[Pioneer Logo]
PIONEER
BALANCED
FUND
ANNUAL REPORT 12/31/97
<PAGE>
TABLE OF CONTENTS
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Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 15
Notes to Financial Statements 21
Report of Independent Public Accountants 25
Trustees, Officers and Service Providers 26
Retirement Plans from Pioneer 27
Programs and Services for Pioneer Shareowners 28
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PIONEER BALANCED FUND
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN 12/31/97
- --------------------------------------------------------------------------------
DEAR SHAREOWNER,
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It is with pleasure that I introduce this report for Pioneer Balanced
Fund, covering the year ended December 31, 1997. I thank you for your
interest and for this opportunity to comment briefly on your Fund and
today's investing environment.
The past 12 months marked the beginning of a new era for your Fund.
Following shareowners' approval, the Fund's investment objective was
revised and its name changed from Pioneer Income Fund on February 3,
1997. Your investment team began building a balanced portfolio of
stocks and bonds designed specifically to pursue growth of capital
and provide regular income - a strategy we believe is well-suited for
the conservative, long-term investor.
The Fund still invests in both stocks and bonds, although each
security no longer is expected to provide income. Instead, the team
uses a proprietary model to determine the appropriate mix of growth-
oriented stocks, dividend-paying stocks and a variety of bonds.
Portfolio manager William Field, a member of our core value
investment team, had a busy period leading this effort since he
assumed responsibility for the Fund's day-to-day management on
January 27. I encourage you to read this report to learn about your
Fund's progress.
If you have questions about Pioneer Balanced Fund, please contact
your investment professional, or Pioneer at 1-800-225-6292. Thank you
for your support.
Respectfully,
/s/ John F. Cogan, Jr.
-------------------------------
John F. Cogan, Jr.,
Chairman and President
1
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PIONEER BALANCED FUND
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PORTFOLIO SUMMARY 12/31/97
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PORTFOLIO DIVERSIFICATION
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(As a percentage of total investment portfolio)
[pie chart
U.S. Common Stocks 57.1%
U.S. Corporate Bonds 27.8%
U.S. Government Securities 10.9%
Short-Term Cash Equivalents 1.7%
International Preferred Stocks 1.1%
Depositary Receipts for International Stocks 0.8%
U.S. Convertible Securities 0.6%
SECTOR DISTRIBUTION
-----------------------------------------------------------------------------
(As a percentage of long-term holdings)
[pie chart]
Financials 25%
Technology 14%
Government Obligations 11%
Health Care 11%
Basic Materials 10%
Energy 7%
Consumer Cyclicals 6%
Capital Goods 3%
Consumer Services 3%
Consumer Staples 3%
Transportation 3%
Communication Services 2%
Utilities 2%
10 LARGEST HOLDINGS
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(As a percentage of long-term holdings)
<TABLE>
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury Bonds, 6.5%, 3.77% 6. Monsanto Co. 2.72%
10/15/06
2. U.S. Treasury Notes, 6.25%, 3.67 7. Integrated Health Services, 2.39
1/31/02 Inc.
3. U.S. Treasury Notes, 5.875%, 3.61 8. General Motors Corp., 9.4%, 2.33
1/31/99 7/15/21
4. Merck & Co., Inc. 3.06 9. Allstate Corp. 2.29
5. The Chase Manhattan Corp. 2.76 10. Delta Air Lines, Inc., 9.2%, 2.16
9/23/14
</TABLE>
Fund holdings will vary for other periods.
2
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PIONEER BALANCED FUND
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PERFORMANCE UPDATE 12/31/97 CLASS A SHARES
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SHARE PRICES AND DISTRIBUTIONS
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NET ASSET VALUE
PER SHARE 12/31/97 12/31/96
$10.15 $10.65
DISTRIBUTIONS PER SHARE INCOME SHORT-TERM LONG-TERM
(12/31/96 - 12/31/97) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$0.404 $0.381 $1.162
INVESTMENT RETURNS
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The mountain chart on the right shows the growth of a $10,000
investment made in Pioneer Balanced Fund at public offering price,
compared to the growth of the Standard & Poor's 500 Index and the
Lehman Brothers Government/Corporate Bond Index.
[mountain chart]
Growth of $10,000
<TABLE>
<CAPTION>
Lehman Brothers Government/
Pioneer Balance Fund* Standard & Poor's 500 Index Corporate Bond Index
<S> <C> <C> <C>
12/87 9,550 10,000 10,000
12/88 10,722 11,655 10,758
12/89 12,427 15,342 12,290
12/90 12,872 14,867 13,307
12/91 15,270 19,388 15,453
12/92 16,428 20,864 16,625
12/93 18,109 22,963 18,459
12/94 17,329 23,266 17,811
12/95 21,142 32,001 21,238
12/96 23,233 39,345 21,861
12/97 26,468 52,468 23,993
</TABLE>
[boxed text]
Average Annual Total Returns
(As of December 31, 1997)
Net Asset Public Offering
Period Value Price*
10 Years 10.73% 10.22%
5 Years 10.01 8.99
1 Year 13.92 8.81
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
The Fund adopted its current name and investment objective on February
3, 1997. Prior to that date, the Fund's name was Pioneer Income Fund and
its objective was income from a portfolio of income-producing bonds and
stocks.
The Lehman Brothers Government/Corporate Bond Index is an unmanaged,
composite index of the U.S. bond market. It contains 5,353 issues,
including Treasury and government agency securities, investment-grade
corporate bonds and Yankee bonds. 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
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PIONEER BALANCED FUND
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PERFORMANCE UPDATE 12/31/97 CLASS B SHARES
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SHARE PRICES AND DISTRIBUTIONS
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NET ASSET VALUE
PER SHARE 12/31/97 12/31/96
$10.08 $10.59
DISTRIBUTIONS PER SHARE INCOME SHORT-TERM LONG-TERM
(12/31/96 - 12/31/97) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$0.311 $0.381 $1.162
INVESTMENT RETURNS
-----------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000
investment made in Pioneer Balanced Fund, compared to the growth of the
Standard & Poor's 500 Index and the Lehman Brothers
Government/Corporate Bond Index.
