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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07379
Pioneer Real Estate Shares
(Exact name of registrant as specified in charter)
60 State Street, Boston, MA 02109
(Address of principal executive offices) (ZIP code)
Dorothy E. Bourassa, Pioneer Investment Management, Inc.,
60 State Street, Boston, MA 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 742-7825
Date of fiscal year end: December 31
Date of reporting period: January 1, 2005 through December 31, 2005
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO SHAREOWNERS.
PIONEER
-------
REAL
ESTATE
SHARES
Annual
Report
12/31/05
[LOGO] PIONEER
Investments(R)
Table of Contents
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Letter to Shareowners 1
Portfolio Summary 2
Prices and Distributions 3
Performance Update 4
Comparing Ongoing Fund Expenses 8
Portfolio Management Discussion 10
Schedule of Investments 14
Financial Statements 17
Notes to Financial Statements 25
Report of Independent Registered Public Accounting Firm 32
Factors Considered by the Independent Trustees in Approving
the Management Contract 33
Trustees, Officers and Service Providers 39
Pioneer Real Estate Shares
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LETTER TO SHAREOWNERS 12/31/05
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Dear Shareowner,
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As 2005 came to a close, U.S. investors looked back on a year of major
challenges, though without much change in the market indices. The war in Iraq
continued, oil prices soared, then dropped, while short-term interest rates
ratcheted steadily higher and intermediate and long-term rates stayed about the
same. Natural disasters also threatened economic expansion. Still, the economy
moved forward as corporate earnings grew. The hope of a growing economy was not
reflected by the small gains or losses in the major U.S. market indices. Among
capitalization ranges, midcap issues made the most headway. Bond prices held
firm and yields remained low, perhaps a sign that the Federal Reserve Board's
interest rate hikes would temper the inflationary pressures induced by a
growing economy.
Among the nagging issues facing the U.S. economy in 2006 is the potential
impact of high energy prices on consumer spending and corporate profits. Also
unknown at this time is whether the Federal Reserve Board will continue to
raise interest rates under its new chairman, Ben Bernanke, who stated his top
priority will be to maintain continuity.
Rising interest rates and improving business conditions made U.S. holdings more
attractive to foreign investors, helping to strengthen the dollar versus the
euro and other key currencies. Investors in many foreign markets enjoyed
stellar returns. Double-digit gains were widespread in Europe, Asia and Latin
America. Even the long-dormant Japanese economy began to stir, while emerging
markets, especially those rich in natural resources, fed global economic
growth.
The disparity of returns among countries and sectors underscores the importance
for investors to maintain a well-diversified portfolio. We believe this may be
a good time for investors to review their holdings with their advisor and
determine if they reflect the wide range of opportunities that exist across
many asset classes, as last year's results make clear.
Investing for income with Pioneer
Adding one or more of Pioneer's income-oriented funds to your investment
program may help improve your portfolio's overall balance. As a premier
provider of fixed-income investments, Pioneer offers you a broad selection of
actively managed bond funds to help meet a variety of investment needs. Pioneer
also offers income-oriented equity funds, each managed using a value-oriented,
total return investment philosophy that seeks enhanced return potential and
lower volatility through active diversification. Your financial advisor can
help you select among Pioneer's fixed-income choices.
Respectfully,
/s/ Osbert M. Hood
Osbert M. Hood
President
Pioneer Investment Management, Inc.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Before investing consider the fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
1
Pioneer Real Estate Shares
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PORTFOLIO SUMMARY 12/31/05
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Portfolio Diversification
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(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT.]
U.S. Common Stocks 85.5%
Temporary Cash Investments 14.5%
Sector Diversification
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(As a percentage of equity holdings)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT.]
Office 18.9%
Apartment 18.2%
Industrial 14.1%
Regional Mall 13.2%
Shopping Center 12.3%
Hotel 10.0%
Self Storage 4.3%
Diversified 4.1%
Cash & Cash Equivalents 2.9%
Triple-Net 1.3%
Health Care 0.4%
Manufactured Homes 0.3%
10 Largest Holdings
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(As a percentage of equity holdings)
1. Simon DeBartolo Group, Inc. 7.07%
2. ProLogis Trust 5.90
3. Boston Properties, Inc. 5.38
4. AvalonBay Communities, Inc. 5.05
5. Equity Residential Property Trust 4.34
6. Archstone Communities Trust 4.10
7. Starwood Hotels & Resorts 3.68
8. Liberty Property Trust 3.65
9. Brookfield Properties Corp. 3.64
10. Host Marriott Corp. 3.54
This list excludes temporary cash investments and derivative instruments.
Portfolio holdings will vary for other periods.
2
Pioneer Real Estate Shares
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PRICES AND DISTRIBUTIONS
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Net Asset Value Per Share
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Class 12/31/05 12/31/04
----- -------- --------
A $25.87 $24.52
B $25.64 $24.32
C $25.68 $24.35
Y $25.84 $24.49
Distributions Per Share
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1/1/05 - 12/31/05
-----------------
Net
Investment Short-Term Long-Term Non-taxable
Class Income Capital Gains Capital Gains Distributions
----- ---------- ------------- ------------- -------------
A $0.2400 $0.0653 $1.7798 0.1384
B $0.0521 $0.0653 $1.7798 0.0905
C $0.0721 $0.0653 $1.7798 0.0956
Y $0.3375 $0.0653 $1.7798 0.1635
3
Pioneer Real Estate Shares
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PERFORMANCE UPDATE 12/31/05 CLASS A SHARES
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Investment Returns
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The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Real Estate Shares at public offering price, compared
to that of the Wilshire Real Estate Securities Index.
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
DOCUMENT.]
Value of $10,000 Investment
Pioneer Real Wilshire Real
Estate Shares Estate Securities Index
12/95 $9,425 $10,000
$12,864 $13,687
12/97 $15,403 $16,397
$12,357 $13,540
12/99 $11,776 $13,108
$15,226 $17,137
12/01 $16,364 $18,928
$16,954 $19,417
12/03 $22,596 $26,615
$30,563 $35,879
12/05 $35,083 $40,924
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Average Annual Total Returns
(As of December 31, 2005)
Public
Net Asset Offering
Period Value (NAV) Price (POP)
10 Years 14.04% 13.37%
5 Years 18.17 16.77
1 Year 14.79 8.17
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Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
NAV results represent the percent change in net asset value per share. Returns
would have been lower had sales charges been reflected. POP returns reflect
deduction of maximum 5.75% sales charge. All results are historical and assume
the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
Index comparisons begin 10/31/93. The Wilshire Real Estate Securities Index is a
market-capitalization weighted measure of the performance of (equity and hybrid)
REITs and real estate operating companies, and its returns are calculated
monthly. 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.
4
Pioneer Real Estate Shares
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PERFORMANCE UPDATE 12/31/05 CLASS B SHARES
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Investment Returns
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The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Real Estate Shares, compared to that of the Wilshire
Real Estate Securities Index.
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
DOCUMENT.]
Value of $10,000 Investment
Pioneer Real Wilshire Real
Estate Shares Estate Securities Index
1/96 $10,000 $10,000
$13,482 $13,501
12/97 $16,023 $16,174
$12,760 $13,356
12/99 $12,065 $12,930
$15,504 $16,904
12/01 $16,499 $18,671
$16,968 $19,152
12/03 $22,448 $26,253
$30,124 $35,391
12/05 $34,256 $40,367
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Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class 13.22% 13.22%
1/31/1996
5 Years 17.18 17.18
1 Year 13.72 9.72
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Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
"If Held" results represent the percent change in net asset value per share.
Returns would have been lower had sales charges been reflected. "If redeemed"
returns reflect the deduction of applicable contingent deferred sales charge
(CDSC). Effective December 1, 2004, the period during which a CDSC is applied to
withdrawals was shortened to 5 years. The maximum CDSC for class B shares
continues to be 4%. For more complete information, please see the prospectus for
details. Note: Shares purchased prior to December 1, 2004 remain subject to the
CDSC in effect at the time you purchased those shares. For performance
information for shares purchased prior to December 1, 2004, please visit
www.pioneerfunds.com/bshares.
All results are historical and assume the reinvestment of dividends and capital
gains. Other share classes are available for which performance and expenses will
differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The Wilshire Real Estate Securities Index is a market capitalization-weighted
measure of the performance of (equity and hybrid) REITs and real estate
operating companies, and its returns are calculated monthly. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not reflect any
fees, expenses or sales charges. You cannot invest directly in an Index.
5
Pioneer Real Estate Shares
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PERFORMANCE UPDATE 12/31/05 CLASS C SHARES
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Investment Returns
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The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Real Estate Shares, compared to that of the Wilshire
Real Estate Securities Index.
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
DOCUMENT.]
Value of $10,000 Investment
Pioneer Real Wilshire Real
Estate Shares Estate Securities Index
1/96 $10,000 $10,000
$13,476 $13,501
12/97 $16,019 $16,174
$12,754 $13,356
12/99 $12,064 $12,930
$15,493 $16,904
12/01 $16,520 $18,671
$16,981 $19,152
12/03 $22,475 $26,253
$30,178 $35,391
12/05 $34,358 $40,367
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Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
Life-of-Class 13.25% 13.25%
1/31/1996
5 Years 17.27 17.27
1 Year 13.85 13.85
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Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class C shares held for less than one year are also subject to a 1% contingent
deferred sales charge (CDSC). The performance of Class C shares does not reflect
the 1% front-end sales charge in effect prior to February 1, 2004. If you paid a
1% sales charge, your returns would be lower than those shown above. "If Held"
results represent the percent change in net asset value per share. Returns would
have been lower had sales charges been reflected. All results are historical and
assume the reinvestment of dividends and capital gains. Other share classes are
available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
The Wilshire Real Estate Securities Index is a market capitalization-weighted
measure of the performance of (equity and hybrid) REITs and real estate
operating companies, and its returns are calculated monthly. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not reflect any
fees, expenses or sales charges. You cannot invest directly in an Index.
6
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS Y SHARES
- --------------------------------------------------------------------------------
Investment Returns
- --------------------------------------------------------------------------------
The mountain chart on the right shows the change in value of a $10,000
investment made in Pioneer Real Estate Shares, compared to that of the Wilshire
Real Estate Securities Index.
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
DOCUMENT.]
