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, 2005
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMIANNUAL REPORT June 30, 2005
Nuveen Investments
Closed-End
Exchange-Traded
Funds
NUVEEN
REAL ESTATE
INCOME FUND
JRS
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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 for the period ended June 30, 2005, your Fund
continued to provide you with attractive monthly distributions and diversified
exposure to the real estate investment marketplace.
Portfolio diversification is a recognized way to try to reduce some of the risk
that comes with investing. Since one part of your portfolio may be going up when
another is going down, portfolio diversification may help smooth your investment
returns over time. In addition to providing regular monthly income, a real
estate oriented investment like your Fund may help you achieve and benefit from
greater portfolio diversification. Your financial advisor can explain these
advantages in more detail. I urge you to contact him or her soon for more
information on this important investment strategy.
I also urge you to consider receiving future Fund reports and other Fund
information faster by using e-mail and the Internet. Sign up is quick and easy -
see the inside front cover of this report for step-by-step instructions.
"IN ADDITION TO PROVIDING REGULAR MONTHLY INCOME, A REAL ESTATE ORIENTED
INVESTMENT LIKE YOUR FUND MAY HELP YOU ACHIEVE AND BENEFIT FROM GREATER
PORTFOLIO DIVERSIFICATION"
Earlier in 2005, The St. Paul Travelers Companies, Inc., which owned 79% of
Nuveen Investments, Inc. (the parent of your Fund's investment adviser), sold a
substantial portion of its stake in Nuveen. More recently, St. Paul sold the
balance of its shares in Nuveen to us or to others. Please be assured that these
transactions only affect Nuveen's corporate structure, and they do not have any
impact on the investment objectives or management of your Fund.
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
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 goals. We thank you for choosing us as a partner as you work toward
that objective.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
August 15, 2005
Nuveen Real Estate Income Fund
(JRS)
Portfolio Managers'
COMMENTS
The Nuveen Real Estate Income Fund is subadvised by a team of real estate
investment professionals at Security Capital Research & Management Incorporated,
a part of JPMorgan Asset Management, which is the asset management business of
JPMorgan Chase & Co. Tony Manno and Ken Statz, who each have more than 22 years'
experience in managing real estate investments, lead the team. Here they review
key investment strategies and performance of the Fund for the six-month period
ended June 30, 2005.
WHAT WAS YOUR OVERALL MANAGEMENT STRATEGY AND WHAT WERE SOME OF THE PRIMARY
TACTICS FOR THE SIX-MONTH REPORTING PERIOD?
During the six-month period ended June 30, 2005, we continued to focus on
finding securities that we believed were best positioned to generate sustainable
income and potential price appreciation over the long-run. In particular, we
sought to maintain significant diversification while taking into account company
credit quality, sector and geographic exposure, and security-type allocations.
Every investment decision was based on a multi-layered analysis of the company,
the real estate it owned, its management and the relative price of the security.
The ability to shift allocations between preferred and common stocks based on
the relative attractiveness of these two distinct markets continued to be an
important tool in managing JRS for income and long-term capital appreciation. In
2004, an environment characterized by rising interest rates indicated a shift in
the risk and reward characteristics favoring common stocks versus preferred
stocks, and as a result we significantly tilted the portfolio toward common
stocks. In the first six months of 2005, we maintained the portfolio's tilt
toward common stocks. We continued to emphasize companies and property types
with a cyclical orientation associated with shorter lease terms and favored what
we thought were the strongest markets and locations where we saw value
enhancement potential and a real inflation hedge over the long term.
4
HOW DID THE FUND PERFORM?
Fund performance results, as well as the performance of a comparative benchmark,
are shown in the accompanying table.
TOTAL RETURNS ON NET ASSET VALUE*
For periods ended June 30, 2005
6-MONTH 1-YEAR
--------------------------------------------------------------------------------
JRS 4.15% 30.40%
--------------------------------------------------------------------------------
Comparative benchmark1 5.20% 23.26%
--------------------------------------------------------------------------------
Dow Jones Wilshire
Real Estate Securities
Index2 6.79% 34.60%
--------------------------------------------------------------------------------
*Six-month returns are cumulative; one-year returns are annualized.
Past performance does not guarantee future results. Current performance may be
higher or lower than the data shown. Returns do not reflect the deduction of
taxes that a shareholder may have to pay on Fund distributions or upon the sale
of Fund shares.
For the six months ended June 30, 2005, the Fund provided an attractive
cumulative total return on net asset value, although its performance trailed a
comparative benchmark and the Dow Jones Wilshire Real Estate Securities Index.
Since 2003, we have been gradually and selectively shifting the portfolio's
property type weightings from a largely defensive posture to one that we believe
is better positioned to perform well in a growing economy. At the same time,
we've remained highly focused on the current income objectives of the Fund. We
pursued this strategy by increasing the portfolio's allocation, relative to its
comparative benchmark, toward more cyclically sensitive multifamily apartment
companies and mall companies over this reporting period. These sectors
outperformed the broader real estate securities universe during this reporting
period.
1 The comparative benchmark return is calculated using the preferred stock and
highest 50% yielding (based on market capitalization) common stock securities
in the SNL Financial L Creal estate database.
2 The Dow Jones Wilshire Real Estate Securities Index is an unmanaged index
comprised of common shares of publicly-traded REITs and other real estate
operating companies.
5
On the other hand, our strategy to shift from defensive positions in light of
improving economic conditions led to a lower allocation, relative to the
comparative benchmark, to the more defensive shopping center sector. This tactic
hurt the Fund's performance relative to the comparative benchmark and the
Wilshire index in the first six months of 2005.
It is important to note that investing in preferred stock remains an important
component of the income and appreciation strategy of JRS. While preferred
securities are included in the comparative benchmark, they are not included in
broader real estate securities indices, like the Wilshire index. Though we have
reduced JRS's allocation to preferred stocks relative to the comparative
benchmark, they remained a significant allocation in the Fund's portfolio over
this six-month reporting period. While we believe it helped the Fund's overall
risk profile, it did create a drag on performance when compared to an
all-common-stock index like the Wilshire index.
6
Distribution and Share Price
INFORMATION
In addition to owning preferred stocks, the Fund has issued its own preferred
shares, called FundPreferredTM. 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
leveraging strategy provided incremental income and helped enhance shareholder
distributions over the six-month period.
The Fund has a managed distribution policy designed to provide relatively stable
monthly cash flow to investors. Under this policy, the Fund's monthly
distributions will be paid from net investment income generated by its
underlying securities as well as from net realized capital gains and/or returns
of capital, generally representing unrealized capital gains. Over this six-month
reporting period, the Fund has maintained a stable monthly distribution of
$0.1350 per share.
As of June 30, 2005, the Fund was trading at a -10.08% discount to its net asset
value, compared with an average discount of -8.03% for the entire six-month
period.
