[LOGO PIONEER]
PIONEER INCOME
FUND
ANNUAL REPORT 12/31/96
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 16
Notes to Financial Statements 22
Report of Independent Public Accountants 26
Results of Shareowner Meeting 27
Trustees, Officers and Service Providers 29
</TABLE>
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PIONEER INCOME FUND
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN 12/31/96
DEAR SHAREOWNER,
-----------------------------------------------------------------------------
I am pleased to introduce this report on Pioneer Income Fund for the
year ended December 31, 1996. We welcome new shareowners,
particularly those in Class C Shares. We also wish to thank you for
voting on the Proposals put forth earlier in the year; results are on
page 27.
After great deliberation, this year we concluded that the Fund's
focus on income was unlikely to work in shareowners' best interest
over the long term. So, following shareowner approval on January 14,
1997, the Fund's objective will change to growth and income, and its
name will become Pioneer Balanced Fund, effective February 3, 1997.
The Fund will still invest in both stocks and bonds, although each
issue will not be expected to provide income. Instead, your Fund's
management team will use a proprietary model to determine the mix of
growth-oriented stocks, dividend-paying stocks and a variety of
bonds. William C. Field, a member of our core equities investment
team, took on the role of day-to-day portfolio manager on January 2,
1997, and will shape the Fund to match its new objectives.
A final note. As you see, we've given your report a facelift. The new
style reflects what shareowners told us they want to see. Now you'll
find a Table of Contents and easy-to-read summaries of portfolio
information and performance. There's also a Portfolio Management
Discussion offering insights into market conditions, portfolio
strategy and results. I encourage you to read on to learn more about
your Fund.
Please contact your investment representative, or Pioneer at
1-800-225-6292, if you have questions about Pioneer Income Fund or
Pioneer Balanced Fund. Thank you for your support.
Respectfully,
/s/ John F. Cogan, Jr.
---------------------------
John F. Cogan, Jr.,
Chairman and President
1
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PIONEER INCOME FUND
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PORTFOLIO SUMMARY 12/31/96
PORTFOLIO DIVERSIFICATION
-----------------------------------------------------------------------------
(As a percentage of total investment portfolio)
U.S. Bonds 55.6%
[PIE CHART]
Convertibles 0.3%
U.S. Preferred Stocks 1.7%
International Bonds 1.9% U.S. Common Stocks 36.9%
Short-Term Cash Equivalents 3.6%
SECTOR DISTRIBUTION
-----------------------------------------------------------------------------
(As a percentage of long-term holdings)
Utilities 25%
Other 2%
Capital Goods 4%
[PIE CHART] Financial 20%
Consumer Durables 4%
Transportation 6%
Services 8% Basic Industries 12%
Energy 9%
Consumer Non-Durables 10%
10 LARGEST HOLDINGS
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(As a percentage of long-term holdings)
<TABLE>
<C> <S> <C> <C> <C> <C>
1. USX Corp., 9.375%, 02/15/12 3.43% 6. General Motors Corp., 9.4%, 2.23%
07/15/21
2. Rural Electric Cooperative 2.78 7. Ameritech Corp. 2.15
(Kansas Electric Power),
9.73%, 12/15/17
3. Pacific Telesis Group 2.38 8. New American Holdings Inc., 2.12
10.125%, 10/15/12
4. AMR Corp., 9.88%, 06/15/20 2.25 9. General Electric Capital 2.08
Corp., 8.85%, 04/01/05
5. Allegheny Power System, Inc. 2.25 10. NorAm Energy, 10.0%, 11/15/19 2.06
</TABLE>
Fund holdings will vary for other periods.
2
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PIONEER INCOME FUND
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/96 CLASS A SHARES
SHARE PRICES AND DISTRIBUTIONS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
PER SHARE 12/31/96 12/31/95
<S> <C> <C>
$10.65 $10.30
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS PER SHARE INCOME SHORT-TERM LONG-TERM
(12/31/95-12/31/96) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
<S> <C> <C> <C>
$0.621 $0.001 -
</TABLE>
INVESTMENT RETURNS
-----------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000
investment made in Pioneer Income Fund at public offering price,
compared to the growth of the Lehman Brothers Corporate Bond Index and
the Standard & Poor's 500 Index.
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 1996)
Net Asset Public Offering
Period Value Price*
10 Years 10.02% 9.53%
5 Years 8.76% 7.76%
1 Year 9.89% 4.90%
GROWTH OF $10,000
Lehman
Pioneer Brothers
Income Standard & Poor's Corporate Bond
Fund* 500 Index Index
12/31/86 9,550 10,000 10,000
12/31/87 10,203 10,525 10,255
12/31/88 11,457 12,267 11,200
12/31/89 13,278 16,148 12,778
12/31/90 13,754 15,648 13,680
12/31/91 16,315 20,406 16,212
12/31/92 17,553 21,959 17,620
12/31/93 19,350 24,169 19,764
12/31/94 18,517 24,488 18,988
12/31/95 22,590 33,681 23,213
12/31/96 24,825 41,411 23,977
/ / Pioneer Income Fund *
- - Lehman Brothers Corporate Bond Index
___ Standard & Poor's 500 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.
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 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 fees, expenses or sales charges. You cannot
invest directly in an Index.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than
their original cost.
3
<PAGE>
PIONEER INCOME FUND
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PERFORMANCE UPDATE 12/31/96 CLASS B SHARES
SHARE PRICES AND DISTRIBUTIONS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
PER SHARE 12/31/96 12/31/95
<S> <C> <C>
$10.59 $10.27
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS PER SHARE INCOME SHORT-TERM LONG-TERM
(12/31/95-12/31/96) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
<S> <C> <C> <C>
$0.567 $0.001 -
</TABLE>
INVESTMENT RETURNS
-----------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000
investment made in Pioneer Income Fund, compared to the growth of the
Lehman Brothers Corporate Bond Index and the Standard & Poor's 500
Index.
