<PAGE>
[Pioneer Logo]
PIONEER
BALANCED
FUND
- ----------------------
ANNUAL REPORT 12/31/98
- ----------------------
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 17
Notes to Financial Statements 23
Report of Independent Public Accountants 28
Trustees, Officers and Service Providers 29
</TABLE>
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN 12/31/98
----------------------------------------------------------------------------
DEAR SHAREOWNER,
----------------------------------------------------------------------------
It is with pleasure that I introduce this report for Pioneer Balanced
Fund, covering the year ended December 31, 1998. I thank you for your
interest and for this opportunity to comment briefly on your Fund and
today's investing environment.
I would first like to introduce to you the new investment team
running the day-to-day operations of your Fund. On September 1,
William C. Field, who led the investment team that converted your
Fund to balanced investing and remains with us as a senior analyst on
our Core Value team, passed the reins of Pioneer Balanced Fund to a
new investment team. Eric Weigel, who joined Pioneer in August of
1998 with 10 years of industry experience, is the leader of Pioneer's
quantitative analysis efforts. He makes overall decisions for the
allocation of assets in the Fund. Tin Chan, who also joined us in
August, has six years of industry experience and manages the equity
holdings of the Fund. The fixed income team manages the bond
portfolio.
We look forward to Pioneer Balanced Fund's first full year under the
new investment team and believe their aggregate skills will serve our
shareowners well in 1999 and beyond. The former investment team built
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. This
will not change.
Inevitably though, there will be some investment style changes, and I
encourage you to read this report carefully 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. Gogan, Jr.
John F. Cogan, Jr.,
Chairman and President
1
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
PORTFOLIO SUMMARY 12/31/98
-----------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
-----------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[PIE CHART]
U.S. Common Stocks 56%
Corporate Bonds 26%
U.S. Government Securities 17%
Short-Term Cash Equivalents 1%
SECTOR DISTRIBUTION
-----------------------------------------------------------------------------
(As a percentage of long-term holdings)
[PIE CHART]
Financial 20%
Government Obligations 17%
Energy 11%
Consumer Cyclicals 10%
Capital Goods 8%
Basic Materials 7%
Communication Services 7%
Technology 5%
Other 15%
10 LARGEST HOLDINGS
-----------------------------------------------------------------------------
(As a percentage of long-term holdings)
<TABLE>
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------
1. Government National Mortgage 3.78% 6. Delta Air Lines, Inc., 9.2%, 2.12%
Association, 6.0%, 10/15/28 9/23/14
------------------------------------------------------------------------------------
2. Exxon Corp. 3.08 7. General Electric Capital 2.08
Corp., 8.85%, 4/1/05
------------------------------------------------------------------------------------
3. Ford Motor Co. 2.84 8. News America Holdings Inc., 2.01
8.25%, 8/10/18
------------------------------------------------------------------------------------
4. Intel Corp. 2.52 9. Southdown Inc., 10.0%, 1.97
3/1/06
------------------------------------------------------------------------------------
5. AT&T Corp. 2.32 10. US West Communications 1.92
Group, Inc.
------------------------------------------------------------------------------------
</TABLE>
Fund holdings will vary for other periods.
2
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/98 CLASS A SHARES
-----------------------------------------------------------------------------
SHARE PRICES AND DISTRIBUTIONS
-----------------------------------------------------------------------------
NET ASSET VALUE
PER SHARE 12/31/98 12/31/97
$9.74 $10.15
DISTRIBUTIONS PER SHARE INCOME SHORT-TERM LONG-TERM
(12/31/97 - 12/31/98) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$0.300 $0.203 $0.025
INVESTMENT RETURNS
-----------------------------------------------------------------------------
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.
-----------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 1998)
NET ASSET PUBLIC OFFERING
PERIOD VALUE PRICE*
10 Years 9.58% 9.08%
5 Years 8.13 7.14
1 Year 1.14 -3.42
-----------------------------------------
* Reflects deduction of the maximum 4.5% sales charge at the beginning of
the period and assumes reinvestment of distributions at net asset value.
Pioneer Lehman Brother Government/ Standard & Poor's
Balance Fund* Corporation Bond Index 500 Index
9550 10000 10000
11068 13163 11424
11465 12755 12369
13600 16632 14361
14632 17899 15449
16130 19701 17157
15435 19958 16555
18831 27447 19742
20964 33738 20311
23575 44987 22293
23845 57911 24405
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
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/98 CLASS B SHARES
-----------------------------------------------------------------------------
SHARE PRICES AND DISTRIBUTIONS
-----------------------------------------------------------------------------
NET ASSET VALUE
PER SHARE 12/31/98 12/31/97
$9.65 $10.08
DISTRIBUTIONS PER SHARE INCOME SHORT-TERM LONG-TERM
(12/31/97 - 12/31/98) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$0.223 $0.203 $0.025
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.
--------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 1998)
IF IF
PERIOD HELD REDEEMED*
Life-of-Fund 9.65% 9.01%
(4/28/95)
1 Year 0.19 -3.64
--------------------------------------
* 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.