7
Nuveen Real Estate Income Fund
JRS
Performance
OVERVIEW As of June 30, 2005
Pie Chart:
PORTFOLIO ALLOCATION
(as a % of total investments)
Common Stocks 70.5%
Preferred Stocks 28.2%
Repurchase Agreements 1.3%
Bar Chart:
2004-2005 MONTHLY DISTRIBUTIONS PER SHARE
Jul 0.115
Aug 0.115
Sep 0.135
Oct 0.135
Nov 0.135
Dec 0.135
Jan 0.135
Feb 0.135
Mar 0.135
Apr 0.135
May 0.135
Jun 0.135
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
7/1//04 16.92
16.98
17
17.12
17.18
17.17
17.27
17.08
16.99
17.08
17.18
17.34
17.39
17.27
17.17
17.05
16.95
17.06
17.04
17.15
17.44
17.44
17.43
17.5
17.5
17.55
17.3
17.38
17.52
17.47
17.47
17.58
17.5
17.68
17.9
17.81
17.9
17.9
17.89
17.83
17.86
17.95
18.04
18.15
18.25
18.69
19.07
19.1
19.04
18.8
18.83
18.69
18.68
18.66
18.78
18.86
18.91
18.68
18.8
18.82
18.94
18.81
18.93
18.99
19.07
19.24
19.37
19.27
19.38
19.38
19.42
19.59
19.63
19.45
19.53
19.68
19.82
19.89
19.75
19.92
20
19.91
20
19.99
20.05
20.02
20.25
20.24
20.45
20.61
19.4
18.96
19.18
19.4
19.68
19.89
19.91
19.9
19.71
19.65
19.68
19.74
19.99
20.14
20.18
20.2
20.24
20.49
20.62
20.78
20.9
20.66
20.7
20.85
20.99
20.75
20.88
20.75
20.76
20.62
20.4
20.41
20.45
20.64
20.65
20.62
20.46
20.64
20.75
20.58
20.2
19.28
19.28
19.38
19.5
19.42
18.94
19.19
19.15
19.24
19.37
19.39
19.44
19.42
19.15
19.04
18.94
19
19.24
19.51
19.76
19.96
20.14
20.18
20.23
20.3
20.47
20.45
20.3
20.38
20.3
20.3
20
19.4
19.5
19.48
19.7
19.8
19.86
19.87
19.98
20.1
20.18
20.03
19.8
19.73
19.3
19.23
19.3
19.02
19.05
18.99
18.63
18.07
17.68
18.1
17.69
17.6
17.85
18.08
18.25
18.11
18.24
18.32
18.55
18.42
18.46
18.65
18.48
18.4
18.44
18.42
18.6
18.58
18.58
18.7
18.9
19.15
19.49
19.38
19.4
19.4
19.37
19.45
19.45
19.68
19.95
20.22
20.39
20.19
20.02
19.92
19.93
19.98
20.02
20.22
20.17
20.26
19.9
19.59
19.57
19.6
19.77
19.91
20.1
20.19
20.02
20.06
20.16
20.15
20.17
20.04
20.02
20.07
20.05
20.13
20.2
20.2
20.19
20.16
20.11
20.1
20
20.09
6/30/05 20.25
FUND SNAPSHOT
------------------------------------
Common Share Price $20.25
------------------------------------
Common Share Net Asset Value $22.52
------------------------------------
Premium/(Discount) to NAV -10.08%
------------------------------------
Market Yield1 8.00%
------------------------------------
Net Assets Attributable to
Common Shares ($000) $633,765
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Office Property 28.8%
------------------------------------
Apartments 19.2%
------------------------------------
Regional Malls 16.3%
------------------------------------
Healthcare 10.0%
------------------------------------
Diversified 8.1%
------------------------------------
Shopping Center 7.6%
------------------------------------
Hotels 4.2%
------------------------------------
Repurchase Agreements 1.3%
------------------------------------
Other 4.5%
------------------------------------
TOP FIVE COMMON STOCK ISSUERS
(as a % of total investments)
------------------------------------
The Macerich Company 8.6%
------------------------------------
Mack-Cali Realty Corporation 7.5%
------------------------------------
Arden Realty, Inc. 6.1%
------------------------------------
Nationwide Health
Properties, Inc. 5.5%
------------------------------------
AvalonBay Communities, Inc. 5.1%
------------------------------------
TOP FIVE PREFERRED STOCK ISSUERS
(as a % of total investments)
------------------------------------
Crescent Real Estate
Equities Company 5.5%
------------------------------------
Apartment Investment &
Management Company 3.6%
------------------------------------
Home Properties Inc. 3.2%
------------------------------------
Mills Corporation 2.6%
------------------------------------
LaSalle Hotel Properties 1.9%
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 11/15/01)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 1.72% 4.15%
------------------------------------
1-Year 30.47% 30.40%
------------------------------------
Since
Inception 17.90% 22.75%
------------------------------------
1 Market yield is based on the Fund's current annualized monthly distribution
divided by the Fund's current market price. REIT distributions received by
the Fund are generally comprised of investment income, long-term and
short-term capital gains and a REIT return of capital. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Fund's
cumulative net ordinary income and net realized gains are less than the
amount of the Fund's distributions, a return of capital for tax purposes.