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 1996)
Period If Held If Redeemed*
Life-of-Fund 13.66% 11.46%
(4/28/95)
1 Year 9.02% 5.02%
GROWTH OF $10,000
Lehman
Pioneer Brothers
Income Standard & Poor's Corporate Bond
Fund* 500 Index Index
04/30/95 10,000 10,000 10,000
10,304 10,386 10,471
06/30/95 10,397 10,631 10,565
10,461 10,991 10,519
10,588 11,011 10,688
09/30/95 10,813 11,475 10,815
10,910 11,441 10,956
11,072 11,934 11,165
12/31/95 11,374 12,166 11,349
11,507 12,585 11,423
11,341 12,695 11,151
03/31/96 11,330 12,818 11,056
11,386 13,016 10,965
11,386 13,338 10,946
06/30/96 11,455 13,393 11,107
11,398 12,806 11,128
11,432 13,073 11,094
09/30/96 11,672 13,808 11,329
11,984 14,193 11,638
12,341 15,260 11,887
12/31/96 12,000 14,948 11,723
/ / Pioneer Income Fund *
- - Lehman Brothers Corporate Bond Index
___ Standard & Poor's 500 Index
* 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 year.
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 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 fees, expenses or sales charges. You cannot
invest directly in an Index.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than
their original cost.
4
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PIONEER INCOME FUND
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PERFORMANCE UPDATE 12/31/96 CLASS C SHARES
SHARE PRICES AND DISTRIBUTIONS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
PER SHARE 12/31/96 1/31/96
<S> <C> <C>
$10.62 $10.39
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS PER SHARE INCOME SHORT-TERM LONG-TERM
(1/31/96-12/31/96) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
<S> <C> <C> <C>
$0.573 $0.001 -
</TABLE>
INVESTMENT RETURNS
-----------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000
investment made in Pioneer Income Fund at public offering price,
compared to the growth of the Lehman Brothers Corporate Bond Index and
the Standard & Poor's 500 Index.
CUMULATIVE TOTAL RETURNS
(As of December 31, 1996)
Period If Held If Redeemed*
Life-of-Fund 8.12% 7.12%
(1/31/96)
GROWTH OF $10,000
Lehman
Pioneer Brothers
Income Standard & Poor's Corporate Bond
Fund* 500 Index Index
1/31/96 10,000 10,000 10,000
2/28/96 9,856 10,087 9,762
3/31/96 9,865 10,185 9,679
4/30/96 9,904 10,342 9,599
5/31/96 9,904 10,598 9,582
6/30/96 9,974 10,642 9,723
7/31/96 9,925 10,176 9,742
8/31/96 9,954 10,388 9,712
9/30/96 10,163 10,972 9,917
10/31/96 10,443 11,278 10,188
11/30/96 10,753 12,126 10,406
12/31/96 10,712 11,885 10,263
/ / Pioneer Income Fund *
- - Lehman Brothers Corporate Bond Index
___ Standard & Poor's 500 Index
* Reflects deduction of the 1% contingent deferred sales charge (CDSC) at
the end of the period and assumes reinvestment of distributions.
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 measure of 500 widely held common stock 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 fees, expenses or sales charges. You cannot
invest directly in an Index.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than
their original cost.
5
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/96
DEAR SHAREOWNER,
-----------------------------------------------------------------------------
Welcome to this final report on Pioneer Income Fund. When Pioneer next
writes to you, we will be updating you on Pioneer Balanced Fund's
progress toward its dual objective of growth and income. We are
pleased to let you know that you will begin receiving quarterly
reports on the Fund, dated March 31 and September 30 of each year, in
addition to the semiannual report of June 30 and annual report of
December 31.
STRONG YEAR FOR STOCKS, TOUGHER ROAD FOR BONDS
Bonds and stocks turned in quite different results for 1996. If the
stock market was characterized by what Alan Greenspan, chairman of the
Federal Reserve, called "irrational exuberance," the bond market was
more aptly described as subdued. Most bond indexes recorded only very
modest total returns for the year versus impressive returns on stock
indexes. Pioneer Income Fund's objective of generating high current
income has led to a portfolio with about two-thirds of its assets
invested in bonds over the past few years. Hence the Fund's total
return has tended to be closer to the returns on bonds rather than
stocks, as measured by the Lehman Brothers Corporate Bond Index and
the Standard & Poor's 500 Index, respectively. That was again the case
in 1996, with Pioneer Income Fund showing a total return of 9.89% on
Class A Shares versus total returns of 2.90% and 22.90%, respectively,
for the Lehman Brothers Index and the Standard & Poor's 500.
EMPHASIS ON CORPORATE BONDS
For the bond portion of the portfolio, our focus was on corporate
issues with Standard & Poor's ratings of BBB and BB. These allocations
helped protect the Fund from some of the weakness in the bond market.
The higher current income on lower-quality bonds attracted investors,
particularly during the latter part of the year. As their prices rose,
the difference narrowed between their yields and those of U.S.
Treasury issues offering the highest quality and comparable maturity.
The result was some nice price appreciation for the portfolio. For
instance, in August,
6
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/96 (CONTINUED)
we purchased a $4 million position in IMC Global, 9.45%, 2011 at
$106.625, giving it an 8.66% yield to maturity. By year-end, it was
valued at $120, producing a 7.24% yield to maturity.
As the year progressed, we found other attractive issues for initial
purchase. These included Freeport McMoRan Resource Partners, 8.75%,
2004, Ford Motor Credit, 9.14%, 2014, and Continental Cablevision,
9.5%, 2013. During the last six months of the year we liquidated 10
bond positions, putting the proceeds to work in what we thought were
more attractive alternatives.