Pioneer Lehman Brother Government/ Standard & Poor's
Balance Fund* Corporation Bond Index 500 Index
10000 10000 10000
10397 10640 10502
10813 11485 10703
11374 12175 11202
11330 12828 10940
11455 13402 10990
11672 13815 11184
12400 14966 11525
12235 15369 11426
13142 18048 11841
14232 19398 12256
14010 19956 12650
14871 22738 12842
14662 23491 13177
13635 21158 13830
13736 25689 13848
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
<PAGE>
PIONEER BALANCED FUND
-----------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/98 CLASS C SHARES
-----------------------------------------------------------------------------
SHARE PRICES AND DISTRIBUTIONS
-----------------------------------------------------------------------------
NET ASSET VALUE
PER SHARE 12/31/98 12/31/97
$9.75 $10.17
DISTRIBUTIONS PER SHARE INCOME SHORT-TERM LONG-TERM
(12/31/97 - 12/31/98) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$0.221 $0.203 $0.025
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.
--------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 1998)
IF IF
PERIOD HELD REDEEMED*
Life-of-Fund 7.35% 7.35%
(1/31/96)
1 Year 0.27 2.27
--------------------------------------
* Assumes reinvestment of distributions. The 1% contingent deferred sales
charge (CDSC) applies to redemptions made within on year of purchase.
Pioneer Lehman Brother Government/ Standard & Poor's
Balance Fund* Corporation Bond Index 500 Index
10000 10000 10000
9865 10190 9706
9974 10646 9750
10163 10974 9922
10812 11888 10225
10678 12208 10137
11487 14336 10505
12456 15408 10873
12269 15851 11222
13029 18061 11393
12859 18659 11691
11956 16806 12269
12302 20405 12286
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
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/98
----------------------------------------------------------------------------
Pioneer Balanced Fund completed a busy year on December 31, 1998,
given the stock and bond markets' dramatic ups and downs and our
efforts to rebalance the Fund's asset allocation. As a result of the
changes to the portfolio since October, investors will begin receiving
monthly dividends -- rather than quarterly -- beginning in January
1999. In the following discussion, your Fund's management team -- Eric
Weigel and Tin Chan with Ken Taubes speaking for the fixed income
team -- provide some insight into the Fund's repositioning and their
expectations for its performance going forward. Mr. Weigel's focus is
asset allocation, and Mr. Chan is responsible for stock selection.
Q: ERIC, HOW DID THE FUND PERFORM IN 1998?
A: There's no denying that the Fund had a tough year. Class A shares
posted a 1.14% total return at net asset value, with 0.19% for
Class B Shares and 0.27% for Class C Shares. The 409 balanced
funds tracked by Lipper Analytical Services returned an average of
13.50% for the same period. The Fund's weak performance is partly
the result of holdings in smaller technology companies, which were
hurt by the lack of Asian demand. Investments in real estate
investment trusts (REITs) also took a toll. Despite their
attractive income payments, they suffered from low investor
interest. The Fund sold all of its shares of REITs during the
rebalancing.
Another significant factor working against the Fund was our "value"
strategy. Often out-of-favor or under-researched by the market,
value stocks sell at prices below their true worth. Although this
approach has significant long-term merit, this was a year when it
did not pay to own undervalued, low profile stocks. Instead,
investors had a seemingly insatiable appetite for growth
investing, which focuses on rapid earnings potential.
Q: ERIC, HOW DID THE PORTFOLIO CHANGE IN THE MOST RECENT QUARTER?
A: First of all, we want to emphasize that the Fund's twin investment
objectives of capital growth and current income have not changed.
However, we have changed the way we're trying to achieve those two
goals. Since September, the Fund has greater emphasis on
income-producing investments of all kinds -- dividend-paying
stocks, corporate bonds and mortgage-backed
6
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
----------------------------------------------------------------------------
securities. Dividends are generally a stable and predictable source
of return and contribute greatly to overall performance. And, in
rising markets, income combined with rising prices can provide
strong returns. In declining markets, the steady income can help
support the value of the Fund's assets.
The asset allocation has remained fairly steady -- 55% to 60%
stocks, about 40% bonds and the small remainder in short-term cash
equivalents. We don't expect a major deviation from this allocation
any time soon.
Q: TIN, YOU'RE NOW PLACING MORE EMPHASIS ON LARGE-COMPANY STOCKS THAN
IN THE PAST. WHY?
A: Large-company stocks can offer good opportunities for "value"
investing. Often times, larger more established companies are
facing short-term pressures, which contribute to uncertainty and
lower stock prices relative to their future earnings power.
Economic or industry-specific factors can have this effect.
The energy and financial sectors currently offer attractive
opportunities for long-term growth at the right price. Energy
stocks, such as Exxon and Chevron, pay strong dividends and are
experiencing solid appreciation, especially in light of recent
megamerger announcements. Takeover activity is also sparking great
enthusiasm for financial stocks, but our value orientation tends
to promote a conservative approach. Federal National Mortgage
Association (Fannie Mae) exemplifies our strategy here. We're also
drawn to sectors with less investor interest, such as utilities
and telecommunications. Deregulation has changed the landscape in
both industries, benefiting Public Service Enterprise Group and US
West Communications Group.
Q: KEN, WHERE DID YOU FIND OPPORTUNITIES IN THE FIXED-INCOME MARKETS?
A: As a result of the financial market's correction and a series of
U.S. interest rate cuts this fall, the difference between Treasury
and non-Treasury yields widened to levels not seen since the early
1990s. This is understandable in light of investors' uncertainty
stemming from the currency crisis in emerging markets and
7
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/98 (CONTINUED)
----------------------------------------------------------------------------
the perception of U.S. Treasurys as a safe haven. We took advantage
of the correction to reduce Treasury holdings and invested the
proceeds in corporate bonds and mortgage-backed securities. This
strategy boosted the Fund's yield and may provide an opportunity
for capital appreciation once the market returns to a more normal
environment.
