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 811-10491
---------------------
Nuveen Real Estate Income Fund
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
-------------------
Date of fiscal year end: December 31
------------------
Date of reporting period: June 30, 2004
------------------
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 STOCKHOLDERS.
SEMIANNUAL REPORT JUNE 30, 2004
Nuveen Investments
Closed-End
Exchange-Traded
Funds
NUVEEN REAL ESTATE INCOME FUND
JRS
Photo of: Man and woman sitting on porch.
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HIGH CURRENT INCOME FROM A PORTFOLIO OF COMMERCIAL REAL ESTATE INVESTMENTS
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Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Chairman's
LETTER TO SHAREHOLDERS
I am very pleased to report that over the first six months of 2004 your Fund
continued to provide you with an attractive monthly distribution and diversified
exposure to the real estate investment marketplace.
In addition to providing regular monthly income, we believe that a real estate
oriented investment like your Fund also may offer opportunities to reduce the
risk of your overall investment portfolio. This is because the value of the
Fund's holdings may move differently than the prices of other common stocks,
bonds or mutual funds you may own. Since one part of your portfolio may be going
up when another is going down, portfolio diversification may reduce your overall
risk. Your financial advisor can explain the advantages of portfolio
diversification in more detail. I urge you to contact him or her soon for more
information on this important investment strategy.
WE BELIEVE THAT A REAL ESTATE ORIENTED INVESTMENT LIKE YOUR FUND ALSO MAY OFFER
OPPORTUNITIES TO REDUCE THE RISK OF YOUR OVERALL INVESTMENT PORTFOLIO.
I also urge you to consider receiving future Fund reports and other Fund
information by e-mail and the Internet. Not only will you be able to receive the
information faster, but this also may help lower your Fund's expenses. Sign up
is quick and easy - see the inside front cover of this report for step-by-step
instructions.
For more than 100 years, Nuveen has specialized in offering quality investments
such as your Fund to those seeking to accumulate and preserve wealth. Our
commitment to careful research, constant surveillance and judicious trading by
our seasoned portfolio management team has never been stronger. Our mission
continues to be to assist you and your financial advisor by offering the
investment solutions and services that can help you secure your long-term
financial objectives. We thank you for choosing us as a partner as you work
toward that goal.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
August 16, 2004
Nuveen Real Estate Income Fund
(JRS)
Portfolio Managers'
PERSPECTIVE
The Nuveen Real Estate Income Fund's portfolio is managed by a team of real
estate investment professionals at Security Capital Research & Management
Incorporated, a part of JPMorgan Fleming Asset Management. Tony Manno and Ken
Statz, who each have more than 21 years' experience in managing real estate
investments, lead the team. Here they review the economic environment and
performance of the Fund.
WHAT WERE THE GENERAL ECONOMIC AND MARKET CONDITIONS DURING THE SIX-MONTH PERIOD
ENDED JUNE 30, 2004?
Entering this calendar year, a prolonged period of economic weakness had left
many commercial real estate operating markets and property sectors around the
United States under significant stress. Especially affected were those sectors
for which business and job creation play a key role in creating and sustaining
marginal demand--apartment buildings, office buildings and hotels. In contrast,
malls and smaller shopping centers, which tend to be more influenced by consumer
behavior, continued to experience healthy operating fundamentals.
During the first half of 2004, U.S. economic activity, especially as it relates
to job creation, improved markedly. New jobs began to emerge with consistency,
and even accelerated through the period, raising the possibility that, from an
operating perspective, a new cycle may be beginning for the hardest hit real
estate property types. With new supply additions having remained largely in
balance during the downturn, increases in demand may ultimately lead to higher
occupancy levels and potentially increased cash flow and dividend coverage for
many real estate operating companies.
Accompanying the operating inflection point reached this period was a shift in
interest rate expectations--one that we believe had a dramatic affect on
shorter-term-focused real estate securities investors. Unusually high volatility
and trading volumes for real estate securities prevailed in the period, with
significant dispersion of performance among property and security types.
GIVEN THESE CONDITIONS, WHAT GENERAL STRATEGIES AND SPECIFIC TACTICS DID YOU
EMPLOY TO MANAGE THE FUND OVER THIS SIX-MONTH PERIOD?
During the reporting period, we continued to focus on those securities that we
believed were best positioned to generate sustainable income and potential price
appreciation. In managing the portfolio, we sought to maintain significant
diversification while taking into account company credit quality issues, sector
and geographic exposure and security-type allocations. Every decision was based
on a multi-layered analysis of the company, the real estate it owns, its
management, and the relative price of the security.
4
The ability to shift allocations between preferred and common stocks based on
the relative attractiveness of these two distinct markets was an important
tactic in managing JRS for income and long-term capital appreciation. As the
potential for increasing interest rates developed over the period, our research
indicated that the greatest relative valuation risk was among many relatively
higher yielding common stocks for which prices appeared excessive. As a result,
we kept the portfolio's significant (30%+) allocation to preferred securities
relatively stable and endeavored to tilt the common stock allocation toward the
property sectors and companies exhibiting the most reasonable valuations, as
well as the potential to benefit from an improving economy.
WHAT RESULTS DID YOU ACHIEVE OVER THE SIX-MONTH PERIOD?
Fund performance results, as well as the performance of a relevant benchmark,
are shown in the accompanying table.