Value of $10,000 Investment
Pioneer Real Wilshire Real
Estate Shares Estate Securities Index
12/95 $10,000 $10,000
$13,645 $13,687
12/97 $16,338 $16,397
$13,209 $13,540
12/99 $12,668 $13,108
$16,468 $17,137
12/01 $17,785 $18,928
$18,534 $19,417
12/03 $24,965 $26,615
$33,808 $35,879
12/05 $39,002 $40,924
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Average Annual Total Returns
(As of December 31, 2005)
If If
Period Held Redeemed
10 Years 14.58% 14.58%
5 Years 18.82 18.82
1 Year 15.36 15.36
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Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Performance for periods prior to the inception of Class Y shares reflects the
NAV performance of the Fund's Class A shares. The performance does not reflect
differences in expenses, including the Rule 12b-1 fees applicable to Class A
shares. Since fees for Class A shares are generally higher than those of Class Y
shares, the performance shown for Y shares prior to their inception would have
been higher. Class A shares are used as a proxy through 4/9/98. Class Y shares
are not subject to sales charges and are available for limited groups of
eligible investors, including institutional investors. All results are
historical and assume the reinvestment of dividends, and capital gains. Other
share classes are available for which performance and expenses will differ.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers Fund performance would be lower. Waivers may
not be in effect for all funds. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The performance table and graph do not reflect the deduction of fees and taxes
that a shareowner would pay on Fund distributions or the redemption of Fund
shares.
Index comparisons begin 4/30/98. The Wilshire Real Estate Securities Index is a
market capitalization weighted measure of the performance of (equity and hybrid)
REITs and real estate operating companies, and its returns are calculated
monthly. Index returns assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees, expenses or sales charges. You cannot invest
directly in an Index.
7
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
COMPARING ONGOING FUND EXPENSES
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As a shareowner in the Fund, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Fund expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 at the beginning of the Fund's latest six-month period and held
throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Real Estate Shares
Based on actual returns from July 1, 2005 through December 31, 2005
Share Class A B C Y
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Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,077.54 $1,072.63 $1,073.15 $1,080.55
On 12/31/05
Expenses Paid During Period* $ 7.85 $ 12.64 $ 12.12 $ 5.24
* Expenses are equal to the Fund's annualized expense ratio of 1.50%, 2.42%,
2.32% and 1.00% for Class A, Class B, Class C and Class Y shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
8
Pioneer Real Estate Shares
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Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the
5% hypothetical examples that appear in the shareholder reports of the other
funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Real Estate Shares
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2005 through December 31, 2005
Share Class A B C R
- ----------------------------------------------------------------------------------------
Beginning Account Value $1,000.00 $1,000.00 $1,000.00 $1,000.00
On 7/1/05
Ending Account Value $1,017.64 $1,013.01 $1,013.51 $1,020.16
On 12/31/05
Expenses Paid During Period* $ 7.63 $ 12.28 $ 11.77 $ 5.09
* Expenses are equal to the Fund's annualized expense ratio of 1.50%, 2.42%,
2.32% and 1.00% for Class A, Class B, Class C and Class Y shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
9
Pioneer Real Estate Shares
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PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
- --------------------------------------------------------------------------------
Real estate stocks produced strong returns for 2005 - outperforming the broader
stock market for the sixth year in a row. While this achievement is gratifying,
the real estate market also experienced above-average volatility and
variability across the different property types comprising this asset class. As
Matthew Troxell of AEW Capital Management, L.P. the Sub-Advisor's Portfolio
Manager explains in the following interview, maintaining competitive relative
performance in 2006 will depend on astute stock picking.
Q: Real estate stocks have enjoyed strong performance, particularly in the
last three years, when the sector posted an average return of over 28%.
What factors are contributing to this performance?
A: Investor interest in the real estate market has grown in recent years as
this asset class has matured and its unique benefits have become more
widely understood. The sector is also gaining more visibility because a
number of real estate companies are listed in the widely followed Standard
& Poor's 500 Index. As the real estate investment trust (REIT) investment
market has grown in size, it has become more liquid - making it easier for
investors to buy and sell these securities. Yet, with a market
capitalization of $300 billion, the REIT market remains relatively small in
comparison with other sectors of the equity market.
Q: How did the Fund perform during fiscal 2005?
A: The Fund's Class A shares posted a total return of 14.79% at net asset
value for the 12 months ended December 31, 2005. The return surpassed the
14.06% return for the fund's benchmark, the Wilshire Real Estate Securities
Index, and the 11.75% average return for the 228 real estate funds tracked
by Lipper, Inc. for the same period. (Lipper Inc. is an independent firm
that measures mutual fund performance.) We attribute the outperformance to
successful stock selection, particularly the Fund's investments in
AvalonBay Communities in the apartment sector and Simon DeBartolo Group,
Inc. in the regional mall sector.
Call 1-800-225-6292 or visit www.pioneerfunds.com for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
The performance data quoted represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more or less than their
original cost.
10
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q: What contributed to the increased volatility in the real estate sector?
A: During 2005, the REIT market experienced greater price volatility than has
historically been the case. We think the volatility was due in large part
to the mixed signals by investors. On the one hand, we saw institutions and
private investors willing to pay more for real estate investments -
suggesting that they perceived these assets to be undervalued. On the other
hand, public investors were not big buyers of these equity assets because
they were thought to be overvalued and too expensive on a number of
traditional metrics, such as a historically low dividend yield spread
relative to 10-year Treasuries, or that real estate stocks were trading at
the high end of their historic price range.
Despite the seesaw effect of these two opposing views, many investors
believe that the fundamentals of the property types - with the possible
exception of the office sector - are improving and the underlying assets
are underpriced. Hence the 14% return for the benchmark.
Q: Could you comment on the underlying fundamentals of the various property
types that the Fund is invested in?
A: Certainly. Regional mall REITs were strong contributors to performance for
the fiscal year given their relative outperformance and considerable
weighting in the portfolio. Healthy consumer spending supported strong
operating results at the property level. The Fund holds mall REITs with
high-quality assets, representing some of the most recognized, high-end and
financially solid retailers.
The fundamentals are rapidly improving in the multi-family sector, which
contributed favorably to your Fund's results. The impact of these holdings
was magnified by the fact that the Fund holds a greater weighting in the
sector than the benchmark. Even as condominiums are attracting more buyers
in the relatively low interest rate environment, the apartment sector has
remained resilient due to strong economic growth and the resulting
improvement in employment. Should interest rates continue to rise, pinching
potential homeowners out of buying condominiums, presumably more people
would be willing to rent - boosting demand for apartments.
11
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05 (continued)
- --------------------------------------------------------------------------------
Perhaps the most surprising performance came from the lodging sector, which
experienced the best improvement in fundamentals of any property type
during 2005 in our opinion. Hotels saw strong room rate growth and
occupancy growth - two measures of profitability. However, despite the
improved profitability at the corporate level, the lodging sector as a
property type still lagged most sectors of the real estate market as well
as the benchmark. Despite this development, we think that the lodging
sector represents good investment value because prices do not reflect the
rapidly improving fundamentals. We think that investor fears of low
non-business travel demand and rising energy prices are overblown. We
believe prospects for the lodging sector are promising in the foreseeable
future.
We limited the Fund's exposure to the office sector during the year because
the fundamentals are improving more slowly than other property types. The
lag is due to the inability of office REITs to reprice as a result of their
longer lease terms, which typically run five to 10 years. While the longer
lease terms can provide protection in a declining market, office REITs do
not tend to respond as quickly to changing market conditions as other
property types with shorter lease terms. Despite our decision to
underweight this sector, the Fund's holdings in the office sector performed
better than the benchmark's investments in the same sector.
Q: After a multi-year rally, are you still optimistic about the performance of
real estate stocks looking ahead?
A: After six years of outperformance relative to the broader market, we are
cautiously upbeat in our outlook. While we do not expect real estate stocks
to repeat the dramatic returns of recent years, we would not be surprised
to see these investments earn competitive returns relative to the rest of
the equity markets given their underlying fundamentals.
There is nothing on the horizon to suggest that real estate stocks will
suffer the fate that technology stocks did in 2000. Real estate companies
have tangible assets that produce a generous cash flow. However,
performance is likely to be volatile, especially since we think the current
trend toward higher interest rates may contribute to uncertainty. Astute
stock picking will be as important as ever, as we assess the growth
prospects and price valuations of the holdings in your portfolio relative
to the rest of the real estate market.
12
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The portfolio invests in REIT securities, the value of which can fall for a
variety of reasons, such as declines in rental income, fluctuating interest
rates, poor property management, environmental liabilities, uninsured
damage, increased competition, or changes in real estate tax laws. At
times, the fund's investments may represent industries or industry sectors
that are interrelated or have common risks, making it more susceptible to
any economic, political, or regulatory developments or other risks
affecting those industries and sectors.
Any information in this shareholder report regarding market or economic
trends or the factors influencing the Fund's historical or future
performance are statements of the opinion of Fund management as of the date
of this report. These opinions should not be relied upon for any other
purposes. Past performance is no guarantee of future results, and there is
no guarantee that market forecasts discussed will be realized.
