[Logo: Pioneer logo]
Pioneer II
ANNUAL REPORT 9/30/99
<PAGE>
Table of Contents
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<TABLE>
<S> <C>
Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 16
Notes to Financial Statements 23
Report of Independent Public Accountants 28
Trustees, Officers and Service Providers 29
</TABLE>
<PAGE>
Pioneer II
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LETTER FROM THE CHAIRMAN 9/30/99
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Dear Shareowner,
- --------------------------------------------------------------------------------
This September 30 marked the close of Pioneer II's 30th year, and we thank you
for sharing our confidence in the Fund's potential.
Over the Fund's life, the choices and services available to investors broadened
considerably. When Pioneer II was introduced in 1969, there were less than 300
mutual funds available, a significant increase from the four in place when
Philip Carret founded Pioneer in 1928. Today there are over 10,000 funds. The
creation of affordable investment options, including mutual funds, opened a
world of opportunity for millions of people worldwide and surely should be
counted among this century's greatest accomplishments. With the new millennium
fast approaching, one can't help but be excited by the challenges, changes and
opportunities that lie ahead for us all.
In some ways, investing has changed a great deal. One thing, however, remains
the same - our belief in the importance of a long-term perspective. Attempts at
market timing and the advent of day-trading unfortunately have led some to adopt
a "get rich quick" mentality. Looking back over time, lasting wealth has come to
investors who held to their discipline and didn't veer off course to chase the
rising star of the day. A solid, forward-thinking plan can offer great rewards,
even though it can be a tad dull moment-to-moment.
This year, we are taking extra steps to make your planning easier, especially
tax planning. I'm pleased to announce that Pioneer funds will distribute their
capital gains in November - a month earlier than in past years. We hope you'll
take advantage of the extra time to work with your investment professional to
prepare for the new century.
I encourage you to read on to learn more about your Fund. If you have questions,
please contact your investment professional. Visit our web site at
www.pioneerfunds.com for information about your fund or accounts, and to view
1999 distribution information.
Respectfully,
/s/ John F. Cogan, Jr.
- ----------------------
John F. Cogan, Jr.
Chairman and President
1
<PAGE>
Pioneer II
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PORTFOLIO SUMMARY 9/30/99
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Portfolio Diversification
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(As a percentage of total investment portfolio)
[Pie chart data]
<TABLE>
<S> <C>
U.S. Common Stocks 87%
International Common Stocks 9%
Depositary Receipts for
International Stocks 3%
Short-Term Cash
Equivalents 1%
</TABLE>
Sector Distribution
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(As a percentage of equity holdings)
[Pie chart data]
<TABLE>
<S> <C>
Financial 17%
Technology 16%
Capital Goods 15%
Healthcare 12%
Utilities 9%
Energy 8%
Consumer
Cyclicals 7%
Consumer Staples 5%
Basic Materials 4%
Other 7%
</TABLE>
10 Largest Holdings
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(As a percentage of equity holdings)
<TABLE>
<S> <C> <C> <C>
1. Koninklijke Philips 5.40% 6. Intel Corp. 3.20%
Electronics NV (NY
shares)
2. Dominion Resources, Inc. 4.56 7. Bell Atlantic Corp. 2.93
3. Ambac Financial Group, 4.00 8. Merck & Co., Inc. 2.54
Inc.
4. Amgen Inc. 3.51 9. Trinity Industries Inc. 2.39
5. IBM Corp. 3.33 10. The Chase Manhattan 2.36
Corp.
</TABLE>
Fund holdings will vary for other periods.
2
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Pioneer II
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PERFORMANCE UPDATE 9/30/99 CLASS A SHARES
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Share Prices and Distributions
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<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 9/30/99 9/30/98
$20.16 $18.32
Distributions per Share Income Short-Term Long-Term
(9/30/98-9/30/99) Dividends Capital Gains Capital Gains
$0.186 - $0.150
</TABLE>
Investment Returns
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The mountain chart on the right shows the growth of a $10,000 investment made
in Pioneer II at public offering price, compared to the growth of the Standard
& Poor's 500 Index.
<TABLE>
<CAPTION>
Average Annual Total Returns
(As of September 30, 1999)
<S> <C> <C>
Net Asset Public Offering
Period Value Price*
10 Years 9.17% 8.52%
5 Years 10.80 9.50
1 Year 11.86 5.42
</TABLE>
[Mountain chart data]
Growth of $10,000
<TABLE>
<CAPTION>
Pioneer Standard &
II* Poor's 500
Index
<S> <C> <C>
9/89 9,425 10,000
7,807 9,076
9/91 9,728 11,894
10,693 13,203
9/93 12,634 14,910
13,565 15,466
9/95 16,266 20,053
18,247 24,114
9/97 26,633 33,858
20,249 36,913
9/99 22,652 47,153
</TABLE>
*Reflects deduction of the maximum 5.75% sales charge at the beginning of the
period and assumes reinvest-ment of distributions at net asset value.
The Standard & Poor's 500 Index is an unmanaged measure of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange and
the Over-the-Counter market. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees, expenses or sales charges. You
cannot invest directly in the Index.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
3
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Pioneer II
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PERFORMANCE UPDATE 9/30/99 CLASS B SHARES
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Share Prices and Distributions
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<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 9/30/99 9/30/98
$19.74 $17.98
Distributions per Share Income Short-Term Long-Term
(9/30/98-9/30/99) Dividends Capital Gains Capital Gains
- - $0.150
</TABLE>
Investment Returns
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The mountain chart on the right shows the growth of a $10,000 investment made in
Pioneer II, compared to the growth of the Standard & Poor's 500 Index.