TOTAL RETURNS ON NET ASSET VALUE
For periods ended June 30, 2004
(cumulative)
6-MONTH 1-YEAR
-----------------------------------------------------------
JRS 3.92% 24.63%
-----------------------------------------------------------
Dow Jones Wilshire 6.96% 29.21%
Real Estate Securities
Index1
-----------------------------------------------------------
Past performance is not predictive of future results.
For more information, see the Performance Overview page.
For the six months ended June 30, 2004, the Fund produced a total return of
3.92%, compared with 6.96% for the Dow Jones Wilshire Index. Many of the largest
contributors to the Fund's underperformance relative to the index over the
six-month reporting period were the same securities that had, over a longer
term, been the Fund's best performers. In our view, these securities continued
to exhibit strong dividend coverage and long-term appreciation potential.
Beginning in 2003, we have been gradually and selectively shifting the
portfolio's property type weightings from a largely defensive posture to one
that better positions it with respect to a growing economy, at all times
remaining highly focused on the current income objectives of the Fund. Though we
began the shift in 2003, from the beginning of this reporting period to June 30
it resulted in an increase in allocation toward more
1 The Dow Jones Wilshire Real Estate Securities Index is an unmanaged index
comprised of publicly-traded REITs and other real estate operating
companies.
5
cyclically sensitive apartment companies (from 17.3% of the portfolio to 18.9%),
and a decrease in allocation to the more defensive shopping center sector (from
12.3% to 11.0%).
Returns by property sector in the second quarter of 2004 began to bear out the
integrity of this research based theme, with apartment companies substantially
outperforming the rest of the real estate securities universe, while shopping
center companies underperformed (all according to the Dow Jones Wilshire Real
Estate Securities Index). Alternatively, while our research indicated near-term
full valuations for healthcare real estate companies, given their relatively
high and well covered dividends, and the high priority current income takes in
the objectives of the Fund, we maintained positions in this defensive oriented
sector. On a total return basis, these companies were among the largest
contributors to the portfolio's recent underperformance.
It is important to note that while JRS has an active program of investing in
preferred stocks, these are not included in the Dow Jones Wilshire index. As
noted, we maintained a sizeable position of preferred stocks in the Fund's
portfolio over this six-month reporting period. While we believed it helped the
Fund's overall risk profile, it did create a drag on performance when compared
with an all common stock portfolio like the index.
In addition to owning preferred stocks, the Fund has issued its own preferred
shares, called FundPreferred(R). This provides a degree of financial leverage
that can increase share price volatility, but also can enhance Fund returns and
supplement the income available to pay common shareholder distributions. This is
one reason why, over the six-month reporting period, the Fund continued to
provide a stable monthly distribution of $0.115 per share. The Fund seeks to
maintain a stable monthly distribution level. The Fund's Board of Trustees has
approved a policy that if, for any monthly distribution, the Fund's net
investment income and net realized capital gains applicable to common shares are
less than the amount of the distribution, the difference may be drawn from the
Fund's assets. The final determination of the source of all distributions for
the year will be made after the end of the year.
As of June 30, 2004, the Fund was trading at a -9.56% discount to its net asset
value, compared with an average discount of about -6.5% for the entire six-month
period.
6
Nuveen Real Estate Income Fund
JRS
Performance
OVERVIEW As of June 30, 2004
FUND SNAPSHOT
------------------------------------
Share Price $16.83
------------------------------------
Common Share Net Asset Value $18.61
------------------------------------
Premium/(Discount) to NAV -9.56%
------------------------------------
Net Assets Attributable to
Common Shares ($000) $523,521
------------------------------------
TOP FIVE COMMON STOCK ISSUERS
(as a % of total investments)
------------------------------------
Mack-Cali Realty Corporation 8.0%
------------------------------------
The Macerich Company 7.2%
------------------------------------
Arden Realty, Inc. 5.9%
------------------------------------
HRPT Properties Trust 5.2%
------------------------------------
Nationwide Health
Properties, Inc. 5.2%
------------------------------------
TOP FIVE PREFERRED STOCK ISSUERS
(as a % of total investments)
------------------------------------
Crescent Real Estate Equities
Company 6.2%
------------------------------------
Apartment Investment &
Management Company 4.9%
------------------------------------
Home Properties, Inc. 3.8%
------------------------------------
Federal Realty Investment Trust 3.1%
------------------------------------
LaSalle Hotel Properties 2.3%
------------------------------------
TOP FIVE INDUSTRIES
(as a % of total investments)
------------------------------------
Office 37.1%
------------------------------------
Apartments 18.9%
------------------------------------
Regional Malls 12.1%
------------------------------------
Shopping Centers 11.0%
------------------------------------
Healthcare 9.8%
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 11/15/01)
-------------------------------------
ON SHARE PRICE ON NAV
-------------------------------------
6-Month
(cumulative) -6.59% 3.92%
-------------------------------------
1-Year 7.65% 24.63%
-------------------------------------
Since
Inception 13.43% 19.94%
-------------------------------------
Pie Chart:
PORTFOLIO HOLDINGS BY TYPE OF INVESTMENT
(as a % of total investments)
Common Stocks 63.6%
Preferred Stocks 36.3%
Short-Term Investments 0.1%
Bar Chart:
2003-2004 MONTHLY DIVIDENDS PER SHARE
Jul 0.115
Aug 0.115
Sep 0.115
Oct 0.115
Nov 0.115
Dec 0.115
Jan 0.115
Feb 0.115
Mar 0.115
Apr 0.115
May 0.115
Jun 0.115
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
7/1/03 17.07
17.22
16.6
16.5
16.43
16.4
17
16.7
17.09
16.96
17.17
16.96
17.3
17.46
17.73
17.81
18.23
17.97
17.32
18
17.94
17.88
18.53
18.75
18.69
18.69
18.94
19.04
18.75
18.26
18.55
19.13
19.11
19.24
19.18
19.3
18
16.77
16.01
15.85
15.15
15.91
16.12
16.69
16.85
16.6
16.17
6/30/04 16.55
7
Shareholder
MEETING REPORT
The annual shareholder meeting was held on January 20, 2004, in Chicago at
Nuveen's headquarters.
