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)

Gifford R. Zimmerman

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:    December 31, 2016                   

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.

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ITEM 1. REPORTS TO STOCKHOLDERS.

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Closed-End Funds

 

		Nuveen
		Closed-End Funds

 

 

 

 

						Annual Report  December 31, 2016
JRS
Nuveen Real Estate Income Fund

 

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IMPORTANT DISTRIBUTION NOTICE

for Shareholders of the Nuveen Real Estate Income Fund (JRS)

Annual Shareholder Report for the period ending December 31, 2016

The Nuveen Real Estate Income Fund seeks to offer attractive cash flow to its shareholders, by converting the expected long-term total return potential of the Fund’s investments in REITs into regular quarterly distributions. Following is a discussion of the Managed Distribution Policy the Fund uses to achieve this.

The Fund pays quarterly common share distributions that seek to convert the Fund’s expected long-term total return potential into regular cash flow. As a result, the Fund’s regular common share distributions (presently $0.2500 per share) may be derived from a variety of sources, including:

 

•

distributions from portfolio companies (REITs),

 

•

realized capital gains or,

 

•

possibly, returns of capital representing in certain cases unrealized capital appreciation.

Such distributions are sometimes referred to as “managed distributions.” The Fund seeks to establish a distribution rate that roughly corresponds to the Adviser’s projections of the total return that could reasonably be expected to be generated by the Fund over an extended period of time. The Adviser may consider many factors when making such projections, including, but not limited to, long-term historical returns for the asset classes in which the Fund invests. As portfolio and market conditions change, the distribution amount and distribution rate on the Common Shares under the Fund’s Managed Distribution Policy could change.

When it pays a distribution, the Fund provides holders of its Common Shares a notice of the estimated sources of the Fund’s distributions (i.e., what percentage of the distributions is estimated to constitute ordinary income, short-term capital gains, long-term capital gains, and/or a non-taxable return of capital) on a year-to-date basis. It does this by posting the notice on its website (www.nuveen.com/cef), and by sending it in written form.

You should not draw any conclusions about the Fund’s investment performance from the amount of this distribution or from the terms of the Fund’s Managed Distribution Policy. The Fund’s actual financial performance will likely vary from month-to-month and from year-to-year, and there may be extended periods when the distribution rate will exceed the Fund’s actual total returns. The Managed Distribution Policy provides that the Board may amend or terminate the Policy at any time without prior notice to Fund shareholders. There are presently no reasonably foreseeable circumstances that might cause the Fund to terminate its Managed Distribution Policy.

 

 

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Table

of Contents

 

Chairman’s Letter to Shareholders			4
Portfolio Managers’ Comments			5
Fund Leverage			8
Common Share Information			9
Risk Considerations			11
Performance Overview and Holding Summaries			12
Report of Independent Registered Public Accounting Firm			14
Portfolio of Investments			15
Statement of Assets and Liabilities			19
Statement of Operations			20
Statement of Changes in Net Assets			21
Statement of Cash Flows			22
Financial Highlights			24
Notes to Financial Statements			26
Additional Fund Information			35
Glossary of Terms Used in this Report			36
Reinvest Automatically, Easily and Conveniently			37
Board Members & Officers			38

 

NUVEEN			3

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Chairman’s Letter

to Shareholders

 

 

	4			NUVEEN

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Portfolio Managers’

Comments

 

Nuveen Real Estate Income Fund (JRS)

The Fund’s portfolio is managed by a team of real estate investment professionals at Security Capital Research & Management Incorporated (Security Capital), a wholly-owned subsidiary of JPMorgan Chase & Company. Anthony R. Manno Jr., Kenneth D. Statz and Kevin W. Bedell lead the team and have managed JRS since its inception in 2001.

Here they discuss economic and financial market conditions, their management strategy and the performance of the Fund for the twelve-month reporting period ended December 31, 2016.

What factors affected the U.S. economy and financial markets during the twelve-month reporting period ended December 31, 2016?

The restrained pace of growth that has defined the U.S. economic recovery since 2009 continued in the twelve-month reporting period. In the four calendar quarters of 2016, growth averaged below 2% (annualized), as measured by real gross domestic product (GDP), which is the value of goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes. Weakness was more pronounced in the first half of the reporting period, as GDP growth averaged below 1.5% in the first two quarters. Although a short-term jump in exports contributed to a more robust gain of 3.5% in the third quarter, the drop in exports that followed widened the trade deficit, which dampened economic activity to a 1.9% annualized rate in the last three months of 2016, as reported by the “advance” estimate of the Bureau of Economic Analysis.

Consumers, whose purchases comprise the largest component of the U.S. economy, benefited from employment growth and firming wages over the twelve-month reporting period. As reported by the Bureau of Labor Statistics, the unemployment rate fell to 4.7% in December 2016 from 5.0% in December 2015 and job gains averaged slightly above 200,000 per month for the past twelve months.

Consumer spending surged in the second quarter of 2016, then decelerated somewhat in the second half of the reporting period. Moreover, as the cost of gasoline and rents climbed over 2016, inflation ticked higher. The Consumer Price Index (CPI) rose 2.1% over the twelve-month reporting period ended December 2016 on a seasonally adjusted basis, as reported by the U.S. Bureau of Labor Statistics. The core CPI (which excludes food and energy) increased 2.2% during the same period, slightly above the Federal Reserve’s (Fed) unofficial longer term inflation objective of 2.0%.

The housing market was another bright spot in the economy. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.6% annual gain in November 2016 (most recent data available at the time this report was prepared) (effective July 26, 2016, the S&P/Case-Shiller U.S. National Home Price

 

 

Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Fund disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s (S&P), Moody’s Investors Service (Moody’s), Inc. or Fitch, Inc. (Fitch). This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.

 

NUVEEN			5

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Portfolio Managers’ Comments (continued)

 

Index was renamed the S&P CoreLogic Case-Shiller U.S. National Home Price Index). The 10-City and 20-City Composites reported year-over-year increases of 4.5% and 5.3%, respectively.

Business spending weakened in the first half of 2016 but modestly improved over the remainder of the year. Early in the reporting period, the energy sector’s slump, financial market turbulence and a murky outlook on U.S. and global growth weighed on business sentiment and dampened spending. However, business confidence improved in the second half of the year, as oil prices stabilized, recession fears diminished and the election of Donald Trump stoked expectations for new pro-growth fiscal policy.

Given the economy’s consistent expansion and the uptick in the inflation rate, the Fed raised one of its main interest rates in December for the second time in a year, to a range of 0.50% to 0.75%. Additionally at its December 2016 meeting, the Fed revised its forecast from two to three increases in 2017, signaling greater confidence in the economy and rising inflation expectations.

Other market-moving events during the reporting period included a spike in volatility in January and February 2016 triggered by deteriorating sentiment about China’s economy, another sharp downturn in oil prices and concerns about central bank policy both in the U.S. and around the world. The Brexit referendum in June 2016 also caught investors off guard. In response, U.K. sterling fell to 30-year lows and global equities tumbled while perceived safe-haven assets such as gold, the U.S. dollar and government bonds saw large inflows. However, the markets stabilized fairly quickly post-Brexit vote, buoyed by reassurances from global central banks and a perception that the temporary price rout presented an attractive buying opportunity. Following a relatively calm July and August 2016, volatility resumed in the final months of the reporting period. Investors worried whether central banks were reaching the limits of their effectiveness as global growth continues to stagnate. The health of the European banking sector came into question, renewing concerns about the potential to trigger a wider crisis. Political uncertainty increased leading up to the November U.S. presidential election, and Trump’s unexpected win contributed to an initial sell-off across global markets. However, after digesting the “shock,” U.S. equities rallied strongly and global developed market stocks pared their losses, while emerging markets, fixed income and gold remained lower through the end of the reporting period.

After largely retracing a mid-year pricing surge, real estate investment trusts (REITs) common equities, as measured by the Wilshire U.S. Real Estate Securities Index (WILRESI), still generated an attractive total return for the reporting period during a highly volatile market, characterized by widely shifting expectations regarding the path for long-term interest rates and economic growth centered mainly around the U.S. national elections. Similar pricing patterns were evident in total returns for REIT senior fixed income securities during the reporting period, with year-end interest rate moves weighing most heavily on the pricing of longer duration perpetual preferred securities.

What key strategies were used to manage the Fund during this twelve-month reporting period ended December 31, 2016?

The Fund is designed to invest at least 90% of its assets in income producing common stocks, preferred stocks, convertible preferred stocks and debt securities issued by real estate companies, with at least 80% of its total assets invested in income producing equity securities issued by REITs.

In managing the JRS portfolio, Security Capital seeks to maintain significant property type and geographic diversification while taking into account company credit quality, sector and security-type allocations. Investment decisions are based on a multi-layered analysis of the company, the real estate it owns, its management and the relative price of the security with a focus on securities that we believe will be best positioned to generate sustainable income and potential price appreciation over the long-run. In addition to fundamental security research, the proportion of the Fund invested in common equity versus preferred, fixed-income and cash investments is a key tactic we use to manage risk at a portfolio level. In general, in times of strong economic growth we increase the portfolio allocation to common equity. In less certain times, we tend to increase our allocation toward preferred securities. As of December 31, 2016, the Fund was

 

	6			NUVEEN

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allocated 59.6% in common equity, 39.6% in preferreds, 0.0% in bonds and 0.8% in cash. We expect further exaggerated pricing swings for REIT common equity. In this context, we remain neutral in our allocation to common equity, and remain in place to take advantage of further volatility in common equity through our allocation to REIT preferred and cash. Shifting allocations between common equity and preferreds is an important tool for the Fund and the balancing of growth and income in an economy experiencing a slow, uneven recovery.

How did the Fund perform during this twelve-month reporting period ended December 31, 2016?

The table in the Performance Overview and Holding Summaries section of this report provides total returns for the one-year, five-year and ten-year periods ended December 31, 2016. The Fund’s total returns on net asset value (NAV) are compared with the performance of a corresponding market index. For the twelve-month reporting period ended December 31, 2016, JRS underperformed the Wilshire U.S. Real Estate Securities Index and its Blended Benchmark.

Within the Fund’s common equity holdings, there were distinctive performance differences by major property type with underlying themes and influences reflecting company-specific factors, earlier reporting period performance differentials, as well as shifting investor expectations colored by macro-economic trends. In this context, 2016 performance leaders by major property type were office, health care and mixed industrial/office. Outperformance among the office companies evidenced several themes, including West Coast focused companies, where supply/demand trends have been more favorable, in particular Hudson Pacific Properties and Douglas Emmett Inc. In addition, Washington, D.C. focused companies outperformed on signs of a bottoming in adverse conditions there and the hope that policy shifts may lift demand for space. In particular, within health care, strong stock selection highlighted by the Fund’s significant investment in Senior Housing Properties Trust, representing a significant overweight relative to index, benefitted from sidestepping turmoil in post-acute/skilled nursing, which widely impacted its health care peers.

Within the Fund’s common equity holdings, the relative underperformers by major property-type were regional malls, strip centers and industrial sector. While the Fund’s regional malls and strip center investments were a drag on benchmark-relative performance, far and away the largest single factor driving the benchmark shortfall was the Fund’s absence of investment in data center companies. The subsector within the industrial sector is a complex real estate segment emerging only in the last 18 months as a material component of the primary REIT indexes. Data center companies significantly contributed to the Index outperformance, in particular the holdings Equinix Inc. and Digital Realty. After rigorous underwriting, we introduced data center investments during the second quarter of 2016. Also detracting were our regional mall and strip center companies, in particular DDR Corporation. Investors are increasingly cautious of the retailing landscape in the context of accelerating on-line sales and the associated shifts in strategy by retailers. Macy’s announcement, during the third quarter, of its intention to close a large number of stores to rebalance its physical footprint and increase its on-line initiatives has been viewed by investors as a broader trend, likely foreshadowing similar moves by other large retailers.

