<PAGE>
PIONEER INTEREST SHARES, INC.
DEAR SHAREOWNERS,
This annual report to shareowners details performance of Pioneer Interest Shares
for 1995. During the year, 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 Fund benefited from a strong bond market, in
which prices of bonds increased as yields fell. As a result, the Fund more than
regained the ground it lost in 1994.
HOW YOUR FUND PERFORMED
The Fund's market price moved to $13.50 per share on December 31, 1995, from
$11.75 per share one year earlier. 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 $12.65 per share on December 31, 1994,
to $13.67 at the close of 1995. In other words, the market value of the Fund on
December 31, 1995, reflected a 1.2% "discount" compared to the value of the
securities in the Fund's portfolio.
Over the course of the year, the Fund paid investors quarterly dividends
totaling $1.08 per share. As of December 31, the Fund provided a yield of 8.00%
based on market price, and 7.90% 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's total return was 24.77%
for the year, assuming all dividends were reinvested. Based on net asset value,
total return was 17.36%. In comparison, the Lehman Brothers Government/Corporate
Bond Index returned 19.24% over the same period.
MARKET OVERVIEW
The year just ended was very strong for the bond market, which rebounded from an
extremely difficult 1994. In 1994, and once in February of 1995, the Federal
Reserve raised key short-term interest rates with the aim of slowing the economy
and heading off the possibility of inflation. In the first half of 1995, there
were numerous signs that the economy was, indeed, cooling. The bond market
reacted positively -- pushing up bond prices and lowering yields -- based on the
belief that the Fed wouldn't have to raise rates further in the near future. As
it turned out, not only did the Fed not raise rates again, on July 6 it lowered
them by 0.25 percentage points and dropped rates again on December 19, by
another 0.25 percentage points.
Your management believes that the bond market overreacted in 1994 -- pushing
prices lower and yields higher than economic conditions merited. So, when market
psychology shifted this year, the resulting bond rally was stronger than it
might have been otherwise. The long-term U.S. Treasury bond provides a good
example. As of December 31, 1994, the interest rate on the 30-year Treasury bond
stood at 7.88%; by the end of July, the rate was 6.84%. By the end of 1995,
long-term interest rates were down to 5.95%, a drop significant enough to push
the prices of 30-year Treasury bonds up by 27% over the 12 months.
HOW PIONEER MANAGED YOUR INVESTMENT
With the strength of the bond market, buoyed by an economy with low inflation
and moderate growth, your management "stayed the course," making only modest
changes to the Fund's portfolio. We only change investments when we see a
substantial new opportunity to help meet the Fund's goals.
As interest rates fell to their lowest levels in many years, we adjusted the
portfolio to take advantage of rising prices but without disregarding the
stability shorter-term securities can offer if interest rates reverse.
Additionally, while long-term interest rates fell sharply, shorter-term yields
declined less, meaning that we could obtain competitive yields without taking
<PAGE>
on the full risks attached to long-term bonds. By the end of 1995, the portion
of the portfolio maturing in less than 5 years was 44%, versus 40% as of
December 31, 1994; the average life of the portfolio shortened to 9.1 years from
11.5 years. In terms of market sectors, the Fund remained diversified across
many sectors to take advantage of the variety of opportunities we found.
EFFECTIVE PORTFOLIO MATURITY
(Average Life as of December 31, 1995)
[Pie Chart]
0-2 years 17%
2-5 years 27
5-7 years 12
7-10 years 13
10-20 years 18
20+ years 13
LOOKING AHEAD
During recent months, the economy has given stronger signals that growth is
slowing, leading many investors to expect the Federal Reserve to lower
short-term rates yet again. In fact, current bond prices already reflect the
expectation for lower rates. We think the Fed is likely to continue its
willingness to intervene in the economy, now to stimulate growth as opposed to
its restrictive stance throughout 1994 and into 1995. We are optimistic that the
economy will pick up steam and avoid the significant downturns some have
predicted. 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 audited financial statements and the
complete list of portfolio holdings as of December 31, 1995. 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, Chemical
Mellon Shareholder Services, at 1-800-288-9541.