[mountain chart]
<TABLE>
<CAPTION>
Growth of $10,000
Lehman Brothers Government/
Pioneer Balance Fund* Standard & Poor's 500 Index Corporate Bond Index
<S> <C> <C> <C>
04/95 10,000 10,000 10,000
10,397 10,631 10,502
10,813 11,475 10,703
11,374 12,166 11,202
11,330 12,818 10,942
11,455 13,393 10,994
11,672 13,807 11,188
12,400 14,958 11,530
12,235 15,359 11,431
13,142 18,039 11,846
14,232 19,390 12,261
12/97 13,710 19,947 12,655
</TABLE>
[boxed text]
Average Annual Total Returns
(As of December 31, 1997)
Net Asset Public Offering
Period Value Price*
Life-of-Fund 13.41% 12.49%
(4/28/95)
1 Year 12.98 9.17
* Reflects deduction of the maximum applicable contingent deferred sales
charge (CDSC) at the end of the period and assumes reinvestment of
distributions. The maximum CDSC of 4% declines over six years.
The Fund adopted its current name and investment objective on February
3, 1997. Prior to that date, the Fund's name was Pioneer Income Fund and
its objective was income from a portfolio of income-producing bonds and
stocks.
The Lehman Brothers Government/Corporate Bond Index is an unmanaged,
composite index of the U.S. bond market. It contains 5,353 issues,
including Treasury and government agency securities, investment-grade
corporate bonds and Yankee bonds. 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 BALANCED FUND
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PERFORMANCE UPDATE 12/31/97 CLASS C SHARES
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SHARE PRICES AND DISTRIBUTIONS
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NET ASSET VALUE
PER SHARE 12/31/97 12/31/96
$10.17 $10.62
DISTRIBUTIONS PER SHARE INCOME SHORT-TERM LONG-TERM
(12/31/96 - 12/31/97) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$0.308 $0.381 $1.162
INVESTMENT RETURNS
-----------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000
investment made in Pioneer Balanced Fund compared to the growth of the
Standard & Poor's 500 Index and the Lehman Brothers
Government/Corporate Bond Index.
[mountain chart]
<TABLE>
<CAPTION>
Growth of $10,000
Lehman Brothers Government/
Pioneer Balance Fund* Standard & Poor's 500 Index Corporate Bond Index
<S> <C> <C> <C>
01/96 10,000 10,000 10,000
9,856 10,087 9,788
9,865 10,185 9,708
9,904 10,342 9,641
9,904 10,598 9,625
9,925 10,642 9,753
9,974 10,176 9,776
9,954 10,388 9,752
10,163 10,971 9,926
10,443 11,278 10,157
10,753 12,126 10,344
10,812 11,885 10,229
11,035 12,633 10,242
11,127 12,727 10,263
10,678 12,204 10,141
10,811 12,938 10,289
11,385 13,717 10,385
11,487 14,334 10,509
12,271 15,475 10,831
12,157 14,608 10,710
12,456 15,407 10,878
12,134 14,897 11,052
12/97 12,165 15,583 11,110
12,269 15,849 11,227
</TABLE>
[boxed text]
Average Annual Total Returns
(As of December 31, 1997)
Net Asset Public Offering
Period Value Price*
Life-of-Fund 11.24% 11.24%
(1/31/96)
1 Year 13.48 13.48
* Assumes reinvestment of distributions. The 1% contingent deferred sales
charge (CDSC) applies to redemptions made within one year of purchase.
The Fund adopted its current name and investment objective on
February 3, 1997. Prior to that date, the Fund's name was Pioneer Income
Fund and its objective was income from a portfolio of income-producing bonds
and stocks.
The Lehman Brothers Government/Corporate Bond Index is an unmanaged,
composite index of the U.S. bond market. It contains 5,353 issues,
including Treasury and government agency securities, investment-grade
corporate bonds and Yankee bonds. 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.
5
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PIONEER BALANCED FUND
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PORTFOLIO MANAGEMENT DISCUSSION 12/31/97
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DEAR SHAREOWNER,
-----------------------------------------------------------------------------
It is with pleasure that I introduce the first annual report for
Pioneer Balanced Fund, covering the year ended December 31, 1997. It
was a busy 12 months for your Fund. Following a shareowner vote in
January, the Fund's name changed from Pioneer Income Fund, and we
revised its objective on February 3, 1997. Since that time, we have
been building a portfolio of stocks and bonds designed to pursue
growth of capital and provide regular income. To date, this strategy
worked to give the Fund more benefit of owning stocks, and the Fund
ended the year with positive results.
STRONG YEAR FOR STOCKS AND BONDS
During the course of the year, the Fund's holdings weathered a
variety of market conditions. Stocks performed well for most of 1997,
although currency devaluations and disinflation in Asia jolted prices
during the fourth quarter. As measured by the Standard & Poor's 500
Index, large stocks brushed off volatility to end the year with a
33.29% total return.
The bond market also turned in good results. After a brief period of
rising interest rates, sparked by the year's only hike in short-term
interest rates by the Federal Reserve on March 25, the economy
stabilized and rates began a steady decline. Toward year-end,
international pressures damped the threat of inflation, and also
stalled any further Fed action. Yields responded by heading even
lower and bond prices rose. This strong finish lifted the bond
market's one-year performance; as measured by the Lehman Brothers
Government/Corporate Bond Index, the bond market returned a bold
9.75% for the year. For your Fund, Class A Shares posted a healthy
total return of 13.92% at net asset value and maintained a steady
quarterly dividend. Although the Fund operated as a balanced
portfolio for less than a full 12 months, the year's performance
landed as anticipated, between the S&P 500 Index and the Lehman
Brothers Government/Corporate Bond Index. You should expect the
Fund's returns to be between the two indexes as we move forward.