The issue at hand, in Security Capital’s view, is the extent to which increasing rates will impact real estate valuations and investor returns. On this question, real estate investors and generalist stock investors appear to be seeing the world differently and this tension is leading to some significant quarter-to-quarter price volatility within REIT common equity.

Security Capital expects this tension and the resulting quarter-to-quarter price volatility, to continue as now more than ever, REITs are most often priced on the margin not by real estate investors, but instead by a diverse universe of generalist stock investors, including large/small cap stock funds, hedge funds and closed end funds. Within their portfolios, REIT’s are aligned with a group of income-oriented investments that become significantly more appealing as rates fall and vice versa. This market dynamic creates opportunity for investors, to a degree that is truly unique to REITs.

 

NUVEEN			7

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Fund

Leverage

 

IMPACT OF THE FUND’S LEVERAGE STRATEGY ON PERFORMANCE

One important factor impacting the return of the Fund relative to its comparative benchmarks was the Fund’s use of leverage through the use of bank borrowings. The Fund uses leverage because our research has shown that, over time, leveraging provides opportunities for additional income and total return for common shareholders. However, use of leverage also can expose common shareholders to additional volatility. For example, as the prices of securities held by the Fund decline, the negative impact of these valuation changes on common share NAV and common shareholder total return is magnified by the use of leverage. Conversely, leverage may enhance common share returns during periods when the prices of securities held by the Fund generally are rising. The Fund’s use of leverage had a negative impact on performance during this reporting period.

The Fund also continued to utilize forward starting interest rate swap contracts to partially hedge its future interest cost of leverage, which as mentioned previously, is through the use of bank borrowings. The swap contracts had a negative impact on performance during this reporting period.

As of December 31, 2016, the Fund’s percentages of leverage are as shown in the accompanying table.

 

		JRS
Effective Leverage*			30.55	%
Regulatory Leverage*			30.55	%

*

Effective leverage is the Fund’s effective economic leverage, and includes both regulatory leverage and the leverage effects of certain derivative and other investments in a Fund’s portfolio that increase the Fund’s investment exposure. Regulatory leverage consists of preferred shares issued or borrowings of the Fund. The Fund, however, may from time to time borrow on a typically transient basis in connection with its day-to-day operations, primarily in connection with the need to settle portfolio trades. Such incidental borrowings are excluded from the calculation of the Fund’s effective leverage ratio. Both of these are part of the Fund’s capital structure. Regulatory leverage is subject to asset coverage limits set forth in the Investment Company Act of 1940.

THE FUND’S REGULATORY LEVERAGE

Bank Borrowings

As noted above, the Fund employs leverage through the use of bank borrowings. The Fund’s bank borrowing activities are as shown in the accompanying table.

 

Current Reporting Period																								Subsequent to the Close of the Reporting Period
January 1, 2016				Draws				Paydowns				December 31, 2016				Average Balance Outstanding								Draws				Paydowns				February 28, 2017
	$140,000,000				$10,750,000				$(6,000,000)				$144,750,000				$140,523,497								$    —				$    —				$144,750,000

Refer to Notes to Financial Statements, Note 8 – Borrowing Arrangements for further details.

 

	8			NUVEEN

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Common Share

Information

 

DISTRIBUTION INFORMATION

The following 19(a) Notice presents the Fund’s most current distribution information as of November 30, 2016 as required by certain exempted regulatory relief the Fund has received.

Because the ultimate tax character of your distributions depends on the Fund’s performance for its entire fiscal year (which is the calendar year for the Fund) as well as certain fiscal year-end (FYE) tax adjustments, estimated distribution source information you receive with each distribution may differ from the tax information reported to you on your Fund’s IRS Form 1099 statement. See “Distribution Information – As of December 31, 2016” below for actual distribution source information for calendar year 2016.

DISTRIBUTION INFORMATION – AS OF NOVEMBER 30, 2016

This notice provides shareholders with information regarding fund distributions, as required by current securities laws. You should not draw any conclusions about the Fund’s investment performance from the amount of this distribution or from the terms of the Fund’s Managed Distribution Policy.

The Fund may in certain periods distribute more than its income and net realized capital gains, although the Fund currently estimates that it has not done so for the fiscal year-to-date period. In such instances, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.”

The amounts and sources of distributions set forth below are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. More details about the Fund’s distributions and the basis for these estimates are available on www.nuveen.com/cef.

The following table provides estimates of the Fund’s distribution sources, reflecting year-to-date cumulative experience through the latest month-end. The Fund attributes these estimates equally to each regular distribution throughout the year. Consequently, the estimated information shown below is for the current distribution, and also represents an updated estimate for all prior months in the year.

Data as of November 30, 2016

 

						Estimated Per Share Sources of Distribution1																Estimated Percentage of the Distribution
JRS (FYE 12/31)		Per Share Distribution				Net Investment Income				Long- Term Gains				Short- Term Gains				Return of Capital				Net Investment Income				Long-Term Gains				Short-Term Gains				Return of Capital
Current Quarter		$	0.2500			$	0.1244			$	0.1256			$	0.0000			$	0.0000				49.7	%			50.3	%			0.0	%			0.0	%
Fiscal YTD		$	0.9800			$	0.4875			$	0.4925			$	0.0000			$	0.0000				49.7	%			50.3	%			0.0	%			0.0	%

 

1

Net investment income (NII) is a projection through the end of the current calendar quarter using actual data through the stated month-end date above. Capital gain amounts are as of the stated date above. JRS owns REIT securities which attribute their distributions to various sources including NII, gains, and return of capital. The estimated per share sources above include an allocation of the NII based on prior year attributions which can be expected to differ from the actual final attributions for the current year.

 

NUVEEN			9

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Common Share Information (continued)

 

The following table provides information regarding JRS’ distributions and total return performance over various time periods. This information is intended to help you better understand whether returns for the specified time periods were sufficient to meet distributions.

Data as of November 30, 2016

 

														Annualized								Cumulative
JRS (FYE 12/31) Inception Date		Quarterly Distribution				Fiscal YTD Distribution				Net Asset Value (NAV)				5-Year Return on NAV				Fiscal YTD Dist Rate on NAV1				Fiscal YTD Return on NAV				Fiscal YTD Dist Rate on NAV1
Nov 2001		$	0.2500			$	0.9800			$	11.18				12.59	%			8.77	%			1.36	%			8.77	%

 

1	As a percentage of 11/30/2016 NAV.

DISTRIBUTION INFORMATION – AS OF DECEMBER 31, 2016

The following tables provide information regarding the Fund’s common share distributions and total return performance for the fiscal year ended December 31, 2016. This information is intended to help you better understand whether the Fund’s returns for the specified time period were sufficient to meet its distributions.

Data as of December 31, 2016

 

						Per Share Sources of Distribution																Percentage of the Distribution
JRS (FYE 12/31)		Per Share Distribution				Net Investment Income				Long- Term Gains				Short- Term Gains				Return of Capital1				Net Investment Income				Long- Term Gains				Short- Term Gains				Return of Capital1
Fiscal YTD		$	0.9800			$	0.9800			$	0.000			$	0.000			$	0.000				100.00	%			0.00	%			0.00	%			0.00	%

 

						Annualized
JRS (FYE 12/31) Inception Date		Net Asset Value (NAV)				1-Year Return on NAV				5-Year Return on NAV				Fiscal YTD Dist Rate on NAV
Nov 2001		$	11.39				5.53	%			12.45	%			8.60	%

 

1

Return of Capital may represent unrealized gains, return of shareholder’s principal, or both. In certain circumstances, all or a portion of the return of capital may be characterized as ordinary income under federal tax law. The actual tax characterization will be provided to shareholders on Form 1099-DIV shortly after calendar year-end.

COMMON SHARE REPURCHASES

During August 2016, the Fund’s Board of Trustees reauthorized an open-market share repurchase program, allowing the Fund to repurchase an aggregate of up to approximately 10% of its outstanding shares.

As of December 31, 2016, and since the inception of the Fund’s repurchase program, the Fund has cumulatively repurchased and retired common shares as shown in the accompanying table.

 

		JRS
Common shares cumulatively repurchased and retired			0
Common shares authorized for repurchase			2,890,000

OTHER COMMON SHARE INFORMATION

As of December 31, 2016, and during the current reporting period, the Fund’s common share price was trading at a premium/(discount) to its common share NAV as shown in the accompanying table.

 

		JRS
Common share NAV			$11.39
Common share price			$10.77
Premium/(Discount) to NAV			(5.44	)%
12-month average premium/(discount) to NAV			(7.17	)%

 

	10			NUVEEN

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Risk

Considerations

 

Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation.

Nuveen Real Estate Income Fund (JRS)

Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. Real estate investments may suffer due to economic downturns and changes in commercial real estate values, rents, property taxes, interest rates and tax laws. The Fund’s concentration in real estate may involve greater risk and volatility than more diversified investments. Prices of equity securities may decline significantly over short or extended periods of time. Debt or fixed income securities such as those held by the Fund, are subject to market risk, credit risk, interest rate risk, derivatives risk, liquidity risk, and income risk. As interest rates rise, bond prices fall. Leverage increases return volatility and magnifies the Fund’s potential return and its risks; there is no guarantee a fund’s leverage strategy will be successful. For these and other risks such as preferred securities risk, see the Fund’s web page at www.nuveen.com/JRS.

 

NUVEEN			11

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JRS

 

Nuveen Real Estate Income Fund

Performance Overview and Holding Summaries as of December 31, 2016

 

Refer to the Glossary of Terms Used in this Report for further definitions of terms used in this section.

Average Annual Total Returns as of December 31, 2016

 

		Average Annual
		1-Year				5-Year				10-Year
JRS at Common Share NAV			5.53%				12.45%				1.73%
JRS at Common Share Price			10.43%				9.60%				0.82%
Wilshire U.S. Real Estate Securities Index (WILRESI)			7.62%				12.24%				4.80%
Blended Benchmark			6.32%				10.31%				N/A

Average Annual Total Returns as of December 31, 2016¹

(including retained gain tax credit/refund)

 

		Average Annual
		1-Year				5-Year				10-Year
JRS at Common Share NAV			5.53%				12.45%				2.15%
JRS at Common Share Price			10.43%				9.60%				1.23%

Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

Common Share Price Performance — Weekly Closing Price

 

 

	12			NUVEEN

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This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

 

 

 

1

The Fund elected to retain a portion of its realized long-term capital gains for the tax year ended December 31, 2007 and pay required federal corporate income taxes on these amounts. These standardized total returns include the economic benefit to common shareholders of record of this tax credit/refund. The Fund had no retained capital gains for the tax years ended December 31, 2008 through December 31, 2016.

2

Excluding investments in derivatives.

