Nuveen
Closed-End
Exchange-Traded
Funds
Nuveen REAL ESTATE INCOME Fund
High current income from
a portfolio of securities of
real estate companies
JRS
April 30, 2002
SEMIANNUAL REPORT
THE NUVEEN
INVESTOR
SEE PAGE 5
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CHAIRMAN OF THE BOARD
SIDEBAR TEXT: "I URGE YOU TO CONSIDER RECEIVING FUTURE FUND REPORTS AND OTHER
INFORMATION ELECTRONICALLY... SEE THE INSIDE FRONT COVER OF THIS REPORT FOR
DETAILED INSTRUCTIONS."
Dear SHAREHOLDER
I am pleased to report that since the inception of your Fund in November 2001,
the Nuveen Real Estate Income Fund has met its primary objective of providing
attractive monthly income, while at the same time offering opportunities to
reduce overall portfolio volatility. Detailed information on your Fund's
performance can be found in the Portfolio Managers' Comments and Performance
Overview sections of this report. I urge you to take the time to read them.
I also urge you to consider receiving future Fund reports and other information
electronically via the Internet and e-mail rather than in hard copy. Not only
will you be able to receive the information faster, but this also may help lower
Fund expenses. Sign up is quick and easy - see the inside front cover of this
report for detailed instructions.
In addition to providing you with steady income, your Nuveen Real Estate Income
Fund also features several characteristics that can help make it an essential
part of your overall investment strategy. These include careful research,
constant surveillance and judicious trading by a seasoned portfolio management
team, with every action designed to supplement income, improve Fund structure,
better adapt to current market conditions or increase diversification. In
uncertain markets like these, prudent investors understand the importance of
diversification, balance, and risk management, all attributes this Fund can
bring to your portfolio.
For more than 100 years, Nuveen has specialized in offering quality investments
to those seeking to accumulate and preserve wealth. Our mission continues to be
to assist you and your financial advisor by offering the investment services and
products that can help you meet your financial objectives. We thank you for
continuing to choose Nuveen Investments as a partner as you work toward that
goal.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
June 15, 2002
NUVEEN REALESTATE INCOME FUND (JRS)
Managers' PERSPECTIVE
The Nuveen Real Estate Income Fund was introduced in November 2001 and is
managed by a team of real estate investment professionals at Security Capital
Research & Management Incorporated, an indirect affiliate of General Electric
Capital Services, Inc. Tony Manno, Ken Statz and Kevin Bedell, who each have
more than 15 years' experience in managing real estate investments, lead the
team. Here the Security Capital Research & Management team reviews the economic
environment and performance of the Fund since its inception.
WHAT WERE THE MAJOR ECONOMIC DRIVERS OF THE U.S. REAL ESTATE MARKET DURING THIS
REPORTING PERIOD AND HOW DID THEY AFFECT THE REIT MARKET?
During the period since the Fund's inception in November 2001, a generally weak
but slowly improving economy helped create conditions favorable for strong
absolute and relative performance for real estate stocks. In a challenging
overall economic environment with increased market focus on income quality and
transparency, we think investors were drawn to the underlying cash flow,
dividends and attractive valuations of many real estate common and preferred
shares.
However, despite the relatively strong price performance of the REIT market, the
actual fundamentals of most commercial properties weakened significantly over
the past six months. Real estate is a cyclical business that responds with a lag
to changes in employment levels and corporate profitability trends. We have not
been surprised at current weakness in fundamental trends. Rather, we've been
encouraged by the lack of widespread overbuilding in most areas. We believe this
has limited profitability erosion in this industry to levels well below past
recessionary periods.
Looking specifically at some major types of properties:
o Apartment occupancy levels in many markets face continued pressure as a
buoyant single-family housing market is leading more renters to become
homeowners. This has magnified the overall loss of renters due to a weak
job market.
o Office market rent and occupancy levels have been hit hard by a depressed
business economy that has slowed new leasing dramatically and caused a
flood of tech- and telecom-related sublet space to hit the market.
o The hotel industry, while still experiencing a reduction in business travel
demand after September 11, has evidenced a sustained improvement due to a
return of leisure travel to more normal levels.
o Retail occupancy rates and rent levels have remained strong as a result of
resilient consumer spending and strong demand from retailers for more
space. Despite the well-publicized news of the Kmart bankruptcy, overall
retailer bankruptcy levels have stayed below those of past recessionary
periods.
WHAT WERE THE KEY STRATEGIES AND TACTICS USED TO MANAGE JRS OVER THIS PERIOD?
We completed the Fund's initial investment phase in March 2002. The completed
program resulted in approximately a 35% allocation to preferred securities and a
65% allocation to common shares, roughly the weightings we contemplated at the
beginning of the process in November 2001. About 63% of total ratable assets at
the end of March 2002 were of investment-grade quality.
The investment climate since the Fund's inception has been competitive, as the
Federal Reserve's continued policy of lowering short-term interest rates has
fueled investor demand for income. Our strategy from the outset was to
aggressively invest the more- liquid common stock portion of the target
portfolio as soon as possible and to opportunistically participate in preferred
share initial public offerings (IPO's) to complete the less-liquid ratable
securities portion. We believe this strategy has worked well, given the
subsequent significant rise in prices of many of the common stocks purchased
soon after the initial public offering in mid-November.