<TABLE>
<CAPTION>
Average Annual Total Returns
(As of September 30, 1999)
<S> <C> <C>
If If
Period Held Redeemed*
Life-of-Fund 6.40% 5.62%
(7/1/96)
1 Year 10.62 6.62
</TABLE>
[Mountain chart data]
Growth of $10,000
<TABLE>
<CAPTION>
Pioneer Standard &
II* Poor's 500
Index
<S> <C> <C>
7/96 10,000 10,000
9/96 10,165 10,247
11,403 11,100
3/97 11,419 11,399
13,165 13,385
9/97 14,698 14,387
13,962 14,799
3/98 15,377 16,859
14,269 17,415
9/98 11,059 15,686
12,717 19,020
3/99 12,240 19,965
13,294 21,367
9/99 11,946 19,998
</TABLE>
*Reflects deduction of the maximum applicable contingent deferred sales charge
(CDSC) at the end of the period and assumes reinvestment of distributions. The
maximum CDSC of 4% declines over six years.
The Standard & Poor's 500 Index is an unmanaged measure of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange and
the Over-the-Counter market. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees, expenses or sales charges. You
cannot invest directly in the Index.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
4
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Pioneer II
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PERFORMANCE UPDATE 9/30/99 CLASS C SHARES
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Share Prices and Distributions
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<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 9/30/99 9/30/98
$19.78 $18.02
Distributions per Share Income Short-Term Long-Term
(9/30/98-9/30/99) Dividends Capital Gains Capital Gains
- - $0.150
</TABLE>
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made in
Pioneer II, compared to the growth of the Standard & Poor's 500 Index.
<TABLE>
<CAPTION>
Average Annual Total Returns
(As of September 30, 1999)
<S> <C> <C>
If If
Period Held Redeemed*
Life-of-Fund 6.44% 6.44%
(7/1/96)
1 Year 10.60 10.60
</TABLE>
[Mountain chart data]
Growth of $10,000
<TABLE>
<CAPTION>
Pioneer Standard &
II* Poor's 500
Index
<S> <C> <C>
7/96 10,000 10,000
9/96 10,161 10,247
11,400 11,100
3/97 11,410 11,399
13,142 13,385
9/97 14,683 14,387
13,952 14,799
3/98 15,360 16,859
14,253 17,415
9/98 11,076 15,686
12,727 19,020
3/99 12,244 19,965
13,303 21,367
9/99 12,250 19,998
</TABLE>
*Assumes reinvestment of distributions. The 1% contingent deferred sales charge
(CDSC) applies to redemptions made within one year of purchase.
The Standard & Poor's 500 Index is an unmanaged measure of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange and
the Over-the-Counter market. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees, expenses or sales charges. You
cannot invest directly in the Index.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
5
<PAGE>
Pioneer II
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PORTFOLIO MANAGEMENT DISCUSSION 9/30/99
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In this report, Richard Dahlberg, the leader of Pioneer II's investment team,
discusses the market environment and Pioneer II's performance over the 12 months
through September 30, 1999. Mr. Dahlberg has been an investment professional for
over 30 years.
Q: Over the last 12 months, the Standard & Poor's 500 Index continued to set new
records. Did value stocks make a comeback?
A: Even though value stocks did perk up a few times during the year - most
notably in the second quarter of 1999 - none of the rallies were lasting. The
performance of the major market averages was, once again, driven by a small
number of blue chip growth stocks. In fact, a majority of the S&P 500's
strong returns came in the first half of the Fund's fiscal year. Since June,
major market averages have declined significantly - some more than the 10%
that defines a correction. Although your Fund's Class A shares returned
11.86% at net asset value for the year, this return trailed the exceptionally
strong 27.73% return of the Standard & Poor's 500 Index and the 16.24%
average return of the 477 multi-cap value* funds followed by Lipper, Inc.
(Lipper tracks mutual fund performance, excluding sales charges.) In addition
to the tough times value stocks faced, the Federal Reserve's interest rate
increases in June and August led to sharp price declines for construction and
financial service stocks - a significant reason for the Fund's
underperformance.
Q: What caused the rally in value stocks?
A: The rebound in global economic growth in the first part of 1999 contributed,
helped along by strong earnings results and global interest rate cuts. The
prices of many commodities, especially oil, also bounced back. This led
investors to rediscover opportunities outside of the small set of stocks that
had been driving the market for over two years. Many of the stocks that
rebounded fall under the "cyclical" category, meaning their fortunes are
often tied to the health of the global economy. Unfortunately, the value
rebound did not last as long as we would have liked.
*Effective September 30, 1999, Lipper, Inc. began a new classification system
for comparing funds. Pioneer II is classified as a multi-cap value fund in
this new system. Under the old classification, Lipper placed the Fund in the
growth and income funds category.
6
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Pioneer II
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Q: Technology is the second largest sector in the portfolio. Why doesn't the
Fund own any internet companies?
A: The extreme valuations of high-flying internet companies generally keep these
stocks off limits to disciplined value investors. However, the Fund's
technology holdings all have strong positions within their industry and, as a
group, boosted performance. Many are involved in the manufacturing of
semiconductors; Intel and Texas Instruments are two examples. These companies
provide the potential for rewards as a result of their involvement with
computers, but they don't have high-risk profiles like many of the ".com"
companies.
Q: What attracts you to a company's stock?
A: We look for stocks of companies that have low price-to-book or price-to-cash
flow characteristics, with improving financial conditions within the company.
We often like to see a catalyst that has the potential to bring a stock back
to a more normalized price range. Catalysts can include management changes,
cyclical changes within an industry or a restructuring whereby a company
streamlines its operations to concentrate on the things that it does best.
Koninklijke Philips Electronics is an example of a company that has recently
streamlined its operations, selling off a number of the less promising
divisions within the company to concentrate on semiconductors and flat
paneled displays. The aluminum and paper industries are examples of
commodity-related areas that experienced a cyclical shift over the past year.
Both areas have made comebacks over the last nine months after a number of
down years. Singapore-based Asia Pulp and Paper and Bowater are two that were
added over the period.
Q: What new holdings did you add? What did you sell?