Two new purchases exemplify our strategy in the corporate bond
arena. High-end retailer, Saks, is benefiting from an improving
credit profile, driven by cost cutting under its new owner, and
strong industry-wide consumer demand. MetroMedia Fiber Network is
laying high bandwidth fiber-optic cables primarily in the
Northeast. The 14% coupon bonds are financing the construction of
the network. Telephone companies are big subscribers, and Bell
Atlantic recently signed on to lease part of the network on a
long-term basis.
Mortgage-backed securities, issued by the U.S. government or its
agencies, are a new addition to the Fund and comprised 14% of net
assets on December 31. We expect these securities will play an
important role, since they offer higher yields than Treasurys and
tend to be more stable in price than many long-term fixed-income
securities.
Q: ERIC, WHAT IS YOUR OUTLOOK FOR THE FUND IN 1999?
A: The new year is likely to be just as volatile as 1998, making
price protection and income all the more important. In addition,
the Fund's value orientation is an inherently lower risk equity
strategy, because investor expectations and stock valuations are
low. We anticipate the Fund's future performance will fall
somewhere between that of the S&P 500 Index and the Lehman
Brothers Government/Corporate Bond Index. We believe our efforts
to rebalance the portfolio should reduce the Fund's overall market
risk and help it steer a smoother course in 1999.
8
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/98
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
INVESTMENT IN SECURITIES - 99.5%
COMMON STOCKS - 56.2%
BASIC MATERIALS - 2.3%
ALUMINUM - 0.4%
20,000 Reynolds Metals Co. $ 1,053,750
------------
CHEMICALS - 0.9%
14,000 Dow Chemical Co. $ 1,273,125
26,000 Eastman Chemical Co. 1,163,500
------------
$ 2,436,625
------------
METALS MINING - 0.2%
45,000 Asarco, Inc. $ 677,812
------------
PAPER & FOREST PRODUCTS - 0.8%
16,000 Georgia-Pacific Group $ 937,000
28,000 Weyerhaeuser Co. 1,422,750
------------
$ 2,359,750
------------
TOTAL BASIC MATERIALS $ 6,527,937
------------
CAPITAL GOODS - 3.6%
AEROSPACE/DEFENSE - 1.2%
28,000 General Dynamics Corp. $ 1,641,500
20,000 Lockheed Martin Corp. 1,695,000
------------
$ 3,336,500
------------
ELECTRICAL EQUIPMENT - 0.5%
5,000 General Electric Co. $ 511,237
16,000 Honeywell, Inc. 1,205,000
------------
$ 1,716,237
------------
ENGINEERING & CONSTRUCTION - 0.4%
25,000 Fluor Corp. $ 1,064,062
------------
MACHINERY (DIVERSIFIED) - 0.6%
34,000 Ingersoll-Rand Co. $ 1,595,875
------------
MANUFACTURING (DIVERSIFIED) - 0.9%
20,000 Tyco International Ltd. $ 1,508,750
10,000 United Technologies Corp. 1,087,500
------------
$ 2,596,250
------------
TOTAL CAPITAL GOODS $ 10,308,924
------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/98 (CONTINUED)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMUNICATION SERVICES - 6.1%
TELECOMMUNICATIONS (LONG DISTANCE) - 2.3%
87,000 AT&T Corp. $ 6,546,750
------------
TELEPHONE - 3.8%
20,000 Ameritech Corp. $ 1,267,500
20,000 Bell Atlantic Corp. 1,060,000
60,000 BellSouth Corp. 2,992,500
84,000 US West Communications Group, Inc. 5,428,500
------------
$ 10,748,500
------------
TOTAL COMMUNICATION SERVICES $ 17,295,250
------------
CONSUMER CYCLICALS - 6.4%
AUTOMOBILES - 2.8%
137,000 Ford Motor Co. $ 8,040,187
------------
HOMEBUILDING - 0.4%
25,000 Centex Corp. $ 1,126,562
------------
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.4%
18,000 Maytag Corp. $ 1,120,500
------------
PUBLISHING - 0.9%
25,000 McGraw-Hill Co., Inc. $ 2,546,875
------------
PUBLISHING (NEWSPAPERS) - 0.4%
22,000 Knight-Ridder, Inc. $ 1,124,750
------------
RETAIL (GENERAL MERCHANDISE) - 1.2%
41,000 Wal-Mart Stores, Inc. $ 3,338,937
------------
SERVICES (ADVERTISING/MARKETING) - 0.3%
13,000 Omnicom Group $ 754,000
------------
TOTAL CONSUMER CYCLICALS $ 18,051,811
------------
CONSUMER STAPLES - 3.9%
DISTRIBUTORS (FOOD & HEALTH) - 0.4%
45,000 SUPERVALU, Inc. $ 1,260,000
------------
ENTERTAINMENT - 0.4%
41,000 The Walt Disney Co. $ 1,230,000
------------
FOODS - 0.6%
9,000 H.J. Heinz Co. $ 506,790
19,000 The Quaker Oats Co. 1,130,500
------------
$ 1,637,290
------------
</TABLE>