6
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PIONEER BALANCED FUND
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A DUAL APPROACH: STOCKS FOR GROWTH AND INCOME
We worked into the second quarter to reposition the Fund as a
conservative "core value" portfolio suitable for a variety of
investors. We designed the Fund specifically to allow more
flexibility and an active mix of stocks and bonds. By increasing or
decreasing stock and bond allocations, the Fund can adapt to
fluctuating market conditions, while reducing overall risk through
diversification. By year-end, Fund holdings were in line with our
long-term goals - 59% stocks, 39% bonds and 2% short-term cash
equivalents.
The Fund enjoys a great variety of investment opportunities as a
growth and income portfolio. Previously, all stocks in the portfolio
had to contribute income. Now stock holdings can produce dividends or
be purchased solely for their growth potential. Holdings include a
wide range of firms - large companies and small.
To select stocks for the Fund, we use a "value" approach, relying on
in-depth research to uncover companies trading below their fair
market value, or what we believe is their potential worth. When
looking at individual companies, we focus on cash flows, market
position, debt and management's strength. Before buying, we set a
target selling price. Once a stock is bought, we monitor its
fundamental characteristics, and use strict discipline and patience
to hold a security through short-term market fluctuations in pursuit
of long-term growth. If a company's business outlook or management
structure changes - for better or worse - we adjust our targets
accordingly.
FINANCIAL STOCKS LED A DIVERSIFIED PORTFOLIO
Holdings in financial stocks played a major role in Fund performance
this year. By December 31, 1997, financial companies were the largest
group - 25% of the Fund's long-term portfolio. A continuing trend of
consolidation in the banking and financial sector led prices up for
Fund holdings Chase Manhattan, Allstate and First Union. Some
technology stocks also posted strong gains. During the third quarter,
their prices rebounded from earlier sell-offs, although as a group
they turned in mixed results for the year. Holdings such as Compaq
Computer, manufacturer of personal computers, and Adaptec, developer
of computer network supplies, did enjoy substantial growth and sharp
gains in their stock price.
7
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PIONEER BALANCED FUND
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PORTFOLIO MANAGEMENT DISCUSSION 12/31/97 (CONTINUED)
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QUALITY BONDS PERFORMED
For your Fund we built a portfolio of high-quality bonds with a
conservative duration. (Duration measures the sensitivity of bond
prices to movement in interest rates. The longer the duration, the
more price will fluctuate with a change in interest rates - up or
down.) On December 31, the Fund's bonds had an average quality rating
of AA, and duration was in the medium range, 5.45 years. This
strategy helped control risk by maintaining a solid "core" portfolio
of fixed-income securities.
During the year, steady economic growth brightened corporate
forecasts. In response, we kept about a quarter of the portfolio in
corporate bonds. We sold holdings in Time Warner and Joy
Technologies, which had contributed steady income and produced a
solid return after significant price appreciation.
Late in the year, falling Asian stock markets sent global investors
on a "flight to quality" away from volatile stocks and into
historically more stable investments. Demand for U.S. government and
agency issues spiked, and prices rocketed up as long-term interest
rates fell to four-year lows. In addition to providing income, U.S.
government securities kept the portfolio "liquid" with their ready
market of buyers and sellers. At year's end, 11% of the portfolio was
in Treasury and government issues.
A LOOK AHEAD
We are pleased with the Fund's performance for 1997, given its
transitional nature. We look forward to 1998 as Pioneer Balanced
Fund's first full year of operation. The Fund's diversified portfolio
of stocks and bonds is, we believe, well suited for long-term
investors looking for both growth potential and regular income.
Because we use a value strategy for stocks and focus on quality for
bonds, the Fund isn't likely to move as quickly, either up or down,
as more aggressive investments - making it ideal for conservative
investors.
Respectfully,
/s/ William C. Field,
------------------------------
William C. Field,
Portfolio Manager
8
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PIONEER BALANCED FUND
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SCHEDULE OF INVESTMENTS 12/31/97
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SHARES VALUE
INVESTMENT IN SECURITIES - 98.3%
PREFERRED STOCKS - 1.7%
117,000 Elf Overseas, (Non-voting) $ 3,056,625
38,150 Sprint Corp., 8.25%, 3/31/00 (Convertible) 1,707,212
------------
TOTAL PREFERRED STOCKS
(Cost $4,273,401) $ 4,763,837
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COMMON STOCKS - 57.9%
BASIC MATERIALS - 2.7%
CHEMICALS (DIVERSIFIED) - 2.7%
180,000 Monsanto Co. $ 7,560,000
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TOTAL BASIC MATERIALS $ 7,560,000
------------
CAPITAL GOODS - 2.2%
AEROSPACE/DEFENSE - 0.3%
20,000 Boeing Co. $ 978,750
------------
MACHINERY (DIVERSIFIED) - 1.9%
180,000 AGCO Corp. $ 5,265,000
------------
TOTAL CAPITAL GOODS $ 6,243,750
------------
COMMUNICATION SERVICES - 1.5%
TELEPHONE - 1.5%
30,000 Bellsouth Corp. $ 1,689,375
50,000 GTE Corp. 2,612,500
------------
TOTAL COMMUNICATION SERVICES $ 4,301,875
------------
CONSUMER CYCLICALS - 2.7%
AUTO PARTS & EQUIPMENT - 0.7%
30,100 Magna International Inc. $ 1,890,656
------------
HOMEBUILDING - 1.2%
180,000 Clayton Homes, Inc. $ 3,240,000
------------
TEXTILES (APPARELS) - 0.8%
