<PAGE>
[Pioneer logo]
Pioneer II
SEMIANNUAL REPORT 3/31/99
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 17
Notes to Financial Statements 24
Report of Independent Public Accountants 29
Trustees, Officers and Service Providers 30
The Pioneer Family of Mutual Funds 31
Programs and Services for Pioneer Shareowners 32
Retirement Plans from Pioneer 34
</TABLE>
<PAGE>
Pioneer II
LETTER FROM THE CHAIRMAN 3/31/99
Dear Shareowner,
- --------------------------------------------------------------------------------
I am pleased to present this semiannual report to the shareowners of Pioneer
II. This report covers the six months from September 30, 1998 through March 31,
1999.
Pioneer II's performance improved over the last six months, reflecting both
portfolio changes and renewed interest in value stocks. Prices of value stocks
jumped in February, but growth stocks ultimately ruled the period. In March,
fueled by the fire for growth stocks, the Dow Jones Industrial Average closed
above 10,000 for the first time. As we prepare this report, valuations of the
most popular stocks are at all time highs and investors seem to be looking for
more reasonable valuations.
After investing for over 70 years, we know the road is not always smooth for
value investors. However, value stocks should not be abandoned. History and
patience have shown that fundamentally strong companies whose stocks are out of
favor can be sound investments. These are the companies we seek for Pioneer
II's portfolio.
We have always encouraged investors to "stay the course" and in light of
today's volatility, this idea is more important than ever. Although it may be
tempting to pull money out of a market that is rocky, consider the following
scenario. When stocks severely declined in October 1987 and again in August
1998, some individuals abandoned their stock investments completely. In turn,
they were left out of terrific returns when the market recovered. No one can
predict when the market will change or the magnitude of that change, but we are
confident that your Fund's portfolio will be well-positioned for an eventual
return to value stocks.
I encourage you to read on to learn more about your Fund, including the
question and answer session with portfolio manager Richard Dahlberg. If you
have questions, please contact your investment professional, or Pioneer at
1-800-225-6292.
Respectfully,
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.
Chairman and President
1
<PAGE>
Pioneer II
PORTFOLIO SUMMARY 3/31/99
P o r t f o l i o D i v e r s i f i c a t i o n
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[pie chart]
U.S. Common Stocks 88%
International
Common Stocks 8%
Depositary Receipts for
International Stocks 3%
Short-Term Cash
Equivalents 1%
S e c t o r D i s t r i b u t i o n
- --------------------------------------------------------------------------------
(As a percentage of equity holdings)
[pie chart]
Financial 22%
Healthcare 14%
Capital Goods 13%
Technology 13%
Consumer Cyclicals 9%
Utilities 8%
Energy 7%
Other 6%
Basic Materials 4%
Consumer Staples 4%
1 0 L a r g e s t H o l d i n g s
- --------------------------------------------------------------------------------
(As a percentage of equity holdings)
<TABLE>
<S> <C> <C> <C>
1. Ambac Financial Group, 5.02% 6. Amgen, Inc. 3.34%
Inc.
2. Koninklijke Philips 4.98 7. Intel Corp. 2.87
Electronics NV (NY
shares)
3. Merck & Co., Inc. 4.01 8. The Chase Manhattan 2.76
Corp.
4. Dominion Resources, Inc. 3.87 9. Charter One Financial, 2.60
Inc.
5. Conseco, Inc. 3.86 10. IBM Corp. 2.53
</TABLE>
Fund holdings will vary for other periods.
2
<PAGE>
Pioneer II
PERFORMANCE UPDATE 3/31/99 CLASS A SHARES
S h a r e P r i c e s a n d D i s t r i b u t i o n s
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 3/31/99 9/30/98
$20.15 $18.32
Distributions per Share Income Short-Term Long-Term
(9/30/98 -3/31/99) Dividends Capital Gains Capital Gains
$0.086 - $0.150
</TABLE>
I n v e s t m e n t R e t u r n s
- --------------------------------------------------------------------------------
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 March 31, 1999)
Net Asset Public Offering
Period Value Price*
<S> <C> <C>
10 Years 10.64% 9.98%
5 Years 12.21 10.89
1 Year -19.55 -24.17
</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.
[Class A Mountain Chart]
Growth of $10,000
<TABLE>
<CAPTION>
Standard & Poor's
Pioneer II* 500 Index
<S> <C> <C>
3/89 9,425 10,000
10,642 11,923
3/91 10,566 13,638
11,984 15,140
3/93 13,779 17,444
14,557 17,702
3/95 16,091 20,450
20,213 27,006
3/97 23,668 32,353
32,194 47,866
3/99 25,900 57,339
</TABLE>
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
<PAGE>
Pioneer II
PERFORMANCE UPDATE 3/31/99 CLASS B SHARES
S h a r e P r i c e s a n d D i s t r i b u t i o n s
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 3/31/99 9/30/98
$19.75 $17.98
Distributions per Share Income Short-Term Long-Term
(9/30/98 -3/31/99) Dividends Capital Gains Capital Gains
- - $0.150
</TABLE>
I n v e s t m e n t R e t u r n s
- --------------------------------------------------------------------------------
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 March 31, 1999)
If If
Period Held Redeemed*
<S> <C> <C>
Life-of-Fund 7.63% 6.70%
(7/1/96)
1 Year -20.40 -23.56%
</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.
[Class B Mountain Chart]
Growth of $10,000
<TABLE>
<CAPTION>
Standard & Poor's
Pioneer II* 500 Index
<S> <C> <C>
7/96 10,000 10,000
9/96 10,165 10,232
11,403 11,085
3/97 11,419 11,383
13,165 13,367
9/97 14,698 14,367
13,962 14,780
3/98 15,377 16,840
14,269 17,398
9/98 11,059 15,671
12,717 19,005
3/99 11,952 20,173
</TABLE>
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
<PAGE>
Pioneer II
PERFORMANCE UPDATE 3/31/99 CLASS C SHARES
S h a r e P r i c e s a n d D i s t r i b u t i o n s
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 3/31/99 9/30/98
$19.77 $18.02
Distributions per Share Income Short-Term Long-Term
(9/30/98 -3/31/99) Dividends Capital Gains Capital Gains
- - $0.150
</TABLE>
I n v e s t m e n t R e t u r n s
- --------------------------------------------------------------------------------
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 March 31, 1999)
If If
Period Held Redeemed*
<S> <C> <C>
Life-of-Fund 7.64% 7.64%
(7/1/96)
1 Year -20.29 -20.29
</TABLE>
* Assumes reinvestment of distributions. The 1% contingent deferred sales charge
(CDSC) applies to redemptions made within one year of purchase.