13
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 97.6%
Hotels, Restaurants & Leisure - 5.7%
Hotels, Resorts & Cruise Lines - 5.7%
160,000 Hilton Hotels Corp. $ 3,857,600
105,000 Starwood Hotels & Resorts 6,705,300
------------
$ 10,562,900
------------
Total Hotels, Restaurants & Leisure $ 10,562,900
------------
Real Estate - 91.9%
Real Estate Management & Development - 3.5%
225,000 Brookfield Properties Corp. $ 6,619,500
------------
Real Estate Investment Trust - 88.4%
85,000 AMB Property Corp. (b) $ 4,179,450
57,000 Apartment Investment & Management Co. 2,158,590
178,000 Archstone Communities Trust 7,456,420
15,000 Arden Realty Group, Inc. 672,450
103,000 AvalonBay Communities, Inc. 9,192,750
58,300 BioMed Property Trust, Inc. 1,422,520
132,000 Boston Properties, Inc. 9,785,160
69,000 Brandywine Realty Trust 1,925,790
86,100 Camden Property Trust 4,986,912
26,300 Carramerica Realty Corp. 910,769
41,600 Corporate Office Properties 1,478,464
128,000 Developers Diversifies Realty Corp. 6,018,560
62,000 Duke Realty Investments, Inc. 2,070,800
14,000 Equity Lifestyle Properties, Inc. 623,000
84,000 Equity Office Properties Trust 2,547,720
202,000 Equity Residential Property Trust 7,902,240
41,100 Extra Space Storage, Inc. 632,940
68,000 Federal Realty Investment Trust 4,124,200
29,500 First Potomac Realty Trust 784,700
120,000 General Growth Properties, Inc. (b) 5,638,800
24,000 Healthcare Realty Trust, Inc. 798,480
101,000 Highwoods Properties, Inc. 2,873,450
23,000 Hospitality Properties Trust 922,300
340,000 Host Marriott Corp. (b) 6,443,000
50,000 iStar Financial, Inc. 1,782,500
14 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Real Estate Investment Trust (continued)
30,000 Kilroy Realty Corp. $ 1,857,000
124,000 Kimco Realty Corp. (b) 3,977,920
66,600 Kite Realty Group Trust 1,030,302
155,000 Liberty Property Trust 6,641,750
22,500 Mills Corp. 943,650
54,200 Pan Pacific Retail Properties, Inc. 3,625,438
85,000 Prentiss Properties Trust 3,457,800
230,000 ProLogis Trust 10,745,600
40,600 PS Business Parks, Inc. 1,997,520
86,000 Public Storage, Inc. 5,823,920
73,000 Regency Centers Corp. 4,303,350
29,000 Shurgard Storage Centers, Inc. 1,644,590
168,000 Simon DeBartolo Group, Inc. (b) 12,873,840
51,400 Spirit Finance Corp. 583,390
38,000 Strategic Hotel Capital, Inc. 782,040
120,000 Taubman Centers, Inc. 4,170,000
16,700 The Macerich Co. 1,121,238
143,000 Trizec Properties Inc. 3,277,560
100,000 United Dominion Realty Trust 2,344,000
75,000 Vornado Realty Trust 6,260,250
------------
$164,793,123
------------
Total Real Estate $171,412,623
------------
TOTAL COMMON STOCKS
(Cost $118,495,552) $181,975,523
------------
The accompanying notes are an integral part of these financial statements. 15
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
TEMPORARY CASH INVESTMENTS - 16.5%
Repurchase Agreement - 1.6%
$3,000,000 UBS Warburg, Inc. 3.25%, dated 12/30/05, with
a repurchase price of $3,000,000 plus accrued
interest on 1/3/06 collateralized by $4,126,000
U.S. Treasury Note, 3.875%, 5/15/09 $ 3,000,000
------------
Security Lending Collateral - 14.9%
Security Lending Collateral Investment
Fund, 4.18% $ 27,795,068
------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $30,795,068) $ 30,795,068
------------
TOTAL INVESTMENTS IN SECURITIES - 114.1%
(Cost $149,290,620) (a) $212,770,591
------------
OTHER ASSETS AND LIABILITIES - (14.1)% $(26,246,832)
------------
TOTAL NET ASSETS - 100.0% $186,523,759
============
(a) At December 31, 2005, the net unrealized gain on investments based on cost
for federal income tax purposes of $150,165,609 was as follows:
Aggregate gross unrealized gain for all investments in which there
is an excess of value over tax cost $62,964,179
Aggregate gross unrealized loss for all investments in which there
is an excess of tax cost over value (359,197)
-----------
Net unrealized gain $62,604,982
===========
(b) At December 31, 2005, the following securities were out on loan:
Shares Security Value
84,850 AMB Property Corp. $ 4,172,075
110,350 General Growth Properties, Inc. 5,185,347
145,840 Host Marriott Corp. 2,763,668
79,450 Kimco Realty Corp. 2,548,756
161,875 Simon Property Group, Inc. 12,404,481
-----------
Total $27,074,327
===========
Purchases and sales of securities (excluding temporary cash investments) for
the year ended 12/31/05 aggregated $42,803,276 and $39,397,469 respectively.
16 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/05
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of
$27,074,327) (cost $149,290,620) $212,770,591
Cash 1,164,353
Receivables -
Investment securities sold 471,270
Fund shares sold 202,754
Dividends, interest and foreign taxes withheld 918,734
------------
Total assets $215,527,702
------------
LIABILITIES:
Payables -
Investment securities purchased $ 377,130
Fund shares repurchased 641,889
Upon return of securities loaned 27,795,068
Due to affiliates 44,594
Accrued expenses 145,262
------------
Total liabilities $ 29,003,943
------------
NET ASSETS:
Paid-in capital $123,527,027
Undistributed net investment income 391,750
Accumulated net realized loss on investments (874,989)
Net unrealized gain on investments 63,479,971
------------
Total net assets $186,523,759
============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class A (based on $110,216,630/4,260,562 shares) $ 25.87
============
Class B (based on $29,992,387/1,169,695 shares) $ 25.64
============
Class C (based on $19,824,375/772,075 shares) $ 25.68
============
Class Y (based on $26,490,367/1,025,173 shares) $ 25.84
============
MAXIMUM OFFERING PRICE:
Class A ($25.87 [divided by] 94.25% ) $ 27.45
============
The accompanying notes are an integral part of these financial statements. 17
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/05
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $24,595) $4,340,766
Interest 99,273
Income from securities loaned, net 16,033
----------
Total investment income $ 4,456,072
-----------
EXPENSES:
Management fees $1,351,514
Transfer agent fees and expenses
Class A 270,773
Class B 139,382
Class C 66,548
Class Y 564
Distribution fees
Class A 250,274
Class B 321,864
Class C 201,819
Administrative reimbursements 32,206
Custodian fees 21,270
Registration fees 154,763
Professional fees 61,133
Printing expense 35,467
Fees and expenses of nonaffiliated trustees 8,979
Miscellaneous 8,295
----------
Total expenses $ 2,924,851
Less fees paid indirectly (6,733)
-----------
Net expenses $ 2,918,118
-----------
Net investment income $ 1,537,954
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $12,370,248
Change in net unrealized gain on investments 10,168,193
-----------
Net gain on investments $22,538,441
-----------
Net increase in net assets resulting from operations $24,076,395
===========
18 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/05 and 12/31/04
Year Ended Year Ended
12/31/05 12/31/04
FROM OPERATIONS:
Net investment income $ 1,537,954 $ 1,975,620
Net realized gain on investments 12,370,248 11,634,942
Change in net unrealized gain on investments 10,168,193 26,245,811
------------ ------------
Net increase in net assets resulting from
operations $ 24,076,395 $ 39,856,373
------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class A ($0.24 and $0.40 per share, respectively) $ (975,314) $ (1,319,119)
Class B ($0.05 and $0.22 per share, respectively) (63,873) (417,097)
Class C ($0.07 and $0.23 per share, respectively) (55,449) (195,750)
Class Y ($0.34 and $0.52 per share, respectively) (221,077) (144,389)
Net realized gain:
Class A ($1.84 and $1.34 per share, respectively) $ (7,449,006) $ (4,710,452)
Class B ($1.84 and $1.34 per share, respectively) (2,041,497) (2,109,461)
Class C ($1.84 and $1.34 per share, respectively) (1,370,463) (1,075,722)
Class Y ($1.84 and $1.34 per share, respectively) (1,643,093) (425,102)
Tax return of capital:
Class A ($0.14 and $0.00 per share, respectively) $ (563,975) -
Class B ($0.09 and $0.00 per share, respectively) $ (112,846) -
Class C ($0.10 and $0.00 per share, respectively) $ (75,822) -
Class Y ($0.16 and $0.00 per share, respectively) $ (106,067) -
------------ ------------
Total distributions to shareowners $(14,678,482) $(10,397,092)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 88,328,211 $ 61,331,263
Reinvestment of distributions 13,169,180 9,054,579
Cost of shares repurchased (88,250,156) (54,417,178)
------------ ------------
Net increase in net assets resulting from
Fund share transactions $ 13,247,235 $ 15,968,664
------------ ------------
Net increase in net assets $ 22,645,148 $ 45,427,945
NET ASSETS:
Beginning of year 163,878,611 118,450,666
------------ ------------
End of year (including undistributed net investment
income of $391,750 and $445,847, respectively) $186,523,759 $163,878,611
============ ============
The accompanying notes are an integral part of these financial statements. 19
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- --------------------------------------------------------------------------------
'05 Shares '05 Amount '04 Shares '04 Amount
CLASS A
Shares sold 1,869,739 $ 46,078,540 1,657,338 $35,581,231
Reinvestment of distributions 315,973 8,167,334 241,199 5,471,749
Less shares repurchased (1,766,214) (44,031,328) (1,200,397) (24,862,587)
---------- ------------ ---------- -----------
Net increase 419,498 $ 10,214,546 698,140 $16,190,393
========== ============ ========== ===========
CLASS B
Shares sold 643,409 $ 15,526,329 656,972 $13,894,429
Reinvestment of distributions 76,949 1,972,638 94,700 2,127,268
Less shares repurchased (1,188,498) (28,932,188) (1,038,302) (21,196,977)
---------- ------------ ---------- -----------
Net decrease (468,140) $(11,433,221) (286,630) $(5,175,280)
========== ============ ========== ===========
CLASS C
Shares sold 391,180 $ 9,450,159 420,763 $ 8,861,166
Reinvestment of distributions 48,255 1,240,675 46,099 1,038,534
Less shares repurchased (516,443) (12,730,754) (373,849) (7,732,176)
---------- ------------ ---------- -----------
Net increase (decrease) (77,008) $ (2,039,920) 93,013 $ 2,167,524
========== ============ ========== ===========
CLASS Y
Shares sold 682,351 $ 17,273,183 131,276 $ 2,994,437
Reinvestment of distributions 68,990 1,788,533 18,292 417,028
Less shares repurchased (100,628) (2,555,886) (30,308) (625,438)
---------- ------------ ---------- -----------
Net increase 650,713 $ 16,505,830 119,260 $ 2,786,027
========== ============ ========== ===========
20 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
CLASS A
Net asset value, beginning of period $ 24.52 $ 19.55 $ 15.30 $ 15.38 $ 15.04
-------- ------- ------- ------- -------
Increase from investment operations:
Net investment income $ 0.28 $ 0.39 $ 0.65 $ 0.57 $ 0.38
Net realized and unrealized gain on investments 3.29 6.31 4.33 0.00(b) 0.70
-------- ------- ------- ------- -------
Net increase from investment operations $ 3.57 $ 6.70 $ 4.98 $ 0.57 $ 1.08
Distributions to shareowners:
Net investment income (0.24) (0.40) (0.73) (0.65) (0.74)
Net realized gain (1.84) (1.33) - - -
Tax return of capital (.14) - - - -
-------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 1.35 $ 4.97 $ 4.25 $ (0.08) $ 0.34
-------- ------- ------- ------- -------
Net asset value, end of period $ 25.87 $ 24.52 $ 19.55 $ 15.30 $ 15.38
======== ======= ======= ======= =======
Total return* 14.79% 35.26% 33.27% 3.58% 7.47%
Ratio of net expenses to average net assets+ 1.50% 1.56% 1.68% 1.67% 1.58%
Ratio of net investment income to average net assets+ 1.14% 1.85% 3.81% 3.70% 4.31%
Portfolio turnover rate 24% 34% 36% 39% 37%
Net assets, end of period (in thousands) $110,217 $94,198 $61,455 $44,904 $39,263
Ratios with reductions for fees paid indirectly:
Net expenses 1.50% 1.56% 1.68% 1.67% 1.58%
Net investment income 1.14% 1.85% 3.81% 3.70% 4.31%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 1.50% 1.56% 1.68% 1.67% 1.57%
Net investment income 1.14% 1.85% 3.81% 3.70% 4.32%
(a) Effective 5/31/04 AEW Management and Advisors, L.P. became sub-advisor to
the Fund.