Respectfully,
[JOHN F. COGAN LOGO]
John F. Cogan, Jr.
Chairman and President,
Pioneer Interest Shares, Inc.
2
<PAGE>
<TABLE>
PIONEER INTEREST SHARES, INC.
SCHEDULE OF INVESTMENTS
December 31, 1995
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT IN SECURITIES -- 100.0%
INDUSTRIALS -- 66.3%
$2,000,000 BB+/Baa3 AMR Corp., 9.75%, 2000............................................ $ 2,231,780
2,000,000 BB+/Baa3 AMR Corp., 9.88%, 2020............................................ 2,405,000
2,000,000 BBB-/Baa3 Boise Cascade Corp., 9.90%, 2000.................................. 2,223,300
2,000,000 BBB-/Baa1 Bowater, Inc., 9.0%, 2009......................................... 2,441,240
4,000,000 AA-/Aa3 BP America Inc., 10.0%, 2018...................................... 4,532,320
1,500,000 A/A2 Caterpillar Inc., 9.75%, 2019..................................... 1,743,150
2,000,000 A-/A3 Chrysler Corp., 10.95%, 2017...................................... 2,244,160
3,000,000 BB+/Baa2 Delta Air Lines, Inc., 9.20%, 2014................................ 3,408,630
4,000,000 BB-/Ba1 Domtar Inc., 11.25%, 2017......................................... 4,255,000
2,000,000 BBB-/Baa3 Federal Paper Board Co., 10.0%, 2011.............................. 2,551,040
3,000,000 BBB-/Baa2 Georgia Pacific Corp., 9.875%, 2021............................... 3,474,450
2,000,000 BBB/Ba1 Joy Technologies Inc., 10.25%, 2003............................... 2,240,000
2,000,000 BBB+/Baa2 Kansas City Southern Industries, 8.8%, 2022....................... 2,217,500
2,000,000 BBB-/Baa2 M.A. Hanna Co., 9.375%, 2003...................................... 2,333,780
1,500,000 BB-/B1 Rexene Corp., 11.75%, 2004........................................ 1,571,250
5,500,000 BBB/Baa2 Shopko Stores Inc., 9.25%, 2022................................... 5,723,740
2,000,000 BB-/B1 Stone Container, 10.75%, 2002..................................... 2,065,000
4,000,000 BBB-/Ba1 Time Warner Inc., 9.15%, 2023..................................... 4,536,160
1,500,000 BB-/Ba3 Unisys Corp., 13.5%, 1997......................................... 1,425,000
4,000,000 BB+/Baa3 USX Corp., 9.375%, 2012........................................... 4,620,960
2,000,000 BB-/B1 Viacom International Inc., 10.25%, 2001........................... 2,300,000
2,000,000 B/B2 Weirton Steel Corp., 10.75%, 2005................................. 1,885,000
2,000,000 BBB-/Ba1 Westinghouse Electric Corp., 8.625%, 2012......................... 2,040,040
337,000 A/A1 Westvaco Corp., 12.3%, 2015....................................... 356,118
-----------
Total (Cost $61,530,652)...................................... $64,824,618
-----------
UTILITIES -- ELECTRIC -- 12.7%
4,000,000 NR/Aaa Big Rivers Electric Cooperative, 10.7%, 2017...................... $ 4,507,400
2,000,000 BBB/Baa2 Commonwealth Edison, 9.75%, 2020.................................. 2,311,520
5,000,000 AAA/Aaa Rural Electric Cooperative (Deseret), 10.11%, 2017................ 5,600,200
-----------
Total (Cost $11,827,600)...................................... $12,419,120
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
PIONEER INTEREST SHARES, INC.
