine - 0.3%
1,000,000 AAA/Aaa Maine State Turnpike Authority
Turnpike Revenue, 6.0%, 7/1/05 $1,053,950
----------
Maryland - 0.3%
1,200,000 AA+/Aa3 University of Maryland System
Auxiliary Facility and Tuition
Revenue, 5.4%, 4/1/06 $1,232,844
----------
Massachusetts - 4.5%
1,130,000 AAA/Aaa Massachusetts Housing Finance
Agency, 5.95%, 7/1/18 $1,124,983
3,000,000 AAA/Aaa Massachusetts State General
Obligation, 6.5%, 11/1/07+ 3,242,640
2,000,000 AAA/Aaa Massachusetts State General
Obligation, 5.75%, 8/1/10 2,077,680
1,000,000 AAA/Aaa Massachusetts State Water Pollution
Abatement Trust Sewer Revenue,
6.0%, 2/1/07 1,061,310
1,750,000 AAA/Aaa Plymouth County Massachusetts
Correctional Facility, 5.0%, 4/1/22 1,481,410
2,000,000 AAA/Aaa South Essex Massachusetts Sewer
District, Series B, 5.25%, 6/15/18 1,836,000
1,325,000 AAA/Aaa Worcester General Obligation, 6.15%,
5/1/09+ 1,423,567
</TABLE>
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
Pioneer Tax-Free Income Fund
SCHEDULE OF INVESTMENTS 12/31/99 (continued)
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Massachusetts - (continued)
$1,440,000 AAA/Aaa Worcester General Obligation, 6.2%,
5/1/10+ $ 1,550,462
1,460,000 AAA/Aaa Worcester General Obligation, 6.25%,
5/1/11+ 1,575,398
1,450,000 AAA/Aaa Worcester General Obligation, 6.3%,
5/1/12+ 1,567,972
-----------
$16,941,422
-----------
Michigan - 4.1%
1,000,000 AAA/Aaa Detroit Michigan Water Supply
Revenue, 5.75%, 7/1/11 $ 1,037,510
1,455,000 AAA/Aaa Grand Rapids Community College,
5.375%, 5/1/16 1,382,803
2,175,000 AAA/Aaa Holly Michigan Area School District,
5.625%, 5/1/15+ 2,267,981
3,445,000 AAA/Aaa Jenison Michigan Public Schools,
5.25%, 5/1/16 3,256,869
2,500,000 AA+/Aa1 Michigan Municipal Bond Authority,
5.625%, 10/1/19 2,406,075
5,715,000 AAA/Aaa Walled Lake School District General
Obligation, Series I, 5.5%, 5/1/22 5,305,806
-----------
$15,657,044
-----------
Minnesota - 1.1%
750,000 NR/A2 Minnesota State Higher Education
Facilities Authority Revenue,
5.625%, 10/1/16 $ 724,298
1,450,000 AA+/Aa2 Minnesota State Housing Finance
Agency, Series H, 6.55%, 7/1/11 1,478,739
990,000 AA/Aa2 Minnesota State Housing Finance
Agency, 6.9%, 8/1/12 1,028,986
1,000,000 AA/Aa2 Minnesota University, 5.75%, 7/1/18 995,490
-----------
$ 4,227,513
-----------
</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>
Missouri - 3.1%
$2,100,000 AAA/Aaa Missouri Environmental Improvement
and Energy Resources Authority,
6.05%, 7/1/16 $ 2,122,890
2,820,000 AAA/NR Missouri Housing Development,
Series B-2, 6.4%, 3/1/29 2,831,900
5,000,000 NR/Aaa Northwest Missouri University, 4.7%,
6/1/18 4,175,300
2,500,000 AAA/Aaa Poplar Bluff School District, 5.8%,
3/1/11 2,560,600
-----------
$11,690,690
-----------
Montana - 0.3%
1,250,000 A2/NR Montana State Higher Education
Assistance Corp. Student Loan
Revenue, 5.5%, 12/1/31 $ 1,118,600
-----------
Nebraska - 3.7%
5,000,000 NR/A Grand Island Sanitation Sewer
Revenue, 6.0%, 4/1/14 $ 5,043,550
7,500,000 A/A3 Hastings Electric System Revenue,
6.3%, 1/1/19 7,642,050
1,325,000 AAA/Aaa Municipal Energy Agency of Nebraska
Revenue, 6.0%, 4/1/08 1,398,431
-----------
$14,084,031
-----------
Nevada - 0.0%
40,000 AA/Aa2 Nevada Housing Division Single
Family Program Revenue, 8.0%,
4/1/09 $ 40,119
-----------
New Hampshire - 0.2%
1,000,000 NR/Aaa New Hampshire Higher Educational &