[Class C Mountain Chart]
Growth of $10,000
<TABLE>
<CAPTION>
Standard & Poor's
Pioneer II* 500 Index
<S> <C> <C>
7/96 10,000 10,000
9/96 10,161 10,232
11,400 11,085
3/97 11,410 11,383
13,142 13,367
9/97 14,683 14,367
13,952 14,780
3/98 15,360 16,840
14,253 17,398
9/98 11,076 15,671
12,727 19,005
3/99 12,244 20,173
</TABLE>
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
PORTFOLIO MANAGEMENT DISCUSSION 3/31/99
In this report, Richard Dahlberg, head of Pioneer II's investment team,
discusses the market environment and Pioneer II's performance over the six
months from September 30, 1998 through March 31, 1999. Mr. Dahlberg has been an
investment professional for nearly 30 years. In addition to managing Pioneer
II, he oversees the portfolio managers and analysts that run Pioneer's core
value fund group.
Q: Over the six months, the Standard and Poor's 500 continued to set new
records. Did this carry over into the broader market?
A: Once again, a small number of large growth stocks were the best performers
and the main contributors to the performance of the S&P 500 Index's stellar
27% return. But since the S&P 500 is capitalization-weighted, larger stocks
account for the majority of its return. The return would be a much different
20% if all 500 stocks in the index were weighted equally - quite a contrast.
So we are pleased that investors made money with the Fund's return of around
11% at net asset value for the six month period.
Q: Is it normal for such a small number of stocks to drive the market?
A: It's not unprecedented, but it is unusual in both its length and its
magnitude. From time to time, usually for short periods, certain areas or
sectors of the market perform far above the market average. Recently, I'm
reminded of the early 1970s when the "nifty 50" group of blue-chip stocks
with relatively high valuations significantly outperformed the rest of the
market. However, over longer periods of time these "bubbles" usually even
out, and companies with solid fundamentals and reasonable valuations tend to
provide solid results.
Q: Technology holdings helped Fund performance. What sectors didn't?
A: The Fund's technology stocks delivered particularly strong returns.
Koninklijke Phillips Electronics and defense contractor, Raytheon, were
standouts. Healthcare stocks Amgen and Wellpoint Health Networks also turned
in impressive returns.
6
<PAGE>
Pioneer II
Financial stocks were a disappointment. Despite strong earnings, investors
turned away from Ambac Financial Group and Conseco. Trinity Industries,
one of the Fund's holdings in the capital goods sector, also lagged. In
each case we think the market has taken an unreasonably negative view and
that, in time, we'll see their real value realized.
Q: Energy stocks were recently trading at low valuations. Did you add any to the
portfolio?
A: We did increase energy-related holdings. Their stock prices went way down
when, as you probably noticed at the gas pump, oil dropped to all-time lows
in early 1999 based on an inflation-adjusted scale. We initiated positions in
mid-sized companies Conoco, Suncor Energy and the utility operator Edison
International. Recently, the members of OPEC came to an agreement on oil
production and, almost immediately, oil and gas prices spiked, a move that
can only help the profitability of these companies. We think the energy area
is likely to make a strong comeback; there are more and more signs that
demand is increasing while supply remains relatively stable.
Q: What changes did you make to sector weightings?
A: Our sector weightings did not change much over the period. However, we
continued to increase the size of the average company in the portfolio. The
median market capitalization has increased over the last six months to $4.2
billion from $3.5 billion and $3.4 billion this time last year. Of course,
from time to time we make changes within sectors, after a stock reaches fair
value or we see a change in its long-term outlook.
Q: You have managed in the value style for over 30 years. How has it changed
over the years?
A: Value investing has not changed, but investors and the investing environment
have. Throughout history there have always been those who believe they live
in a "new era" and that "the rules have changed." We are seeing this today
with the way the internet has opened up the flow of information. Stocks of
many internet companies are selling at unbelievable extremes, even though
they have little or no sales, and prospects
7
<PAGE>
Pioneer II
PORTFOLIO MANAGEMENT DISCUSSION 3/31/99 (continued)
for positive earnings may be years away. But we manage Pioneer II with the
belief that stocks purchased at reasonable prices will tend to outperform
those that are purchased at exorbitant prices. This is a proven strategy
based on fundamentals, and if we are patient, I am convinced it will
contribute to success in the future.
Q: What is your outlook?
A: We think the strong economic conditions in the United States will continue.
However, there are a number of circumstances that, over a longer period,
could influence the market. First, we are concerned that consumers, who have
been on a buying binge for quite some time, will get satiated. Some
indicators, such as new car sales, are reaching peak levels. Savings rates
are at all time lows. If consumers scale back, it will be difficult for
companies to meet earnings expectations, and the stock market could suffer.
Another factor is the comeback of the Asian economies. Global interest rates
were suppressed when the Asian economies were experiencing tough times last
year. But once companies in Asia rebound, they will call on capital that is
currently invested in the United States and, in turn, we may see higher
interest rates. This most likely would have a damper on the U.S. equity
markets.
Even so, for the near term, low inflation and competitive interest rates
should help equity markets prosper. Now we are beginning to see investors
take an interest in a broader array of stocks, including value stocks.
Portfolio holdings are beginning to pick up some momentum, and we are
hopeful the trend will continue.
