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[Pioneer Logo]
Pioneer II
Semiannual Report
March 31, 1996
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DEAR FELLOW SHAREOWNER,
Pioneer II closed the first half of its 27th fiscal year on March 31, 1996.
Performance in the stock market -- particularly within the large-capitalization
arena -- remained strong during the period, continuing the trend begun early in
1995. Despite the gains, however, some setbacks occurred, especially early in
1996 when economic data triggered fears of inflation and sent long-term interest
rates higher. The stock market reacted with increased volatility, including some
interim price declines.
HOW YOUR FUND PERFORMED
For the six months ended March 31, 1996, we report the following for Pioneer II:
* Shareowners received a dividend of $0.1521 per share and a capital gains
distribution of $1.7317 per share, both paid in December.
* Net asset value per share stood at $20.35 on March 31, versus $20.66 on
September 30, 1995, reflecting payment of $1.8838 in distributions.
* The Fund's six-month total return was 8.11% based on net asset value and
1.90% based on public offering price. Total return represents the change in
share price and assumes the reinvestment of all distributions at net asset
value.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of March 31, 1996)
Period Net Asset Value Public Offering Price*
------ --------------- ----------------------
Life-of-Fund
(9/30/69) 14.70% 14.44%
20 Years 16.27 15.94
10 Years 10.89 10.24
5 Years 13.85 12.51
1 Year 25.61 18.40
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A FAST-MOVING STOCK MARKET
At the beginning of your Fund's semiannual period the environment for stock
investing was favorable. The low inflation, slow economic growth and falling
interest rates that existed throughout 1995 continued into 1996. In fact, the
Federal Reserve (the Fed) cut short-term interest rates on January 31,
reflecting its belief the economy was moving too slowly and needed stimulation.
Late in the period, however, better-than-expected employment reports indicated
the economy was picking up steam. While only one of many indicators used to
determine the economy's strength, the employment figures nonetheless spooked
financial markets and led to spurts of volatility. Increasing commodities
prices, concerns the Fed would raise short-term interest rates, and waning hopes
of a final federal budget and reduced government spending in an election year
added to the uncertainty. Despite the heightened volatility, the Dow Jones
Industrial Average pushed ahead to post an impressive gain of 18.01% for the
Fund's semiannual period. The broader-based Standard & Poor's 500 Index returned
11.68% over the same six months. The figures recorded by the indices, while
reflective of the stock market's continued strength, masked the significant
volatility that many individual stocks -- and stock investors -- encountered.
PORTFOLIO CHANGES
In choosing investments for Pioneer II's portfolio, your management researches
individual companies, comparing a company's stock price to what we determine is
its true value. When we come across a company we think is undervalued, we'll buy
and hold the stock until it reaches the price we determined was its full value.
The exception occurs when a company experiences a fundamental change in its
management, operations or some other major aspect of the business that alters
our assessment of its potential.
Over the six-month period, we found a number of undervalued technology issues.
After enjoying impressive price increases in 1995, technology stocks in general
experienced volatile price swings. We found several -- based in the U.S. and
overseas -- we thought had become "cheap" in comparison to their growth
potential. We added to Pioneer II's technology holdings, increasing them to 23%
of the portfolio, versus 9% six months ago. The securities we selected tend to
be highly competitive, multinational operators. Additions to the Fund over the
past six months include: Cypress Semiconductor, SGS Thomson
Microelectronics, Texas Instruments, Motorola, Intel, Arrow Electronics,
Nokia, and Ericsson. Each has strong prospects, and we expect they will be solid
performers for your Fund. SGS Thomson, for example, has a strong cash flow and
an impressive trailing price-to-earnings ratio. This French
- ----------
* Reflects deduction of the maximum 5.75% sales charge and assumes reinvestment
of all distributions at net asset value.
Past performance does not guarantee future results. Returns and share prices
fluctuate, when redeemed, may be worth more or less than their original cost.
<PAGE>
semiconductor company also benefits from great distribution channels, which
helps sell its products in an efficient and timely manner.
In the utility and financial sector, a number of holdings reached our target
prices. As a result, we sold several; for example, the Fund's utility position
stood at 9% on March 31, down from 13% six months ago. After strong performance,
due in large part to the extremely harsh winter season, your management began to
sell the Fund's investments in MCN Corp. and National Power Plc. As to financial
holdings, we became concerned that some stock prices were moving based on
factors other than individual merits. We decreased the portfolio's weighting in
financial companies to 19%, versus 22% on September 30. We sold stocks we
thought hit their full values, including: Federal National Mortgage Association,
Norwest, Chemical Banking and National City. We did, however, find financial
companies we think still offer value. We added Merrill Lynch and Dean Witter,
which have both posted solid earnings and continue to benefit from strong
consumer demand.