Health Facilities, 5.0%, 6/1/28 $ 845,220
-----------
New Jersey - 0.3%
1,000,000 AA+/Aa1 New Jersey Sales Tax General
Obligation, 5.8%, 2/15/07 $ 1,049,700
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
Pioneer Tax-Free Income Fund
SCHEDULE OF INVESTMENTS 12/31/99 (continued)
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
New Mexico - 2.1%
$2,600,000 AA/Aa3 Bernalillo County Gross Receipts Tax
Revenue, 5.75%, 4/1/21+ $2,705,898
2,000,000 NR/Aaa Dona Ana County Revenue, 5.5%,
6/1/14 1,980,280
1,215,000 AA/Aa1 New Mexico Mortgage Finance
Authority, 6.85%, 7/1/12 1,242,265
1,000,000 AAA/NR Rio Rancho New Mexico Water &
Wastewater System Revenue,
4.75%, 5/15/16 857,660
1,200,000 AAA/Aaa University of New Mexico Revenue,
6.55%, 8/15/25 1,305,840
----------
$8,091,943
----------
New York - 0.5%
2,350,000 AA/Aa3 New York City Transitional Financial
Authority Revenue, 4.75%,
11/15/18 $1,969,253
----------
North Carolina - 0.9%
1,250,000 AA/Aa1 Charlotte Law Enforcement Project,
6.1%, 12/1/15 $1,264,663
970,000 AA/Aa3 Charlotte-Mecklenburg Hospital
Authority Revenue, 6.25%, 1/1/20 974,413
1,000,000 AAA/Aaa Franklin County Certificate
Participation, 6.625%, 6/1/14 1,087,610
----------
$3,326,686
----------
North Dakota - 1.2%
2,000,000 AAA/Aaa Grand Forks Health Care Systems,
5.6%, 8/15/17 $1,906,460
1,640,000 NR/Aa3 North Dakota State Housing Finance
Agency Revenue, 5.8%, 7/1/18 1,570,119
1,000,000 AAA/Aaa State Water Community Revenue,
5.75%, 7/1/27 940,960
----------
$4,417,539
----------
</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>
Ohio - 1.7%
$1,050,000 AAA/Aaa Bedford, Ohio County School District,
6.25%, 12/1/13 $ 1,096,315
2,870,000 AAA/Aaa Cleveland Ohio General Obligation,
5.75%, 8/1/13 2,957,277
500,000 AA-/Aa2 Ohio State Building Authority
Revenue, 6.0%, 10/1/08 531,215
1,000,000 AAA/Aaa Ohio State Turnpike Commission
Revenue, 5.5%, 2/15/16 980,050
1,000,000 AAA/Aaa Ohio State Water Development
Authority Revenue, 6.0%, 12/1/06 1,059,740
-----------
$ 6,624,597
-----------
Oklahoma - 4.6%
1,500,000 A-/A2 Grand River Dam Authority Revenue,
5.75%, 6/1/06 $ 1,559,535
2,520,000 AAA/Aaa Grand River Dam Authority Revenue,
6.25%, 6/1/11 2,727,471
7,700,000 AAA/Aaa McGee Creek Authority Water
Revenue, 6.0%, 1/1/23 7,769,531
5,300,000 A+/A1 Oklahoma State Turnpike Authority
Revenue, 6.125%, 1/1/20 5,311,342
-----------
$17,367,879
-----------
Oregon - 0.8%
2,860,000 A/Aaa Washington County Unified Sewer
Agency Revenue, 6.2%,
Prerefunded, 10/1/04* $ 3,029,255
-----------
Pennsylvania - 2.9%
2,750,000 AAA/Aaa Allegheny County Sanitary Authority
Revenue, 5.375%, 12/1/24 $ 2,476,678
1,300,000 AAA/Aaa Lycoming County General Obligation,
5.8%, 11/15/22+ 1,365,013
1,000,000 AAA/Aaa New Kensington School District,
5.5%, 5/15/17+ 1,029,210
1,300,000 AA/A1 Pennsylvania State Higher Education,
4.5%, 7/15/16 1,069,848
1,650,000 AAA/NR Tyrone Pennsylvania Area School
District, 4.85%, 9/15/14 1,469,441
</TABLE>
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
Pioneer Tax-Free Income Fund
SCHEDULE OF INVESTMENTS 12/31/99 (continued)
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Pennsylvania - (continued)
$2,095,000 AAA/Aaa Wallenpaupack Area School District,
5.25%, 11/15/13 $ 2,124,540
2,000,000 AAA/NR Wallingford-Swarthmore General
Obligation, 5.25%, 5/15/17 1,849,520
-----------
$11,384,250
-----------
