[LOGO]
Pioneer
Interest
Shares, Inc.
SEMIANNUAL REPORT
JUNE 30, 1996
<PAGE>
PIONEER INTEREST SHARES, INC.
DEAR SHAREOWNER,
This semiannual report details the performance of Pioneer Interest Shares for
the first six months of 1996. During the period, your Fund successfully pursued
its objective of providing attractive current income by investing primarily in
investment-grade bonds (those securities rated BBB or better by Standard &
Poor's Corp. or Moody's Investors Service). The bond market, coming off a strong
year in 1995, faltered as 1996 progressed. Interest rates rose and volatility
increased as investors became less certain of the outlook for economic
growth and inflation.
HOW YOUR FUND PERFORMED
The Fund's market price moved to $13.00 per share on June 30, 1996, from $13.50
on December 31, 1995, reflecting investors' unease about bond investments.
Because your Fund is a "closed-end" fund, the actual value of the securities it
owns -- its net asset value, or NAV -- may be more or less than is reflected in
the market price of Fund shares on any given trading day. The Fund's NAV ranged
from $13.67 per share at the close of 1995 to $13.18 at the end of the
semiannual period. In other words, the market value of the Fund on June 30,
1996, reflected a 1.4% "discount" compared to the value of the securities in the
Fund's portfolio.
Over the past six months, the Fund paid investors quarterly dividends totaling
$0.54 per share. As of June 30, the Fund provided a yield of 8.31% based on
market price, and 8.19% based on net asset value.
As a closed-end fund, there are two key ways to measure your Fund's total
return. Looking at change in market price, the Fund generated a total return of
0.33% for the half-year, assuming all dividends were reinvested. Based on net
asset value, total return was 0.45%. In comparison, the unmanaged Lehman
Brothers Government/Corporate Bond Index returned -1.88% over the same period.
MARKET OVERVIEW
The first six months of 1996 turned out to be quite different from 1995. The
period began with the Federal Reserve (the Fed) carrying forward its tactics
from 1995 -- cutting interest rates to avoid sputtering economic growth. After
lowering short-term rates in January, the Fed soon shifted its focus to signs of
a rapidly expanding economy and the potential for increasing inflation. In
February, the reported increase in employment was the highest in 12 years,
sparking speculation that the Fed would move to raise interest rates to prevent
any economic overheating.
Bond investors did not receive this news well, and bond prices fell as interest
rates rose. Although the Fed did not act again, the bond market remained
unsettled through the end of June. The benchmark long-term U.S. Treasury bond
provided a good example. As of December 31, 1995, the interest rate on the
30-year Treasury bond stood at 5.95%; by the end of June, the rate was 6.89%.
HOW PIONEER MANAGED YOUR INVESTMENT
The main strategy during the past six months was to keep a close eye on issue
selection and maintaining the Fund's income stream. We continued to hold
Treasury securities mostly to help maintain the Fund's liquidity. Generally, we
preferred corporate bonds we believe have the potential to see their quality
ratings upgraded. In fact, several portfolio holdings were upgraded, including
NorAm Energy, M.A. Hanna, Bowater and Delta Air Lines. Bonds rated A and BBB
accounted for 49% of the portfolio on June 30. Other issues in this group
include Rexene, Stone Container, Kansas City Southern Industries and USX.
<PAGE>
When possible, we added "non-callable" and "call protected" bonds to the
portfolio that cannot be redeemed, or "called," early by their issuers.
Non-callable bonds help us manage the Fund's income stream and lock in the
potential for gains when interest rates are falling.
In terms of maturity, we continued to concentrate the portfolio in securities
with an average life of five years or less, although holdings were diversified
among all maturity ranges. Shorter-term issues help protect the Fund's NAV from
price declines as interest rates rise, while longer-term securities generally
provide higher yields and more price movement. The portfolio's average effective
maturity was 8.8 years on June 30, down from 9.1 years on December 31.
