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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)
Joseph P. Barri, Hale and Dorr LLP, 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: June 30
Date of reporting period: January 1, 2003 through June 30, 2003
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.
PIONEER
-------
REAL
ESTATE
SHARES
Semiannual
Report
6/30/03
[PIONEER LOGO]
Investments(R)
Table of Contents
- --------------------------------------------------------------------------------
Letter from the President 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 7
Schedule of Investments 11
Financial Statements 13
Notes to Financial Statements 21
Trustees, Officers and Service Providers 27
Retirement Plans from Pioneer 28
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
LETTER FROM THE PRESIDENT 6/30/03
- --------------------------------------------------------------------------------
Dear Shareowners,
- --------------------------------------------------------------------------------
With the fading of concerns over the Iraq -------------------------------
war, investors whose attention had been
focused overseas were buoyed by hints of Pioneer's new
increased economic activity at home. The president
nation's stock markets began a broad-based
rally in early March, and prices continued to Osbert Hood was recently
climb. From April through June, the major named Chief Executive
stock market averages recorded one of the Officer and President of
biggest quarterly jumps in years. Increasing Pioneer Investments USA.
investor confidence also led to strong Mr. Hood, formerly Pioneer's
returns on corporate bonds. How- ever, Chief Operating Officer and
returns on government bonds, which rose a key member of the senior
sharply earlier, have slowed. management committee,
joined Pioneer in 2000 from
Encouraging factors aren't hard for investors John Hancock Financial Ser-
to find. The lowest interest rates many of us vices, where he had held
have ever seen and the administration's tax "I am excited and honored
cuts mean higher incomes for many consumers. to have the opportunity to
The tax reductions on dividends and capital lead Pioneer as it continues
gains are of special interest to investors. to grow," Mr. Hood said.
Corporations can also borrow at the lowest "As CEO I look forward to
rates in years. Many companies senior furthering Pioneer's strategic
financial positions. are realizing goals, including developing
substantial savings by replacing old, new products that can meet
high-cost debt with new issues that carry the wider needs of investors
lower interest. The Federal Reserve Board cut and the advisers who serve
rates once again in June in an effort to them."
inject further stimulus into the economy. And
the weak U.S. dollar helps exporters and -------------------------------
multinational companies operating in
countries with stronger currencies. One
possible lesson to be learned from the
market's decline and recovery is the
importance of staying invested. Those who
stayed with their commitments participated in
the recent rally, while those who remained on
the sidelines had to play catch-up. If the
protracted slump caused your investment
discipline to slip, this may be an ideal time
to contact your financial advisor for guid
ance on resuming your investment program.
Our style focuses on companies, not on forecasts
There are always risks, of course, and the direction of the economy is something
of a puzzle at the moment. If it continues to struggle for very long, investors
may once again seek shelter in short-term commitments. However, Pioneer's
portfolio managers and analysts do not base investment decisions on economic
assumptions. Instead, as it has since our founding in 1928, our value-focused
investment style requires complete understanding of a company and its potential.
That means intensive analysis of financial reports, visits to companies and
detailed discussions with corporate managers. When we discover potential that
appears to exceed the market's valuation, that company becomes a candidate for
investment. Our research efforts are aided in no small measure by the global
resources of our parent organization, UniCredito Italiano S.p.A.
Like everyone at Pioneer, I appreciate your continued confidence in our products
and services.
Respectfully,
/s/ Osbert M. Hood
- ------------------
Osbert M. Hood
Pioneer Investment Management, Inc.
The preceding information is the opinion of Fund management. Past performance is
no guarantee of future results, and there is no guarantee that market forecasts
discussed will be realized.
1
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY 6/30/03
- --------------------------------------------------------------------------------
Portfolio Diversification
- --------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[Representation of Pie Chart]
U.S. Common Stocks 93.9%
Temporary Cash Investment 6.1%
Sector Diversification
- --------------------------------------------------------------------------------
(As a percentage of equity holdings)
[Representation of Pie Chart]
Retail 26.5%
Office 22.9%
Apartment 18.4%
Diversified 11.6%
Industrial 7.8%
Hotel 6.1%
Self Storage 4.7%
Manufactured Homes 1.7%
Other 0.3%
10 Largest Holdings
- --------------------------------------------------------------------------------
(As a percentage of equity holdings)*
- ---------------------------------------------------------------------------------------------
1. Equity Office Properties Trust 6.87% 6. Vornado Realty Trust 4.00%
- ---------------------------------------------------------------------------------------------
2. Simon DeBartolo Group, Inc. 5.71 7. Apartment Investment & 3.62
Management Co.
- ---------------------------------------------------------------------------------------------
3. General Growth Properties, Inc. 4.35 8. Starwood Hotels & Resorts 3.42
- ---------------------------------------------------------------------------------------------
4. Equity Residential Property 4.22 9. Boston Properties, Inc. 3.31
Trust
- ---------------------------------------------------------------------------------------------
5. ProLogis Trust 4.12 10. Duke Realty Investments, Inc. 2.82
- ---------------------------------------------------------------------------------------------
* This list excludes money market instruments. Portfolio holdings will vary
for other periods.
2
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/03 CLASS A SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value per Share 6/30/03 12/31/02
$16.70 $15.30
Distributions per Share Income Short-Term Long-Term
(1/1/03 - 6/30/03) Dividends Capital Gains Capital Gains
$0.330 $ - $ -
Investment Returns
- --------------------------------------------------------------------------------
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.
- -----------------------------------------------
Average Annual Total Returns
(As of June 30, 2003)
Net Asset Public Offering
Period Value Price*
Life-of-Class
(10/25/93) 8.31% 7.66%
5 Years 5.56 4.32
1 Year 2.54 -3.37
- -----------------------------------------------
* Reflects deduction of the maximum 5.75% sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
[Representation of Mountain Chart]
Pioneer Wilshire
Real Estate Real Estate
Shares* Securities Index
10/93 9425 10000
9184 9553
12/94 9206 9709
10321 11034
12/96 14083 15103
16863 18093
12/98 13528 14941
12892 14464
12/00 16669 18910
17914 20887
12/02 18561 21425
6/03 20688 24312
+ 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.