60,000 Nike, Inc. (Class B) $ 2,355,000
------------
TOTAL CONSUMER CYCLICALS $ 7,485,656
------------
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
PIONEER BALANCED FUND
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SCHEDULE OF INVESTMENTS 12/31/97 (CONTINUED)
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SHARES VALUE
CONSUMER SERVICES - 2.6%
FOODS - 0.5%
30,000 H.J. Heinz Co. $ 1,524,375
------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.7%
175,000 First Brands Corp. $ 4,714,063
------------
RETAIL (DEPT. STORES) - 0.4%
20,000 J.C. Penney Co. $ 1,206,250
------------
TOTAL CONSUMER SERVICES $ 7,444,688
------------
ENERGY - 4.1%
OIL & GAS (REFINING & MARKETING) - 1.6%
105,000 Sun Company, Inc. $ 4,416,562
------------
OIL (DOMESTIC INTEGRATED) - 1.1%
40,000 Atlantic Richfield Co. $ 3,205,000
------------
OIL (INTERNATIONAL INTEGRATED) - 1.4%
20,000 Amoco Corp. $ 1,702,500
30,000 Mobil Corp. 2,165,625
------------
$ 3,868,125
------------
TOTAL ENERGY $ 11,489,687
------------
FINANCIAL - 17.6%
BANKS (MAJOR REGIONAL) - 1.6%
90,000 First Union Corp. $ 4,612,500
------------
BANKS (MONEY CENTER) - 2.7%
70,000 The Chase Manhattan Corp. $ 7,665,000
------------
CONSUMER FINANCE - 1.4%
340,000 Long Beach Financial Corp.* $ 3,952,500
------------
FINANCIAL (DIVERSIFIED) - 5.2%
100,000 Arden Realty Group, Inc. $ 3,075,000
40,000 Franchise Finance Corporation of America 1,080,000
100,000 Mack-Cali Reality Corp. 4,100,000
140,000 Ocwen Asset Investment Corp. 2,870,000
245,000 Prime Retail, Inc. 3,475,937
------------
$ 14,600,937
------------
INSURANCE (PROPERTY-CASUALTY) - 2.2%
70,000 Allstate Corp. $ 6,361,250
------------
10
The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
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SHARES VALUE
INSURANCE (LIFE/HEALTH) - 1.8%
110,000 Conseco, Inc. $ 4,998,125
------------
SAVINGS & LOAN - 2.7%
107,500 Bank Plus Corp.* $ 1,357,188
68,250 Charter One Financial, Inc. 4,308,281
2,000 GreenPoint Financial Corp. 145,125
47,500 Washington Federal, Inc. 1,493,281
5,000 Washington Mutual, Inc. 318,750
------------
$ 7,622,625
------------
TOTAL FINANCIAL $ 49,812,937
------------
HEALTH CARE - 8.8%
HEALTH CARE (HOSPITAL MGT.) - 0.3%
25,100 Columbia/HCA Healthcare Corp. $ 743,588
------------
HEALTH CARE (LONG TERM CARE) - 2.3%
213,060 Intergrated Health Services, Inc. $ 6,644,809
------------
HEALTH CARE (MEDICAL PRODUCTS/SUPPLIES) - 1.5%
107,100 Beckman Instruments, Inc. $ 4,284,000
------------
HEALTH CARE (DRUGS/MAJOR PHARMACEUTICALS) - 4.7%
30,000 American Home Products Corp. $ 2,295,000
80,000 Merck & Co., Inc. 8,500,000
50,000 Teva Pharmaceutical Industries Ltd. (A.D.R.) 2,365,625
------------
$ 13,160,625
------------
TOTAL HEALTH CARE $ 24,833,022
------------
TECHNOLOGY - 13.6%
COMPUTERS (HARDWARE) - 1.0%
50,000 Compaq Computer Corp. $ 2,821,875
------------
COMPUTERS (NETWORKING) - 0.8%
95,000 Ascend Communications, Inc.* $ 2,327,500
------------
COMPUTERS (SOFTWARE & SERVICES) - 0.1%
7,500 Mercury Interactive Corp.* $ 200,625
------------
ELECTRONICS (COMPONENT DIST.) - 2.1%
80,000 Adaptec, Inc.* $ 2,970,000
44,000 Avnet, Inc. 2,904,000
------------
$ 5,874,000
------------
ELECTRONICS (SEMICONDUCTORS) - 1.5%
60,000 Intel Corp. $ 4,215,000
------------
The accompanying notes are an integral part of these financial statements. 11
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PIONEER BALANCED FUND
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SCHEDULE OF INVESTMENTS 12/31/97 (CONTINUED)
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<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS
SHARES (UNAUDITED) VALUE
<S> <C> <C> <C>
EQUIPMENT (SEMICONDUCTOR) - 6.9%
150,000 Applied Materials, Inc.* $ 4,518,750
283,900 Helix Technology Corp. 5,536,050
175,000 Lam Research Corp.* 5,118,750
150,000 Photronics, Inc.* 3,637,500
20,000 Teradyne, Inc.* 640,000
-------------
$ 19,451,050
-------------
SERVICES (DATA PROCESSING) - 1.2%
120,000 First Data Corp. $ 3,510,000
-------------
TOTAL TECHNOLOGY $ 38,400,050
-------------
UTILITIES - 2.1%
ELECTRIC COMPANIES - 2.1%
10,000 Allegheny Power Systems, Inc. $ 325,000
135,000 Dominion Resources, Inc. 5,745,938
-------------
TOTAL UTILITIES $ 6,070,938
-------------
TOTAL COMMON STOCKS
(Cost $154,169,359) $ 163,642,603
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C> <C>
DEBT OBLIGATIONS - 38.7%
CORPORATE BONDS - 27.8%
BASIC MATERIALS - 6.9%
$ 2,000,000 B/B1 Bethlehem Steel Corp., 10.375%, 9/1/03 $ 2,130,000
2,000,000 BBB/Baa1 Bowater, Inc., 9.0%, 8/1/09 2,354,560
4,000,000 BBB-/Baa2 Georgia Pacific Co., 9.875%, 11/1/21 4,536,280
5,000,000 BB-/B1 Southdown, Inc., 10.0%, 3/1/06 5,550,000
4,000,000 BBB-/Baa3 USX Corp., 9.375%, 2/15/12 5,006,360
-------------
TOTAL BASIC MATERIALS $ 19,577,200
-------------
CONSUMER CYCLICALS - 2.9%
5,000,000 A-/A3 General Motors Corp., 9.4%, 7/15/21 $ 6,475,300
1,500,000 A/A2 May Department Stores Co., 9.875%,
6/15/00 1,626,885
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TOTAL CONSUMER CYCLICALS $ 8,102,185
-------------
</TABLE>
12
The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
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<TABLE>
<CAPTION>
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
<S> <C> <C> <C>
CONSUMER STAPLES - 2.7%
$ 5,000,000 BBB/Baa3 News America Holdings, Inc., 8.25%,
8/10/18 $ 5,515,200
2,000,000 BB-/B1 Viacom International, Inc., 10.25%,
9/15/01 2,180,000
------------
TOTAL CONSUMER STAPLES $ 7,695,200
------------
ENERGY - 2.7%
2,500,000 BBB/Baa2 Ashland Oil Co., 8.8%, 11/15/12 $ 2,987,575
4,100,000 A-/A3 Phillips Petroleum Co., 8.86%, 5/15/22 4,518,446
------------
TOTAL ENERGY $ 7,506,021
------------
FINANCIAL - 7.5%
4,000,000 A/A1 Ford Motor Credit Co., 9.14%, 12/30/14 $ 4,605,640
2,000,000 A-/A3 General Motors Acceptance Corp., 8.5%,
1/1/03 2,184,980
5,000,000 AAA/Aaa General Electric Capital Corp., 8.85%,
4/1/05 5,758,250
5,000,000 BB-/Ba1 Riggs National Corp., 8.5%, 2/1/06 5,342,750