[PIE CHART REFLECTING THE FOLLOWING INFORMATION]
PORTFOLIO MATURITY
(Effective Maturity as of June 30, 1996)
20+ YEARS 14%
10-20 YEARS 15%
7-10 YEARS 10%
5-7 YEARS 18%
2-5 YEARS 21%
0-2 YEARS 22%
LOOKING AHEAD
As we close the books on the first six months of 1996, investors are trying to
evaluate a mixed bag of economic indicators. Some point to strong growth,
bringing on worries about an overheating economy that could spur inflation
higher. Other reports show weak consumer spending and slow wage growth,
ingredients of low inflation. Until the picture clarifies, we think it's
reasonable to expect interest rates and bond prices to move up and down as they
have over recent months.
Ultimately, however, we believe inflation worries will abate, allowing interest
rates to drop back down. Regardless, your Fund's holdings in carefully selected
corporate bonds give you a way to benefit from economic progress. Your
management will continue to look for opportunities that present themselves in
this environment, while emphasizing current income and investment-grade quality
issues.
Please refer to the following pages for the Fund's audited Schedule of
Investments and financial statements as of June 30, 1996. If you have any
questions about your investment in Pioneer Interest Shares, Inc., contact your
investment representative, or call the Fund's sub-transfer agent, ChaseMellon
Shareholder Services at 1-800-288-9541.
Respectfully,
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.
Chairman and President,
Pioneer Interest Shares, Inc.
2
<PAGE>
PIONEER INTEREST SHARES, INC.
<TABLE>
SCHEDULE OF INVESTMENTS
June 30, 1996
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT IN SECURITIES -- 100.0%
INDUSTRIALS -- 69.4%
$2,000,000 BB+/Baa3 AMR Corp., 9.88%, 2020.............................................. $ 2,324,580
2,000,000 BB+/Baa3 Boise Cascade Corp., 9.90%, 2000.................................... 2,126,960
2,000,000 BBB-/Baa1 Bowater, Inc., 9.375%, 2021......................................... 2,306,040
4,000,000 AA-/A1 BP America Inc., 10.0%, 2018........................................ 4,393,800
2,000,000 A/A2 Caterpillar Inc., 9.75%, 2019....................................... 2,235,260
2,000,000 A-/A3 Chrysler Corp., 10.95%, 2017........................................ 2,186,540
3,000,000 BB+/Baa2 Delta Air Lines, Inc., 9.20%, 2014.................................. 3,289,560
4,000,000 BB-/Ba1 Domtar Inc., 11.25%, 2017........................................... 4,240,000
2,000,000 BBB-/Baa3 Federal Paper Board Co., 10.0%, 2011................................ 2,431,100
3,000,000 BBB-/Baa2 Georgia Pacific Corp., 9.875%, 2021................................. 3,249,360
2,000,000 BBB/Ba1 Joy Technologies Inc., 10.25%, 2003................................. 2,200,000
2,000,000 BBB+/Baa2 Kansas City Southern Industries, Inc., 8.8%, 2022................... 2,079,640
2,000,000 BBB-/Baa2 M.A. Hanna Co., 9.375%, 2003........................................ 2,179,800
3,000,000 BBB/Baa3 News America Holdings, Inc., 10.125%, 2012.......................... 3,373,500
2,000,000 BBB/Baa1 Phillips Petroleum Co., 9.18%, 2021................................. 2,146,800
1,000,000 BB-/B1 Rexene Corp., 11.75%, 2004.......................................... 1,035,000
2,000,000 BBB/Baa2 Shopko Stores Inc., 9.25%, 2022..................................... 2,095,000
2,000,000 BB-/B1 Stone Container Corp., 10.75%, 2002................................. 2,020,000
1,000,000 BBB-/Ba1 Tele-Commun Inc., 8.75%, 2023....................................... 943,520
2,500,000 B+/Ba3 Tenet Healthcare Corp., 10.125%, 2005............................... 2,637,500
4,000,000 BBB-/Ba1 Time Warner Inc., 9.15%, 2023....................................... 4,135,760
1,500,000 BB-/Ba3 Unisys Corp., 15.0%, 1997........................................... 1,586,250
4,000,000 BB+/Baa3 USX Corp., 9.375%, 2012............................................. 4,410,160
2,000,000 BB-/B1 Viacom International Inc., 10.25%, 2001............................. 2,140,000
2,000,000 B/B2 Weirton Steel Corp., 10.75%, 2005................................... 1,900,000
2,000,000 BBB-/Ba1 Westinghouse Electric Corp., 8.625%, 2012........................... 1,930,340
-----------
Total (Cost $64,647,511)........................................ $65,596,470
-----------
UTILITIES -- ELECTRIC -- 15.1%
4,000,000 NR/Aaa Big Rivers Electric Cooperative, 10.7%, 2017........................ $ 4,396,600
2,000,000 BBB/Baa2 Commonwealth Edison Co., 9.75%, 2020................................ 2,260,720
5,000,000 AAA/Aaa Rural Electric Cooperative (Deseret), 10.11%, 2017.................. 5,468,850
2,000,000 A/A2 Virginia Electric Power, 8.75%, 2021................................ 2,096,000
-----------
Total (Cost $13,953,600)........................................ $14,222,170
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PIONEER INTEREST SHARES, INC.