(b) Amount rounds to less than one cent per share.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all 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 with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 21
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
CLASS B
Net asset value, beginning of period $ 24.32 $ 19.40 $ 15.17 $ 15.25 $ 14.94
------- ------- ------- ------- -------
Increase from investment operations:
Net investment income $ 0.06 $ 0.19 $ 0.51 $ 0.43 $ 0.54
Net realized and unrealized gain on investments 3.24 6.28 4.30 0.02 0.39
------- ------- ------- ------- -------
Net increase from investment operations $ 3.30 $ 6.47 $ 4.81 $ 0.45 $ 0.93
Distributions to shareowners:
Net investment income (0.05) (0.22) (0.58) (0.53) (0.62)
Net realized gain (1.84) (1.33) - - -
Tax return of capital (0.09) - - - -
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 1.32 $ 4.92 $ 4.23 $ (0.08) $ 0.31
------- ------- ------- ------- -------
Net asset value, end of period $ 25.64 $ 24.32 $ 19.40 $ 15.17 $ 15.25
======= ======= ======= ======= =======
Total return* 13.72% 34.20% 32.30% 2.84% 6.42%
Ratio of net expenses to average net assets+ 2.42% 2.37% 2.50% 2.40% 2.36%
Ratio of net investment income to average net assets+ 0.14% 0.96% 2.98% 2.90% 3.50%
Portfolio turnover rate 24% 34% 36% 39% 37%
Net assets, end of period (in thousands) $29,992 $39,833 $37,325 $28,121 $30,699
Ratios with reduction for fees paid indirectly:
Net expenses 2.42% 2.37% 2.50% 2.40% 2.36%
Net investment income 0.14% 0.96% 2.98% 2.90% 3.50%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 2.42% 2.37% 2.50% 2.40% 2.36%
Net investment income 0.14% 0.96% 2.98% 2.90% 3.50%
(a) Effective 5/31/04 AEW Management and Advisors, L.P. became sub-advisor to
the Fund.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all 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 with no reduction for fees paid indirectly.
22 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
CLASS C
Net asset value, beginning of period $ 24.35 $ 19.42 $ 15.20 $ 15.28 $ 14.96
------- ------- ------- ------- -------
Increase from investment operations:
Net investment income $ 0.08 $ 0.20 $ 0.52 $ 0.44 $ 0.55
Net realized and unrealized gain on investments 3.26 6.29 4.31 0.00(b) 0.41
------- ------- ------- ------- -------
Net increase from investment operations $ 3.34 $ 6.49 $ 4.83 $ 0.44 $ 0.96
Distributions to shareowners:
Net investment income (0.07) (0.23) (0.61) (0.52) (0.64)
Net realized gain (1.84) (1.33) - - -
Tax return of capital (0.10) - - - -
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 1.33 $ 4.93 $ 4.22 $ (0.08) $ 0.32
------- ------- ------- ------- -------
Net asset value, end of period $ 25.68 $ 24.35 $ 19.42 $ 15.20 $ 15.28
======= ======= ======= ======= =======
Total return* 13.85% 34.27% 32.35% 2.79% 6.63%
Ratio of net expenses to average net assets+ 2.32% 2.34% 2.39% 2.46% 2.28%
Ratio of net investment income to average net assets+ 0.27% 1.02% 3.20% 2.95% 3.57%
Portfolio turnover rate 24% 34% 36% 39% 37%
Net assets, end of period (in thousands) $19,824 $20,675 $14,686 $ 7,429 $ 6,136
Ratios with reduction for fees paid indirectly:
Net expenses 2.32% 2.34% 2.39% 2.46% 2.28%
Net investment income 0.27% 1.02% 3.20% 2.95% 3.57%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 2.32% 2.34% 2.39% 2.46% 2.27%
Net investment income 0.27% 1.02% 3.20% 2.95% 3.58%
(a) Effective 5/31/04 AEW Management and Advisors, L.P. became sub-advisor to
the Fund.
(b) Amount rounds to less than one cent per share.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all 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 with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 23
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/05 12/31/04(a) 12/31/03 12/31/02 12/31/01
CLASS Y
Net asset value, beginning of period $ 24.49 $ 19.53 $ 15.27 $ 15.35 $ 15.01
------- ------- ------- ------- -------
Increase from investment operations:
Net investment income $ 0.35 $ 0.50 $ 0.76 $ 0.66 $ 0.63
Net realized and unrealized gain on investments 3.34 6.31 4.33 0.00(b) 0.52
------- ------- ------- ------- -------
Net increase from investment operations $ 3.69 $ 6.81 $ 5.09 $ 0.66 $ 1.15
Distributions to shareowners:
Net investment income (0.34) (0.52) (0.83) (0.74) (0.81)
Net realized gain (1.84) (1.33) - - -
Tax return of capital (0.16) - - - -
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 1.35 $ 4.96 $ 4.26 $ (0.08) $ 0.34
------- ------- ------- ------- -------
Net asset value, end of period $ 25.84 $ 24.49 $ 19.53 $ 15.27 $ 15.35
======= ======= ======= ======= =======
Total return* 15.36% 35.97% 34.16% 4.21% 8.00%
Ratio of net expenses to average net assets+ 1.00% 1.01% 1.05% 1.10% 1.12%
Ratio of net investment income to average net assets+ 1.84% 2.47% 4.47% 4.39% 4.36%
Portfolio turnover rate 24% 34% 36% 39% 37%
Net assets, end of period (in thousands) $26,490 $ 9,172 $ 4,984 $ 3,671 $ 2,349
Ratios with reduction for fees paid indirectly:
Net expenses 1.00% 1.01% 1.05% 1.10% 1.12%
Net investment income 1.84% 2.47% 4.47% 4.39% 4.36%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 1.00% 1.01% 1.05% 1.10% 1.11%
Net investment income 1.84% 2.47% 4.47% 4.39% 4.37%
(a) Effective 5/31/04 AEW Management and Advisors, L.P. became sub-advisor to
the Fund.
(b) Amount rounds to less than one cent per share.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, and the complete redemption of
the investment at net asset value at each end of each period.
+ Ratio with no reduction for fees paid indirectly.
24 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Real Estate Shares (the Fund) is a Delaware statutory trust registered
under the Investment Company Act of 1940 as a non-diversified, open-end
management investment company. The investment objective of the Fund is to seek
long-term growth of capital. Current income is a secondary objective.
The Fund offers four classes of shares - Class A, Class B, Class C, and Class Y
shares. Each class of shares represents an interest in the same portfolio of
investments of the Fund and has 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
shareowners, respectively. There is no distribution plan for Class Y shares.
The Fund's financial statements have been prepared in conformity with U.S.
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 income, expenses and gains and losses on investments during the
reporting year. Actual results could differ from those estimates.
Information regarding the Fund's principal risks is contained in the Fund's
prospectus. Please refer to those documents when considering the Fund's risks.
Because the Fund may invest a substantial portion of its assets in Real Estate
Investment Trusts (REITs), the Fund may be subject to certain risks associated
with direct investments in REITs. REITs may be affected by changes in the value
of their underlying properties and by defaults of their borrowers or tenants.
REITs depend generally on their ability to generate cash flow to make
distributions to shareowners, and certain REITs have self-liquidation
provisions by which mortgages held may be paid in full and distributions of
capital returns may be made at any time. In addition, the performance of a REIT
may be affected by its failure to qualify for tax-free pass-through of income
under the Internal Revenue Code or its failure to maintain exemption from
registration under the Investment Company Act of 1940.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements, which are
25
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
consistent with those policies generally accepted in the investment company
industry.
A. Security Valuation
Security transactions are recorded on trade date. The net asset value of
the Fund is computed once daily, on each day the New York Stock Exchange
(NYSE) is open, as of the close of regular trading on the NYSE. 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
NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of such times. The Fund also may use
the fair value of a security, including a non-U.S. security, when the
closing market price on the principal exchange where the security is traded
no longer reflects the value of the security. At December 31, 2005 there
were no securities fair valued. 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
becomes aware of the ex-dividend 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.
B. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with
26
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
federal income tax rules. Therefore, the sources 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. A portion of the dividend income
recorded by the Fund is from distributions by publicly traded REITs, and
such distributions for tax purposes may also consist of capital gains and
return of capital. The actual return of capital and capital gains portions
of such distributions will be determined by formal notifications from the
REITs subsequent to the calendar year-end. Distributions received from the
REITs that are determined to be a return of capital, are recorded by the
Fund as a reduction of the cost basis of the securities held.
The tax character of distributions paid during the years ended December 31,
2005 and 2004 were as follows:
- --------------------------------------------------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income* $ 1,758,621 $ 3,660,098
Long-term capital gain 12,061,151 6,736,994
----------- -----------
13,819,772 $10,397,092
Return of capital 858,710 -
----------- -----------
Total $14,678,482 $10,397,092
=========== ===========
- --------------------------------------------------------------------------------
* Included in the Fund's distributions from 2004 ordinary income is
$360,268 in excess of investment company taxable income, which, in
accordance with applicable U.S. tax law, is taxable to shareowners as
ordinary income distributions.
The following shows the components of distributable earnings on a federal
income tax basis at December 31, 2005.
- --------------------------------------------------------------------------------
2005
- --------------------------------------------------------------------------------
Undistributed Ordinary
Income $ 391,750
Unrealized appreciation 62,604,982
-----------
Total $62,996,732
===========
- --------------------------------------------------------------------------------
27
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
The difference between book basis and tax-basis unrealized appreciation is
attributable to the tax deferral of losses on wash sales.