8
<PAGE>
Pioneer II
SCHEDULE OF INVESTMENTS 3/31/99
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
INVESTMENT IN SECURITIES - 98.8%
CONVERTIBLE CORPORATE BOND - 0.0%
$4,000,000 Halter Marine Group, Inc., Exchangeable
Note, 4.5%, 9/15/04 (144A)+ $ 2,070,000
--------------
TOTAL CONVERTIBLE CORPORATE BOND
(Cost $4,000,000) $ 2,070,000
--------------
<CAPTION>
Shares
<S> <C> <C>
PREFERRED STOCK - 0.5%
355,000 Telecomunicacoes Brasileiras SA (A.D.R.) $ 28,621,875
--------------
TOTAL PREFERRED STOCK
(Cost $32,209,230) $ 28,621,875
--------------
COMMON STOCKS - 98.3%
Basic Materials - 4.2%
Aluminum - 0.3%
400,000 Aluminum Company of America $ 16,475,000
--------------
Chemicals - 0.9%
185,000 E.I. du Pont de Nemours & Co. $ 10,741,562
1,440,000 Lyondell Petrochemicals Co. 19,710,000
2,180,000 Mississippi Chemical Corp.+ 20,437,500
--------------
$ 50,889,062
--------------
Chemicals (Diversified) - 0.4%
500,000 Monsanto Co. $ 22,968,750
--------------
Chemicals (Specialty) - 0.9%
1,800,000 Cytec Industries Inc.* $ 40,162,500
2,569,500 Terra Industries Inc. 11,723,344
--------------
$ 51,885,844
--------------
Containers & Packaging (Paper) - 0.4%
4,300,000 Vitro SA (A.D.R.) $ 24,993,750
--------------
Iron & Steel - 0.3%
1,792,900 Rouge Industries, Inc.+ $ 15,687,875
--------------
Metals Mining - 0.5%
1,000,000 Freeport-McMoRan Copper & Gold, Inc.
(Class B) $ 10,875,000
1,300,000 USEC Inc. 17,712,500
--------------
$ 28,587,500
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
Pioneer II
SCHEDULE OF INVESTMENTS 3/31/99 (continued)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Paper & Forest Products - 0.5%
100,000 Georgia-Pacific Group $ 7,425,000
1,600,000 Longview Fibre Co. 18,500,000
--------------
$ 25,925,000
--------------
Total Basic Materials $ 237,412,781
--------------
Capital Goods - 13.1%
Containers (Metals & Glass) - 0.3%
726,000 Owens-Illinois, Inc.* $ 18,150,000
--------------
Electrical Equipment - 4.9%
3,383,900 Koninklijke Philips Electronics NV (NY Shares) $ 278,960,256
--------------
Machinery (Diversified) - 0.0%
102,900 Global Industrial Technologies, Inc.* $ 1,080,450
--------------
Manufacturing (Diversified) - 2.7%
538,900 Amcast Industrial Corp.+ $ 8,689,762
673,000 Hanson Plc (A.D.R.) 29,612,000
3,947,600 Trinity Industries, Inc.+ 115,960,750
--------------
$ 154,262,512
--------------
Manufacturing (Specialized) - 4.8%
1,638,700 Briggs & Stratton Corp.+ $ 80,808,394
2,276,000 Dionex Corp.*+ 85,919,000
4,890,000 Donaldson Co., Inc.+ 88,020,000
2,386,100 Halter Marine Group, Inc.*+ 13,869,206
--------------
$ 268,616,600
--------------
Metal Fabricators - 0.2%
911,125 A.M. Castle & Co.+ $ 10,990,445
--------------
Waste Management - 0.2%
175,000 Waste Management Inc. $ 7,765,625
--------------
Total Capital Goods $ 739,825,888
--------------
Communication Services - 2.8%
Telephone - 2.8%
300,000 Ameritech Corp. $ 17,362,500
2,225,000 Bell Atlantic Corp. 115,004,687
600,000 SBC Communications, Inc. 28,275,000
--------------
Total Communication Services $ 160,642,187
--------------
</TABLE>
10 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Consumer Cyclicals - 8.8%
Auto Parts & Equipment - 0.8%
1,839,400 Breed Technologies, Inc. $ 6,552,863
1,002,500 Delphi Automotive Systems Corp.* 17,794,375
665,000 Simpson Industries, Inc. 6,400,625
127,000 Strattec Security Corp.* 3,571,875
300,000 TRW Inc. 13,650,000
--------------
$ 47,969,738
--------------
Automobiles - 1.5%
1,010,000 General Motors Corp. $ 87,743,750
--------------
Consumer (Jewelry, Novelties, & Gifts) - 1.8%
3,747,450 Lancaster Colony Corp.+ $ 99,775,856
--------------
Homebuilding - 4.0%
4,145,000 Champion Enterprises, Inc.*+ $ 80,309,375
8,184,000 Clayton Homes, Inc.+ 90,535,500
3,766,200 Oakwood Homes Corp.+ 52,962,187
--------------
$ 223,807,062
--------------
Retail (Department Stores) - 0.6%
400,000 Federated Department Stores, Inc.* $ 16,050,000
450,000 May Department Stores Co. 17,606,250
--------------
$ 33,656,250
--------------
Retail (Specialty) - 0.1%
500,000 Officemax Inc.* $ 4,312,500
--------------
Total Consumer Cyclicals $ 497,265,156
--------------
Consumer Staples - 4.0%
Beverages (Non-Alcoholic) - 0.3%
400,000 Pepsico, Inc. $ 15,675,000
--------------
Foods - 2.3%
4,500,000 IBP, Inc. $ 83,812,500
20,000 Nestle SA (Registered Shares) 36,425,209
400,000 Sara Lee Corp. 9,900,000
--------------
$ 130,137,709
--------------
Services (Employment) - 1.4%
2,850,000 Kelly Services Inc. (Non-voting) $ 79,087,500
--------------
Total Consumer Staples $ 224,900,209
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 11
<PAGE>
Pioneer II
SCHEDULE OF INVESTMENTS 3/31/99 (continued)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Energy - 6.8%
Oil (Domestic Integrated) - 3.0%
1,040,000 Atlantic Richfield Co. $ 75,920,000
3,840,000 Conoco, Inc. 94,320,000
--------------
$ 170,240,000
--------------
Oil (International Integrated) - 1.4%
650,000 Texaco, Inc. $ 36,887,500
1,411,000 YPF SA (Class D) (A.D.R.) 44,534,687
--------------
$ 81,422,187
--------------
Oil & Gas (Drilling & Equipment) - 1.4%
1,858,100 BJ Services Co.* $ 43,549,219
1,400,000 R&B Falcon Corp.* 12,337,500
410,000 Smith International, Inc.* 16,400,000
300,000 Weatherford International Inc.* 7,837,500
--------------
$ 80,124,219
--------------