8
Shareholder
MEETING REPORT
The annual shareholder meeting was held on March 22, 2005, 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:
Robert P. Bremner
For 27,425,564 --
Withhold 173,912 --
-------------------------------------------------------------------------------------------
Total 27,599,476 --
===========================================================================================
Lawrence H. Brown
For 27,424,660 --
Withhold 174,816 --
-------------------------------------------------------------------------------------------
Total 27,599,476 --
===========================================================================================
Jack B. Evans
For 27,430,102 --
Withhold 169,374 --
-------------------------------------------------------------------------------------------
Total 27,599,476 --
===========================================================================================
William C. Hunter
For 27,424,338 --
Withhold 175,138 --
-------------------------------------------------------------------------------------------
Total 27,599,476 --
===========================================================================================
William J. Schneider
For -- 6,418
Withhold -- 100
-------------------------------------------------------------------------------------------
Total -- 6,518
===========================================================================================
Timothy R. Schwertfeger
For -- 6,419
Withhold -- 99
-------------------------------------------------------------------------------------------
Total -- 6,518
===========================================================================================
Judith M. Stockdale
For 27,425,333 --
Withhold 174,143 --
-------------------------------------------------------------------------------------------
Total 27,599,476 --
===========================================================================================
Eugene S. Sunshine
For 27,427,188 --
Withhold 172,288 --
-------------------------------------------------------------------------------------------
Total 27,599,476 --
===========================================================================================
9
Nuveen Real Estate Income Fund (JRS)
Portfolio of
INVESTMENTS June 30, 2005 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 90.5% (70.5% OF TOTAL INVESTMENTS)
APARTMENTS - 15.9%
526,300 Amli Residential Properties Trust $ 16,452,138
215,300 Apartment Investment & Management Company 8,810,076
870,000 Archstone-Smith Trust 33,599,400
516,400 AvalonBay Communities, Inc. 41,725,120
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED - 0.6%
326,000 Spirit Finance Corporation 3,830,500
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 12.3%
1,912,300 Nationwide Health Properties, Inc. 45,149,403
1,740,300 Senior Housing Properties Trust 32,909,073
------------------------------------------------------------------------------------------------------------------------------------
HOTELS - 0.7%
492,564 Hersha Hospitality Trust 4,699,061
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 2.9%
459,600 First Industrial Realty Trust, Inc. 18,338,040
------------------------------------------------------------------------------------------------------------------------------------
OFFICE PROPERTY - 31.3%
1,388,800 Arden Realty, Inc. 49,969,024
3,092,100 HRPT Properties Trust 38,434,803
1,351,500 Mack-Cali Realty Corporation 61,222,950
298,100 Maguire Properties, Inc. 8,448,154
1,205,600 Reckson Associates Realty Corporation 40,447,880
------------------------------------------------------------------------------------------------------------------------------------
REGIONAL MALLS - 15.3%
977,400 Glimcher Realty Trust 27,122,850
1,044,100 The Macerich Company 70,006,905
------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTER - 8.5%
378,000 Cedar Shopping Centers Inc. 5,575,500
413,800 Federal Realty Investment Trust 24,414,200
880,300 New Plan Excel Realty Trust 23,917,751
------------------------------------------------------------------------------------------------------------------------------------
STORAGE - 3.0%
984,200 U-Store-It Trust 18,749,010
------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks - (cost $340,941,287) 573,821,838
--------------------------------------------------------------------------------------------------------------------
10
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 36.2% (28.2% OF TOTAL INVESTMENTS)
APARTMENTS - 8.8%
Apartment Investment & Management Company:
603,500 Series R, 10.000% $ 15,781,525
380,000 Series U, 7.750% 9,538,000
158,000 Series Y, 7.875% 3,965,800
945,000 Home Properties Inc., Series F, 9.000% 26,200,125
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED - 9.7%
Crescent Real Estate Equities Company:
1,031,300 Series A (Convertible), 6.750% 21,977,003
850,000 Series B, 9.500% 22,729,000
150,000 Lexington Corporate Properties Trust, Series B, 8.050% 3,952,500
497,623 PS Business Parks Inc., Series F, 8.750% 13,107,390
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 0.5%
32,558 Nationwide Health Properties Inc., Series A, 7.677% 3,337,195
------------------------------------------------------------------------------------------------------------------------------------
HOTELS - 4.6%
130,000 Ashford Hospitality Trust, Series A, 8.550% 3,396,250
360,000 Boykin Lodging Company, Series A, 10.500% 9,990,000
592,000 LaSalle Hotel Properties, Series A, 10.250% 15,818,240
------------------------------------------------------------------------------------------------------------------------------------
OFFICE PROPERTY - 5.7%
Alexandria Real Estate Equities Inc.:
95,400 Series B, 9.100% 2,514,744
160,000 Series C, 8.375% 4,222,400
200,000 Corporate Office Properties Trust, Series G, 8.000% 5,170,000
12,141 Highwoods Properties, Inc., Series A, 8.625% 13,867,298
406,000 Maguire Properties, Inc., Series A, 7.625% 10,263,680
------------------------------------------------------------------------------------------------------------------------------------
REGIONAL MALLS - 5.7%
Glimcher Realty Trust:
113,000 Series F, 8.750% 3,027,270
50,000 Series G, 8.125% 1,277,500
The Mills Corp:
115,200 Series C, 9.000% 3,106,368
213,000 Series E, 8.750% 5,772,300
480,000 Series G, 7.875% 12,345,024
Taubman Centers, Inc.:
9,547 Series A, 8.300% 244,308
400,000 Series H, 7.625% (WI, settling 7/01/05) 10,150,000
------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTER - 1.2%
160,000 Cedar Shopping Centers Inc., Series A, 8.875% 4,295,008
125,000 Saul Centers, Inc. Series A, 8.000% 3,273,750
------------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks - (cost $212,046,093) 229,322,678
--------------------------------------------------------------------------------------------------------------------
11
Nuveen Real Estate Income Fund (JRS) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (COST $10,826,822) - 1.7% (1.3%OF TOTAL INVESTMENTS)
State Street Bank, 2.600% dated 6/30/05, due 7/1/05, repurchase price $10,827,604
$ 10,827 collateralized by $11,030,000 U.S. Treasury Notes, 3.500% due 2/15/10, value $11,043,788 $ 10,826,822
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $563,814,202) - 128.4% 813,971,338
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (1.3)% (8,206,482)
--------------------------------------------------------------------------------------------------------------------
Taxable Auctioned Preferred Shares, at Liquidation Value - (27.1)% (172,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 633,764,856
====================================================================================================================
INTEREST RATE SWAP CONTRACTS OUTSTANDING AT JUNE 30, 2005:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FIXED RATE FLOATING RATE** DATE (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------------
Citigroup N.A. $43,000,000 4.8000% 3.1500% 2/06/07 $ (671,845)
Citigroup N.A. 43,000,000 5.1900 3.1500 2/06/09 (1,813,726)
-------------------------------------------------------------------------------------------------------------------
$(2,485,571)
====================================================================================================================
(1) All percentages shown in the Portfolio of
Investments are based on net assets applicable to
Common shares unless otherwise noted.
(WI) Security purchased on a when-issued basis.
* Based on LIBOR (London Inter-Bank Offered Rates).
See accompanying notes to financial statements.
12
Statement of
ASSETS AND LIABILITIES June 30, 2005 (Unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $563,814,202) $813,971,338
Dividends and interest receivable 4,197,482
Receivable for investments sold 622,449
Other assets 36,496
--------------------------------------------------------------------------------
Total assets 818,827,765
--------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 10,000,000
Interest rate swaps, at value 2,485,571
Accrued expenses:
Management fees 379,937
Other 158,936
Taxable Auctioned Preferred share dividends payable 38,465
--------------------------------------------------------------------------------
Total liabilities 13,062,909
--------------------------------------------------------------------------------
Taxable Auctioned Preferred shares, at liquidation value 172,000,000
--------------------------------------------------------------------------------
Net assets applicable to Common shares $633,764,856
================================================================================
Common shares outstanding 28,136,413
================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 22.52
================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
--------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 281,364
Paid-in surplus 391,025,257
Undistributed (Over-distribution of) net investment income (13,580,242)
Accumulated net realized gain from investments and interest
rate swaps 8,366,912
Net unrealized appreciation (depreciation) of investments
and interest rate swaps 247,671,565
--------------------------------------------------------------------------------
Net assets applicable to Common shares $633,764,856
================================================================================
Authorized shares:
Common Unlimited
Taxable Auctioned Preferred Unlimited
================================================================================
See accompanying notes to financial statements.