Puerto Rico - 0.7%
2,650,000 AAA/Aaa Puerto Rico Municipal Financial
Agency, 5.875%, 8/1/14 $ 2,731,858
-----------
Rhode Island - 0.2%
860,000 AA+/Aa2 Rhode Island Housing & Mortgage
Finance, 6.75%, 10/1/17 $ 875,635
-----------
South Carolina - 5.1%
1,790,000 AAA/Aaa Beaufort Water & Sewer Revenue,
6.5%, 3/1/13 $ 1,880,664
1,000,000 AA/Aa2 Columbia Waterworks & Sewer
System Revenue, 5.5%, 2/1/09 1,023,560
2,400,000 A+/A1 Fairfield County Pollution Control,
6.5%, 9/1/14 2,543,664
1,000,000 AA/Aa1 Greenville Waterworks Revenue,
6.0%, 2/1/08 1,061,540
1,250,000 AAA/Aaa South Carolina Grand Strand Water &
Sewer Authority, 6.375%, 6/1/12 1,367,462
10,000,000 AAA/Aaa South Carolina Public Service
Authority Revenue, 6.625%,
Prerefunded, 7/1/02* 10,651,600
750,000 NR/Aa2 South Carolina State Housing
Finance & Development Authority
Revenue, 6.2%, 7/1/09 753,180
-----------
$19,281,670
-----------
South Dakota - 0.7%
1,235,000 NR/Aa3 South Dakota Conservancy District
Revenue, 5.625%, 8/1/17 $ 1,155,775
1,255,000 AAA/Aaa South Dakota State Lease Revenue,
8.0%, 9/1/05 1,433,360
-----------
$ 2,589,135
-----------
</TABLE>
18 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>
Tennessee - 1.5%
$3,075,000 AA/NR Chattanooga General Obligation,
5.25%, 9/1/17 $2,873,218
1,000,000 AAA/Aaa Metropolitan Government Nashville &
Davidson County Sports Authority,
5.75%, 7/1/17 991,300
1,565,000 AAA/Aaa Metropolitan Government Nashville &
Davidson County Water & Sewer
Authority, 6.0%, 1/1/07 1,653,642
----------
$5,518,160
----------
Texas - 9.9%
2,600,000 AAA/Aaa Alief Texas Independent School
District, 5.25%, 2/15/17 $2,419,222
4,000,000 AAA/Aaa Brazos River Authority Texas
Revocable, 5.05%, 11/1/18 3,420,520
750,000 AAA/Aaa Carroll Texas Independent School
District, 6.75%, 8/15/21 819,495
850,000 AAA/Aaa Carroll Texas Independent School
District, 6.75%, 8/15/22 928,277
2,145,000 AAA/Aaa Castleberry Independent School
District General Obligation, 5.7%,
8/15/21 2,052,958
2,310,000 AAA/Aaa Clear Creek Independent School
District General Obligation, 0%,
2/1/10 1,322,290
1,800,000 A/NR Collin County Texas Housing Financial
Corporation, 5.125%, 6/1/18 1,527,786
1,305,000 NR/Aaa Comal Independent School District
General Obligation, 7.0%, 2/1/07 1,434,495
1,000,000 AAA/Aaa Dallas-Fort Worth Texas Regional,
5.5%, 11/1/04 1,029,810
1,720,000 AAA/Aaa Grapevine-Colleyville Independent
School District, 0%, 8/15/12 831,723
2,050,000 NR/Aaa Keller Independent School District
General Obligation, 0%, 8/15/10 1,138,980
2,000,000 NR/Aaa Kingsbridge Utility Systems Revenue,
5.375%, 3/1/15 1,882,180
1,250,000 AAA/Aaa Lamar Texas Conservation
Independent School District,
4.75%, 2/15/20 1,031,888
</TABLE>
The accompanying notes are an integral part of these financial statements. 19
<PAGE>
Pioneer Tax-Free Income Fund
SCHEDULE OF INVESTMENTS 12/31/99 (continued)
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Texas - (continued)
$1,100,000 AAA/Aaa North Forest School, 6.0%, 8/15/11 $ 1,160,236
2,350,000 AAA/Aaa Nueces River Authority Water Supply
Revenue, 5.5%, 3/1/27 2,149,310
1,000,000 AA/Aa1 Port Houston Authority General
Obligation, 5.0%, 10/1/05 1,005,380
1,595,000 AAA/Aaa Port Lavaca Utility Systems Revenue,
5.75%, 2/15/22 1,548,282
3,500,000 AAA/Aaa San Antonio Texas Water Revenue,
5.6%, 5/15/21 3,302,635
3,000,000 AAA/Aaa Texas Public Finance Authority