REAL ESTATE-RELATED INVESTMENTS SHONE
On the stock side, the most significant change was the reduction of
the Fund's stake in convertible preferred securities and a meaningful
increase in stocks of real estate investment trusts (REITs). In all,
we added six more REITs to the portfolio: Arden Realty Group, Beacon
Properties, Cousins Properties, Duke Realty Investments, Gables
Residential Trust and Simon DeBartolo Group. The investment
performance of these REITs, which made up 3% of the total portfolio at
year-end, was one of the bright spots of the year. They grew in
popularity and price, thanks to their high income levels and tendency
to move independently of the overall market - two important factors
for investors in 1996's fast-paced financial markets. In fact, REITs
were one of the top-performing stock sectors for the year.
Other additions to the stock portfolio included General Mills, Amoco,
Chase Manhattan, GreenPoint Financial, Dominion Resources, GTE and
Lucent Technologies. Lucent Technologies was spun-off by AT&T. It
represents the telecommunications-equipment division of "Ma Bell,"
which is now, after all of its many divestitures, almost exclusively a
provider of long-distance telephone service.
7
<PAGE>
PIONEER INCOME FUND
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PORTFOLIO MANAGEMENT DISCUSSION 12/31/96 (CONTINUED)
LOOKING AHEAD
As Mr. Cogan discussed in his introductory letter, Pioneer Balanced
Fund will be different than Pioneer Income Fund, although common
characteristics remain. The Fund will continue to own both stocks and
bonds; however, the allocation to stocks will likely increase. We
expect to bring the portfolio to something near the 60% stock-40% bond
split that has proven to provide a solid mix of reward and risk for
balanced funds as a group looking back over the years.
We have high hopes for the Fund's new flexibility to add stocks that
offer potential for price appreciation, even if they don't contribute
to income. Of course, we'll still look for market segments like REITs
that offer potential for both appreciation and income. And we'll
consider a wide variety of bonds in an effort to generate income and
manage volatility. While the Fund's dividend is likely to decrease as
we expand the Fund to include growth opportunities, we expect the
Fund's portfolio will be in line so that your March distribution
reflects the new income level. And ultimately, we hope the reward will
be an improved total return for shareowners.
Please be assured that with Pioneer Balanced Fund, your investment
will receive the same careful, research-oriented approach we apply to
all of our funds. We have enjoyed managing your Fund over these past
three years since we acquired it from Mutual of Omaha in November
1993. We are hopeful you will continue to be pleased with your
investment, and we thank you for your support and interest.
Respectfully,
/s/ John A. Carey /s/ Sherman B. Russ
--------------------- ------------------------
John A. Carey, Sherman B. Russ,
Portfolio Manager Portfolio Manager
8
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/96
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C> <C>
INVESTMENT IN SECURITIES - 96.4%
CONVERTIBLE CORPORATE BONDS - 0.3%
$40,000 Atlantic Richfield, Exchangeable Note,
9.0%, 9/15/97 $ 860,000
----------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $990,000) $ 860,000
----------------
<CAPTION>
SHARES
<C> <S> <C> <C>
PREFERRED STOCKS - 1.7%
117,000 Elf Overseas, Series A, 8.5% $ 3,056,625
10,200 United Dominion Realty Trust (Series A) 269,025
38,150 Sprint Corp., Conv., 8.25%, 3/31/00 1,368,631
----------------
TOTAL PREFERRED STOCKS
(Cost $4,540,463) $ 4,694,281
----------------
COMMON STOCKS - 36.9%
BASIC INDUSTRIES - 1.4%
CHEMICALS - 1.4%
42,000 E.I. du Pont de Nemours and Co. $ 3,963,750
----------------
TOTAL BASIC INDUSTRIES $ 3,963,750
----------------
CONSUMER DURABLES - 2.1%
MOTOR VEHICLES - 2.1%
55,000 Chrysler Corp. $ 1,815,000
125,000 Ford Motor Co. 3,984,375
----------------
TOTAL CONSUMER DURABLES $ 5,799,375
----------------
CONSUMER NON-DURABLES - 4.1%
AGRICULTURE & FOOD - 3.7%
50,000 CPC International, Inc. $ 3,875,000
20,000 General Mills, Inc. 1,267,500
150,000 H.J. Heinz Co. 5,362,500
----------------
$ 10,505,000
----------------
RETAIL NON-FOOD - 0.4%
22,600 The May Department Stores Co. $ 1,056,550
----------------
TOTAL CONSUMER NON-DURABLES $ 11,561,550
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/96 (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C> <C>
ENERGY - 1.2%
OIL & GAS EXTRACTION - 0.9%
24,000 Amoco Corp. $ 1,932,000
5,000 Mobil Corp. 611,250
----------------
$ 2,543,250
----------------
OIL REFINING & DRILLING - 0.3%
5,700 Atlantic Richfield Co. $ 755,250
----------------
TOTAL ENERGY $ 3,298,500
----------------
FINANCIAL - 14.3%
COMMERCIAL BANK - 1.3%
137,930 Huntington Bancshares, Inc. $ 3,637,904
----------------
MISC. FINANCE - 2.8%
35,000 The Chase Manhattan Corp. $ 3,123,750
25,000 GreenPoint Financial Corp. 1,181,250
100,000 Northern Trust Corp. 3,625,000
$ 7,930,000
----------------
REAL ESTATE - 1.7%
154,585 The Rouse Co. $ 4,908,074
REAL ESTATE INVESTMENT TRUSTS - 8.5%
43,400 Arden Realty Group, Inc. $ 1,204,350