Oil & Gas - (Exploration/Production) - 1.0%
500,000 Anadarko Petroleum Corp. $ 18,875,000
500,000 Burlington Resources Inc. 19,968,750
500,000 Suncor Energy, Inc. 16,750,000
--------------
$ 55,593,750
--------------
Total Energy $ 387,380,156
--------------
Financial - 21.6%
Banks (Major Regional) - 2.5%
1,000,000 Banc One Corp. $ 55,062,500
707,200 Banco Rio De La Plata SA (A.D.R.) 6,806,800
1,400,000 Fleet Financial Group, Inc. 52,675,000
400,000 Mellon Bank Corp. 28,150,000
--------------
$ 142,694,300
--------------
Banks (Money Center) - 2.7%
1,900,000 The Chase Manhattan Corp. $ 154,493,750
--------------
Banks (Regional) - 0.5%
1,242,100 North Fork Bancorporation, Inc. $ 26,239,363
--------------
Consumer Finance - 1.0%
1,485,000 Countrywide Credit Industries, Inc. $ 55,687,500
--------------
Financial (Diversified) - 5.0%
5,202,700 Ambac Financial Group, Inc.+ $ 280,945,800
--------------
</TABLE>
12 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Insurance (Life/Health) - 4.1%
7,000,389 Conseco, Inc. $ 216,137,010
400,000 Nationwide Financial Services 16,800,000
--------------
$ 232,937,010
--------------
Insurance (Property/Casualty) - 1.0%
1,550,000 Allstate Corp. $ 57,446,875
--------------
Savings & Loans Companies - 4.8%
5,038,500 Charter One Financial, Inc. $ 145,407,961
3,150,000 Washington Mutual, Inc. 128,756,250
--------------
$ 274,164,211
--------------
Total Financial $1,224,608,809
--------------
Healthcare - 13.8%
Biotechnology - 3.3%
2,500,000 Amgen, Inc.* $ 187,187,500
--------------
Healthcare (Diversified) - 2.5%
860,400 Abbott Laboratories $ 40,277,475
1,350,000 American Home Products Corp. 88,087,500
1,135,000 Dura Pharmaceuticals, Inc.* 16,031,875
--------------
$ 144,396,850
--------------
Healthcare (Drugs/Major Pharmaceuticals) - 6.7%
2,800,000 Astra AB (Series A Free)* $ 64,263,972
500,000 Lilly, Eli & Co. 42,437,500
2,800,000 Merck & Co., Inc. 224,525,000
300,000 Novartis AG (A.D.R.) 24,412,500
379,700 Pharmacia & Upjohn, Inc. 23,683,787
--------------
$ 379,322,759
--------------
Healthcare (Hospital Management) - 0.4%
1,050,000 Columbia/HCA Healthcare Corp. $ 19,884,375
--------------
Healthcare (Long Term Care) - 0.1%
1,018,300 Integrated Health Services, Inc.* $ 5,600,650
--------------
Healthcare (Managed Care) - 0.8%
604,900 Humana Inc.* $ 10,434,525
425,600 Wellpoint Health Networks Inc.* 32,265,800
--------------
$ 42,700,325
--------------
Total Healthcare $ 779,092,459
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
Pioneer II
SCHEDULE OF INVESTMENTS 3/31/99 (continued)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Technology - 12.9%
Communications Equipment - 0.5%
1,240,000 Alcatel SA (A.D.R.) $ 28,287,500
--------------
Computers (Hardware) - 4.0%
1,600,000 Compaq Computer Corp. $ 50,700,000
800,000 Dell Computer Corp.* 32,700,000
800,000 IBM Corp. 141,800,000
--------------
$ 225,200,000
--------------
Computers (Peripherals) - 0.8%
1,550,000 Storage Technology Corp.* $ 43,206,250
--------------
Electronics (Component Distributors) - 1.3%
5,000,000 Arrow Electronics, Inc.*+ $ 75,000,000
--------------
Electronics (Defense) - 0.7%
732,200 Raytheon Co. (Class B) $ 42,925,225
--------------
Electronics (Instrumentation) - 0.1%
788,200 MTS Systems Corp. $ 7,980,525
--------------
Electronics (Semiconductors) - 4.3%
1,383,500 Etec Systems, Inc.*+ $ 40,726,781
1,350,000 Intel Corp. 160,818,750
400,000 Texas Instruments Inc. 39,700,000
--------------
$ 241,245,531
--------------
Equipment (Semiconductors) - 0.1%
525,000 Helix Technology Corp. $ 8,071,875
--------------
Photography/Imaging - 1.1%
950,000 Eastman Kodak Co. $ 60,681,250
--------------
Total Technology $ 732,598,156
--------------
Transportation - 2.1%
Airlines - 0.2%
200,000 AMR Corp.* $ 11,712,500
--------------
Railroads - 1.9%
600,000 Canadian National Railway Co. $ 33,375,000
1,400,000 Union Pacific Corp. 74,812,500
--------------
$ 108,187,500
--------------
Total Transportation $ 119,900,000
--------------
</TABLE>
14 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Utilities - 8.2%
Electric Companies - 6.5%
5,862,000 Dominion Resources, Inc. $ 216,527,625
2,000,000 Edison International 44,500,000
2,509,063 Hawaiian Electric Industries, Inc.+ 87,974,021
500,000 Public Service Enterprise Group, Inc. 19,093,750
--------------
$ 368,095,396
--------------
Natural Gas - 1.7%
2,073,000 Kinder Morgan Energy Partners, L.P. $ 71,777,625
600,000 Williams Companies, Inc. 23,700,000
--------------
$ 95,477,625
--------------
Total Utilities $ 463,573,021
--------------
TOTAL COMMON STOCKS
(Cost $4,528,262,826) $5,567,198,822
--------------
TOTAL INVESTMENT IN SECURITIES
(Cost $4,564,472,056) $5,597,890,697
--------------
<CAPTION>
Principal
Amount
<S> <C> <C>
TEMPORARY CASH INVESTMENTS - 1.2%
Commercial Paper - 1.2%
$28,627,000 American Express Co., 5.0%, 4/1/99 $ 28,627,000
39,663,000 Prudential Funding Corp., 4.85%, 4/5/99 39,663,000
--------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $68,290,000) $ 68,290,000
--------------
TOTAL INVESTMENT IN SECURITIES AND
TEMPORARY CASH INVESTMENTS - 100%
(Cost $4,632,762,056) (a) $5,666,180,697
==============
</TABLE>
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
Pioneer II
SCHEDULE OF INVESTMENTS 3/31/99 (continued)
* Non-income producing security.