The Fund has reclassified $276,338 to decrease undistributed net investment
income, $168,140 to decrease accumulated net realized loss on investments
and $108,198 to increase paid in capital to reflect permanent book/tax
differences. The reclassification has no impact on the net asset value of
the Fund and is designed to present the Fund's capital accounts on a tax
basis.
C. Fund Shares
The Fund records sales and repurchases of its shares on trade date. Pioneer
Funds Distributor, Inc. (PFD), the principal underwriter for the Fund and a
wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito
Italiano). PFD earned $48,708 in underwriting commissions on the sale of
Class A shares during the year ended December 31, 2005.
D. 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. Class Y shares are not subject to a distribution plan (see
Note 4). Shareowners of each class share all expenses and fees paid to the
transfer agent, Pioneer Investment Management Shareholder Services, Inc.
(PIMSS), for its services, which are allocated based on the number of
accounts in each class and the ratable allocation of related out-of-pocket
expenses (see Note 3). Income, common expenses and realized and unrealized
gains and losses are calculated at the Fund level and allocated daily to
all classes of shares based on their respective percentage of adjusted net
assets at the beginning of the day.
Distributions to shareowners 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, Class C and Class Y can bear different
transfer agent and distribution fees.
28
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
E. Securities Lending
The Fund lends securities in its Portfolio to certain broker-dealers or
other institutional investors, with the Fund's custodian acting as the
lending agent. When entering into a loan, the Fund receives collateral,
which is maintained by the custodian and earns income in the form of
negotiated lenders' fees. The Fund also continues to receive interest or
payments in lieu of dividends on the securities loaned. Gain or loss on the
fair value of the loaned securities that may occur during the term of the
loan will be for the account of the Fund. The loans are secured by
collateral of at least 102%, at all times, of the fair value of the
securities loaned. The amount of the collateral will be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Fund has the right under the lending agreements to recover the securities
from the borrower on demand. The Fund invests cash collateral in the
Securities Lending Investment Fund, which is sponsored by Brown Brothers
Harriman & Co., the Fund's custodian.
F. Repurchase Agreements
With respect to repurchase agreements entered into by the Fund, the value
of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Fund's custodian, or subcustodians. The Fund's
investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
Fund's portfolio. Management fees are calculated daily at the annual rate of
0.80% of the Fund's average daily net assets. Effective May 31, 2004, AEW
Management and Advisors LP (AEW) became subadvisor to the Fund. PIM pays a
portion of the fee it receives from the Fund to AEW as compensation for
sub-advisory services to the Fund.
29
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/05 (continued)
- --------------------------------------------------------------------------------
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 December 31, 2005, $8,133 was payable to PIM
related to management fees, administrative costs and certain other services and
is included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Fund at
negotiated rates. Included in due to affiliates is $32,202 in transfer agent
fees payable to PIMSS at December 31, 2005.
4. Distribution Plans
The Fund adopted a Plan of Distribution with respect to Class A, Class B and
Class C 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 attributable to Class A shares in reimbursement of its actual
expenditures to finance activities primarily intended to result in the sale of
Class A shares. 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 $4,259 in distribution fees payable to PFD at December 31,
2005.
In addition, redemptions of each class of shares (except Class Y shares) may be
subject to a contingent deferred sales charge (CDSC). Effective February 1,
2004, a CDSC of 1.00% may be imposed on redemptions of certain net asset value
purchases of Class A shares within 18 months of purchase (12 months for shares
purchased prior to February 1, 2004). Class B shares subscribed on or after
December 1, 2004 that are redeemed within five 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. Shares purchased prior to December 1,
2004 remain subject to the CDSC in effect at the time those shares were
purchased. Redemptions of Class C shares within one year of purchase are
subject to a CDSC
30
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of 1.00%. Proceeds from the CDSC are paid to PFD. For the year ended December
31, 2005, CDSCs in the amount of $46,261 were paid to PFD.
5. Expense Offset Arrangements
The Fund has entered into certain expense offset arrangements with PIMSS
resulting in a reduction in the Fund's total expenses due to interest earned on
cash held by PIMSS. For the year ended December 31, 2005, the Fund's expenses
were reduced by $6,733 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 is payable
at the Federal Funds Rate plus 1/2% on an annualized basis. 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
December 31, 2005, the Fund had no borrowings under this agreement.
31
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareowners of
Pioneer Real Estate Shares:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Real Estate Shares (the "Fund") as of
December 31, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended. 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
audit. The financial highlights for the year ended December 31, 2001 were
audited by other auditors who have ceased operations and whose report, dated
February 15, 2002, expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2005, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. 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 Real Estate Shares at December 31, 2005, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and financial highlights for each of the four
years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 10, 2006
32
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that both the Board of Trustees and
a majority of the Independent Trustees (collectively "the Trustees") voting
separately annually approve the Fund's management contract (the "Management
Contract") between the Fund and Pioneer Investment Management, Inc., the Fund's
adviser (the "Investment Adviser"). The Investment Adviser has retained AEW
Management and Advisors, L.P. (the "Sub-adviser") to act as sub-adviser to the
Fund pursuant to a sub-advisory agreement between the Investment Adviser and
the Sub-adviser (the "Sub-advisory Agreement"). The Trustees have determined
that the terms of the Management Contract and the Sub-advisory Agreement are
fair and reasonable and that renewal of these contracts will enable the Fund to
receive quality investment advisory services at a cost deemed reasonable and is
in the best interests of the Fund and its shareowners. In making such
determinations, the Independent Trustees relied upon the assistance of counsel
to the Independent Trustees and counsel to the Fund.
Throughout the year, the Independent Trustees regularly met in executive
session separately from the Interested Trustees of the Fund and any officer of
the Investment Adviser, or its affiliates. While the Trustees, including the
Independent Trustees, act on all major matters relating to the Fund, a
significant portion of the activities of the Board of Trustees (including
certain of those described herein) is conducted through committees, the members
of which are comprised exclusively of Independent Trustees. Such committee
meetings are attended by officers of the Fund or the Investment Adviser to the
extent requested by the members of the committee.
In evaluating the Management Contract and Sub-advisory Agreement, the Trustees
conducted a review that was specifically focused upon the renewal of the
Management Contract and Sub-advisory Agreement, and relied upon their
knowledge, resulting from their meetings throughout the year, of the Investment
Adviser, its services and the Fund. Both in meetings specifically dedicated to
renewal of the Management Contract and at other meetings during the course of
the year, the Trustees, including the Independent Trustees, received materials
relating to the Investment Adviser's investment and management services under
the Management Contract. These materials included (i) information on the
investment performance of the Fund, a peer group of funds and an index, in each
case selected by the Independent Trustees for this purpose, (ii) sales and
redemption data in respect of the Fund, (iii) the general investment outlook in
the
33
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
markets in which the Fund invests, (iv) arrangements in respect of the
distribution of the Fund's shares, (v) the procedures employed to determine the
value of each of the Fund's assets, (vi) the Investment Adviser's management of
the relationships with the Fund's unaffiliated service providers, (vii) the
record of compliance with the Fund's investment policies and restrictions and
with the Fund's Code of Ethics and the structure and responsibilities of the
Investment Adviser's compliance department, (viii) the nature, cost and
character of non-investment management services provided by the Investment
Adviser and its affiliates, (ix) the disclosures included in the Fund's
prospectuses and reports to shareowners and (x) the investment and compliance
staff and operations of the Subadviser.
Specifically, in connection with the Independent Trustees' review of the
Management Contract and the Sub-advisory Agreement, the Independent Trustees
requested and the Investment Adviser provided additional information in order
to evaluate the quality of the Investment Adviser's and Sub-adviser's services
and the reasonableness of the fee under the Management Contract and the
Sub-advisory Agreement. Among other items, this information included data or
analyses of (1) investment performance for one, three, five and ten year
periods for the Fund and a peer group selected by the Independent Trustees for
this purpose, (2) management and other fees incurred by a peer group of funds
selected by the Independent Trustees for this purpose, (3) the advisory fees of
comparable portfolios of other clients of the Investment Adviser and the
Sub-adviser, (4) expense ratios for the Fund and a peer group of funds selected
by the Independent Trustees for this purpose, (5) the overall organization of
the Investment Adviser and the Sub-adviser, (6) the Investment Adviser's and
the Sub-adviser's financial results and condition, including, in the case of
the Investment Adviser, its and certain of its affiliates profitability from
services performed for the Fund, (7) transfer agency fees and administrative
reimbursements paid to the Investment Adviser or affiliates, (8) investment
management staffing, and (9) operating expenses paid to third parties. The
Trustees also reviewed information regarding the potential for each of the Fund
and the Investment Adviser to benefit from further economies of scale in the
management of the Fund in light of reasonable growth expectations for the Fund
and certain of the Fund's expenses that are not incurred as fees based on a
percentage of net assets.
34
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following summarizes factors considered by the Trustees in connection with
reviewing the information described above and their renewal of the Fund's
Management Contract. The Trustees did not identify any single factor as
all-important or controlling, and the summary does not detail all the matters
that were considered.
A. Ancillary Benefits to Shareowners. The Trustees considered the benefits to
shareowners of investing in a Fund that is part of a large number of
investment companies offering a variety of investment disciplines and
providing for a large variety of Fund and shareowner services.
B. Compliance and Investment Performance. The Trustees determined that the
Investment Adviser had policies and systems reasonably designed to achieve
compliance with the Fund's investment objectives and regulatory
requirements. The Trustees also reviewed the Fund's investment performance
based upon total return, as well as the Fund's performance compared to both
the performance of a peer group and an index, in each case selected by the
Independent Trustees for this purpose. The Fund's performance, based upon
total return, was in the second quintile of the peer group for the 12
months ended June 30, 2005, the third quintile of the peer group for the
three years ended June 30, 2005, the fourth quintile for the five years
ended June 30, 2005 and the fifth quintile for the ten years ended June 30,
2005. The Sub-adviser was appointed in May 2004. (In all quintile rankings
referred to throughout this discussion first quintile is most favorable to
the Fund's shareowners. Thus, highest relative performance would be first
quintile and lowest relative expenses also would be first quintile.) The
Trustees also considered the yield (gross of expenses) on the Fund's Class
A shares relative to the yield (at June 30, 2005) on the Wilshire Real
Estate Securities Index. The Trustees also considered the activities of the
Investment Adviser in monitoring the investment and compliance operations
of the Sub-adviser. The Trustees concluded that the performance of the Fund
since the appointment of the Sub-adviser supported the continuation of the
Management Contract and the Sub-advisory Agreement.