50,000 Beacon Properties Corp. 1,831,250
200,000 BRE Properties, Inc. (Class A) 4,950,000
180,100 Carramerica Realty Corp. 5,267,925
25,000 Cousins Properties, Inc. 703,125
50,000 Duke Realty Investments, Inc. 1,925,000
70,700 Gables Residential Trust 2,050,300
20,000 Simon DeBartolo Group, Inc. 620,000
333,100 United Dominion Realty Trust, Inc. 5,163,050
----------------
$ 23,715,000
----------------
TOTAL FINANCIAL $ 40,190,978
----------------
TECHNOLOGY - 1.4%
PHOTO/INSTRUMENTATION - 1.4%
50,000 Eastman Kodak Co. $ 4,012,500
----------------
TOTAL TECHNOLOGY $ 4,012,500
----------------
</TABLE>
10 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER INCOME FUND
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<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C> <C>
UTILITIES - 12.4%
ELECTRIC UTILITY - 2.5%
200,000 Allegheny Power Systems, Inc. $ 6,075,000
25,000 Dominion Resources, Inc. 962,500
----------------
$ 7,037,500
----------------
GAS UTILITY - 0.4%
40,000 The Brooklyn Union Gas Co. $ 1,205,000
----------------
TELECOMMUNICATIONS - 8.5%
96,000 Ameritech Corp. $ 5,820,000
59,600 AT&T Corp. 2,592,600
40,000 GTE Corp. 1,820,000
19,315 Lucent Technologies, Inc. 893,319
100,000 NYNEX Corp. 4,812,500
175,000 Pacific Telesis Group 6,431,250
40,000 U.S. West Communications 1,290,000
----------------
$ 23,659,669
----------------
WATER UTILITY - 1.0%
89,200 E'Town Corp. $ 2,820,950
----------------
TOTAL UTILITIES $ 34,723,119
----------------
TOTAL COMMON STOCKS
(Cost $78,504,931) $ 103,549,772
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 11
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/96 (CONTINUED)
<TABLE>
<CAPTION>
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
DEBT OBLIGATIONS - 57.5%
CORPORATE BONDS - 55.2%
BASIC INDUSTRIES - 9.7%
$2,000,000 B+/B1 Bethlehem Steel Corp.,
10.375%, 9/1/03 $ 2,115,000
2,000,000 BBB/Baa1 Bowater, Inc., 9.0%, 8/1/09 2,254,880
3,000,000 BBB/Baa1 Bowater, Inc., 9.375%,
12/15/21 3,586,320
4,000,000 BBB-/Baa2 Georgia Pacific Co., 9.875%,
11/1/21 4,471,240
3,000,000 BB-/B1 Stone Container Corp., 10.75%,
10/1/02 3,161,250
8,000,000 BBB-/Baa3 USX Corp., 9.375%, 2/15/12 9,283,120
2,500,000 B/B2 Weirton Steel Corp., 10.75%,
6/1/05 2,450,000
----------------
TOTAL BASIC INDUSTRIES $ 27,321,810
----------------
CAPITAL GOODS - 3.1%
3,000,000 A/A2 Caterpillar, Inc., 9.75%,
6/1/19 $ 3,287,730
2,000,000 BBB-/Baa3 Centex Corp., 8.75%, 3/1/07 2,092,360
3,000,000 BBB/Baa2 Joy Technologies, Inc.,
10.25%, 9/1/03 3,307,500
----------------
TOTAL CAPITAL GOODS $ 8,687,590
----------------
CONSUMER DURABLES - 2.1%
5,000,000 A-/A3 General Motors Corp., 9.4%,
7/15/21 $ 6,036,850
----------------
TOTAL CONSUMER DURABLES $ 6,036,850
----------------
CONSUMER NON-DURABLES - 5.1%
4,000,000 BB-/Ba1 Federated Department Stores,
Inc., 10.0%, 2/15/01 $ 4,344,920
3,300,000 BB+/Ba3 Freeport McMoRan Resource
Partners, L.P., 8.75%, 2/15/04 3,423,750
4,000,000 BBB/Baa2 IMC Global, Inc., 9.45%,
12/25/11 4,800,000
1,500,000 A/A2 May Department Stores Co.,
9.875%, 6/15/00 1,655,175
----------------
TOTAL CONSUMER NON-DURABLES $ 14,223,845
----------------
</TABLE>
12 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
ENERGY - 7.4%
$2,500,000 BBB/Baa1 Ashland Oil Co., 8.8%,
11/15/12 $ 2,799,825
5,000,000 AA/Aa2 BP America, Inc., 10.0%,
7/1/18 5,454,350
2,000,000 BB+/Baa3 Coastal Corp., 9.625%, 5/15/12 2,384,820
5,000,000 BBB/Baa3 Noram Energy Co., 10.0%,
11/15/19 5,569,800
4,100,000 A-/A3 Phillips Petroleum Co., 8.86%,
5/15/22 4,471,706
----------------
TOTAL ENERGY $ 20,680,501
----------------
FINANCIAL - 4.4%
4,000,000 A+/A1 Ford Motor Credit Co., 9.14%,
12/30/14 $ 4,446,440
2,000,000 A-/A3 General Motors Acceptance
Corp., 8.5%, 1/1/03 2,162,860
5,000,000 AAA/Aaa General Electric Capital
Corp., 8.85%, 4/1/05 5,616,600
----------------
TOTAL FINANCIAL $ 12,225,900
----------------
SERVICES - 8.1%
2,500,000 BBB+/Baa2 Continental Cablevision, Inc.,
9.5%, 8/1/13 $ 2,853,775
5,000,000 BBB/Baa3 News America Holdings, Inc.,
10.125%, 10/15/12 5,734,050
2,400,000 BBB-/Ba1 Tele-Communications, Inc.,
8.75%, 2/15/23 2,250,216
4,000,000 B+/Ba3 Tenet Healthcare Corp.,
10.125%, 3/1/05 4,430,000
5,000,000 BBB-/Ba1 Time Warner, Inc., 9.15%,
2/1/23 5,419,950
2,000,000 BB-/B1 Viacom International, Inc.,
10.25%, 9/15/01 2,180,000
----------------
TOTAL SERVICES $ 22,867,991
----------------
TECHNOLOGY - 0.4%
1,000,000 B+/B1 Unisys Corp., 15.0%, 7/1/97 $ 1,045,000
----------------
TOTAL TECHNOLOGY $ 1,045,000
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/96 (CONTINUED)
<TABLE>
<CAPTION>
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
TRANSPORTATION - 6.0%
$2,000,000 BB+/Baa3 AMR Corp., 9.75%, 3/15/00 $ 2,155,740
4,950,000 BB+/Baa3 AMR Corp., 9.88%, 6/15/20 6,084,639
5,000,000 BBB/Baa1 Delta Air Lines, Inc., 9.2%,
9/23/14 5,533,500
3,000,000 BBB+/Baa2 Kansas City Southern
Industries, Inc., 8.8%, 7/1/22 3,166,860
----------------
TOTAL TRANSPORTATION $ 16,940,739
----------------
UTILITIES - 8.9%
3,000,000 AAA/Aaa Cajun Electric Power
Cooperative, 9.52%, 3/15/19 $ 3,245,460
2,000,000 AAA/Aaa Cajun Electric Power
Cooperative, 8.92%, 3/15/19 2,162,040
5,000,000 BBB/Baa2 Commonwealth Edison Co.,
9.75%, 2/15/20 5,535,100
