<PAGE>
PIONEER
INCOME
FUND
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
PIONEER INCOME FUND
Dear Shareowners:
The United States financial markets roared ahead in 1995. Both stocks and bonds
enjoyed their best year in quite a long while. Slow economic growth coupled with
low inflation led the Federal Reserve to take action to lower interest rates,
and short-, medium- and long-term rates all came down dramatically. The effect
on the financial markets was electrifying. While high-growth areas like
technology and pharmaceuticals excited equity investors the most, at least in
the earlier part of the year, interest rate-sensitive industries -- particularly
banks, insurance companies and utilities -- saw good, steady gains throughout
the year. Bond investors had the opportunity for double-digit percentage gains
almost across the board.
HOW YOUR FUND PERFORMED
We are pleased to report the following results for Pioneer Income Fund for the
year and the six-month period ended December 31, 1995:
CLASS A SHARES
o The Fund provided a 5.74% 30-day yield on December 31, 1995, based on net
asset value.
o Shareowners received a total of $0.651 per share in income dividends during
the year, including $0.331 in the last six months. The Fund also paid a
capital gains distribution of $0.1075 per share in December.
o Net asset value was $10.30 per share at December 31,1995, versus $9.79 on June
30, 1995, and $9.11 on December 31, 1994.
o The Fund generated a 12-month total return of 22.00% based on net asset value
and 16.50% for shareowners who paid the maximum 4.50% sales charge. Total
return for the six months ended December 31 was 9.83% at net asset value and
4.90% at public offering price. Total return assumes reinvestment of
distributions at net asset value.
CLASS B SHARES
Class B shares were introduced to Pioneer Income Fund on April 28, 1995. We
report the following results since that time:
o On December 31, Class B shares offered a 30-day yield of 5.14%.
o Since April 28, shareowners received $0.4591 per share in income dividends,
$0.3091 of that since June 30. Shareowners also received a capital-gains
distribution of $0.1075 per share in December.
o Net asset value was $10.27 per share on December 31, 1995, versus $9.78 on
June 30 and $9.55 on April 28.
o The Fund provided a total return of 13.74% assuming shares were held from
April 28 through December 31 and 9.40% for the six months ended December 31.
If shares were sold, and the contingent deferred sales charge paid at the end
of the period, total return was 9.74% for April 28 through December 31 and
5.40% for the six months ended December 31. Total return assumes reinvestment
of all distributions.
By way of comparison, the unmanaged Lehman Brothers Corporate Bond Index showed
a total return of 22.25% for the year ended December 31 and 7.42% for the six
months ended December 31. The unmanaged Standard & Poor's 500 Index rose
<PAGE>
37.45% and 14.40% during the same periods. For more information on the Fund's
performance, please turn to pages 4 and 5.
HOW PIONEER MANAGED YOUR INVESTMENT
The declining interest rates of the past year posed a challenge to us with
respect to maintaining the Fund's high current income and yield. In the bond
portion of the portfolio, we met the challenge largely by increasing the
portfolio's weighting in higher yielding industrial bonds. Throughout the year,
interest rates on short-term instruments were not much different than those on
longer-term notes and bonds. Thus, there was not much yield to be gained by
taking the extra risk to principal involved with owning long-maturity bonds.
Accordingly we continued to whittle away at the average maturity of the Fund's
bond investments. At December 31, 1995, the average effective maturity was 8.8
years, down from 9.3 years at June 30 and 10.8 years at December 31, 1994.
Bonds continued to make up somewhat more than 60% of the total portfolio and
were strong contributors to the Fund's total return for the year as bond prices
increased with falling rates. We continued to look for high-quality bonds that
meet our criteria for income, along with issues we believe will see an improved
quality rating. During the second half of the year, your managers added
positions in four industrial bonds -- Caterpillar, Joy Technologies, Phillips
Petroleum, Rexene -- which we found to be attractive, generally investment-grade
credits. Two electric utilities, Public Service Electric & Gas and Texas
Utilities Electric were eliminated from the portfolio when they were called by
their issuers.
On the equity side, the search for income led us to emphasize holdings with the
better dividend yields. This was a continuous process throughout the year. Over
the past six months, we liquidated six positions, including a large holding in
the preferred stock of United Water Resources that we thought was less
attractive from a total return standpoint than alternative investments. We added
two positions: United Dominion Realty (preferred) expanded the Fund's existing
position in the Virginia-based real estate investment trust, or REIT; Canadian
National Railway gave the Fund an interest in the newly privatized Canadian
transportation company. The Fund also received two new securities, US West
Communications and US West Media, in exchange for its previous holding of US
West. Like a number of other companies today, US West has reorganized itself
into smaller, more closely-focused business entities.
LOOKING AHEAD
The past two years have demonstrated both the potential volatility in financial
markets, and the value of maintaining a disciplined, long-term approach to
investing. As we saw in 1994, when interest rates rose and the Fund's portfolio
declined in value, an upward swing in rates can hurt. The lesson in 1995,
however, was how quickly a reverse in rates can move prices back up. There's no
surefire way to protect investment value against declines or to guarantee
participation in a fast-moving market, but we know that taking the long view
with a conservatively managed portfolio can be an effective way to seek current
income without abandoning principal.
As 1996 gets underway, the economy still looks slow, inflation appears minimal,
and most investors expect further interest rate cuts from the Federal Reserve.