 

NUVEEN			13

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Report of

Independent Registered Public Accounting Firm

 

To the Board of Trustees and Shareholders of

Nuveen Real Estate Income Fund:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Nuveen Real Estate Income Fund (the “Fund”) as of December 31, 2016, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, the statement of cash flows for the year then ended, and the financial highlights for each of the years in the three-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the periods presented through December 31, 2013 were audited by other auditors whose report dated February 27, 2014 expressed an unqualified opinion on those financial highlights.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2016, by correspondence with the custodian and brokers or other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, its cash flows for the year then ended, and the financial highlights for each of the years in the three-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Chicago, Illinois

February 28, 2017

 

	14			NUVEEN

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JRS

 

Nuveen Real Estate Income Fund
Portfolio of Investments		December 31, 2016

 

Shares				Description (1)														Value
				LONG-TERM INVESTMENTS – 142.3% (99.2% of Total Investments)
				REAL ESTATE INVESTMENT TRUST COMMON STOCKS – 85.5% (59.6% of Total Investments)
				Diversified – 2.1% (1.5% of Total Investments)
	179,075			Liberty Property Trust														$	7,073,463
				Health Care – 9.4% (6.6% of Total Investments)
	234,575			Health Care Property Investors Inc., (2)															6,971,569
	530,100			Senior Housing Properties Trust, (2)															10,034,793
	95,300			Ventas Inc., (2)															5,958,156
	119,331			Welltower Inc., (2)															7,986,824
				Total Health Care															30,951,342
				Hotels, Restaurants & Leisure – 5.3% (3.7% of Total Investments)
	100,225			Chesapeake Lodging Trust															2,591,819
	122,500			Hospitality Properties Trust															3,888,150
	295,325			Host Hotels & Resorts Inc.															5,563,923
	72,075			LaSalle Hotel Properties															2,196,125
	104,175			Pebblebrook Hotel Trust															3,099,206
				Total Hotels, Restaurants & Leisure															17,339,223
				Industrial – 5.3% (3.7% of Total Investments)
	329,278			Prologis Inc., (2)															17,382,585
				Office – 9.8% (6.8% of Total Investments)
	72,075			Alexandria Real Estate Equities Inc.															8,009,695
	164,850			Douglas Emmett Inc.															6,026,916
	155,775			Hudson Pacific Properties Inc.															5,417,855
	122,360			Vornado Realty Trust, (2)															12,770,713
				Total Office															32,225,179
				Residential – 16.0% (11.1% of Total Investments)
	241,350			American Homes 4 Rents, Class A															5,063,523
	100,226			Apartment Investment & Management Company, Class A															4,555,272
	83,638			AvalonBay Communities, Inc.															14,816,471
	249,095			Equity Residential															16,031,753
	33,413			Essex Property Trust Inc.															7,768,523
	44,356			Mid-America Apartment Communities															4,343,340
				Total Residential															52,578,882
				Retail – 20.7% (14.4% of Total Investments)
	231,575			CBL & Associates Properties Inc.															2,663,113
	534,300			Developers Diversified Realty Corporation (2)															8,158,761
	29,300			Federal Realty Investment Trust															4,163,823
	198,324			General Growth Properties Inc., (2)															4,954,134
	161,350			Kimco Realty Corporation															4,059,566
	47,702			Macerich Company, (2)															3,379,210
	73,560			Regency Centers Corporation															5,071,962
	145,099			Simon Property Group, Inc., (2)															25,779,734
	22,575			Taubman Centers Inc.															1,668,970
	228,800			Weingarten Realty Trust, (2)															8,188,752
				Total Retail															68,088,025
				Specialized – 16.9% (11.8% of Total Investments)
	47,300			Coresite Realty Corporation															3,754,201
	223,200			CubeSmart															5,975,064
	89,100			CyrusOne Inc.															3,985,443

 

NUVEEN			15

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JRS		Nuveen Real Estate Income Fund
		Portfolio of Investments (continued)		December 31, 2016

 

Shares				Description (1)														Value
				Specialized (continued)
	56,850			Digital Realty Trust Inc.														$	5,586,081
	29,825			Equinix Inc. (2)															10,659,753
	53,450			Extra Space Storage Inc.															4,128,478
	70,450			Life Storage, Inc.															6,006,567
	69,412			Public Storage, Inc.															15,513,581
				Total Specialized															55,609,168
				Total Real Estate Investment Trust Common Stocks (cost $214,599,624)															281,247,867
Shares				Description (1)		Coupon								Ratings (3)				Value
				REAL ESTATE INVESTMENT TRUST PREFERRED STOCKS – 56.8% (39.6% of Total Investments)
				Diversified – 5.0% (3.5% of Total Investments)
	203,599			PS Business Parks, Inc.			6.450%								BBB			$	5,106,263
	301,250			PS Business Parks, Inc.			6.000%								BBB				7,323,388
	171,000			PS Business Parks, Inc.			5.750%								BBB				3,980,880
				Total Diversified															16,410,531
				Health Care – 3.6% (2.5% of Total Investments)
	125,000			Sabra Health Care Real Estate Investment Trust			7.125%								BB–				3,188,750
	17,450			Senior Housing Properties Trust			6.250%								BBB–				427,002
	320,900			Welltower Inc.			6.500%								Baa2				8,067,426
				Total Health Care															11,683,178
				Hotels, Restaurants & Leisure – 3.3% (2.3% of Total Investments)
	100,000			Ashford Hospitality Trust Inc.			8.450%								N/R				2,498,000
	150,800			Hospitality Properties Trust			7.125%								Baa3				3,803,176
	179,450			Sunstone Hotel Investors Inc.			0.000%								N/R				4,549,058
				Total Hotels, Restaurants & Leisure															10,850,234
				Industrial – 0.9% (0.6% of Total Investments)
	120,600			Terreno Realty Corporation			7.750%								BB				3,045,150
				Office – 15.5% (10.8% of Total Investments)
	155,000			Alexandria Real Estate Equities Inc., Series B			6.450%								Baa3				3,882,750
	231,000			Brandywine Realty Trust, Series D			6.900%								Ba1				5,843,145
	32,750			Corporate Office Properties Trust			7.375%								BB				825,300
	12,359			Highwoods Properties, Inc., Series A, (4)			8.625%								Baa3				14,521,825
	34,100			Kilroy Realty Corporation			6.875%								Baa3				864,435
	72,950			Kilroy Realty Corporation			6.375%								Baa3				1,825,939
	213,700			SL Green Realty Corporation			6.500%								Ba1				5,329,678
	292,675			Vornado Realty Trust			6.625%								BBB–				7,363,703
	134,500			Vornado Realty Trust			6.625%								BBB–				3,370,570
	311,850			Vornado Realty Trust			5.700%								BBB–				7,347,186
				Total Office															51,174,531
				Residential – 4.7% (3.3% of Total Investments)
	241,275			American Homes 4 Rent			0.000%								N/R				6,031,875
	302,225			Apartment Investment & Management Company			6.875%								BB				7,797,405
	13,875			Equity Lifestyle Properties Inc.			6.750%								N/R				348,540
	17,080			Mid-America Apartment Communities Inc.			8.500%								BBB–				1,096,024
	12,200			Sun Communities Inc.			7.125%								N/R				305,488
				Total Residential															15,579,332
				Retail – 19.7% (13.7% of Total Investments)
	285,125			CBL & Associates Properties Inc.			7.375%								BB				6,971,306
	73,275			DDR Corporation			6.500%								Baa3				1,795,238
	54,225			DDR Corporation			6.250%								Baa3				1,292,182
	596,800			General Growth Properties			6.375%								N/R				14,806,608
	40,250			National Retail Properties Inc.			6.625%								Baa2				1,010,678

 

	16			NUVEEN

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Shares				Description (1)		Coupon								Ratings (2)				Value
				Retail (continued)
	19,950			Penn Real Estate Investment Trust			8.250%								N/R			$	504,536
	12,900			Regency Centers Corporation			6.625%								Baa2				323,790
	38,247			Regency Centers Corporation			6.000%								Baa2				915,633
	24,900			Retail Properties of America			7.000%								BB				620,010
	346,550			Saul Centers, Inc.			6.875%								N/R				8,708,802
	3,169			Simon Property Group, Inc.			8.375%								BBB+				213,400
	503,650			Taubman Centers Incorporated, Series K			6.250%								N/R				12,465,338
	262,425			Taubman Centers Incorporated., Series J			6.500%								N/R				6,455,655
	103,775			Urstadt Biddle Properties			7.125%								N/R				2,646,263
	141,200			Urstadt Biddle Properties			6.750%								N/R				3,637,312
	99,650			Washington Prime Group, Inc.			6.875%								Ba1				2,471,320
				Total Retail															64,838,071
				Specialized – 4.1% (2.9% of Total Investments)
	49,200			Digital Realty Trust Inc.			7.375%								Baa3				1,335,780
	267,563			Public Storage, Inc. (5)			6.375%								A3				6,996,772
	167,000			Public Storage, Inc.			5.900%								A3				4,121,560
	27,975			Public Storage, Inc.			4.950%								A3				593,070
	21,905			Public Storage, Inc.			4.900%								A3				462,196
				Total Specialized															13,509,378
				Total Real Estate Investment Trust Preferred Stocks (cost $185,467,998)															187,090,405
				Total Long-Term Investments (cost $400,067,622)															468,338,272
Principal Amount (000)				Description (1)		Coupon				Maturity								Value
				SHORT-TERM INVESTMENTS – 1.2% (0.8% of Total Investments)
				REPURCHASE AGREEMENTS – 1.2% (0.8% of Total Investments)
$	3,968			Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/30/16, repurchase price $3,967,961, collateralized by $4,175,000 U.S. Treasury Notes, 1.125%, due 7/31/21, value $4,048,243			0.030%				1/03/17							$	3,967,948
				Total Short-Term Investments (cost $3,967,948)															3,967,948
				Total Investments (cost $404,035,570) – 143.5%															472,306,220
				Borrowings – (44.0)% (6), (7)															(144,750,000	)
				Other Assets Less Liabilities – 0.5% (8)															1,564,939
				Net Assets Applicable to Common Shares – 100%														$	329,121,159

Investments in Derivatives as of December 31, 2016

Interest Rate Swaps

 

Counterparty		Notional Amount				Fund Pay/ Receive Floating Rate				Floating Rate Index				Fixed Rate (Annualized)				Fixed Rate Payment Frequency				Effective Date (9)				Optional Termination Date				Termi nation Date				Value				Unrealized Appreciation (Depreciation)
JPMorgan Chase Bank, N.A.		$	35,761,000				Receive				1-Month USD -LIBOR-ICE				1.462	%			Monthly				7/03/17				12/01/18				12/01/20			$	(346,830	)		$	(638,709	)
JPMorgan Chase Bank, N.A.			35,761,000				Receive				1-Month USD -LIBOR-ICE				1.842				Monthly				7/03/17				12/01/20				12/01/22				(164,778	)			(1,036,256	)
		$	71,522,000																															$	(511,608	)		$	(1,674,965	)

 

NUVEEN			17

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JRS		Nuveen Real Estate Income Fund
		Portfolio of Investments (continued)		December 31, 2016

 

 

For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease.

 

(1)	All percentages shown in the Portfolio of Investments are based on net assets applicable to common shares unless otherwise noted.

 

(2)	Investment, or portion of investment, is hypothecated as described in the Notes to Financial Statements, Note 8 – Borrowing Arrangements, Rehypothecation. The total value of investments hypothecated as of the end of the reporting period was $106,332,345.

 

(3)

For financial reporting purposes, the ratings disclosed are the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. Ratings are not covered by the report of independent registered public accounting firm.

 

(4)	For fair value measurement disclosure purposes, investment classified as Level 2. See Notes to Financial Statements, Note 2 – Investment Valuation and Fair Value Measurements for more information.

 

(5)	Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives.

 

(6)	Borrowings as a percentage of Total Investments is 30.6%.

 

(7)

The Fund may pledge up to 100% of its eligible investments (excluding any investments separately pledged as collateral for specific investments in derivatives, when applicable) in the Portfolio of Investments as collateral for Borrowings. As of the end of the reporting period investments with a value of $365,537,143 have been pledged as collateral for borrowings.