JRS
------------------------------------------------------------------------------------------------------------------------------------
Common and
Preferred shares Preferred shares
voting together voting together
as a class as a class
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
William E. Bennett
For 27,207,639 --
Withhold 191,528 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Robert P. Bremner
For 27,210,174 --
Withhold 188,993 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Lawrence H. Brown
For 27,206,506 --
Withhold 192,661 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Jack B. Evans
For 27,221,621 --
Withhold 177,546 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Anne E. Impellizzeri*
For 27,186,544 --
Withhold 212,623 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
William L. Kissick*
For 27,190,186 --
Withhold 208,981 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Thomas E. Leafstrand*
For 27,196,038 --
Withhold 203,129 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Peter R. Sawers*
For 27,201,531 --
Withhold 197,636 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
*Board Member retired effective June 30, 2004.
8
JRS
------------------------------------------------------------------------------------------------------------------------------------
Common and
Preferred shares Preferred shares
voting together voting together
as a class as a class
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
William J. Schneider
For -- 6,606
Withhold -- 3
------------------------------------------------------------------------------------------------------------------------------------
Total -- 6,609
====================================================================================================================================
Timothy R. Schwertfeger
For -- 6,606
Withhold -- 3
------------------------------------------------------------------------------------------------------------------------------------
Total -- 6,609
====================================================================================================================================
Judith M. Stockdale
For 27,203,704 --
Withhold 195,463 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Sheila W. Wellington*
For 27,175,029 --
Withhold 224,138 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT WAS REACHED AS FOLLOWS:
For 26,916,173 --
Against 228,789 --
Abstain 254,205 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
*Board Member retired effective June 30, 2004.
9
Nuveen Real Estate Income Fund (JRS)
Portfolio of
INVESTMENTS June 30, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 84.6% (63.6% OF TOTAL INVESTMENTS)
APARTMENTS - 13.4%
526,300 Amli Residential Properties Trust $ 15,441,642
870,000 Archstone-Smith Trust 25,517,100
516,400 Avalonbay Communities, Inc. 29,186,928
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 12.5%
1,912,300 Nationwide Health Properties, Inc. 36,142,470
1,740,300 Senior Housing Properties Trust 29,219,637
------------------------------------------------------------------------------------------------------------------------------------
HOTEL - 0.9%
492,564 Hersha Hospitality Trust 4,866,532
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 3.6%
517,100 First Industrial Realty Trust, Inc. 19,070,648
------------------------------------------------------------------------------------------------------------------------------------
OFFICE - 34.0%
1,388,800 Arden Realty, Inc. 40,844,608
3,642,100 HRPT Properties Trust 36,457,421
1,351,500 Mack-Cali Realty Corporation 55,925,070
348,100 Maguire Properties, Inc. 8,622,437
1,305,600 Reckson Associates Realty Corporation 35,851,776
------------------------------------------------------------------------------------------------------------------------------------
REGIONAL MALLS - 13.0%
807,600 Glimcher Realty Trust 17,864,112
1,044,100 The Macerich Company 49,981,067
------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTERS - 7.2%
413,800 Federal Realty Investment Trust 17,209,942
880,300 New Plan Excel Realty Trust 20,563,808
------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $322,399,914) 442,765,198
-------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 48.2% (36.3% OF TOTAL INVESTMENTS)
APARTMENTS - 11.7%
Apartment Investment & Management Company:
91,600 Series G, 9.375% 2,372,440
51,050 Series Q, 10.100% 1,337,510
803,500 Series R, 10.000% 21,180,260
380,000 Series U, 7.750% 8,892,000
945,000 Home Properties, Inc. - Series F, 9.000% 26,152,875
51,300 United Dominion Realty Trust - Series B, 8.600% 1,334,313
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED - 8.9%
Crescent Real Estate Equities Company:
1,031,300 Series A (Convertible), 6.750% 20,605,374
850,000 Series B, 9.500% 22,384,750
150,000 Lexington Corporate Properties Trust - Series B, 8.050% 3,769,500
10
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 0.6%
32,558 Nationwide Health Properties, Inc. - Series A, 7.677% $ 3,142,866
------------------------------------------------------------------------------------------------------------------------------------
HOTEL - 5.2%
360,000 Boykin Lodging Company - Series A, 10.500% 9,432,000
592,000 LaSalle Hotel Properties - Series A, 10.250% 15,850,800
82,000 WestCoast Hospitality Corporation - Series A, 9.500% 2,066,400
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 3.3%
497,623 PS Business Parks, Inc. - Series F, 8.750% 13,087,485
162,300 Keystone Property Trust - Series E, 7.375% 4,089,960
------------------------------------------------------------------------------------------------------------------------------------
OFFICE - 7.2%
199,100 Alexandria Real Estate Equities, Inc. - Series B, 9.100% 5,319,952
160,000 Alexandria Real Estate Equities, Inc. - Series C, 8.375% 4,055,008
200,000 Corporate Office Properties Trust - Series G, 8.000% 5,000,000
Highwoods Properties, Inc.:
12,141 Series A, 8.625% 822,528
33,600 Series B, 8.000% 12,687,345
406,000 Maguire Properties, Inc. - Series A, 7.625% 9,804,900