<TABLE>
SCHEDULE OF INVESTMENTS
June 30, 1996 (Continued)
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UTILITIES -- NATURAL GAS -- 8.4%
$2,000,000 BB+/Baa3 Coastal Corp., 9.625%, 2012......................................... $ 2,278,380
2,000,000 BBB-/Baa2 Colorado Interstate Gas Co., 10.0%, 2005............................ 2,332,320
3,000,000 BB+/Ba2 NorAm Energy Corp., 10.0%, 2019..................................... 3,281,820
-----------
Total (Cost $7,305,640)......................................... $ 7,892,520
-----------
BANKS -- 1.3%
52,476 NR/NR Bank of America National Trust & Savings Association, 10.5%, 2009... $ 53,899
1,156,000 A/A3 Citicorp, 10.75%, 2015.............................................. 1,214,505
-----------
Total (Cost $1,294,042)......................................... $ 1,268,404
-----------
U.S. GOVERNMENT OBLIGATIONS -- 1.1%
1,000,000 U.S. Treasury Notes, 8.75%, 2000.................................... $ 1,082,970
-----------
Total (Cost $1,071,563)......................................... $ 1,082,970
-----------
FOREIGN GOVERNMENT AND GOVERNMENT SPONSORED -- 4.7%
4,000,000 A+/A2 Hydro-Quebec, 9.75%, 2018........................................... $ 4,434,440
-----------
Total (Cost $4,345,000)......................................... $ 4,434,440
-----------
TOTAL INVESTMENT IN SECURITIES
(COST $92,617,356) (a) (b)...................................... $94,496,974
===========
<FN>
NR Not rated.
(a) At June 30, 1996, the net unrealized gain on investments based on cost for federal income tax
purposes of $92,617,356 was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of
value over tax cost............................................................................... $ 2,758,150
------------
Aggregate gross unrealized loss for all investments in which there is an excess of
tax cost over value............................................................................... (878,532)
------------
Net unrealized gain............................................................................... $ 1,879,618
============
(b) At December 31, 1995, the Fund had a capital loss carryforward of $9,843,604 which will expire
between 1997 and 2003 if not utilized.
Purchases and sales of securities (excluding temporary cash investments) for the six months
ended
June 30,1996 were as follows:
Purchases Sales
----------- -----------
Long-term U.S. Government....................................................... $ 2,048,906 $ 7,104,672
Other Long-term Securities...................................................... 15,224,484 9,877,907
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PIONEER INTEREST SHARES, INC.
<TABLE>
BALANCE SHEET
June 30, 1996
<S> <C>
ASSETS:
Investment in securities, at value
(cost $92,617,356; see Schedule of
Investments and Note 1).............. $ 94,496,974
Cash................................... 9,913
Receivables --
Investment securities sold........... 1,078,719
Interest............................. 2,263,702
Other.................................. 11,481
------------
Total assets....................... $ 97,860,789
------------
LIABILITIES:
Payable for investment securities
purchased............................ $ 1,114,094
Due to affiliates (Notes 2 and 3)...... 51,099
Accrued expenses....................... 28,062
------------
Total liabilities.................. $ 1,193,255
------------
NET ASSETS:
Paid-in capital (Note 1)............... $104,867,363
Distributions in excess of net
investment income.................... (38,494)
Accumulated net realized loss on
investments.......................... (10,040,953)
Net unrealized gain on investments..... 1,879,618
------------
Total net assets (equivalent to
$13.18 per share based on
7,332,922 fund shares
outstanding - 50,000,000
shares authorized)............. $ 96,667,534
============
</TABLE>
PIONEER INTEREST SHARES, INC.