Real estate investments may be subject to special risks, including risks
related to general and local economic conditions, and risks related to an
individual property.
Past performance does not guarantee future results. Returns and principal
value fluctuate, and your shares, when redeemed, may be worth more or less
than their original cost.
The performance table and graph do not reflect the deduction of taxes that a
shareowner would pay on Fund distributions or the redemption of Fund shares.
3
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/03 CLASS B SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value per Share 6/30/03 12/31/02
$16.57 $15.17
Distributions per Share Income Short-Term Long-Term
(1/1/03 - 6/30/03) Dividends Capital Gains Capital Gains
$0.260 $ - $ -
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.
- ----------------------------------------
Average Annual Total Returns
(As of June 30, 2003)
If If
Period Held Redeemed*
Life-of-Class
(1/31/96) 8.93% 8.93%
5 Years 4.75 4.58
1 Year 1.74 -2.19
- ----------------------------------------
* Reflects deduction of the maximum applicable contingent deferred sales
charge (CDSC) at the end of the period and assumes reinvestment of
distributions. The maximum CDSC of 4% declines over six years.
[Representation of Mountain Chart]
Pioneer Wilshire
Real Estate Real Estate
Shares* Securities Index
1/96 10000 10000
13481 13501
12/97 16023 16174
12761 13356
12/99 12065 12930
15504 16904
12/01 16499 18671
16968 19152
6/03 18845 21733
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.
Real estate investments may be subject to special risks, including risks
related to general and local economic conditions, and risks related to an
individual property.
Past performance does not guarantee future results. Returns and principal value
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
The performance table and graph do not reflect the deduction of taxes that a
shareowner would pay on Fund distributions or the redemption of Fund shares.
4
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/03 CLASS C SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value per Share 6/30/03 12/31/02
$16.60 $15.20
Distributions per Share Income Short-Term Long-Term
(1/1/03 - 6/30/03) Dividends Capital Gains Capital Gains
$0.270 $ - $ -
Investment Returns
- --------------------------------------------------------------------------------
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.
- -----------------------------------------------
Average Annual Total Returns
(As of June 30, 2003)
Net Asset Public Offering
Period Value Price/CDSC*
Life-of-Class
(1/31/96) 8.94% 8.80%
5 Years 4.78 4.57
1 Year 1.82 0.80
- -----------------------------------------------
* Reflects deduction of the 1% sales charge at the beginning of the period and
assumes reinvestment of distributions. The 1% contingent deferred sales
charge (CDSC) applies to redemptions made within one year of purchase.
[Representation of Mountain Chart]
Pioneer Wilshire
Real Estate Real Estate
Shares* Securities Index
1/31/96 9900 10000
13344 13501
12/31/97 15861 16174
12629 13356
12/31/99 11945 12930
15341 16904
12/31/01 16357 18671
16814 19152
6/30/03 18681 21733
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.
Real estate investments may be subject to special risks, including risks
related to general and local economic conditions, and risks related to an
individual property.
Past performance does not guarantee future results. Returns and principal value
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
The performance table and graph do not reflect the deduction of taxes that a
shareowner would pay on Fund distributions or the redemption of Fund shares.
5
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 6/30/03 CLASS Y SHARES
- --------------------------------------------------------------------------------
Share Prices and Distributions
- --------------------------------------------------------------------------------
Net Asset Value per Share 6/30/03 12/31/02
$16.68 $15.27
Distributions per Share Income Short-Term Long-Term
(1/1/03 - 6/30/03) Dividends Capital Gains Capital Gains
$0.370 $ - $ -
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.
- ----------------------------------------
Average Annual Total Returns*
(As of June 30, 2003)
If If
Period Held Redeemed*
Life-of-Class
(4/9/98) 4.82% 4.82%
5 Year 6.26 6.26
1 Year 3.20 3.20
- ----------------------------------------
* Assumes reinvestment of distributions.
[Representation of Mountain Chart]
Pioneer Wilshire
Real Estate Real Estate
Shares* Securities Index
4/98 10000 10000
8391 8591
12/99 8047 8317
10461 10873
12/01 11298 12010
11774 12319
6/03 13166 13979
+ 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 the Index.
Real estate investments may be subject to special risks, including risks
related to general and local economic conditions, and risks related to an
individual property.
Past performance does not guarantee future results. Returns and principal
value fluctuate, and your shares, when redeemed, may be worth more or less
than their original cost.
The performance table and graph do not reflect the deduction of taxes that a
shareowner would pay on Fund distributions or the redemption of Fund shares.
6
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 6/30/03
- --------------------------------------------------------------------------------
Following the swift conclusion of the war in Iraq in early April, equity
markets staged an impressive rebound, contributing to strong gains for the six
months ended June 30, 2003 - the first half of your Fund's fiscal year. It
appears that the relatively short duration of the war in Iraq helped to temper
investors' anxiety and ease the uncertainty overshadowing stock markets
worldwide. In the following interview, portfolio manager Jeff Caira suggests
that while volatility and slow economic growth are complicating a recovery, the
outlook is improving.
Q: The Fund had positive returns going into the April rally. How did it perform
for the six months ended June 30, 2003?
A: The Fund achieved favorable gains for the first half of its fiscal year,
which is rewarding given the fact that many sectors of the real estate
market were showing increasing vulnerability to the weaker U.S. economy. In
April, investors returned to the market with enthusiasm, buoyed by interest
rate cuts in both Europe and the United States and a modestly improving U.S.
macroeconomic outlook.
For the six months ended June 30, 2003, the Fund's Class A, B and C shares
increased 11.46%, 11.06% and 11.11%, respectively, at net asset value. The
Fund underperformed its benchmark, the Wilshire Real Estate Securities
Index, which rose 13.47% for the same period. Poor stock selection in the
hotel sector and our decision to limit the Fund's exposure to strip malls
during a period of strong performance accounts for the disparity.
Q: Why did the Fund's hotel stocks prove to be so disappointing?