A: We added a number of stocks whose share prices weren't reflecting their
improved business conditions. General Motors (Class H) is particularly
attractive; it sells at about half of the price of its largest competitor. We
think Oracle is still uniquely positioned to succeed within the software
industry. We started to buy the stock in June after it dropped due to the
misperception that Year 2000 problems were going
7
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Pioneer II
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PORTFOLIO MANAGEMENT DISCUSSION 9/30/99 (continued)
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to hurt its earnings. Since that time the Company's stock has performed
extremely well, almost doubling in price.
Some purchases were geared to helping us increase the Fund's exposure to the
energy sector, which performed well as oil prices continued to rise. With
global demand increasing and oil-producing nations limiting their production,
our outlook for the sector remains positive. Suncor Energy, an oil
exploration company, and British enterprise Shell Transport and Trading, are
two examples of energy-related companies that we added. In all, there were 16
additions to the portfolio.
Financial companies were hurt as interest rate and credit quality concerns
persisted. We completely sold Aames Financial and reduced the position in
Conseco. Healthcare stocks have been generally weak across the board, as
government legislation aimed at restructuring Medicare looms, potentially
hurting HMOs. Integrated Health Services was sold after we concluded that a
turnaround may take longer than we were willing to wait. In total, we sold
out of 24 stocks over the period.
Q: What is your outlook for the rest of the year?
A: In general, we feel that the prospects for value stocks are positive,
although it is impossible to predict when a sustained comeback will occur.
However, we are convinced that our value approach will return to favor. It is
sometimes difficult to persevere through periods like we have experienced
over the last two years, but we have lived through these rough times before
and we remain committed to helping you achieve your long term investment
goals.
Given the historically high stock valuations and investors' growing
impatience and short-term outlook, we would not be surprised to see the
volatility of the last few months continue. Regardless of what happens in the
stock market over the next six months, our focus will remain the same; we
will continue to search for companies whose stocks we believe are undervalued
but have better times ahead.
8
<PAGE>
Pioneer II
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SCHEDULE OF INVESTMENTS 9/30/99
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<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
INVESTMENT IN SECURITIES - 99.1%
PREFERRED STOCK - 0.5%
355,000 Telecomunicacoes Brasileiras SA
(A.D.R.) (Preferred Block) $ 11,094
355,000 Telecomunicacoes Brasileiras SA (A.D.R.) 26,602,813
------------
TOTAL PREFERRED STOCK
(Cost $32,209,230) $ 26,613,907
------------
COMMON STOCKS - 98.6%
Basic Materials - 4.4%
Aluminum - 0.5%
400,000 Alcoa Inc. $ 24,825,000
------------
Chemicals - 0.8%
1 E.I. du Pont de Nemours & Co. $ 61
1,774,000 Lyondell Petrochemicals Co. 23,727,250
2,180,000 Mississippi Chemical Corp.+ 15,260,000
------------
$ 38,987,311
------------
Chemicals (Specialty) - 0.9%
1,800,000 Cytec Industries Inc.* $ 43,200,000
2,169,500 Terra Industries Inc. 3,661,031
------------
$ 46,861,031
------------
Containers & Packaging (Paper) - 0.3%
4,300,000 Vitro SA (A.D.R.) $ 17,737,500
------------
Iron & Steel - 0.2%
1,692,900 Rouge Industries, Inc.+ $ 12,485,137
------------
Metals Mining - 0.6%
1,000,000 Freeport-McMorRan Copper & Gold, Inc.
(Class B) $ 15,562,500
1,300,000 USEC Inc. 13,325,000
------------
$ 28,887,500
------------
Paper & Forest Products - 1.1%
2,000,000 Asia Pulp and Paper Ltd. (A.D.R.)* $ 11,750,000
300,000 Bowater Inc. 15,750,000
200,000 Georgia-Pacific Group 8,100,000
1,600,000 Longview Fibre Co. 19,900,000
------------
$ 55,500,000
------------
Total Basic Materials $225,283,479
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</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
Pioneer II
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SCHEDULE OF INVESTMENTS 9/30/99 (continued)
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<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Capital Goods - 14.8%
Containers (Metals & Glass) - 0.2%
526,000 Owens-Illinois, Inc.* $ 10,421,375
------------
Electrical Equipment - 5.4%
2,729,188 Koninklijke Philips Electronics NV (NY Shares) $275,647,988
------------
Manufacturing (Diversified) - 3.0%
538,900 Amcast Industrial Corp.+ $ 7,174,106
673,000 Hanson Plc (A.D.R.) 26,036,687
3,947,600 Trinity Industries, Inc.+ 121,882,150
------------
$155,092,943
------------
Manufacturing (Specialized) - 6.0%
1,638,700 Briggs & Stratton Corp.+ $ 95,659,112
2,176,000 Dionex Corp.*+ 93,024,000
4,890,000 Donaldson Co., Inc.+ 113,386,875
1,286,100 Halter Marine Group, Inc.* 6,993,169
------------
$309,063,156
------------
Metal Fabricators - 0.2%
911,125 A.M. Castle & Co.+ $ 11,502,953
------------
Total Capital Goods $761,728,415
------------
Communication Services - 3.9%
Telephone - 3.9%
300,000 Ameritech Corp. $ 20,156,250
2,225,000 Bell Atlantic Corp. 149,770,312
600,000 SBC Communications, Inc. 30,637,500
------------
Total Communication Services $200,564,062
------------
Consumer Cyclicals - 7.0%
Auto Parts & Equipment - 0.7%
1,708,419 Delphi Automotive Systems Corp. $ 27,441,480
665,000 Simpson Industries, Inc. 7,356,562
127,000 Strattec Security Corp.* 4,445,000
------------
$ 39,243,042
------------
Automobiles - 1.2%
1,010,000 General Motors Corp. $ 63,566,875
------------
Consumer (Jewelry, Novelties, & Gifts) - 2.0%
3,157,450 Lancaster Colony Corp.+ $101,038,400
------------
</TABLE>
10 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