 

(8)

Other assets less liabilities includes the unrealized appreciation (depreciation) of certain over-the-counter (“OTC”) derivatives as presented on the Statement of Assets and Liabilities, when applicable. The unrealized appreciation (depreciation) of OTC-cleared and exchange-traded derivatives is recognized as part of the cash collateral at brokers and/or the receivable or payable for variation margin as presented on the Statement of Assets and Liabilities, when applicable.

 

(9)	Effective date represents the date on which both the Fund and counterparty commence interest payment accruals on each contract.

 

USD-LIBOR-ICE

United States Dollar – London Inter-Bank Offered Rate – Intercontinental Exchange

 

See accompanying notes to financial statements.

 

	18			NUVEEN

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Statement of Assets and Liabilities						December 31, 2016

 

 

 

Assets
Long-term investments, at value (cost $400,067,622)		$	468,338,272
Short-term investments, at value (cost approximates value)			3,967,948
Interest rate swaps premiums paid			1,163,357
Receivable for dividends			2,538,347
Other assets			83,450
Total assets			476,091,374
Liabilities
Borrowings			144,750,000
Unrealized depreciation on interest rate swaps			1,674,965
Accrued expenses:
Interest on borrowings			17,022
Management fees			342,625
Trustees fees			83,679
Other			101,924
Total liabilities			146,970,215
Net assets applicable to common shares		$	329,121,159
Common shares outstanding			28,892,471
Net asset value (“NAV”) per common share outstanding		$	11.39
Net assets applicable to common shares consist of:
Common shares, $.01 par value per share		$	288,925
Paid-in surplus			323,886,880
Undistributed (Over-distribution of) net investment income			(80,844	)
Accumulated net realized gain (loss)			(61,569,487	)
Net unrealized appreciation (depreciation)			66,595,685
Net assets applicable to common shares		$	329,121,159
Authorized shares:
Common			Unlimited
Preferred			Unlimited

 

See accompanying notes to financial statements.

 

NUVEEN			19

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Statement of Operations						Year Ended December 31, 2016

 

 

 

Investment Income
Dividends		$	17,351,829
Interest			100,711
Other			47,312
Total investment income			17,499,852
Expenses
Management fees			4,144,960
Interest expense on borrowings			1,690,428
Custodian fees			68,680
Trustees fees			13,673
Professional fees			57,649
Shareholder reporting expenses			76,824
Shareholder servicing agent fees			2,441
Stock exchange listing fees			6,533
Investor relations expense			82,020
Other			17,225
Total expenses			6,160,433
Net investment income (loss)			11,339,419
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments			38,070,766
Swaps			7,333
Change in net unrealized appreciation (depreciation) of:
Investments			(30,049,530	)
Swaps			(264,809	)
Net realized and unrealized gain (loss)			7,763,760
Net increase (decrease) in net assets applicable to common shares from operations		$	19,103,179

 

See accompanying notes to financial statements.

 

	20			NUVEEN

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Statement of Changes in Net Assets

 

		Year Ended 12/31/16				Year Ended 12/31/15
Operations
Net investment income (loss)		$	11,339,419			$	10,873,042
Net realized gain (loss) from:
Investments			38,070,766				11,354,744
Swaps			7,333				(7,333	)
Change in net unrealized appreciation (depreciation) of:
Investments			(30,049,530	)			(3,539,891	)
Swaps			(264,809	)			(1,604,174	)
Net increase (decrease) in net assets applicable to common shares from operations			19,103,179				17,076,388
Distributions to Common Shareholders
From net investment income			(28,314,622	)			(25,713,861	)
Return of capital			—				(2,022,911	)
Decrease in net assets applicable to common shares from distributions to common shareholders			(28,314,622	)			(27,736,772	)
Net increase (decrease) in net assets applicable to common shares			(9,211,443	)			(10,660,384	)
Net assets applicable to common shares at the beginning of period			338,332,602				348,992,986
Net assets applicable to common shares at the end of period		$	329,121,159			$	338,332,602
Undistributed (Over-distribution of) net investment income at the end of period		$	(80,844	)		$	(81,132	)

 

See accompanying notes to financial statements.

 

NUVEEN			21

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Statement of Cash Flows						Year Ended December 31, 2016

 

 

 

Cash Flows from Operating Activities:
Net Increase (Decrease) in Net Assets Applicable to Common Shares from Operations		$	19,103,179
Adjustments to reconcile the net increase (decrease) in net assets applicable to common shares from operations to net cash provided by (used in) operating activities:
Purchases of investments			(489,620,678	)
Proceeds from sales and maturities of investments			479,799,277
Proceeds from (Purchases of) short-term investments, net			3,825,051
Proceeds from (Payments for) swap contracts, net			7,333
Premiums received (paid) for interest rate swaps			(735,814	)
Capital gain and return of capital distributions from investments			8,075,932
(Increase) Decrease in:
Receivable for dividends			60,489
Receivable for investments sold			10,817,481
Other assets			6,562
Increase (Decrease) in:
Payable for investments purchased
Accrued interest on borrowings			8,601
Accrued management fees			(4,974	)
Accrued Trustees fees			71
Accrued other expenses			(15,315	)
Net realized (gain) loss from:
Investments			(38,070,766	)
Swaps			(7,333	)
Change in net unrealized (appreciation) depreciation of:
Investments			30,049,530
Swaps			264,809
Net cash provided by (used in) operating activities			23,563,435
Cash Flows from Financing Activities:
Proceeds from borrowings			10,750,000
Repayments of borrowings			(6,000,000	)
Cash distributions paid to common shareholders			(28,314,622	)
Net cash provided by (used in) financing activities			(23,564,622	)
Net Increase (Decrease) in Cash			(1,187	)
Cash at the beginning of period			1,187
Cash at the end of period		$	—
Supplemental Disclosure of Cash Flow Information
Cash paid for interest on borrowings (excluding borrowing costs)		$	1,676,855

 

See accompanying notes to financial statements.

 

	22			NUVEEN

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NUVEEN			23

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Financial

Highlights

 

Selected data for a common share outstanding throughout each period:

 

						Investment Operations												Less Distributions to Common Shareholders																Common Shares
		Beginning Common Share NAV				Net Investment Income (Loss)(a)				Net Realized/ Unrealized Gain (Loss)				Total				From Net Investment Income				From Accumulated Net Realized Gains				Return of Capital				Total				Premium from Shares Sold through Shelf Offering				Ending NAV				Ending Share Price
Year Ended 12/31:
2016		$	11.71			$	0.39			$	0.27			$	0.66			$	(0.98	)		$	—			$	—			$	(0.98	)		$	—			$	11.39			$	10.77
2015			12.08				0.38				0.21				0.59				(0.89	)			—				(0.07	)			(0.96	)			—				11.71				10.62
2014			9.56				0.37				3.05				3.42				(0.90	)			—				—				(0.90	)			—	*			12.08				11.50
2013			10.49				0.34				(0.32	)			0.02				(0.95	)			—				—				(0.95	)			—				9.56				9.52
2012			9.64				0.37				1.40				1.77				(0.92	)			—				—				(0.92	)			—				10.49				10.48

 

		Borrowings at End of Period
		Aggregate Amount Outstanding (000)				Asset Coverage Per $1,000
Year Ended 12/31:
2016		$	144,750			$	3,274
2015			140,000				3,417
2014			134,100				3,602
2013			123,500				3,230
2012			123,000				3,449

 

	24			NUVEEN

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								Common Share Supplemental Data/ Ratios Applicable to Common Shares
Common Share Total Returns												Ratios to Average Net Assets Before Reimbursement(c)
Based on NAV(b)				Based on Share Price(b)				Ending Net Assets (000)				Expenses				Net Investment Income (Loss)				Portfolio Turnover Rate(d)
	5.53	%			10.43	%		$	329,121				1.81	%			3.33	%			101	%
	5.24				0.99				338,333				1.81				3.19				56
	36.78				31.03				348,993				1.75				3.35				61
	(0.25	)			(0.88	)			275,446				1.83				3.18				88
	18.63				9.25				301,207				1.90				3.56				54

 

(a)	Per share Net Investment Income (Loss) is calculated using the average daily shares method.

(b)

Total Return Based on Common Share NAV is the combination of changes in common share NAV, reinvested dividend income at NAV and reinvested capital gains distributions at NAV, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending NAV. The actual reinvest price for the last dividend declared in the period may often be based on the Fund’s market price (and not its NAV), and therefore may be different from the price used in the calculation. Total returns are not annualized.

Total Return Based on Common Share Price 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. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.

(c)     •

Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to borrowings (as described in Note 8 – Borrowing Arrangements).

•

Each ratio includes the effect of all interest expense paid and other costs related to borrowings as follows:

 

 

(d)	Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 5 – Investment Transactions) divided by the average long-term market value during the period.

*	Rounds to less than $0.01 per share.

 

See accompanying notes to financial statements.

 

NUVEEN			25

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Notes to

Financial Statements

 

1. General Information and Significant Accounting Policies

General Information

Fund Information

Nuveen Real Estate Income Fund (the “Fund”) is registered under the Investment Company Act of 1940, as amended, as a diversified closed-end registered investment company. The Fund’s common shares are listed on the NYSE (common shares of the Fund were formerly traded on the NYSE MKT) and trade under the ticker symbol “JRS.” The Fund was organized as a Massachusetts business trust on August 27, 2001.

The end of the reporting period for the Fund is December 31, 2016, and the period covered by these Notes to Financial Statements is the fiscal year ended December 31, 2016 (the “current fiscal period”).

Investment Adviser

The Fund’s investment adviser is Nuveen Fund Advisors, LLC (the “Adviser”), a subsidiary of Nuveen, LLC (“Nuveen”). Nuveen is the investment management arm of Teachers Insurance and Annuity Association of America (TIAA). The Adviser has overall responsibility for management of the Fund, oversees the management of the Fund’s portfolios, manages the Fund’s business affairs and provides certain clerical, bookkeeping and other administrative services, and, if necessary, asset allocation decisions. The Adviser has entered into a sub-advisory agreement with Security Capital Research & Management Incorporated (“Security Capital”). Security Capital manages the Fund’s investment portfolio, while the Adviser manages the Fund’s investments in swap contracts.

Investment Objective and Principal Investment Strategies

The Fund seeks to provide high current income and capital appreciation by investing at least 90% of its total assets in income producing common stocks, preferred stocks, convertible preferred stocks and debt securities issued by real estate companies. The Fund will invest at least 80% of its total assets in income producing equity securities issued by Real Estate Investment Trusts (“REITs”), and will not invest more than 25% of its total assets in non-investment grade preferred stocks, convertible preferred stocks and debt securities.

Significant Accounting Policies

The Fund is an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 “Financial Services – Investment Companies.” 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 (“U.S. GAAP”).

Investment Transactions

Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Fund has earmarked securities in its portfolio with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments.

As of the end of the reporting period, the Fund did not have any outstanding when-issued/delayed delivery purchase commitments.

Investment Income

Dividend income is recorded on the ex-dividend date or, for foreign securities, when information is available. Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Interest income also reflects paydown gains and losses, if any. Other income is comprised of fees earned in connection with the rehypothecation of pledged collateral as further described in Note 8 – Borrowing Arrangements, Rehyphothecation.

Professional Fees

Professional fees presented on the Statement of Operations consist of legal fees incurred in the normal course of operations, audit fees, tax consulting fees and, in some cases, workout expenditures. Workout expenditures are incurred in an attempt to protect or enhance an investment or to pursue other claims or legal actions on behalf of Fund shareholders. If a refund is received for workout expenditures paid in a prior reporting period, such amounts will be recognized as “Legal fee refund” on the Statement of Operations.