A: In addition to choosing stocks that lagged the hotel sector's spring rally,
our decision to underweight (relative to the benchmark) the Fund's exposure
to this sector had the added misfortune of limiting the Fund's participation
in the rebound. One holding, MeriStar Hospitality, which owns over 100
hotels around the United States, was very volatile. It was down 66% from
December 31, 2002 to March 11, 2003, then turned around and rose 130% from
March 11, 2003 to June 30, 2003. For the entire six months under review,
however, the holding was down 22%. Furthermore, Starwood Hotels & Resorts,
which we'd chosen to slightly underweight, outperformed the benchmark for
the six-month period.
7
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 6/30/03 (continued)
- --------------------------------------------------------------------------------
Our preference for larger, high-quality real-estate companies also proved to
be a drawback during the rally. It appears that some of the rally's strength
was driven by income-oriented investors who, confronted with the prospects
of falling interest rates, bought high-yielding real-estate investments -
regardless of the company's asset quality, property type or long-term
prospects. The heightened demand drove prices higher, contributing to their
outperformance.
Q: Given investors' penchant for higher-yielding real-estate stocks, could you
provide an example of a holding that pays above-average income while meeting
your criteria for quality and sustainable growth potential?
A: Certainly. Prentiss Properties, which offered a dividend yield of 7.3% on
June 30, 2003 manages office properties in a variety of markets - both
high-growth, low-barriers-to-entry markets and higher-barriers-to-entry
markets. Their properties are primarily located in Washington, D.C.,
Chicago, Dallas, Austin and Northern California. With its strong management
team, this real estate investment trust strives for an attractive return on
capital, which is backed by solid financials, and has a history of market
leadership that has helped it consistently to outperform many of its peers.
Q: Despite sluggish economic growth, retail stocks turned in strong
performance. Why was that?
A: Retail stocks benefited from continued improvement in fundamentals, as
landlords were generally able to increase occupancy levels in retail centers
and generate strong rent increases on expiring and new leases. Additionally,
there were fewer tenant bankruptcies than there were for the same period
last year, keeping cash flows strong. Investors continued to bid the stocks
up despite valuation levels at the high end of the historical range.
Investors appeared to be downplaying valuation levels in favor of the strong
absolute and even stronger relative fundamentals of that property type.
8
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Although we increased investments in retail stocks during the reporting
period, which has been very beneficial for the Fund, the portfolio did hold
a slight underweight position (relative to the Fund's benchmark) in the
community-center sector, which rallied strongly. We did not believe that the
underlying fundamentals supporting community centers justified the continued
share price appreciation and kept the Fund's weighting below that of the
benchmark. As it turned out, prices of community-center property companies
appreciated more strongly than most other property types. Two of the Fund's
largest investments in the retail sector, Pan Pacific Retail Properties and
Weingarten Realty Investors, were significant contributors to performance
for the six months under review.
Q: Has the outlook for the office sector improved?
A: Office real estate investment trusts are still experiencing weak
fundamentals, since the sector is so highly correlated to the direction of
economic growth, albeit with a lag. Vacancy rates have risen, and expiring
contractual rent agreements, which experienced dramatic increases in recent
years, are, in many cases, in jeopardy of being renewed at today's lower
rent levels. We're watching the group closely to look for signs of job
growth in the economy, which could signal a subsequent turnaround in office
property fundamentals. We are pleased to see that the supply of new office
buildings has moderated, which bodes well for the sector once job growth
improves and demand increases.
Q: Are you optimistic about prospects for the real estate sector longer term?
A: Yes. We continue to believe that the longer-term benefits of real-estate
investments remain intact - namely above-average dividend yields, relatively
stable cash flows and modest growth. The industry's current fundamentals are
weak, however, and we don't foresee substantial improvement, with the
exception of hotel REITs, until economic growth resumes. We believe job
growth will be critical to such a recovery.
9
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 6/30/03 (continued)
- --------------------------------------------------------------------------------
The Fund's sector diversification is less defensive than it was six months
ago - underscoring our improving but still cautious outlook. During the
reporting period, we reduced heavy positions in industrial, manufactured
housing and office REITs and slightly increased the portfolio's exposure to
retail by adding to community-center property companies. Since real estate
is a lagging indicator of the economy's strength by about six months, we
want to be sure the portfolio is well positioned for an eventual recovery
before it becomes widely apparent. Thus, we'll continue to focus on
attractively priced companies that we feel have the best total-return
potential, solid cash flow, and the best prospects for profitability in a
recovering economy.