C. The Investment Adviser's Personnel and Methods. The Trustees reviewed the
background of members of the team responsible for the daily management of
the Fund and the Fund's investment
35
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
objective and discipline. The Independent Trustees also have had
discussions with senior management of the Investment Adviser responsible
for investment operations. Among other things, the Trustees considered the
number, education and experience of the Sub-adviser's investment staff. The
Trustees concluded that the Investment Adviser and the Sub-adviser have the
quality and depth of personnel and the well-developed methods essential to
performing their duties under the Management Contract and the Sub-advisory
Agreement.
D. Nature and Quality of Other Services. The Trustees considered the nature,
quality, cost and extent of other services provided to shareowners of the
Fund, including administrative and shareowner services performed by the
Investment Adviser under the Management Contract. The Trustees also
considered the reasonableness of the arrangements for reimbursement of the
Investment Adviser's out-of-pocket costs and expenses, including overhead,
for certain administrative services that the Investment Adviser is not
required to provide under the Management Contract. The Trustees also
considered the nature and extent of the other services provided by the
Investment Adviser's affiliates under other contracts and its supervision
of third party service providers. Based on these considerations, the
Trustees concluded that the nature, quality, cost and extent of such
services are satisfactory and reliable and serve the shareowners of the
Fund well.
E. Management Fee and Expenses. The Trustees considered the Investment
Adviser's fee under the Management Contract relative to the management fees
charged by a peer group of funds selected by the Independent Trustees for
this purpose using data provided by an independent third party. The Fund's
management fee for the 12 months ended June 30, 2005 was in the third
quintile relative to the management fees paid by the other funds in that
peer group for the comparable period. The Trustees determined that the fee
under the Management Contract was reasonable and fair in light of both the
overall nature and quality of services provided by the Investment Adviser
and the fees charged by the funds in the peer group. The Trustees also
evaluated the fee under the Sub-advisory Agreement and the portion of the
fee under the Management Contract retained by the Investment Adviser and
determined that they were consistent with other sub-advised funds. The
Trustees also considered the Fund's expense
36
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ratio and expense ratios of a peer group of funds selected by the
Independent Trustees for this purpose. The Fund's expense ratio for the 12
months ended June 30, 2005 was in the fourth quintile of the applicable
peer group for the most recent fiscal year of the peer group for the
comparable period. The Trustees concluded that the Fund's overall expense
ratio was reasonable compared to that of comparable funds.
F. Profitability. The Trustees considered the level of the Investment
Adviser's profits with respect to the management of the Pioneer Funds,
including details with respect to the Fund. This consideration included a
review of the Investment Adviser's methodology in allocating certain of its
costs to the management of each Fund. The Trustees also considered the
financial results realized by the Investment Adviser in connection with the
operation of the Fund. They further considered the profits realized by the
Investment Adviser and its affiliates from non-fund businesses that may
benefit from or be related to the Fund's business. The Trustees considered
the Investment Adviser's profit margins in comparison with the limited
available industry data. The Trustees concluded that the Investment
Adviser's profits from management of the Pioneer Funds, including the
financial results derived from the Fund, bear a reasonable relationship to
the services rendered and are fair for the management of the Fund.
G. Economies of Scale. The Trustees considered the economies of scale with
respect to the management of the Fund, whether the Fund had appropriately
benefited from any economies of scale, and whether there was potential for
realization of any further economies of scale. Because the management fee
would remain in the third quintile even with significant growth of the
assets under management, the Trustees concluded that any perceived or
potential economies of scale would be shared at future asset levels, in a
reasonable manner as the Fund grows in size, between the Investment Adviser
and the Fund's shareholders.
H. Other Benefits to the Investment Adviser. The Trustees also considered the
character and amount of fees paid by the Fund, other than under the
Management Contract, for services provided by the Investment Adviser and
affiliates, including fees for services such as shareowner services. The
Trustees also considered the receipt of sales loads and payments under Rule
12b-1 plans in respect of
37
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN
APPROVING THE MANAGEMENT CONTRACT (continued)
- --------------------------------------------------------------------------------
the Pioneer Funds (including the Fund). The Trustees further considered the
revenues and profitability of the Investment Adviser's businesses other
than the fund business, including the Investment Adviser's institutional
investment advisory business. The Trustees considered the intangible
benefits that accrue to the Investment Adviser and its affiliates by virtue
of its relationship with the Fund and the Pioneer Funds as a group. The
Trustees concluded that all these types of benefits accruing to the
Investment Adviser were reasonable in the context of the overall
relationship between the Investment Adviser and the Fund.
Conclusion. The Trustees, in light of the Investment Adviser's and
Sub-adviser's overall performance, considered it appropriate to continue to
retain the management services of the Investment Adviser and the Sub-adviser.
Based on their evaluation of all material factors deemed relevant and the
advice of independent counsel, the Trustees concluded that the Management
Contract with the Fund and the Sub-advisory Agreement are fair and reasonable
and voted to approve the continuation of the Management Contract and the
Sub-advisory Agreement for another year.
38
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Wilmer Cutler Pickering Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Fund's Board of Trustees provides broad supervision over the Fund's
affairs. The officers of the Fund are responsible for the Fund's operations.
The Fund's Trustees and officers are listed below, together with their
principal occupations during the past five years. Trustees who are interested
persons of the Fund within the meaning of the Investment Company Act of 1940
are referred to as Interested Trustees. Trustees who are not interested persons
of the Fund are referred to as Independent Trustees. Each of the Trustees may
serve as a trustee of each of the 91 U.S. registered investment portfolios for
which Pioneer Investment Management, Inc. ("Pioneer") serves as investment
adviser (the "Pioneer Funds"). The address for all Interested Trustees and all
officers of the Fund is 60 State Street, Boston, Massachusetts 02109.
The Fund's statement of additional information provides more detailed
information regarding the Fund's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Fund are available without charge,
upon request, by calling our toll free number (1-800-225-6292). Information
regarding how the Fund voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30 is publicly available to
shareowners at www.pioneerfunds.com and on the SEC's web site at
http://www.sec.gov.
39
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships Held
Name and Age With the Fund and Term of Office Past Five Years by this Trustee
John F. Cogan, Jr. (79)* Chairman of the Trustee since 1995. Deputy Chairman and a Director of Chairman and Director of
Board, Serves until Pioneer Global Asset Management ICI Mutual Insurance
Trustee and President successor trustee is S.p.A. ("PGAM"); Non-Executive Company; Director
elected or earlier Chairman and a Director of Pioneer of Harbor Global
retirement or Investment Management USA Inc. Company, Ltd.
removal ("PIM-USA"); Chairman and a
Director of Pioneer; Director of
Pioneer Alternative Investment
Management Limited (Dublin);
President and a Director of Pioneer
Alternative Investment Management
(Bermuda) Limited and affiliated
funds; President and Director of
Pioneer Funds Distributor, Inc.
("PFD"); President of all of the
Pioneer Funds; and Of Counsel
(since 2000, partner prior to
2000), Wilmer Cutler Pickering Hale
and Dorr LLP (counsel to PIM-USA
and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
====================================================================================================================================
Osbert M. Hood (53)** Trustee and Trustee since 2003. President and Chief Executive None
Executive Vice Serves until Officer, PIM-USA since May 2003
President successor trustee is (Director since January 2001);
elected or earlier President and Director of Pioneer
retirement or since May 2003); Chairman and
removal Director of Pioneer Investment
Management Shareholder Services,
Inc. ("PIMSS") since May 2003;
Executive Vice President of all of
the Pioneer Funds since June 2003;
Executive Vice President and Chief
Operating Officer of PIM-USA,
November 2000 to May 2003.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
====================================================================================================================================
40
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships Held
Name, Age and Address With the Fund and Term of Office Past Five Years by this Trustee
David R. Bock **(62) Trustee Trustee since 2005. Senior Vice President and Chief Director of The
3050 K. Street NW, Serves until successor Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 trustee is elected or (publicly traded health care Investment Company
earlier retirement or services company) (2001 - present); (privately-held
removal. Managing Partner, Federal City affordable housing
Capital Advisors (boutique merchant finance company);
bank)(1995 - 2000; 2002 to 2004); Director of New York
Executive Vice President and Chief Mortgage Trust (publicly
Financial Officer, Pedestal Inc. traded mortgage REIT)
(internet-based mortgage trading
company) (2000 - 2002)
**Mr. Bock became a Trustee of the Fund on January 1, 2005.
====================================================================================================================================
Mary K. Bush (57) Trustee Trustee since 1997. President, Bush International Director of Brady
3509 Woodbine Street, Serves until (international financial advisory Corporation (industrial
Chevy Chase, MD 20815 successor trustee firm) identification and
is elected or earlier specialty coated
retirement or removal material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc. (tobacco)
====================================================================================================================================
Margaret B.W. Graham (58) Trustee Trustee since 1995. Founding Director, The Winthrop None
1001 Sherbrooke Street Serves until Group, Inc. (consulting firm);
West, successor trustee Professor of Management, Faculty of
Montreal, Quebec, Canada is elected or earlier Management, McGill University
H3A 1G5 retirement or removal
====================================================================================================================================
41
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships Held
Name, Age and Address With the Fund and Term of Office Past Five Years by this Trustee
Marguerite A. Piret (57) Trustee Trustee since 1995. President and Chief Executive Director of New America
One Boston Place, 28th Floor, Serves until Officer, Newbury, Piret & Company, High Income Fund, Inc.
Boston, MA 02108 successor trustee Inc. (investment banking firm) (closed-end investment
is elected or earlier company)
retirement or removal
====================================================================================================================================
Stephen K. West (77) Trustee Trustee since 1995. Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, Serves until Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 successor trustee (closed-end investment
is elected or earlier company) and
retirement or removal AMVESCAP PLC
(investment managers)
====================================================================================================================================
John Winthrop (69) Trustee Trustee since 1995. President, John Winthrop & Co., None
One North Adgers Wharf, Serves until Inc. (private investment firm)
Charleston, SC 29401 successor trustee
is elected or earlier
retirement or removal
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
FUND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior Vice None
discretion of President - Legal of Pioneer; and
the Board Secretary/Clerk of most of
PIM-USA's subsidiaries; Secretary
of all of the Pioneer Funds since
September 2003 (Assistant Secretary
from November 2000 to September
2003)
====================================================================================================================================
42
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships Held
Name and Age With the Fund and Term of Office Past Five Years by this Officer
Christopher J. Kelley (41) Assistant Secretary Serves at the Assistant Vice President None
discretion of and Senior Counsel of
the Board Pioneer since July 2002;
Vice President and Senior
Counsel of BISYS Fund
Services, Inc. (April
2001 to June 2002);
Senior Vice President and
Deputy General Counsel of
Funds Distributor, Inc.