+ Investment held by the Fund representing 5% or more of the outstanding voting
stock of such company.
144A Security is exempt from registration under Rule 144A of the Securities Act
of 1933. Such securities may be resold normally to qualified institutional
buyers in a transaction exempt from registration. At March 31, 1999, the
value of these securities amounted to $2,070,000 or 0.04% of total net
assets.
(a) At March 31, 1999, the net unrealized gain on investments based on cost for
federal income tax purposes of $4,637,927,565 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $1,489,107,201
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value (460,854,069)
--------------
Net unrealized gain $1,028,253,132
==============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for
the six months ended March 31, 1999 aggregated $545,833,421 and $639,028,021,
respectively.
16 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
BALANCE SHEET 3/31/99
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (including temporary cash
investments of $68,290,000) (cost $4,632,762,056) $5,666,180,697
Cash 309
Receivables -
Investment securities sold 7,380,000
Fund shares sold 2,510,366
Dividends, interest and foreign taxes withheld 10,832,088
Other 103,176
--------------
Total assets $5,687,006,636
--------------
LIABILITIES:
Payables -
Investment securities purchased $ 2,724,820
Fund shares repurchased 11,449,275
Due to affiliates 4,646,670
Accrued expenses 646,506
--------------
Total liabilities $ 19,467,271
--------------
NET ASSETS:
Paid-in capital $4,545,335,902
Accumulated undistributed net investment income 31,712,087
Accumulated undistributed net realized gain on investments and
foreign currency transactions 57,072,751
Net unrealized gain on investments 1,033,418,641
Net unrealized loss on foreign currency transactions and other assets
and liabilities denominated in foreign currencies (16)
--------------
Total net assets $5,667,539,365
==============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $5,640,144,310/279,914,857 shares) $ 20.15
==============
Class B (based on $23,406,063/1,185,398 shares) $ 19.75
==============
Class C (based on $3,988,992/201,776 shares) $ 19.77
==============
MAXIMUM OFFERING PRICE:
Class A $ 21.38
==============
</TABLE>
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
Pioneer II
STATEMENT OF OPERATIONS
For the Six Months Ended 3/31/99
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $917,414) $ 53,777,781
Interest 4,918,961
------------
Total investment income $ 58,696,742
------------
EXPENSES:
Management fees
Basic fee $ 17,809,373
Performance adjustment (2,910,409)
Transfer agent fees
Class A 5,655,791
Class B 66,580
Class C 16,850
Distribution fees
Class A 6,027,382
Class B 135,922
Class C 25,110
Administrative fees 1,395,772
Custodian fees 122,620
Registration fees 400,728
Professional fees 174,952
Printing 167,712
Fees and expenses of nonaffiliated trustees 53,458
Miscellaneous 37,166
------------
Total expenses $ 29,179,007
Less fees paid indirectly (390,960)
------------
Net expenses $ 28,788,047
------------
Net investment income $ 29,908,695
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Investments (including $4,819,260 from affiliated
companies) $ 64,449,160
Foreign currency transactions and other assets
and liabilities denominated in foreign currencies 8,036 $ 64,457,196
------------ ------------
Change in net unrealized gain from:
Investments $531,658,680
Foreign currency transactions and other assets
and liabilities denominated in foreign currencies (6,661) $531,652,019
------------ ------------
Net gain on investments and foreign currency
transactions $596,109,215
------------
Net increase in net assets resulting from operations $626,017,910
============
</TABLE>
18 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended 3/31/99 and the Year Ended 9/30/98
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
FROM OPERATIONS: 3/31/99 9/30/98
<S> <C> <C>
Net investment income $ 29,908,695 $ 52,687,726
Net realized gain on investments and foreign currency
transactions 64,457,196 178,376,750
Change in net unrealized gain on investments and
foreign currency transactions 531,652,019 (1,990,795,373)
-------------- ---------------
Net increase (decrease) in net assets resulting
from operations $ 626,017,910 $(1,759,730,897)
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ($0.09 and $0.16 per share, respectively) $ (25,346,193) $ (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) (44,442,920) (904,693,302)
Class B ($0.15 and $3.34 per share, respectively) (229,777) (2,365,132)
Class C ($0.15 and $3.34 per share, respectively) (45,439) (403,479)
-------------- ---------------
Total distributions to shareholders $ (70,064,329) $ (952,782,775)
-------------- ---------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 303,576,924 $ 751,999,994
Reinvestment of distributions 65,326,170 899,054,779
Cost of shares repurchased (778,257,763) (969,188,428)
-------------- ---------------
Net increase (decrease) in net assets resulting
from fund share transactions $ (409,354,669) $ 681,866,345
-------------- ---------------
Net increase (decrease) in net assets $ 146,598,912 $(2,030,647,327)