7,000,000 AAA/Aaa Rural Electric Cooperative
(Kansas Electric), 9.73%,
12/15/17 7,507,850
3,000,000 AAA/Aaa Rural Electric Cooperative
(Soyland Power), 9.7%, 9/30/17 3,193,470
3,000,000 A/A2 Virginia Electric and Power
Co., 8.75%, 4/1/21 3,216,090
----------------
TOTAL UTILITIES $ 24,860,010
----------------
TOTAL CORPORATE BONDS $ 154,890,236
----------------
U.S. GOVERNMENT
OBLIGATIONS - 0.4%
1,000,000 U.S. Treasury Notes, 7.75%,
2/15/01 $ 1,056,720
----------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS $ 1,056,720
----------------
</TABLE>
14 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
FOREIGN BONDS - 1.9%
$4,850,000 A+/A2 Hydro-Quebec, 9.75%, 1/15/18 $ 5,420,748
----------------
TOTAL FOREIGN BONDS $ 5,420,748
----------------
TOTAL DEBT OBLIGATIONS
(Cost $156,243,657) $ 161,367,704
----------------
TOTAL INVESTMENT IN SECURITIES
(Cost $240,279,051) $ 270,471,757
----------------
TEMPORARY CASH
INVESTMENT - 3.6%
COMMERCIAL PAPER - 3.6%
10,072,000 Household Finance Corp.,
6.55%, 1/2/97 $ 10,072,000
----------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $10,072,000) $ 10,072,000
----------------
TOTAL INVESTMENT IN SECURITIES
AND TEMPORARY CASH
INVESTMENT - 100%
(Cost $250,351,051)(a) $ 280,543,757
----------------
</TABLE>
(a) At December 31, 1996, the net unrealized gain on investments based on
cost for federal income tax purposes of $249,975,008 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized gain for all investments
in which there is an excess of value over tax cost $ 32,310,666
Aggregate gross unrealized loss for all investments
in which there is an excess of tax cost over value (1,741,917)
----------------
Net unrealized gain $ 30,568,749
----------------
</TABLE>
Purchases and sales of securities (excluding temporary cash investments)
for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Long-term U.S. Government $12,162,641 $21,588,242
Other Long-term Securities 72,052,714 73,243,443
</TABLE>
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
BALANCE SHEET 12/31/96
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (including temporary cash
investments of $10,072,000)(cost $250,351,051) $280,543,757
Receivables -
Fund shares sold 109,354
Dividends and interest 4,206,455
Other 5,421
------------
Total assets $284,864,987
------------
LIABILITIES:
Payables -
Fund shares repurchased $ 222,217
Dividends 292
Due to bank 157,175
Due to affiliates 375,251
Accrued expenses 46,839
------------
Total liabilities $ 801,774
------------
NET ASSETS:
Paid-in capital $251,543,542
Accumulated undistributed net investment income 263,168
Accumulated undistributed net realized gain 2,063,797
Net unrealized gain on investments 30,192,706
------------
Total net assets $284,063,213
------------
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $276,064,279/25,928,250 shares) $ 10.65
------------
Class B (based on $6,939,701/655,303 shares) $ 10.59
------------
Class C (based on $1,059,233/99,710 shares) $ 10.62
------------
MAXIMUM OFFERING PRICE:
Class A $ 11.15
------------
</TABLE>
16 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED 12/31/96
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld
of $2,351) $ 5,223,996
Interest 15,013,248
-----------
Total investment income $20,237,244
-----------
EXPENSES:
Management fees $ 1,386,645
Transfer agent fees
Class A 692,242
Class B 12,772
Class C 957
Distribution fees
Class A 683,756
Class B 44,098
Class C 5,581
Accounting 78,051
Custodian fees 46,201
Registration fees 34,090
Professional fees 49,650
Printing 21,040
Fees and expenses of nonaffiliated trustees 18,652
Miscellaneous 29,248
-----------
Total expenses $ 3,102,983
Less fees paid indirectly (65,399)
-----------
Net expenses $ 3,037,584
-----------
Net investment income $17,199,660
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $ 2,594,045
Change in net unrealized gain on investments 6,288,804
-----------
Net gain on investments $ 8,882,849
-----------
Net increase in net assets resulting from operations $26,082,509
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED 12/31/96 AND 12/31/95
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FROM OPERATIONS: 12/31/96 12/31/95
<S> <C> <C>
Net investment income $ 17,199,660 $ 17,780,699
Net realized gain on investments 2,594,045 2,830,576
Change in net unrealized gain on investments 6,288,804 33,075,737
------------ ------------
Net increase in net assets resulting from
operations $ 26,082,509 $ 53,687,012
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ($0.62 and $0.65 per share, respectively) $(16,361,461) $(17,646,195)
Class B ($0.52 and $0.46 per share, respectively) (242,093) (40,696)
Class C ($0.49 per share) (31,699) -
In excess of net investment income:
Class B ($0.05 and $0.00 per share, respectively) (33,567) -
Class C ($0.08 per share) (7,943) -
Net realized gain:
Class A ($0.00 and $0.11 per share, respectively) (31,088) (2,813,942)
Class B ($0.00 and $0.11 per share, respectively) (1,181) (16,634)
Class C ($0.00 per share) (116) -
In excess of net realized gain:
Class A ($0.00 and $0.00 per share, respectively) - (83,040)
Class B ($0.00 and $0.00 per share, respectively) - (491)
------------ ------------