Building Revenue, 0%, 2/1/07 2,059,710
5,500,000 AAA/Aaa Texas Public Finance Authority
Building Revenue, 0%, 2/1/08 3,561,195
2,750,000 AAA/Aaa Texas Public Finance Authority
Building Revenue, 0%, 2/1/10 1,574,155
1,500,000 AA/Aa1 Texas State General Obligation, 5.8%,
10/1/04 1,566,795
250,000 AAA/Aaa University of Texas Permanent
University Fund, 8.0%, 7/1/04+ 281,820
-----------
$38,049,142
-----------
Utah - 2.4%
2,500,000 AAA/Aaa St. George Water Revenue, 5.85%,
6/1/20 $ 2,424,600
1,630,000 AAA/Aaa Utah State University Revenue, 4.7%,
12/1/12 1,462,746
1,615,000 AAA/Aaa Utah State University Revenue, 4.8%,
12/1/13 1,444,472
3,480,000 AA/NR Weber County Municipal Building
Authority Revenue, 5.75%,
12/15/19 3,252,965
455,000 NR/Aaa White County Water Revenue, 5.9%,
2/1/22 440,635
-----------
$ 9,025,418
-----------
Virginia - 4.9%
1,750,000 A+/A1 Chesapeake Water & Sewer System
Revenue, 6.5%, 7/1/12 $ 1,838,113
3,685,000 A+/A1 Chesapeake Water & Sewer System
Revenue, 6.4%, 7/1/17 3,731,542
</TABLE>
20 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>
Virginia - (continued)
$2,000,000 AAA/Aaa Metro Expressway Authority, 5.25%,
7/15/17 $ 1,863,200
3,000,000 AAA/Aaa Metro Expressway Authority, 5.25%,
7/15/22 2,706,750
2,500,000 AA/Aa2 Norfolk Virginia Industrial
Development Revenue, 5.625%,
9/15/17 2,395,725
6,525,000 AAA/Aaa South East Public Service Authority,
5.0%, 7/1/15 6,008,546
-----------
$18,543,876
-----------
Washington - 5.7%
3,825,000 AAA/Aaa Central Puget Sound Regional
Transportation Authority, 5.25%,
2/1/16 $ 3,599,057
2,820,000 AAA/Aaa Clark County Public Utility District #1
Water Revenue, 5.5%, 1/1/15 2,725,051
5,000,000 AAA/Aaa Clark County School District #37
Vancouver, 5.25%, 12/1/14 4,824,350
1,655,000 AA+/Aa1 King County General Obligation,
6.625%, 12/1/15 1,772,372
1,000,000 AAA/Aaa King & Snohomish Counties,
Washington School District, 5.75%,
12/1/14 1,000,440
2,500,000 NR/Aaa Snohomish County Public Utility
District Revenue, 6.8%, 1/1/20+ 2,731,150
2,250,000 AAA/Aaa Snohomish County School District
General Obligation, 5.7%, 12/1/11 2,332,688
2,000,000 A/NR Vancouver Washington Housing
Revenue, 5.5%, 3/1/28 1,761,540
1,000,000 AA+/Aa1 Washington State General Obligation,
6.0%, 5/1/02 1,029,610
-----------
$21,776,258
-----------
West Virginia - 1.0%
3,000,000 AAA/Aaa West Virginia State Building
Commission, 5.375%, 7/1/21 $ 2,771,760
1,000,000 AAA/Aaa West Virginia State Housing
Development, 7.05%, 11/1/24 1,044,980
-----------
$ 3,816,740
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements. 21
<PAGE>
Pioneer Tax-Free Income Fund
SCHEDULE OF INVESTMENTS 12/31/99 (continued)
<TABLE>
<CAPTION>
S&P/
Moody's
Principal Ratings
Amount (unaudited) Value
<S> <C> <C> <C>
Wisconsin - 0.7%
$1,430,000 AAA/Aaa Adams-Friendship School District,
6.5%, 4/1/16 $ 1,538,966
1,000,000 AA/Aa2 Wisconsin State General Obligation,
5.3%, 11/1/12 994,410
------------
$ 2,533,376
------------
TOTAL INVESTMENT IN TAX-EXEMPT
OBLIGATIONS
(Cost $376,912,878) (a) $371,613,087
------------
Shares
TAX-EXEMPT MONEY MARKET MUTUAL
FUND - 2.3%
8,930,096 Provident Institutional Municipal Fund $ 8,930,096
------------
TOTAL TAX-EXEMPT MONEY MARKET
MUTUAL FUND
(Cost $8,930,096) $ 8,930,096
------------
TOTAL INVESTMENT IN
SECURITIES - 100% $380,543,183
============
(Cost $385,842,974) (b) (c)