10 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
RESTAURANTS - 1.5%
127,000 Darden Restaurants $ 2,286,000
27,000 McDonald's Corp. 2,068,875
------------
$ 4,354,875
------------
SPECIALITY PRINTING - 1.0%
31,000 Deluxe Corp. $ 1,133,437
35,000 R.R. Donnelly & Sons Co. 1,533,437
------------
$ 2,666,874
------------
TOTAL CONSUMER STAPLES $ 11,149,039
------------
ENERGY - 8.3%
OIL (DOMESTIC INTEGRATED) - 0.9%
55,000 Royal Dutch Petroleum Co. $ 2,633,125
------------
OIL (INTERNATIONAL INTEGRATED) - 6.6%
44,000 Chevron Corp. $ 3,649,250
126,000 Conoco, Inc.* 2,630,250
119,000 Exxon Corp. 8,701,875
32,000 Mobil Corp. 2,788,000
20,000 Texaco, Inc. 1,057,500
------------
$ 18,826,875
------------
OIL & GAS (REFINING & MARKETING) - 0.8%
45,000 Ashland Oil, Inc. $ 2,176,875
------------
TOTAL ENERGY $ 23,636,875
------------
FINANCIAL - 15.0%
BANKS (MAJOR REGIONAL) - 4.5%
70,000 Banc One Corp. $ 3,574,375
38,000 First Union Corp. 2,310,875
28,000 Fleet Financial Group, Inc. 1,251,250
29,000 PNC Bank Corp. 1,569,625
110,000 Wells Fargo Co. 4,393,125
------------
$ 13,099,250
------------
BANKS (MONEY CENTER) - 1.8%
61,000 BankAmerica Corp. $ 3,667,625
14,000 J.P. Morgan & Co., Inc. 1,470,875
------------
$ 5,138,500
------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 11
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/98 (CONTINUED)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED) - 1.8%
40,000 American General Corp. $ 3,120,000
26,000 Federal National Mortgage Association 1,924,000
------------
$ 5,044,000
------------
INSURANCE (LIFE/HEALTH) - 2.0%
36,000 Jefferson - Pilot Corp. $ 2,700,000
26,000 Trans America Corp. 3,003,000
------------
$ 5,703,000
------------
INSURANCE (MULTI-LINE) - 1.5%
40,000 Cigna Corp. $ 3,092,500
14,000 Lincoln National Corp. 1,145,375
------------
$ 4,237,875
------------
INSURANCE (PROPERTY/CASUALTY) - 2.1%
69,000 Allstate Corp. $ 2,665,125
10,000 Progressive Corp. 1,693,750
37,000 Safeco Corp. 1,588,688
------------
$ 5,947,563
------------
INSURANCE BROKERS - 1.3%
42,000 AOC Corp. $ 2,325,750
23,000 Marsh & McLennan Co., Inc. 1,344,063
------------
$ 3,669,813
------------
TOTAL FINANCIAL $ 42,840,001
------------
HEALTHCARE - 1.0%
HEALTHCARE (DIVERSIFIED) - 0.6%
11,000 Allergan, Inc. $ 712,250
13,000 Warner-Lambert Co., Inc. 977,438
------------
$ 1,689,688
------------
HEALTHCARE (DRUGS/MAJOR PHARMACEUTICALS) - 0.4%
14,000 Eli Lilly & Co. $ 1,244,250
------------
TOTAL HEALTH CARE $ 2,933,938
------------
TECHNOLOGY - 5.2%
COMMUNICATIONS EQUIPMENT - 0.8%
12,000 Lucent Technologies, Inc. $ 1,320,000
16,000 Motorola, Inc. 977,000
------------
$ 2,297,000
------------
</TABLE>
12 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS
SHARES (UNAUDITED) VALUE
<S> <C> <C> <C>
COMPUTERS (HARDWARE) - 1.9%
$ 56,000 Compaq Computer Corp. $ 2,348,500
43,000 Hewlett-Packard Co. 2,937,438
------------
$ 5,285,938
------------
ELECTRONICS (SEMICONDUCTORS) - 2.5%
60,000 Intel Corp. $ 7,113,750
------------
TOTAL TECHNOLOGY $ 14,696,688
------------
TRANSPORTATION - 0.5%
AIRLINES - 0.5%
65,000 Southwest Airlines Co. $ 1,458,438
------------
TOTAL TRANSPORTATION $ 1,458,438
------------
UTILITIES - 3.9%
ELECTRIC COMPANIES - 3.9%
53,000 DTE Energy Co. $ 2,272,375
52,000 Firstenergy Corp. 1,693,250
106,000 Houston Industries, Inc. 3,405,250
88,000 Public Service Enterprise Group, Inc. 3,520,000
------------
TOTAL UTILITIES $ 10,890,875
------------
TOTAL COMMON STOCK
(Cost $139,097,532) $159,789,776
------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C> <C>
DEBT OBLIGATIONS - 43.3%
CORPORATE BONDS - 26.0%
BASIC MATERIALS - 5.0%
$ 500,000 B-/Caa1 AEI Resources, 11.5%, 12/15/06 $ 495,000
2,000,000 BB-/Ba3 Bethlehem Steel Corp., 10.375%, 9/1/03 2,100,000
2,000,000 BBB/Baa2 Bowater Inc., 9.0%, 8/1/09 2,359,000
4,000,000 BBB-/Baa2 Georgia Pacific Co., 9.875%, 11/1/21 4,488,080
4,000,000 BBB-/Baa2 USX Corp., 9.375%, 2/15/12 4,801,320
------------
TOTAL BASIC MATERIALS $ 14,243,400
------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/98 (CONTINUED)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
<S> <C> <C> <C>
CAPITAL GOODS - 4.5%
$ 1,000,000 BB/Ba2 Allied Waste North America, 7.625%, 1/1/06 $ 1,010,000