What concerns us is the near unanimity of that viewpoint! Events rarely unfold
according to script. We cannot foresee any better than anyone else what might
2
<PAGE>
go wrong. However, we would be surprised if 1996 proved to be the smooth ride so
many now are forecasting. As always, we shall do what we can to moderate risk
and achieve satisfactory returns. An emphasis on conservatively priced
investments and a focus on underlying business value, rather than market
sentiment, have long characterized our approach to managing your money. We think
that in today's market that approach is as appropriate as ever.
On the following pages please find the audited list of portfolio holdings and
financial statements as of December 31, 1995. If you have questions about your
investment in Pioneer Income Fund, please contact your investment
representative. Please also feel free to call Pioneer directly at
1-800-225-6292. We appreciate your support.
Yours sincerely,
[SIGNATURE]
John F. Cogan, Jr.
Chairman and President,
Pioneer Income Fund
3
<PAGE>
GROWTH OF A $10,000 INVESTMENT*
The following chart shows the growth of a $10,000 investment made in Pioneer
Income Fund Class A at public offering price on December 31, 1985, compared to
the growth of the Lehman Brothers Corporate Bond Index and the Standard & Poor's
500 Index.
- -------------------------------------------------------
PIONEER INCOME FUND CLASS A:
AVERAGE ANNUAL TOTAL RETURNS
(AS OF DECEMBER 31, 1995)
NET PUBLIC OFFERING
CLASS A SHARES ASSET VALUE PRICE*
-----------------------------------------------------
Life of Fund (5/17/68) 8.74% 8.56%
10 Years 9.96 9.46
Five Years 10.43 9.42
One Year 22.00 16.50
- -------------------------------------------------------
[LINE GRAPH]
Pioneer Lehman Brothers
Income A S&P 500 Corporate Bond
Index
----------------------------------------------------------------
1/1/86 $9,425 $10,000 $10,000
$10,530 $12,074 $10,954
12/31/86 $10,440 $11,862 $11,653
$11,434 $15,109 $11,654
12/31/87 $11,151 $12,476 $11,951
$12,044 $14,059 $12,621
12/31/88 $12,522 $14,534 $13,054
$13,668 $16,933 $14,257
12/31/89 $14,513 $19,125 $14,892
$14,859 $19,708 $15,339
12/31/90 $15,033 $18,530 $15,943
$16,060 $21,165 $16,952
12/31/91 $17,833 $24,151 $18,893
$18,052 $23,992 $19,572
12/31/92 $19,186 $25,988 $20,535
$20,445 $27,248 $22,292
12/31/93 $21,149 $28,596 $23,032
$20,201 $27,639 $21,872
12/31/94 $20,239 $28,984 $22,126
$22,482 $34,823 $25,180
12/31/95 $24,691 $39,837 $27,049
The Lehman Brothers Corporate Bond Index is an unmanaged measure of
investment-grade domestic and yankee bonds. Bonds in the Index must be publicly
issued, fixed-rate and non-convertible. Investors cannot directly invest in the
Index. The Standard & Poor's (S&P) 500 Index is an unmanaged, capitalization-
weighted measure of 500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and the Over-the-Counter market. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not reflect any
sales charges, fees, or expenses. You cannot directly invest in an index.
* Reflects deduction of the maximum 4.50% sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
Past performance does not guarantee future results. Return and principal
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
4
<PAGE>
GROWTH OF A $10,000 INVESTMENT*
The following chart shows the growth of a $10,000 investment made in Pioneer
Income Fund Class B compared to the growth of the Lehman Brothers Corporate Bond
Index and the Standard & Poor's 500 Index.+
- -------------------------------------------------
PIONEER INCOME FUND CLASS B:
AVERAGE ANNUAL TOTAL RETURNS
(AS OF DECEMBER 31, 1995)
CLASS B SHARES IF HELD IF REDEEMED*
-----------------------------------------------
Life of Fund (4/28/95) 13.74% 9.74%
- -------------------------------------------------
[LINE GRAPH]
Pioneer Lehman Brothers
Income B S&P 500 Corporate Bond
Index
----------------------------------------------------------------
4/28/95 $10,000 $10,000 $10,000
5/30/95 $10,304 $10,363 $10,471
6/30/95 $10,397 $10,654 $10,566
7/31/95 $10,461 $10,992 $10,519
8/30/95 $10,588 $10,989 $10,688
9/30/95 $10,813 $11,498 $10,815
10/31/95 $10,910 $11,440 $10,956
11/30/95 $11,072 $11,910 $11,166
12/31/95 $10,974 $12,188 $11,350
The Lehman Brothers Corporate Bond Index is an unmanaged measure of
investment-grade domestic and yankee bonds. Bonds in the Index must be publicly
issued, fixed-rate and non-convertible. The Standard & Poor's (S&P) 500 Index is
an unmanaged capitalization-weighted measure of 500 widely held common stocks
listed on the New York Stock Exchange, American Stock Exchange and the
Over-the-Counter market. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any sales charges, fees or expenses. You
cannot invest directly in an index.
* Reflects deduction of the maximum 4.0% contingent deferred sales charge at the
end of the period and assumes reinvestment of distributions.
+ Index comparison begins April 30, 1995.