Since March 2002, we have selectively added to JRS's preferred positions by
participating in a number of offerings. Money for these purchases came from
reducing JRS's positions
in some common stocks that had appreciated above our target valuations. The
ability to maneuver JRS between these two distinct securities markets based on
their relative pricing is an important part of our strategy to try to achieve
both income and capital appreciation. As of April 30, 2002, JRS's preferred
allocation had increased to 40%, due to this reallocation of capital.
WERE THERE ANY SPECIFIC AREAS OR TYPES OF PROPERTIES YOU FOCUSED ON
IN PARTICULAR?
As of April 30, 2002, we believe the portfolio was well diversified as we worked
to reduce the Fund's exposure to an adverse event that might affect one or a
small group of issuers. One area we specifically avoided in our initial
portfolio was hotel-related securities. We had "red-lined" these due to the very
unsettled demand outlook for hotels after September 11. However, we think the
demand picture has clarified since November and hotel companies have continued
to pay the dividends on their preferred securities. Though most have sharply
reduced their dividends on common stock, our confidence in the preferred
dividend outlook for this sector has improved and the current portfolio has a
2.7% allocation to hotel company preferred stock.
HOW HAS THE FUND PERFORMED OVER THIS PERIOD?
For the period from its inception in November 2001 through April 30, 2002, the
Fund produced an 11.68% return on net asset value. This compares with a 12.91%
return over the same period for the Wilshire Real Estate Securities Index, an
unmanaged index comprised of publicly traded REITs and real estate operating
companies. Part of the JRS return comes from its monthly dividend, which the
Fund began paying in February 2002.
As of April 30, 2002, the Fund's share price had risen to $15.97 from its IPO
price of $15.00. It was trading at a 2.77% premium above its net asset value per
share as of that date.
WHAT IS YOUR STRATEGY GOING FORWARD OVER THE NEXT YEAR OR SO?
Our strategy of managing JRS for maximum income and capital appreciation over
the next year will mainly be achieved by adjusting, as needed, the allocations
between common and preferred securities. After a sustained period of economic
weakness during which an income focused strategy has been appropriate, we expect
the forward investment environment to shift from weakness to moderate growth. We
also expect the Federal Reserve's posture on short-term interest rates to shift
from the aggressive lowering of short-term rates to a new policy of increasing
short-term rates as the economy recovers. This outlook suggests that JRS's
preferred allocation, the most interest rate sensitive area of the portfolio,
may need to be pruned back in favor of growth-oriented common real estate
securities, depending on the ultimate strength of the economy. However, we also
may opportunistically increase the common stock exposure of JRS if the economic
recovery develops more strength than current consensus expectations.
WHAT IS YOUR OUTLOOK FOR THE REAL ESTATE MARKETS FOR THE NEXT YEAR OR SO?
Our current outlook for real estate markets over the next year is for a gradual
improvement in occupancy rates for the more cyclically sensitive office,
multi-family, and hotel companies and continued strong occupancy and rental rate
levels for retail-oriented companies. Despite the lack of near-term visibility
on the pace of the current economic rebound, most companies are confirming
earnings guidance for modest growth in 2002 with a significant acceleration in
growth possible in the second half of 2003. The current sharp decline in new
construction starts, which will limit new supply in 2003 and 2004, is a cause
for a more optimistic outlook for real estate fundamentals during the next two
years.
Our outlook for real estate stocks in general over the next twelve months is for
a 10% to 12% total rate of return. More than half of this return we believe will
come from well-supported dividend yields of 6% to 8%, while the remaining return
will come from capital appreciation in line with current earnings growth
expectations of 2% to 5%. We believe our view is supported by: 1) the modest
valuation levels for most of these securities compared to historical averages;
2) investor expectations for growth that we believe are realistic and confirmed
by company earnings guidance; and 3) an ongoing shift in investor demand toward
commercial real estate for the potential income and diversification benefits it
offers in a more sober investment environment.
We believe JRS is well positioned to take advantage of these developments, and
that the Fund continues to offer investors opportunities for strong returns and
portfolio diversification.