------------------------------------------------------------------------------------------------------------------------------------
REGIONAL MALLS - 3.2%
87,000 CBL & Associates Properties, Inc. - Series B, 8.750% 4,593,600
113,000 Glimcher Realty Trust - Series F, 8.750% 2,858,900
The Mills Corp.:
115,200 Series C. 9.000% 3,055,680
213,000 Series E, 8.750% 5,582,730
24,500 Taubman Centers, Inc. - Series A, 8.300% 608,825
------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTERS - 7.4%
Developers Diversified Realty Corporation:
86,200 Series F, 8.600% 12,192,000
480,000 Series G, 8.000% 2,228,270
808,000 Federal Realty Investment Trust - Series B, 8.500% 21,371,600
125,000 Saul Centers, Inc. - Series A, 8.000% 3,187,500
------------------------------------------------------------------------------------------------------------------------------------
STORAGE - 0.7%
76,900 Public Storage Inc. - Series A 2,007,859
Shurgard Storage Centers, Inc.:
30,000 Series C, 8.700% 643,290
24,600 Series D, 8.750% 758,700
------------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (cost $237,369,428) 252,477,220
--------------------------------------------------------------------------------------------------------------------
11
Nuveen Real Estate Income Fund (JRS) (continued)
Portfolio of INVESTMENTS June 30, 2004 (Unaudited)
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (COST $1,061,000) - 0.2% (0.1% OF TOTAL INVESTMENTS)
$ 1,061 State Street Bank Repurchase Agreement, 1.170%, dated 6/30/04, due 7/01/04, $ 1,061,000
============= repurchase price $1,061,034, collateralized by U.S. Treasury Bonds
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $560,830,342) - 133.0% 696,303,418
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.1%) (782,752)
--------------------------------------------------------------------------------------------------------------------
Taxable Auctioned Preferred Shares, at Liquidation Value - (32.9%) (172,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 523,520,666
====================================================================================================================
(1) All percentages in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
See accompanying notes to financial statements.
12
Statement of
ASSETS AND LIABILITIES June 30, 2004 (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $560,830,342) $696,303,418
Cash 598
Receivables:
Dividends 4,026,340
Interest 34
Other assets 29,089
------------------------------------------------------------------------------------------------------------------------------------
Total assets 700,359,479
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Interest rate swaps, at value 4,378,955
Accrued expenses:
Management fees 334,074
Other 103,992
Taxable Auctioned Preferred share dividends payable 21,792
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,838,813
------------------------------------------------------------------------------------------------------------------------------------
Taxable Auctioned Preferred shares, at liquidation value 172,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $523,520,666
====================================================================================================================================
Common shares outstanding 28,136,413
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 18.61
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 281,364
Paid-in surplus 395,008,674
Undistributed (Over-distribution of) net investment income (5,802,808)
Accumulated net realized gain from investments and interest rate swap transactions 2,939,315
Net unrealized appreciation of investments and interest rate swap transactions 131,094,121
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $523,520,666
====================================================================================================================================
Authorized shares:
Common Unlimited
Taxable Auctioned Preferred Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
13
Statement of
OPERATIONS Six Months Ended June 30, 2004 (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $17,103,200
Interest 33,818
------------------------------------------------------------------------------------------------------------------------------------
Total investment income 17,137,018
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 3,097,369
Taxable Auctioned Preferred shares - auction fees 214,411
Taxable Auctioned Preferred shares - dividend disbursing agent fees 11,602
Shareholders' servicing agent fees and expenses 3,798
Custodian's fees and expenses 62,180
Trustees' fees and expenses 12,312
Professional fees 30,675
Shareholders' reports - printing and mailing expenses 58,682
Stock exchange listing fees 1,281
Investor relations expense 42,321
Other expenses 12,927
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 3,547,558
Custodian fee credit (1,534)
Expense reimbursement (1,040,644)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 2,505,380
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 14,631,638
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain from investments 4,958,741
Net realized gain (loss) from interest rate swap transactions (2,019,426)
Change in net unrealized appreciation of investments 954,726
Change in net unrealized appreciation (depreciation) of interest rate swap transactions 2,841,729
------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 6,735,770
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO TAXABLE AUCTIONED PREFERRED SHAREHOLDERS
From net investment income (1,008,591)
From accumulated net realized gains from investments --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from distributions to Taxable Auctioned Preferred shareholders (1,008,591)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $20,358,817
====================================================================================================================================
See accompanying notes to financial statements.