3,000,000 BB/A3 Washington Mutual Capital, 8.375%,
6/1/27 3,280,530
------------
TOTAL FINANCIAL $ 21,172,150
------------
HEALTH CARE - 1.8%
5,000,000 BB-/Ba3 Quorum Health Group, 8.75%, 11/1/05 $ 5,156,250
------------
TOTAL HEALTH CARE $ 5,156,250
------------
TRANSPORTATION - 3.3%
5,000,000 BBB/Baa1 Delta Air Lines, Inc., 9.2%, 9/23/14 $ 5,988,400
3,000,000 BBB-/Baa2 Kansas City Southern Industries, Inc.,
8.8%, 7/1/22 3,274,380
------------
TOTAL TRANSPORTATION $ 9,262,780
------------
TOTAL CORPORATE BONDS $ 78,471,786
------------
U.S. GOVERNMENT OBLIGATIONS - 10.9%
10,000,000 U.S. Treasury Bonds, 6.5%, 10/15/06 $ 10,472,300
10,000,000 U.S. Treasury Notes, 5.875%, 1/31/99 10,024,800
</TABLE>
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/97 (CONTINUED)
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
<S> <C> <C> <C>
$10,000,000 U.S. Treasury Notes, 6.25%, 1/31/02 $ 10,182,800
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS $ 30,679,900
------------
TOTAL DEBT OBLIGATIONS
(Cost $104,567,489) $109,151,686
------------
TOTAL INVESTMENT IN SECURITIES
(Cost $263,010,249) $277,558,126
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TEMPORARY CASH INVESTMENT - 1.7%
COMMERCIAL PAPER - 1.7%
$ 4,837,000 American Express Co., 6.65%, 1/2/98
$ 4,837,000
------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $4,837,000) $ 4,837,000
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY ------------
CASH INVESTMENT - 100%
(Cost $267,847,249) (a) $282,395,126
============
</TABLE>
(a) At December 31, 1997, the net unrealized gain on investments based on
cost for federal income tax purposes of $267,918,049 was as follows:
<TABLE>
<S> <C> <C>
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 21,869,640
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (7,392,563)
------------
Net unrealized gain $ 14,477,077
============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments)
for the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Long-Term U.S. Government $ 39,793,750 $ 11,020,391
Other Long-Term Securities 295,496,308 344,381,484
</TABLE>
14 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------
BALANCE SHEET 12/31/97
-----------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (including temporary cash
investment of $4,837,000) (cost $267,847,249) $282,395,126
Cash 3,669,428
Receivables -
Investment securities sold 3,430,651
Fund shares sold 113,133
Dividends and interest 2,700,954
Other 7,105
------------
Total assets $292,316,397
------------
LIABILITIES:
Payables -
Investment securities purchased $ 1,103,644
Fund shares repurchased 329,425
Due to affiliates 420,136
Accrued expenses 79,338
------------
Total liabilities $ 1,932,543
------------
NET ASSETS:
Paid-in capital $269,065,286
Accumulated undistributed net investment income 284,555
Accumulated undistributed net realized gain on investments 6,486,136
Net unrealized gain on investments 14,547,877
------------
Total net assets $290,383,854
============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $274,694,754/27,051,137 shares) $ 10.15
============
Class B (based on $13,788,823/1,367,764 shares) $ 10.08
============
Class C (based on $1,900,277/186,855 shares) $ 10.17
============
MAXIMUM OFFERING PRICE:
Class A $ 10.63
============
</TABLE>
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------
STATEMENT OF OPERATIONS
-----------------------------------------------------------------------
FOR THE YEAR ENDED 12/31/97
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $2,271) $3,806,139
Interest 9,870,279
----------
Total investment income $ 13,676,418
------------
EXPENSES:
Management fees $1,832,707
Transfer agent fees
Class A 525,579
Class B 25,355
Class C 3,855
Distribution fees
Class A 686,539
Class B 99,188
Class C 14,106
Accounting 66,452
Custodian fees 54,579
Registration fees 55,519
Professional fees 66,923
Printing 46,600
Fees and expenses of nonaffiliated trustees 21,344
Miscellaneous 33,586
----------
Total expenses $ 3,532,332
Less fees paid indirectly (61,427)
------------
Net expenses $ 3,470,905
------------
Net investment income $ 10,205,513
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $ 42,840,367
Change in net unrealized gain on investments (15,644,829)
------------
Net gain on investments $ 27,195,538
------------
Net increase in net assets resulting from operations $ 37,401,051
============
</TABLE>
16 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------
FOR THE YEARS ENDED 12/31/97 AND 12/31/96
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FROM OPERATIONS: 12/31/97 12/31/96
<S> <C> <C>
Net investment income $ 10,205,513 $ 17,199,660
Net realized gain on investments 42,840,367 2,594,045
Change in net unrealized gain on investments (15,644,829) 6,288,804
------------ ------------
Net increase in net assets resulting from operations $ 37,401,051 $ 26,082,509
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ($0.40 and $0.62 per share, respectively) $ (9,787,194) $(16,361,461)
Class B ($0.31 and $0.52 per share, respectively) (296,419) (242,093)
Class C ($0.31 and $0.49 per share, respectively) (41,660) (31,699)
In excess of net investment income:
Class B ($0.00 and $0.05 per share, respectively) - (33,567)
Class C ($0.00 and $0.08 per share, respectively) - (7,943)
Net realized gain:
Class A ($1.54 and $0.00 per share, respectively) (36,413,655) (31,088)
Class B ($1.54 and $0.00 per share, respectively) (1,818,106) (1,181)
Class C ($1.54 and $0.00 per share, respectively) (245,120) (116)
------------ ------------
Total distributions to shareholders $(48,602,154) $(16,709,148)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 35,307,081 $ 30,741,958
Reinvestment of distributions 43,110,353 14,065,908
Cost of shares repurchased (60,895,690) (53,556,419)
------------ ------------
Net increase (decrease) in net assets resulting from
fund share transactions $ 17,521,744 $ (8,748,553)
------------ ------------