NUVEEN REAL ESTATE INCOME FUND
Performance
OVERVIEW As of April 30, 2002
JRS
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $15.97
--------------------------------------------------
Common Share Net Asset Value $15.54
--------------------------------------------------
Net Assets Attributable to
Common Shares ($000) $436,761
--------------------------------------------------
Latest Dividend per Share $0.1125
--------------------------------------------------
TOP 5 COMMON % OF TOTAL
STOCK HOLDINGS INVESTMENTS
--------------------------------------------------
Mack-Cali Realty Corporation 6.31%
--------------------------------------------------
Post Properties, Inc. 5.57%
--------------------------------------------------
HRPT Properties Trust 5.17%
--------------------------------------------------
First Industrial Realty Trust, Inc. 4.99%
--------------------------------------------------
The Macerich Company 4.60%
--------------------------------------------------
% OF TOTAL
TOP 5 INDUSTRIES STOCK HOLDINGS
--------------------------------------------------
Office 34.68%
--------------------------------------------------
Retail 21.63%
--------------------------------------------------
Multifamily 18.78%
--------------------------------------------------
Healthcare 13.70%
--------------------------------------------------
Industrial 7.71%
--------------------------------------------------
TOTAL RETURN
SINCE INCEPTION
--------------------------------------------------
Market NAV
--------------------------------------------------
Since 11/15/01 9.61% 11.68%
--------------------------------------------------
2002 MONTHLY DIVIDENDS PER SHARE
1/02 0.1125
2/02 0.1125
3/02 0.1125
4/02 0.1125
SHARE PRICE PERFORMANCE
WEEKLY CLOSING PRICE
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
11/16/01 15.25
15.07
15.09
15.14
15.01
15.05
15.13
15.06
15.16
15.13
15.06
15.12
15.34
15.1
14.92
15.2
15.4
15.47
15.34
15.66
15.75
15.8
15.99
4/30/02 15.98
PHOTO OF: 2 boys walking with baseball mitts and bat.
THE NUVEEN
INVESTOR
BOND SURVEILLANCE - A HIGH PRIORITY AT NUVEEN
The Enron scandal has raised numerous questions about the real value of American
securities. Investors want to know what safeguards are in place to inspire their
trust and ensure their holdings are dependable. The Nuveen Investor recently
spoke with David Blair, Assistant Vice President and Senior Analyst at Nuveen,
about the research and surveillance processes used for Nuveen funds.
HOW DO NUVEEN'S RESEARCH ANALYSTS EVALUATE BONDS PRIOR TO PURCHASE?
We evaluate factors impacting market sectors, issuers and specific bonds and
assign credit ratings to bonds we consider for purchase. We seek to purchase
bonds with stable and improving credit characteristics, which have attractive
prices and yields relative to other bonds in their sectors.
HOW DO YOU CONDUCT YOUR RESEARCH?
We conduct detailed analyses that often involve site visits and discussions with
managers of the projects being financed. Since Nuveen is a major investor with
large buying power, issuers and project managers are willing to listen to us and
respond to our concerns.
IS THE RESEARCH AND ANALYSIS PROCESS ANY DIFFERENT WHEN CONSIDERING HIGH-YIELD
BONDS?
Up to 20 percent of some funds can be invested in below investment grade bonds
to help the fund attain a higher yield. This underscores the need for research.
If one of our 16 analysts believes a high-yield bond should be purchased, a
second analyst reviews the issue as well.
HOW DO YOU MONITOR THE VARIOUS BONDS ONCE THEY'VE BEEN PURCHASED?
We have a proprietary database with information and analysis on the bonds Nuveen
holds in its funds. Among other things, we are able to evaluate risk exposure to
sectors, issuers and specific bonds on an on-going basis.
HOW DOES THE RESEARCH DEPARTMENT COMMUNICATE THE INFORMATION GATHERED?
We conduct biweekly meetings within the research department and weekly meetings
with portfolio managers. We also write-up our findings and distribute them with
"buy," "hold" or "sell" recommendations to portfolio managers.
(continued on page 7)
Volume ONE 2002
INSIDE
5 Bond Surveillance -
A High Priority at Nuveen
6 Is it Time to Rethink
Your Bond Strategy?
7 Many Investors Continue
to Find Solutions with Professional Advice
8 Fund Reports
Available Online
8 ETFConnect:
The Source for All Exchange-Traded Funds
(C)2002 Nuveen Investments.
All rights reserved.
LOGO: NUVEEN Investments
IS IT TIME TO RETHINK YOUR BOND STRATEGY?
Significant stock market losses in recent history have sent many investors
toward bonds as a way to potentially cut their losses and balance equity-
dominated portfolios. While many consider bonds a set-and-forget investment,
there are several circumstances that might prompt you to reassess -- and perhaps
revamp -- your bond holdings.
TAX BRACKET CHANGES
The Economic Growth and Tax Relief Reconciliation Act of 2001 has dropped tax
brackets a percentage point this year, but a higher salary, large bonus, sale of
assets or retirement may push you into a higher tax bracket for 2002.
If you are in a higher tax bracket and want to generate an income stream without
raising your tax burden, tax-free municipal bonds may be a prudent option. Even
if you are in a lower tax bracket, municipal bonds could make sense. The
question is whether municipal or taxable bonds will deliver a better taxable
yield.
RETIREMENT PLANS CHANGE
Whether you are near retirement or are currently enjoying it, you may want to
consider rebalancing your retirement accounts with less stock and more bonds, to
potentially reduce risk and try to preserve the assets that you have
accumulated. If you are just entering retirement you may want to make tax-free
municipal bonds a part of your portfolio to emphasize income generation and
protection from taxation.
RISK TOLERANCE CHANGES
The recent market volatility and market downturn may have caused many investors
to reevaluate their tolerance for risk. On the other hand, your portfolio might
have performed well over the last few years and you may not need to take on
extra risk to meet your long-term goals. In either situation you could take a
look at your bond portfolio and determine whether you need to make changes to
correspond with your tolerance for risk.