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<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Homebuilding - 2.4%
4,145,000 Champion Enterprises, Inc.*+ $ 37,305,000
8,184,000 Clayton Homes, Inc.+ 71,098,500
3,166,200 Oakwood Homes Corp.+ 14,247,900
------------
$122,651,400
------------
Retail (Department Stores) - 0.6%
400,000 Federated Department Stores, Inc.* $ 17,475,000
450,000 May Department Stores Co. 16,396,875
------------
$ 33,871,875
------------
Retail (Specialty) - 0.1%
400,000 Officemax Inc.* $ 2,325,000
------------
Total Consumer Cyclicals $362,696,592
------------
Consumer Staples - 4.4%
Beverages (Non-Alcoholic) - 0.2%
400,000 Pepsico, Inc. $ 12,100,000
------------
Foods - 2.5%
3,300,000 IBP, Inc. $ 81,468,750
20,000 Nestle SA (Registered Shares) 37,534,939
400,000 Sara Lee Corp. 9,375,000
------------
$128,378,689
------------
Services (Employment) - 1.7%
2,850,000 Kelly Services Inc. (non-voting) $ 85,856,250
------------
Total Consumer Staples $226,334,939
------------
Energy - 8.2%
Oil & Gas (Drilling & Equipment) - 2.0%
1,558,100 BJ Services Co.* $ 49,567,056
1,900,000 R&B Falcon Corp.* 24,937,500
410,000 Smith International, Inc.* 16,605,000
300,000 Weatherford International Inc.* 9,600,000
------------
$100,709,556
------------
Oil & Gas - Exploration/Production - 1.0%
500,000 Anadarko Petroleum Corp. $ 15,281,250
500,000 Burlington Resources Inc.* 18,375,000
500,000 Suncor Energy, Inc. 19,125,000
------------
$ 52,781,250
------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 11
<PAGE>
Pioneer II
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SCHEDULE OF INVESTMENTS 9/30/99 (continued)
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<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Oil (Domestic Integrated) - 4.4%
1,040,000 Atlantic Richfield Co. $ 92,170,000
3,840,000 Conoco, Inc. (Class A) 106,560,000
227,256 Conoco, Inc. (Class B) 6,221,133
500,000 Shell Transport and Trading Co. (A.D.R.) 22,750,000
------------
$227,701,133
------------
Oil (International Integrated) - 0.8%
650,000 Texaco, Inc. $ 41,031,250
------------
Total Energy $422,223,189
------------
Financial - 17.2%
Banks (Major Regional) - 2.2%
1,000,000 Banc One Corp. $ 34,812,500
639,600 Banco Rio De La Plata SA (A.D.R.) 6,875,700
1,400,000 Fleet Boston Corp. 51,275,000
600,000 Mellon Bank Corp. 20,250,000
------------
$113,213,200
------------
Banks (Money Center) - 2.3%
1,600,000 The Chase Manhattan Corp. $120,600,000
------------
Banks (Regional) - 0.5%
1,242,100 North Fork Bancorporation, Inc. $ 24,220,950
------------
Consumer Finance - 0.9%
1,485,000 Countrywide Credit Industries, Inc. $ 47,891,250
------------
Financial (Diversified) - 3.9%
4,310,300 Ambac Financial Group, Inc.+ $204,200,463
------------
Insurance (Life/Health) - 2.2%
5,500,389 Conseco, Inc. $106,226,263
627,000 Manulife Financial Corp.* 7,442,453
------------
$113,668,716
------------
Insurance (Multi-Line) - 0.3%
400,000 Nationwide Financial Services, Inc. $ 14,150,000
------------
Insurance (Property/Casualty) - 0.8%
1,550,000 Allstate Corp. $ 38,653,125
------------
</TABLE>
12 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
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<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Savings & Loans Companies - 4.1%
5,185,425 Charter One Financial, Inc. $119,912,953
3,150,000 Washington Mutual, Inc. 92,137,500
------------
$212,050,453
------------
Total Financial $888,648,157
------------
Healthcare - 11.4%
Biotechnology - 3.5%
2,200,000 Amgen, Inc.* $179,300,000
------------
Healthcare (Diversified) - 1.6%
760,400 Abbott Laboratories $ 27,944,700
1,350,000 American Home Products Corp. 56,025,000
------------
$ 83,969,700
------------
Healthcare (Drugs Generic) - 0.3%
1,135,000 Dura Pharmcueticals Inc.* $ 15,819,063
------------
Healthcare
(Drugs/Major Pharmaceuticals) - 5.1%
1,412,600 Astrazenica Plc $ 58,879,885
500,000 Lilly, Eli & Co. 32,000,000
2,000,000 Merck & Co., Inc. 129,625,000
300,000 Novartis AG (A.D.R.) 22,237,500
379,700 Pharmacia & Upjohn, Inc. 18,842,613
------------
$261,584,998
------------
Healthcare (Hospital Management) - 0.4%
1,050,000 Columbia/HCA Healthcare Corp. $ 22,246,875
------------
Healthcare (Managed Care) - 0.5%
504,900 Humana Inc.* $ 3,471,188
425,600 Wellpoint Health Networks Inc.* 24,259,200
------------
$ 27,730,388
------------
Total Healthcare $590,651,024
------------
Technology - 16.1%
Communications Equipment - 0.7%
1,240,000 Alcatel SA (A.D.R.) $ 34,410,000
------------
Computers (Hardware) - 4.3%
1,600,000 Compaq Computer Corp. $ 36,700,000
300,000 Dell Computer Corp.* 12,543,750
1,400,000 IBM Corp. 169,925,000
------------
$219,168,750
------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
Pioneer II
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SCHEDULE OF INVESTMENTS 9/30/99 (continued)
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<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Computers (Peripherals) - 0.6%
1,550,000 Storage Technology Corp.* $ 29,837,500
------------
Computers (Software and Services) - 0.6%
700,000 Oracle Corp.* $ 31,850,000
------------
Electronics
(Component Distributors) - 1.5%
4,500,000 Arrow Electronics, Inc.* $ 79,312,500
------------
Electronics (Defense) - 1.0%
300,000 General Motors Corp. (Class H) $ 17,175,000
732,200 Raytheon Co. (Class B) 36,335,425
------------
$ 53,510,425
------------
Electronics (Instrumentation) - 0.2%
788,200 MTS Systems Corp. $ 8,177,575
------------
Electronics (Semiconductors) - 5.5%
1,383,500 Etec Systems, Inc.*+ $ 52,054,188
2,200,000 Intel Corp. 163,487,500
800,000 Texas Instruments Inc. 65,800,000
------------
$281,341,688
------------
Equipment (Semiconductor) - 0.3%
525,000 Helix Technology Corp. $ 17,456,250
------------
Photography/Imaging - 1.4%
950,000 Eastman Kodak Co. $ 71,665,625
------------
Total Technology $826,730,313
------------
Transportation - 2.2%
Airlines - 0.2%
200,000 AMR Corp.* $ 10,900,000
------------
Railroads - 2.0%
1,280,000 Canadian National Railway Co. $ 38,800,000