 

	26			NUVEEN

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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. GAAP.

The Fund makes quarterly cash distributions to common shareholders of a stated dollar amount per share. Subject to approval and oversight by the Fund’s Board of Trustees (the “Board”), the Fund seeks to maintain a stable distribution level designed to deliver the long-term return potential of the Fund’s investment strategy through regular quarterly distributions (a “Managed Distribution Program”). Total distributions during a calendar year generally will be made from the Fund’s net investment income, net realized capital gains and net unrealized capital gains in the Fund’s portfolio, if any. The portion of distributions paid attributed to net unrealized gains, if any, is distributed from the Fund’s assets and is treated by shareholders as a nontaxable distribution (“return of capital”) for tax purposes. In the event that total distributions during a calendar year exceed the Fund’s total return on net asset value (“NAV”), the difference will reduce NAV per share. If the Fund’s total return on NAV exceeds total distributions during a calendar year, the excess will be reflected as an increase in NAV per share. The final determination of the source and character of all distributions paid by the Fund during the fiscal year is made after the end of the fiscal year and is reflected in the financial statements contained in the annual report as of December 31 each year.

The tax character of Fund distributions for a fiscal year is dependent upon the amount and tax character of distributions received from securities held in the Fund’s portfolio. Distributions received from certain securities in which the Fund invests, most notably REIT securities, may be characterized for tax purposes as ordinary income, long-term capital gain and/or a return of capital. The issuer of a security reports the tax character of its distributions only once per year, generally during the first two months of the calendar year. The distribution is included in the Fund’s ordinary income until such time the Fund is notified by the issuer of the actual tax character. For the current fiscal period, dividend income, net realized gain (loss) and unrealized appreciation (depreciation) recognized on the Statement of Operations reflect the amounts of ordinary income, capital gain, and/or return of capital as reported by the issuers of such securities.

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.

Netting Agreements

In the ordinary course of business, the Fund may enter into transactions subject to enforceable master repurchase agreements, International Swaps and Derivative Association, Inc. (“ISDA”) master agreements or other similar arrangements (“netting agreements”). Generally, the right to offset in netting agreements allows the Fund to offset certain securities and derivatives with a specific counterparty, when applicable, as well as any collateral received or delivered to that counterparty based on the terms of the agreements. Generally, the Fund manages its cash collateral and securities collateral on a counterparty basis.

The Fund’s investments subject to netting agreements as of the end of the reporting period, if any, are further described in Note 3 – Portfolio Securities and Investments in Derivatives.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 current fiscal period. Actual results may differ from those estimates.

2. Investment Valuation and Fair Value Measurements

The fair valuation input levels as described below are for fair value measurement purposes.

Fair value is defined as the price that would be received upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The following is a summary of the three-tiered hierarchy of valuation input levels.

 

Level 1 –		Inputs are unadjusted and prices are determined using quoted prices in active markets for identical securities.

 

NUVEEN			27

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Notes to Financial Statements (continued)

 

Level 2 –		Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3 –		Prices are determined using significant unobservable inputs (including management’s assumptions in determining the fair value of investments).

Common stocks and other equity-type securities are valued at the last sales price on the securities exchange on which such securities are primarily traded and are generally classified as Level 1. Securities primarily traded on the NASDAQ National Market (“NASDAQ”) are valued at the NASDAQ Official Closing Price and are generally classified as Level 1. However, securities traded on a securities exchange or NASDAQ for which there were no transactions on a given day or securities not listed on a securities exchange or NASDAQ are valued at the quoted bid price and are generally classified as Level 2.

Prices of fixed-income securities are provided by an independent pricing service (“pricing service”) approved by the Board. The pricing service establishes a security’s fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer or market activity, provided by the Adviser. These securities are generally classified as
Level 2 or Level 3 depending on the observability of the significant inputs.

Prices of swap contracts are also provided by a pricing service approved by the Board using the same methods as described above, and are generally classified as Level 2.

Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2.

Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Board and/or its appointee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security’s fair value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the observability of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Board and/or its appointee.

The inputs or methodologies used for valuing securities are not an indication of the risks associated with investing in those securities. The following is a summary of the Fund’s fair value measurements as of the end of the reporting period:

 

		Level 1				Level 2				Level 3				Total
Long-Term Investments*:
Real Estate Investment Trust Common Stocks		$	281,247,867			$	—			$	—			$	281,247,867
Real Estate Investment Trust Preferred Stocks			172,568,580				14,521,825	**			—				187,090,405
Short-Term Investments:
Repurchase Agreements			—				3,967,948				—				3,967,948
Investments in Derivatives:
Interest Rate Swaps***			—				(1,674,965	)			—				(1,674,965	)
Total		$	453,816,447			$	16,814,808			$	—			$	470,631,255

*	Refer to the Fund’s Portfolio of Investments for industry classifications.

**	Refer to the Fund’s Portfolio of Investments for securities classified as Level 2.

***	Represents net unrealized appreciation (depreciation) as reported in the Fund’s Portfolio of Investments.

The Board is responsible for the valuation process and has appointed the oversight of the daily valuation process to the Adviser’s Valuation Committee. The Valuation Committee, pursuant to the valuation policies and procedures adopted by the Board, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies and reporting to the Board. The Valuation Committee is aided in its efforts by the Adviser’s

 

	28			NUVEEN

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dedicated Securities Valuation Team, which is responsible for administering the daily valuation process and applying fair value methodologies as approved by the Valuation Committee. When determining the reliability of independent pricing services for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of the pricing services and monitors the quality of security prices received through various testing reports conducted by the Securities Valuation Team.

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making a fair value determination, based on the facts and circumstances specific to the portfolio instrument. Fair value determinations generally will be derived as follows, using public or private market information:

 

(i)

If available, fair value determinations shall be derived by extrapolating from recent transactions or quoted prices for identical or comparable securities.

 

(ii)

If such information is not available, an analytical valuation methodology may be used based on other available information including, but not limited to: analyst appraisals, research reports, corporate action information, issuer financial statements and shelf registration statements. Such analytical valuation methodologies may include, but are not limited to: multiple of earnings, discount from market value of a similar freely-traded security, discounted cash flow analysis, book value or a multiple thereof, risk premium/yield analysis, yield to maturity and/or fundamental investment analysis.

The purchase price of a portfolio instrument will be used to fair value the instrument only if no other valuation methodology is available or deemed appropriate, and it is determined that the purchase price fairly reflects the instrument’s current value.

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such testing and fair valuation occurrences are reported to the Board.

3. Portfolio Securities and Investments in Derivatives

Portfolio Securities

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 counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.

The following table presents the repurchase agreements for the Fund that are subject to netting agreements as of the end of the reporting period, and the collateral delivered related to those repurchase agreements.

 

Counterparty		Short-Term Investments, at Value				Collateral Pledged (From) Counterparty*				Net Exposure
Fixed Income Clearing Corporation		$	3,967,948			$	(3,967,948	)		$	—

*	As of the end of the reporting period, the value of the collateral pledged from the counterparty exceeded the value of the repurchase agreements. Refer to the Fund’s Portfolio of Investments for details on the repurchase agreements.

Investments in Derivatives

The Fund is authorized to invest in certain derivative instruments, such as futures, options and swap contracts. The Fund limits its investments in futures, options on futures and swap contracts to the extent necessary for the Adviser to claim the exclusion from registration by the Commodity Futures Trading Commission as a commodity pool operator with respect to the Fund. The Fund records derivative instruments at fair value with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Fund’s investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes.

Interest Rate Swap Contracts

Interest rate swap contracts involve the Fund’s agreement with the counterparty to pay or receive a fixed rate payment in exchange for the counterparty receiving or paying a variable rate payment. Forward interest rate swap contracts involve the Fund’s agreement with a counterparty to pay, in the future, a fixed or variable rate payment in exchange for the counterparty paying the Fund a variable or fixed rate payment, the accruals for which would begin at a specified date in the future (the “effective date”).

The amount of the payment obligation for an interest rate swap is based on the notional amount and the termination date of the contract. Interest rate swap contracts 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.

 

NUVEEN			29

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Notes to Financial Statements (continued)

 

Interest rate swap contracts are valued daily. Upon entering into an interest rate swap contract (and beginning on the effective date for a forward interest rate swap contract), the Fund accrues the fixed rate payment expected to be paid or received and the variable rate payment expected to be received or paid on the interest rate swap contracts on a daily basis, and recognizes the daily change in the fair value of the Fund’s contractual rights and obligations under the contracts. For an over-the-counter (“OTC”) swap that is not cleared through a clearing house (“OTC Uncleared”), the net amount recorded on these transactions, for each counterparty, is recognized on the Statement of Assets and Liabilities as a component of “Unrealized appreciation or depreciation on interest rate swaps (, net).”

Upon the execution of an OTC swap cleared through a clearing house (“OTC Cleared”), the Fund is obligated to deposit cash or eligible securities, also known as “initial margin,” into an account at its clearing broker equal to a specified percentage of the contract amount. Cash deposited by the Fund to cover initial margin requirements on open swap contracts, if any, is recognized as a component of “Cash collateral at brokers” on the Statement of Assets and Liabilities. Investments in OTC Cleared swaps obligate the Fund and the clearing broker to settle monies on a daily basis representing changes in the prior day’s “mark-to-market” of the swap contract. If the Fund has unrealized appreciation, the clearing broker will credit the Fund’s account with an amount equal to the appreciation. Conversely, if the Fund has unrealized depreciation, the clearing broker will debit the Fund’s account with an amount equal to the depreciation. These daily cash settlements are also known as “variation margin.” Variation margin for OTC Cleared swaps is recognized as a receivable and/or payable for “Variation margin on swap contracts” on the Statement of Assets and Liabilities. Upon the execution of an OTC Uncleared swap, neither the Fund nor the counterparty is required to deposit initial margin as the trades are recorded bilaterally between both parties to the swap contract, and the terms of the variation margin are subject to a predetermined threshold negotiated by the Fund and the counterparty. Variation margin for OTC Uncleared swaps is recognized as a component of “Unrealized appreciation or depreciation on interest rate swaps (, net)” as described in the preceding paragraph.

The net amount of periodic payments settled in cash are recognized as a component of “Net realized gain (loss) from swaps” on the Statement of Operations, in addition to the net realized gain or loss recorded upon the termination of the swap contract. For tax purposes, payments expected to be received or paid on the swap contacts are treated as ordinary income or expense, respectively. Changes in the value of the swap contracts during the fiscal period are recognized as a component of “Change in net unrealized appreciation (depreciation) of swaps” on the Statement of Operations. In certain instances, payments are made or received upon entering into the swap contract to compensate for differences between the stated terms of the swap agreements and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). Payments received or made at the beginning of the measurement period, if any, are recognized as “Interest rate swaps premiums paid and/or received” on the Statement of Assets and Liabilities.

During the current fiscal period, the Fund continued to utilize forward starting interest rate swap contracts to partially hedge its future interest cost of leverage, which is through the use of bank borrowings.

The average notional amount of interest rate swap contracts outstanding during the current fiscal period was as follows:

 

Average notional amount of interest rate swap contracts outstanding*			$71,522,000

*	The average notional amount is calculated based on the outstanding notional at the beginning of the fiscal period and at the end of each fiscal quarter within the current fiscal period.

The following table presents the fair value of all swap contracts held by the Fund as of the end of the reporting period, the location of these instruments on the Statement of Assets and Liabilities and the primary underlying risk exposure.