SCHEDULE OF INVESTMENTS
December 31, 1995 (Continued)
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
UTILITIES -- NATURAL GAS -- 8.4%
$2,000,000 BB+/Baa3 Coastal Corp., 9.625%, 2012....................................... $ 2,402,580
2,000,000 BBB-/Baa2 Colorado Interstate Gas Co., 10.0%, 2005.......................... 2,386,540
3,000,000 BB+/Ba2 NorAm Energy Corp., 10.0%, 2019................................... 3,416,310
-----------
Total (Cost $7,305,640)....................................... $ 8,205,430
-----------
BANKS -- 1.3%
61,402 NR/NR Bank of America National Trust & Savings Association, 10.5%,
2009.............................................................. $ 62,876
1,156,000 A/A3 Citicorp, 10.75%, 2015............................................ 1,215,175
-----------
Total (Cost $1,302,834)....................................... $ 1,278,051
-----------
U.S. GOVERNMENT OBLIGATIONS -- 6.5%
1,700,000 U.S. Treasury Notes, 7.75%, 2001.................................. $ 1,877,174
1,000,000 U.S. Treasury Notes, 8.5%, 1997................................... 1,040,160
1,500,000 U.S. Treasury Notes, 8.75%, 2000.................................. 1,703,670
1,700,000 U.S. Treasury Notes, 9.25%, 1996.................................. 1,702,397
-----------
Total (Cost $6,204,047)....................................... $ 6,323,401
-----------
FOREIGN GOVERNMENT AND GOVERNMENT SPONSORED -- 4.8%
4,000,000 A+/A2 Hydro-Quebec, 9.75%, 2018......................................... $ 4,694,320
-----------
Total (Cost $4,345,000)....................................... $ 4,694,320
-----------
TOTAL INVESTMENT IN SECURITIES
(COST $92,515,773) (a) (b).................................... $97,744,940
===========
<FN>
NR Not rated.
</FN>
</TABLE>
<TABLE>
<S> <C>
(a) At December 31, 1995, the net unrealized gain on investments based on cost for federal income
tax purposes of $92,518,617 was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of
value over tax cost............................................................................ $ 5,593,445
Aggregate gross unrealized loss for all investments in which there is an excess of
tax cost over value............................................................................ (367,122)
------------
Net unrealized gain............................................................................ $ 5,226,323
============
(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 year ended
December 31, 1995 were as follows:
</TABLE>
<TABLE>
<CAPTION>
Purchases Sales
----------- -----------
<S> <C> <C>
Long-term U.S. Government....................................................... $15,963,480 $14,368,576
Other Long-term Securities...................................................... 31,242,150 32,291,631
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
PIONEER INTEREST SHARES, INC.
BALANCE SHEET
December 31, 1995
<S> <C>
ASSETS:
Investment in securities, at value
(cost $92,515,773; see Schedule of
Investments and Note 1).............. $ 97,744,940
Cash................................... 21,555
Interest receivable.................... 2,291,642
Other.................................. 14,525
------------
Total assets....................... $100,072,662
------------
LIABILITIES:
Due to affiliates (Notes 2 and 3)...... $ 57,694
Accrued expenses....................... 25,572
------------
Total liabilities.................. $ 83,266
------------
NET ASSETS:
Paid-in capital (Note 1)............... $104,606,677
Accumulated net realized loss on
investments.......................... (9,846,448)
Net unrealized gain on investments..... 5,229,167
------------
Total net assets (equivalent to
$13.67 per share based on
7,313,173 trust shares
outstanding, $0.01 par value,
50,000,000 shares authorized).... $ 99,989,396
============
</TABLE>
<TABLE>
PIONEER INTEREST SHARES, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<S> <C>
INVESTMENT INCOME (NOTE 1):
Interest.............................. $ 8,792,793
-----------
EXPENSES:
Management fees (Note 2).............. $ 548,325
Transfer agent fees (Note 3).......... 211,184
Registration fees..................... 17,194
Professional fees..................... 41,895
Accounting (Note 2)................... 50,512
Custodian fees........................ 21,279
Printing.............................. 21,240
Fees and expenses of nonaffiliated
directors........................... 26,400
Miscellaneous......................... 10,027
-----------
Total expenses...................... $ 948,056
Less fees paid indirectly (Note
4)................................ (8,828)
-----------
Net expenses........................ $ 939,228
-----------
Net investment income............. $ 7,853,565