1,300,000 Union Pacific Corp. 62,481,250
------------
$101,281,250
------------
Total Transportation $112,181,250
------------
Utilities - 9.0%
Electric Companies - 6.8%
5,162,000 Dominion Resources, Inc. $232,935,250
2,000,000 Edison International 48,625,000
</TABLE>
14 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
1,409,063 Hawaiian Electric Industries, Inc. $ 49,581,404
500,000 Public Service Enterprise Group, Inc. 19,312,500
--------------
$ 350,454,154
--------------
Natural Gas - 2.2%
2,073,000 Kinder Morgan Energy Partners, L.P. $ 89,786,813
600,000 Williams Companies, Inc. 22,462,500
--------------
$ 112,249,313
--------------
Total Utilities $ 462,703,467
--------------
TOTAL COMMON STOCKS
(Cost $4,071,809,949) $5,079,744,887
--------------
TOTAL INVESTMENT IN SECURITIES
(Cost $4,104,019,179) $5,106,358,794
--------------
<CAPTION>
Principal
Amount
<S> <C> <C>
TEMPORARY CASH INVESTMENTS - 0.9%
Commercial Paper - 0.9%
$28,265,000 American Express Co., 5.39%, 10/1/99 $ 28,265,000
16,563,000 Exxon Project Investment Co., Inc., 5.4%,
10/4/99 16,563,000
--------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $44,828,000) $ 44,828,000
--------------
TOTAL INVESTMENT IN SECURITIES AND
TEMPORARY CASH INVESTMENTS - 100%
(Cost $4,148,847,179) (a) $5,151,186,794
==============
</TABLE>
* Non-income producing security.
+ Investment held by the Fund representing 5% or more of the outstanding voting
stock of such company.
(a) At September 30, 1999, the net unrealized gain on investments based on cost
for federal income tax purposes of $4,148,847,179 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $1,549,707,809
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value (547,368,194)
--------------
Net unrealized gain $1,002,339,615
==============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for the
year ended September 30, 1999 aggregated $668,087,643 and $1,272,609,461
respectively.
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
BALANCE SHEET 9/30/99
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (including temporary cash
investments of $44,828,000) (cost $4,148,847,179) $5,151,186,794
Cash 61,158
Receivables -
Investment securities sold 1,166,211
Fund shares sold 4,488,380
Dividends, interest and foreign taxes withheld 5,619,623
Other 387,248
--------------
Total assets $5,162,909,414
--------------
LIABILITIES:
Payables -
Investment securities purchased $ 62,000
Fund shares repurchased 6,111,466
Due to affiliates 4,249,774
Accrued expenses 616,369
--------------
Total liabilities $ 11,039,609
--------------
NET ASSETS:
Paid-in capital $3,998,198,492
Accumulated undistributed net investment income 28,087,934
Accumulated undistributed net realized gain on investments and
foreign currency transactions 123,244,135
Net unrealized gain on investments 1,002,339,615
Net unrealized loss on forward foreign currency contracts and other
assets and liabilities denominated in foreign currencies (371)
--------------
Total net assets $5,151,869,805
==============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $5,125,858,493/254,252,979 shares) $ 20.16
==============
Class B (based on $21,972,149/1,113,210 shares) $ 19.74
==============
Class C (based on $4,039,163/204,237 shares) $ 19.78
==============
MAXIMUM OFFERING PRICE:
Class A $ 21.39
==============
</TABLE>
16 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 9/30/99
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $1,051,468) $104,045,666
Interest 5,703,604
------------
Total investment income $109,749,270
------------
EXPENSES:
Management fees
Basic fee $ 35,001,553
Performance adjustment (5,823,117)
Transfer agent fees
Class A 11,355,754
Class B 129,497
Class C 24,876
Distribution fees
Class A 11,931,052
Class B 257,885
Class C 46,606
Administrative fees 1,672,571
Custodian fees 260,545
Registration fees 206,508
Professional fees 293,109
Printing 610,374
Fees and expenses of nonaffiliated trustees 112,833
Miscellaneous 77,991
------------
Total expenses $ 56,158,037
Less fees paid indirectly (906,955)
------------
Net expenses $ 55,251,082
------------
Net investment income $ 54,498,188
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Investments (including $21,342,826 from affiliated
companies) $128,982,063
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 7,716 $128,989,779
------------ ------------
Change in net unrealized gain from:
Investments $500,579,654
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (7,016) $500,572,638
------------ ------------
Net gain on investments and foreign currency
transactions $629,562,417
------------
Net increase in net assets resulting from operations $684,060,605
============
</TABLE>
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 9/30/99 and 9/30/98
<TABLE>
<CAPTION>
Year Ended Year Ended
FROM OPERATIONS: 9/30/99 9/30/98
<S> <C> <C>
Net investment income $ 54,498,188 $ 52,687,726
Net realized gain on investments and foreign currency
transactions 128,989,779 178,376,750
Change in net unrealized gain or loss on investments
and foreign currency transactions 500,572,638 (1,990,795,373)
--------------- ---------------
Net increase (decrease) in net assets resulting
from operations $ 684,060,605 $(1,759,730,897)
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ($0.19 and $0.16 per share, respectively) $ (51,921,429) $ (45,296,909)
Class B ($0.00 and $0.02 per share, respectively) -- (16,699)
Class C ($0.00 and $0.06 per share, respectively) -- (7,254)
Net realized gain:
Class A ($0.15 and $3.34 per share, respectively) (44,442,516) (904,693,302)
Class B ($0.15 and $3.34 per share, respectively) (229,790) (2,365,132)
Class C ($0.15 and $3.34 per share, respectively) (45,439) (403,479)
--------------- ---------------
Total distributions to shareholders $ (96,639,174) $ (952,782,775)
--------------- ---------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 549,021,003 $ 751,999,994
Reinvestment of distributions 89,470,501 899,054,779
Cost of shares repurchased (1,594,983,583) (969,188,428)
--------------- ---------------