Past performance does not guarantee future results. Return and principal
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
5
<PAGE>
<TABLE>
<CAPTION>
PIONEER INCOME FUND
SCHEDULE OF INVESTMENTS
December 31, 1995
Standard &
Poor's/Moody's
Principal Rating
Amount (unaudited) Value
- --------------------------------------------------------------------------------------------
<C> <C> <C> <C>
INVESTMENT IN SECURITIES -- 97.5%
BONDS -- 60.5%
INDUSTRIALS -- 36.0%
$ 2,000,000 BB+/Baa3 AMR Corp., 9.75%, 2000 $ 2,231,780
4,950,000 BB+/Baa3 AMR Corp., 9.88%, 2020 5,952,375
2,500,000 BBB/Baa1 Ashland Oil Co., 8.8%, 2012 2,972,150
2,000,000 B+/B1 Bethlehem Steel Corp., 10.375%, 2003 2,110,000
5,000,000 BBB-/Baa1 Bowater, Inc., 9.0%, 2009 6,103,100
5,000,000 AA-/A1 BP America, Inc., 10.0%, 2018 5,665,400
2,500,000 A/A2 Caterpillar Inc., 9.75%, 2019 2,905,250
2,000,000 BBB-/Baa3 Centex Corp., 8.75%, 2007 2,230,900
5,000,000 BB+/Baa2 Delta Air Lines Trust, 9.2%, 2014 5,681,050
3,000,000 BB-/Ba1 Domtar Inc., 11.25%, 2017 3,191,250
4,000,000 BB-/Ba1 Federated Department Stores Inc., 10%, 2001 4,320,000
5,000,000 BBB+/A3 General Motors Corp., 9.4%, 2021 6,492,400
4,000,000 BBB-/Baa2 Georgia-Pacific Corp., 9.875%, 2021 4,632,600
3,000,000 BB-/B1 Huntsman Corp., 10.625, 2001 3,348,000
3,000,000 BBB/Ba1 Joy Technologies Inc., 10.25%, 2003 3,360,000
1,500,000 A/A2 The May Department Stores Co., 9.875%, 2000 1,705,560
4,100,000 BBB/Baa1 Phillips Petroleum Co., 8.86%, 2022 4,737,222
2,000,000 BB-/B1 Rexene Corp., 11.75%, 2004 2,095,000
4,000,000 BBB/Baa2 Shopko Stores Inc., 9.25%, 2022 4,162,720
3,000,000 BB-/B1 Stone Container Corp., 10.75%, 2002 3,097,500
5,000,000 BBB-/Ba1 Time Warner, Inc., 9.15%, 2023 5,670,200
1,000,000 BB-/Ba3 Unisys Corp., 13.5%, 1997 950,000
8,000,000 BB+/Baa3 USX Corp., 9.375%, 2012 9,241,920
2,000,000 BB-/B1 Viacom International Inc., 10.25%, 2001 2,300,000
3,500,000 B/B2 Weirton Steel Corp., 10.75%, 2005 3,298,750
2,000,000 BBB-/Ba1 Westinghouse Electric Corp., 8.625%, 2012 2,040,040
------------
$100,495,167
------------
UTILITIES -- ELECTRIC -- 12.1%
2,500,000 NR/Aaa Big Rivers Electric Cooperative, 9.5% , 2017 $ 2,790,175
2,000,000 AAA/Aaa Cajun Electric Power Cooperative, 8.92%, 2019 2,227,500
3,000,000 AAA/Aaa Cajun Electric Power Cooperative, 9.52%, 2019 3,331,200
5,000,000 BBB/Baa2 Commonwealth Edison Co., 9.75%, 2020 5,778,800
7,000,000 AAA/Aaa Rural Electric Cooperative
(Kansas Electric Power), 9.73%, 2017 7,734,720
11,000,000 AAA/Aaa Rural Electric Cooperative (Soyland), 9.7%, 2017 12,018,600
------------
$ 33,880,995
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
PIONEER INCOME FUND
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued
Standard &
Poor's/Moody's
Principal Rating
Amount (unaudited) Value
- --------------------------------------------------------------------------------------------
<C> <C> <C> <C>
BANKS AND FINANCIAL -- 2.9%
$ 5,000,000 AAA/Aaa General Electric Capital Corp., 8.85%, 2005 $ 5,973,600
2,000,000 BBB+/A3 General Motors Acceptance Corp., 8.5%, 2003 2,258,680
------------
$ 8,232,280
------------
UTILITIES -- NATURAL GAS -- 2.9%
2,000,000 BB+/Baa3 Coastal Corp., 9.625%, 2012 $ 2,402,580
5,000,000 BB+/Ba2 NorAm Energy Corp., 10.0%, 2019 5,693,850
------------
$ 8,096,430
------------
U.S. GOVERNMENT OBLIGATIONS -- 4.0%
3,000,000 AAA/Aaa United States Treasury Note, 7.75%, 2001 $ 3,315,000
3,500,000 AAA/Aaa United States Treasury Note, 8.5%, 1997 3,640,560
4,000,000 AAA/Aaa United States Treasury Note, 6%, 1999 4,090,000
------------
$ 11,045,560
------------
FOREIGN BONDS -- 2.6%
4,850,000 A+/A2 Hydro-Quebec, 9.75%, 2018 $ 5,691,863
2,800,000 NR/NR Mexico City - Toluca Toll Road, 11.0%, 2002, 144A 1,498,000