The accompanying chart shows the many sectors represented in Pioneer II's
portfolio at the end of the semiannual period.
SECTOR DISTRIBUTION
(Percentage of Equity Holdings as of March 31, 1996)
[PIE CHART DEPICTING THE FOLLOWING INFORMATION]
Technology 23%
Financial Services 19%
Basic Industries 13%
Consumer Non-Durables 11%
Utilities 9%
Service Industries 8%
Capital Goods 7%
Consumer Durables 6%
Other 4%
On March 31, about 12% of the Fund's portfolio was invested outside the
United States. As with U.S.-based holdings, we look at the prospects of
individual companies, rather than jumping into a "hot" industry or country.
Your management also carefully weighs the risks of international investing,
such as currency fluctuations and economic and political instabilities. To
minimize these and other concerns, the Fund is focused primarily on large,
popular companies based in the world's more established markets. We favor
multinational operators that have proven themselves as dominant players in
their field. Examples include Fuji Photo Film and Telefonos de Mexico.
LOOKING AHEAD
Debates will undoubtedly persist -- particularly in this election year -- as to
whether financial markets will move higher, or whether they will reverse course.
We believe no one can predict stock market movements into the future; however,
we think it is likely stock prices will remain somewhat volatile near-term,
especially given the uncertain strength of the economy. Your management,
however, does not get bogged down in market forecasting. Instead, we remain
focused on what we think is the most effective way to invest for the long term
- -- identifying the potential of individual companies.
Your Fund's management will continue to research and analyze the many
opportunities that exist in the United States and around the world. By doing so,
we expect to give shareowners a broadly diversified portfolio that can offer
continued solid long-term results.
The following pages provide the Fund's audited Schedule of Investments and
financial statements as of March 31, 1996. If you have any questions about your
investment in Pioneer II, please contact your investment representative, or call
Pioneer at 1-800-225-6292.
Respectfully,
[Signature of John F. Cogan, Jr.]
John F. Cogan, Jr.
Chairman and President,
Pioneer II
2
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SCHEDULE OF INVESTMENTS -- PIONEER II -- March 31, 1996
- --------------------------------------------------------------------------------
SHARES VALUE
- ------------ ----------------
COMMON STOCKS -- 99.3%
BASIC INDUSTRIES -- 13.5%
Aerospace -- 0.6%
450,000 Lockheed Martin Corp. $ 34,143,750
420,587 Modi Luft Ltd. 169,310
-------------
$ 34,313,060
-------------
Chemicals -- 2.5%
600,000 AKZO N.V. (A.D.R.) $ 33,450,000
38,400 ARCO Chemical Co. 1,992,000
584,200 Cytec Industries Inc.* 49,364,900
84,200 Eastman Chemical Co. 5,820,325
800,000 Exide Corp. 18,700,000
3,750,000 Methanex Corp.* 25,312,500
-------------
$ 134,639,725
-------------
Forest Products -- 1.7%
1,150,000 Abitibi-Price, Inc. $ 15,668,750
4,372,700 Longview Fibre Co.+ 73,789,312
-------------
$ 89,458,062
-------------
Iron & Steel -- 5.1%
1,050,000 A.M. Castle & Co.+ $ 30,975,000
5,570,400 Allegheny Ludlum Corp.+ 103,052,400
831,900 Amcast Industrial Corp.+ 14,766,225
1,450,000 British Steel Plc (Sponsored A.D.R.) 42,775,000
2,722,000 National Steel Corp. (Class B)*+ 38,108,000
1,993,600 Rouge Steel Co. (Class A)+ 44,108,400
-------------
$ 273,785,025
-------------
Metals & Mining -- 3.2%
1,475,000 Ashanti Goldfields Co., Ltd.