The preceding information is the opinion of Fund management. Past
performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
10
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/03 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 93.9%
Hotels, Restaurants & Leisure - 3.2%
Hotels, Resorts & Cruise Lines - 3.2%
103,000 Starwood Hotels & Resorts $ 2,944,770
-----------
Total Hotels, Restaurants & Leisure $ 2,944,770
-----------
Real Estate - 90.7%
Real Estate Management & Development - 4.0%
17,300 American Financial Realty Trust* $ 257,943
100,000 Catellus Development Corp.* 2,200,000
109,800 Trizec Properties, Inc. 1,248,426
-----------
$ 3,706,369
-----------
Real Estate Investment Trusts - 86.7%
21,200 Alexandria Real Estate Equities, Inc. $ 954,000
55,000 AMB Property Corp. 1,549,350
90,000 Apartment Investment & Management Co. 3,114,000
91,442 Archstone Communities Trust 2,194,608
82,000 Arden Realty Group, Inc. 2,127,900
48,000 AvalonBay Communities, Inc.* 2,046,720
65,000 Boston Properties, Inc. 2,847,000
60,000 Brandywine Realty Trust 1,477,200
52,500 Camden Property Trust 1,834,875
58,000 Carramerica Realty Corp. 1,612,980
50,000 CBL & Associates Properties 2,150,000
42,500 Chelsea Property Group, Inc. 1,713,175
88,000 Duke Realty Investments, Inc. 2,424,400
219,000 Equity Office Properties Trust 5,915,190
140,000 Equity Residential Property Trust 3,633,000
12,000 Essex Property Trust, Inc. 687,000
46,000 Federal Realty Investment Trust 1,472,000
5,000 First Industrial Realty Trust, Inc. 158,000
60,000 General Growth Properties, Inc. 3,746,400
30,000 Home Properties of NY, Inc. 1,057,200
184,550 Host Marriott Corp.* 1,688,632
80,000 Innkeepers USA Trust 544,000
55,000 Liberty Property Trust 1,903,000
42,300 Manufactured Home Communities, Inc. 1,485,153
17,900 MeriStar Hospitality Corp. 92,006
53,500 Mills Corp. 1,794,925
46,000 Pan Pacific Retail Properties, Inc. 1,810,100
The accompanying notes are an integral part of these financial statements. 11
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 6/30/03 (unaudited) (continued)
- --------------------------------------------------------------------------------
Shares Value
Real Estate Investment Trusts (continued)
64,000 Prentiss Properties Trust $ 1,919,360
130,000 ProLogis Trust 3,549,000
42,000 PS Business Parks, Inc.* 1,482,600
5,427 Public Storage, Inc. (Series A) 154,127
68,000 Public Storage, Inc. 2,303,160
24,000 Regency Centers Corp.* 839,520
48,000 Shurgard Storage Centers, Inc. 1,587,840
125,900 Simon DeBartolo Group, Inc. 4,913,877
45,500 SL Green Realty Corp. 1,587,495
47,900 Taubman Centers, Inc. 917,764
50,000 The Macerich Co. 1,756,500
75,000 United Dominion Realty Trust 1,291,500
79,000 Vornado Realty Trust 3,444,400
40,000 Western Resources, Inc. 1,676,000
-----------
$79,455,957
-----------
Total Real Estate $83,162,326
-----------
TOTAL COMMON STOCKS
(Cost $72,260,509) $86,107,096
===========
Principal
Amount
TEMPORARY CASH INVESTMENT - 6.1%
Securities Lending Collateral - 6.1%
$5,626,175 Securities Lending Investment Fund, 1.21% $ 5,626,175
-----------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $5,626,175) $ 5,626,175
===========
TOTAL INVESTMENT IN SECURITIES - 100.0%
(Cost $77,886,684)(a)(b) $91,733,271
===========
* Non-income producing security.
(a) At June 30, 2003, the net unrealized gain on investments based on cost for federal income tax
purposes of $78,881,976 was as follows:
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $15,065,150
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value (2,213,855)
-----------
Net unrealized gain $12,851,295
===========
(b) At December 31, 2002, the Fund had a net capital loss carryforward of $6,305,662 which will
expire between 2007 and 2010 if not utilized.
Purchases and sales of securities (excluding temporary cash investments) for the six months
ended June 30, 2003 aggregated $11,784,632 and $14,643,030, respectively.
12 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
BALANCE SHEET 6/30/03 (unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities
loaned of $5,415,813) (cost $77,886,684) $91,733,271
Cash 152,719
Receivables -
Investment securities sold 694,851
Fund shares sold 169,619
Dividends and interest 563,680
-----------
Total assets $93,314,140
-----------
LIABILITIES:
Payables -
Fund shares repurchased $ 35,233
Upon return of securities loaned 5,626,175
Due to affiliates 127,200
Accrued expenses 61,826
Other 714
-----------
Total liabilities $ 5,851,148
-----------
NET ASSETS:
Paid-in capital $81,728,938
Accumulated undistributed net investment income 198,263
Accumulated net realized loss on investments (8,310,796)
Net unrealized gain on investments 13,846,587
-----------
Total net assets $87,462,992
===========
NET ASSET VALUE PER SHARES:
(Unlimited number of shares authorized)
Class A (based on $46,653,668/2,792,965 shares) $ 16.70
===========
Class B (based on $27,658,634/1,669,115 shares) $ 16.57
===========
Class C (based on $8,992,598/541,723 shares) $ 16.60
===========
Class Y (based on $4,158,092/249,260 shares) $ 16.68
===========
MAXIMUM OFFERING PRICE:
Class A ($16.70 [divided by] 94.25%) $ 17.72
===========
Class C ($16.60 [divided by] 99.00%) $ 16.77
===========
The accompanying notes are an integral part of these financial statements. 13
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended 6/30/03
INVESTMENT INCOME:
Dividends $2,431,626
Interest 14,786
Income from securities loaned, net 1,215
----------
Total investment income $ 2,447,627
-----------
EXPENSES:
Management fees $ 335,122
Transfer agent fees
Class A 87,028
Class B 66,807
Class C 15,113
Class Y 195
Distribution fees
Class A 55,950
Class B 136,716
Class C 39,594
Custodian fees 9,990
Registration fees 41,922
Professional fees 16,412
Printing fees 22,685
Administrative fees 18,596
Fees and expenses of nonaffiliated trustees 4,841
Miscellaneous 9,559
----------
Total expenses $ 860,530
Less fees paid indirectly (1,482)
-----------
Net expenses $ 859,048
-----------
Net investment income $ 1,588,579
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments $(1,009,842)
Change in net unrealized gain on investments 8,549,334
-----------
Net gain on investments $ 7,539,492
-----------
Net increase in net assets resulting from operations $ 9,128,071
===========
14 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Six Months Ended 6/30/03 and the Year Ended 12/31/02
Six Months
Ended Year
6/30/03 Ended
(unaudited) 12/31/02
FROM OPERATIONS:
Net investment income $ 1,588,579 $ 2,965,893
Net realized gain (loss) on investments (1,009,842) 3,534,194
Change in net unrealized gain (loss) on investments 8,549,334 (6,269,519)