5,000,000 AAA/Aaa General Electric Capital Corp., 8.85%,
4/1/05 5,892,900
250,000 B/B2 Metromedia Fiber Network, Inc., 10.0%,
11/15/08 256,875
5,000,000 BBB-/Baa3 Southdown Inc., 10.0%, 3/1/06 5,575,500
------------
TOTAL CAPITAL GOODS $ 12,735,275
------------
COMMUNICATION SERVICES - 0.4%
1,000,000 A-/Baa1 Sprint Capital Corp., 5.7%, 11/15/03 $ 1,004,680
------------
TOTAL COMMUNICATION SERVICES $ 1,004,680
------------
CONSUMER CYCLICALS - 3.5%
2,000,000 A/A2 General Motors Acceptance Corp., 8.5%,
1/1/03 $ 2,198,560
1,500,000 A/A1 May Department Stores Co., 9.875%, 6/15/00 1,589,025
5,000,000 BBB-/Baa3 News America Holdings Inc., 8.25%, 8/10/18 5,695,700
750,000 BB+/Baa3 Saks Inc., 8.25%, 11/15/08 795,983
------------
TOTAL CONSUMER CYCLICALS $ 10,279,268
------------
CONSUMER STAPLES - 0.2%
500,000 B/B3 Agrilink Foods, 11.875%, 11/1/08 $ 507,500
------------
TOTAL CONSUMER STAPLES $ 507,500
------------
ENERGY - 2.7%
2,500,000 BBB/Baa2 Ashland Oil Co., 8.8%, 11/15/12 $ 2,953,375
4,100,000 A-/A3 Phillips Petroleum Co., 8.86%, 5/15/22 4,616,354
------------
TOTAL ENERGY $ 7,569,729
------------
FINANCIAL - 4.6%
4,000,000 A/A1 Ford Motor Credit Co., 9.14%, 12/30/14 $ 4,597,040
5,000,000 BB-/Ba1 Riggs National Corp., 8.5%, 2/1/06 5,217,650
3,000,000 BBB+/A3 Washington Mutual Capital, Inc., 8.375%,
6/1/27 3,329,520
------------
TOTAL FINANCIAL $ 13,144,210
------------
</TABLE>
14 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
<S> <C> <C> <C>
HEALTHCARE - 1.8%
$ 250,000 B+/B2 Biovail International Corp., 10.875%,
11/15/05 $ 252,500
5,000,000 BB-/Ba3 Quorum Health Group, 8.75%, 11/1/05 4,775,000
------------
TOTAL HEALTHCARE $ 5,027,500
------------
TRANSPORTATION - 3.3%
5,000,000 BBB/Baa1 Delta Air Lines, Inc., 9.2%, 9/23/14 $ 5,995,450
3,000,000 BBB-/Baa2 Kansas City Southern Industries, Inc.,
8.8%, 7/1/22 3,332,340
------------
TOTAL TRANSPORTATION $ 9,327,790
------------
TOTAL CORPORATE BONDS $ 73,839,352
------------
U.S. GOVERNMENT OBLIGATIONS - 17.3%
3,000,000 Federal Home Loan Mortgage Corp., 6.0%,
7/15/24 $ 3,029,670
3,500,000 Federal National Mortgage Association,
5.5%, 12/1/13 3,452,960
2,828,524 Federal National Mortgage Association,
REMIC Series 98-50 EN, 6.5%, 9/25/28 2,834,832
887,270 Government National Mortgage Association,
7.0%, 3/15/12 906,497
1,480,783 Government National Mortgage Association,
7.0%, 11/15/13 1,521,964
2,020,000 Government National Mortgage Association,
7.0%, 12/15/13 2,076,176
4,987,513 Government National Mortgage Association,
6.0%, 9/15/28 4,942,326
10,773,730 Government National Mortgage Association,
6.0%, 10/15/28 10,677,299
4,984,936 Government National Mortgage Association,
6.5%, 10/15/28 5,033,240
1,973,309 Government National Mortgage Association,
REMIC Series 1998-24A, 6.5%, 11/20/24 1,997,581
2,000,000 Government National Mortgage Association,
REMIC Series 1998-13B, 6.5%, 12/20/25 2,030,400
</TABLE>
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/98 (CONTINUED)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C> <C>
$ 4,050,000 U.S. Treasury Bonds, 6.5%, 10/15/06 $ 4,492,544
1,290,000 U.S. Treasury Bonds, 8.125%, 8/15/19 1,722,073
4,250,000 U.S. Treasury Notes, 6.25%, 1/31/02 4,441,718
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS $ 49,159,280
------------
TOTAL DEBT OBLIGATIONS
(Cost $120,064,874) $122,998,632
------------
TOTAL INVESTMENT IN SECURITIES
(Cost $259,162,406) $282,788,408
------------
TEMPORARY CASH INVESTMENT - 0.5%
COMMERCIAL PAPER - 0.5%
1,413,000 Ford Motor Credit Corp., 4.92%, 1/4/99 $ 1,413,000
------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $1,413,000) $ 1,413,000
------------
TOTAL INVESTMENT IN SECURITIES
AND TEMPORARY CASH INVESTMENT - 100%
(Cost $260,575,406) (a)(b) $284,201,408
============
* Non-income producing security.
(a) At December 31, 1998, the net unrealized gain on investments based on
cost for federal income tax purposes of $260,575,406 was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 27,126,383
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (3,500,381)
------------
Net unrealized gain $ 23,626,002
============
(b) At December 31, 1998, the Fund had a net capital loss carryforward of
$14,695,906 which will expire in 2006 if not utilized.