</TABLE>
22 The accompanying notes are an integral part of these financial statements.
<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.
** A portion of this bond is partially prerefunded.
NR Not rated.
+ Escrowed to maturity in U.S. government securities.
(a) The concentration of investments by type of obligation/market sector is as
follows:
Insured 47.8%
Escrowed in U.S. Government Securities 12.3
General Obligation 8.5
Cash Equivalent 2.3
Revenue Bonds:
Education 2.8
Water & Sewer 3.8
Hospital 1.1
Housing 6.9
Pollution Control 2.8
Electric 2.8
Power 1.0
Transportation 2.1
Other 5.8
(b) At December 31, 1999, the net unrealized loss on investments based on cost
for federal income tax purposes of $385,842,974 was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 6,714,662
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (12,014,453)
-----------
Net unrealized loss $(5,299,791)
===========
(c) At December 31, 1999, the Fund had a capital loss carryforward of $1,220,892
which will expire in 2007 if not utilized.
Purchases and sales of securities (excluding temporary cash investments) for the
year ended December 31, 1999, aggregated $95,468,391 and $141,967,413,
respectively.
The accompanying notes are an integral part of these financial statements. 23
<PAGE>
Pioneer Tax-Free Income Fund
BALANCE SHEET 12/31/99
ASSETS:
Investment in securities, at value (including temporary cash
investment of $8,930,096) (cost $385,842,974) $380,543,183
Receivables -
Investment securities sold 220,031
Fund shares sold 621,866
Interest 6,237,529
Other 11,456
------------
Total assets $387,634,065
------------
LIABILITIES:
Payables -
Investment securities purchased $ 2,995,911
Fund shares repurchased 208,143
Dividends 455,916
Due to affiliates 293,838
Accrued expenses 96,619
------------
Total liabilities $ 4,050,427
------------
NET ASSETS:
Paid-in capital $391,302,853
Accumulated undistributed net investment income 17,815
Accumulated net realized loss on investments (2,437,239)
Net unrealized loss on investments (5,299,791)
------------
Total net assets $383,583,638
============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $368,558,621/33,560,680 shares) $ 10.98
============
Class B (based on $12,519,609/1,148,077 shares) $ 10.90
============
Class C (based on $2,505,408/229,690 shares) $ 10.91
============
MAXIMUM OFFERING PRICE:
Class A $ 11.50
============
24 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
STATEMENT OF OPERATIONS
For the Year Ended 12/31/99
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 22,372,870
------------
EXPENSES:
Management fees $2,005,180
Transfer agent fees
Class A 446,910
Class B 17,393
Class C 5,107
Distribution fees
Class A 989,586
Class B 128,354
Class C 40,268
Administrative fees 103,305
Custodian fees 61,928
Registration fees 49,698
Professional fees 94,777
Printing 35,053
Fees and expenses of nonaffiliated trustees 31,929
Miscellaneous 16,335
----------
Total expenses $ 4,025,823
Less fees paid indirectly (67,296)
------------
Net expenses $ 3,958,527
------------
Net investment income $ 18,414,343
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments $ (2,437,239)
Change in net unrealized gain on investments (32,832,549)
------------
Net loss on investments $(35,269,788)
------------
Net decrease in net assets resulting from operations $(16,855,445)
============
</TABLE>
The accompanying notes are an integral part of these financial statements. 25
<PAGE>
Pioneer Tax-Free Income Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended 12/31/99 and 12/31/98
<TABLE>
<CAPTION>
Year Ended Year Ended
12/31/99 12/31/98
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 18,414,343 $ 18,401,335
Net realized gain (loss) on investments (2,437,239) 12,007,205
Change in net unrealized gain on investments (32,832,549) (5,848,257)
------------ ------------
Net increase (decrease) in net assets resulting
from operations $(16,855,445) $ 24,560,283