------------
$ 7,189,863
------------
TOTAL BONDS (Cost $161,345,868) $168,940,295
------------
CONVERTIBLE BONDS -- 1.2%
40,000 A/A2 Atlantic Richfield Co., Exchangeable Notes,
9.0%, 1997 $ 940,000
1,800,000 B/B3 Raymond Corp., Conv. Sub. Deb., 6.5%, 2003 2,493,000
------------
TOTAL CONVERTIBLE BONDS (Cost $2,790,000) $ 3,433,000
------------
Shares
- -----------
PREFERRED STOCKS -- 4.6%
50,000 Bethlehem Steel, Conv., $3.50 $ 2,187,500
50,000 Reynolds Metals Co., Conv., 7.00% 2,531,250
117,000 Elf Overseas, Series A, 8.5% 3,115,125
10,200 United Dominion Realty (Class A) 263,925
65,000 Rouse Co., Conv., 6.5% 3,355,625
38,150 Sprint Corp., Conv., 8.25% 1,449,700
------------
TOTAL PREFERRED STOCKS (Cost $12,346,900) $ 12,903,125
------------
COMMON STOCKS -- 31.2%
CHEMICALS -- 1.1%
42,000 E.I. du Pont de Nemours and Co. $ 2,934,750
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
PIONEER INCOME FUND
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued)
Shares Value
- --------------------------------------------------------------------------------------------
<C> <C> <C> <C>
CONSUMER DURABLES -- 1.6%
125,000 Ford Motor Co. $ 3,625,000
22,600 The May Department Stores Co. 954,850
------------
$ 4,579,850
------------
CONSUMER NON-DURABLES -- 3.3%
50,000 CPC International, Inc. $ 3,431,250
75,000 Flowers Industries, Inc. 909,375
150,000 H.J. Heinz & Co. 4,968,750
------------
$ 9,309,375
------------
ENERGY -- 2.8%
50,000 Atlantic Richfield Co. $ 5,537,500
30,000 Texaco, Inc. 2,355,000
------------
$ 7,892,500
------------
FINANCIAL --3 .6%
50,000 Boatmen's Bancshares, Inc. $ 2,043,750
216,300 Huntington Bancshares Inc. 5,191,200
50,000 Northern Trust Corp. 2,800,000
------------
$ 10,034,950
------------
REAL ESTATE -- 5.4%
100,000 BRE Properties, Inc. (Class A) $ 3,562,500
180,100 Carr Realty Corp. 4,389,938
120,800 Health Care REIT, Inc. 2,174,400
333,100 United Dominion Realty Trust, Inc. 4,996,500
------------
$ 15,123,338
------------
TELECOMMUNICATIONS -- 7.8%
96,000 Ameritech Corp. $ 5,664,000
39,600 AT & T Corp. 2,564,100
100,000 Nynex Corp. 5,400,000
175,000 Pacific Telesis Group 5,884,375
40,000 U.S. West, Inc. 1,430,000
40,000 U.S. West Media Group 760,000
------------
$ 21,702,475
------------
TRANSPORTATION -- 0.5%
83,700 Canadian National Railway Co.*+ $ 1,255,500
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
Pioneer Income Fund
Schedule of Investments
December 31, 1995 (Continued)
Shares Value
- --------------------------------------------------------------------------------------------
<C> <C> <C> <C>
UTILITIES -- 5.1%
200,000 Allegheny Power System, Inc. $ 5,725,000
40,000 Brooklyn Union Gas Co. 1,170,000
89,200 E'Town Corp. 2,687,150
45,600 Lakehead Pipeline Partner, L.P. 1,168,500
100,000 Western Resources, Inc. 3,337,500
------------
$ 14,088,150
------------
TOTAL COMMON STOCKS (Cost $71,810,638) $ 86,920,888
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $248,293,406) (a) $272,197,308
------------
Principal
Amount
- --------------
TEMPORARY CASH INVESTMENT -- 2.5%
COMMERCIAL PAPER -- 2.5%
$ 7,086,000 Household Finance Corp., 5.7%, 01/02/96 $ 7,089,368
------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $7,086,000) $ 7,089,368
------------
TOTAL INVESTMENT IN SECURITES AND
TEMPORARY CASH INVESTMENT -- 100.0%
(Cost $255,379,406) $279,286,676
============
<FN>
* Non-income producing security.
+ Partly-paid security -- additional subscription payment of C$10.75 per
share will be required on
November 28, 1996.
144A Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1995, the value of these amounted to $1,498,000, or 0.5% of total net
assets.
NR Not rated.