NET ASSETS:
Beginning of period 5,520,940,453 7,551,587,780
-------------- ---------------
End of period (including accumulated undistributed net
investment income of $31,712,087 and $27,149,585,
respectively) $5,667,539,365 $ 5,520,940,453
============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements. 19
<PAGE>
Pioneer II
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
CLASS A '99 Shares '99 Amount '98 Shares '98 Amount
<S> <C> <C> <C> <C>
Shares sold 14,355,448 $ 288,080,581 30,569,567 $729,551,456
Reinvestment of distributions 3,246,866 65,067,192 39,778,758 896,463,906
Less shares repurchased (37,689,723) (763,058,129) (40,837,229) (961,622,337)
----------- ------------- ----------- ------------
Net increase (decrease) (20,087,409) $(409,910,356) 29,511,096 $664,393,025
=========== ============= =========== ============
CLASS B
Shares sold 577,824 $ 11,463,587 768,581 $ 18,334,775
Reinvestment of distributions 11,167 219,982 103,776 2,303,825
Less shares repurchased (576,265) (11,458,892) (256,120) (5,827,965)
----------- ------------- ----------- ------------
Net increase 12,726 $ 224,677 616,237 $ 14,810,635
=========== ============= =========== ============
CLASS C
Shares sold 201,837 $ 4,032,756 171,838 $ 4,113,763
Reinvestment of distributions 1,976 38,996 12,930 287,048
Less shares repurchased (189,420) (3,740,742) (79,658) (1,738,126)
----------- ------------- ----------- ------------
Net increase 14,393 $ 331,010 105,110 $ 2,662,685
=========== ============= =========== ============
</TABLE>
20 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
FINANCIAL HIGHLIGHTS 3/31/99
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
3/31/99 9/30/98
<S> <C> <C>
CLASS A
Net asset value, beginning of period $ 18.32 $ 27.85
---------- ----------
Increase (decrease) from investment operations:
Net investment income $ 0.11 $ 0.17
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 1.96 (6.20)
---------- ----------
Net increase (decrease) from investment operations $ 2.07 $ (6.03)
Distributions to shareholders:
Net investment income (0.09) (0.16)
Net realized gain (0.15) (3.34)
---------- ----------
Net increase (decrease) in net asset value $ 1.83 $ (9.53)
---------- ----------
Net asset value, end of period $ 20.15 $ 18.32
========== ==========
Total return* 11.28% (23.97)%
Ratio of net expenses to average net assets 0.97%**+ 0.90%+
Ratio of net investment income to average net assets 1.00%**+ 0.74%+
Portfolio turnover rate 19%** 50%
Net assets, end of period (in thousands) $5,640,144 $5,496,480
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.96%** 0.90%
Net investment income 1.01%** 0.74%
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
9/30/97 9/30/96 9/30/95 9/30/94
<S> <C> <C> <C> <C>
CLASS A
Net asset value, beginning of period $ 20.94 $ 20.66 $ 19.38 $ 20.55
---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income $ 0.16 $ 0.23 $ 0.35 $ 0.36
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 8.83 2.10 3.04 1.05
---------- ---------- ---------- ----------
Net increase (decrease) from investment operations $ 8.99 $ 2.33 $ 3.39 $ 1.41
Distributions to shareholders:
Net investment income (0.15) (0.32) (0.30) (0.33)
Net realized gain (1.93) (1.73) (1.81) (2.25)
---------- ---------- ---------- ----------
Net increase (decrease) in net asset value $ 6.91 $ 0.28 $ 1.28 $ (1.17)
---------- ---------- ---------- ----------
Net asset value, end of period $ 27.85 $ 20.94 $ 20.66 $ 19.38
========== ========== ========== ==========
Total return* 45.95% 12.18% 19.92% 7.37%
Ratio of net expenses to average net assets 0.96%+ 0.92%+ 0.93%+ 0.90%++
Ratio of net investment income to average net assets 0.68%+ 1.13%+ 1.85%+ 1.59%++
Portfolio turnover rate 47% 66% 63% 68%
Net assets, end of period (in thousands) $7,534,010 $5,431,797 $5,114,963 $4,509,225
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.95% 0.90% 0.91% 0.90%
Net investment income 0.69% 1.15% 1.87% 1.59%
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
++ Ratios for 1994 have been restated to confirm with certain provisions of SEC
Release No. 33-7197: Payment for Investment Company Services with Brokerage
Commissions.
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Pioneer II
FINANCIAL HIGHLIGHTS 3/31/99
<TABLE>
<CAPTION>
Six Months
Ended Year Ended Year Ended 7/1/96 to
3/31/99 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 $ (0.01) $ (0.07) $ (0.07) $(0.01)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.93 (6.11) 8.76 0.35
------- ------- ------- ------
Net increase (decrease) from
investment operations $ 1.92 $ (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 $ 1.77 $ (9.54) $ 6.63 $ 0.34
------- ------- ------- ------
Net asset value, end of period $ 19.75 $ 17.98 $ 27.52 $20.89
======= ======= ======= ======
Total return* 10.68% (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 (0.11)%**+ (0.31)%+ (0.32)%+ (0.25)%**+
Portfolio turnover rate 19%** 50% 47% 66%
Net assets, end of period (in thousands) $23,406 $21,084 $15,311 $ 864
Ratios assuming reduction for fees paid
indirectly:
Net expenses 2.05%** 1.96% 1.90% 2.02%**
Net investment loss (0.10)%** (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.