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A ($0.51 and $0.55 per share, respectively) $(17,809,302) $(17,980,683)
Class B ($0.42 and $0.46 per share, respectively) (473,569) (289,800)
Class C ($0.43 and $0.46 per share, respectively) (148,848) (94,932)
Net realized gain
Class A ($0.02 and $0.34 per share, respectively) (784,680) (10,813,748)
Class B ($0.02 and $0.34 per share, respectively) (26,846) (287,687)
Class C ($0.02 and $0.34 per share, respectively) (5,867) (86,889)
------------ ------------
Total distributions to shareholders $(19,249,112) $(29,553,739)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $100,949,129 $ 36,186,954
Reinvestment of distributions 13,627,470 21,872,591
Cost of shares repurchased (102,330,723) (66,710,982)
------------ ------------
Net increase (decrease) in net assets resulting
from fund share transactions $ 12,245,876 $ (8,651,437)
------------ ------------
Net decrease in net assets $(23,858,681) $(13,644,893)
NET ASSETS:
Beginning of year 407,442,319 421,087,212
------------ ------------
End of year (including accumulated undistributed net
investment income of $17,815 and $35,920,
respectively) $383,583,638 $407,442,319
============ ============
</TABLE>
26 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
<TABLE>
<CAPTION>
CLASS A '99 Shares '99 Amount '98 Shares '98 Amount
<S> <C> <C> <C> <C>
Shares sold 7,543,435 $86,596,005 2,187,317 $ 26,771,233
Reinvestment of distributions 1,153,857 13,267,232 1,762,278 21,391,471
Less shares repurchased (7,867,060) (90,109,075) (5,221,565) (63,854,984)
---------- ----------- ---------- ------------
Net increase (decrease) 830,232 $ 9,754,162 (1,271,970) $(15,692,280)
========== =========== ========== ============
CLASS B
Shares sold 629,429 $ 7,279,180 520,467 $ 6,346,574
Reinvestment of distributions 26,899 306,603 34,208 411,417
Less shares repurchased (412,353) (4,707,059) (112,747) (1,381,673)
---------- ----------- ---------- ------------
Net increase 243,975 $ 2,878,724 441,928 $ 5,376,318
========== =========== ========== ============
CLASS C
Shares sold 608,030 $ 7,073,944 252,146 $ 3,069,147
Reinvestment of distributions 4,704 53,635 5,781 69,703
Less shares repurchased (656,171) (7,514,589) (120,497) (1,474,325)
---------- ----------- ---------- ------------
Net increase (decrease) (43,437) $ (387,010) 137,430 $ 1,664,525
========== =========== ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements. 27
<PAGE>
Pioneer Tax-Free Income Fund
FINANCIAL HIGHLIGHTS 12/31/99
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
CLASS A
Net asset value, beginning of year $ 12.02 $ 12.17 $ 11.96 $ 12.36 $ 11.24
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.51 $ 0.55 $ 0.59 $ 0.62 $ 0.64
Net realized and unrealized gain (loss) on investments (1.02) 0.19 0.45 (0.21) 1.21
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ (0.51) $ 0.74 $ 1.04 $ 0.41 $ 1.85
Distributions to shareholders:
Net investment income (0.51) (0.55) (0.59) (0.62) (0.64)
Net realized gain (0.02) (0.34) (0.24) (0.19) (0.09)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ (1.04) $ (0.15) $ 0.21 $ (0.40) $ 1.12
-------- -------- -------- -------- --------
Net asset value, end of year $ 10.98 $ 12.02 $ 12.17 $ 11.96 $ 12.36
======== ======== ======== ======== ========
Total return* (4.29)% 6.20% 8.94% 3.57% 16.84%
Ratio of net expenses to average net assets+ 0.93% 0.93% 0.93% 0.92% 0.91%
Ratio of net investment income to average net assets+ 4.43% 4.48% 4.87% 5.16% 5.37%
Portfolio turnover rate 24% 52% 22% 44% 35%
Net assets, end of year (in thousands) $368,559 $393,390 $413,856 $441,733 $476,584
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.92% 0.92% 0.91% 0.90% 0.89%
Net investment income 4.44% 4.49% 4.89% 5.18% 5.39%
</TABLE>
* Assumes initial investment at net asset value at the beginning of each period,
reinvestment of all distributions, the complete redemption of the investment
at net asset value at the end of each period, and no sales charges. Total
return would be reduced if sales charges were taken into account.