(Sponsored G.D.R.) $ 36,875,000
3,862,000 Trinity Industries, Inc.+ 134,687,250
-------------
$ 171,562,250
-------------
Non-Ferrous Metals -- 0.4%
330,000 Phelps Dodge Corp. $ 22,646,250
-------------
Tire & Rubber -- 0.0%
9,600 Carlisle Companies Inc. $ 416,400
-------------
TOTAL BASIC INDUSTRIES ..................................... $726,820,772
-------------
CAPITAL GOODS -- 6.9%
Construction & Engineering -- 1.9%
4,240,000 AGCO Corp.+ $ 102,290,000
-------------
Producer Goods -- 5.0%
1,815,100 Briggs & Stratton Corp.+ $ 78,276,188
825,000 BW/IP Holdings, Inc. 14,746,875
2,486,800 Donaldson Co., Inc.+ 68,387,000
975,000 Global Industrial Technologies , Inc.* 23,400,000
300,000 Kennametal, Inc. 10,837,500
55,000 Lindberg Corp. 550,000
1,014,200 Tecumseh Products Co. (Class A) 59,711,025
162,500 Tecumseh Products Co. (Class B) 9,059,375
Producer Goods -- continued
SHARES VALUE
- ------------ ----------------
221,400 U.S. Industries, Inc.* $ 4,594,050
-------------
$ 269,562,013
-------------
TOTAL CAPITAL GOODS ........................................ $ 371,852,013
-------------
CONSUMER DURABLES -- 5.9%
Consumer Durables -- 0.3%
698,700 Bassett Furniture Industries, Inc.+ $ 18,166,200
-------------
Motor Vehicles -- 5.6%
2,914,200 Breed Technologies, Inc.+ $ 54,276,975
275,000 Caterpillar, Inc. 18,700,000
1,200,000 Cummins Engine Co., Inc. 48,450,000
300,000 Douglas & Lomason Co.+ 3,487,500
217,300 Federal-Mogul Corp. 4,047,212
1,252,000 Magna International Inc. (Class A) 57,748,500
700,000 Simpson Industries, Inc. 6,562,500
880,300 A.O. Smith Corp.+ 20,797,088
2,395,000 Stewart & Stevenson Services, Inc.+ 67,359,375
460,000 Strattec Security Corp.*+ 7,590,000
470,000 AB Volvo (Series B Free) 10,932,849
-------------
$ 299,951,999
-------------
TOTAL CONSUMER DURABLES .................................... $ 318,118,199
-------------
CONSUMER NON-DURABLES -- 11.0%
Agriculture & Food -- 5.6%
2,000,000 Hormel Foods Corp. $ 52,500,000
8,900,000 IBP, Inc.+ 228,062,500
1,579,000 Terra Industries Inc. 20,329,625
-------------
$ 300,892,125
-------------
Consumer Luxuries -- 1.3%
2,950,000 Brunswick Corp. $ 67,850,000
-------------
Home Products -- 1.0%
1,416,000 Lancaster Colony Corp. $ 52,746,000
-------------
Retail Food -- 1.1%
20,000 Nestle S.A. (Registered Shares) $ 22,560,309
1,154,900 Supervalu, Inc. 35,657,538
-------------
$ 58,217,847
-------------
Retail Non-Food -- 1.7%
200,000 Fuji Photo Film (A.D.R.) $ 11,550,000
930,000 Reebok International Ltd. 25,691,250
2,100,000 Toys "R" Us, Inc.* 56,700,000
-------------
$ 93,941,250
-------------
Textiles/Clothes -- 0.3%
1,600,000 Shaw Industries, Inc. $ 17,600,000
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TOTAL CONSUMER NON-DURABLES ................................ $ 591,247,222
-------------
ENERGY -- 2.0%
Oil Refining & Drilling -- 1.2%
225,000 Atlantic Richfield Co. $ 26,775,000
1,900,000 YPF S.A. (Class D)
(Sponsored A.D.R.) 38,237,500
-------------
$ 65,012,500
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The accompanying notes are an integral part of these financial statements.
3
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SCHEDULE OF INVESTMENTS -- PIONEER II -- March 31, 1996
- --------------------------------------------------------------------------------
SHARES VALUE
- ------------ ----------------
Oil Services -- 0.8%
1,091,700 Santa Fe Pacific Pipeline Partners, L.P.+ $ 40,665,825
--------------
TOTAL ENERGY ............................................... $ 105,678,325
--------------
FINANCIAL -- 18.5%
Commercial Bank -- 6.0%
275,500 Banco Comercial Portugues S.A. (A.D.R.) $ 3,788,125
1,075,000 Banco De Santander S.A. 51,141,729
150,000 Banco Popular Espanol S.A. 25,887,821
1,620,000 BankAmerica Corp. 125,550,000
80,000 First Interstate Bancorp 13,880,000
1,000,000 First Tennessee National Corp. 33,000,000
860,000 Mellon Bank Corp. 47,407,500
615,600 New York Bancorp Inc.+ 14,466,600
30,000 Wells Fargo & Co. 7,830,000
--------------
$ 322,951,775
--------------
Financial Services -- 4.0%
4,000,000 California Federal Bank*+ $ 71,500,000
180,000 California Federal Bank
Goodwill Certificates* 1,327,500
210,000 Charter One Financial, Inc. 7,087,500
208,000 The Chase Manhattan Corp. 14,700,000
830,000 Dean Witter, Discover & Co. 47,517,500
345,400 First USA, Inc. 19,558,275
855,000 Merrill Lynch & Co., Inc. 51,941,250
--------------
$ 213,632,025