PORTFOLIO CHANGES
If you make significant changes to one or more of your investments, you'll want
to look at your portfolio as a whole, particularly with regard to overall asset
allocation. You may need to do some rebalancing to stay on track with your
investment strategy.
Your financial advisor can help. Regardless of how your circumstances change, he
or she can provide up-to-date information on the bond market and various funds
to help you decide how to maximize your returns consistent with your short- and
long-term financial goals.
No investment is risk free and some investments carry more risk than others. It
is important to know what the risks are, to evaluate them against any potential
rewards, and to determine your tolerance for risk when selecting an investment.
Photo of: bridge to lighthouse
Photo of: 2 toddlers playing
The Nuveen Investor Vol 02.1
LOGO: Nuveen Investments
MANY INVESTORS CONTINUE TO FIND SOLUTIONS WITH PROFESSIONAL ADVICE
For many investors, current financial markets are confusing and frustrating.
According to research conducted for the Forum for Investor Advice*, that's the
number one reason many turn to a financial advisor. They want someone to suggest
ideas and provide consultation, dialogue and professional advice.
Investors say their advisors are helpful in other key ways, including...
O Saving time. After consultation, investors note that the second most
important reason for using an advisor is to have someone else monitor their
portfolio, reducing the amount of time they spend on investing.
O Help in sorting through information. Investors in the 21st century have
more products from which to choose than in the past. For example, there are
approximately 8,000 mutual funds today, up from 3,000 in 1990.
O Assistance in setting financial goals. According to investors who use a
financial advisor, they are more likely to have a plan for a specific
financial goal than do-it-yourself investors.
O Staying focused. Advisor-assisted investors are more likely than
do-it-yourself investors to have developed a comprehensive investment
program.
O Peace of mind. Investors say their comfort level in all types of markets is
higher when using an advisor for a "second opinion" on an investment
decision.
*The survey of 324 investors was conducted in December of 2000 by Market Facts
and analyzed by New York based Neuwirth Research. Of the 324, 166 said they had
an ongoing relationship with a financial advisor, while 157 described themselves
as do-it-yourselfers.
--------------------------------------------------------------------------------
(continued from page 5)
HOW ARE PROBLEM BONDS IDENTIFIED AND HANDLED?
We conduct surveillance on our bonds on a regular basis to ensure, among other
things, that deteriorating bonds are identified early. We then discuss any
emerging problems and potential courses of action with the portfolio manager.
HOW MANY ISSUES DOES THE RESEARCH DEPARTMENT FOLLOW?
We follow 12 sectors and 1,500 uninsured bonds, worth about $18 billion of
Nuveen's $45 billion in total municipal assets. The remaining $27 billion in
municipal assets are insured or escrowed (backed by Treasury bonds). For the
insured bonds, we monitor closely on a regular basis the insurers guaranteeing
the bonds.
WILL RESEARCH AND SURVEILLANCE CHANGE IN LIGHT OF PROBLEMS WITH ENRON
SECURITIES?
Overall, our investment process and surveillance have worked well and been
effective. However, we meet as a group on a regular basis and are constantly
evaluating ways to improve the process to respond to issues and the market
environment.
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The Nuveen Investor Vol 02.1
LOGO: Nuveen Investments
LOOK AHEAD...
FUND REPORTS AVAILABLE ONLINE
Nuveen Fund information is now available online. Once you register, you'll
receive an e-mail notice with a link to your Fund's reports and other
information just as soon as it is ready. Registering takes only a few minutes.
If you receive statements from a brokerage firm or financial advisor, go to
WWW.INVESTORDELIVERY.COM. Enter your personal 13-character enrollment number
imprinted on the address sheet of this report near your name. From the options
on the follow-up page, select the New Enrollment-Create screen. Once there,
enter your e-mail address and a personal, four-digit PIN. Hit the Submit button.
Confirm the information you entered is correct, then hit Submit again.
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If you receive statements directly from Nuveen, go to WWW.NUVEEN.COM. Select the
Access Your Account tab, then select E-Report Enrollment. Finally, click on the
Enrollment Page. Once there, you'll need to provide your social security number
and e-mail address. Click on Enroll.
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After registering, you should receive a confirming e-mail within 24 hours. If
not, repeat these steps to ensure all information is accurate. You can use this
same process if you need to change your registration information or want to
cancel Internet viewing. The e-mail address you provide is strictly confidential
and will only be used to notify you of shareholder information.
--------------------------------------------------------------------------------
The information in this newsletter should not be construed as specific tax or
investment advice. Contact your advisor for information about your particular
situation.
--------------------------------------------------------------------------------
ETFCONNECT: THE SOURCE FOR ALL EXCHANGE-TRADED FUNDS
Last fall, Nuveen launched ETFConnect, the industry's first website
featuring all-encompassing information on exchanged-traded funds. Whatever
you're looking for in the world of Index ETFs or Closed-End Exchange-Traded
Funds - prices, NAVs, dividend information, performance histories, new
developments - this is the place. Highlights include Quick Facts sheets for more
than 500 funds, a multi-fund search capability, website links, a list of fund
sponsors, tools for portfolio tracking, and a continually updated education
center. Check out WWW.ETFCONNECT.COM.