14
Statement of
CHANGES IN NET ASSETS (Unaudited)
FOR THE PERIOD
11/01/03
SIX MONTHS ENDED THROUGH YEAR ENDED
6/30/04 12/31/03 10/31/03
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 14,631,638 $ 3,420,799 $ 24,030,692
Net realized gain from investments 4,958,741 2,731,047 14,955,847
Net realized gain (loss) from interest rate swap transactions (2,019,426) -- --
Change in net unrealized appreciation of investments 954,726 36,408,836 106,540,733
Change in net unrealized appreciation (depreciation) of interest
rate swap transactions 2,841,729 (30,461) 1,684,638
Distributions to Taxable Auctioned Preferred shareholders:
From net investment income (1,008,591) (205,848) (1,534,591)
From accumulated net realized gains from investments -- (137,777) (666,002)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations 20,358,817 42,186,596 145,011,317
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (19,414,125) (400,409) (27,213,445)
From accumulated net realized gains from investments -- (2,353,670) (11,530,158)
Tax return of capital -- (3,717,296) (1,129,210)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from distributions to
Common shareholders (19,414,125) (6,471,375) (39,872,813)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares issued to shareholders due to reinvestment
of distributions -- 46,398 382,555
Taxable Auctioned Preferred shares offering costs -- -- 3,544
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from
capital share transactions -- 46,398 386,099
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares 944,692 35,761,619 105,524,603
Net assets applicable to Common shares at the beginning of period 522,575,974 486,814,355 381,289,752
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $523,520,666 $522,575,974 $486,814,355
====================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of period $ (5,802,808) $ (11,730) $ (2,826,809)
====================================================================================================================================
See accompanying notes to financial statements.
15
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Real Estate Income Fund (the "Fund") is a non-diversified, closed-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's Common shares are listed on the American Stock
Exchange and trade under the ticker symbol "JRS." The Fund was organized as a
Massachusetts business trust on August 27, 2001.
The Fund seeks to provide high current income by investing primarily in a
portfolio of income-producing common stocks, preferred stocks, convertible
preferred stocks and debt securities issued by real estate companies, such as
Real Estate Investment Trusts ("REITs").
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Securities Valuation
Exchange-listed securities are generally valued at the last sales price on the
securities exchange on which such securities are primarily traded. Securities
traded on a securities exchange for which there are no transactions on a given
day or securities not listed on a securities exchange are valued at the mean of
the closing bid and asked price. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. If it is determined that market prices for a
security are unavailable or inappropriate, the Board of Trustees of the Fund, or
its designee, may establish a fair value for the security. Short-term securities
are valued at amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on an accrual basis (see Dividends and Distributions to Common
Shareholders for REIT income recognition policy).
Income Taxes
The Fund intends to distribute all income and capital gains to shareholders and
to otherwise comply with the requirements of Subchapter M of the Internal
Revenue Code applicable to regulated investment companies. Therefore, no federal
income tax provision is required. Net realized capital gains and ordinary income
distributions made by the Fund are subject to federal taxation.
Dividends and Distributions to Common Shareholders
Dividends to Common shareholders are declared monthly. The Fund's policy is to
pass through to its shareholders, each month, substantially all REIT
distributions it receives, together with other operating income less operating
expenses. REIT distributions received by the Fund are generally comprised of
investment income, long-term and short-term capital gains, and a return of REIT
capital. The actual character of amounts received during the period is not known
until after the fiscal year-end. For the twelve months ended December 31, 2003,
the character of distributions to the Fund from the REITs was 69.69% ordinary
income, 12.66% long-term and short-term capital gains, and 17.65% return of REIT
capital.
16
For the six months ended June 30, 2004, and the fiscal year ended October 31,
2003, the Fund applied a percentage estimate for the breakdown of income type,
to its receipts from the REITs and treated as income in the Statement of
Operations only the amount of ordinary income so calculated. The Fund adjusts
that estimated breakdown of income type (and consequently its net investment
income) as necessary early in the following calendar year when the REITs inform
their shareholders of the actual breakdown of income type. For the fiscal period
ended December 31, 2003, the Fund applied the actual character of distributions
reported by the REITs in which the Fund invests to its receipts from the REITS.
If a REIT held in the portfolio of investments did not report the actual
character of its distributions during the period, the Fund treated the
distributions as ordinary income.
During the six months ended June 30, 2004, the Fund treated each distribution to
its shareholders from the portfolio REITs as being entirely from net investment
income. The Fund will recharacterize those distributions as being from ordinary
income, long-term and short-term capital gains, and return of capital, if
necessary, at the beginning of the subsequent calendar year, based upon the
income type breakdown information conveyed at that time by the REITs whose
securities are held in the Fund's portfolio. Consequently, the financial
statements may reflect an over-distribution of net investment income that is at
least partly attributable to the fact that, as of the date of the financial
statements, some of the amounts received by the Fund from the portfolio REITs,
but none of the dividends paid by the Fund to shareholders from the portfolio
REITs, during the six months ended June 30, 2004, were treated as something
other than ordinary income.
During the fiscal year ended October 31, 2003, the Fund treated each
distribution to its shareholders from the portfolio REITs as being entirely from
net investment income. The Fund recharacterized those distributions as being
from ordinary income, long-term and short-term capital gains, and return of
capital, if necessary, at the beginning of the subsequent calendar year, based
upon the income type breakdown information conveyed at that time by the REITs
whose securities were held in the Fund's portfolio. Recharacterizations are
reflected in the accompanying financial statements. For the fiscal period ended
December 31, 2003, the Fund applied the actual character of distributions
reported by the REITs in which the Fund invests to the distributions paid to the
Fund shareholders.