--------------
Finance/Miscellaneous -- 1.8%
508,200 Bay View Capital Corp.+ $ 16,516,500
2,225,000 Greenpoint Financial Corp. 61,187,500
696,000 Resource Bancshares Mortgage
Group, Inc.* 10,875,000
110,000 Student Loan Marketing Association 8,415,000
--------------
$ 96,994,000
--------------
Insurance-General -- 4.4%
3,205,000 AMBAC Inc.+ $ 154,240,625
948,900 MBIA Inc. 71,167,500
707,600 Western National Corp. 11,498,500
--------------
$ 236,906,625
--------------
Savings & Loan -- 2.3%
650,000 Coastal Savings Financial, Inc.* $ 20,312,500
135,000 Great Western Financial Corp. 3,256,875
3,450,000 Washington Mutual Savings Bank 102,637,500
--------------
$ 126,206,875
--------------
TOTAL FINANCIAL ............................................ $ 996,691,300
--------------
SERVICES -- 7.9%
Health Services & Personal Care -- 3.5%
2,600,000 Columbia/HCA Healthcare Corp. $ 150,150,000
670,000 GranCare, Inc.* 12,060,000
637,500 Lincare Holdings Inc.* 20,718,750
152,700 Service Corporation International 7,444,125
--------------
$ 190,372,875
--------------
Pharmaceuticals -- 0.7%
845,000 Astra AB (Series A Free) $ 39,122,126
--------------
Miscellaneous -- 3.7%
1,237,500 American Greetings Corp. (Class A) $ 34,185,937
2,910,300 Kelly Services Inc. (Class A)+ 93,220,401
2,200,000 Manpower, Inc. 68,200,000
--------------
$ 195,606,338
--------------
TOTAL SERVICES ............................................. $ 425,101,339
--------------
TECHNOLOGY -- 22.8%
Business Machines -- 1.2%
500,000 International Business Machines Corp. $ 55,562,500
788,900 Tandem Computers Inc.* 7,001,488
--------------
$ 62,563,988
--------------
Computer Services -- 1.2%
1,000,000 Dell Computer Corp.* $ 33,500,000
1,200,000 Silicon Graphics, Inc.* 30,000,000
--------------
$ 63,500,000
--------------
Electronics -- 17.9%
300,000 Analog Devices, Inc.* $ 8,400,000
400,000 Applied Materials, Inc.* 13,950,000
4,756,300 Arrow Electronics, Inc.*+ 223,546,100
175,000 Avnet, Inc. 8,443,750
1,000,000 Cypress Semiconductor Corp.* 11,750,000
1,110,000 DSC Communications Corp.* 29,970,000
3,950,000 EMC Corp.* 86,406,250
330,000 Hewlett-Packard Co. 31,020,000
1,090,000 Intel Corporation Corp. 61,993,750
400,000 Kemet Corp.* 9,050,000
500,000 Lam Research Corp.* 17,500,000
1,500,000 L.M. Ericsson Telephone Co. (A.D.R.) 32,062,500
1,100,000 LSI Logic Corp.* 29,425,000
960,100 Motorola, Inc. 50,885,300
248,500 MTS Systems Corp.+ 9,318,750
360,000 Nokia Corp. (Class A) 12,436,844
3,250,000 Nokia Corp. (Class A) (A.D.R.) 111,312,500
650,000 SGS - Thomson Microelectronics N.V.* 23,562,500
23,000 Siemens AG 12,623,111
800,000 Storage Technology Corp.* 20,900,000
1,950,000 Stratus Computers, Inc.*+ 54,112,500
--------------
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
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SCHEDULE OF INVESTMENTS -- PIONEER II -- March 31, 1996
- --------------------------------------------------------------------------------
SHARES VALUE
- ------------ ----------------
Electronics --continued
1,300,000 Teradyne, Inc.* $ 21,775,000
1,350,000 Texas Instruments, Inc. 68,681,250
311,800 Watkins -- Johnson Co. 11,146,850
--------------
$ 960,271,955
--------------
Photo/Instrumention -- 2.5%
1,188,000 Dionex Corp.*+ $ 42,025,500
1,823,800 Varian Associates, Inc.+ 90,962,025
100,000 Viacom, Inc.* 4,212,500
--------------
$ 137,200,025
--------------
TOTAL TECHNOLOGY ........................................... $1,223,535,968
--------------
TRANSPORTATION -- 1.7%
Railroad & Bus -- 1.3%
1,534,800 CSX Corp. $ 70,025,250
--------------
Ships & Shipping -- 0.4%
1,017,500 American President Companies, Ltd. $ 23,402,500
--------------
TOTAL TRANSPORTATION ....................................... $ 93,427,750
--------------
UTILITIES -- 9.1%
Electric Utility -- 8.1%
1,265,400 Baltimore Gas & Electric Co. $ 34,956,675
4,750,000 Dominion Resources, Inc. 188,218,750
766,300 Detroit Edison Co. 25,766,837
300,000 Empresa Nacional de Electridad S.A. 17,170,001
2,572,000 Hawaiian Electric Industries, Inc.+ 90,020,000
380,000 Huaneng Power International, Inc. (A.D.R.)* 6,507,500
1,760,600 Union Electric Co. 72,184,600
--------------
$ 434,824,363
--------------
Gas Utility -- 0.6%
320,000 Peoples Energy Corp. $ 10,360,000
1,007,300 Washington Gas Light Co. 22,034,687
--------------
$ 32,394,687
--------------
Telecommunications -- 0.3%
100,000 Telecommunications Brasileiras S.A.