13
Statement of
OPERATIONS Six Months Ended June 30, 2005 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 14,028,679
Interest 85,051
--------------------------------------------------------------------------------
Total investment income 14,113,730
--------------------------------------------------------------------------------
EXPENSES
Management fees 3,362,859
Taxable Auctioned Preferred shares - auction fees 213,233
Taxable Auctioned Preferred shares -
dividend disbursing agent fees 9,918
Shareholders' servicing agent fees and expenses 3,140
Custodian's fees and expenses 83,549
Trustees' fees and expenses 13,973
Professional fees 35,508
Shareholders' reports - printing and mailing expenses 50,724
Stock exchange listing fees 1,164
Investor relations expense 69,690
Other expenses 21,259
--------------------------------------------------------------------------------
Total expenses before expense reimbursement 3,865,017
Expense reimbursement (1,142,754)
--------------------------------------------------------------------------------
Net expenses 2,722,263
--------------------------------------------------------------------------------
Net investment income 11,391,467
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain from investments 9,502,585
Net realized gain (loss) from interest rate swaps (1,135,673)
Change in net unrealized appreciation (depreciation)
of investments 5,789,624
Change in net unrealized appreciation (depreciation)
of interest rate swaps 1,388,651
--------------------------------------------------------------------------------
Net realized and unrealized gain 15,545,187
--------------------------------------------------------------------------------
DISTRIBUTIONS TO TAXABLE AUCTIONED PREFERRED SHAREHOLDERS
From net investment income (2,360,342)
From accumulated net realized gains from investments --
--------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Taxable Auctioned Preferred shareholders (2,360,342)
--------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares
from operations $ 24,576,312
================================================================================
See accompanying notes to financial statements.
14
Statement of
CHANGES IN NET ASSETS (Unaudited)
SIX MONTHS ENDED YEAR ENDED
6/30/05 12/31/04
-----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 11,391,467 $ 24,895,312
Net realized gain from investments 9,502,585 18,980,955
Net realized gain (loss) from interest rate swaps (1,135,673) (4,017,763)
Change in net unrealized appreciation (depreciation) of investments 5,789,624 109,849,162
Change in net unrealized appreciation (depreciation) of interest rate swaps 1,388,651 3,346,462
Distributions to Taxable Auctioned Preferred shareholders:
From net investment income (2,360,342) (1,353,325)
From accumulated net realized gains from investments -- (1,218,577)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations 24,576,312 150,482,226
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (22,790,493) (19,333,368)
From accumulated net realized gains from investments -- (17,762,374)
Tax return of capital -- (3,983,421)
-----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from distributions to
Common shareholders (22,790,493) (41,079,163)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares 1,785,819 109,403,063
Net assets applicable to Common shares at the beginning of period 631,979,037 522,575,974
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $633,764,856 $631,979,037
====================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of period $(13,580,242) $ 179,126
====================================================================================================================================
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").
Effective January 1, 2005, Nuveen Institutional Advisory Corp. ("NIAC"), the
Fund's previous Adviser, and its affiliate, Nuveen Advisory Corp. ("NAC"), were
merged into Nuveen Asset Management ("NAM"), each wholly owned subsidiaries of
Nuveen Investments, Inc. ("Nuveen"). As a result of the merger, NAM is now the
Adviser to all funds previously advised by either NIAC or NAC.
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.
Investment 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 prices. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. Prices of interest rate swaps are provided by an
independent pricing service approved by the Fund's Board of Trustees. If the
pricing service is unable to supply a price for an interest rate swap the Fund
may use a market quote provided by a major broker/dealer in such investments. If
it is determined that market prices for an investment are unavailable or
inappropriate, the Board of Trustees of the Fund, or its designee, may establish
a fair value for the investment. In establishing a fair value, the Board of
Trustees, or its designee, will use a wide variety of market data including
yields or prices of comparable securities, indications of value from security
dealers, general market conditions and other information and analysis.
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 transactions are determined on the specific identification method.
Securities purchased on a when-issued or delayed delivery basis may have
extended settlement periods. Any securities so purchased are subject to market
fluctuation during this period. The Fund has instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At June 30, 2005, the
Fund had an outstanding when-issued purchase commitment of $10,000,000.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on an accrual basis.
16
Income Taxes
The Fund intends to distribute substantially all net investment income and net
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.
Dividends and Distributions to Common Shareholders
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.
The Fund intends to make monthly cash distributions to Common Shareholders of a
stated dollar amount based primarily on the Fund's net investment income but
also secondarily on net realized capital gains and/or on net unrealized capital
gains in the Fund's portfolio (stated in terms of a fixed cents per Common Share
dividend rate) ("Managed Distribution Policy"). The Fund seeks 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 Taxable Auctioned Preferred
shares, if any, and interest and required principal payments on borrowings, if
any. Under the 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 and
would be treated by shareholders as a return of capital for tax purposes. The
final determination of the source of all distributions for the year will be made
after the end of the year.
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 a period are not known until
after the fiscal year-end of the Fund. For the twelve months ended December 31,
2004, the character of distributions to the Fund from the REITs was 58.07%
ordinary income, 25.75% long-term and short-term capital gains, and 16.18%
return of REIT capital.
For the six months ended June 30, 2005, the Fund applied the actual percentages
for the twelve months ended December 31, 2004, described above 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 year ended
December 31, 2004, 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, 2005, 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 year, based upon the income type
breakdown information conveyed at the time by the REITs whose securities are
held in the Fund's portfolio. Consequently, the financial statements at June 30,
2005 reflect an over-distribution of net investment income that is at least
partly attributable to the fact that some of the amounts received by the Fund
from the portfolio REITS, but none of the dividends paid by the Fund to
shareholders, were treated as something other than ordinary income. For the
fiscal year ended December 31, 2004, 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.
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, Taxable Auctioned Preferred shares, $25,000 stated value
per share, as a means of effecting financial leverage. The dividend rate on each
series is determined every seven days, pursuant to a dutch auction process
overseen by the auction agent, and is payable weekly at 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's use of interest rate swap transactions is
intended to mitigate the negative impact that an increase in short-term interest
rates could have on Common share net earnings as a result of leverage. Interest
rate swap transactions involve the Fund's agreement with the 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 interest rate swap
contract. Interest rate swaps do not involve the delivery of securities or other
underlying assets or principal. Accordingly, the risk of loss with respect to
the swap counterparty on such transactions is limited to the net amount of
interest payments that the Fund is to receive. Interest rate swap positions are
valued 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.
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.
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 results may differ from those estimates.
18
2. FUND SHARES
The Fund did not engage in transactions in its own shares during the six months
ended June 30, 2005, nor during the fiscal year ended December 31, 2004.
3. SECURITIES TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
six months year ended June 30, 2005, aggregated $25,918,400 and $27,670,346,
respectively.
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 investment transactions.
At June 30, 2005, the cost of investments owned was $563,814,202.
The net unrealized appreciation of investments at June 30, 2005, aggregated
$250,157,136, of which $250,162,973 related to appreciated securities and $5,837
related to depreciated securities.