Commencing with the Fund's September 1, 2004 dividend declaration, payable
October 1, 2004, the Fund intends to make monthly cash distributions to Common
Shareholders of a stated dollar amount (stated in terms of a fixed cents per
Common Share dividend rate) ("Managed Distribution Policy"). The Fund will seek
to maintain a stable dividend level, subject to approval and oversight by the
Fund's Board of Trustees. Distributions will be made only after paying any
accrued dividends or making any redemption or liquidation payments to
FundPreferred shares, if any, and interest and required principal payments on
Borrowings, if any. Under a Managed Distribution Policy, if, for any monthly
distribution, net investment income and net realized capital gain were less than
the amount of the distribution, the difference would be distributed from the
Fund's assets. The final determination of the source of all distributions for
the year will be made after the end of the year.
Distributions to Common shareholders are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
Taxable Auctioned Preferred Shares
The Fund has issued and outstanding 1,720 Series M, 1,720 Series T, 1,720 Series
W and 1,720 Series F, $25,000 stated value Taxable Auctioned Preferred shares.
The dividend rate on each series may change every seven days, as set pursuant to
a dutch auction process by the auction agent, and is payable at or near the end
of each rate period.
17
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
Interest Rate Swap Transactions
The Fund is authorized to enter into hedging transactions, including interest
rate swap transactions. The Fund uses interest rate swaps with the intent to
reduce or eliminate the risk that an increase in short-term interest rates could
have on Common share net earnings as a result of leverage. Interest rate swaps
involve the Fund's agreement with the swap counterparty to pay a fixed rate
payment in exchange for the counterparty paying the Fund a variable rate payment
that is intended to approximate the Fund's variable rate payment obligation on
Taxable Auctioned Preferred shares or any variable rate borrowing. The payment
obligation is based on the notional amount of the swap. Interest rate swaps do
not involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of credit loss with respect to the swap counterparty on
interest rate swaps is limited to the net amount of interest payments that the
Fund is to receive. The Fund has instructed the custodian to segregate assets
with a current value at least equal to the amount of the net payment obligations
under any interest rate swap transactions. Interest rate swap positions are
marked to market daily. Although there are economic advantages of entering into
interest rate swap transactions, there are also additional risks. The Fund helps
manage the credit risks associated with interest rate swap transactions by
entering into agreements only with counterparties the Adviser believes have the
financial resources to honor their obligations and by having the Adviser
continually monitor the financial stability of the swap counterparties.
Due to recent clarification provided by the SEC to regulated investment
companies, effective with the current reporting period, the Fund changed the way
it presents net interest expense on interest rate swap transactions in the
financial statements. As of January 1, 2004, net interest expense amounts paid
are included in "Net realized gain (loss) from interest rate swap transactions".
Net interest expense amounts accrued, but not yet paid, at June 30, 2004, are
included in "Change in net unrealized appreciation (depreciation) of interest
rate swap transactions". Prior to January 1, 2004, net interest expense was
presented in "Expenses" and reported as "Net interest expense on interest rate
swap transactions". The effect of this reclassification had no impact on the
Fund's net assets applicable to Common shares or the tax liability of the Fund
or its shareholders. For the six months ended June 30, 2004, this
reclassification resulted in a $2,322,216 increase to net investment income, a
$2,019,426 decrease to net realized gain (loss) from interest rate swap
transactions and a $302,790 decrease to change in net unrealized appreciation
(depreciation) of interest rate swap transactions.
At June 30, 2004, the Fund had open interest rate swap agreements as follows:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
AMOUNT FIXED RATE FLOATING RATE* DATE (DEPRECIATION)
---------------------------------------------------------------------------------------------
$43,000,000 4.0225% 1.1500% 2/07/05 $ (618,837)
43,000,000 4.8000 1.1500 2/06/07 (1,657,659)
43,000,000 5.1900 1.1500 2/06/09 (2,102,459)
---------------------------------------------------------------------------------------------
$(4,378,955)
=============================================================================================
*Based on LIBOR (London Interbank Offered Rate)
18
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on the Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Offering Costs
Nuveen Investments, LLC has agreed to pay all Common share offering costs (other
than the sales load) that exceed $.03 per Common share. The Fund's share of
Common share offering costs ($843,000) were recorded as a reduction of the
proceeds from the sale of the Common shares.
Costs incurred by the Fund in connection with its offering of Taxable Auctioned
Preferred shares ($2,013,664) were recorded as a reduction to paid-in surplus.
Indemnifications
Under the Fund's organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts that provide general indemnifications to other parties.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual amounts may differ from those estimates.
2. FUND SHARES
There were no share transactions during the six months ended June 30, 2004.
During the two months ended December 31, 2003, 2,658 Common shares were issued
to shareholders due to reinvestment of distributions.
During the fiscal year ended October 31, 2003, 24,199 Common shares were issued
to shareholders due to reinvestment of distributions.
3. SECURITIES TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
six months ended June 30, 2004, aggregated $45,755,176 and $41,035,743,
respectively.
19
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to timing differences in recording income and in recognizing
certain gains and losses on security transactions.