Net increase (decrease) in net assets resulting
from fund share transactions $ (956,492,079) $ 681,866,345
--------------- ---------------
Net decrease in net assets $ (369,070,648) $(2,030,647,327)
NET ASSETS:
Beginning of year 5,520,940,453 7,551,587,780
--------------- ---------------
End of year (including accumulated undistributed net
investment income of $28,087,934 and $27,149,585,
respectively) $ 5,151,869,805 $ 5,520,940,453
=============== ===============
</TABLE>
18 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A '99 Shares '99 Amount '98 Shares '98 Amount
<S> <C> <C> <C> <C>
Shares sold 25,634,232 $ 527,769,739 30,569,567 $ 729,551,456
Reinvestment of distributions 4,390,605 89,211,509 39,778,758 896,463,906
Less shares repurchased (75,774,124) (1,572,599,850) (40,837,229) (961,622,337)
----------- --------------- ----------- -------------
Net increase (decrease) (45,749,287) $ (955,618,602) 29,511,096 $ 664,393,025
=========== =============== =========== =============
CLASS B
Shares sold 796,132 $ 16,027,099 768,581 $ 18,334,775
Reinvestment of distributions 11,167 219,995 103,776 2,303,825
Less shares repurchased (866,761) (17,501,553) (256,120) (5,827,965)
----------- --------------- ----------- -------------
Net increase (decrease) (59,462) $ (1,254,459) 616,237 $ 14,810,635
=========== =============== =========== =============
CLASS C
Shares sold 259,176 $ 5,224,165 171,838 $ 4,113,763
Reinvestment of distributions 1,976 38,997 12,930 287,048
Less shares repurchased (244,298) (4,882,180) (79,658) (1,738,126)
----------- --------------- ----------- -------------
Net increase 16,854 $ 380,982 105,110 $ 2,662,685
=========== =============== =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements. 19
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 9/30/99
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
<S> <C> <C>
CLASS A
Net asset value, beginning of year $ 18.32 $ 27.85
---------- ----------
Increase (decrease) from investment operations:
Net investment income $ 0.21 $ 0.17
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 1.97 (6.20)
---------- ----------
Net increase (decrease) from investment operations $ 2.18 $ (6.03)
Distributions to shareholders:
Net investment income (0.19) (0.16)
Net realized gain (0.15) (3.34)
---------- ----------
Net increase (decrease) in net asset value $ 1.84 $ (9.53)
---------- ----------
Net asset value, end of year $ 20.16 $ 18.32
========== ==========
Total return* 11.86% (23.97)%
Ratio of net expenses to average net assets 0.96%+ 0.90%+
Ratio of net investment income to average net assets 0.93%+ 0.74%+
Portfolio turnover rate 12% 50%
Net assets, end of year (in thousands) $5,125,858 $5,496,480
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.95% 0.90%
Net investment income 0.94% 0.74%
<CAPTION>
Year Ended Year Ended Year Ended
9/30/97 9/30/96 9/30/95
<S> <C> <C> <C>
CLASS A
Net asset value, beginning of year $ 20.94 $ 20.66 $ 19.38
---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income $ 0.16 $ 0.23 $ 0.35
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 8.83 2.10 3.04
---------- ---------- ----------
Net increase (decrease) from investment operations $ 8.99 $ 2.33 $ 3.39
Distributions to shareholders:
Net investment income (0.15) (0.32) (0.30)
Net realized gain (1.93) (1.73) (1.81)
---------- ---------- ----------
Net increase (decrease) in net asset value $ 6.91 $ 0.28 $ 1.28
---------- ---------- ----------
Net asset value, end of year $ 27.85 $ 20.94 $ 20.66
========== ========== ==========
Total return* 45.95% 12.18% 19.92%
Ratio of net expenses to average net assets 0.96%+ 0.92%+ 0.93%+
Ratio of net investment income to average net assets 0.68%+ 1.13%+ 1.85%+
Portfolio turnover rate 47% 66% 63%
Net assets, end of year (in thousands) $7,534,010 $5,431,797 $5,114,963
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.95% 0.90% 0.91%
Net investment income 0.69% 1.15% 1.87%
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 9/30/99
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended 7/1/96 to
9/30/99 9/30/98(a) 9/30/97(a) 9/30/96
<S> <C> <C> <C> <C>
CLASS B
Net asset value, beginning of period $ 17.98 $ 27.52 $ 20.89 $20.55
------- ------- ------- ------
Increase (decrease) from investment operations:
Net investment loss $ (0.04) $ (0.07) $ (0.07) $(0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 1.95 (6.11) 8.76 0.35
------- ------- ------- ------
Net increase (decrease) from investment operations $ 1.91 $ (6.18) $ 8.69 $ 0.34
Distributions to shareholders:
Net investment income -- (0.02) (0.13) --
Net realized gain (0.15) (3.34) (1.93) --
------- ------- ------- ------
Net increase (decrease) in net asset value $ 1.76 $ (9.54) $ 6.63 $ 0.34
------- ------- ------- ------
Net asset value, end of period $ 19.74 $ 17.98 $ 27.52 $20.89
======= ======= ======= ======
Total return* 10.62% (24.76)% 44.58% 1.65%
Ratio of net expenses to average net assets 2.06%+ 1.96%+ 1.94%+ 2.03%**+
Ratio of net investment loss to average net assets (0.18)%+ (0.31)%+ (0.32)%+ (0.25)%**+
Portfolio turnover rate 12% 50% 47% 66%
Net assets, end of period (in thousands) $21,972 $21,084 $15,311 $ 864
Ratios assuming reduction for fees paid indirectly:
Net expenses 2.04% 1.96% 1.90% 2.02%**
Net investment loss (0.16)% (0.31)% (0.28)% (0.24)%**
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 9/30/99
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended 7/1/96 to
9/30/99 9/30/98(a) 9/30/97(a) 9/30/96
<S> <C> <C> <C> <C>
CLASS C
Net asset value, beginning of period $18.02 $ 27.55 $20.88 $20.55
------ ------- ------ ------
Increase (decrease) from investment operations:
Net investment loss $(0.04) $ (0.06) $(0.08) $(0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 1.95 (6.07) 8.77 0.34
------ ------- ------ ------
Net increase (decrease) from investment operations $ 1.91 $ (6.13) $ 8.69 $ 0.33
Distributions to shareholders:
Net investment income -- (0.06) (0.09) --
Net realized gain (0.15) (3.34) (1.93) --
------ ------- ------ ------