(Sponsored A.D.R.) $ 4,975,000
360,000 Telefonos de Mexico S.A. (A.D.R.) 11,835,000
--------------
$ 16,810,000
--------------
Utility -- Other -- 0.1%
508,300 United Water Resources, Inc. $ 6,671,437
--------------
TOTAL UTILITIES ............................................ $ 490,700,487
--------------
TOTAL COMMON STOCKS
(Cost $4,543,813,851) ................................... $5,343,173,375
--------------
PRINCIPAL
AMOUNT
- ---------
TEMPORARY CASH INVESTMENTS -- 0.7%
Commercial Paper -- 0.7%
$24,791,000 Ford Motor Credit Co., 5.42%, 4/2/96 $ 24,791,000
10,168,000 Ford Motor Credit Co., 5.35%, 4/1/96 10,168,000
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TOTAL TEMPORARY CASH INVESTMENTS
(Cost $34,959,000) ...................................... $ 34,959,000
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TOTAL INVESTMENT IN SECURITIES -- 100%
(Cost $4,578,772,851)(a) ................................ $5,378,132,375
==============
* Non-income producing security.
+ Investments held by the Fund representing 5% or more of the outstanding
voting stock of such company (see Note 6).
(a) At March 31, 1996, the net unrealized gain on investments
based on cost for federal income tax purposes of $4,580,409,160
was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 959,119,244
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (161,396,029)
-------------
Net unrealized gain $ 797,723,215
=============
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended March 31, 1996 aggregated
approximately $2,377,307,000 and $2,270,893,000, respectively.
The accompanying notes are an integral part of these financial statements.
5
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BALANCE SHEET -- MARCH 31, 1996
(Dollars in Thousands Except Per Share Amounts)
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including temporary
cash investments of $34,959)(cost $4,578,773;
see Schedule of Investments and Notes 1 and 6) ............ $5,378,132
Foreign currencies, at value (Note 1) ........................ 2,133
Receivables --
Investments securities sold ............................... 19,529
Dividends, interest and foreign taxes withheld (Note 1) ... 6,503
Fund shares sold .......................................... 2,547
Other ........................................................ 111
----------
Total assets ........................................... $5,408,955
----------
LIABILITIES:
Payables --
Investment securities purchased ........................... $ 28,982
Fund shares repurchased ................................... 2,070
Due to affiliates (Notes 2, 3 and 4) ......................... 3,736
Accrued expenses ............................................. 365
----------
Total liabilities ...................................... $ 35,153
----------
NET ASSETS:
Paid-in capital (Note 1) ..................................... $4,143,866
Accumulated undistributed net investment income (Note 1) ..... 30,682
Accumulated undistributed net realized gain on
investments and foreign currency transactions (Note 1) .... 399,911
Net unrealized gain on investments (Note 1) .................. 799,359
Net unrealized loss on other assets and liabilities
denominated in foreign currencies (Note 1 ................. (16)
----------
Total net assets (equivalent to $20.35 per share
based on 264,118,192 shares outstanding --
unlimited number of shares authorized) .............. $5,373,802
==========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS -- FOR THE SIX MONTHS ENDED MARCH 31, 1996
(Dollars in Thousands)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1):
Dividends (net of foreign taxes withheld of $630) ............ $ 50,237
Interest (net of foreign taxes withheld of $38) .............. 3,775
----------
Total investment income .................................... $ 54,012
----------
EXPENSES:
Management fees (Note 2) ..................................... $ 11,796
Distribution fees (Note 4) ................................... 4,842
Transfer agent fees (Note 3) ................................. 5,242
Registration fees ............................................ 81
Professional fees ............................................ 83
Accounting (Note 2) .......................................... 106
Custodian fees ............................................... 438
Printing ..................................................... 78
Fees and expenses of nonaffiliated trustees .................. 36
Miscellaneous ................................................ 111
----------
Total expenses ............................................. $ 22,813
Less fees paid indirectly (Note 5) ......................... (469)
----------
Net expenses ............................................... $ 22,344
----------
Net investment income .................................. $ 31,668
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments (Note 1) ............................... $ 484,270
Forward foreign currency contracts and
other assets and liabilities denominated
in foreign currencies (Note 1) ................... (589) $ 483,681
-------- ----------
Net unrealized gain (loss) from:
Change in net unrealized gain on investments
(Note 1) ......................................... $(108,637)
Change in net unrealized gain on other assets
and liabilities denominated in foreign
currencies (Note 1) ............................ 159 $ (108,478)
- -------- ----------
Net gain on investments and foreign currency
transactions .................................................. $ 375,203
----------
Net increase in net assets resulting from operations .......... $ 406,871
==========
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
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STATEMENTS OF CHANGES IN NET ASSETS -- FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND