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments
(Note 1)............................ $(2,239,237)
Change in unrealized gain on
investments......................... 9,716,727
-----------
Net gain on investments............. $ 7,477,490
-----------
Net increase in net assets
resulting from operations....... $15,331,055
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
PIONEER INTEREST SHARES, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1995 and 1994
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................................ $ 7,853,565 $ 8,222,730
Net realized loss on investments................................................. (2,239,237) (4,301,326)
Change in net unrealized gain (loss) on investments.............................. 9,716,727 (7,602,553)
----------- ------------
Net increase (decrease) in net assets resulting from operations................ $15,331,055 $ (3,681,149)
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ($1.08 and $1.13 per share, respectively).................. $(7,856,132) $ (8,220,163)
Tax return of capital ($0.00 and $0.00 per share, respectively).................. (35,747) --
----------- ------------
Decrease in net assets resulting from distributions to shareholders............ $(7,891,879) $ (8,220,163)
----------- ------------
</TABLE>
<TABLE>
<CAPTION>
Shares
--------------------------
1995 1994
----------- -----------
<S> <C> <C> <C> <C>
FROM TRUST SHARE TRANSACTIONS:
Net asset value of shares issued to shareholders in
reinvestment of dividends......................... 22,993 43,509 $ 297,731 $ 584,110
=========== ===========
----------- ------------
Net increase (decrease) in net assets......................................... $ 7,736,907 $(11,317,202)
NET ASSETS:
Beginning of year............................................................... 92,252,489 103,569,691
----------- ------------
End of year (including undistributed net investment income of $0 and $2,567,
respectively)................................................................. $99,989,396 $ 92,252,489
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
PIONEER INTEREST SHARES, INC.
FINANCIAL HIGHLIGHTS -- SELECTED DATA FOR A SHARE OUTSTANDING FOR THE YEARS
PRESENTED
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------------------------------------
1995 1994 1993+ 1992 1991 1990 1989
------- ------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year............ $ 12.65 $ 14.29 $ 14.09 $ 14.15 $ 13.34 $ 13.73 $ 13.53
------- ------- -------- -------- ------- ------- -------
Increase (decrease) from investment
operations -
Net investment income........................ $ 1.07 $ 1.12 $ 1.11 $ 1.15 $ 1.17 $ 1.22 $ 1.27
Net realized and unrealized gain (loss) on
investments................................ 1.03 (1.63) 0.22 (0.06) 0.81 (0.39) 0.19
------- ------- -------- -------- ------- ------- -------
Total increase (decrease) from investment
operations............................... $ 2.10 $ (0.51) $ 1.33 $ 1.09 $ 1.98 $ 0.83 $ 1.46
Distributions to shareholders:
From net investment income................... (1.08) (1.13) (1.11) (1.15) (1.17) (1.22) (1.26)
In excess of net investment income........... -- -- (0.02) -- -- -- --
------- ------- -------- -------- ------- ------- -------
Net increase (decrease) in net asset value.... $ 1.02 $ (1.64) $ 0.20 $ (0.06) $ 0.81 $ (0.39) $ 0.20
------- ------- -------- -------- ------- ------- -------
Net asset value, end of year.................. $ 13.67 $ 12.65 $ 14.29 $ 14.09 $ 14.15 $ 13.34 $ 13.73
======= ======= ======== ======== ======= ======= =======
Market value, end of year..................... $13.500 $11.750 $ 13.875 $ 14.750 $14.250 $12.825 $13.750
Total return*................................. 24.77% (7.54)% 1.57% 12.24% 22.81% 0.71% 11.64%
Ratio of net operating expenses to average
net assets................................... 0.98%++ 1.03% 0.82% 0.82% 0.82% 0.84% 0.85%
Ratio of net investment income to average
net assets................................... 8.04%++ 8.46% 7.60% 8.20% 8.63% 9.16% 9.30%
Portfolio turnover rate....................... 49% 65% 61% 44% 40% 32% 62%
Net assets, end of year (in thousands)........ $99,989 $92,252 $103,570 $100,596 $99,798 $93,386 $95,383
Ratio assuming reduction for fees paid
indirectly:
Net operating expenses....................... 0.97% -- -- -- -- -- --
Net investment income........................ 8.05% -- -- -- -- -- --
<FN>
* Assumes initial investment at market value at the beginning of each year,
reinvestment of all distributions, the complete redemption of the investment
at the market value at the end of each year and no sales charges. Total
return would be reduced if sales charges were taken into account.