Net increase (decrease) in net asset value $ 1.76 $ (9.53) $ 6.67 $ 0.33
------ ------- ------ ------
Net asset value, end of period $19.78 $ 18.02 $27.55 $20.88
====== ======= ====== ======
Total return* 10.60% (24.56)% 44.51% 1.61%
Ratio of net expenses to average net assets 2.08%+ 1.93%+ 1.99%+ 2.02%**+
Ratio of net investment loss to average net assets (0.22)%+ (0.28)%+ (0.39)%+ (0.15)%**+
Portfolio turnover rate 12% 50% 47% 66%
Net assets, end of period (in thousands) $4,039 $ 3,377 $2,267 $ 214
Ratios assuming reduction for fees paid indirectly:
Net expenses 2.06% 1.93% 1.95% 2.01%**
Net investment loss (0.20)% (0.28)% (0.35)% (0.14)%**
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 9/30/99
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer II (the Fund) is a Delaware business trust registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The investment objectives of the Fund are reasonable income and growth
of capital.
The Fund offers three classes of shares - Class A, Class B and Class C shares.
Shares of Class A, Class B and Class C each represent an interest in the same
portfolio of investments of the Fund and have equal rights to voting,
redemptions, dividends and liquidation, except that each class of shares can
bear different transfer agent and distribution fees and have exclusive voting
rights with respect to the distribution plans that have been adopted by Class A,
Class B and Class C shareholders, respectively.
The Fund's financial statements have been prepared in conformity with generally
accepted accounting principles that require the management of the Fund to, among
other things, make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
consistently followed by the Fund, which are in conformity with those generally
accepted in the investment company industry:
A. Security Valuation
Security transactions are recorded on trade date. The net asset value is
computed once daily, on each day the New York Stock Exchange is open, as of
the close of regular trading on the Exchange. In computing the net asset
value, securities are valued at the last sale price on the principal exchange
where they are traded. Securities that have not traded on the date of
valuation, or securities for which sale prices are not 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.
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. 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
23
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 9/30/99 (continued)
- --------------------------------------------------------------------------------
data in the exercise of reasonable diligence. Interest income is recorded on
the accrual basis, net of unrecoverable foreign taxes withheld at the
applicable country rates. Temporary cash investments are valued at amortized
cost.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes. It
is the Fund's practice to first select for sale those securities that have
the highest cost and also qualify for long-term capital gain or loss
treatment for tax purposes.
B. 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. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareholders. Therefore, no federal income tax provision is required.
The characterization of distributions to shareholders for financial reporting
purposes is determined in accordance with federal income tax rules.
Therefore, the source of the Fund's distributions may be shown in the
accompanying financial statements as either from or in excess of net
investment income or net realized gain on investment transactions, or from
paid-in capital, depending on the type of book/tax differences that may
exist.
At September 30, 1999, the Fund reclassified $1,638,410 from accumulated
undistributed net investment income to accumulated undistributed net realized
gain on investments and foreign currency transactions. The reclassification
has no impact on the net asset value of the
24
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fund and is designed to present the Fund's capital accounts on a tax basis.
The Fund has designated $125,559,275 as a capital gain dividend for purposes
of the dividend paid deduction.
D. Fund Shares
The Fund records sales and repurchases of its shares on trade date. Net
losses, if any, as a result of cancellations are absorbed by Pioneer Funds
Distributor, Inc. (PFD), the principal underwriter for the Fund and an
indirect subsidiary of The Pioneer Group, Inc. (PGI). PFD earned $1,565,861
in underwriting commissions on the sale of fund shares during the year ended
September 30, 1999.
E. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A, Class B and Class C shares of the Fund,
respectively. Shareholders of each class share all expenses and fees paid to
the transfer agent, Pioneering Services Corporation (PSC), for their
services, which are allocated based on the number of accounts in each class
and the ratable allocation of related out-of-pocket expense (see Note 3).
Income, common expenses and realized and unrealized gains and losses are
calculated at the Fund level and allocated daily to each class of shares
based on the respective percentage of adjusted net assets at the beginning of
the day.
Distributions to shareholders are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time, and in the same amount,
except that Class A, Class B and Class C shares can bear different transfer
agent and distribution fees.
2. Management Agreement
Pioneer Investment Management, Inc. (PIM), manages the Fund's portfolio and is
a wholly owned subsidiary of PGI. PIM receives a basic fee that is calculated
at the annual rate 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 (plus minus
symbol)0.10% based on the Fund's investment performance as compared with the
Lipper Growth & Income Funds Index. For the year ended September 30, 1999, the
aggregate performance adjustment resulted in a reduction to the basic fee of
$5,823,117. For the year ended September 30, 1999, the net management fee was
equivalent to 0.50% of average net assets.