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2004, 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 period ended December
31, 2004, the Fund's last fiscal year end, was designated for purposes of the
dividends paid deduction as follows:
--------------------------------------------------------------------------------
Distributions from net ordinary income * $20,708,231
Distributions from net long-term capital gains 18,932,319
Tax return of capital 3,983,421
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
19
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within the Fund. This pricing structure enables Nuveen fund shareholders to
benefit from growth in the assets within each individual fund as well as from
growth in the amount of complex-wide assets managed by the Adviser. As of July
31, 2005, the complex-level fee rate was .1889%.
The annual fund-level fee, payable monthly, for the Fund is based upon the
average daily Managed Assets of the Fund as follows:
AVERAGE DAILY MANAGED ASSETS FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $500 million .7000%
For the next $500 million .6750
For the next $500 million .6500
For the next $500 million .6250
For Managed Assets over $2 billion .6000
================================================================================
The annual complex-level fee, payable monthly, which is additive to the
fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the
aggregate amount of total fund assets managed as follows:
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds in
the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level fee
rate for such complex-wide Managed Assets shall be .1400% until such time as
a different rate or rates is determined.
20
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.
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)
6. ANNOUNCEMENT REGARDING PARENT COMPANY OF ADVISER
In early April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul
Travelers"), which owned 79% of Nuveen, (A) completed a public offering of a
substantial portion of its equity stake in Nuveen, (B) sold Nuveen $200 million
of its Nuveen shares, (C) entered into an agreement with Nuveen to sell an
additional $400 million of its Nuveen shares on a "forward" basis with payment
for and settlement of these shares delayed for several months, and (D) entered
into agreements with two unaffiliated investment banking firms to sell an amount
equal to most or all of its remaining Nuveen shares for current payment but for
future settlement. Transactions (C) and (D) above were settled in late July,
which effectively reduced St. Paul Travelers' controlling stake in Nuveen and
was deemed an "assignment" (as defined in the 1940 Act) of the investment
management agreement between the Fund and the Adviser, which resulted in the
automatic termination of the agreement under the 1940 Act. In anticipation of
such deemed assignment, the Board of Trustees had approved a new ongoing
investment management agreement for the Fund and the submission of the agreement
for approval by the Fund's shareholders, which shareholder approval was received
prior to the settlement of transactions (C) and (D). The new ongoing management
agreement took effect upon such settlement.
7. SUBSEQUENT EVENT -- DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Fund declared a distribution of $.1350 per Common share which was paid on
August 1, 2005, to shareholders of record on July 15, 2005.
22
Financial
HIGHLIGHTS (Unaudited)
23
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
--------------------------------------------------------------- -----------------------------------------
Distributions Distributions
from Net from
Investment Capital
Income to Gains to Net
Beginning Taxable Taxable Investment Capital
Common Net Auctioned Auctioned Income to Gains to Tax
Share Net Realized/ Preferred Preferred Common Common Return
Net Asset Investment Unrealized Share- Share- Share- Share- of
Value Income(a) Gain (Loss) holders+ holders+ Total holders holders Capital Total
====================================================================================================================================
Year Ended 12/31:
2005(e) $22.46 $ .40 $ .55 $(.08) $ -- $ .87 $(.81) $ -- $ -- $ (.81)
2004(b) 18.57 .88 4.56 (.05) (.04) 5.35 (.69) (.63) (.14) (1.46)
2003(c) 17.30 .12 1.38 (.01) -- 1.49 (.01) (.08) (.13) (.22)
Year Ended 10/31:
2003 13.56 .85 4.38 (.05) (.02) 5.16 (.97) (.41) (.04) (1.42)
2002(d) 14.33 1.02 (.46) (.07) (.02) .47 (.89) (.25) -- (1.14)
====================================================================================================================================
Total Returns
----------------------
Offering
Costs and
Taxable Based
Auctioned Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
========================================================================================
Year Ended 12/31:
2005(e) $ -- $22.52 $20.25 1.72% 4.15%
2004(b) -- 22.46 20.75 19.80 30.12
2003(c) -- 18.57 18.73 6.49 8.69
Year Ended 10/31:
2003 -- 17.30 17.81 35.40 39.80
2002(d) (.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
===================================================================================================================
Year Ended 12/31:
2005(e) $633,765 1.31%* 3.47%* .92%* 3.85%* 3%
2004(b) 631,979 1.34 4.13 .94 4.52 14
2003(c) 522,576 2.31* 4.07* 1.91* 4.47* 2
Year Ended 10/31:
2003 486,814 2.51 5.17 2.09 5.59 26
2002(d) 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
================================================================
Year Ended 12/31:
2005(e) $172,000 $25,000 $117,117
2004(b) 172,000 25,000 116,857
2003(c) 172,000 25,000 100,956
Year Ended 10/31:
2003 172,000 25,000 95,758
2002(d) 172,000 25,000 80,420
================================================================
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) For the fiscal year ended December 31, 2004, the Fund changed its method of
presentation for net interest expense on interest rate swap transactions.
The effect of this reclassification was to increase Net Investment Income
by $0.15 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 0.77% with a
corresponding increase in each of the Ratios of Net Investment Income to
Average Net Assets Applicable to Common Shares.
(c) For the period November 1, 2003 through December 31, 2003.
(d) For the period November 15, 2001 (commencement of operations) through
October 31, 2002.
(e) For the six months ended June 30, 2005.
* Annualized.
** Total Investment Return on Market Value is the combination of changes in
the market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. Total Return on Common Share Net
Asset Value is the combination of changes in Common Share net asset value,
reinvested dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ o Ratios do not reflect the effect of dividend payments to Taxable
Auctioned Preferred shareholders.
o Income ratios reflect income earned on assets attributable to Taxable
Auctioned Preferred shares.
o For periods ended prior to December 31, 2004, each Ratio of Expenses
to Average Net Assets Applicable to Common Shares and each Ratio of
Net Investment Income to Average Net Assets Applicable to Common
Shares included the effect of the net interest expense incurred on
interest rate swap transactions as follows:
Year Ended 12/31:
2003(c) .91*
Year Ended 10/31:
2003 1.03
2002(d) .68*
See accompanying notes to financial statements.
24-25 SPREAD
ANNUAL INVESTMENT
MANAGEMENT AGREEMENT
APPROVAL PROCESS
At a meeting held on May 10-12, 2005, the Board of Trustees of the Fund,
including the independent Trustees, unanimously approved the Investment
Management Agreement between the Fund and NAM and the Sub-Advisory Agreement
between NAM and Security Capital (NAM and Security Capital are each a "Fund
Adviser").