<TABLE>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME (NOTE 1):
Interest.............................. $ 4,359,570
-----------
EXPENSES:
Management fees (Note 2).............. $ 276,022
Transfer agent fees (Note 3).......... 64,321
Registration fees..................... 13,610
Professional fees..................... 26,510
Accounting (Note 2)................... 30,918
Custodian fees........................ 16,233
Printing.............................. 8,720
Fees and expenses of nonaffiliated
directors........................... 8,180
Miscellaneous......................... 5,781
-----------
Total expenses...................... $ 450,295
Less fees paid indirectly (Note
4)................................ (6,677)
-----------
Net expenses........................ $ 443,618
-----------
Net investment income............. $ 3,915,952
-----------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Net realized loss on investments
(Note 1)............................ $ (194,505)
Change in unrealized gain on
investments......................... (3,349,549)
-----------
Net loss on investments............. $(3,544,054)
-----------
Net increase in net assets
resulting from operations....... $ 371,898
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PIONEER INTEREST SHARES, INC.
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
---------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................................................................. $ 3,915,952 $ 7,853,565
Net realized loss on investments...................................................... (194,505) (2,239,237)
Change in net unrealized gain (loss) on investments................................... (3,349,549) 9,716,727
----------- -----------
Net increase in net assets resulting from operations................................ $ 371,898 $15,331,055
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ($0.53 and $1.08 per share, respectively).................. $(3,915,952) $(7,856,132)
From tax return of capital ($0.00 and $0.00 per share, respectively).................. -- (35,747)
In excess of net investment income ($0.01 and $0.00 per share, respectively).......... (38,494) --
----------- -----------
Decrease in net assets resulting from distributions to shareholders................. $(3,954,446) $(7,891,879)
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Shares
-------------------------------------
Six Months Ended Year Ended
FROM FUND SHARE TRANSACTIONS: June 30, 1996 December 31, 1995
---------------- -----------------
<S> <C> <C> <C> <C>
Net asset value of shares issued to
shareholders in reinvestment of
distributions................................ 19,749 22,993 $ 260,686 $ 297,731
====== ====== ----------- -----------
Net increase (decrease) in net assets............................................... $(3,321,862) $ 7,736,907
NET ASSETS:
Beginning of period................................................................... 99,989,396 92,252,489
----------- -----------
End of period (including distributions in excess of net investment income of $38,494
and $0, respectively)............................................................... $96,667,534 $99,989,396
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
PIONEER INTEREST SHARES, INC.
<TABLE>
FINANCIAL HIGHLIGHTS -- SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS
PRESENTED
<CAPTION>
Six
Months
Ended
June For the Years Ended December 31,
30, ---------------------------------------------------------------------------------
1996 1995 1994 1993++ 1992 1991 1990 1989
------- ------- ------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 13.67 $ 12.65 $ 14.29 $ 14.09 $ 14.15 $ 13.34 $ 13.73 $ 13.53
------- ------- ------- -------- -------- ------- ------- -------
Increase (decrease) from
investment operations --
Net investment income.......... $ 0.53 $ 1.07 $ 1.12 $ 1.11 $ 1.15 $ 1.17 $ 1.22 $ 1.27
Net realized and unrealized
gain (loss) on investments... (0.48) 1.03 (1.63) 0.22 (0.06) 0.81 (0.39) 0.19
------- ------- ------- -------- -------- ------- ------- -------
Net increase (decrease) from
investment operations...... $ 0.05 $ 2.10 $ (0.51) $ 1.33 $ 1.09 $ 1.98 $ 0.83 $ 1.46
Distributions to shareholders:
From net investment income..... (0.53) (1.08) (1.13) (1.11) (1.15) (1.17) (1.22) (1.26)
In excess of net investment
income....................... (0.01) -- -- (0.02) -- -- -- --
------- ------- ------- -------- -------- ------- ------- -------
Net increase (decrease) in net
asset value.................... $ (0.49) $ 1.02 $ (1.64) $ 0.20 $ (0.06) $ 0.81 $ (0.39) $ 0.20
------- ------- ------- -------- -------- ------- ------- -------
Net asset value, end of
period......................... $ 13.18 $ 13.67 $ 12.65 $ 14.29 $ 14.09 $ 14.15 $ 13.34 $ 13.73
======= ======= ======= ======== ======== ======= ======= =======
Market value, end of period..... $13.000 $13.500 $11.750 $ 13.875 $ 14.750 $14.250 $12.825 $13.750