25
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 9/30/99 (continued)
- --------------------------------------------------------------------------------
In addition, under the management agreement, certain other services and costs,
including accounting, regulatory reporting and insurance premiums, are paid by
the Fund. At September 30, 1999, $2,277,266 was payable to PIM related to
management fees, administrative and certain other services.
3. Transfer Agent
PSC, a wholly owned subsidiary of PGI, provides substantially all transfer agent
and shareholder services to the Fund at negotiated rates. Included in due to
affiliates is $1,015,110 in transfer agent fees payable to PSC at September 30,
1999.
4. Distribution Plans
The Fund adopted a Plan of Distribution for each class of shares (Class A Plan,
Class B Plan and Class C Plan) in accordance with Rule 12b-1 of the Investment
Company Act of 1940. Pursuant to the Class A Plan, the Fund pays PFD a service
fee of up to 0.25% of the Fund's average daily net assets in reimbursement of
its actual expenditures to finance activities primarily intended to result in
the sale of Class A shares. On qualifying investments made prior to August 19,
1991, the Class A Plan provides for reimbursement of such expenditures in an
amount not to exceed 0.15%. Pursuant to the Class B Plan and the Class C Plan,
the Fund pays PFD 1.00% of the average daily net assets attributable to each
class of shares. The fee consists of a 0.25% service fee and a 0.75%
distribution fee paid as compensation for personal services and/or account
maintenance services or distribution services with regard to Class B and Class C
shares. Included in due to affiliates is $957,398 in distribution fees payable
to PFD at September 30, 1999.
In addition, redemptions of each class of shares may be subject to a contingent
deferred sales charge (CDSC). A CDSC of 1.00% may be imposed on redemptions of
certain net asset value purchases of Class A shares within one period of
purchase. Class B shares that are redeemed within six years of purchase are
subject to a CDSC at declining rates beginning at 4.0%, based on the lower of
cost or market value of shares being redeemed. Redemptions of Class C shares
within one year of purchase are subject to a CDSC of 1.00%. Proceeds from the
CDSCs are paid to PFD. For the year ended September 30, 1999, CDSCs in the
amount of $102,586 were paid to PFD.
26
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. Expense Offsets
The Fund has entered into certain directed brokerage and expense offset
arrangements resulting in a reduction in the Fund's total expenses. For the year
ended September 30, 1999, the Fund's expenses were reduced by $906,955 under
such arrangements.
6. Line of Credit Facility
The Fund, along with certain other funds in the Pioneer Family of Funds (the
Funds), collectively participate in a $50 million committed, unsecured revolving
line of credit facility. Borrowings are used solely for temporary or emergency
purposes. The Fund may borrow up to the lesser of $50 million or the limits set
by its prospectus for borrowings. Interest on collective borrowings of up to $25
million is payable at the Federal Funds Rate plus 3/8% on an annualized basis,
or at the Federal Funds Rate plus 1/2% if the borrowing exceeds $25 million at
any one time. The Funds pay an annual commitment fee for this facility. The
commitment fee is allocated among such Funds based on their respective borrowing
limits. For the year ended September 30, 1999, the Fund had no borrowings under
this agreement.
7. Affiliated Companies
The Fund's investments in certain companies 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 September 30, 1999:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Affiliates Purchases Sales Income Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A.M. Castle & Co. $ - $ - $ 710,678 $ 11,502,953
Ambac Financial Group, Inc - - 2,101,223 204,200,463
Amcast Industrial Corp. - - 301,784 7,174,106
Briggs & Stratton Corp. - - 1,917,279 95,659,112
Champion Enterprises, Inc. - - - 37,305,000
Clayton Homes, Inc. - - 656,320 71,098,500
Dionex Corp. - 7,904,112 - 93,024,000
Donaldson Co., Inc. - - 1,173,600 113,386,875
Etec Systems, Inc. - 45,373 - 52,054,188
Lancaster Colony Corp. - 20,049,289 2,188,470 101,038,400
Mississippi Chemical Corp. - - 872,000 15,260,000
Oakwood Homes Corp. - 11,038,546 146,648 14,247,900
Rouge Industries, Inc. - 754,998 215,148 12,485,137
Trinity Industries, Inc. - - 2,763,320 121,882,150
------- ----------- ----------- ------------
$ - $39,792,318 $13,046,470 $950,318,784
======= =========== =========== ============
- -----------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareowners and the Board of Trustees of Pioneer II:
We have audited the accompanying balance sheet, including the schedule of
investments, of Pioneer II as of September 30, 1999, and the related statement
of operations, the statements of changes in net assets, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1999 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 September 30, 1999, the results of its operations, the changes
in its net assets, and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 5, 1999
28
<PAGE>
Pioneer II
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Officers Trustees
John F. Cogan, Jr. John F. Cogan, Jr., Chairman and
Mary K. Bush President
Richard H. Egdahl, M.D. Richard E. Dahlberg, Vice President
Margaret B.W. Graham David D. Tripple, Executive Vice President
John W. Kendrick Eric W. Reckard, Treasurer
Marguerite A. Piret Joseph P. Barri, Secretary
David D. Tripple
Stephen K. West
John Winthrop
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Public Accountants
Arthur Andersen LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneering Services Corporation
29
<PAGE>
- --------------------------------------------------------------------------------
HOW TO CONTACT PIONEER
- --------------------------------------------------------------------------------
We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
Call us for:
Account information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
Pioneering Services Corporation
60 State Street
Boston, Massachusetts 02109
Our toll-free fax 1-800-225-4240
Our Internet e-mail address [email protected]
(for general questions about Pioneer only)
Visit our website: www.pioneerfunds.com
This report must be preceded or accompanied by a current
Fund prospectus.
[Logo: Pioneer logo]
Pioneer Investment Management, Inc.
60 State Street 7092-00-1199
Boston, Massachusetts 02109 (C) Pioneer Funds Distributor, Inc.
www.pioneerfunds.com [Recycle bug] Printed on Recycled Paper