----------- -----------
Net increase in net assets resulting from
operations $ 9,128,071 $ 230,568
----------- -----------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class A ($0.33 and $0.65 per share, respectively) $ (918,127) $(1,850,041)
Class B ($0.26 and $0.53 per share, respectively) (438,761) (1,102,867)
Class C ($0.27 and $0.52 per share, respectively) (134,414) (276,969)
Class Y ($0.37 and $0.74 per share, respectively) (89,588) (147,486)
----------- -----------
Total distributions to shareowners $(1,580,890) $(3,377,363)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $17,282,479 $56,130,051
Reinvestment of distributions 1,336,405 2,856,732
Cost of shares repurchased (22,827,909) (50,162,172)
----------- -----------
Net increase (decrease) in net assets resulting
from Fund share transactions $(4,209,025) $ 8,824,611
----------- -----------
Net increase in net assets $ 3,338,156 $ 5,677,816
NET ASSETS:
Beginning of period 84,124,836 78,447,020
----------- -----------
End of period (including accumulated undistributed net
investment income of $198,263 and $190,574,
respectively) $87,462,992 $84,124,836
=========== ===========
The accompanying notes are an integral part of these financial statements. 15
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended 6/30/03 and the Year Ended 12/31/02
'03 Shares '03 Amount
(unaudited) (unaudited) '02 Shares '02 Amount
CLASS A
Shares sold 638,868 $ 9,903,827 1,589,375 $25,219,955
Reinvestment of distributions 52,598 825,749 104,380 1,655,498
Less shares repurchased (833,929) (13,002,038) (1,311,752) (20,085,837)
-------- ----------- ---------- -----------
Net increase (decrease) (142,463) $(2,272,462) 382,003 $ 6,789,616
======== =========== ========== ===========
CLASS B
Shares sold 263,096 $ 4,093,723 1,262,820 $20,177,940
Reinvestment of distributions 21,789 338,652 53,916 851,204
Less shares repurchased (469,257) (7,339,583) (1,475,871) (22,257,992)
-------- ----------- ---------- -----------
Net decrease (184,372) $(2,907,208) (159,135) $(1,228,848)
======== =========== ========== ===========
CLASS C
Shares sold 196,231 $ 3,075,363 573,021 $ 9,117,393
Reinvestment of distributions 6,536 102,222 14,085 222,382
Less shares repurchased (149,766) (2,349,382) (500,057) (7,470,836)
-------- ----------- ---------- -----------
Net increase 53,001 $ 828,203 87,049 $ 1,868,939
======== =========== ========== ===========
CLASS Y
Shares sold 13,249 $ 209,566 102,295 $ 1,614,763
Reinvestment of distributions 4,451 69,782 8,068 127,648
Less shares repurchased (8,900) (136,906) (23,013) (347,507)
-------- ----------- ---------- -----------
Net increase 8,800 $ 142,442 87,350 $ 1,394,904
======== =========== ========== ===========
16 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Six Months Ended
6/30/03 Year Ended
CLASS A (unaudited) 12/31/02
Net asset value, beginning of period $ 15.30 $ 15.38
------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.32 $ 0.57
Net realized and unrealized gain (loss) on investments 1.41 0.00(a)
------- -------
Net increase (decrease) from investment operations $ 1.73 $ 0.57
Distributions to shareowners:
Net investment income (0.33) (0.65)
Net realized gain - -
Tax return of capital - -
------- -------
Net increase (decrease) in net asset value $ 1.40 $ (0.08)
------- -------
Net asset value, end of period $ 16.70 $ 15.30
======= =======
Total return* 11.46% 3.58%
Ratio of net expenses to average net assets+ 1.73%** 1.67%
Ratio of net investment income to average net assets+ 4.12%** 3.70%
Portfolio turnover rate 29%** 39%
Net assets, end of period (in thousands) $46,654 $44,904
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 1.73%** 1.67%
Net investment income 4.12%** 3.70%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 1.73%** 1.67%
Net investment income 4.12%** 3.70%
Year Ended Year Ended Year Ended Year Ended
CLASS A 12/31/01 12/31/00 12/31/99 12/31/98
Net asset value, beginning of period $ 15.04 $ 12.18 $ 13.46 $ 17.81
------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.38 $ 0.64 $ 0.65 $ 0.56
Net realized and unrealized gain (loss) on investments 0.70 2.86 (1.28) (4.05)
------- ------- ------- -------
Net increase (decrease) from investment operations $ 1.08 $ 3.50 $ (0.63) $ (3.49)
Distributions to shareowners:
Net investment income (0.74) (0.50) (0.60) (0.51)
Net realized gain - - - (0.27)
Tax return of capital - (0.14) (0.05) (0.08)
------- ------- ------- -------
Net increase (decrease) in net asset value $ 0.34 $ 2.86 $ (1.28) $ (4.35)
------- ------- ------- -------
Net asset value, end of period $ 15.38 $ 15.04 $ 12.18 $ 13.46
======= ======= ======= =======
Total return* 7.47% 29.31% (4.70)% (19.77)%
Ratio of net expenses to average net assets+ 1.58% 1.65% 1.69% 1.69%
Ratio of net investment income to average net assets+ 4.31% 4.56% 4.45% 3.29%
Portfolio turnover rate 37% 25% 39% 11%
Net assets, end of period (in thousands) $39,263 $43,129 $40,113 $67,619
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 1.58% 1.65% 1.83% 1.69%
Net investment income 4.31% 4.56% 4.31% 3.29%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 1.57% 1.63% 1.67% 1.67%
Net investment income 4.32% 4.58% 4.47% 3.31%
(a) 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.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 17
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Six Months Ended
6/30/03 Year Ended
CLASS B (unaudited) 12/31/02
Net asset value, beginning of period $ 15.17 $ 15.25
------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.24 $ 0.43
Net realized and unrealized gain (loss) on investments 1.42 0.02
------- -------
Net increase (decrease) from investment operations $ 1.66 $ 0.45
Distributions to shareowners:
Net investment income (0.26) (0.53)
Net realized gain - -
Tax return of capital - -
------- -------
Net increase (decrease) in net asset value $ 1.40 $ (0.08)
------- -------
Net asset value, end of period $ 16.57 $ 15.17
======= =======
Total return* 11.06% 2.84%
Ratio of net expenses to average net assets+ 2.58%** 2.40%
Ratio of net investment income to average net assets+ 3.23%** 2.90%
Portfolio turnover rate 29%** 39%
Net assets, end of period (in thousands) $27,659 $28,121
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 2.58%** 2.40%
Net investment income 3.23%** 2.90%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 2.58%** 2.40%
Net investment income 3.23%** 2.90%
Year Ended Year Ended Year Ended Year Ended
CLASS B 12/31/01 12/31/00 12/31/99 12/31/98
Net asset value, beginning of period $ 14.94 $ 12.11 $ 13.38 $ 17.70