At June 30, 2004, the cost of investments was $560,830,342.
Gross unrealized appreciation and gross unrealized depreciation of investments
at June 30, 2004, were as follows:
--------------------------------------------------------------------------------
Gross unrealized:
Appreciation $136,503,509
Depreciation (1,030,433)
--------------------------------------------------------------------------------
Net unrealized appreciation of investments $135,473,076
================================================================================
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2003, the Fund's last fiscal year end, were as follows:
--------------------------------------------------------------------------------
Undistributed net ordinary income * $--
Undistributed net long-term capital gains --
================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
The tax character of distributions paid during the fiscal years ended December
31, 2003 and October 31, 2003, was designated for purposes of the dividends paid
deduction as follows:
FOR THE TWO MONTHS ENDED
DECEMBER 31, 2003
--------------------------------------------------------------------------------
Distributions from net ordinary income * $3,904,970
Distributions from net long-term capital gains 2,435,010
Tax return of capital 3,717,296
================================================================================
FISCAL YEAR ENDED OCTOBER 31, 2003
--------------------------------------------------------------------------------
Distributions from net ordinary income * $33,787,266
Distributions from net long-term capital gains 7,156,788
Tax return of capital 1,129,210
================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
20
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, at the rates set forth below, which
are based upon the Fund's average daily managed assets. "Managed assets" means
the average daily net assets of the Fund including assets attributable to
Taxable Auctioned Preferred shares and the principal amount of borrowings, if
any.
AVERAGE DAILY MANAGED ASSETS MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $500 million .9000%
For the next $500 million .8750
For the next $500 million .8500
For the next $500 million .8250
For Managed Assets over $2 billion .8000
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Security Capital Research & Management
Incorporated ("Security Capital"), under which Security Capital manages the
investment portfolio of the Fund. Security Capital is compensated for its
services to the Fund from the management fee paid to the Adviser.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
As approved by the Board of Trustees, a complex-wide fee schedule for all Funds
managed by the Adviser and its affiliates went into effect on August 1, 2004.
The implementation of this complex-wide fee schedule is expected to result in a
marginal immediate decrease in the rates (approximately .004%) at which
management fees are to be paid by the Funds. As assets in the Nuveen Fund
complex grow, the management fee rates to be paid by the Funds will decrease
further. Under no circumstances will the complex-wide fee schedule result in an
increase in the rates at which management fees would be paid by the Funds if the
complex-wide fee schedule were not implemented.
For the first ten years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
NOVEMBER 30, NOVEMBER 30,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond November 30, 2011.
21
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
Subadvisor Acquisition
On November 24, 2003, Banc One Investment Advisors Corporation, an indirect,
wholly-owned subsidiary of Bank One Corporation acquired Security Capital.
Pursuant to the Investment Company Act of 1940, the change in ownership of
Security Capital caused the existing sub-advisory agreement to terminate, and
shareholders of the Fund were required to approve a new subadvisory agreement
with Security Capital. At the Fund's annual shareholder meeting on January 20,
2004, shareholders approved the new sub-advisory agreement.
On July 1, 2004, Bank One Corporation was merged with JPMorgan Chase & Co. As a
result of the merger, Security Capital became part of JPMorgan Fleming Asset
Management. JPMorgan Fleming Asset Management is the marketing name for the
asset management business of JPMorgan Chase & Co. Those businesses include
JPMorgan Investment Management Inc. and its affiliates, including, without
limitation, Banc One Investment Advisors Corporation, Banc One High Yield
Partners, LLC, Security Capital Research & Management Incorporated, and JPMorgan
Alternative Asset Management, Inc. As the merger was not deemed to cause a
change in control of the Fund's Sub-Adviser, shareholder approval of a new
sub-advisory agreement was not necessary.
6. SUBSEQUENT EVENT - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Fund declared a distribution of $.1150 per Common share which was paid on
August 2, 2004, to shareholders of record on July 15, 2004.