22 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
FINANCIAL HIGHLIGHTS 3/31/99
<TABLE>
<CAPTION>
Six Months
Ended Year Ended Year Ended 7/1/96 to
3/31/99 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 $(0.03) $(0.06) $(0.08) $(0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 1.93 (6.07) 8.77 0.34
------ ------ ------ ------
Net increase (decrease) from
investment operations $ 1.90 $(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 $ 1.75 $(9.53) $ 6.67 $ 0.33
------ ------ ------ ------
Net asset value, end of period $19.77 $18.02 $27.55 $20.88
====== ====== ====== ======
Total return* 10.55% (24.56)% 44.51% 1.61%
Ratio of net expenses to average net assets 2.24%* *+ 1.93%+ 1.99%+ 2.02%* *+
Ratio of net investment loss to average net
assets (0.31)%**+ (0.28)%+ (0.39)%+ (0.15)%**+
Portfolio turnover rate 19%** 50% 47% 66%
Net assets, end of period (in thousands) $3,989 $3,377 $2,267 $ 214
Ratios assuming reduction for fees paid
indirectly:
Net expenses 2.21%* * 1.93% 1.95% 2.01%* *
Net investment loss (0.28)%** (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. 23
<PAGE>
Pioneer II
NOTES TO FINANCIAL STATEMENTS 3/31/99
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
24
<PAGE>
Pioneer II
data in the exercise of reasonable diligence. Interest income is recorded on
the accrual basis. Temporary cash investments are valued at amortized cost.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes. It
is the Fund's practice to first select for sale those securities that have
the highest cost and also qualify for long-term capital gain or loss
treatment for tax purposes.
Settlements from litigation and class action suits are recognized when the
Fund acquires an enforceable right to such awards. Included in net realized
gain from investments is $323,866 of class action settlements received by the
Fund during the six months ended March 31, 1999.
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.
25
<PAGE>
Pioneer II
NOTES TO FINANCIAL STATEMENTS 3/31/99 (continued)
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 $963,566 in
underwriting commissions on the sale of fund shares during the six months
ended March 31, 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 - 0.10% based on
the Fund's investment performance as compared with the Lipper Growth & Income
Funds Index. For the six months ended March 31, 1999, the aggregate performance
adjustment resulted in a reduction to the basic fee of $2,910,409. The
management fee was equivalent to 0.50% of average daily net assets for the six
months ended March 31, 1999.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Fund. At March 31, 1999, $2,696,581
26
<PAGE>
Pioneer II
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 $980,296 in transfer agent fees payable to PSC at March 31,
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 $969,793 in distribution fees
payable to PFD at March 31, 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 year of
purchase. Class B shares that are redeemed within six years of purchase are
subject to a CDSC at declining rates beginning at 4.0%, based on the lower of
cost or market value of shares being redeemed. Redemptions of Class C shares
within one year of purchase are subject to a CDSC of 1.00%. Proceeds from the
CDSCs are paid to PFD. For the six months ended March 31, 1999, CDSCs in the
amount of $53,724 were paid to PFD.
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 six
months ended March 31, 1999, the Fund's expenses were reduced by $390,960 under
such arrangements.
27
<PAGE>
Pioneer II
NOTES TO FINANCIAL STATEMENTS 3/31/99 (continued)
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 six months ended March 31, 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 March 31, 1999:
<TABLE>
<CAPTION>
Affiliates Purchases Sales Income Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A.M. Castle & Co. $ - $ - $ 355,339 $ 10,990,445
Ambac Financial Group, Inc. - 19,874,501 1,112,060 280,945,800
Amcast Industrial Corp. - - 150,892 8,689,762
Arrow Electronics, Inc. - - - 75,000,000
Briggs & Stratton Corp. - - 950,446 80,808,394
Champion Enterprises, Inc. - - - 80,309,375
Clayton Homes, Inc. - 1,154,961 263,488 90,535,500
Dionex Corp. - 3,749,875 - 85,919,000
Donaldson Co., Inc. - - 586,800 88,020,000
Etec Systems, Inc. - 45,373 - 40,726,781
Halter Marine Group, Inc. - 869,766 90,000 15,939,206
Hawaiian Electric Industries, Inc. - 19,614,364 3,421,238 87,974,021
Lancaster Colony Corp. - - 1,124,235 99,775,856
Mississippi Chemical Corp. - - 436,000 20,437,500
Oakwood Homes Corp. - 3,053,548 79,324 52,962,187
Rouge Industries, Inc. - - 107,574 15,687,875
Trinity Industries, Inc. - - 1,342,184 115,960,750
------- ----------- ----------- --------------
$ - $48,362,388 $10,019,580 $1,250,682,452
======= =========== =========== ==============
</TABLE>
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<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 March 31, 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
March 31, 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 March 31, 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
May 5, 1999
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<PAGE>
Pioneer II
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
Trustees Officers
John F. Cogan, Jr. John F. Cogan, Jr., Chairman and
Mary K. Bush President
Richard H. Egdahl, M.D. Richard E. Dahlberg, Vice President
Margaret B.W. Graham David D. Tripple, Executive Vice President
John W. Kendrick John A. Boynton, Treasurer
Marguerite A. Piret Joseph P. Barri, Secretary
David D. Tripple
Stephen K. West
John Winthrop
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Public Accountants
Arthur Andersen LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneering Services Corporation
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<PAGE>
THE PIONEER FAMILY OF MUTUAL FUNDS
For information about any Pioneer mutual fund, please contact your investment
representative, or call Pioneer at 1-800-225-6292. Ask for a free fund
information kit, which includes a fund prospectus. Please read the prospectus
carefully before you invest or send money.
Growth Funds
United States
Pioneer Capital Growth Fund
Pioneer Growth Shares
Pioneer Micro-Cap Fund
Pioneer Mid-Cap Fund
Pioneer Small Company Fund
International/Global
Pioneer Emerging Markets Fund
Pioneer Europe Fund
Pioneer Gold Shares
Pioneer Indo-Asia Fund
Pioneer International Growth Fund
Pioneer World Equity Fund
Growth and Income Funds
Pioneer Fund
Pioneer II
Pioneer Balanced Fund
Pioneer Equity-Income Fund
Pioneer Real Estate Shares
Income Funds
Taxable
Pioneer America Income Trust
Pioneer Bond Fund
Pioneer Short-Term Income Trust
Pioneer Strategic Income Fund
Tax-Free
Pioneer Tax-Free Income Fund
Money Market Fund
Pioneer Cash Reserves Fund
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<PAGE>
PROGRAMS AND SERVICES FOR PIONEER SHAREOWNERS
Your investment representative can give you additional information on Pioneer's
programs and services. If you want to order literature on any of the following
items directly, simply call Pioneer at 1-800-225-6292.