+ Ratios assuming no reduction for fees paid indirectly.
28 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
FINANCIAL HIGHLIGHTS 12/31/99
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended 4/28/95 to
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
CLASS B
Net asset value, beginning of period $ 11.93 $ 12.09 $11.88 $12.31 $11.81
------- ------- ------ ------ ------
Increase (decrease) from investment operations:
Net investment income $ 0.42 $ 0.46 $ 0.50 $ 0.53 $ 0.35
Net realized and unrealized gain (loss) on investments (1.01) 0.18 0.44 (0.22) 0.58
------- ------- ------ ------ ------
Net increase (decrease) from investment operations $ (0.59) $ 0.64 $ 0.94 $ 0.31 $ 0.93
Distributions to shareholders:
Net investment income (0.42) (0.46) (0.49) (0.53) (0.34)
In excess of net investment income - - - (0.02) -
Net realized gain (0.02) (0.34) (0.24) (0.19) (0.09)
------- ------- ------ ------ ------
Net increase (decrease) in net asset value $ (1.03) $ (0.16) $ 0.21 $(0.43) $ 0.50
------- ------- ------ ------ ------
Net asset value, end of period $ 10.90 $ 11.93 $12.09 $11.88 $12.31
======= ======= ====== ====== ======
Total return* (5.01)% 5.43% 8.16% 2.66% 7.94%
Ratio of net expenses to average net assets+ 1.70% 1.64% 1.68% 1.67% 1.72%**
Ratio of net investment income to average net assets+ 3.66% 3.73% 4.12% 4.38% 4.38%**
Portfolio turnover rate 24% 52% 22% 44% 35%
Net assets, end of period (in thousands) $12,520 $10,790 $5,588 $4,792 $2,069
Ratios assuming reduction for fees paid indirectly:
Net expenses 1.69% 1.63% 1.66% 1.65% 1.65%**
Net investment income 3.67% 3.74% 4.14% 4.40% 4.45%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratios assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 29
<PAGE>
Pioneer Tax-Free Income Fund
FINANCIAL HIGHLIGHTS 12/31/99
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended 1/31/96 to
12/31/99 12/31/98 12/31/97 12/31/96
<S> <C> <C> <C> <C>
CLASS C
Net asset value, beginning of period $11.94 $12.11 $11.88 $12.32
------ ------ ------ ------
Increase (decrease) from investment operations:
Net investment income $ 0.43 $ 0.46 $ 0.49 $ 0.49
Net realized and unrealized gain (loss) on investments (1.00) 0.17 0.47 (0.24)
------ ------ ------ ------
Net increase (decrease) from investment operations $(0.58) $ 0.63 $ 0.96 $ 0.25
Distributions to shareholders:
Net investment income (0.43) (0.46) (0.49) (0.49)
In excess of net investment income - - - (0.01)
Net realized gain (0.02) (0.34) (0.24) (0.19)
------ ------ ------ ------
Net increase (decrease) in net asset value $(1.03) $(0.17) $ 0.23 $(0.44)
------ ------ ------ ------
Net asset value, end of period $10.91 $11.94 $12.11 $11.88
====== ====== ====== ======
Total return* (4.93)% 5.33% 8.32% 2.19%
Ratio of net expenses to average net assets+ 1.69% 1.63% 1.70% 1.71%**
Ratio of net investment income to average net assets+ 3.62% 3.72% 4.04% 4.34%**
Portfolio turnover rate 24% 52% 22% 44%
Net assets, end of period (in thousands) $2,505 $3,262 $1,643 $ 383
Ratios assuming reduction for fees paid indirectly:
Net expenses 1.65% 1.60% 1.67% 1.69%**
Net investment income 3.66% 3.75% 4.07% 4.36%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratios assuming no reduction for fees paid indirectly.
30 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS 12/31/99
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.
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.