Purchases and sales of securities (excluding temporary cash investments)
for the year ended December 31, 1998 were as follows:
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Long-term U.S. Government $ 67,201,867 $ 54,924,114
Other Long-term Securities 208,855,391 210,310,559
</TABLE>
16 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
BALANCE SHEET 12/31/98
----------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (including temporary
cash
investment of $1,413,000) (cost $260,575,406) $284,201,408
Receivables -
Investment securities sold 1,872,005
Fund shares sold 423,505
Dividends and interest 2,124,979
Other 1,944
------------
Total assets $288,623,841
------------
LIABILITIES:
Payables -
Investment securities purchased $ 3,589,445
Fund shares repurchased 519,111
Due to bank 182,319
Due to affiliates 295,474
Accrued expenses 103,238
------------
Total liabilities $ 4,689,587
------------
NET ASSETS:
Paid-in capital $274,820,527
Accumulated undistributed net investment income 183,630
Accumulated net realized loss on investments (14,695,905)
Net unrealized gain on investments 23,626,002
------------
Total net assets $283,934,254
============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $257,419,328/26,429,768 shares) $ 9.74
============
Class B (based on $22,737,214/2,355,547 shares) $ 9.65
============
Class C (based on $3,777,712/387,301 shares) $ 9.75
============
MAXIMUM OFFERING PRICE:
Class A $ 10.20
============
</TABLE>
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
----------------------------------------------------------------------------
FOR THE YEAR ENDED 12/31/98
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (Net of foreign taxes withheld of $3,754) $3,080,845
Interest 9,073,682
----------
Total investment income $ 12,154,527
------------
EXPENSES:
Management fees $1,917,359
Transfer agent fees
Class A 474,703
Class B 53,853
Class C 11,848
Distribution fees
Class A 685,982
Class B 191,341
Class C 32,121
Accounting 73,167
Custodian fees 57,610
Registration fees 68,900
Professional fees 44,983
Printing 33,361
Fees and expenses of nonaffiliated trustees 17,643
Miscellaneous 17,261
----------
Total expenses $ 3,680,132
Less fees paid indirectly (57,721)
------------
Net expenses $ 3,622,411
------------
Net investment income $ 8,532,116
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments $(14,852,123)
Change in net unrealized gain on investments 9,078,125
------------
Net loss on investments $ (5,773,998)
------------
Net increase in net assets resulting from operations $ 2,758,118
============
</TABLE>
18 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 12/31/98 AND 12/31/97
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FROM OPERATIONS: 12/31/98 12/31/97
<S> <C> <C>
Net investment income $ 8,532,116 $ 10,205,513
Net realized gain (loss) on investments (14,852,123) 42,840,367
Change in net unrealized gain on investments 9,078,125 (15,644,829)
------------ ------------
Net increase in net assets resulting from operations $ 2,758,118 $ 37,401,051
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ($0.30 and $0.40 per share, respectively) $ (8,098,749) $ (9,787,194)
Class B ($0.22 and $0.31 per share, respectively) (445,932) (296,419)
Class C ($0.22 and $0.31 per share, respectively) (73,667) (41,660)
Net realized gain:
Class A ($0.23 and $1.54 per share, respectively) (5,730,953) (36,413,655)
Class B ($0.23 and $1.54 per share, respectively) (527,666) (1,818,106)
Class C ($0.23 and $1.54 per share, respectively) (85,992) (245,120)
------------ ------------
Total distributions to shareholders $(14,962,959) $(48,602,154)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 53,764,258 $ 35,307,081
Reinvestment of distributions 13,428,978 43,110,353
Cost of shares repurchased (61,437,995) (60,895,690)
------------ ------------
Net increase in net assets resulting from fund share
transactions $ 5,755,241 $ 17,521,744
------------ ------------
Net increase (decrease) in net assets $ (6,449,600) $ 6,320,641
NET ASSETS:
Beginning of year 290,383,854 284,063,213
------------ ------------
End of year (including accumulated undistributed net
investment income of $183,630 and $284,555 respectively) $283,934,254 $290,383,854
============ ============
</TABLE>
<TABLE>
<CAPTION>
CLASS A '98 SHARES '98 AMOUNT '97 SHARES '97 AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,662,322 $ 37,731,555 2,323,054 $ 25,981,813
Reinvestment of distributions 1,248,982 12,409,860 4,015,098 40,935,530
Less shares repurchased (5,532,673) (56,591,983) (5,215,265) (58,241,422)
---------- ------------ ---------- ------------
Net increase (decrease) (621,369) $ (6,450,568) 1,122,887 $ 8,675,921
========== ============ ========== ============
CLASS B
Shares sold 1,232,938 $ 12,581,848 690,179 $ 7,841,955
Reinvestment of distributions 90,776 885,232 192,597 1,938,506
Less shares repurchased (335,931) (3,367,944) (170,315) (1,906,474)
---------- ------------ ---------- ------------
Net increase 987,783 $ 10,099,136 712,461 $ 7,873,987
========== ============ ========== ============
CLASS C
Shares sold 333,098 $ 3,450,855 129,250 $ 1,483,313
Reinvestment of distributions 13,580 133,886 23,280 236,317
Less shares repurchased (146,232) (1,478,068) (65,385) (747,794)
---------- ------------ ---------- ------------
Net increase 200,446 $ 2,106,673 87,145 $ 971,836
========== ============ ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements. 19
<PAGE>
PIONEER BALANCED FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS A 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.15 $ 10.65 $ 10.30 $ 9.11 $ 10.21
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.30 $ 0.41 $ 0.64 $ 0.66 $ 0.66
Net realized and unrealized gain (loss) on
investments (0.18) 1.03 0.33 1.29 (1.09)
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ 0.12 $ 1.44 $ 0.97 $ 1.95 $ (0.43)
Distributions to shareholders:
Net investment income (0.30) (0.40) (0.62) (0.65) (0.67)
Net realized gain (0.23) (1.54) - (0.11) -
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ (0.41) $ (0.50) $ 0.35 $ 1.19 $ (1.10)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.74 $ 10.15 $ 10.65 $ 10.30 $ 9.11
======== ======== ======== ======== ========
Total return* 1.14% 13.92% 9.89% 22.00% (4.31)%
Ratio of net expenses to average net assets 1.17%+ 1.19%+ 1.10%+ 1.13%+ 1.11%
Ratio of net investment income to average net assets 2.92%+ 3.55%+ 6.17%+ 6.58%+ 7.07%
Portfolio turnover rate 94% 122% 31% 25% 50%
Net assets, end of year (in thousands) $257,419 $274,695 $276,064 $281,639 $259,970
Ratios assuming reduction for fees paid indirectly:
Net expenses 1.16% 1.17% 1.08% 1.11% -
Net investment income 2.93% 3.57% 6.19% 6.60% -
</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.