[picture of etfconnect.com website]
The Nuveen Investor Vol 02.1
logo: Nuveen Investments
Nuveen Real Estate Income Fund (JRS)
Portfolio of
INVESTMENTS April 30, 2002 (Unaudited)
MARKET
SHARES DESCRIPTION VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 84.1%
HEALTHCARE - 17.7%
634,000 Health Care Property Investors, Inc. $ 25,886,220
1,417,600 Nationwide Health Properties, Inc. 26,367,360
1,740,300 Senior Housing Properties Trust 25,042,917
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 7.0%
909,800 First Industrial Realty Trust, Inc. 30,632,966
------------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY - 11.2%
189,800 Amli Residential Properties Trust 4,820,920
320,700 Gables Residential Trust 9,941,700
1,006,900 Post Properties, Inc. 34,224,531
------------------------------------------------------------------------------------------------------------------------------------
OFFICE - 28.9%
1,084,500 Brandywine Realty Trust 25,908,705
235,500 Glenborough Realty Trust Incorporated 5,286,975
856,100 Highwoods Properties, Inc. 24,073,532
3,658,900 HRPT Properties Trust 31,759,252
1,181,500 Mack-Cali Realty Corporation 38,753,200
------------------------------------------------------------------------------------------------------------------------------------
RETAIL - 19.3%
513,800 Federal Realty Investment Trust 13,846,910
310,000 Heritage Property Investment Trust 7,641,500
771,700 IRT Property Company 9,322,136
961,500 The Macerich Company 28,220,025
1,285,500 New Plan Excel Realty Trust 25,131,525
------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $341,148,082) 366,860,374
--------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 53.5%
DIVERSIFIED - 0.7%
Colonial Properties Trust:
33,100 Series A, 8.750% 830,479
25,100 Series C, 9.250% 657,620
31,000 Duke Realty Corporation - Series B, 7.990% 1,535,470
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 1.1%
46,530 Health Care Property Investors, Inc. - Series B, 8.700% 1,170,230
60,800 Healthcare Realty Trust, Inc. - Series A, 8.875% 1,536,416
29,562 Nationwide Health Properties, Inc. - Series A, 7.677% 2,291,055
------------------------------------------------------------------------------------------------------------------------------------
HOTEL - 3.8%
600,000 LaSalle Hotel Properties - Series A, 10.250% 15,900,000
29,300 FelCor Lodging Trust Inc. - Series B, 9.000% 729,570
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 3.6%
147,400 Liberty Property Trust - Series A, 8.800% 3,686,474
482,523 PS Business Parks, Inc. - Series F, 8.750% 11,966,570
Nuveen Real Estate Income Fund (JRS) (continued)
Portfolio of INVESTMENTS April 30, 2002 (Unaudited)
MARKET
SHARES DESCRIPTION VALUE
-----------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY - 14.6%
Apartment Investment & Management Company:
91,600 Series G, 9.375% $ 2,340,380
59,400 Series H, 9.500% 1,514,700
225,600 Series P (Convertible), 9.000% 5,718,960
51,050 Series Q, 10.100% 1,332,405
835,800 Series R, 10.000% 21,814,380
1,000,000 Home Properties of New York, Inc. - Series F, 9.000% 26,650,000
60,000 Post Properties, Inc. - Series A, 8.500% 3,120,000
51,300 United Dominion Realty Trust, Inc. - Series B, 8.600% 1,336,365
-----------------------------------------------------------------------------------------------------------------------------------
OFFICE - 18.9%
233,300 Alexandria Real Estate Equities, Inc. - Series B, 9.100% 6,019,140
CarrAmerica Realty Corp.:
628,800 Series B, 8.570% 15,814,320
503,800 Series C, 8.550% 12,670,570
1,085,100 Crescent Real Estate Equities Company - Series A (Convertible), 6.750% 21,712,851
136,500 Glenborough Realty Trust Incorporated - Series A (Convertible), 7.750% 3,071,250
Highwoods Properties, Inc.:
11,907 Series A, 8.625% 11,170,314
33,600 Series B, 8.000% 816,480
167,900 HRPT Properties Trust - Series A, 9.875% 4,373,795
92,881 Parkway Properties, Inc. - Series A, 8.750% 2,351,747
187,500 Reckson Associates Realty Corporation - Series A (Convertible), 7.625% 4,509,375
-----------------------------------------------------------------------------------------------------------------------------------
RETAIL - 10.5%
49,000 Developers Diversified Realty Corporation - Series C, 8.375% 1,212,750
1,200,000 Federal Realty Investment Trust - Series B, 8.500% 29,940,000
237,300 Glimcher Realty Trust - Series B, 9.250% 5,932,500
New Plan Excel Realty Trust:
99,100 Series B, 8.625% 2,472,545
21,000 Series D, 7.800% 1,041,470
50,000 Simon Property Group, Inc. - Series B (Convertible), 6.500% 4,572,500
24,500 Taubman Centers, Inc. - Series A, 8.300% 585,550
-----------------------------------------------------------------------------------------------------------------------------------
STORAGE - 0.3%
Shurgard Storage Centers, Inc.:
30,000 Series C, 8.700% 772,800
24,600 Series D, 8.750% 637,140
-----------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (cost $227,682,331) 233,808,171
-------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 3.0%
13,241,213 J.P. Morgan Prime Money Market Fund, effective yield of 1.780% 13,241,213
=============----------------------------------------------------------------------------------------------------------------------
Total Investments (cost $582,071,626) - 140.6% 613,909,758
-----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (1.2)% (5,148,666)
-----------------------------------------------------------------------------------------------------------------------------------
Taxable Auctioned Preferred Shares, at Liquidation Value - (39.4)% (172,000,000)
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 436,761,092
===================================================================================================================================
See accompanying notes to financial statements.