22
Financial
HIGHLIGHTS (Unaudited)
23
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations
--------------------------------------------------------------------
Distributions Distributions
from Net from
Investment Capital
Income to Gains to
Beginning Net Taxable Taxable
Common Realized/ Auctioned Auctioned
Share Net Unrealized Preferred Preferred
Net Asset Investment Investment Share- Share-
Value Income(a) Gain (Loss) holders+ holders+ Total
=======================================================================================================
1/01/04- 6/30/04(b) $18.57 $ .52 $ .25 $(.04) $ -- $ .73
11/01/03-12/31/03 17.30 .12 1.38 (.01) -- 1.49
11/01/02-10/31/03 13.56 .85 4.38 (.05) (.02) 5.16
11/15/01-10/31/02 14.33 1.02 (.46) (.07) (.02) .47
=======================================================================================================
Less Distributions Total Returns
--------------------------------------------- ----------------------
Offering
Costs and
Net Taxable Based
Investment Capital Auctioned Ending on
Income to Gains to Tax Preferred Common Based Common
Common Common Return Share Share Ending on Share Net
Share- Share- of Underwriting Net Asset Market Market Asset
holders holders Capital Total Discounts Value Value Value** Value**
====================================================================================================================================
1/01/04- 6/30/04(b) $(.69) $ -- $ -- $ (.69) $ -- $18.61 $16.83 (6.59)% 3.92%
11/01/03-12/31/03 (.01) (.08) (.13) (.22) -- 18.57 18.73 6.49 8.69
11/01/02-10/31/03 (.97) (.41) (.04) (1.42) -- 17.30 17.81 35.40 39.80
11/15/01-10/31/02 (.89) (.25) -- (1.14) (.10) 13.56 14.40 3.30 2.09
====================================================================================================================================
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
------------------------------ -----------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
=======================================================================================================================
1/01/04- 6/30/04(b) $523,521 1.35%* 5.19%* .96%* 5.59%* 6%
11/01/03-12/31/03 522,576 2.31* 4.07* 1.91* 4.47* 2
11/01/02-10/31/03 486,814 2.51 5.17 2.09 5.59 26
11/15/01-10/31/02 381,290 2.12* 6.71* 1.72* 7.11* 37
=======================================================================================================================
Cumulative Taxable Auctioned
Preferred at End of Period
---------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
================================================================
1/01/04- 6/30/04(b) $172,000 $25,000 $101,093
11/01/03-12/31/03 172,000 25,000 100,956
11/01/02-10/31/03 172,000 25,000 95,758
11/15/01-10/31/02 172,000 25,000 80,420
================================================================
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) As discussed in the accompanying notes to financial statements, as of
January 1, 2004, the Fund changed its method of presentation for net
interest expense on interest rate swap transactions. The effect of this
reclassification for the six months ended June 30, 2004, was to increase
Net Investment Income by $0.08 per share with a corresponding decrease in
Net Realized/Unrealized Investment Gain (Loss), a decrease in each of the
Ratios of Expenses to Average Net Assets Applicable to Common Shares by
0.89%* with a corresponding increase in each of the Ratios of Net
Investment Income to Average Net Assets Applicable to Common Shares.
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Common Share Net Asset
Value is the combination of reinvested dividend income at net asset value,
reinvested capital gains distributions at net asset value, if any, and
changes in Common share net asset value per share. Total returns are not
annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Taxable Auctioned
Preferred shareholders; income ratios reflect income earned on assets
attributable to Taxable Auctioned Preferred shares. Each Ratio of Expenses
to Average Net Assets Applicable to Common Shares for the periods prior to
December 31, 2003 and each Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares for the periods prior to December 31,
2003 included the effect of the net interest expense paid on interest rate
swap transactions as follows:
11/01/03 - 12/31/03 .91*
11/01/02 - 10/31/03 1.03
11/15/01 - 10/31/02 .68*
See accompanying notes to financial statements.
24-25 SPREAD
Reinvest Automatically
EASILY AND CONVENIENTLY
SIDEBAR TEXT: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of the shares may increase before
purchases are completed, the average purchase price per share may exceed the
market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
..CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
26
Other Useful
INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available (i) without
charge, upon request, by calling Nuveen Investments at (800) 257-8787; and (ii)
on the Commission's website at http://www.sec.gov.
GLOSSARY OF TERMS USED IN THIS REPORT
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return (including change in NAV and reinvested dividends) that
would have been necessary on an annual basis to equal the investment's actual
performance over the time period being considered.
NET ASSET VALUE (NAV): A Fund's NAV is calculated by subtracting the liabilities
of the fund from its total assets and then dividing the remainder by the number
of shares outstanding. Fund NAVs are calculated at the end of each business day.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
The Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the six months ended June 30, 2004. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
27
Nuveen Investments:
SERVING Investors
For GENERATIONS
Photo of: 2 women looking at a photo album.
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS.
Managing $100 billion in assets, Nuveen Investments offers access to a number of
different asset classes and investing solutions through a variety of products.
Nuveen Investments markets its capabilities under four distinct brands: Nuveen,
a leader in tax-free investments; NWQ, a leader in value-style equities;
Rittenhouse, a leader in growth-style equities; and Symphony, a leading
institutional manager of market-neutral alternative investment portfolios.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers and for
a prospectus, where applicable, talk to your financial advisor, or call us at
(800) 257-8787. Please read the information carefully before you invest.
Learn more
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ESA-A-0604D
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The registrant's audit committee, as of the end of the reporting period, June
30, 2004, was comprised of the following individuals: Robert P. Bremner; Jack B.
Evans; and William J. Schneider.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable at this time.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable at this time.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In the event of a vacancy on the Board, the nominating and governance committee
receives suggestions from various sources, including shareholders, as to
suitable candidates. Suggestions should be sent in writing to Lorna Ferguson,
Vice President for Board Relations, Nuveen Investments, 333 West Wacker Drive,
Chicago, IL 60606. The nominating and governance committee sets appropriate
standards and requirements for nominations for new directors and reserves the
right to interview all candidates and to make the final selection of any new
directors.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")(17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal half-year (the registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) 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 to
this filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
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) Nuveen Real Estate Income Fund
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By (Signature and Title)* /s/ Jessica R. Droeger
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Jessica R. Droeger
Vice President and Secretary
Date: September 9, 2004
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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/ Gifford R. Zimmerman
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Gifford R. Zimmerman
Chief Administrative Officer
(Principal Executive Officer)
Date: September 9, 2004
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By (Signature and Title)* /s/ Stephen D. Foy
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Stephen D. Foy
Vice President and Controller
(Principal Financial Officer)
Date: September 9, 2004
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* Print the name and title of each signing officer under his or her signature.