Total distributions to shareholders $(16,709,148) $(20,600,998)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 30,741,958 $ 22,365,044
Reinvestment of distributions 14,065,908 17,287,840
Cost of shares repurchased (53,556,419) (49,270,950)
------------ ------------
Net decrease in net assets resulting from
fund share transactions $ (8,748,553) $ (9,618,066)
------------ ------------
Net increase in net assets $ 624,808 $ 23,467,948
NET ASSETS:
Beginning of year 283,438,405 259,970,457
------------ ------------
End of year (including accumulated undistributed net
investment income of $263,168 and $0, respectively) $284,063,213 $283,438,405
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A '96 SHARES '96 AMOUNT '95 SHARES '95 AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,362,021 24,241,197 2,103,203 20,546,527
Reinvestment of distributions 1,360,560 13,797,072 1,747,425 17,240,367
Less shares repurchased (5,136,994) (52,728,595) (5,050,730) (49,169,717)
---------- ----------- ---------- -----------
Net decrease (1,414,413) (14,690,326) (1,200,102) (11,382,823)
---------- ----------- ---------- -----------
CLASS B
Shares sold 535,117 5,482,009 180,493 1,818,517
Reinvestment of distributions 23,415 237,783 4,715 47,473
Less shares repurchased (78,441) (799,735) (9,996) (101,233)
---------- ---------- ---------- -----------
Net increase 480,091 4,920,057 175,212 1,764,757
---------- ----------- ---------- -----------
CLASS C*
Shares sold 99,372 1,018,752
Reinvestment of distributions 3,040 31,053
Less shares repurchased (2,702) (28,089)
---------- -----------
Net increase 99,710 1,021,716
---------- -----------
</TABLE>
* Class C shares were first publicly offered on January 31, 1996.
18 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/96
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS A 12/31/96 12/31/95 12/31/94 12/31/93(A) 12/31/92
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.30 $ 9.11 $ 10.21 $ 10.13 $ 10.14
---------- ---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income $ 0.64 $ 0.66 $ 0.66 $ 0.65 $ 0.65
Net realized and unrealized gain (loss) on investments 0.33 1.29 (1.09) 0.37 0.09
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ 0.97 $ 1.95 $ (0.43) $ 1.02 $ 0.74
Distributions to shareholders:
Net investment income (0.62) (0.65) (0.67) (0.64) (0.66)
Net realized gain - (0.11) - (0.30) (0.09)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ 0.35 $ 1.19 $ (1.10) $ 0.08 $ (0.01)
-------- -------- -------- -------- --------
Net asset value, end of year $ 10.65 $ 10.30 $ 9.11 $ 10.21 $ 10.13
-------- -------- -------- -------- --------
Total return* 9.89% 22.00% (4.31)% 10.24% 7.59%
Ratio of net expenses to average net assets 1.10%+ 1.13%+ 1.11% 1.06% 0.99%
Ratio of net investment income to average net assets 6.17%+ 6.58%+ 7.07% 6.52% 6.47%
Portfolio turnover rate 31% 25% 50% 69% 54%
Average commission rate paid(1) $ 0.0587 - - - -
Net assets, end of year (in thousands) $276,064 $281,639 $259,970 $296,699 $250,033
Ratios assuming reduction for fees paid indirectly:
Net expenses 1.08% 1.11% - - -
Net investment income 6.19% 6.60% - - -
</TABLE>
(a) Prior to the assumption of the management agreement on December 1, 1993 by
Pioneering Management Corporation, the Fund was advised by Mutual of Omaha
Fund Management Company.
* Assumes initial investment at net asset value at the beginning of each year,
reinvestment of distributions, the complete redemption of the investment at
net asset value at the end of each year and no sales charges. Total return
would be reduced if sale charges were taken into account.
+ Ratios assuming no reduction for fees paid indirectly.
(1) Amount represents the rate of commission paid per share on the Fund's
exchange listed security transactions.
The accompanying notes are an integral part of these financial statements. 19
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/96
<TABLE>
<CAPTION>
YEAR ENDED 4/28/95 TO
CLASS B 12/31/96 12/31/95
<S> <C> <C>
Net asset value, beginning of period $ 10.27 $ 9.55
-------- --------
Increase from investment operations:
Net investment income $ 0.52 $ 0.39
Net realized and unrealized gain on
investments 0.37 0.90
-------- --------
Net increase from investment
operations $ 0.89 $ 1.29
Distributions to shareholders:
Net investment income (0.52) (0.46)
In excess of net investment income (0.05) -
Net realized gain - (0.11)
-------- --------
Net increase in net asset value $ 0.32 $ 0.72
-------- --------
Net asset value, end of period $ 10.59 $10.27
-------- --------
Total return* 9.02% 13.74%
Ratio of net expenses to average net assets 1.88%+ 1.88%**+
Ratio of net investment income to average
net assets 5.45%+ 5.83%**+
Portfolio turnover rate 31% 25%
Average commission rate paid(1) $ 0.0587 -
Net assets, end of period (in thousands) $ 6,940 $1,800
Ratios assuming reduction of fees paid
indirectly:
Net expenses 1.86% 1.78%**
Net investment income 5.47% 5.93%**
* Assumes initial investment at net asset value at the beginning of each period,
reinvestment of distributions, the complete redemption of the investment at net
asset value at the end of each period and no sales charges. Total return would
be reduced if sale charges were taken into account.