THE APPROVAL PROCESS
To assist the Board in its evaluation of an advisory contract with a Fund
Adviser, the independent Trustees received a report in adequate time in advance
of their meeting which outlined, among other things, the services provided by
the Fund Adviser; the of the Fund Adviser, including the responsibilities of
various departments and key personnel; the Fund's past performance as well as
the Fund's performance compared to funds of similar investment objectives
compiled by an independent third party (a "Peer Group") as described below and
with recognized and/or customized benchmarks (as appropriate); the profitability
of the Fund Adviser and certain industry profitability analyses for advisers to
unaffiliated investment companies; the expenses of the Fund Adviser in providing
the various services; the advisory fees of the Fund Adviser, including
comparisons of such fees with the management fees of comparable funds in its
Peer Group as well as comparisons of the Fund Adviser's management fees with the
fees the Fund Adviser assesses to other types of investment products or
accounts, if any; the soft dollar practices of the Fund Adviser; and the
expenses of the Fund, including comparisons of the Fund's expense ratios (after
any fee waivers) with the expense ratios of its Peer Group. This information
supplements that received by the Board throughout the year regarding Fund
performance, expense ratios, portfolio composition, trade execution and sales
activity.
In addition to the foregoing materials, independent legal counsel to the
independent Trustees provided, in advance of the meeting, a legal memorandum
outlining, among other things, the duties of the Trustees under the 1940 Act as
well as the general principles of relevant state law in reviewing and approving
advisory contracts; the requirements of the 1940 Act in such matters; an
adviser's fiduciary duty with respect to advisory agreements and compensation;
the standards used by courts in determining whether investment company boards of
directors have fulfilled their duties and factors to be considered by the board
in voting on advisory agreements.
At the Board meeting, NAM made a presentation to and responded to questions from
the Board. In addition, the independent Trustees noted that Security Capital
also has previously made written or oral presentations to the Board providing it
with the opportunity to explain its investment strategies, discuss market
conditions, and highlight any material issues. Many of these presentations were
part of site visits by the Board throughout the year. After the presentations
and after reviewing the written materials, the independent Trustees met
privately with their legal counsel to review the Board's duties in reviewing
advisory contracts and consider the renewal of the advisory contract. It is with
this background that the Trustees considered each advisory contract (which
includes the sub-advisory contract) with a Fund Adviser. The independent
Trustees, in consultation with independent counsel, reviewed the factors set out
in judicial decisions and SEC directives relating to the renewal of advisory
contracts. As outlined in more detail below, the Trustees considered all factors
they believed relevant with respect to the Fund, including the following: (a)
the nature, extent and quality of the services to be provided by the Fund
Adviser; (b) the investment performance of the Fund and the Fund Adviser; (c)
the costs of the services to be provided and profits to be realized by the Fund
Adviser and its affiliates from the relationship with the Fund; (d) the extent
to which economies of scale would be realized as the Fund grows; and (e) whether
fee levels reflect these economies of scale for the benefit of Fund investors.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In evaluating the nature, extent and quality of the respective Fund Adviser's
services, the Trustees reviewed information concerning the types of services
that a Fund Adviser or its affiliates provide and are expected to provide to the
Nuveen Funds; narrative and statistical information concerning the Fund's
performance record and how such performance compares to the Fund's Peer Group
and recognized and/or customized benchmarks (as described in further detail in
Section B below); information describing the Fund Adviser's organization and its
various departments, the experience and responsibilities of key personnel, and
available resources. In the discussion of key personnel, the Trustees received
materials regarding the changes or additions in personnel of the applicable Fund
Adviser. The Trustees further noted the willingness of the personnel of NAM to
engage in open, candid discussions with the Board. The Trustees further
considered the quality of the Fund Adviser's investment process in making
portfolio management decisions, including any refinements or improvements to the
portfolio management processes, enhancements to technology and systems that are
available to portfolio managers, and any additions of new personnel which may
strengthen or expand the research and investment capabilities of the Fund
Adviser. In their review of the advisory contracts for the fixed income funds,
the Trustees also noted that Nuveen won the Lipper Award for Best Fund Family:
Fixed Income-Large Asset Class, for 2004. Given the Trustees' experience with
the Funds, other Nuveen funds and the Fund Advisers, the Trustees noted that
they were familiar with and continue to have a good understanding of the
organization, operations and personnel of the Fund Advisers.
26
In addition to advisory services, the independent Trustees considered the
quality of the administrative or non-advisory services provided. In this regard,
NAM provides the Fund with such administrative and other services (exclusive of,
and in addition to, any such services provided by others for the Funds) and
officers and other personnel as are necessary for the operations of the Fund. In
addition to investment management services, NAM and its affiliates provide the
Fund with a wide range of services, including: preparing shareholder reports;
providing daily accounting; providing quarterly financial statements; overseeing
and coordinating the activities of other service providers; administering and
organizing Board meetings and preparing the Board materials for such meetings;
providing legal support (such as helping to prepare registration statements,
amendments thereto and proxy statements and responding to regulatory inquiries);
and performing other Fund administrative tasks necessary for the operation of
the Fund (such as tax reporting and fulfilling regulatory filing requirements).
In addition, in evaluating the administrative services, the Trustees considered,
in particular, a Fund Adviser's policies and procedures for assuring compliance
with applicable laws and regulations in light of the new SEC regulations
governing compliance. The Trustees noted NAM's focus on compliance and its
compliance systems. In their review, the Trustees considered, among other
things, the additions of experienced personnel to NAM's compliance group and
modifications and other enhancements to NAM's computer systems. In addition to
the foregoing, the Trustees also noted that NAM outsources certain services that
cannot be replicated without significant costs or at the same level of
expertise. Such outsourcing has been a beneficial and efficient use of resources
by keeping expenses low while obtaining quality services. Further, as the Fund
utilizes a sub-adviser, the Trustees considered NAM's ability and procedures to
monitor the sub-adviser's performance, business practices and compliance
policies and procedures. In this regard, the Trustees noted the role of NAM's
investment oversight committee, including its increased personnel, the
responsibilities and experience of the staff, and procedures to monitor
sub-advisers, including the use of site visits.
In addition to the above, in reviewing the variety of additional services that
NAM or its affiliates must provide to closed-end funds, such as the Fund, the
independent Trustees determined that Nuveen's commitment to supporting the
secondary market for the common shares of its closed-end funds is particularly
noteworthy. In this regard, the Trustees noted Nuveen's efforts to sponsor
numerous forums for analysts and specialists regarding the various Nuveen
closed-end funds, its creation of a new senior position dedicated to providing
secondary market support services and enhancing communications with investors
and analysts, and its advertising and media relations efforts designed to raise
investor and analyst awareness of the closed-end funds.
In evaluating the services of Security Capital, the independent Trustees noted
that the Sub-Advisory Agreement was essentially an agreement for portfolio
management services only and that Security Capital was not expected to supply
other significant administrative services to the Fund.