(a) At December 31, 1995, the net unrealized gain on investments based on cost
for federal income tax purposes of $248,293,406 was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost......... $ 27,288,916
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value......... (3,385,014)
------------
Net unrealized gain..................................... $ 23,903,902
============
</FN>
</TABLE>
Purchases and sales of securities (excluding temporary cash
investments) for the year ended December 31, 1995 were as follows:
Purchases Sales
------------ ------------
Long-term U.S. Government $ 16,365,625 $ 24,017,897
Other Long-term Securities 50,496,246 59,609,767
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
PIONEER INCOME FUND
BALANCE SHEET
December 31, 1995
ASSETS:
Investment in securities, at value (including temporary
cash investment of $7,089,368) (cost $255,379,406;
see Schedule of Investments and Note 1) ...................... $279,286,676
Cash ........................................................... 146,838
Receivables --
Interest ....................................................... 3,859,072
Dividends ...................................................... 485,193
Trust shares sold .............................................. 182,948
Other .......................................................... 6,521
------------
Total assets ................................................. $283,967,248
------------
LIABILITIES:
Payables -
Trust shares repurchased ..................................... $ 179,975
Dividends .................................................... 17,620
Due to affiliates (Notes 2, 3 and 4) ........................... 277,508
Accrued expenses ............................................... 53,740
------------
Total liabilities ............................................ $ 528,843
------------
NET ASSETS:
Paid-in capital (Note 1) ....................................... $260,323,316
Accumulated net realized loss on investments (Note 1) .......... (788,813)
Net unrealized gain on investments (Note 1) .................... 23,903,902
------------
Total net assets ........................................... $283,438,405
------------
NET ASSET VALUE PER SHARE:
Class A -- (based on $281,638,529/27,342,663 shares of
beneficial interest outstanding --
unlimited number of shares authorized) ..................... $10.30
======
Class B -- (based on $1,799,876/175,212 shares of
beneficial interest outstanding --
unlimited number of shares authorized)...................... $10.27
======
MAXIMUM OFFERING PRICE:
Class A....................................................... $10.79
======
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
PIONEER INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
INVESTMENT INCOME (NOTE 1):
Interest ..................................................... $ 15,162,658
Dividends .................................................... 5,617,968
------------
Total investment income .................................... $ 20,780,626
------------
EXPENSES:
Management fees (Note 2) ..................................... $ 1,306,546
Distribution fees (Note 4)
Class A .................................................... 674,096
Class B .................................................... 4,628
Transfer agent fees (Note 3)
Class A .................................................... 771,771
Class B .................................................... 1,475
Registration fees ............................................ 47,580
Professional fees ............................................ 69,800
Accounting (Note 2) ............................................ 69,330
Custodian fees ................................................. 42,832
Fees and expenses of nonaffiliated trustees .................... 25,120
Printing ....................................................... 18,300
Miscellaneous .................................................. 24,976
------------
Total expenses ............................................... $ 3,056,454
Less fees paid indirectly (Note 5) ........................... (56,527)
------------
Net expenses ................................................. $ 2,999,927
------------
Net investment income ...................................... $ 17,780,699
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments (Note 1) .................... $ 2,830,576
Change in net unrealized gain on investments ................. 33,075,737
------------
Net gain on investments .................................... $ 35,906,313
------------
Net increase in net assets resulting from operations ..... $ 53,687,012
============
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
PIONEER INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1995 and 1994
1995 1994
------------ ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ........................................... $ 17,780,699 $ 18,819,632
Net realized gain (loss) on investments ......................... 2,830,576 (1,121,099)
Change in net unrealized gain (loss) on investments ............. 33,075,737 (30,351,285)
------------ ------------
Net increase (decrease) in net assets resulting
from operations ............................................. $ 53,687,012 $(12,652,752)
------------ ------------
EQUALIZATION (NOTE 1):
Net undistributed investment income included in price
of shares sold, net of shares repurchased ..................... $ -- $ (1,217)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ---
Class A ($0.65 and $0.67 per share, respectively) ............. $(17,646,195) $(19,110,002)
Class B ($0.46 and $0.00 per share, respectively) ............. (40,696) --
From net realized gain on investments ---
Class A ($0.11 and $0.00 per share, respectively) ............. (2,813,942) (108,415)
Class B ($0.11 and $0.00 per share, respectively) ............. (16,634) --
In excess of net realized gain on investments --
Class A ($0.00 and $0.00 per share, respectively) ............. (83,040) --
lass B ($0.00 and $0.00 per share, respectively) .............. (491) --
------------ ------------
Decrease in net assets resulting from distributions
to shareholders ............................................... $(20,600,998) $(19,218,417)
------------ ------------
FROM TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares ................................ $ 22,365,044 $ 33,801,549
Net asset value of shares issued to shareholders
in reinvestment of dividends .................................. 17,287,840 15,932,724
Cost of shares repurchased ...................................... (49,270,950) (54,590,110)
------------ ------------
Decrease in net assets resulting from
trust share transactions .................................... $ (9,618,066) $ (4,855,837)
------------ ------------