** Annualized.
+ Ratios assuming no reduction for fees paid indirectly.
(1) Amount represents the rate of commission paid per share on the Fund's exchange
listed security transactions.
</TABLE>
20 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/96
<TABLE>
<CAPTION>
1/31/96 TO
CLASS C (A) 12/31/96
<S> <C>
Net asset value, beginning of period $ 10.39
--------
Increase from investment operations:
Net investment income $ 0.49
Net realized and unrealized gain on investments 0.31
--------
Net increase from investment operations $ 0.80
Distributions to shareholders:
Net investment income (0.49)
In excess of net investment income (0.08)
--------
Net increase in net asset value $ 0.23
--------
Net asset value, end of period $ 10.62
--------
Total return* 8.12%
Ratio of net expenses to average net assets 1.76%**+
Ratio of net investment income to average net assets 5.63%**+
Portfolio turnover rate 31%
Average commission rate paid(1) $ 0.0587
Net assets, end of period (in thousands) $ 1,059
Ratios assuming reduction of fees paid indirectly:
Net expenses 1.73%**
Net investment income 5.66%**
(a) Class C shares were first publicly offered on January 31, 1996.
* Assumes initial investment at net asset value at the beginning of each period,
reinvestment of distributions, the complete redemption of the investment at net asset
value at the end of each period and no sales charges. Total return would be reduced
if sale charges were taken into account.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
(1) Amount represents the rate of commission paid per share on the Fund's exchange listed
security transactions.
</TABLE>
The accompanying notes are an integral part of these financial statements. 21
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/96
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
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 and conservation
of capital. Growth of capital is a secondary consideration.
The Fund offers three classes of shares - Class A, Class B and Class C
shares. Class C shares were first publicly offered on January 31,
1996. Shares of Class A, Class B and Class C each represent an
interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemptions, dividends and liquidation, except
that each class of shares can bear different transfer agent and
distribution fees and have exclusive voting rights with respect to the
distribution plans that have been adopted by Class A, Class B and
Class C shareholders, respectively.
The Fund's financial statements have been prepared in conformity with
generally accepted accounting principles that require the management
of the Fund to, among other things, make estimates and assumptions
that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ
from those estimates. The following is a summary of significant
accounting policies consistently followed by the Fund, which are in
conformity with those generally accepted in the investment company
industry:
A. SECURITY VALUATION
Security transactions are recorded on trade date. Debt securities
are valued based on valuations furnished by independent pricing
services that utilize matrix systems. These matrix systems reflect
such factors as security prices, yields, maturities and ratings and
are supplemented by dealer and exchange quotations and fair market
value information from other sources, as required. Market discount
and premium are accreted or amortized daily on a straight-line
basis. Equity securities are valued at the last sale price on the
principal exchange where they are traded. 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
22
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
available are valued at their fair values as determined by, or under
the direction of, the Board of Trustees. Dividend income is
recorded on the ex-dividend date and 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.
Settlements from litigation and class action suits are recognized
when the Fund acquires an enforceable right to such awards, and 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 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.
The Fund has reclassified $259,729 and $31,221 from accumulated
undistributed net investment income and paid-in capital,
respectively, to accumulated undistributed net realized gain. 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
23
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/96 (CONTINUED)
Fund and an indirect subsidiary of The Pioneer Group, Inc. (PGI).
PFD earned $76,135 in underwriting commissions on the sale of fund
shares during the year ended December 31, 1996.
D. CLASS ALLOCATIONS
Distribution fees are calculated based on the average daily net
asset value attributable to Class A, Class B and Class C shares of
the Fund, respectively. Shareholders of each class share all
expenses and fees paid to the transfer agent, Pioneering Services
Corporation (PSC), for their services, which are allocated based on
the number of accounts in each class and the ratable allocation of
related out-of-pocket 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.
Distributions to shareholders are recorded as of the ex-dividend
date. Distributions paid by the Fund with respect to each class of
shares are calculated in the same manner, at the same time, and in
the same amount, except that Class A, Class B and Class C shares
can bear different transfer agent and distribution fees.
2. MANAGEMENT AGREEMENT
Pioneering Management Corporation (PMC), the Fund's investment
adviser, manages the Fund's portfolio and is a wholly owned subsidiary
of PGI. Management fees are calculated daily at the annual rate of
0.50% of the Fund's average daily net assets up to $250 million; 0.48%
of the next $50 million; and 0.45% of the excess over $300 million.
In addition, under the management agreement, certain other services
and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Fund. At December 31, 1996, $129,201 was
payable to PMC related to management fees and certain other services.
3. TRANSFER AGENT
PSC, a wholly owned subsidiary of PGI, provides substantially all
transfer agent and shareholder services to the Fund at negotiated
rates. Included
in due to affiliates is $60,278 in transfer agent fees payable to PSC
at December 31, 1996.
24
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
4. DISTRIBUTION PLANS
The Fund adopted a Plan of Distribution for each class of shares
(Class A Plan, Class B Plan and Class C Plan) in accordance with Rule
12b-1 of the Investment Company Act of 1940. Pursuant to the Class A
Plan, the Fund pays PFD a service fee of up to 0.25% of the Fund's
average daily net assets in reimbursement of its actual expenditures
to finance activities primarily intended to result in the sale of
Class A shares. Pursuant to the Class B Plan and the Class C Plan, the
Fund pays PFD 1.00% of the average daily net assets attributable to
each class of shares. The fee consists of a 0.25% service fee and a
0.75% distribution fee paid as compensation for personal services
and/or account maintenance services or distribution services with
regard to Class B and Class C shares. Included in due to affiliates is
$185,773 in distribution fees payable to PFD at December 31, 1996.