FOR THE YEAR ENDED SEPTEMBER 30, 1995 (Dollars in Thousands Except Per Share Amounts)
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year Ended
Ended March 31, September 30,
1996 1995
--------------- -------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ....................................................................... $ 31,668 $ 87,027
Net realized gain on investments and other foreign currency transactions .................... 483,681 402,697
Change in net unrealized gain on investments and other foreign currency transactions ........ (108,478) 377,142
Net increase in net assets resulting from operations .................................... $ 406,871 $ 866,866
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ($0.15 and $0.30 per share, respectively) ............................. $ (37,388) $ (71,692)
Net realized gain on investments ($1.73 and $1.81 per share, respectively) .................. (424,186) (415,685)
---------- ----------
Decrease in net assets resulting from distributions to shareholders ..................... $ (461,574) $ (487,377)
---------- ----------
FROM FUND SHARE TRANSACTIONS: .............................. Shares
------------
Net proceeds from sale of shares ......................... 7,857,946 14,703,193 $ 158,925 $ 272,715
------------ ------------ ---------- ----------
Net asset value of shares issued to shareholders in
reinvestment of dividend distributions ................. 22,781,861 27,336,288 439,689 463,968
Cost of shares repurchased ............................... (14,062,821) (27,190,398) (285,072) (510,434)
------------ ------------ ---------- ----------
Net increase in net assets resulting
from fund share transactions ........................... 16,576,986 14,849,083 $ 313,542 $ 226,249
============ ============ ---------- ----------
Net increase in net assets ............................................................ $ 258,839 $ 605,738
NET ASSETS:
Beginning of period ....................................................................... 5,114,963 4,509,225
---------- ----------
End of period (including accumulated undistributed net investment income
of $30,682 and $36,402, respectively) ................................................. $5,373,802 $5,114,963
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS -- Selected Data For a Share Outstanding for the Periods Presented
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended For the Year Ended September 30,
March 31, -----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.66 $ 19.38 $ 20.55 $ 18.86 $ 18.22
---------- ---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income $ 0.12 $ 0.35 $ 0.36 $ 0.38 $ 0.44
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.45 3.04 1.05 2.85 1.27
---------- ---------- ---------- ---------- ----------
Total increase (decrease)
from investment operations $ 1.57 $ 3.39 $ 1.41 $ 3.23 $ 1.71
Distributions to shareholders from:
Net investment income (0.15) (0.30) (0.33) (0.39) (0.47)
Net realized gain (1.73) (1.81) (2.25) (1.15) (0.60)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value $ (0.31) $ 1.28 $ (1.17) $ 1.69 $ 0.64
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 20.35 $ 20.66 $ 19.38 $ 20.55 $ 18.86
========== ========== ========== ========== ==========
Total return* 8.11% 19.92% 7.37% 18.15% 9.92%
Ratio of net expenses to average net assets 0.88%**++ 0.93%++ 0.90%+ 0.96%+ 0.94%+
Ratio of net investment income
to average net assets 1.20%*** 1.85%++ 1.59%+ 1.89+ 2.31%+
Portfolio turnover rate 89%** 63% 68% 66% 64%
Average commission rate paid*** $ 0.0383 -- -- -- --
Net assets, end of period (in thousands) $5,373,802 $5,114,963 $4,509,225 $4,347,672 $3,974,712
Ratios net of expenses paid through third
party brokerage/service and certain
expense offset arrangements:
Net expenses 0.86%** 0.91% 0.90% 0.95% 0.93%
Net investment income 1.22%** 1.87% 1.59% 1.90% 2.32%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended September 30,
----------------------------------------------------------------------------
1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.35 $ 21.12 $ 18.29 $ 24.09 $ 18.48 $ 16.65
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income $ 0.52 $ 0.59 $ 0.65 $ 0.54 $ 0.46 $ 0.43
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 3.16 (3.81) 3.84 (3.86) 6.67 3.07
---------- ---------- ---------- ---------- ---------- ----------
Total increase (decrease)
from investment operations $ 3.68 $ (3.22) $ 4.49 $ (3.32) $ 7.13 $ 3.50
Distributions to shareholders from:
Net investment income (0.55) (0.64) (0.62) (0.48) (0.49) (0.52)
Net realized gain (0.26) (1.91) (1.04) (2.00) (1.03) (1.15)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value $ 2.87 $ (5.77) $ 2.83 $ (5.80) $ 5.61 $ 1.83
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 18.22 $ 15.35 $ 21.12 $ 18.29 $ 24.09 $ 18.48
========== ========== ========== ========= ========== ==========
Total return* 24.61% (17.16%) 26.55% (12.04%) 41.37% 22.77%
Ratio of net expenses to average net assets 0.83 0.75 0.77 0.81 0.75 0.72%
Ratio of net investment income
to average net assets 3.02 3.18 3.31 3.06 2.18 2.43%
Portfolio turnover rate 46% 42% 34% 30% 26% 29%
Average commission rate paid*** -- -- -- -- --
-------------
Net assets, end of period (in thousands) $4,039,234 $3,588,735 $4,411,923 $3,724,615 $4,456,459 $2,841,545
Ratios net of expenses paid through third
party brokerage/service and certain
expense offset arrangements:
Net expenses -- -- -- -- -- --
Net investment income -- -- -- -- -- --
<FN>
* Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, and the
complete redemption of the investment at the 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.