------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.54 $ 0.52 $ 0.52 $ 0.45
Net realized and unrealized gain (loss) on investments 0.39 2.87 (1.25) (4.03)
------- ------- ------- -------
Net increase (decrease) from investment operations $ 0.93 $ 3.39 $ (0.73) $ (3.58)
Distributions to shareowners:
Net investment income (0.62) (0.43) (0.49) (0.42)
Net realized gain - - - (0.27)
Tax return of capital - (0.13) (0.05) (0.05)
------- ------- ------- -------
Net increase (decrease) in net asset value $ 0.31 $ 2.83 $ (1.27) $ (4.32)
------- ------- ------- -------
Net asset value, end of period $ 15.25 $ 14.94 $ 12.11 $ 13.38
====== ======= ======= =======
Total return* 6.42% 28.50% (5.45)% (20.36)%
Ratio of net expenses to average net assets+ 2.36% 2.39% 2.45% 2.45%
Ratio of net investment income to average net assets+ 3.50% 3.82% 3.75% 2.77%
Portfolio turnover rate 37% 25% 39% 11%
Net assets, end of period (in thousands) $30,699 $35,848 $33,069 $55,407
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 2.36% 2.39% 2.59% 2.45%
Net investment income 3.50% 3.82% 3.61% 2.77%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 2.36% 2.38% 2.44% 2.44%
Net investment income 3.50% 3.83% 3.76% 2.78%
* 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.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
18 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Six Months Ended
6/30/03 Year Ended
CLASS C (unaudited) 12/31/02
Net asset value, beginning of period $15.20 $15.28
------ ------
Increase (decrease) from investment operations:
Net investment income $ 0.29 $ 0.44
Net realized and unrealized gain (loss) on investments 1.38 (0.00)(a)
------ ------
Net increase (decrease) from investment operations $ 1.67 $ 0.44
Distributions to shareowners:
Net investment income (0.27) (0.52)
Net realized gain - -
Tax return of capital - -
------ ------
Net increase (decrease) in net asset value $ 1.40 $(0.08)
------ ------
Net asset value, end of period $16.60 $15.20
====== ======
Total return* 11.11% 2.79%
Ratio of net expenses to average net assets+ 2.48%** 2.46%
Ratio of net investment income to average net assets+ 3.38%** 2.95%
Portfolio turnover rate 29%** 39%
Net assets, end of period (in thousands) $8,993 $7,429
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 2.48%** 2.46%
Net investment income 3.38%** 2.95%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 2.48%** 2.46%
Net investment income 3.38%** 2.95%
Year Ended Year Ended Year Ended Year Ended
CLASS C 12/31/01 12/31/00 12/31/99 12/31/98
Net asset value, beginning of period $14.96 $12.12 $13.37 $ 17.70
------ ------ ------ -------
Increase (decrease) from investment operations:
Net investment income $ 0.55 $ 0.51 $ 0.52 $ 0.45
Net realized and unrealized gain (loss) on investments 0.41 2.87 (1.24) (4.04)
------ ------ ------ -------
Net increase (decrease) from investment operations $ 0.96 $ 3.38 $(0.72) $ (3.59)
Distributions to shareowners:
Net investment income (0.64) (0.42) (0.48) (0.42)
Net realized gain - - - (0.27)
Tax return of capital - (0.12) (0.05) (0.05)
------ ------ ------ -------
Net increase (decrease) in net asset value $ 0.32 $ 2.84 $(1.25) $ (4.33)
------ ------ ------ -------
Net asset value, end of period $15.28 $14.96 $12.12 $ 13.37
====== ====== ====== =======
Total return* 6.63% 28.42% (5.41)% (20.38)%
Ratio of net expenses to average net assets+ 2.28% 2.40% 2.52% 2.41%
Ratio of net investment income to average net assets+ 3.57% 3.78% 3.63% 2.67%
Portfolio turnover rate 37% 25% 39% 11%
Net assets, end of period (in thousands) $6,136 $6,276 $6,566 $12,735
Ratios with no waiver of management fees by PIM and no
reduction for fees paid indirectly:
Net expenses 2.28% 2.40% 2.66% 2.41%
Net investment income 3.57% 3.78% 3.49% 2.67%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 2.27% 2.38% 2.51% 2.40%
Net investment income 3.58% 3.80% 3.64% 2.68%
(a) 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.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 19
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Six Months Ended
6/30/03 Year Ended
CLASS Y (a) (unaudited) 12/31/02
Net asset value, beginning of period $15.27 $15.35
------ ------
Increase (decrease) from investment operations:
Net investment income $ 0.21 $ 0.66
Net realized and unrealized gain (loss) on investments 1.57 (0.00)(b)
------ ------
Net increase (decrease) from investment operations $ 1.78 $ 0.66
Distributions to shareowners:
Net investment income (0.37) (0.74)
Net realized gain - -
Tax return of capital - -
------ ------
Net increase (decrease) in net asset value $ 1.41 $(0.08)
------ ------
Net asset value, end of period $16.68 $15.27
====== ======
Total return* 11.83% 4.21%
Ratio of net expenses to average net assets+ 1.11%** 1.10%
Ratio of net investment income to average net assets+ 4.84%** 4.39%
Portfolio turnover rate 29%** 39%
Net assets, end of period (in thousands) $4,158 $3,671
Ratios with no waiver of management fees by PIM and
no reduction for fees paid indirectly:
Net expenses 1.11%** 1.10%
Net investment income 4.84%** 4.39%
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 1.11%** 1.10%
Net investment income 4.84%** 4.39%
Year Ended Year Ended Year Ended 4/9/98 to
CLASS Y (a) 12/31/01 12/31/00 12/31/99 12/31/98
Net asset value, beginning of period $15.01 $12.16 $13.46 $ 17.52
------ ------ ------ -------
Increase (decrease) from investment operations:
Net investment income $ 0.63 $ 0.72 $ 0.70 $ 0.47
Net realized and unrealized gain (loss) on investments 0.52 2.84 (1.25) (3.76)
------ ------ ------ -------
Net increase (decrease) from investment operations $ 1.15 $ 3.56 $(0.55) $ (3.29)
Distributions to shareowners:
Net investment income (0.81) (0.55) (0.70) (0.44)
Net realized gain - - - (0.27)
Tax return of capital - (0.16) (0.05) (0.06)
------ ------ ------ -------
Net increase (decrease) in net asset value $ 0.34 $ 2.85 $(1.30) $ (4.06)
------ ------ ------ -------
Net asset value, end of period $15.35 $15.01 $12.16 $ 13.46
====== ====== ====== =======
Total return* 8.00% 29.99% (4.10)% (18.78)%
Ratio of net expenses to average net assets+ 1.12% 1.02% 1.10% 1.21%**
Ratio of net investment income to average net assets+ 4.36% 5.16% 5.14% 4.31%**
Portfolio turnover rate 37% 25% 39% 11%**
Net assets, end of period (in thousands) $2,349 $1,196 $ 907 $ 1,362
Ratios with no waiver of management fees by PIM and
no reduction for fees paid indirectly:
Net expenses 1.12% 1.02% 1.24% 1.21%**
Net investment income 4.36% 5.16% 5.00% 4.31%**
Ratios with waiver of management fees and reduction for fees
paid indirectly:
Net expenses 1.11% 1.02% 1.10% 1.21%**
Net investment income 4.37% 5.16% 5.14% 4.31%**