On March 31, 1999 (Closing Date), the Fund acquired the assets of the Pioneer
Intermediate Tax-Free Fund in exchange solely for (i) the issuance of Class A, B
and C shares of beneficial interest of the Fund and (ii) the assumption by the
Fund of the liabilities of the Pioneer Intermediate Tax-Free Fund. Following
this transfer, the Pioneer Intermediate Tax-Free Fund was liquidated and
dissolved and Class A, B and C shares of the Fund were distributed to the former
shareholders of the Pioneer Intermediate Tax-Free Fund.
The reorganization was accomplished by a tax-free transfer of assets whereby
each shareholder of the Pioneer Intermediate Tax-Free Fund received a number of
full and fractional shares of the Fund held as of the Closing Date. The net
assets, net asset values per share and shares outstanding as of the Closing Date
were:
Intermediate
Tax-Free Fund
(Pre-reorganization)
--------------------------------------------------
Class A Class B Class C
--------------------------------------------------
Net Assets $54,324,957 $3,216,001 $961,794
Shares Outstanding 5,328,944 313,997 94,496
Net Asset Value Per Share 10.19 10.24 10.18
31
<PAGE>
Pioneer Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS 12/31/99 (continued)
Tax-Free Income Fund (Pre-reorganization)
--------------------------------------------------
Class A Class B Class C
--------------------------------------------------
Net Assets $384,347,190 $11,175,662 $4,352,569
Shares Outstanding 32,272,218 944,724 367,515
Net Asset Value Per Share 11.91 11.83 11.84
Tax-Free Income Fund (Post-reorganization)
--------------------------------------------------
Class A Class B Class C
--------------------------------------------------
Net Assets $438,672,147 $14,391,663 $5,314,363
Shares Outstanding 36,833,685 1,216,586 448,725
Net Asset Value Per Share 11.91 11.83 11.84
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. Valuations may be
supplemented by dealers and other sources, as required. Market discount is
accreted daily on a straight-line basis. Original issue discount and market
premium are accreted or amortized daily into interest income on a
yield-to-maturity basis with a corresponding increase or decrease 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.
32
<PAGE>
Pioneer Tax-Free Income 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.
In order to comply with federal income tax regulations, the Fund has
designated $18,414,343 as tax-exempt interest dividends. For purposes of the
corporate dividend exclusion, none of the distributions per share qualify for
the exclusion.
At December 31, 1999, the Fund has reclassified $729 from accumulated
undistributed net investment income 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.
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 $43,314 in
underwriting commissions on the sale of fund shares during the year ended
December 31, 1999.
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
33
<PAGE>
Pioneer Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS 12/31/99 (continued)
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
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 and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Fund. At December 31, 1999, $169,736 was payable to
PIM related to management fees, administrative 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 $38,266 in transfer agent fees payable to PSC at December 31,
1999.
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 average daily net assets attributable to Class A
shares in reimbursement
34
<PAGE>
Pioneer Tax-Free Income Fund
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 $85,836 in distribution fees payable to
PFD at December 31, 1999.
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 4.00%, 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 year ended December 31, 1999, CDSCs in the amount of $69,513 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 year ended December 31, 1999,
the Fund's expenses were reduced by $67,296 under such arrangements.
6. Line of Credit Facility
The Fund, along with certain other funds 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 borrowing exceeds $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 year ended December 31, 1999, the Fund had no borrowings under
this agreement.
35
<PAGE>
Pioneer Tax-Free Income Fund
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners and the Board of Trustees
of Pioneer Tax-Free Income Fund:
We have audited the accompanying balance sheet, including the schedule of
investments, of Pioneer Tax-Free Income Fund as of December 31, 1999, and the
related statement of operations, 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
December 31, 1999, 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, 1999, 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 4, 2000
36
<PAGE>
Pioneer Tax-Free Income Fund
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
Trustees Officers
John F. Cogan, Jr. John F. Cogan, Jr., Chairman and
Mary K. Bush President
Richard H. Egdahl, M.D. David D. Tripple, Executive Vice President
Margaret B.W. Graham Eric W. Reckard, Treasurer
John W. Kendrick Joseph P. Barri, Secretary
Marguerite A. Piret
David D. Tripple
Stephen K. West
John Winthrop
Investment Adviser
Pioneer Investment Management, Inc.
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
37
<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
FactFoneSM 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 Investment Management, Inc.
60 State Street
Boston, Massachusetts 02109
www.pioneerfunds.com
7309-00-0200
(Copyright) Pioneer Funds Distributor, Inc.
[Recyle Logo] Printed on Recycled Paper