Statement of
ASSETS AND LIABILITIES April 30, 2002 (Unaudited)
--------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $568,830,413) $600,668,545
Temporary investments in short-term securities, at amortized cost, which
approximates market value 13,241,213
Dividends and interest receivable 1,870,779
Other assets 9,659
--------------------------------------------------------------------------------------------------
Total assets 615,790,196
--------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 471,177
Payable for investments purchased 2,125,398
Interest rate swaps, at fair value 478,432
Accrued expenses:
Management fees 301,987
Organization and offering costs 339,311
Other 113,918
Taxable Auctioned Preferred share dividends payable 36,818
Common share dividends payable 3,162,063
--------------------------------------------------------------------------------------------------
Total liabilities 7,029,104
--------------------------------------------------------------------------------------------------
Taxable Auctioned Preferred shares, at liquidation value $172,000,000
--------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $436,761,092
==================================================================================================
Common shares outstanding 28,107,228
==================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 15.54
==================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
--------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 281,072
Paid-in surplus 399,494,920
Balance of undistributed net investment income 2,026,165
Accumulated net realized gain from investment transactions 3,368,400
Net unrealized appreciation of investments and interest rate swap transactions 31,590,535
--------------------------------------------------------------------------------------------------
Net assets applicable to Common Shares $436,761,092
==================================================================================================
Authorized shares:
Common Unlimited
Preferred Unlimited
==================================================================================================
See accompanying notes to financial statements.
Statement of
OPERATIONS For the Period November 15, 2001
(commencement of operations) through April 30, 2002 (Unaudited)
--------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $17,503,119
Interest 658,605
--------------------------------------------------------------------------------------------------
Total investment income 18,161,724
--------------------------------------------------------------------------------------------------
EXPENSES
Management fees 2,150,878
Taxable Auctioned Preferred shares - auction fees 129,589
Taxable Auctioned Preferred shares - dividend disbursing agent fees 12,055
Shareholders' servicing agent fees and expenses 4,934
Custodian's fees and expenses 46,898
Trustees' fees and expenses 3,866
Professional fees 10,448
Shareholders' reports - printing and mailing expenses 25,436
Stock exchange listing fees 786
Investor relations expense 5,613
Other expenses 4,709
--------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 2,395,212
Custodian fee credit (94)
Expense reimbursement (719,442)
--------------------------------------------------------------------------------------------------
Net expenses 1,675,676
--------------------------------------------------------------------------------------------------
Net investment income 16,486,048
--------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain from investment transactions 3,368,400
Change in net unrealized appreciation of investments 31,838,132
Change in net unrealized appreciation (depreciation) of interest
rate swap transactions (247,597)
--------------------------------------------------------------------------------------------------
Net gain from investments 34,958,935
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO TAXABLE AUCTIONED PREFERRED SHAREHOLDERS
From undistributed net investment income (967,803)
--------------------------------------------------------------------------------------------------
NET INTEREST RATE SWAP PAYMENTS (843,875)
--------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $49,633,305
==================================================================================================
See accompanying notes to financial statements.
Statement of
CHANGES IN NET ASSETS For the Period
November 15, 2001 (commencement of operations) through
April 30, 2002 (Unaudited)
-------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 16,486,048
Net realized gain from investment transactions 3,368,400
Change in net unrealized appreciation of investments 31,838,132
Change in net unrealized appreciation (depreciation) of interest
rate swap transactions (247,597)
Distributions to Taxable Auctioned Preferred Shareholders from undistributed
net investment income (967,803)
Net interest rate swap payments (843,875)
-------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations 49,633,305
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From undistributed net investment income (12,648,205)
-------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from distributions to
Common shareholders (12,648,205)
-------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares 401,689,500
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 3,425
Taxable Auctioned Preferred shares offering costs (2,017,208)
-------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares
from capital share transactions 399,675,717
-------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares 436,660,817
Net assets applicable to Common shares at the beginning of period 100,275
-------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $436,761,092
=================================================================================================
Balance of undistributed net investment income at the end of period $ 2,870,040
=================================================================================================
See accompanying notes to financial statements.