FactFone(SM)
Our automated account information service, available to you 24 hours a day,
seven days a week. FactFone gives you a quick and easy way to check fund share
prices, yields, dividends and distributions, as well as information about your
own account. Simply call 1-800-225-4321. For specific account information, have
your 13-digit account number and four-digit personal identification number at
hand.
90-Day Reinstatement Privilege (for Class A Shares)
Enables you to reinvest all or a portion of the money you redeem from your
Pioneer account - without paying a sales charge - within 90 days of your
redemption. You have the choice of investing in any Pioneer fund, as long as
you meet its minimum investment requirement.
Investomatic Plan
An easy and convenient way for you to invest on a regular basis. All you need
to do is authorize a set amount of money to be moved out of your bank account
into the Pioneer fund of your choice. Investomatic also allows you to change
the dollar amount, frequency and investment date right over the phone. By
putting aside affordable amounts of money regularly, you can build a long-term
investment - without sacrificing your current standard of living.
Payroll Investment Program (PIP)
Lets you invest in a Pioneer fund directly through your paycheck. All that's
involved is for your employer to fill out an authorization form allowing
Pioneer to deduct from participating employees' paychecks. You specify the
dollar amount you want to invest into the Pioneer fund(s) of your choice.
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<PAGE>
Automatic Exchange Program
A simple way to move money from one Pioneer fund to another over a period of
time. Just invest a lump sum in one fund, and select the other Pioneer funds
you wish to invest in. You choose the amounts and dates for Pioneer to sell
shares of your original fund and use the proceeds to buy shares of the other
funds you have chosen. Over time, your investment will be shifted out of the
original fund. (Automatic Exchange is available for originating accounts with a
balance of $5,000 or more.)
Directed Dividends
Lets you invest cash dividends from one Pioneer fund to an account in another
Pioneer fund with no sales charge or fee. Simply fill out the applicable
information on a Pioneer Account Options Form. (This program is available for
dividend payments only; capital gains distributions are not eligible at this
time.)
Direct Deposit
Lets you move money into your bank account using electronic funds transfer
(EFT). EFT moves your money faster than you would receive a check, eliminates
unnecessary paper and mail, and avoids lost checks. Simply fill out a Pioneer
Direct Deposit Form, giving your instructions.
Systematic Withdrawal Plan (SWP)
Lets you establish automatic withdrawals from your account at set intervals.
You decide the frequency and the day of the month you want. Pioneer will send
the proceeds by check to the address you designate, or electronically to your
bank account. You also can authorize Pioneer to make the redemptions payable to
someone else. (SWPs are available only for accounts with a value of $10,000 or
more.)
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<PAGE>
RETIREMENT PLANS FROM PIONEER
Pioneer has a long history of helping people work toward their retirement
goals, offering plans suited to the individual investor and businesses of all
sizes. For more information on Pioneer retirement plans, contact your
investment professional, or call Pioneer at 1-800-622-0176.
Individual Retirement Account (IRA)
Traditional IRA
An IRA is a tax-favored account that allows anyone under age 701/2 with earned
income to contribute up to $2,000 annually. Spouses may contribute up to $2,000
annually into a separate IRA, for a total of $4,000 per year for a married
couple. Earnings are tax-deferred, and contributions may be tax-deductible.
Roth IRA
Contributions up to $2,000 a year per person in earned income, are not tax-
deductible, but earnings are tax-free for qualified withdrawals. You can
contribute beyond age 701/2, although there are income limits for contributions
at any age.
401(k) Plan
The traditional 401(k) plan allows employees to make pre-tax contributions
through payroll deduction, up to $10,000 per year or 25% of pay, whichever is
less. Employers may contribute.
SIMPLE (Savings Incentive Match PLan for Employees)
IRA Plan
Businesses with 100 or fewer eligible employees can establish either plan; both
resemble the traditional 401(k), but with less testing and lower administration
costs. Employees can make pre-tax contributions of up to $6,000 per year, and
an employer contribution is required.
Most retirement plan withdrawals must meet specific conditions to avoid
penalties.
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<PAGE>
403(b) Plan
Also known as a Tax-Sheltered Account (TSA), a 403(b) plan is available only to
employees of public schools, not-for-profit hospitals and other tax-exempt
organizations. A 403(b) plan lets employees set aside a portion of their
salary, before taxes, through payroll deduction.
Simplified Employee Pension Plan (SEP)
SEPs let self-employed people and small-business owners make tax-deductible
contributions of up to 15% of their income. Generally, employers must
contribute the same percentage of pay for themselves and any eligible
employees; contributions are made directly to employees' IRAs. SEPs are easy to
administer and can be an especially good choice for firms with few or no
employees.
Profit Sharing Plan
Profit sharing plans offer companies considerable flexibility, allowing them to
decide each year whether a contribution will be made and how much, up to 15% of
each participant's pay. These plans can include provisions for loans and
vesting schedules.
Age-Based Profit Sharing Plan
Like traditional profit sharing plans, employer contributions are flexible, but
age-based plans allocate contributions based on both age and salary. Age-based
plans are designed for employers who want to maximize their own contributions
while keeping contributions to employees affordable.
Money Purchase Pension Plan (MPP)
Money purchase plans are similar to profit-sharing plans, but allow for higher
annual contributions - up to 25% of pay. MPPs aren't as flexible as profit
sharing plans; a fixed percentage of pay must be contributed each year,
determined when the plan is established. Businesses often set up both MPPs and
profit sharing plans.
Most retirement plan withdrawals must meet specific conditions to avoid
penalties.
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This page for your notes.
36
<PAGE>
This page for your notes.
37
<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.
[Pioneer logo]
Pioneer Investment Management, Inc.
60 State Street 0599-6378
Boston, Massachusetts 02109 (C) Pioneer Funds Distributor, Inc.
www.pioneerfunds.com [recycle symbol] Printed on Recycled Paper