(a) Class Y shares were first publicly offered on April 9, 1998.
(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.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
20 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 6/30/03 (unaudited)
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Real Estate Shares (the Fund) is a Delaware business trust registered
under the Investment Company Act of 1940 as a diversified, open-end management
investment company. The investment 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 the level of transfer agent and distribution fees
may differ among classes. Class A, Class B and Class C shareowners have
exclusive voting rights with respect to the distribution plan for each class.
There is no distribution plan for Class Y shares.
The Fund's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America that
require the management of the Fund to, among other things, make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund, which are in conformity with those generally accepted in the
investment company industry.
A. Security Valuation
Security transactions are recorded as of trade date. The net asset value is
computed once daily, on each day the New York Stock Exchange is open, as of
the close of regular trading on the Exchange. In computing the net asset
value, securities are valued at the last sale price on the principal
exchange where they are traded. Securities that have not traded on the date
of valuation, or securities for which sale prices are not generally
reported, are valued at the mean between the last bid and asked prices.
Securities for which market quotations are not readily available are valued
at their fair values as determined by, or under the direction of, the Board
of Trustees. Dividend income is recorded on the ex-dividend
21
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 6/30/03 (unaudited) (continued)
- --------------------------------------------------------------------------------
date, except that certain dividends from foreign securities where the
ex-dividend date may have passed are recorded as soon as the Fund is
informed of the ex-dividend data in exercise of reasonable diligence.
Interest income, including interest on income bearing cash accounts, is
recorded on the accrual basis. Temporary cash investments are valued at
amortized cost.
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 by
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.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes. It
is the Fund's practice to first select for sale those securities that have
the highest cost and also qualify for long-term capital gain or loss
treatment for tax purposes.
B. 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 characterization of distributions to shareowners for financial reporting
purposes is determined in accordance with federal income tax rules.
Therefore, the source of the Fund's distributions may be shown in the
accompanying financial statements as either from or in excess of net
investment income or net realized gain on investment transactions, or from
paid-in capital, depending on the type of book/tax differences that may
exist.
22
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 current year distributions paid will be determined at
the end of the current fiscal year. The tax character of distributions paid
during the year ended December 31, 2002 were as follows:
- --------------------------------------------------------------------------------
2002
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $3,377,363*
Long-term capital gain -
----------
Total $3,377,363*
----------
- --------------------------------------------------------------------------------
*Included in the Fund's distributions from ordinary income for the year ended
December 31, 2002 is $993,124 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 components of distributable earnings on a federal
income tax basis at December 31, 2002. These amounts do not include the
capital loss carryforward.
- --------------------------------------------------------------------------------
2002
- --------------------------------------------------------------------------------
Undistributed ordinary income $ -
Undistributed long-term gain
Unrealized appreciation 4,301,961
----------
Total $4,301,961
----------
- --------------------------------------------------------------------------------
23
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 6/30/03 (unaudited) (continued)
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
C. Fund Shares
The Fund records sales and repurchases of its shares as of 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), earned $9,797 in underwriting commissions on the sale
of Fund shares during the six months ended June 30, 2003.
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.
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.
F. Security 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
dividends on the securities loaned, and gain or loss in the fair value of
the securities loaned that may occur during
24
Pioneer Real Estate Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 fair value of the collateral is adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
value of loaned securities and cash collateral at period end are disclosed
on the balance sheet. The Fund invests cash collateral in the Securities
Lending Investment Fund, which is managed by Brown Brothers Harriman & Co.,
the Fund's custodian.
2. Management Agreement
Pioneer Investment Management, Inc. (PIM), the Fund's investment adviser,
manages the Fund's portfolio and is a wholly owned indirect subsidiary of
UniCredito Italiano. Management fees are calculated daily at the annual rate of
0.80% of the Fund's average daily net assets.
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 June 30, 2003, $66,465 was payable to PIM
related to management fees, administrative fees and certain other services.
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 $16,597 in transfer agent
fees payable to PIMSS at June 30, 2003.
4. Distribution Plans
The Fund adopted Plans 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 under 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
25
Pioneer Real Estate Shares
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NOTES TO FINANCIAL STATEMENTS 6/30/03 (unaudited) (continued)
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account maintenance services or distribution services with regard to Class B
and Class C shares. Included in due to affiliates is $44,138 in distribution
fees payable to PFD at June 30, 2003.