*** Amount represents the rate of commission paid per share on the Fund's exchange listed security transactions.
+ Ratios for 1994, 1993 and 1992 have been modified to comply with certain provisions of SEC Release No. 33-7197:
Payment for Investment Company Services with Brokerage Commissions. Ratios of net operating expenses and net investment income
to average net assets prior to 1992 have not been modified as such.
++ Ratios include expenses paid through third party brokerage/service and certain expense offset arrangements.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996
- --------------------------------------------------------------------------------
1. Pioneer II (the Fund), originally a Massachusetts business trust, is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. Effective May 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 reasonable income
and growth of capital.
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. Each
day, 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 sales prices are not generally reported, are valued at
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available are valued at their fair values as
determined by, or under the direction of, the Board of Trustees (the Trustees).
Trading in foreign securities is substantially completed each day at various
times prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Temporary cash investments are valued at amortized
cost. Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities where the ex-dividend date may have passed are
recorded as soon as the Fund is informed of the ex-dividend date. Interest
income is recorded on the accrual basis, net of unrecoverable foreign taxes
withheld at the applicable country rates.
In addition, net realized gains on securities in certain countries give
rise to capital gains taxes. It is the Fund's policy to provide a reserve
against net unrealized gains for anticipated capital gains taxes on such
securities held by the Fund. During the six months ended March 31, 1996, the
Fund paid no capital gains taxes.
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. Foreign Currency Translation -- The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in foreign currencies are
translated into U.S. dollars using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
among other things, the net realized gains and losses on foreign currency
contracts, disposition of foreign currencies and the difference between the
amount of income accrued and the U.S. dollar actually received. Further, the
effects of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in market
price of those securities but are included with the net realized and unrealized
gain or loss on investments.
C. Forward Foreign Currency Contracts -- The Fund enters into forward foreign
currency contracts (contracts) for the purchase or sale of a specific foreign
currency at a fixed price on a future date as a hedge or cross-hedge against
either specific investment transactions (settlement hedges) or portfolio
positions (portfolio hedges). All contracts are marked to market daily at the
applicable exchange rates, and any resulting unrealized gains or losses are
recorded in the Fund's financial statements. The Fund records realized gains and
losses at the time a portfolio hedge is offset by entry into a closing
transaction or extinguished by delivery of the currency.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996
- --------------------------------------------------------------------------------
Risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of the contract
and from unanticipated movements in the value of foreign currencies relative to
the U.S. dollar. As of March 31, 1996, the Fund had no outstanding portfolio
hedges.
D. 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.
E. Fund Shares -- The Fund records sales and repurchases of its fund shares on
trade date. Net losses, if any, as a result of cancellations are absorbed by
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Fund
and an indirect subsidiary of The Pioneer Group, Inc. (PGI). PFD earned
approximately $764,000 in underwriting commissions on the sale of fund shares
during the six months ended March 31, 1996. Distributions to shareholders are
recorded as of the ex-dividend date.
2. Pioneering Management Corporation (PMC), the Fund's investment adviser,
manages the Fund's portfolio and is a wholly owned subsidiary of PGI. Management
fees are calculated daily at the annual rate of 0.50% of the Fund's average
daily net assets up to $250 million; 0.48% of the next $50 million; and 0.45% of
the excess over $300 million.
In addition, under the management agreement, certain other services and
costs, including accounting, regulatory reporting and insurance premiums, are
paid by the Fund. Included in due to affiliates are approximately $333,000 and
$31,000 in management fees and accounting fees, respectively, payable to PMC at
March 31, 1996.
Effective May 1, 1996, the Fund's shareholders approved a new management
contract whereby PMC receives a basic fee of 0.60% of the Fund's average daily
net assets. The basic fee is subject to a performance adjustment (up to a
maximum of 0.10%) based on the Fund's investment performance as compared to the
appropriate index over a specified period of time.