Net increase in net assets $ 6,320,641 $ 624,808
NET ASSETS:
Beginning of year 284,063,213 283,438,405
----------- -----------
End of year (including accumulated undistributed net
investment income of $284,555 and $263,168,
respectively) $290,383,854 $284,063,213
============ ============
</TABLE>
<TABLE>
<CAPTION>
CLASS A '97 SHARES '97 AMOUNT '96 SHARES '96 AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,323,054 $ 25,981,813 2,362,021 $ 24,241,197
Reinvestment of distributions 4,015,098 40,935,530 1,360,560 13,797,072
Less shares repurchased (5,215,265) (58,241,422) (5,136,994) (52,728,595)
---------- ------------ ---------- ------------
Net increase (decrease) 1,122,887 $ 8,675,921 (1,414,413) $(14,690,326)
========== ============ ========== ============
CLASS B
Shares sold 690,179 $ 7,841,955 535,117 $ 5,482,009
Reinvestment of distributions 192,597 1,938,506 23,415 237,783
Less shares repurchased (170,315) (1,906,474) (78,441) (799,735)
---------- ------------ ---------- ------------
Net increase 712,461 $ 7,873,987 480,091 $ 4,920,057
========== ============ ========== ============
CLASS C*
Shares sold 129,250 $ 1,483,313 99,372 $ 1,018,752
Reinvestment of distributions 23,280 236,317 3,040 31,053
Less shares repurchased (65,385) (747,794) (2,702) (28,089)
---------- ------------ ---------- ------------
Net increase 87,145 $ 971,836 99,710 $ 1,021,716
========== ============ ========== ============
</TABLE>
* Class C Shares were first publicly offered on January 31, 1996
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
PIONEER BALANCED FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS A 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.65 $ 10.30 $ 9.11 $ 10.21 $ 10.13
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.41 $ 0.64 $ 0.66 $ 0.66 $ 0.65
Net realized and unrealized gain (loss) on
investments 1.03 0.33 1.29 (1.09) 0.37
-------- -------- -------- -------- --------
Net increase (decrease) from investment
operations $ 1.44 $ 0.97 $ 1.95 $ (0.43) $ 1.02
Distributions to shareholders:
Net investment income (0.40) (0.62) (0.65) (0.67) (0.64)
Net realized gain (1.54) - (0.11) - (0.30)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ (0.50) $ 0.35 $ 1.19 $ (1.10) $ 0.08
-------- -------- -------- -------- --------
Net asset value, end of year $ 10.15 $ 10.65 $ 10.30 $ 9.11 $ 10.21
======== ======== ======== ======== ========
Total return* 13.92% 9.89% 22.00% (4.31)% 10.24%
Ratio of net expenses to average net assets 1.19%+ 1.10%+ 1.13%+ 1.11% 1.06%
Ratio of net investment income to average net
assets 3.55%+ 6.17%+ 6.58%+ 7.07% 6.52%
Portfolio turnover rate 122% 31% 25% 50% 69%
Average brokerage commission per share $ 0.0569 $ 0.0587 - - -
Net assets, end of year (in thousands) $274,695 $276,064 $281,639 $259,970 $296,699
Ratios assuming reduction for fees paid
indirectly:
Net expenses 1.17% 1.08% 1.11% - -
Net investment income 3.57% 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 sales charges were taken into account.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/97
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED 4/28/95 TO
CLASS B 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C>
Net asset value, beginning
of period $ 10.59 $ 10.27 $ 9.55
-------- -------- --------
Increase from investment
operations:
Net investment income $ 0.32 $ 0.52 $ 0.39
Net realized and unrealized
gain on investments 1.02 0.37 0.90
-------- -------- --------
Net increase from
investment operations $ 1.34 $ 0.89 $ 1.29
Distributions to shareholders:
Net investment income (0.31) (0.52) (0.46)
In excess of net investment
income -- (0.05) --
Net realized gain (1.54) -- (0.11)
-------- -------- --------
Net increase (decrease) in net asset
value $ (0.51) $ 0.32 $ 0.72
-------- -------- --------
Net asset value, end of period $ 10.08 $ 10.59 $10.27
======== ======== ========
Total return* 12.98% 9.02% 13.74%
Ratio of net expenses to
average net assets 2.01%+ 1.88%+ 1.88%**+
Ratio of net investment income
to average net assets 2.65%+ 5.45%+ 5.83%**+
Portfolio turnover rate 122% 31% 25%
Average brokerage commission per share $ 0.0569 $ 0.0587 --
Net assets, end of period
(in thousands) $ 13,789 $ 6,940 $ 1,800
Ratios assuming reduction of
fees paid indirectly:
Net expenses 1.99% 1.86% 1.78%**
Net investment income 2.67% 5.47% 5.93%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 19
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/97
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 1/31/96 TO
CLASS C 12/31/97 12/31/96
<S> <C> <C>
Net asset value, beginning of period $ 10.62 $ 10.39
-------- --------
Increase from investment operations:
Net investment income $ 0.33 $ 0.49
Net realized and unrealized gain on
investments 1.07 0.31
-------- --------
Net increase from investment
operations $ 1.40 $ 0.80
Distributions to shareholders:
Net investment income (0.31) (0.49)
In excess of net investment income -- (0.08)
Net realized gain (1.54) --
-------- --------
Net increase (decrease) in net asset value $ (0.45) $ 0.23
-------- --------
Net asset value, end of period $ 10.17 $ 10.62
======== ========
Total return* 13.48% 8.12%
Ratio of net expenses to average net assets 2.03%+ 1.76%**+
Ratio of net investment income to average net
assets 2.68%+ 5.63%**+
Portfolio turnover rate 122% 31%
Average broker commission per share $ 0.0569 $ 0.0587
Net assets, end of period (in thousands) $ 1,900 $ 1,059
Ratios assuming reduction of fees paid
indirectly:
Net expenses 1.98% 1.73%**
Net investment income 2.73% 5.66%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
20 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/97
-----------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Pioneer Balanced Fund (the Fund) is a Delaware business trust
registered under the Investment Company Act of 1940 as a diversified,
open-end management investment company. 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 from
Pioneer Income Fund.