Total return*................... 0.33% 24.77% (7.54)% 1.57% 12.24% 22.81% 0.71% 11.64%
Ratio of net expenses to average
net assets..................... 0.92%**+ 0.98%+ 1.03% 0.82% 0.82% 0.82% 0.84% 0.85%
Ratio of net investment income
to average net assets.......... 8.00%**+ 8.04%+ 8.46% 7.60% 8.20% 8.63% 9.16% 9.30%
Portfolio turnover rate......... 36%** 49% 65% 61% 44% 40% 32% 62%
Net assets, end of period
(in thousands)................. $96,668 $99,989 $92,252 $103,570 $100,596 $99,798 $93,386 $95,383
Ratios assuming reduction for
fees paid indirectly:
Net expenses................... 0.91%** 0.97% -- -- -- -- -- --
Net investment income.......... 8.01%** 8.05% -- -- -- -- -- --
<FN>
* Assumes initial investment at market value at the beginning of each period,
reinvestment of all distributions, the complete redemption of the investment
at the market value at the end of each period and no sales charges. Total
return would be reduced if sales charges were taken into account.
** Annualized.
+ Ratios assuming no reduction for fees paid indirectly.
++ 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.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PIONEER INTEREST SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
1. Pioneer Interest Shares, Inc. (the Fund), originally a Nebraska corporation,
is registered under the Investment Company Act of 1940 as a diversified,
closed-end management investment company. Effective August 1, 1996, the Fund was
reorganized as a Delaware business trust. The reorganization has no effect on
the Fund's operations. The investment objective of the Fund is to seek interest
income by investing in a diversified portfolio of debt obligations which
management considers to be of high quality.
The Fund's financial statements have been prepared in conformity with
generally accepted accounting principles that require the management of the Fund
to, among other things, make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies consistently followed by the Fund, which are in conformity with those
generally accepted in the investment company industry.
A. Security Valuation -- Security transactions are recorded on trade date.
Securities are valued based on valuations furnished by an independent pricing
service that utilizes a matrix system. This matrix system reflects such factors
as security prices, yields, maturities and ratings, and is supplemented by
dealer and exchange quotations and fair market value information from other
sources, as required. Principal amounts of mortgage-backed securities are
adjusted for monthly paydowns. Premium and discount related to certain
mortgage-backed securities are amortized or accreted in proportion to the
underlying monthly paydowns. Market discount is accreted daily on a
straight-line basis. Temporary cash investments are valued at amortized cost.
Interest income is recorded on the accrual basis.
Gains and losses on sales of investments are calculated on the "identified
cost" method for both financial reporting and federal income tax purposes. It is
the Fund's practice to first select for sale those securities that have the
highest cost and also qualify for long-term capital gain or loss treatment for
tax purposes.
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.
C. Dividend and Distributions -- All shareholders of the Fund are eligible
to participate in the Dividend and Distribution Reinvestment Plan (the Plan).
Under the Plan, participants will receive all dividends and distributions in
full and fractional shares of the Fund in lieu of cash when shares are trading
at or above net asset value. When shares are trading below net asset value,
dividends and distributions will be paid in cash. When the Fund declares
dividends or distributions, the number of shares to be credited to a
participant's account or the cash to be distributed to a participant, determined
as of the close of business of the New York Stock Exchange (Exchange) on the
Dividend Valuation Date, is computed as follows: (a) If the
8
<PAGE>
PIONEER INTEREST SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Continued)
last sales price of shares of the capital stock of the Fund is at or above net
asset value, the Fund will issue new full and fractional shares (computed to
three decimals) of capital stock at the greater of net asset value or 95% of
such last sales price, to be credited to the participant's account; or (b) if
the last sales price of shares of the capital stock of the Fund is below the net
asset value, the Agent will distribute the dividends or distributions to the
participant in cash. There are no brokerage or service fees chargeable to
participants in the Plan; however, this Plan may be amended in the future to
impose a service charge. Participating in the Plan does not relieve shareholders
from any federal, state or local taxes which may be due on dividends and
distributions paid in any taxable year. Dividends and distributions to
shareholders are recorded as of the Dividend Valuation Date.