+ 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.
++ Ratios assuming no reduction for fees paid indirectly.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PIONEER INTEREST SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. Pioneer Interest Shares, Inc. (the Fund) is a Nebraska corporation registered
under the Investment Company Act of 1940 as a diversified, closed-end management
investment company. 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
plus accrued interest, which approximates value. 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.
The Fund has reclassified $35,747 from paid-in capital to distributions from
tax return of capital. This 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. 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
8
<PAGE>
PIONEER INTEREST SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 (Continued)
business of the New York Stock Exchange (Exchange) on the Dividend Valuation
Date, is computed as follows: (a) If the 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 $44,668 and $3,378 in
management and accounting fees, respectively, payable to PMC at December 31,
1995.
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 $9,648 in
transfer agent fees payable to PSC at December 31, 1995.
4. The Fund has entered into certain expense offset arrangements resulting in a
reduction in the Fund's total expenses. For the year ended December 31, 1995,
the Fund's expenses were reduced by $8,828 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 December 31, 1995, and the
related statement of operations for the year then ended, and statements of
changes in net assets and financial highlights for the years ended December 31,
1995 and 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the 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
December 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Interest Shares, Inc., as of December 31, 1995, the results of its
operations for the year then ended, and the changes in its net assets and
financial highlights for the years ended December 31, 1995 and 1994, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 2, 1996
10
<PAGE>
<TABLE>
PIONEER INTEREST SHARES, INC.
TAX TREATMENT OF DISTRIBUTIONS MADE DURING THE YEAR ENDED DECEMBER 31, 1995
During the year ended December 31, 1995, the Fund paid the following
distributions from net investment income:
<CAPTION>
Distributions
Per
To Shareholders of Record Payment Date Share
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
March 16, 1995 March 31, 1995 $0.27
June 15, 1995 June 30, 1995 0.26
September 14, 1995 September 29, 1995 0.27
December 14, 1995 December 29, 1995 0.28
-----
TOTAL $1.08
=====
</TABLE>
For purposes of the dividend exclusion, none of the $1.08 per share qualifies
for the exclusion.
DIRECTORS FEES, PRINCIPAL SHAREHOLDERS AND SHARE OWNERSHIP OF DIRECTORS AND
OFFICERS (UNAUDITED)
The aggregate direct remuneration paid by the Fund to non-affiliated directors
and officers during the year ended December 31, 1995 was $22,309 plus expenses
incurred in attending directors meetings of $3,955. Fees of directors who are
affiliated with or "interested persons" of Pioneering Management Corporation and
Pioneer Funds Distributor, Inc., investment adviser and principal underwriter,
respectively, of the Fund ($1,000 in 1995), are reimbursed to the Fund by
Pioneering Management Corporation in accordance with the management contract
with the Fund. At December 31, 1995, the directors and officers of the Fund
owned beneficially 100 shares of the Fund (approximately 0% of the outstanding
shares). The Pioneer Group, Inc., the parent company of Pioneering Management
Corporation and Pioneer Funds Distributor, Inc., is a publicly held corporation
of which Mr. Cogan, Chairman and President of the Fund, owned approximately 15%
of the outstanding shares of capital stock at December 31, 1995.
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
SERVICES AND
BROWN BROTHERS SUB-TRANSFER AGENT
HARRIMAN & CO.
CHEMICAL MELLON
INDEPENDENT PUBLIC SHAREHOLDER SERVICES
ACCOUNTANTS
ARTHUR ANDERSEN LLP
Please direct your questions about
your account in Pioneer Interest
Shares to CHEMICAL MELLON SHAREHOLDER
SERVICES at 1-800-288-9541.
(Telecommunication Device for the
Deaf: 1-800-231-5469).
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Contact Chemical Mellon Shareholder Services in writing
as follows:
<S> <C>
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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0296-2997
[registered trademark]Pioneer Funds Distributor, Inc.
[PIONEER LOGO]
Pioneer
Interest
Shares, Inc.
ANNUAL REPORT
DECEMBER 31, 1995