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Fund covered in this report and its corresponding American Stock Exchange
symbol is Nuveen Real Estate Income Fund (JRS) (the "Fund"). Prior to the
commencement of operations, the Fund had no operations other than those related
to organizational matters, the initial capital contribution of $100,275 by
Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of The John Nuveen Company, and the recording of the organizational expenses
($15,000) and their reimbursement by Nuveen Investments, also a wholly owned
subsidiary of The John Nuveen Company.
The Fund seeks to provide high current income by investing primarily in a
portfolio of income-producing common stocks, preferred stocks, convertible
preferred stocks and debt securities issued by real estate companies, such as
Real Estate Investment Trusts ("REITs"). The Fund is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
Securities are valued at the last sales price on the securities exchange or
Nasdaq on which such securities are primarily traded. Securities traded on a
securities exchange or Nasdaq for which there are no transactions on a given day
or securities not listed on a securities exchange or Nasdaq are valued at the
mean of the closing bid and asked price. If it is determined that market prices
for a security are unavailable or inappropriate, the Board of Trustees of the
Fund, may establish a fair value for the security.
Because the Fund may invest a substantial portion of its assets in REITs, the
Fund may be subject to certain risks associated with direct investments in
REITs. REITs may be affected by changes in value of their underlying properties
and by defaults by tenants. REITs depend generally on their ability to generate
cash flow to make distributions to shareholders, and certain REITs have
self-liquidation provisions by which mortgages held may be paid in full and
distributions of capital returns may be made at any time.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on an accrual basis.
Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its net
investment income to its shareholders. Therefore, no federal income tax
provision is required.
Dividends and Distributions to Shareholders
Net investment income is declared monthly as a dividend. Generally, payment is
made or reinvestment is credited to shareholder accounts on the first business
day after month-end. Net realized capital gains from investment transactions, if
any, are distributed to shareholders not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
Distributions to shareholders of net investment income and net realized capital
gains 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 accounting principles generally accepted in the United
States. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income or distributions in excess of net realized gains, where
applicable.
Taxable Auctioned Preferred Shares
The Fund has issued and outstanding 1,720 Series M, 1720 Series T, 1,720 Series
W and 1,720 Series F $25,000 stated value Taxable Auctioned Preferred shares.
The dividend rate on each series may change every seven days, as set by the
auction agent.
Interest Rate Transactions
The Fund is authorized to enter into hedging transactions including interest
rate swap transactions. The Fund uses interest rate swaps with the intent to
reduce or eliminate the risk that an increase in short-term interest rates could
have on Common share net earnings as a result of leverage. Interest rate swaps
involve the Fund's agreement with the swap counterparty to pay a fixed rate
payment in exchange for the counterparty paying the Fund a variable rate payment
that is intended to approximate the Fundvariable rate payment obligation on
Taxable Auctioned Preferred shares or any variable rate borrowing. The payment
obligation is based on the notional amount of the swap. Interest rate swaps do
not involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate swaps is limited to
the net amount of interest payments that the Fund is contractually obligated to
make. The Fund has instructed the custodian to segregate assets in a separate
account with a current value at least equal to the amount of the Fund's net
payment obligations under any interest rate swap transactions. Interest rate
swap positions are marked to market daily. Although there are economic
advantages of entering into interest rate swap transactions, there are also
additional risks. The Fund helps manage the risks associated with interest rate
swap transactions by entering into agreements only with firms the Adviser deems
to be of good standing.
At April 30, 2002, the Fund had open interest rate swap agreements with Citibank
NA as follows:
NOTIONAL TERMINATION UNREALIZED
AMOUNT FIXED RATE FLOATING RATE* DATE APPRECIATION (DEPRECIATION)
---------------------------------------------------------------------------------------------------------
$43,000,000 4.0225% 1.8700% 2/06/05 $ (35,771)
43,000,000 4.8000 1.8700 2/06/07 (109,370)
43,000,000 5.1900 1.8700 2/06/09 (102,456)
---------------------------------------------------------------------------------------------------------
$(247,597)
=========================================================================================================
*Based on LIBOR (London Interbank Offered Rate)
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.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
Offering Costs
Nuveen Investments agreed to pay all Common share offering costs (other than the
sales load) that exceed $.03 per Common share. The Fund's share of offering
costs ($843,000) were recorded as a reduction of the proceeds from the sale of
shares.
Costs incurred by the Fund in connection with its offering of Taxable Auctioned
Preferred shares ($2,017,208) were recorded as a reduction to paid-in surplus.
2. FUND SHARES
During the period November 15, 2001 (commencement of operations) through April
30, 2002, 28,100,000 Common shares and 6,880 Preferred shares were sold and 228
Common shares were issued to shareholders due to reinvestment of distributions.
3. DISTRIBUTIONS TO SHAREHOLDERS
The Fund declared a dividend distribution of $.1125 per Common share from its
net investment income which was paid on June 3, 2002, to shareholders of record
on May 15, 2002.
4. SECURITIES TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
period November 15, 2001 (commencement of operations) through April 30, 2002,
aggregated $628,649,754 and $63,295,925, respectively.
At April 30, 2002, the cost of investments owned for federal income tax purposes
was the same as the cost for financial reporting purposes.