In addition, redemptions of each class of shares (except Class Y shares) may be
subject to a contingent deferred sales charge (CDSC). A CDSC of 1.00% may be
imposed on redemptions of certain net asset value purchases of Class A shares
within one year of purchase. Class B shares that are redeemed within six years
of purchase are subject to a CDSC at declining rates beginning at 4.00%, based
on the lower of cost or market value of shares being redeemed. Redemptions of
Class C shares within one year of purchase are subject to a CDSC of 1.00%.
Proceeds from the CDSCs are paid to PFD. For the six months ended June 30,
2003, CDSCs in the amount of $23,269 were paid to PFD.
5. Expense Offsets
The Fund has entered into certain expense offset arrangements resulting in a
reduction in the Fund's total expenses. For the six months ended June 30, 2003,
the Fund's expenses were reduced by $1,482 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 six months ended
June 30, 2002, the Fund had no borrowings under this agreement.
26
Pioneer Real Estate Shares
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TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Trustees Officers
John F. Cogan, Jr., Chairman John F. Cogan, Jr., President
Mary K. Bush Osbert M. Hood, Executive
Richard H. Egdahl, M.D. Vice President*
Margaret B.W. Graham Vincent Nave, Treasurer
Osbert M. Hood* Joseph P. Barri, Secretary
Marguerite A. Piret
Stephen K. West
John Winthrop
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management
Shareholder Services, Inc.
*Mr. Hood was elected Trustee and Executive Vice President on June 3, 2003.
Proxy Voting and Procedures of the Fund are available without charge, upon
request, by calling our toll free number (1-800-225-6292). This information is
also on the Securities and Exchange Commission's web site at
http://www.sec.gov.
27
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RETIREMENT PLANS FROM PIONEER
- --------------------------------------------------------------------------------
Pioneer has a long history of helping people work toward their retirement
goals, offering plans suited to the individual investor and businesses of all
sizes. For more information on Pioneer retirement plans, contact your
investment professional, or call Pioneer at 1-800-622-0176.
Individual Retirement Accounts (IRAs)
Traditional IRA*
For anyone under age 70 1/2 earning income. Individuals can contribute up to
$3,000 annually. Earnings are tax-deferred, and contributions may be
tax-deductible.
Roth IRA*
Available to single individuals earning less than $110,000 in income annually,
and married couples with joint income less than $160,000. Contributions of up
to $3,000 a year are not tax-deductible, but all earnings are tax-free for
qualified withdrawals. Distributions are tax and penalty-free if certain
conditions are met.
Employer-Sponsored Plans
Uni-K Plan*
A 401(k) plan designed specifically for any business that employs only owners
and their spouses. Participants can make salary deferral contributions up to
$11,000 per year. In addition, each year the business may contribute up to 25%
of pay.
401(k) Plan*
Allows employees to make pre-tax contributions through payroll deduction, up to
$11,000 per year. Employers' contributions are discretionary. The 401(k) offers
companies maximum flexibility.
SIMPLE IRA Plan*
The Savings Incentive Match PLan for Employees (SIMPLE) is designed for
employers with 100 or fewer eligible employees. Employees can decide whether to
contribute. Employers must contribute.
Most retirement plan withdrawals must meet specific conditions to avoid
penalties.
* Special Catch-Up Provisions are available to individuals age 50 and older to
contribute additional amounts to their retirement accounts. For more
information, call our Retirement Plans Information line at 1-800-622-0176.
28
403(b) Plan*
Also known as a Tax-Sheltered Account (TSA), this plan lets employees of public
schools, non-profit hospitals and other tax-exempt organizations make pre-tax
contributions through payroll deduction.
SEP-IRA
The Simplified Employee Pension (SEP) plan lets self-employed people and
small-business owners make tax-deductible contributions of up to 25% of income,
while maintaining complete contribution flexibility each year.
Profit Sharing Plan
Companies can decide each year whether - and how much - to contribute to
participants, up to 25% of each participant's pay. Can include vesting
schedules that are not available with a SEP-IRA.
Age-Based Profit Sharing Plan
Employer contributions are flexible, but are based on a formula using age and
salary. Each year, a business can contribute up to 25% of the total eligible
payroll.
Money Purchase Pension Plan (MPP)
Allows employer contributions, up to 25% of pay annually. Companies must
contribute a fixed percentage of pay each year.
Defined Benefit Pension Plan
Requires a business to contribute enough each year to fund a specific future
benefit. Most beneficial to older employees who need to accumulate assets
rapidly.
Most retirement plan withdrawals must meet specific conditions to avoid
penalties.
* Special Catch-Up Provisions are available to individuals age 50 and older to
contribute additional amounts to their retirement accounts. For more
information, call our Retirement Plans Information line at 1-800-622-0176.
29
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
This report must be preceded or accompanied by a current
Fund prospectus.
[PIONEER LOGO]
Investments(R)
Pioneer Investment Management, Inc.
60 State Street 13711-00-0803
Boston, Massachusetts 02109 (C) 2003 Pioneer Funds Distributor, Inc.
www.pioneerfunds.com Underwriter of Pioneer mutual funds, Member SIPC
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.
Not applicable for semiannual reports; to be answered on annual submissions
after July 15, 2003.
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.
(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)).
(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 for semiannual reports; to be answered on annual submissions
after July 15, 2003.
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.
(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.
(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.
(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.
(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.
(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.
(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.
(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.
(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.
Not applicable for semiannual reports; to be answered on annual submissions
after December 15, 2003.
ITEMS 5-6. [RESERVED]
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. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation of
these
controls and procedures as of a date within 90 days prior to the filing date of
this report.
(b) There were no significant changes in the registrants 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 10. 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.
Not applicable.
(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 August 25, 2003
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 August 25, 2003
By (Signature and Title)* /s/ Vincent Nave
Vincent Nave, Treasurer
Date August 25, 2003
* Print the name and title of each signing officer under his or her signature.