+ Ratio assuming no reduction for fees paid indirectly.
20
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/98
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED 4/28/95 TO
CLASS B 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.08 $ 10.59 $10.27 $ 9.55
------- ------- ------ ------
Increase (decrease) from investment
operations:
Net investment income $ 0.23 $ 0.32 $ 0.52 $ 0.39
Net realized and unrealized gain
(loss) on investments (0.21) 1.02 0.37 0.90
------- ------- ------ ------
Net increase from investment
operations $ 0.02 $ 1.34 $ 0.89 $ 1.29
Distributions to shareholders:
Net investment income (0.22) (0.31) (0.52) (0.46)
In excess of net investment
income - - (0.05) -
Net realized gain (0.23) (1.54) - (0.11)
------- ------- ------ ------
Net increase (decrease) in net
asset value $ (0.43) $ (0.51) $ 0.32 $ 0.72
------- ------- ------ ------
Net asset value, end of period $ 9.65 $ 10.08 $10.59 $10.27
======= ======= ====== ======
Total return* 0.19% 12.98% 9.02% 13.74%
Ratio of net expenses to average
net assets 2.03%+ 2.01%+ 1.88%+ 1.88%**+
Ratio of net investment income to
average net assets 2.09%+ 2.65%+ 5.45%+ 5.83%**+
Portfolio turnover rate 94% 122% 31% 25%
Net assets, end of period (in
thousands) $22,737 $13,789 $6,940 $1,800
Ratios assuming reduction of fees
paid indirectly:
Net expenses 2.01% 1.99% 1.86% 1.78%**
Net investment income 2.11% 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. 21
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12/31/98
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED 1/31/96 TO
CLASS C 12/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
Net asset value, beginning of period $10.17 $10.62 $10.39
------ ------ ------
Increase (decrease) from investment
operations:
Net investment income $ 0.23 $ 0.33 $ 0.49
Net realized and unrealized
gain (loss) on investments (0.20) 1.07 0.31
------ ------ ------
Net increase from investment operations $ 0.03 $ 1.40 $ 0.80
Distributions to shareholders:
Net investment income (0.22) (0.31) (0.49)
In excess of net investment income - - (0.08)
Net realized gain (0.23) (1.54) -
------ ------ ------
Net increase (decrease) in net asset value $(0.42) $(0.45) $ 0.23
------ ------ ------
Net asset value, end of period $ 9.75 $10.17 $10.62
====== ====== ======
Total return* 0.27% 13.48% 8.12%
Ratio of net expenses to average net assets 2.12%+ 2.03%+ 1.76%**+
Ratio of net investment income to average
net assets 2.01%+ 2.68%+ 5.63%**+
Portfolio turnover rate 94% 122% 31%
Net assets, end of period (in thousands) $3,778 $1,900 $1,059
Ratios assuming reduction of fees paid
indirectly:
Net expenses 2.09% 1.98% 1.73%**
Net investment income 2.04% 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.
22 The accompanying notes are an integral part of these financial statements.
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/98
----------------------------------------------------------------------------
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. The net asset value
is computed once daily, on each day the New York Stock Exchange is
open, as of the close of regular trading on the Exchange. Debt
securities are valued at prices supplied by independent pricing
services, which consider such factors as Treasury spreads, yields,
maturities and ratings, and valuations may be supplemented by
dealers and other sources, as required. 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
23
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/98 (CONTINUED)
----------------------------------------------------------------------------
are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by,
or under the direction of, the 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. Included
in net realized gain from investments is $28,336 of class action
settlements received by the Fund during the year ended December 31,
1998.
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, 1998, the Fund reclassified $14,693 from accumulated
undistributed net investment income to accumulated undistributed net
realized loss on investments. The reclassification has no impact on
the net asset value of the Fund and is designed to present the
Fund's capital accounts on a tax basis.
C. FUND SHARES
The Fund records sales and repurchases of its shares on trade date.
Net losses, if any, as a result of cancellations are absorbed by
Pioneer
24
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Funds Distributor, Inc. (PFD), the principal underwriter for the Fund
and an indirect subsidiary of The Pioneer Group, Inc. (PGI). PFD
earned $78,187 in underwriting commissions on the sale of fund
shares during the year ended December 31, 1998.