Based on their review, the Trustees found that, overall, the nature, extent and
quality of services provided (and expected to be provided) to the Fund under the
Investment Management Agreement or Sub-Advisory Agreement, as applicable, were
of a high level and were quite satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUND AND FUND ADVISERS
As previously noted, the Board received a myriad of performance information
regarding the Fund and its Peer Group, if available. Among other things, the
Board received materials reflecting the Fund's historic performance, the Fund's
performance compared to its Peer Group (as available), its performance compared
to recognized and/or customized benchmarks (as applicable). The Trustees
reviewed performance information including, among other things, total return
information compared with the Fund's Peer Group as well as recognized and/or
customized benchmarks (as appropriate) for the one-, three- and five-year
periods (as applicable) ending December 31, 2004. This information supplements
the Fund performance information provided to the Board at each of their
quarterly meetings. Based on their review, the Trustees determined that the
respective Fund's absolute and relative investment performance over time had
been satisfactory.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
In evaluating the management fees and expenses that the Fund is expected to
bear, the Trustees considered the Fund's current management fee structure,
the sub-advisory fee arrangements and the Fund's expected expense ratios in
absolute terms as well as compared with the fees and expense ratios of the
unaffiliated funds in its Peer Group. The Trustees reviewed the financial
information of the respective Fund Adviser, including its respective
revenues, expenses and profitability. In reviewing fees, the Trustees, among
other things, reviewed comparisons of the Fund's gross management fees (fees
after fund-level and complex-wide level breakpoints but before reimbursement
and fee waivers), net management fees (after breakpoints and reimbursements
and fee waivers) and total expense ratios (before and after waivers) with
those of the unaffiliated funds in its Peer Group and peer averages. In this
regard, the Trustees noted that the relative ranking of the Nuveen Funds on
fees and expenses was aided by the significant level of fee reductions
provided by the fund-level and complex-wide breakpoint schedules, and the fee
waivers and reimbursements provided by Nuveen for certain funds launched
since 1999. The complex-wide breakpoint schedule was instituted in 2004 and
is described in further detail below in Section D entitled "Economies of
Scale and Whether Fee Levels Reflect These Economies of Scale." In its
review, the Trustees noted that all taxable closed-end exchange-traded Nuveen
funds had net expense ratios below or within an acceptable range compared to
peers.
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
The Trustees further compared the fees of NAM to the fees NAM or an affiliate
thereof assessed for other types of clients (such as separate managed
accounts as well as fees charged on funds that are not offered by Nuveen but
are sub-advised by one of Nuveen's investment management teams). With respect
to separately managed accounts, the advisory fees to such separate managed
accounts are generally lower than those charged to the Fund. The Trustees
noted, however, the additional services that are provided and the costs
incurred by Nuveen in managing and operating registered investment companies,
such as the Fund,
27
ANNUAL INVESTMENT MANAGEMENT
AGREEMENT APPROVAL PROCESS (continued)
compared to individually managed separate accounts. For instance, as
described above, NAM and its affiliates provide numerous services to the Fund
including, but not limited to, preparing shareholder reports; providing daily
accounting; preparing quarterly financial statements; overseeing and
coordinating the activities of other service providers; administering and
organizing Board meetings and preparing the Board materials for such
meetings; providing legal support; and administering all other aspects of the
Fund's operations. Further, the Trustees noted the increased compliance
requirements for funds in light of new SEC regulations and other legislation.
These services are generally not required to the same extent, if at all, for
separate accounts. In addition to the differences in services, the Trustees
also considered, among other things, the differences in product distribution,
investor profiles and account sizes. Accordingly, the Trustees believe that
the nature and number of services provided to operate the Fund merit the
higher fees than those to separate managed accounts.
In considering the fees of Security Capital, the Trustees also considered the
pricing schedule Security Capital charges for similar investment management
services for other fund sponsors or clients. Generally, the sub-advisory fees
were at the lower end of the sub-adviser's fee schedule. In addition, the
Trustees noted that the sub-advisory fees and arrangements with unaffiliated
sub-advisers were established through arms-length negotiations between the
sub-adviser and NAM.
3. PROFITABILITY OF ADVISERS
In conjunction with its review of fees, the Trustees also considered the
profitability of NAM as well as the profitability of Security Capital. The
Trustees reviewed the respective Fund Adviser's revenues, expenses and
profitability margins (on both a pre-tax and after-tax basis). In reviewing
profitability, the Trustees recognized that one of the most difficult issues
in determining profitability is establishing a method of allocating expenses.
Accordingly, the Trustees reviewed a Fund Adviser's assumptions and
methodology of allocating expenses. In this regard, the methods of allocation
used appeared reasonable but the Board noted the inherent limitations in
allocating costs among various advisory products. The Trustees also
recognized that individual fund or product line profitability of other
advisers is generally not publicly available. Further, profitability may be
affected by numerous factors including the types of funds managed, expense
allocations, business mix, etc. and therefore comparability of profitability
is somewhat limited. Nevertheless, to the extent available, the Trustees
considered the respective Fund Adviser's profit margin compared to the
profitability of various publicly-traded investment management companies
and/or investment management companies that publicly disclose some or all of
their financial results compiled by three independent third-party service
providers. The Trustees also reviewed the revenues, expenses and profit
margins of various unaffiliated advisory firms with similar amounts of assets
under management for the last year prepared by NAM. Based on their review,
the Trustees were satisfied that each Fund Adviser's level of profitability
from its relationship with the Fund was reasonable in light of the services
provided.
In evaluating the reasonableness of the compensation, the Trustees also
considered any other revenues paid to a Fund Adviser as well as any indirect
benefits (such as soft dollar arrangements, if any) the Fund Adviser and its
affiliates are expected to receive that are directly attributable to their
management of the Funds, if any. See Section E below for additional
information. Based on their review of the overall fee arrangements of the
Fund, the Trustees determined that the advisory fees and expenses of the Fund
were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
In reviewing the compensation, the Trustees have long understood the benefits of
economies of scale as the assets of a fund grows and have sought to ensure that
shareholders share in these benefits. One method for shareholders to share in
economies of scale is to include breakpoints in the advisory fee schedules that
reduce fees as fund assets grow. Accordingly, the Trustees received and reviewed
the schedules of advisory fees for the Fund, including fund-level breakpoints
thereto. In addition, after lengthy negotiations with management, the Board in
May, 2004 approved a complex-wide fee arrangement pursuant to which fees of the
funds in the Nuveen complex, including the Fund, are reduced as the assets in
the fund complex reach certain levels. The complex-wide fee arrangement was
introduced on August 1, 2004 and the Trustees reviewed data regarding the
reductions of fees for the Fund for the period of August 1, 2004 to December 31,
2004. In evaluating the complex-wide fee arrangement, the Trustees considered,
among other things, the historic and expected fee savings to shareholders as
assets grow, the amount of fee reductions at various asset levels, and that the
arrangement would extend to all funds in the Nuveen complex. The Trustees also
considered the impact, if any, the complex-wide fee arrangement may have on the
level of services provided. Based on their review, the Trustees concluded that
the breakpoint schedule and complex-wide fee arrangement currently was
acceptable and desirable in providing benefits from economies of scale to
shareholders.