(July 2000 to April 2001;
Assistant Secretary of
all Pioneer Funds since
September 2003
====================================================================================================================================
David C. Phelan (48) Assistant Secretary Serves at the Partner, Wilmer Cutler None
discretion of Pickering Hale and Dorr
the Board LLP; Assistant Secretary
of all Pioneer Funds
since September 2003
====================================================================================================================================
Vincent Nave (60) Treasurer Serves at the Vice President - Fund None
discretion of Accounting,
the Board Administration and
Custody Services of
Pioneer; and Treasurer of
all of the Pioneer Funds
====================================================================================================================================
Mark E. Bradley (46) Assistant Treasurer Serves at the Deputy Treasurer of None
discretion Pioneer since 2004;
of the Board Treasurer and Senior Vice
President, CDC IXIS Asset
Management Services from
2002 to 2003; Assistant
Treasurer and Vice
President, MFS Investment
Management from 1997 to
2002; and Assistant
Treasurer of all of the
Pioneer Funds since
November 2004
====================================================================================================================================
Luis I. Presutti (40) Assistant Treasurer Serves at the Assistant Vice President None
discretion - Fund Accounting,
of the Board Administration and
Custody Services of
Pioneer; and Assistant
Treasurer of all of the
Pioneer Funds
====================================================================================================================================
43
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FUND OFFICERS
- --------------------------------------------------------------------------------
Positions Held Length of Service Principal Occupation During Other Directorships Held
Name and Age With the Fund and Term of Office Past Five Years by this Officer
Gary Sullivan (47) Assistant Treasurer Serves at the Fund Accounting Manager - None
discretion of Fund Accounting, Administration
the Board and Custody Services of
Pioneer; and Assistant Treasurer
of all of the Pioneer Funds
since May 2002
====================================================================================================================================
Katherine Kim Sullivan (32) Assistant Treasurer Serves at the Fund Administration Manager - None
discretion of Fund Accounting, Administration
the Board and Custody Services since June
2003; Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody
Services (Fund Accounting
Manager from August 1999 to May
2002, Assistant Treasurer of all
Pioneer Funds since September
2003
====================================================================================================================================
Martin J. Wolin (38) Chief Compliance Serves at the Chief Compliance Officer of None
Officer discretion of Pioneer (Director of Compliance
the Board and Senior Counsel from November
2000 to September 2004); and
Chief Compliance Officer of all
of the Pioneer Funds since 2004.
====================================================================================================================================
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Fund's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
44
- --------------------------------------------------------------------------------
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:
PIMSS, Inc.
P.O. Box 55014
Boston, Massachusetts 02205-5014
Our toll-free fax 1-800-225-4240
Our internet e-mail address ask.pioneer@pioneerinvest.com
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
Before investing consider the Fund's investment objectives, risks, charges and
expenses. Contact your advisor or Pioneer Investments for a prospectus
containing this information. Read it carefully.
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year on
Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, DC. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
ITEM 2. CODE OF ETHICS.
(a) Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third party. If
the registrant has not adopted such a code of ethics, explain why it has not
done so.
The registrant has adopted, as of the end of the period covered by this report,
a code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer and controller.
(b) For purposes of this Item, the term "code of ethics" means written standards
that are reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in
reports and documents that a registrant files with, or submits to, the
Commission and in other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and
regulations;
(4) The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) The registrant must briefly describe the nature of any amendment, during the
period covered by the report, to a provision of its code of ethics that applies
to the registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code of
ethics definition enumerated in paragraph (b) of this Item. The registrant must
file a copy of any such amendment as an exhibit pursuant to Item 10(a), unless
the registrant has elected to satisfy paragraph (f) of this Item by posting its
code of ethics on its website pursuant to paragraph (f)(2) of this Item, or by
undertaking to provide its code of ethics to any person without charge, upon
request, pursuant to paragraph (f)(3) of this Item.
The registrant has made no amendments to the code of ethics during the period
covered by this report.
(d) If the registrant has, during the period covered by the report, granted a
waiver, including an implicit waiver, from a provision of the code of ethics to
the registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set forth
in paragraph (b) of this Item, the registrant must briefly describe the nature
of the waiver, the name of the person to whom the waiver was granted, and the
date of the waiver.
Not applicable.
(e) If the registrant intends to satisfy the disclosure requirement under
paragraph (c) or (d) of this Item regarding an amendment to, or a waiver from,
a provision of its code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions and that relates to any
element of the code of ethics definition enumerated in paragraph (b) of this
Item by posting such information on its Internet website, disclose the
registrant's Internet address and such intention.
Not applicable.
(f) The registrant must:
(1) File with the Commission, pursuant to Item 10(a), a copy of its code
of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller,
or persons performing similar functions, as an exhibit to its annual
report on this Form N-CSR;
(2) Post the text of such code of ethics on its Internet website and
disclose, in its most recent report on this Form N-CSR, its Internet
address and the fact that it has posted such code of ethics on its
Internet website; or
(3) Undertake in its most recent report on this Form N-CSR to provide to
any person without charge, upon request, a copy of such code of ethics
and explain the manner in which such request may be made.
See Item 10(2)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of trustees has determined that
the registrant either:
(i) Has at least one audit committee financial expert serving on its audit
committee; or
(ii) Does not have an audit committee financial expert serving on its audit
committee.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit committee
financial expert and whether that person is "independent." In order to be
considered "independent" for purposes of this Item, a member of an audit
committee may not, other than in his or her capacity as a member of the audit
committee, the board of trustees, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or other
compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as defined in
Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)).
Ms. Marguerite A. Piret, an independent trustee, is such an audit committee
financial expert.
(3) If the registrant provides the disclosure required by paragraph (a)(1)
(ii) of this Item, it must explain why it does not have an audit committee
financial expert.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each
of the last two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years.
Audit Fees
Fees for audit services provided to the Fund, including fees
associated with the routine and non routine filings of its
Form N-1A, totaled approximately $28,865 in 2005 and
$25,100 in 2004.
(b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in
each of the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
Audit-Related Fees
There were no audit-related services provided to
the Fund during the fiscal years ended December 31, 2005
and 2004.
(c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of
the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning. Registrants shall
describe the nature of the services comprising the fees disclosed under this
category.
Tax Fees
Fees for tax services, including tax returns and tax
advisory services, totaled approximately $6,800 in 2005
and $6,000 in 2004.
(d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in
each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
All Other Fees
There were no other services provided to
the Fund during the fiscal years ended December 31, 2005
and 2004.
(e) (1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
PIONEER FUNDS
APPROVAL OF AUDIT, AUDIT-RELATED, TAX AND OTHER SERVICES
PROVIDED BY THE INDEPENDENT AUDITOR
SECTION I - POLICY PURPOSE AND APPLICABILITY
The Pioneer Funds recognize the importance of maintaining the independence of
their outside auditors. Maintaining independence is a shared responsibility
involving Pioneer Investment Management, Inc ("PIM"), the audit committee and
the independent auditors.
The Funds recognize that a Fund's independent auditors: 1) possess knowledge of
the Funds, 2) are able to incorporate certain services into the scope of the
audit, thereby avoiding redundant work, cost and disruption of Fund personnel
and processes, and 3) have expertise that has value to the Funds. As a result,
there are situations where it is desirable to use the Fund's independent
auditors for services in addition to the annual audit and where the potential
for conflicts of interests are minimal. Consequently, this policy, which is
intended to comply with Rule 210.2-01(C)(7), sets forth guidelines and
procedures to be followed by the Funds when retaining the independent audit firm
to perform audit, audit-related tax and other services under those
circumstances, while also maintaining independence.
Approval of a service in accordance with this policy for a Fund shall also
constitute approval for any other Fund whose pre-approval is required pursuant
to Rule 210.2-01(c)(7)(ii).
In addition to the procedures set forth in this policy, any non-audit services
that may be provided consistently with Rule 210.2-01 may be approved by the
Audit Committee itself and any pre-approval that may be waived in accordance
with Rule 210.2-01(c)(7)(i)(C) is hereby waived.
Selection of a Fund's independent auditors and their compensation shall be
determined by the Audit Committee and shall not be subject to this policy.
SECTION II - POLICY
- ---------------- -------------------------------- -------------------------------------------------
SERVICE SERVICE CATEGORY DESCRIPTION SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
CATEGORY
- ---------------- -------------------------------- -------------------------------------------------
I. AUDIT Services that are directly o Accounting research assistance
SERVICES related to performing the o SEC consultation, registration
independent audit of the Funds statements, and reporting
o Tax accrual related matters
o Implementation of new accounting
standards
o Compliance letters (e.g. rating agency
letters)
o Regulatory reviews and assistance
regarding financial matters
o Semi-annual reviews (if requested)
o Comfort letters for closed end
offerings
- ---------------- -------------------------------- -------------------------------------------------
II. Services which are not o AICPA attest and agreed-upon procedures
AUDIT-RELATED prohibited under Rule o Technology control assessments
SERVICES 210.2-01(C)(4) (the "Rule") o Financial reporting control assessments
and are related extensions of o Enterprise security architecture
the audit services support the assessment
audit, or use the
knowledge/expertise gained
from the audit procedures as a
foundation to complete the
project. In most cases, if
the Audit-Related Services are
not performed by the Audit
firm, the scope of the Audit
Services would likely
increase. The Services are
typically well-defined and
governed by accounting
professional standards (AICPA,
SEC, etc.)
- ---------------- -------------------------------- -------------------------------------------------
------------------------------------- ------------------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
------------------------------------- ------------------------------------
o "One-time" pre-approval o A summary of all such
for the audit period for all services and related fees
pre-approved specific service reported at each regularly
subcategories. Approval of the scheduled Audit Committee
independent auditors as meeting.
auditors for a Fund shall
constitute pre approval for
these services.