In addition, redemptions of each class of shares may be subject to a
contingent deferred sales charge (CDSC). A CDSC of 1.00% may be
imposed on redemptions of certain net asset value purchases of Class A
shares within one year of purchase. Class B shares that are redeemed
within six years of purchase are subject to a CDSC at declining rates
beginning at 4.0%, based on the lower of cost or market value of
shares being redeemed. Redemptions of Class C shares within one year
of purchase are subject to a CDSC of 1.00%. Proceeds from the CDSC are
paid to PFD. For the year ended December 31, 1996, CDSCs in the amount
of $5,060 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, 1996, the Fund's expenses were reduced by $65,399
under such arrangements.
6. OTHER MATTERS
Effective February 3, 1997, certain changes were made to the Fund's
operations including, among other things, a new management contract
and a change in the Fund's investment objective from current income
consistent with preservation and conservation of capital to capital
growth and current income. In connection with this policy change, the
Fund changed its name to Pioneer Balanced Fund.
25
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
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, 1996,
and the related statement of operations, and the statements of
changes in net assets for the periods presented and financial
highlights for each of the three years ended December 31, 1996. 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 two 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, 1996 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Pioneer Income Fund as of December 31, 1996,
the results of its operations, and the changes in its net assets for
the periods presented and financial highlights for each of the three
years ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 3, 1997
26
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
RESULTS OF SHAREOWNER MEETING
On January 14, 1997, Pioneer Income Fund held a special meeting of
shareowners. All proposals were passed by shareowner vote. Following
are the detailed results of the vote for each Proposal presented.
PROPOSAL 1 -- APPROVE AMENDMENTS TO THE FUND'S INVESTMENT OBJECTIVE.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
14,073,964.612 908,696.017 1,296,263.809
</TABLE>
PROPOSAL 2 -- APPROVE A NEW MANAGEMENT CONTRACT WITH PIONEERING
MANAGEMENT CORPORATION (PMC).
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
12,167,722.114 2,594,434.935 1,516,767.389
</TABLE>
PROPOSAL 3 -- ELECT EIGHT TRUSTEES TO SERVE ON THE BOARD OF TRUSTEES.
<TABLE>
<CAPTION>
NOMINEE AFFIRMATIVE WITHHELD
<S> <C> <C>
John F. Cogan, Jr. 15,984,678.517 612,907.921
Richard H. Egdahl, M.D. 16,012,253.600 585,332.838
Margaret B.W. Graham 16,032,384.540 565,201.898
John W. Kendrick 16,019,699.458 577,886.980
Marguerite A. Piret 16,038,621.609 558,964.829
David D. Tripple 16,025,415.840 572,170.598
Stephen K. West 16,023,247.488 574,338.950
John Winthrop 16,000,330.445 597,255.993
</TABLE>
PROPOSAL 4 -- RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS THE FUND'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31,
1997.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
14,814,987.323 300,307.194 1,480,491.921
</TABLE>
PROPOSAL 5A -- AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING UNDERWRITING.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
13,647,107.647 733,120.891 1,898,695.900
</TABLE>
PROPOSAL 5B -- AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING COMMODITIES.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
13,500,741.689 945,701.238 1,832,481.511
</TABLE>
27
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
RESULTS OF SHAREOWNER MEETING (CONTINUED)
PROPOSAL 5C -- ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING INVESTMENT COMPANIES.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
13,442,630.872 978,387.572 1,857,905.994
</TABLE>
PROPOSAL 5D -- ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING AFFILIATES OF AFFILIATES.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
13,358,834.892 984,555.173 1,935,534.373
</TABLE>
PROPOSAL 5E -- ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING "UNSEASONED" ISSUERS.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
13,300,232.169 1,043,589.322 1,935,102.947
</TABLE>
PROPOSAL 5F -- AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING BORROWING.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
13,404,932.489 1,012,469.570 1,861,522.379
</TABLE>
PROPOSAL 5G -- ADD A NEW FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
"SENIOR SECURITIES."
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C>
13,574,619.493 795,610.631 1,908,694.314
</TABLE>
28
<PAGE>
PIONEER INCOME FUND
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
<TABLE>
<S> <C>
TRUSTEES OFFICERS
John F. Cogan, Jr. John F. Cogan, Jr., Chairman and
Richard H. Egdahl, M.D. President
Margaret B.W. Graham David D. Tripple, Executive Vice
John W. Kendrick President
Marguerite A. Piret John A. Carey, Vice President
David D. Tripple Sherman B. Russ, Vice President
Stephen K. West William H. Keough, Treasurer
John Winthrop Joseph P. Barri, Secretary
</TABLE>
INVESTMENT ADVISER
Pioneering Management Corporation
CUSTODIAN
Brown Brothers Harriman & Co.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
PRINCIPAL UNDERWRITER
Pioneer Funds Distributor, Inc.
LEGAL COUNSEL
Hale and Dorr LLP
SHAREHOLDER SERVICES AND TRANSFER AGENT
Pioneering Services Corporation
29
<PAGE>
HOW TO CONTACT PIONEER
- -------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us for
assistance of information.
YOU CAN CALL US FOR:
ACCOUNT INFORMATION, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FACTFONE(sm) for automated fund yields, prices,
account information and transactions 1-800-225-4321
RETIREMENT PLANS INFORMATION 1-800-622-0176
TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD) 1-800-225-1997
OR WRITE TO US:
Pioneering Service 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)
THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT
FUND PROSPECTUS.
<TABLE>
<S> <C>
[LOGO PIONEER] PIONEER FUNDS DISTRIBUTOR, INC. 0297-3837
60 STATE STREET (C) PIONEER FUNDS DISTRIBUTOR, INC.
BOSTON, MASSACHUSETTS 02109 [LOGO] PRINTED ON RECYCLED PAPER
</TABLE>