28
E. INDIRECT BENEFITS
In evaluating fees, the Trustees also considered any indirect benefits or
profits the respective Fund Adviser or its affiliates may receive as a result of
its relationship with the Fund. In this regard, the Trustees considered any
benefits from soft dollar arrangements. The Trustees noted that although NAM
manages a large amount of assets, it has very little, if any, brokerage to
allocate. This is due to the fact that NAM typically manages the portfolios of
the municipal funds in the Nuveen complex and municipal bonds generally trade on
a principal basis. Accordingly, NAM does not currently have any soft dollar
arrangements and does not pay excess brokerage commissions (or spreads on
principal transactions) in order to receive research services. The Trustees also
considered any soft dollar arrangements of Security Capital. With respect to
Security Capital, the Trustees noted that it does not use soft dollar
arrangements.
In addition to soft dollar arrangements, the Trustees also considered any other
revenues, if any, received by NAM or its affiliates. In this regard, for Nuveen
funds with outstanding preferred shares and new closed-end funds, the Trustees
also considered revenues received by Nuveen for serving as agent for
broker-dealers at its preferred trading desk and for acting as co-manager in the
initial public offering of new closed-end exchange-traded funds.
F. OTHER CONSIDERATIONS
Nuveen, until recently, was a majority owned subsidiary of St. Paul Travelers
Companies, Inc. ("St. Paul"). As noted, St. Paul earlier this year announced its
intention to divest its equity stake in Nuveen. Nuveen is the parent of NAM.
Pursuant to a series of transactions, St. Paul had begun to reduce its interest
in Nuveen which would ultimately result in a change of control of Nuveen and
therefore NAM. As mandated by the 1940 Act, such a change in control would
result in an assignment of the Investment Management Agreement with NAM and the
automatic termination of such agreement. Accordingly, the Board also considered
the approval of a New Investment Management Agreement with the Fund in light of,
and which would take effect upon, the anticipated change of control. More
specifically, the Board considered for the Fund a New Investment Management
Agreement on substantially identical terms to the existing Investment Management
Agreement, to take effect after the change of control has occurred and the
contract has been approved by Fund shareholders. In its review, the Board
considered whether the various transactions necessary to divest St. Paul's
interest will have an impact on the various factors they considered in approving
NAM, such as the scope and quality of services to be provided following the
change of control. In reviewing the St. Paul transactions, the Board considered,
among other things, the impact, if any, on the operations and organizational
structure of NAM; the possible benefits and costs of the transactions to the
Fund; the potential implications of any arrangements used by Nuveen to finance
certain of the transactions; the ability of NAM to perform its duties after the
transactions; whether the Fund's fee structure or expense ratio would change;
any changes to the current practices of the Fund; any changes to the terms of
the advisory agreement; and any anticipated changes to the operations of NAM.
Based on its review, the Board determined that St. Paul's divestiture would not
affect the nature and quality of services provided by NAM, the terms of the
Investment Management Agreement, including the fees thereunder, and would not
materially affect the organization or operations of NAM. Accordingly, the Board
determined that their analysis of the various factors regarding their approval
of NAM would continue to apply after the change of control.
In addition to the foregoing, a change in control of NAM may be deemed an
assignment of the Sub-Advisory Agreement between NAM and Security Capital. The
Board therefore considered approval of a New Sub-Advisory Agreement with
Security Capital in light of the anticipated change of control. More specially,
the Board considered approval of the New Sub-Advisory Agreement on substantially
identical terms as the respective Original Sub-Advisory Agreement, to take
effect after the change of control has occurred and the agreement has been
approved by Fund shareholders. In reviewing the impact of the St. Paul divesture
on Security Capital, the Board considered the same factors as outlined
previously with respect to their review of NAM. As with NAM, the Board concluded
that the St. Paul divestiture would not affect the nature and quality of
services provided by Security Capital, the terms of the Sub-Advisory Agreement,
including the fees paid thereunder, and would not materially affect the
organization or operations of Security Capital. Accordingly, the Board
determined that their analysis of the various factors regarding their review and
approval of Security Capital would continue to apply following the change in
control.
G. APPROVAL
The Trustees did not identify any single factor discussed previously as
all-important or controlling. The Trustees, including a majority of independent
Trustees, concluded that the terms of the Investment Management and Sub-Advisory
Agreements were fair and reasonable, that the respective Fund Adviser's fees are
reasonable in light of the services provided to the Fund, that the renewal of
the NAM Investment Management Agreement and Sub-Advisory Agreement should be
approved, and that the new, post-change of control NAM Investment Management
Agreement and the Sub-Advisory Agreement be approved and recommended to
shareholders.
29
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.
30
Other Useful
INFORMATION
In April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul Travelers")
sold the majority of its controlling equity interest in Nuveen Investments, Inc.
("Nuveen") to the general public. Nuveen is the parent of Nuveen Asset
Management ("NAM"), which is each Fund's investment manager. This sale was
deemed to be an "assignment" of the investment management agreement between each
Fund and NAM and, if applicable, of the sub-advisory agreement between NAM and
the Fund's sub-adviser. As required by law, the shareholders of each Fund were
asked to approve a new investment management agreement and, if applicable, a new
subadvisory agreement that reflected this change in ownership. The shareholders
of each Fund voted this approval at a Shareholders' Meeting on July 26, 2005.
There were no changes to the investment objectives or management of any Fund as
a result of these actions.
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
The Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
most recent 12-month period ended June 30, 2005, and (iii) a description of the
policies and procedures that the Fund used to determine how to vote proxies
relating to portfolio securities are available without charge, upon request, by
calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549.
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 that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
MARKET YIELD (ALSO KNOWN AS DISTRIBUTION YIELD OR CURRENT YIELD): Market yield
is based on the Fund's current annualized monthly distribution divided by the
Fund's current market price. REIT distributions received by the Fund are
generally comprised of investment income, long-term and short-term capital gains
and a REIT return of capital. The Fund's monthly distributions to its
shareholders may be comprised of ordinary income, net realized capital gains
and, if at the end of the calendar year the Fund's cumulative net ordinary
income and net realized gains are less than the amount of the Fund's
distributions, a tax return of capital.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage 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
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
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 period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
31
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 more than $120 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 fixed-income 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, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should consider the
investment objective and policies, risk considerations, charges and expenses of
the Fund carefully before investing. The prospectus contains this and other
information relevant to an investment in the Fund. For a prospectus, please
contact your securities representative or Nuveen Investments, 333 W. Wacker Dr.,
Chicago, IL 60606. Please read the prospectus carefully before you invest or
send money.
o Share prices
o Fund details
Learn more o Daily financial news
about Nuveen Funds at o Investor education
WWW.NUVEEN.COM/ETF o Interactive planning tools
Logo: NUVEEN Investments
ESA-A-0605D
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.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
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.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this Item.
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 second fiscal quarter
of the period covered by this 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
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: September 7, 2005
-------------------------------------------------------------------
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
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: September 7, 2005
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: September 7, 2005
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.