 

Location on the Statements of Assets and Liabilities

Underlying Risk Exposure

Derivative Instrument

Asset Derivatives

(Liability) Derivatives

Location

Value

Location

Value

Interest rate

Swaps (OTC Uncleared)

—

$

—

Unrealized depreciation on interest rate swaps**

$

(1,674,965

)

**	Some swap contracts require a counterparty to pay or receive a premium, which is disclosed on the Statement of Assets and Liabilities and is not reflected in the cumulative unrealized appreciation (depreciation) presented above.

The following table presents the swap contracts subject to netting agreements and the collateral delivered related to those swap contracts as of the end of the reporting period.

 

																		Gross Amounts not offset on the Statement of Assets and Liabilities
Counterparty		Gross Unrealized Appreciation on Interest Rate Swaps***				Gross Unrealized (Depreciation) on Interest Rate Swaps***				Amounts Netted on Statement of Assets and Liabilities				Net Unrealized Appreciation (Depreciation) on Interest Rate Swaps				Interest Rate Swaps Premiums Paid				Collateral Pledged to (from) Counterparty				Net Exposure
JPMorgan Chase Bank, N.A.		$	—			$	(1,674,965	)		$	—			$	(1,674,965	)		$	1,163,357			$	401,403			$	(110,205	)

***	Represents gross unrealized appreciation (depreciation) for the counterparty as reported in the Fund’s Portfolio of Investments.

 

	30			NUVEEN

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The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized on swap contracts on the Statement of Operations during the current fiscal period, and the primary underlying risk exposure.

 

Underlying Risk Exposure		Derivative Instrument		Net Realized Gain (Loss) from Swaps		Change in Net Unrealized Appreciation (Depreciation) of Swaps
Interest rate		Swaps		$7,333		$(264,809)

Market and Counterparty Credit Risk

In the normal course of business the Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose the Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of the Fund’s exposure to counterparty credit risk in respect to these financial assets approximates its carrying value as recorded on the Statement of Assets and Liabilities.

The Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of the Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when the Fund has an unrealized loss, the Fund has instructed the custodian to pledge assets of the Fund as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.

4. Fund Shares

Common Shares Equity Shelf Program and Offering Costs

The Fund has filed a registration statement with the Securities and Exchange Commission (“SEC”) authorizing the Fund to issue additional common shares through an equity shelf program (“Shelf Offering”), which became effective with the SEC during a prior fiscal period.

Under this Shelf Offering, the Fund, subject to market conditions, may raise additional equity capital by issuing additional shares from time to time in varying amounts and by different offering methods at a net price at or above the Fund’s NAV per common share. In the event the Fund’s Shelf Offering registration statement is no longer current, the Fund may not issue additional common shares until a post-effective amendment to the registration statement has been filed with the SEC.

Additional authorized common shares, common shares sold and offering proceeds, net of offering costs under the Fund’s Shelf Offering during the current and prior fiscal period were as follows:

 

		Year Ended 12/31/16				Year Ended 12/31/15*
Additional authorized common shares			—				7,100,000
Common shares sold			—				—
Offering proceeds, net of offering costs		$	—			$	—

*	Represents total additional authorized common shares for the period January 1, 2015 through April 30, 2015.

Costs incurred by the Fund in connection with its Shelf Offering were recorded as a deferred charge and recognized as a component of “Deferred offering costs” on the Statement of Assets and Liabilities. The deferred asset is reduced during the one-year period that additional shares are sold by reducing the proceeds from such sales and is recognized as a component of “Proceeds from shelf offering, net of offering costs” on the Statement of Changes in Net Assets. Any remaining deferred charges at the end of the one-year life of the Shelf Offering period will be expensed accordingly, as well as any additional Shelf Offering costs the Fund may incur. As Shelf Offering costs are expensed they are recognized as a component of “Other expenses” on the Statement of Operations.

Common Share Transactions

The Fund did not have any transactions in common shares during current and prior fiscal period.

5. Investment Transactions

Long-term purchases and sales (including maturities but excluding derivative transactions) during the current fiscal period aggregated $489,620,678 and $479,799,277, respectively.

 

NUVEEN			31

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Notes to Financial Statements (continued)

 

6. Income Tax Information

The Fund intends to distribute substantially all of its net investment company taxable income to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. In any year when the Fund realizes net capital gains, the Fund may choose to distribute all or a portion of its net capital gains to shareholders, or alternatively, to retain all or a portion of its net capital gains and pay federal corporate income taxes on such retained gains.

For all open tax years and all major taxing jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

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 recognizing certain gains and losses on investment transactions. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the NAV of the Fund.

As of December 31, 2016, the cost and unrealized appreciation (depreciation) of investments (excluding investments in derivatives), as determined on a federal income tax basis, were as follows:

 

Cost of investments			$411,446,321
Gross unrealized:
Appreciation			$74,127,323
Depreciation			(13,267,424	)
Net unrealized appreciation (depreciation) of investments			$60,859,899

Permanent differences, primarily due to tax basis earnings and profits adjustments and treatment of notional principal contracts, resulted in reclassifications among the Fund’s components of common share net assets as of December 31, 2016, the Fund’s tax year end, as follows:

 

Paid-in surplus			$(16,969,047)
Undistributed (Over-distribution of) net investment income			16,975,491
Accumulated net realized gain (loss)			(6,444	)
The tax components of undistributed net ordinary income and net long-term capital gains as of December 31, 2016, the Fund’s tax year end, were as follows:
Undistributed net ordinary income			$  —
Undistributed net long-term capital gains			—
The tax character of distributions paid during the Fund’s tax years ended December 31, 2016 and December 31, 2015, was designated for purposes of the dividends paid deduction as follows:
2016
Distributions from net ordinary income1		$	28,314,622
Distributions from net long-term capital gains			—
Return of capital			—
2015
Distributions from net ordinary income1		$	25,713,861
Distributions from net long-term capital gains			—
Return of capital			2,022,911
1      Net ordinary income consists of net taxable income derived from dividends and interest, and current year earnings and profits attributable to realized gains.

As of December 31, 2016, the Fund’s tax year end, the Fund had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as shown in the following table. The losses not subject to expiration will be utilized first by the Fund.

 

Expiration:
December 31, 2017		$	54,158,736
Not subject to expiration			—
Total		$	54,158,736

 

	32			NUVEEN

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During the Fund’s tax year ended December 31, 2016, the Fund utilized $38,643,328 of its capital loss carryforwards.

7. Management Fees and Other Transactions with Affiliates

Management Fees

The Fund’s management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. Security Capital is compensated for its services to the Fund from the management fees paid to the Adviser.

The Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within the Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.

The annual Fund-level fee, payable monthly, is calculated according to the following schedule:

 

Average Daily Managed Assets*		Fund-Level Fee
For the first $500 million			0.7000	%
For the next $500 million			0.6750
For the next $500 million			0.6500
For the next $500 million			0.6250
For managed assets over $2 billion			0.6000

The annual complex-level fee, payable monthly, is calculated by multiplying the current complex-wide fee rate, determined according to the following schedule by the Fund’s daily managed assets:

 

Complex-Level Managed Asset Breakpoint Level*		Effective Rate at Breakpoint Level
$55 billion			0.2000	%
$56 billion			0.1996
$57 billion			0.1989
$60 billion			0.1961
$63 billion			0.1931
$66 billion			0.1900
$71 billion			0.1851
$76 billion			0.1806
$80 billion			0.1773
$91 billion			0.1691
$125 billion			0.1599
$200 billion			0.1505
$250 billion			0.1469
$300 billion			0.1445

*

For the complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to certain types of leverage. For these purposes, leverage includes the funds’ use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen funds that constitute “eligible assets.” Eligible assets do not include assets attributable to investments in other Nuveen funds or assets in excess of a determined amount (originally $2 billion) added to the Nuveen fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011. As of December 31, 2016, the complex-level fee for the Fund was 0.1625%.

Other Transactions with Affiliates

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 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.

8. Borrowing Arrangements

Borrowings

The Fund has entered into a borrowing arrangement as a means of leverage.

The Fund has a $150,000,000 million (maximum commitment amount) committed financing agreement (“Borrowings”). As of the end of the reporting period, the outstanding balance on these Borrowings was $144,750,000 million.

 

NUVEEN			33

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Notes to Financial Statements (continued)

 

Interest is charged on these Borrowings at 1-Month LIBOR (London Inter-Bank Offered Rate) plus 0.65% (1-Month LIBOR plus 0.85% prior to February 25, 2016) per annum on the amount borrowed and 0.50% per annum on the undrawn balance. The Fund is only charged the 0.50% per annum undrawn fee if the undrawn portion of the Borrowings on that day is more than 20% of the maximum commitment amount. During the current fiscal period, the average daily balance outstanding and average annual interest rate on these Borrowings were $140,523,497 and 1.18%, respectively.

In order to maintain these Borrowings, the Fund must meet certain collateral, asset coverage and other requirements. Borrowings outstanding are fully secured by securities specifically identified in the Fund’s portfolio of investments (“Pledged Collateral”).

Borrowings outstanding are recognized as “Borrowings” on the Statement of Assets and Liabilities. Interest expense incurred on the drawn amount and undrawn balance are recognized as a component of “Interest expense on borrowings” on the Statement of Operations.

Rehypothecation

The Fund has entered into a Rehypothecation Side Letter (“Side Letter”) with its prime brokerage lender, allowing it to re-register the Pledged Collateral in its own name or in a name other than the Fund’s to pledge, repledge, hypothecate, rehyphothecate, sell, lend or otherwise transfer or use the Pledged Collateral (the “Hypothecated Securities”) with all rights of ownership as described in the Side Letter. Subject to certain conditions, the total value of the outstanding Hypothecated Securities shall not exceed the lesser of (i) 98% of the outstanding balance on the Borrowings to which the Pledged Collateral relates and (ii) 33 ¹⁄₃% of the Fund’s total assets. The Fund may designate any Pledged Collateral as ineligible for rehypothecation. The Fund may also recall Hypothecated Securities on demand.

The Fund also has the right to apply and set-off an amount equal to one-hundred percent (100%) of the then-current fair market value of such Pledged Collateral against the current Borrowings under the Side Letter in the event that the prime brokerage lender fails to timely return the Pledged Collateral and in certain other circumstances. In such circumstances, however, the Fund may not be able to obtain replacement financing required to purchase replacement securities and, consequently, the Fund’s income generating potential may decrease. Even if the Fund is able to obtain replacement financing, it might not be able to purchase replacement securities at favorable prices.

The Fund will receive a fee in connection with the Hypothecated Securities (“Rehypothecation Fees”) in addition to any principal, interest, dividends and other distributions paid on the Hypothecated Securities.

As of the end of the reporting period, the Fund had Hypothecated Securities totaling $106,332,345. During the current fiscal period the Fund earned Rehypothecation Fees of $47,312, which is recognized as “Other income” on the Statement of Operations.

 

	34			NUVEEN

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Additional

Fund Information (Unaudited)

 

Board of Trustees
William Adams IV*		Margo Cook*		Jack B. Evans		William C. Hunter		David J. Kundert		Albin F. Moschner
John K. Nelson		William J. Schneider		Judith M. Stockdale		Carole E. Stone		Terence J. Toth		Margaret L. Wolff

 

*	Interested Board Member.