Net increase (decrease) in net assets ........................... $ 23,467,948 $(36,728,223)
NET ASSETS:
Beginning of year ............................................... 259,970,457 296,698,680
------------ ------------
End of year (including accumulated undistributed net investment
income of $0 and $251,982, respectively) ...................... $283,438,405 $259,970,457
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
PIONEER INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1995 and 1994 (Continued)
Year ended December 31, 1995 Year Ended December 31, 1994
---------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ....................... 2,103,203 $ 20,546,527 3,500,927 $ 33,801,549
Shares issued to shareholders in
reinvestment of distributions ... 1,747,425 17,240,367 1,691,536 15,932,724
Less shares repurchased ........... (5,050,730) (49,169,717) (5,703,841) (54,590,110)
---------- ------------ -------- ------------
Net decrease .................... (1,200,102) $(11,382,823) (511,378) $ (4,855,837)
========== ============ ========== ============
CLASS B*
Shares sold ....................... 180,493 $ 1,818,517
Shares issued to shareholders in
reinvestment of distributions ... 4,715 47,473
Less shares repurchased ........... (9,996) (101,233)
---------- ------------
Net increase .................... 175,212 $ 1,764,757
========== ============
<FN>
* Class B shares were first publicly offered on April 28, 1995.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
PIONEER INCOME FUND
FINANCIAL HIGHLIGHTS --
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
For the Years Ended December 31,
CLASS A 1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.11 $ 10.21 $ 10.13 $ 10.14 $ 9.14
-------- -------- -------- -------- --------
Increase (decrease) from
investment operations:
Net investment income $ 0.66 $ 0.66 $ 0.65 $ 0.65 $ 0.65
Net realized and unrealized
gain (loss) on investments 1.29 (1.09) 0.37 0.09 1.00
-------- -------- -------- -------- --------
Net increase (decrease) from
investment operations $ 1.95 $ (0.43) $ 1.02 $ 0.74 $ 1.65
Distributions to
shareholders from:
Net investment income (0.65) (0.67) (0.64) (0.66) (0.65)
Net realized gain (0.11) -- (0.30) (0.09) --
-------- -------- -------- -------- --------
Net increase (decrease)
in net asset value $ 1.19 $ (1.10) $ 0.08 $ (0.01) $ 1.00
-------- -------- -------- -------- --------
Net asset value,
end of period $ 10.30 $ 9.11 $ 10.21 $ 10.13 $ 10.14
======== ======== ======== ======== ========
Total return* 22.00% (4.31%) 10.24% 7.59% 18.62%
Ratio of net operating
expenses to average
net assets 1.13%+ 1.11% 1.06% 0.99% 1.04%
Ratio of net investment
income to average
net assets 6.58%+ 7.07% 6.52% 6.47% 6.73%
Portfolio turnover rate 25% 50% 69% 54% 43%
Net assets, end of period
(in thousands) $281,639 $259,970 $296,699 $250,033 $197,184
Ratios assuming reduction
for fees paid indirectly:
Net operating expenses 1.11% -- -- -- --
Net investment income 6.60% -- -- -- --
CLASS A 1990 1989 1988 1987 1986
-------- -------- -------- -------- --------
Net asset value,
beginning of period $ 9.53 $ 8.92 $ 8.67 $ 8.94 $ 9.17
-------- -------- -------- -------- --------
Increase (decrease) from
investment operations:
Net investment income $ 0.70 $ 0.74 $ 0.77 $ 0.76 $ 0.80
Net realized and unrealized
gain (loss) on investments (0.38) 0.63 0.27 (0.14) 0.04
-------- -------- -------- -------- --------
Net increase (decrease) from
investment operations $ 0.32 $ 1.37 $ 1.04 $ 0.62 $ 0.84
Distributions to
shareholders from:
Net investment income (0.71) (0.75) (0.76) (0.76) (0.80)
Net realized gain -- (0.01) (0.03) (0.13) (0.27)
-------- -------- -------- -------- --------
Net increase (decrease)
in net asset value (0.39) $ 0.61 $ 0.25 $ (0.27) $ (0.23)
-------- -------- -------- -------- --------
Net asset value,
end of period $ 9.14 $ 9.53 $ 8.92 $ 8.67 $ 8.94
======== ======== ======== ======== ========
Total return* 3.59% 15.89% 12.29% 6.82% 9.29%
Ratio of net operating
expenses to average
net assets 0.94% 0.78% 0.80% 0.79% 0.77%
Ratio of net investment
income to average
net assets 7.67% 7.98% 8.55% 8.29% 8.46%
Portfolio turnover rate 44% 69% 87% 115% 76%
Net assets, end of period
(in thousands) $166,205 $169,607 $159,212 $149,659 $118,760
Ratios assuming reduction
for fees paid indirectly:
Net operating expenses -- -- -- -- --
Net investment income -- -- -- -- --
<FN>
+ Ratios assuming no reduction for fees paid indirectly.
++ Prior to the assumption of the management agreement on December 1, 1993 by
Pioneering Management Corporation, the Fund was advised by Mutual of Omaha Fund
Management Company.
* 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.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
PIONEER INCOME FUND
FINANCIAL HIGHLIGHTS --
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED (Continued)
April 28, 1995
CLASS B*** to December 31, 1995
--------------------
Net asset value, beginning of period $ 9.55
Increase from investment operations:
Net investment income $ 0.39
Net realized and unrealized gain on investments 0.90
------
Total increase from investment operations $ 1.29
Distributions to shareholders from:
Net investment income (0.46)
Net realized gain (0.11)
------
Net increase in net asset value $ 0.72
------
Net asset value, end of period $10.27
======
Total return* 13.74%
Ratio of net operating expenses to average net assets 1.88%**+
Ratio of net investment income to average net assets 5.83%**+
Portfolio turnover rate 25%
Net assets, end of period (in thousands) $1,800
Ratios assuming reduction for fees paid indirectly:
Net operating expenses 1.78%**
Net investment income 5.93%**
+ Ratios assuming no reduction for fees paid indirectly.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized
*** Class B shares were first publicly offered on April 28, 1995.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
PIONEER INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. Pioneer 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 current
income consistent with preservation of capital. Growth of capital is a secondary
consideration.
The Board of Trustees (the Trustees) has authorized the issuance of two
share classes of the Fund, designated as Class A and Class B shares. Class B
shares were first publicly offered on April 28, 1995. Shares issued and
outstanding prior to April 28, 1995 were designated as Class A shares. The
shares of each class represent an interest in the same portfolio of investments
of the Fund and have equal rights to voting, redemptions, dividends and
liquidation, except that each class of shares can bear different transfer agent
and distribution fees and have exclusive voting rights with respect to the
distribution plans that have been adopted by Class A and Class B shareholders.