3. Pioneering Services Corporation (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 approximately $882,000 in
transfer agent fees payable to PSC at March 31, 1996.
4. The Fund adopted a Plan of Distribution (the Plan) that allows for the Fund
to reimburse PFD for expenditures to finance any activities primarily intended
to result in the sale of fund shares. The Plan provides for reimbursement of
such expenditures in an amount not to exceed 0.15% on qualifying investments in
the Fund made prior to August 19, 1991 and 0.25% on qualifying investments made
on or subsequent to that date. Included in due to affiliates is approximately
$2,490,000 in distribution fees payable to PFD at March 31, 1996.
5. The Fund has entered into certain directed brokerage and expense offset
arrangements resulting in a reduction in the Fund's total expenses. For the six
months ended March 31, 1996, the Fund's expenses were reduced by approximately
$469,000 under such arrangements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996
- --------------------------------------------------------------------------------
6. The Fund's investments in certain companies may exceed 5% of the outstanding
voting stock. Such companies are deemed affiliates of the Fund for financial
reporting purposes. The following summarizes transactions with affiliates of the
Fund as of March 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Dividend
Affiliates Purchases Sales Income Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A.M. Castle & Co. $ -- $ -- $ 315 $ 30,975
A.O. Smith Corp. 17,739 -- 113 20,797
AGCO Corp. 14,228 4,547 63 102,290
Allegheny Ludlum Corp. 21,637 -- 1,435 103,052
AMBAC Inc. 8,981 -- 941 154,241
Amcast Industrial Corp. -- -- 233 14,766
Arrow Electronics, Inc. 165,027 -- -- 223,546
Bassett Furniture Industries, Inc. 1,402 876 262 18,166
Bay View Capital Corp. 6,158 -- 100 16,517
Breed Technologies, Inc. 36,343 -- 323 54,277
Briggs & Stratton Corp. -- 13,765 984 78,276
California Federal Bank 14,042 -- -- 71,500
Dionex Corp. -- 227 -- 42,026
Donaldson Co., Inc. 21,483 -- 354 68,387
Douglas & Lomason Co. -- 1,183 70 3,488
Hawaiian Electric Industries, Inc. 61,956 -- 1,816 90,020
IBP, Inc. 56,424 38,311 417 228,063
Kelly Services Inc. (Class A) 44,435 -- 863 93,220
Longview Fibre Co. 25,160 -- 1,204 73,789
MTS Systems Corp. -- -- 60 9,319
National Steel Corp. (Class B) 12,612 668 -- 38,108
New York Bancorp Inc. 10 594 257 14,467
Rouge Steel Co. (Class A) -- -- 120 44,108
Santa Fe Pacific Pipeline Partners, L.P. 2,797 312 1,629 40,666
Stewart & Stevenson Services, Inc. 48,042 146 272 67,359
Strattec Security Corp. -- 1,003 -- 7,590
Stratus Computers, Inc. 10,698 8,047 -- 54,113
Trinity Industries, Inc. 55,579 1,280 956 134,687
Varian Associates, Inc. 48,455 11,392 265 90,962
-------- ------- ---------- ----------
$673,208 $82,351 $ 13,052 $1,988,775
======== ======= ========== ==========
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF PIONEER II:
We have audited the accompanying balance sheet of Pioneer II, including the
schedule of investments, as of March 31, 1996, and the related statement of
operations, statements of changes in net assets and 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 March
31, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Pioneer II as of March 31, 1996, the results of its operations, the changes in
its net assets and financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 1, 1996
13
<PAGE>
PIONEER II
60 State Street
Boston, Massachusetts
02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
FRANCIS J. BOGGAN, Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
TRUSTEES
JOHN F. COGAN, JR.
RICHARD H. EGDAHL, M.D.
DAVID D. TRIPPLE
MARGARET B.W. GRAHAM
JOHN W. KENDRICK
MARGUERITE A. PIRET
DAVID D. TRIPPLE
STEPHEN K. WEST
JOHN WINTHROP
INVESTMENT ADVISER
PIONEERING MANAGEMENT CORPORATION
PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR
SHAREHOLDER SERVICES AND TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
-----------------------------------------------------
Please call Pioneer for information on:
Existing accounts, new accounts,
prospectuses, applications,
and service forms.......... 1-800-225-6292
Fund yields and prices..... 1-800-225-4321
Telecommunications Device for
the Deaf (TDD)............. 1-800-225-1997
Retirement plans........... 1-800-622-0176
Toll-free fax.............. 1-800-225-4240
-----------------------------------------------------
When distributed to persons who are not shareowners of the Fund, this report
must be accompanied by an official prospectus, which discusses the objectives,
policies and other information about the Fund.
0596-3320
[Copyright] Pioneer Funds Distributor, Inc.