 

Fund Manager Nuveen Fund Advisors, LLC 333 West Wacker Drive Chicago, IL 60606		Custodian State Street Bank & Trust Company One Lincoln Street Boston, MA 02111		Legal Counsel Chapman and Cutler LLP Chicago, IL 60603		Independent Registered Public Accounting Firm KPMG LLP 200 East Randolph Drive Chicago, IL 60601		Transfer Agent and Shareholder Services State Street Bank & Trust Company Nuveen Funds P.O. Box 43071 Providence, RI 02940-3071 (800) 257-8787

 

 

Quarterly Form N-Q Portfolio of Investments Information

The Fund is required to file its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. You may obtain this information directly from the SEC. 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 toll-free at (800) SEC-0330 for room hours and operation.

Nuveen Funds’ Proxy Voting Information

You may obtain (i) information regarding how each fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, without charge, upon request, by calling Nuveen toll-free at (800) 257-8787 or on Nuveen’s website at www.nuveen.com and (ii) a description of the policies and procedures that each fund used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen toll free at (800) 257-8787. You may also obtain this information directly from the SEC. Visit the SEC on-line at http://www.sec.gov.

 

 

CEO Certification Disclosure

The Fund’s Chief Executive Officer (CEO) has submitted to the New York Stock Exchange (NYSE) the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual. The Fund has filed with the SEC the certification of its CEO and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.

 

 

Common Share Repurchases

The Fund intends to repurchase, through its open-market share repurchase program, shares of its own common stock at such times and in such amounts as is deemed advisable. During the period covered by this report, the Fund repurchased shares of its common stock, as shown in the accompanying table. Any future repurchases will be reported to shareholders in the next annual or semi-annual report.

 

		JRS
Common shares repurchased			—

FINRA BrokerCheck

The Financial Industry Regulatory Authority (FINRA) provides information regarding the disciplinary history of FINRA member firms and associated investment professionals. This information as well as an investor brochure describing FINRA BrokerCheck is available to the public by calling the FINRA BrokerCheck Hotline number at (800) 289-9999 or by visiting www.FINRA.org.

 

NUVEEN			35

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Glossary of Terms

Used in this Report (Unaudited)

 

∎

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.

 

∎

Blended Benchmark: A blended return comprised of: 1) 60% Wilshire U.S. Real Estate Securities Index (WILRESI). The Wilshire U.S. Real Estate Securities Index measures the performance of publicly traded real estate investment trusts (REITs) and 2) 40% Wells Fargo Hybrid and Preferred Securities REIT Index (inception date 5/31/2007). The Wells Fargo Hybrid and Preferred Securities REIT Index is designed to track the performance of preferred securities issued in the U.S. market by REITs. The index is composed exclusively of preferred shares and depositary shares. Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees.

 

∎

Effective Leverage: Effective leverage is a fund’s effective economic leverage, and includes both regulatory leverage (see below) and the leverage effects of certain derivative investments in the fund’s portfolio.

 

∎

Gross Domestic Product (GDP): The total market value of all final goods and services produced in a country/region in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.

 

∎

Leverage: Leverage is created whenever a fund has investment exposure (both reward and/or risk) equivalent to more than 100% of the investment capital.

 

∎

Net Asset Value (NAV) Per Share: A fund’s Net Assets is equal to its total assets (securities, cash, accrued earnings and receivables) less its total liabilities. NAV per share is equal to the fund’s Net Assets divided by its number of shares outstanding.

 

∎

Regulatory Leverage: Regulatory leverage consists of preferred shares issued by or borrowings of a fund. Both of these are part of a fund’s capital structure. Regulatory leverage is subject to asset coverage limits set in the Investment Company Act of 1940.

 

∎

Wilshire U.S. Real Estate Securities Index (WILRESI): A float-adjusted market capitalization index that is reviewed quarterly. This index is designed to measure the performance of publicly traded real estate investment trusts and to serve as a proxy for direct real estate investments. Index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees.

 

	36			NUVEEN

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Reinvest Automatically,

Easily and Conveniently

 

 

NUVEEN			37

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Board

Members & Officers (Unaudited)

 

Name, Year of Birth & Address		Position(s) Held with the Funds		Year First Elected or Appointed and Term(1)		Principal Occupation(s) Including other Directorships During Past 5 Years		Number of Portfolios in Fund Complex Overseen by Board Member
Independent Board Members:
∎   WILLIAM J.  SCHNEIDER						Chairman of Miller-Valentine Partners, a real estate investment company; Board Member of WDPR Public Radio station; formerly, Senior Partner and Chief Operating Officer (retired (2004) of Miller-Valentine Group; formerly, Board member, Business Advisory Council of the Cleveland Federal Reserve Bank and University of Dayton Business School Advisory Council; past Chair and Director, Dayton Development Coalition.
1944 333 W. Wacker Drive Chicago, IL 60606		Chairman and Board Member		1996 Class III				182
∎   JACK B. EVANS						President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Director and Chairman, United Fire Group, a publicly held company; Director, The Gazette Company; Life Trustee of Coe College and the Iowa College Foundation; formerly, President Pro-Tem of the Board of Regents for the State of Iowa University System; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm.
1948 333 W. Wacker Drive Chicago, IL 60606		Board Member		1999 Class III				182
∎   WILLIAM C. HUNTER						Dean Emeritus, formerly, Dean, Tippie College of Business, University of Iowa (2006-2012); Director (since 2004) of Xerox Corporation; past Director (2005-2015), and past President (2010-2014) Beta Gamma Sigma, Inc., The International Business Honor Society; Director of Wellmark, Inc. (since 2009); formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003); formerly, Director (1997-2007), Credit Research Center at Georgetown University.
1948 333 W. Wacker Drive Chicago, IL 60606		Board Member		2003 Class I				182
∎   DAVID J. KUNDERT						Formerly, Director, Northwestern Mutual Wealth Management Company (2006-2013), retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Banc One Corporation and Chairman and CEO, Banc One Investment Management Group; Regent Emeritus, Member of Investment Committee, Luther College; member of the Wisconsin Bar Association; member of Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation; member of the Board of Directors (Milwaukee), College Possible; Board member of Milwaukee Repertory Theatre (since 2016).
1942 333 W. Wacker Drive Chicago, IL 60606		Board Member		2005 Class II				182

 

	38			NUVEEN

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Name, Year of Birth & Address		Position(s) Held with the Funds		Year First Elected or Appointed and Term(1)		Principal Occupation(s) Including other Directorships During Past 5 Years		Number of Portfolios in Fund Complex Overseen by Board Member
Independent Board Members (continued):
∎   ALBIN F.  MOSCHNER(2)						Founder and Chief Executive Officer, Northcroft Partners, LLC, a management consulting firm (since 2012); previously, held positions at Leap Wireless International, Inc., including Consultant (2011-2012), Chief Operating Officer (2008-2011), and Chief Marketing Officer (2004-2008); formerly, President, Verizon Card Services division of Verizon Communications, Inc. (2000-2003); formerly, President, One Point Services at One Point Communications (1999-2000); formerly, Vice Chairman of the Board, Diba, Incorporated (1996-1997); formerly, various executive positions with Zenith Electronics Corporation (1991-1996). Director, USA Technologies, Inc., a provider of solutions and services to facilitate electronic payment transactions (since 2012); formerly, Director, Wintrust Financial Corporation (1996-2016).
1952 333 W. Wacker Drive Chicago, IL 60606		Board Member		2016 Class III				182
∎   JOHN K. NELSON						Member of Board of Directors of Core12 LLC (since 2008), a private firm which develops branding, marketing and communications strategies for clients; Director of The Curran Center for Catholic American Studies (since 2009) and The President’s Council, Fordham University (since 2010); formerly, senior external advisor to the financial services practice of Deloitte Consulting LLP (2012-2014): formerly, Chairman of the Board of Trustees of Marian University (2010 as trustee, 2011-2014 as Chairman); formerly, Chief Executive Officer of ABN AMRO N.V. North America, and Global Head of its Financial Markets Division (2007-2008); prior senior positions held at ABN AMRO include Corporate Executive Vice President and Head of Global Markets-the Americas (2006-2007), CEO of Wholesale Banking North America and Global Head of Foreign Exchange and Futures Markets (2001-2006), and Regional Commercial Treasurer and Senior Vice President Trading-North America (1996-2001); formerly, Trustee at St. Edmund Preparatory School in New York City.
1962 333 W. Wacker Drive Chicago, IL 60606		Board Member		2013 Class II				182
∎   JUDITH M. STOCKDALE						Board Member, Land Trust Alliance (since 2013) and U.S. Endowment for Forestry and Communities (since 2013); formerly, Executive Director (1994-2012), Gaylord and Dorothy Donnelley Foundation; prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994).
1947 333 W. Wacker Drive Chicago, IL 60606		Board Member		1997 Class I				182
∎   CAROLE E. STONE						Director, Chicago Board Options Exchange, Inc. (since 2006); Director, C2 Options Exchange, Incorporated (since 2009); Director, CBOE Holdings, Inc. (since 2010); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010).
1947 333 W. Wacker Drive Chicago, IL 60606		Board Member		2007 Class I				182
∎   TERENCE J. TOTH						Co-Founding Partner, Promus Capital (since 2008); Director, Fulcrum IT Service LLC (since 2010) and Quality Control Corporation (since 2012); member: Catalyst Schools of Chicago Board (since 2008) and Mather Foundation Board (since 2012), and chair of its Investment Committee; formerly, Director, Legal & General Investment Management America, Inc. (2008-2013); formerly, CEO and President, Northern Trust Global Investments (2004-2007): Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); formerly, Member, Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004).
1959 333 W. Wacker Drive Chicago, IL 60606		Board Member		2008 Class II				182

 

NUVEEN			39

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Board Members & Officers (Unaudited) (continued)

 

Name, Year of Birth & Address		Position(s) Held with the Funds		Year First Elected or Appointed and Term(1)		Principal Occupation(s) Including other Directorships During Past 5 Years		Number of Portfolios in Fund Complex Overseen by Board Member
Independent Board Members (continued):
∎   MARGARET L. WOLFF						Member of the Board of Directors (since 2013) of Travelers Insurance Company of Canada and The Dominion of Canada General Insurance Company (each, a part of Travelers Canada, the Canadian operation of The Travelers Companies, Inc.); formerly, Of Counsel, Skadden, Arps, Slate, Meagher & Flom LLP (Mergers & Acquisitions Group) (2005-2014); Member of the Board of Trustees of New York-Presbyterian Hospital (since 2005); Member (since 2004) and Chair (since 2015) of the Board of Trustees of The John A. Hartford Foundation (a philanthropy dedicated to improving the care of older adults); formerly, Member (2005-2015) and Vice Chair (2011-2015) of the Board of Trustees of Mt. Holyoke College.
1955 333 W. Wacker Drive Chicago, IL 60606		Board Member		2016 Class I				182
Interested Board Members:
∎   WILLIAM ADAMS IV(3)						Co-Chief Executive Officer and Co-President (since March 2016), formerly, Senior Executive Vice President, Global Structured Products (2010-2016) of Nuveen Investments, Inc.; Executive Vice President (since February 2017) of Nuveen, LLC; Co-President of Nuveen Fund Advisors, LLC (since 2011); Co- Co-President, Global Products and Solutions (since January 2017), formerly, Chief Executive Officer (2016-2017), formerly, Senior Executive Vice President of Nuveen Securities, LLC; President (since 2011), of Nuveen Commodities Asset Management, LLC; Board Member of the Chicago Symphony Orchestra and of Gilda’s Club Chicago; formerly, Executive Vice President, U.S. Structured Products, of Nuveen Investments, Inc. (1999-2010).
1955 333 W. Wacker Drive Chicago, IL 60606		Board Member		2013 Class II				182
∎   MARGO L. COOK(2)(3)						Co-Chief Executive Officer and Co-President (since March 2016), formerly, Senior Executive Vice President of Nuveen Investments, Inc.; Co-President, Global Products and Solutions (since January 2017), formerly, Co-Chief Executive Officer (2015-2016), formerly, Executive Vice President (2013-2015), of Nuveen Securities, LLC; Executive Vice President (since February 2017) of Nuveen, LLC; Co-President (since October 2016), formerly Senior Executive Vice President of Nuveen Fund Advisors, LLC (Executive Vice President since 2011); formerly, Managing Director of Nuveen Commodities Asset Management, LLC (2011-2016); Chartered Financial Analyst.
1964 333 W. Wacker Drive Chicago, IL 60606		Board Member		2016 Class III				182
Name, Year of Birth & Address		Position(s) Held with the Funds		Year First Elected or Appointed(4)		Principal Occupation(s) During Past 5 Years		Number of Portfolios in Fund Complex Overseen by Officer
Officers of the Funds:
∎   CEDRIC H. ANTOSIEWICZ						Senior Managing Director (since January 2017), formerly, Managing Director (2004-2017) of Nuveen Securities, LLC; Senior Managing Director (since February 2017), formerly, Managing Director (2014-2017) of Nuveen Fund Advisors, LLC.
1962 333 W. Wacker Drive Chicago, IL 60606		Chief Administrative Officer		2007				75
∎   LORNA C. FERGUSON						Managing Director (since 2004) of Nuveen.
1945 333 W. Wacker Drive Chicago, IL 60606		Vice President		1998				183