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.
Debt securities are valued based on valuations furnished by an independent
pricing service that utilizes a matrix system. This matrix system reflects such
factors as security prices, yields, maturities and ratings and is supplemented
by dealer and exchange quotations and fair market value information from other
sources, as required. Market discount and premium are accreted or amortized
daily on a straight-line basis. Equity securities are valued at the last sale
price on the principal exchange where they are traded. Equity securities that
have not traded on the date of valuation, or securities for which sale prices
are not generally reported, are valued at the mean between the last bid and
asked prices. Securities for which market quotations are not readily available
are valued at their fair values as determined by, or under the direction of, the
Trustees. Temporary cash investments are valued at cost plus accrued interest,
which approximates value. Dividend income is recorded on the ex-dividend date
and interest income is recorded on the accrual basis.
Gains and losses on sales of investments are calculated on the "identified
cost" method for both financial reporting and federal income tax purposes. It is
the Fund's practice to first select for sale those securities that have the
highest cost and also qualify for long-term capital gain or loss treatment for
tax purposes. Settlements from litigation and class action suits are recognized
when the Fund acquires an enforceable right to such awards. These settlements
are included in other income to the extent that they are not identifiable with
realized or unrealized losses. Included in net realized gain from investments is
$65,026 of class action settlements received by the Fund during the year ended
December 31, 1995.
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 income tax rules. Therefore,
the source of the Fund's distributions may be shown in the accompanying
financial statements as either
16
<PAGE>
PIONEER INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 (Continued)
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.
The Fund has reclassified $345,790, $415,817 and $70,027 from accumulated
undistributed net investment income, accumulated net realized loss and paid-in
capital, respectively. The reclassification has no impact on the net asset value
of the Fund and is designed to present the Fund's capital accounts on a tax
basis.
C. Trust Shares -- The Fund records sales and repurchases of its trust
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
$73,704 in underwriting commissions on the sale of the Fund's trust shares
during the year ended December 31, 1995. Distributions to shareholders are
recorded as of the ex-dividend date. Distributions paid by the Fund, if any,
with respect to each class of shares are calculated in the same manner, at the
same time, on the same day and in the same amount, except that Class A and Class
B shares can bear different transfer agent and distribution fees.
D. Class Allocations -- Distribution fees are calculated based on the
average daily net asset value attributable to Class A and Class B shares of the
Fund, respectively. Shareholders of Class A and Class B share all expenses and
fees paid to the transfer agent, Pioneering Services Corporation (PSC), for
their services, which are allocated based on the number of accounts in each
class and the ratable allocation of related out-of-pocket expenses (see Note 3).
Income, common expenses and realized and unrealized gains and losses are
calculated at the Fund level and allocated daily to each class of shares based
on the respective percentage of adjusted net assets at the beginning of the day.
E. Equalization -- Through December 31, 1994, the Fund followed the
accounting practice known as equalization by which a portion of the proceeds
from sales and cost repurchases of fund shares, which is equivalent, on a per
share basis, to the amount of undistributed net income on the date of the
transaction, is credited or charged to the fund shares.
2. Pioneering Management Corporation (PMC), the Fund's investment adviser,
manages the Fund's portfolio and is a wholly owned subsidiary of PGI. Management
fees are calculated daily at the annual rate of 0.50% of the Fund's average
daily net assets up to $250 million; 0.48% of the next $50 million; and 0.45% of
the excess over $300 million.
Prior to December 1, 1995, management fees were calculated in accordance
with the prior management contract with Mutual of Omaha Fund Management Company
at annual rates of 0.50% of average daily net assets up to $100 million; 0.48%
of the next $100 million; 0.46% of the next $100 million; 0.44% of the next $100
million; 0.42% of the next $100 million; and 0.40% of the excess over $500
million.
In addition, under the management agreement, certain other services and
costs, including accounting, regulatory reporting and insurance premiums, are
paid by the Fund. Included in due to affiliates is $19,267 and $5,477 in
management fees and accounting fees, respectively, payable to PMC at December
31, 1995.
3. PSC, a wholly owned subsidiary of PGI, provides substantially all transfer
agent and shareholder services to the Fund at negotiated rates. Included in due
to affiliates is $70,563 in transfer agent fees payable to PSC at December 31,
1995.
4. The Fund adopted a Plan of Distribution for Class A shares (Class A Plan) and
Class B shares (Class B Plan) in accordance with Rule 12b-1 of the Investment
Company Act of 1940. These
17
<PAGE>
PIONEER INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 (Continued)
plans allow for Class A shares and Class B shares to reimburse and compensate,
respectively, PFD for providing varying levels of distribution services and
other account maintenance services. The Class A Plan and Class B Plan provide
for reimbursement of PFD's distribution services in an amount up to 0.25% and
0.75%, respectively, of the average daily net assets of the respective classes
of shares. The Fund may also compensate PFD for additional services in an amount
up to 0.25% of the Fund's average daily net assets attributable to Class B
shares. Included in due to affiliates is $182,201 in distribution fees payable
to PFD at December 31, 1995.
In addition, Class B shares that are redeemed within six years of purchase
are subject to a contingent deferred sales charge (CDSC) at declining rates
beginning at 4.0% based on the lower of cost or market value of shares being
redeemed. Proceeds from the CDSC are paid to PFD. For the year ended December
31, 1995, CDSC in the amount of $134 was paid to PFD.