The Fund offers three classes of shares -- Class A, Class B and Class
C shares. Shares of Class A, Class B and Class C each represent an
interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemptions, dividends and liquidation, except
that each class of shares can bear different transfer agent and
distribution fees and have exclusive voting rights with respect to the
distribution plans that have been adopted by Class A, Class B and
Class C shareholders, respectively.
The Fund's financial statements have been prepared in conformity with
generally accepted accounting principles that require the management
of the Fund to, among other things, make estimates and assumptions
that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ
from those estimates. The following is a summary of significant
accounting policies consistently followed by the Fund, which are in
conformity with those generally accepted in the investment company
industry:
A. SECURITY VALUATION
Security transactions are recorded on trade date. 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. 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
21
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/97 (CONTINUED)
-----------------------------------------------------------------------------
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 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.
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.
At December 31, 1997, the Fund reclassified $58,853 from accumulated
undistributed net investment income to accumulated undistributed
net realized gain on investments. The reclassification has no
impact on the net asset value of the Fund and is designed to
present the Fund's capital accounts on a tax basis.
In order to comply with federal income tax regulations, the Fund has
designated $28,192,107 as a capital gain dividend for the purposes
of the dividend paid deduction. Of this amount, $23,448,986 and
$4,743,121 are subject to the maximum 28% and 20% federal income
tax rates, respectively.
22
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
C. FUND SHARES
The Fund records sales and repurchases of its shares on trade date.
Net losses, if any, as a result of cancellations are absorbed by
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter
for the Fund and an indirect subsidiary of The Pioneer Group, Inc.
(PGI). PFD earned $68,276 in underwriting commissions on the sale
of fund shares during the year ended December 31, 1997.
D. CLASS ALLOCATIONS
Distribution fees are calculated based on the average daily net
asset value attributable to Class A, Class B and Class C shares of
the Fund, respectively. Shareholders of each class share all
expenses and fees paid to the transfer agent, Pioneering Services
Corporation (PSC), for their services, which are allocated based on
the number of accounts in each class and the ratable allocation of
related out-of-pocket expense (see Note 3). Income, common expenses
and realized and unrealized gains and losses are calculated at the
Fund level and allocated daily to each class of shares based on the
respective percentage of adjusted net assets at the beginning of
the day.
Distributions to shareholders are recorded as of the ex-dividend
date. Distributions paid by the Fund with respect to each class of
shares are calculated in the same manner, at the same time, and in
the same amount, except that Class A, Class B and Class C shares
can bear different transfer agent and distribution fees.
2. MANAGEMENT AGREEMENT
Pioneering Management Corporation (PMC), the Fund's investment
adviser, manages the Fund's portfolio and is a wholly owned subsidiary
of PGI. Management fees are calculated daily at the annual rate of
0.50% of the Fund's average daily net assets up to $250 million; 0.48%
of the next $50 million; and 0.45% of the excess over $300 million.
In addition, under the management agreement, certain other services
and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Fund. At December 31, 1997, $176,797 was
payable to PMC related to management fees and certain other services.
23
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/97 (CONTINUED)
-----------------------------------------------------------------------------
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 $53,694 in transfer agent fees
payable to PSC at December 31, 1997.
4. DISTRIBUTION PLANS
The Fund adopted a Plan of Distribution for each class of shares
(Class A Plan, Class B Plan and Class C Plan) in accordance with Rule
12b-1 of the Investment Company Act of 1940. Pursuant to the Class A
Plan, the Fund pays PFD a service fee of up to 0.25% of the Fund's
average daily net assets in reimbursement of its actual expenditures
to finance activities primarily intended to result in the sale of
Class A shares. Pursuant to the Class B Plan and the Class C Plan, the
Fund pays PFD 1.00% of the average daily net assets attributable to
each class of shares. The fee consists of a 0.25% service fee and a
0.75% distribution fee paid as compensation for personal services
and/or account maintenance services or distribution services with
regard to Class B and Class C shares. Included in due to affiliates is
$189,645 in distribution fees payable to PFD at December 31, 1997.
In addition, redemptions of each class of shares may be subject to a
contingent deferred sales charge (CDSC). A CDSC of 1.00% may be
imposed on redemptions of certain net asset value purchases of Class A
shares within one year of purchase. Class B shares that are redeemed
within six years of purchase are subject to a CDSC at declining rates
beginning at 4.0%, based on the lower of cost or market value of
shares being redeemed. Redemptions of Class C shares within one year
of purchase are subject to a CDSC of 1.00%. Proceeds from the CDSCs
are paid to PFD. For the year ended December 31, 1997, CDSCs in the
amount of $13,632 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, 1997, the Fund's expenses were reduced by $61,427
under such arrangements.