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
5. UNREALIZED APPRECIATION (DEPRECIATION)
At April 30, 2002, net unrealized appreciation of investments for federal income
tax purposes aggregated $31,838,132 of which $34,521,594 related to appreciated
investments and $2,683,462 related to depreciated investments.
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, at the rates set forth below, which
are based upon the average daily managed assets of the Fund. "Managed assets"
consists of the average daily net assets applicable to Common shares, assets
attributable to Taxable Auctioned Preferred Shares and the principal amount of
borrowings, if any.
AVERAGE DAILY MANAGED ASSETS MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $500 million .9000%
For the next $500 million .8750
For the next $500 million .8500
For the next $500 million .8250
For net assets over $2 billion .8000
================================================================================
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of the Fund in an amount equal to .30% of the average daily managed
assets for the period November 15, 2001 (commencement of operations) through
November 30, 2006, .25% of the average daily managed assets for the year ended
November 30, 2007, .20% of the average daily managed assets for the year ended
November 30, 2008, .15% of the average daily managed assets for the year ended
November 30, 2009, .10% of the average daily managed assets for the year ended
November 30, 2010, and .05% of the average daily managed assets for the year
ended November 30, 2011. The Adviser has not agreed to reimburse the Fund for
any portion of its fees and expenses beyond November 30, 2011.
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.
Subadvisor Acquisition
On May 14, 2002, GE Capital Corp., a wholly owned subsidiary of General Electric
Co., acquired Security Capital Group Incorporated, the parent company of
Security Capital, subadvisor to the Fund. Pursuant to the Investment Company Act
of 1940, shareholders of the Fund are required to approve this change in the
subadvisor. A special shareholder meeting to vote on this issue will be held
during the 3rd quarter of 2002.
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout the period:
Investment Operations Less Distributions
--------------------------------------------------------------- --------------------------------
Distributions Distributions
from Net from
Investment Capital
Income to Gains to Net
Beginning Net Taxable Taxable Investment Capital
Common Realized/ Auctioned Auctioned Income to Gains to
Share Net Unrealized Preferred Preferred Common Common
Net Asset Investment Investment Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
==================================================================================================================================
Year Ended 10/31:
2002(a) $14.33 $.59 $1.24 $(.04) $-- $1.79 $(.45) $-- $(.45)
==================================================================================================================================
Total Returns
---------------------
Offering
Costs and
Taxable Based
Net Auctioned Ending on
Interest Preferred Common Based Common
Rate Share Share Ending on Share Net
Swap Underwriting Net Asset Market Market Asset
Payments Discounts Value Value Value** Value**
==================================================================================================
Year Ended 10/31:
2002(a) (.03) $(.10) $15.54 $15.97 9.61% 11.68%
==================================================================================================
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 10/31:
2002(a) $436,761 1.27%* 8.36%* .89%* 8.74%* 13%
===================================================================================================================
Cumulative Taxable Auctioned
Preferred Stock at End of Period
--------------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
=================================================================
Year Ended 10/31:
2002(a) $172,000 $25,000 $88,483
=================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Common Share Net Asset
Value is the combination of reinvested dividend income, reinvested capital
gains distributions, if any, and changes in Common share net asset value
per share. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Taxable Auctioned
Preferred Shareholders or the effect of the interest rate swap payments;
income ratios reflect income earned on assets attributable to Taxable
Auctioned Preferred Shares.
(a) For the period November 15, 2001 (commencement of operations) through April
30, 2002.
See accompanying notes to financial statements.
Build Your Wealth
AUTOMATICALLY
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 95% of
the then-current market price or at net asset value, whichever is higher. 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 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.
FLEXIBILITY
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.
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.
Fund
INFORMATION
BOARD OF TRUSTEES
James F. Bacon
William E. Bennett
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Timothy R. Schwertfeger
Sheila W. Wellington
FUND MANAGER
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN, TRANSFER AGENT
AND SHAREHOLDER SERVICES
JPMorgan Chase Bank
P.O. Box 660086
Dallas, TX 75266-0086
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler
Chicago, IL
INDEPENDENT AUDITORS
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 ended April 30, 2002. Any future repurchases
will be reported to shareholders in the next annual or semiannual report.
Serving Investors
FOR GENERATIONS
Photo of: John Nuveen, Sr.
For over a century, generations of Americans have relied on Nuveen Investments
to help them grow and keep the money they've earned. Financial advisors,
investors and their families have associated Nuveen Investments with quality,
expertise and dependability since 1898. That is why financial advisors have
entrusted the assets of more than 1.3 million investors to Nuveen.
With the know-how that comes from a century of experience, Nuveen continues to
build upon its reputation for quality. Now, financial advisors and investors can
count on Nuveen Investments to help them design customized solutions that meet
the far-reaching financial goals unique to family wealth strategies - solutions
that can translate into legacies.
To find out more about how Nuveen Investments' products and services can help
you preserve your financial security, talk with your financial advisor, or call
us at (800) 257-8787 for more information, including a prospectus where
applicable. Please read that information carefully before you invest.
Logo: NUVEEN Investments
Nuveen Investments o 333 West Wacker Drive
Chicago, IL 60606 o www.nuveen.com FSA-6-4-02