2. Pioneering Management Corporation (PMC), the Fund's investment adviser,
manages the Fund's portfolio and is a wholly owned subsidiary of The Pioneer
Group, Inc. (PGI). Management fees are calculated daily at the annual rate of
0.625% of the Fund's average daily net assets up to $50 million and 0.50% of
excess over $50 million.
In addition, under the management agreement, certain other services and
costs, including accounting, regulatory reporting and insurance premiums, are
paid by the Fund. Included in due to affiliates is $41,632 and $4,207 in
management and accounting fees, respectively, payable to PMC at June 30, 1996.
3. Pioneering Services Corporation (PSC), a wholly owned subsidiary of PGI,
through a sub-transfer agency agreement with Chemical Mellon Shareholder
Services, provides substantially all transfer agent and shareholder services to
the Fund at negotiated rates. Included in due to affiliates is $5,260 in
transfer agent fees payable to PSC at June 30, 1996.
4. The Fund has entered into certain expense offset arrangements resulting in a
reduction in the Fund's total expenses. For the six months ended June 30, 1996,
the Fund's expenses were reduced by $6,677 under such arrangements.
9
<PAGE>
PIONEER INTEREST SHARES, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF PIONEER INTEREST SHARES, INC.:
We have audited the accompanying balance sheet of Pioneer Interest Shares,
Inc., including the schedule of investments, as of June 30, 1996, and the
related statement of operations for the period then ended, the statements of
changes in net assets for the periods presented and financial highlights for the
periods ended June 30, 1996, December 31, 1995 and December 31, 1994. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for each of the five years ended December 31, 1993, were audited by
other auditors whose report dated February 22, 1994 expressed an unqualified
opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Interest Shares, Inc. as of June 30, 1996, the results of its operations
for the period then ended, the changes in its net assets for the periods
presented, and financial highlights for the periods ended June 30, 1996,
December 31, 1995 and December 31, 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 1, 1996
10
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
11
<PAGE>
PIONEER INTEREST SHARES, INC.
60 State Street
Boston, Massachusetts 02109
OFFICERS DIRECTORS
JOHN F. COGAN, JR. JOHN F. COGAN, JR.
Chairman and President RICHARD H. EGDAHL, M.D.
DAVID D. TRIPPLE MARGARET B. W. GRAHAM
Executive Vice President JOHN W. KENDRICK
SHERMAN B. RUSS MARGUERITE A. PIRET
Vice President DAVID D. TRIPPLE
WILLIAM H. KEOUGH STEPHEN K. WEST
Treasurer JOHN WINTHROP
JOSEPH P. BARRI
Secretary
INVESTMENT ADVISER LEGAL COUNSEL
PIONEERING MANAGEMENT HALE AND DORR
CORPORATION
PRINCIPAL UNDERWRITER TRANSFER AGENT
PIONEER FUNDS PIONEERING SERVICES
DISTRIBUTOR, INC. CORPORATION
CUSTODIAN
SHAREHOLDER
BROWN BROTHERS SERVICES AND
HARRIMAN & CO. SUB-TRANSFER AGENT
INDEPENDENT PUBLIC CHASEMELLON
ACCOUNTANTS SHAREHOLDER SERVICES
ARTHUR ANDERSEN LLP
- - --------------------------------------------------------
Please direct your questions about your account in
Pioneer Interest Shares to CHASEMELLON SHAREHOLDER
SERVICES at 1-800-288-9541. (Telecommunication Device
for the Deaf: 1-800-231-5469.)
Contact ChaseMellon Shareholder Services in writing as
follows:
FOR: WRITE TO:
General inquiries, lost PO Box 590
dividend checks, change Ridgefield Park, NJ 07660
of address, account
consolidation
Lost stock certificates PO Box 467
Washington Bridge Station
New York, NY 10033
Stock transfer PO Box 469
Washington Bridge Station
New York, NY 10033
Dividend reinvestment PO Box 750
plan (DRIP) Pittsburgh, PA 15230
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0896-3596
[COPYRIGHT]Pioneer Funds Distributor, Inc.