5. The Fund has entered into certain expense offset arrangements resulting in a
reduction in the Fund's total expenses. For the year ended December 31, 1995,
the Fund's expenses were reduced by $56,527 under such arrangements.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Trustees of Pioneer Income Fund:
We have audited the accompanying balance sheet of Pioneer Income Fund,
including the schedule of investments, as of December 31, 1995, and the related
statement of operations for the year then ended, and statements of changes in
net assets and financial highlights for the years ended December 31, 1995 and
1994. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for each of the eight years ended December 31, 1993 were audited by
other auditors whose report dated February 22, 1994 expressed an unqualified
opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Pioneer Income Fund as of December 31, 1995, the results of its operations for
the year then ended, and the changes in its net assets and financial highlights
for the years ended December 31, 1995 and 1994, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 2, 1996
18
<PAGE>
PIONEER INCOME FUND
TAX TREATMENT OF DISTRIBUTIONS
Made During the Year Ended December 31, 1995
Distributions Per Share
------------------------------------
From Net
To Shareholders Investment
Of Record Payment Date Income From Net Realized Gain
- --------------- ------------ ---------- ----------------------
CLASS A SHARES
March 17, 1995 March 29, 1995 $0.1600 $ --
June 22, 1995 June 30, 1995 0.1600 --
September 21, 1995 September 29, 1995 0.1600 --
December 20, 1995 December 28, 1995 0.1710 0.1075
------- -------
Total $0.6510 $0.1075
------- -------
CLASS B SHARES
June 22, 1995 June 30, 1995 $0.1500 $ --
September 21, 1995 September 29, 1995 0.1500 --
December 20, 1995 December 28, 1995 0.1591 0.1075
------- -------
Total $0.4591 $0.1075
------- -------
On a per share basis, the distributions from net realized gain for Class A and
Class B shares include $0.1075 which should be reported as long-term capital
gains.
Corporate shareholders may deduct up to 70% of qualifying dividends received
during the year. For purposes of computing the exclusion, 31% of distributions
from net investment income for Class A and Class B shares represents qualifying
dividends.
Shareholders who elected to take the Capital Gain Distribution in additional
shares of the Fund should report the distribution as explained above. The tax
cost of the shares received is $10.16 and $10.13 per share for Class A and Class
B shares, respectively.
The Fund hereby designates $2,914,107 as a capital gain dividend for the
purposes of the dividend paid deduction.
TRUSTEES' FEES, PRINCIPAL SHAREHOLDERS AND SHARE OWNERSHIP
OF TRUSTEES AND OFFICERS (UNAUDITED)
The aggregate direct remuneration paid by the Fund to nonaffiliated
trustees and officers during the year ended December 31, 1995 was approximately
$23,000, plus expenses incurred in attending trustees meetings of approximately
$3,000. Fees of trustees who are affiliated with or "interested persons" of
Pioneering Management Corporation and Pioneer Funds Distributor, Inc.,
investment adviser and principal underwriter, respectively, of the Fund ($1,000
in 1995) are reimbursed to the Fund by Pioneering Management Corporation in
accordance with the management agreement with the Fund. At December 31, 1995,
the trustees and officers of the Fund owned beneficially 1,643 Class A shares of
the Fund (approximately 0.01% of the outstanding Class A shares). The Pioneer
Group, Inc., the parent company of Pioneering Management Corporation and Pioneer
Funds Distributor, Inc., is a publicly held corporation of which Mr. Cogan,
Chairman and President of the Fund, owned approximately 15% of the outstanding
shares of capital stock at December 31, 1995.
19
<PAGE>
PIONEER INCOME FUND
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR.
Chairman and President
DAVID D. TRIPPLE
Executive Vice President
JOHN A. CAREY
Vice President
SHERMAN B. RUSS
Vice President
WILLIAM H. KEOUGH
Treasurer
JOSEPH P. BARRI
Secretary
INVESTMENT ADVISER
Pioneering Management
Corporation
CUSTODIAN
Brown Brothers
Harriman & Co.
SHAREHOLDER
SERVICES AND
TRANSFER AGENT
Pioneering Services Corporation
60 State Street
Boston, Massachusetts
02109
TRUSTEES
John F. Cogan, Jr.
Richard H. Egdahl, M.d.
Margaret B. W. Graham
John W. Kendrick
Marguerite A. Piret
David D. Tripple
Stephen K. West
John Winthrop
PRINCIPAL UNDERWRITER
Pioneer Funds
Distributor, Inc.
LEGAL COUNSEL
Hale and Dorr
INDEPENDENT
PUBLIC
ACCOUNTANTS
Arthur Andersen LLP
- ----------------------------------------------------------------------
Please call Pioneer for information on:
Existing accounts, new accounts, prospectuses,
applications and service forms........................ 1-800-225-6292
Fund yields and prices................................ 1-800-225-4321
Toll-free fax......................................... 1-800-225-4240
Retirement plans...................................... 1-800-622-0176
Telecommunications Device for the Deaf (TDD).......... 1-800-225-1997
- ----------------------------------------------------------------------
When distributed to persons who are not shareowners of the Fund, this report
must be accompanied by an official prospectus, which discusses the objectives,
policies, sales charges and other information about the Fund.
0296-2996
[Copyright] Pioneer Funds Distributor, Inc.