------------------------------------- ------------------------------------
o "One-time" pre-approval o A summary of all such
for the fund fiscal year within services and related fees
a specified dollar limit (including comparison to
for all pre-approved specified dollar limits)
specific service subcategories reported quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limit for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for Audit-Related
Services not denoted as
"pre-approved", or
to add a specific service
subcategory as "pre-approved"
------------------------------------- ------------------------------------
SECTION III - POLICY DETAIL, CONTINUED
- ----------------------- --------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
DESCRIPTION
- ----------------------- --------------------------- -----------------------------------------------
III. TAX SERVICES Services which are not o Tax planning and support
prohibited by the Rule, o Tax controversy assistance
if an officer of the Fund o Tax compliance, tax returns, excise
determines that using the tax returns and support
Fund's auditor to provide o Tax opinions
these services creates
significant synergy in
the form of efficiency,
minimized disruption, or
the ability to maintain a
desired level of
confidentiality.
- ----------------------- --------------------------- -----------------------------------------------
- ------------------------------------- -------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
- ------------------------------------- -------------------------
- ------------------------------------- -------------------------
o "One-time" pre-approval o A summary of
for the fund fiscal year all such services and
within a specified dollar limit related fees
(including comparison
to specified dollar
limits) reported
quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limits for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for tax services not
denoted as pre-approved, or to add a specific
service subcategory as
"pre-approved"
- ------------------------------------- -------------------------
SECTION III - POLICY DETAIL, CONTINUED
- ----------------------- --------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
DESCRIPTION
- ----------------------- --------------------------- -----------------------------------------------
IV. OTHER SERVICES Services which are not o Business Risk Management support
prohibited by the Rule, o Other control and regulatory
A. SYNERGISTIC, if an officer of the Fund compliance projects
UNIQUE QUALIFICATIONS determines that using the
Fund's auditor to provide
these services creates
significant synergy in
the form of efficiency,
minimized disruption,
the ability to maintain a
desired level of
confidentiality, or where
the Fund's auditors
posses unique or superior
qualifications to provide
these services, resulting
in superior value and
results for the Fund.
- ----------------------- --------------------------- -----------------------------------------------
- --------------------------------------- ------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
- ------------------------------------- --------------------------
o "One-time" pre-approval o A summary of
for the fund fiscal year within all such services and
a specified dollar limit related fees
(including comparison
to specified dollar
limits) reported
quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limits for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for "Synergistic" or
"Unique Qualifications" Other
Services not denoted as
pre-approved to the left, or to
add a specific service
subcategory as "pre-approved"
- ------------------------------------- --------------------------
SECTION III - POLICY DETAIL, CONTINUED
- ----------------------- ------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PROHIBITED SERVICE SUBCATEGORIES
DESCRIPTION
- ----------------------- ------------------------- -----------------------------------------------
PROHIBITED SERVICES Services which result 1. Bookkeeping or other services
in the auditors losing related to the accounting records or
independence status financial statements of the audit
under the Rule. client*
2. Financial information systems design
and implementation*
3. Appraisal or valuation services,
fairness* opinions, or
contribution-in-kind reports
4. Actuarial services (i.e., setting
actuarial reserves versus actuarial
audit work)*
5. Internal audit outsourcing services*
6. Management functions or human
resources
7. Broker or dealer, investment
advisor, or investment banking services
8. Legal services and expert services
unrelated to the audit
9. Any other service that the Public
Company Accounting Oversight Board
determines, by regulation, is
impermissible
- ----------------------- ------------------------- -----------------------------------------------
- ------------------------------------------- ------------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
- ------------------------------------------- ------------------------------
o These services are not to be o A summary of all
performed with the exception of the(*) services and related
services that may be permitted fees reported at each
if they would not be subject to audit regularly scheduled
procedures at the audit client (as Audit Committee meeting
defined in rule 2-01(f)(4)) level will serve as continual
the firm providing the service. confirmation that has
not provided any
restricted services.
- ------------------------------------------- ------------------------------
- --------------------------------------------------------------------------------
GENERAL AUDIT COMMITTEE APPROVAL POLICY:
o For all projects, the officers of the Funds and the Fund's auditors will each
make an assessment to determine that any proposed projects will not impair
independence.
o Potential services will be classified into the four non-restricted service
categories and the "Approval of Audit, Audit-Related, Tax and Other
Services" Policy above will be applied. Any services outside the specific
pre-approved service subcategories set forth above must be specifically
approved by the Audit Committee.
o At least quarterly, the Audit Committee shall review a report summarizing the
services by service category, including fees, provided by the Audit firm as
set forth in the above policy.
- --------------------------------------------------------------------------------
(2) Disclose the percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
Non-Audit Services
Beginning with non-audit service contracts entered into on
or after May 6, 2003, the effective date of the new SEC
pre-approval rules, the Fund's audit committee is required
to pre-approve services to affiliates defined by SEC rules
to the extent that the services are determined to have a
direct impact on the operations or financial reporting of the
Fund. For the years ended December 31, 2005 and 2004,
there were no services provided to an affiliate that required
the Fund's audit committee pre-approval.
(f) If greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent employees.
N/A
(g) Disclose the aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant for each of
the last two fiscal years of the registrant.
Aggregate Non-Audit Fees
The aggregate non-audit fees for the Fund and affiliates, as
previously defined, totaled approximately $6,800 in 2005
and $6,000 in 2004. These fees include services provided
prior to May 6, 2003, the effective date of the pre-approval
process
The Fund's audit committee of the Board of Trustees has
considered whether the provision of non-audit services that
were rendered to the Affiliates (as defined) that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01
of Regulation S-X is compatible with maintaining the
principal accountant's independence.
(h) Disclose whether the registrant's audit committee of the board of trustees
has considered whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
The Fund's independent auditor, Ernst &
Young LLP ("E&Y"), has advised the Audit
Committee of the Fund's Board of Trustees that
E&Ys Spanish affiliate (E&Y Spain) performed
certain non-audit work for Pioneer Global
Investments Limited ("PGIL"), an affiliate of the
Funds investment adviser. The services involved
the receipt and disbursement of monies transferred
to E&Y Spain by PGIL in payment of individual
payroll and related income tax withholdings due on
returns prepared by E&Y Spain for certain PGIL
employees located in Spain from February 2001 to
October 2005. E&Y became auditors of the Fund in
May 2002. These payroll and tax services were
discontinued in November 2005. The annual fee
received by E&Y Spain for all such services totaled
approximately 9,000 Euro per year. E&Y has informed
the Audit Committee that based on its internal
reviews and the de minimus nature of the services
provided and fees received, E&Y does not believe
its independence with respect to the Fund has been
impaired or that it is disqualified from acting as
independent auditors to the Fund.
N/A
Item 5. Audit Committee of Listed Registrants
(a) If the registrant is a listed issuer as defined in Rule 10A-3
under the Exchange Act (17 CFR 240.10A-3), state whether
or not the registrant has a separately-designated standing
audit committee established in accordance with Section
3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)).
If the registrant has such a committee, however designated,
identify each committee member. If the entire board of directors
is acting as the registrants audit committee as specified in
Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)),
so state.
The registrant has a separately-designated standing audit
committe eestablished in accordance with Section
3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)).
(b) If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act (17 CFR 240.10A-3(d)) regarding an exemption
from the listing standards for audit committees.
N/A
Item 6. Schedule of Investments.
File Schedule I Investments in securities of unaffiliated issuers
as of the close of the reporting period as set forth in 210.12-
12 of Regulation S-X [17 CFR 210.12-12], unless the schedule is
included as part of the report to shareholders filed under Item
1 of this Form.
Included in Item 1
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
A closed-end management investment company that is filing an annual report on
this Form N-CSR must, unless it invests exclusively in non-voting securities,
describe the policies and procedures that it uses to determine how to vote
proxies relating to portfolio securities, including the procedures that the
company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
Not applicable to open-end management investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a) If the registrant is a closed-end management investment company that
is filing an annual report on this Form N-CSR,provide the following
information:
(1) State the name, title, and length of service of the person or persons
employed by or associated with the registrant or an investment adviser
of the registrant who are primarily responsible for the day-to-day management
of the registrants portfolio (Portfolio Manager). Also state each Portfolio
Managers business experience during the past 5 years.
Not applicable to open-end management investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
(a) If the registrant is a closed-end management investment company,
in the following tabular format, provide the information specified in
paragraph (b) of this Item with respect to any purchase made by or on
behalf of the registrant or any affiliated purchaser, as defined in
Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of
shares or other units of any class of the registrants equity securities
that is registered by the registrant pursuant to Section 12 of the
Exchange Act (15 U.S.C. 781). Instruction to paragraph (a). Disclose
all purchases covered by this Item, including purchases that do not
satisfy the conditions of the safe harbor of Rule 10b-18 under the
Exchange Act (17 CFR 240.10b-18), made in the period covered by the
report. Provide disclosures covering repurchases made on a monthly basis.
For example, if the reporting period began on January 16 and ended on
July 15, the chart would show repurchases for the months from January 16
through February 15, February 16 through March 15, March 16 through
April 15, April 16 through May 15, May 16 through June 15, and June 16
through July 15.
Not applicable to open-end management investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
Describe any material changes to the procedures by which shareholders
may recommend nominees to the registrants board of directors, where
those changes were implemented after the registrant last provided
disclosure in response to the requirements of Item 7(d)(2)(ii)(G)
of Schedule 14A (17 CFR 240.14a-101), or this Item.
There have been no material changes to the procedures by which the
shareholders may recommend nominees to the registrants board of
directors since the registrant last provided disclosure in response
to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14(A) in
its definitive proxy statement, or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Disclose the conclusions of the registrant's principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, about the effectiveness of the registrant's disclosure
controls and procedures (as defined in Rule 30a-2(c) under the Act (17 CFR
270.30a-2(c))) based on their evaluation of these controls and procedures as of
a date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph.
The registrant's principal executive officer and principal financial
officer have concluded, that the registrant's disclosure controls and
procedures are effective based on their evaluation of these controls and
procedures as of a date within 90 days of the filing date of this report.
(b) Disclose whether or not there were significant changes in the registrant's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act
(17 CFR 270.30a-2).
Filed herewith.
SIGNATURES
[See General Instruction F]
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Pioneer Real Estate Shares
By (Signature and Title)* /s/ John F. Cogan, Jr.
John F. Cogan, Jr, President
Date February 28, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ John F. Cogan, Jr.
John F. Cogan, Jr., President
Date February 28, 2006
By (Signature and Title)* /s/ Vincent Nave
Vincent Nave, Treasurer
Date February 28, 2006
* Print the name and title of each signing officer under his or her signature.