24
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF PIONEER BALANCED FUND:
We have audited the accompanying balance sheet, including the
schedule of investments, of Pioneer Balanced Fund as of December 31,
1997, and the related statement of operations, and the statements of
changes in net assets for the periods presented and the financial
highlights for the four years ended December 31, 1997. These
financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audits. The financial highlights for the year ended December 31, 1993
were audited by other auditors whose report dated February 22, 1994
expressed an unqualified opinion.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Pioneer Balanced Fund as of December 31, 1997,
the results of its operations, and the changes in its net assets for
the periods presented and financial highlights for the four years
ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 2, 1998
25
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
-----------------------------------------------------------------------------
TRUSTEES OFFICERS
John F. Cogan, Jr. John F. Cogan, Jr., Chairman and
Mary K. Bush President
Richard H. Egdahl, M.D. David D. Tripple, Executive Vice
Margaret B.W. Graham President
John W. Kendrick William C. Field, Vice President
Marguerite A. Piret William H. Keough, Treasurer
David D. Tripple Joseph P. Barri, Secretary
Stephen K. West
John Winthrop
INVESTMENT ADVISER
Pioneering Management Corporation
CUSTODIAN
Brown Brothers Harriman & Co.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
PRINCIPAL UNDERWRITER
Pioneer Funds Distributor, Inc.
LEGAL COUNSEL
Hale and Dorr LLP
SHAREOWNER SERVICES AND TRANSFER AGENT
Pioneering Services Corporation
26
<PAGE>
-----------------------------------------------------------------------------
RETIREMENT PLANS FROM PIONEER
-----------------------------------------------------------------------------
Pioneer offers retirement plans suited to the individual investor and
businesses of all sizes. For information, contact your investment
professional, or call Pioneer at 1-800-622-0176.
INDIVIDUAL PLANS
INDIVIDUAL RETIREMENT ACCOUNT (IRA) The $2,000 maximum annual
contribution may be tax-deductible; earnings are tax-deferred.
ROTH IRA
ROTH IRA New in 1998, $2,000 maximum annual contribution are not
tax-deductible. Earnings are tax-free for qualified withdrawals.
PLANS FOR SMALL BUSINESSES OR THE SELF-EMPLOYED
SIMPLE (SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES)
IRA OR 401(k) PLAN For firms with 100 or fewer employees.
Employees can make pre-tax contributions of up to $6,000 annually,
and an employer contribution is required.
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP) Self-employed people and
small-business owners can make tax-deductible contributions of up to
15% of their income.
EMPLOYER-SPONSORED PLANS
401(k) PLAN Allows employees to make pre-tax contributions. Also
allows for employer contributions.
403(b) PLAN Lets employees of tax-exempt organizations set aside part
of their salary, before taxes, through payroll deduction.
PROFIT SHARING PLAN Employers contribute on a discretionary basis,
usually based on profits.
AGE-WEIGHTED PROFIT SHARING PLAN Employer makes discretionary
contributions based on employees' age and salary.
MONEY PURCHASE PENSION PLAN (MPP) Employers contribute based on a
fixed formula.
Most retirement plan withdrawals must meet specific conditions to
avoid penalties.
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PROGRAMS AND SERVICES FOR PIONEER SHAREOWNERS
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Your investment professional can give you additional information on
Pioneer's programs and services. If you want to order literature on
any of the following items directly, simply call Pioneer at
1-800-225-6292.
FACTFONE(SM)
Our automated account information service, available to you 24 hours
a day, seven days a week. FactFone gives you a quick and easy way to
check fund share prices, yields, dividends and distributions, as well
as information about your own account. Simply call 1-800-225-4321.
For specific account information, have your 13-digit account number
and four-digit personal identification number at hand.
90-DAY REINSTATEMENT PRIVILEGE (FOR CLASS A SHARES)
Enables you to reinvest all or a portion of the money you redeem from
your Pioneer account - without paying a sales charge - within 90 days
of your redemption. You have the choice of investing in any Pioneer
fund, as long as you meet its minimum investment requirement.
INVESTOMATIC PLAN
An easy and convenient way for you to invest on a regular basis. All
you need to do is authorize a set amount of money to be moved out of
your bank account into the Pioneer fund of your choice. Investomatic
also allows you to change the dollar amount, frequency and investment
date right over the phone. By putting aside affordable amounts of
money regularly, you can build a long-term investment - without
sacrificing your current standard of living.
PAYROLL INVESTMENT PROGRAM (PIP)
Lets you invest in a Pioneer fund directly through your paycheck. All
that's involved is for your employer to fill out an authorization
form allowing Pioneer to deduct from participating employees'
paychecks. You specify the dollar amount you want to invest into the
Pioneer fund(s) of your choice.
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AUTOMATIC EXCHANGE PROGRAM
A simple way to move money from one Pioneer fund to another over a
period of time. Just invest a lump sum in one fund, and select the
other Pioneer funds you wish to invest in. You choose the amounts and
dates for Pioneer to sell shares of your original fund and use the
proceeds to buy shares of the other funds you have chosen. Over time,
your investment will be shifted out of the original fund. (Automatic
Exchange is available for originating accounts with a balance of
$5,000 or more.)
DIRECTED DIVIDENDS
Lets you invest cash dividends from one Pioneer fund to an account in
another Pioneer fund with no sales charge or fee. Simply fill out the
applicable information on a Pioneer Account Options Form. (This
program is available for dividend payments only; capital gains
distributions are not eligible at this time.)
DIRECT DEPOSIT
Lets you move money into your bank account using electronic funds
transfer (EFT). EFT moves your money faster than you would receive a
check, eliminates unnecessary paper and mail, and avoids lost checks.
Simply fill out a Pioneer Direct Deposit Form, giving your
instructions.
SYSTEMATIC WITHDRAWAL PLAN (SWP)
Lets you establish automatic withdrawals from your account at set
intervals. You decide the frequency and the day of the month you
want. Pioneer will send the proceeds by check to the address you
designate, or electronically to your bank account. You also can
authorize Pioneer to make the redemptions payable to someone else.
(SWPs are available for accounts with a value of $10,000 or more.)
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