D. CLASS ALLOCATIONS
Distribution fees are calculated based on the average daily net asset
value attributable to Class A, Class B and Class C shares of the
Fund, respectively. Shareholders of each class share all expenses
and fees paid to the transfer agent, Pioneering Services Corporation
(PSC), for their services, which are allocated based on the number
of accounts in each class and the ratable allocation of related
out-of-pocket expense (see Note 3). Income, common expenses and
realized and unrealized gains and losses are calculated at the Fund
level and allocated daily to each class of shares based on the
respective percentage of adjusted net assets at the beginning of the
day.
Distributions to shareholders are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares
are calculated in the same manner, at the same time, and in the same
amount, except that Class A, Class B and Class C shares can bear
different transfer agent and distribution fees.
2. MANAGEMENT AGREEMENT
Pioneer Investment Management (PIM) (formerly Pioneering Management
Corp.), 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 0.65% of the Fund's average daily net
assets up to $1 billion; 0.60% of the next $4 billion; and 0.55% of the
excess over $5 billion.
In addition, under the management and administration agreements,
certain other services and costs, including accounting, regulatory
reporting and insurance premiums, are paid by the Fund. At December 31,
1998, $161,930 was payable to PIM related to management fees,
administrative and certain other services.
25
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/98 (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 $56,728 in transfer agent fees
payable to PSC at December 31, 1998.
4. DISTRIBUTION PLANS
The Fund adopted a Plan of Distribution for each class of shares (Class
A Plan, Class B Plan and Class C Plan) in accordance with Rule 12b-1 of
the Investment Company Act of 1940. Pursuant to the Class A Plan, the
Fund pays PFD a service fee of up to 0.25% of the Fund's average daily
net assets in reimbursement of its actual expenditures to finance
activities primarily intended to result in the sale of Class A shares.
Pursuant to the Class B Plan and the Class C Plan, the Fund pays PFD
1.00% of the average daily net assets attributable to each class of
shares. The fee consists of a 0.25% service fee and a 0.75%
distribution fee paid as compensation for personal services and/or
account maintenance services or distribution services with regard to
Class B and Class C shares. Included in due to affiliates is $76,816 in
distribution fees payable to PFD at December 31, 1998.
In addition, redemptions of each class of shares may be subject to a
contingent deferred sales charge (CDSC). A CDSC of 1.00% may be imposed
on redemptions of certain net asset value purchases of Class A shares
within one year of purchase. Class B shares that are redeemed within
six years of purchase are subject to a CDSC at declining rates
beginning at 4.0%, based on the lower of cost or market value of shares
being redeemed. Redemptions of Class C shares within one year of
purchase are subject to a CDSC of 1.00%. Proceeds from the CDSCs are
paid to PFD. For the year ended December 31, 1998, CDSCs in the amount
of $30,579 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, 1998, the Fund's expenses were reduced by $57,721 under
such arrangements.
26
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
----------------------------------------------------------------------------
6. LINE OF CREDIT FACILITY
Effective April 14, 1998, the Fund, along with certain other funds in
the Pioneer Family of Funds (the Funds), collectively participate in a
$50 million committed, unsecured revolving line of credit facility.
Borrowings are used solely for temporary or emergency purposes. The
Fund may borrow up to the lesser of $50 million or the limits set by
its prospectus for borrowings. Interest on collective borrowings of up
to $25 million is payable at the Federal Funds Rate plus 3/8% on an
annualized basis, or at the Federal Funds Rate plus 1/2% if the
borrowing exceeds $25 million at any one time. The Funds pay an annual
commitment fee for this facility. The commitment fee is allocated among
such Funds based on their respective borrowing limits. For the period
ended December 31, 1998, the Fund had no borrowings under this
agreement.
27
<PAGE>
PIONEER BALANCED FUND
----------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------------------------------------
TO THE SHAREOWNERS 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, 1998, and
the related statement of operations, the statements of changes in net
assets, and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Pioneer Balanced Fund as of December 31, 1998,
the results of its operations, the changes in its net assets and the
financial highlights for periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 12, 1999
28
<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 John A. Boynton, Treasurer
Marguerite A. Piret Joseph P. Barri, Secretary
David D. Tripple
Stephen K. West
John Winthrop
INVESTMENT ADVISER
Pioneer Investment Management, Inc.
CUSTODIAN
Brown Brothers Harriman & Co.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
PRINCIPAL UNDERWRITER
Pioneer Funds Distributor, Inc.
LEGAL COUNSEL
Hale and Dorr LLP
SHAREOWNER SERVICES AND TRANSFER AGENT
Pioneering Services Corporation
29
<PAGE>
- --------------------------------------------------------------------------------
HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
CALL US FOR:
ACCOUNT INFORMATION, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FACTFONE(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
RETIREMENT PLANS INFORMATION 1-800-622-0176
TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD) 1-800-225-1997
WRITE TO US:
Pioneering Services Corporation
60 State Street
Boston, Massachusetts 02109
OUR TOLL-FREE FAX 1-800-225-4240
OUR INTERNET E-MAIL ADDRESS [email protected]
(for general questions about Pioneer only)
VISIT OUR WEBSITE: www.pioneerfunds.com
THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT
FUND PROSPECTUS.
<TABLE>
<S> <C> <C>
[PIONEER LOGO] PIONEER FUNDS DISTRIBUTOR, INC.
60 STATE STREET 0898-5427
BOSTON, MASSACHUSETTS 02109 (c)PIONEER FUNDS DISTRIBUTOR, INC.
www.pioneerfunds.com [LOGO FOR RECYCLED PAPER] PRINTED ON RECYCLED PAPER
</TABLE>
