Amundi Funds II - Pioneer U.S. Mid Cap Value
August 2004

Tension in Iraq, the presidential elections and record oil prices were the secular themes of August as US equity markets were mixed.

The Portfolio’s overweighted position in Telecommunications combined with good stock selection was significant. Avoidance of Quest Communications and investment in Century Tel were the main contributing factors to performance. Performance was also helped by stock selection in Energy and Materials. Exploration company, Transocean, and mining company, Phelps Dodge, also contributed to performance.

Performance was hurt by Financials. The Portfolio has significantly underweighted the sector due to concerns regarding rising interest rates. Returns were also brought down by an overweighted position in Information Technology, where stocks in general suffered price declines. UTStarcom and Cypress Semiconductor were both negative.

There were no major changes to the Portfolio in August. We expanded existing holdings such as Imation, Symbol Technologies and MeadWestvaco. We sold Jones Apparel. The Portfolio's most overweighted sectors were Industrials, Healthcare and Information Technology. Our most underweighted sectors were Financials, Utilities and Materials.

Company earnings continue to be strong generally but appear largely priced into today’s stock prices, making us only cautiously optimistic about the upside potential in the stockmarket. We strive to own companies that have strong fundamentals, clean balance sheets, solid management teams and that are trading below their fair valuations.