 

	40			NUVEEN

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Name, Year of Birth & Address		Position(s) Held with the Funds		Year First Elected or Appointed(4)		Principal Occupation(s) During Past 5 Years		Number of Portfolios in Fund Complex Overseen by Officer
Officers of the Funds (continued):
∎   STEPHEN D. FOY						Managing Director (since 2014), formerly, Senior Vice President (2013-2014) and Vice President (2005-2013) of Nuveen Fund Advisors, LLC; Chief Financial Officer of Nuveen Commodities Asset Management, LLC (since 2010); Managing Director (since 2016) of Nuveen Securities, LLC; Certified Public Accountant.
1954 333 W. Wacker Drive Chicago, IL 60606		Vice President and Controller		1998				183
∎   NATHANIEL T. JONES						Managing Director (since January 2017), formerly, Senior Vice President (2016-2017), formerly, Vice President (2011-2016) of Nuveen.; Chartered Financial Analyst.
1979 333 W. Wacker Drive Chicago, IL 60606		Vice President and Treasurer		2016				183
∎   WALTER M. KELLY						Managing Director (since January 2017), formerly, Senior Vice President (2008-2017) of Nuveen.
1970 333 W. Wacker Drive Chicago, IL 60606		Chief Compliance Officer and Vice President		2003				183
∎   DAVID J. LAMB						Managing Director (since January 2017), formerly, Senior Vice President of Nuveen Investments Holdings, Inc. (since 2006), Vice President prior to 2006.
1963 333 W. Wacker Drive Chicago, IL 60606		Vice President		2015				75
∎   TINA M. LAZAR						Managing Director (since January 2017), formerly, Senior Vice President (2014-2017)of Nuveen Securities, LLC.
1961 333 W. Wacker Drive Chicago, IL 60606		Vice President		2002				183
∎   KEVIN J. MCCARTHY						Senior Managing Director (since February 2017), formerly, Executive Vice President (2016-2017), Secretary (since 2016) and General Counsel (since 2016), formerly, Managing Director and Assistant Secretary of Nuveen Investments, Inc.; Senior Managing Director (since January 2017), formerly, Executive Vice President (2016-2017), formerly, Managing Director (2008-2016), and Assistant Secretary (since 2008) of Nuveen Securities, LLC; Senior Managing Director (since February 2017), formerly, Executive Vice President (2016-2017), and Secretary (since 2016), formerly, Managing Director (2008-2016) and Assistant Secretary (2007-2016), and Co-General Counsel (since 2011) of Nuveen Fund Advisors, LLC; Senior Managing Director (since February 2017), formerly, Executive Vice President (2016-2017) and Secretary (since 2016), formerly, Managing Director, Assistant Secretary (2011-2016), and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Senior Managing Director (since February 2017), formerly, Executive Vice President (2016-2017) and Secretary (since 2016) of Nuveen Investments Advisers, LLC; Vice President (since 2007) and Secretary (since 2016) of NWQ Investment Management Company, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC and Winslow Capital Management, LLC (since 2010); Vice President (since 2010) and Secretary (since 2016), formerly, Assistant Secretary of Nuveen Commodities Asset Management, LLC.
1966 333 W. Wacker Drive Chicago, IL 60606		Vice President and Assistant Secretary		2007				183
∎   KATHLEEN L.  PRUDHOMME						Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors, LLC; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Managing Director and Assistant Secretary (since 2011) of Nuveen Securities, LLC; formerly, Deputy General Counsel, FAF Advisors, Inc. (2004-2010).
1953 901 Marquette Avenue Minneapolis, MN 55402		Vice President and Assistant Secretary		2011				183

 

NUVEEN			41

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Board Members & Officers (Unaudited) (continued)

 

Name, Year of Birth & Address		Position(s) Held with the Funds		Year First Elected or Appointed(4)		Principal Occupation(s) During Past 5 Years		Number of Portfolios in Fund Complex Overseen by Officer
Officers of the Funds (continued):
∎  CHRISTOPHER M.  ROHRBACHER						Managing Director (since January 2017) of Nuveen Securities, LLC; Managing Director (since January 2017), formerly, Senior Vice President (2016-2017) and Assistant Secretary (since October 2016) of Nuveen Fund Advisors, LLC; Vice President and Assistant Secretary (since 2010) of Nuveen Commodities Asset Management, LLC.
1971 333 West Wacker Drive Chicago, IL 60606		Vice President and Assistant Secretary		2008				183
∎  JOEL T. SLAGER						Fund Tax Director for Nuveen Funds (since 2013); previously, Vice President of Morgan Stanley Investment Management, Inc., Assistant Treasurer of the Morgan Stanley Funds (from 2010 to 2013).
1978 333 W. Wacker Drive Chicago, IL 60606		Vice President and Assistant Secretary		2013				183
∎  GIFFORD R. ZIMMERMAN						Managing Director (since 2002), and Assistant Secretary of Nuveen Securities, LLC; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, LLC; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Vice President (since February 2017), formerly, Managing Director (2003-2017) and Assistant Secretary (since 2003) of Symphony Asset Management LLC; Managing Director and Assistant Secretary (since 2002) of Nuveen Investments Advisers, LLC; Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002), Santa Barbara Asset Management, LLC (since 2006), and of Winslow Capital Management, LLC, (since 2010); Chartered Financial Analyst.
1956 333 W. Wacker Drive Chicago, IL 60606		Vice President and Secretary		1988				183

 

(1)

The Board Members serve three year terms. The Board of Trustees is divided into three classes. Class I, Class II, and Class III, with each being elected to serve until the third succeeding annual shareholders’ meeting subsequent to its election or thereafter in each case when its respective successors are duly elected or appointed. The first year elected or appointed represents the year in which the board member was first elected or appointed to any fund in the Nuveen Complex.

(2)	On June 22, 2016, Ms. Cook and Mr. Moschner were appointed as Board members, effective July 1, 2016.

(3)	“Interested person” as defined in the 1940 Act, by reason of his position with Nuveen Investments, Inc. and certain of its subsidiaries, which are affiliates of the Nuveen Funds.

(4)	Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the Officer was first elected or appointed to any fund in the Nuveen Complex.

 

	42			NUVEEN

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Notes

 

 

NUVEEN			43

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Nuveen:

Serving Investors for Generations

Since 1898, financial advisors and their clients have relied on Nuveen to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.

Focused on meeting investor needs.   Nuveen helps secure the long-term goals of individual investors and the advisors who serve them, providing access to investment expertise from leading asset managers and solutions across traditional and alternative asset classes. Built on more than a century of industry leadership, Nuveen’s teams of experts align with clients’ specific financial needs and goals, demonstrating commitment to advisors and investors through market perspectives and wealth management and portfolio advisory services. Nuveen manages $236 billion in assets as of December 31, 2016.

Find out how we can help you.   To learn more about how the products and services of Nuveen may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.   Learn more about Nuveen Funds at: www.nuveen.com/cef

Securities offered through Nuveen Securities, LLC, Member FINRA and SIPC | 333 West Wacker Drive | Chicago, IL 60606 | www.nuveen.com/cef

 

EAN-A-1216D        23205-INV-Y-03/18

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ITEM 2. CODE OF ETHICS.

As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. There were no amendments to or waivers from the Code during the period covered by this report. The registrant has posted the code of ethics on its website at www.nuveen.com/CEF/Shareholder/FundGovernance.aspx. (To view the code, click on Code of Conduct.)

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The registrant’s Board of Directors or Trustees (“Board”) determined that the registrant has at least one “audit committee financial expert” (as defined in Item 3 of Form N-CSR) serving on its Audit Committee. The registrant’s audit committee financial experts are Carole E. Stone and Jack B. Evans, who are “independent” for purposes of Item 3 of Form N-CSR.

Ms. Stone served for five years as Director of the New York State Division of the Budget. As part of her role as Director, Ms. Stone was actively involved in overseeing the development of the State’s operating, local assistance and capital budgets, its financial plan and related documents; overseeing the development of the State’s bond-related disclosure documents and certifying that they fairly presented the State’s financial position; reviewing audits of various State and local agencies and programs; and coordinating the State’s system of internal audit and control. Prior to serving as Director, Ms. Stone worked as a budget analyst/examiner with increasing levels of responsibility over a 30 year period, including approximately five years as Deputy Budget Director. Ms. Stone has also served as Chair of the New York State Racing Association Oversight Board, as Chair of the Public Authorities Control Board, as a Commissioner on the New York State Commission on Public Authority Reform and as a member of the Boards of Directors of several New York State public authorities. These positions have involved overseeing operations and finances of certain entities and assessing the adequacy of project/entity financing and financial reporting. Currently, Ms. Stone is on the Board of Directors of CBOE Holdings, Inc., of the Chicago Board Options Exchange, and of C2 Options Exchange. Ms. Stone’s position on the boards of these entities and as a member of both CBOE Holdings’ Audit Committee and its Finance Committee has involved, among other things, the oversight of audits, audit plans and preparation of financial statements.

Mr. Evans was formerly President and Chief Operating Officer of SCI Financial Group, Inc., a full service registered broker-dealer and registered investment adviser (“SCI”). As part of his role as President and Chief Operating Officer, Mr. Evans actively supervised the Chief Financial Officer (the “CFO”) and actively supervised the CFO’s preparation of financial statements and other filings with various regulatory authorities. In such capacity, Mr. Evans was actively involved in the preparation of SCI’s financial statements and the resolution of issues raised in connection therewith. Mr. Evans has also served on the audit committee of various reporting companies. At such companies, Mr. Evans was involved in the oversight of audits, audit plans, and the preparation of financial statements. Mr. Evans also formerly chaired the audit committee of the Federal Reserve Bank of Chicago.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Nuveen Real Estate Income Fund

The following tables show the amount of fees that KPMG LLP, the Funds’ auditor, billed to the Funds’ during the Funds’ last two full fiscal years. The Audit Committee approved in advance all audit services and non-audit services that KPMG LLP provided to the Funds, except for those non-audit services that were subject to the pre-approval exception under Rule 2-01 of Regulation S-X (the “pre-approval exception”). The preapproval exception for services provided directly to the Funds waives the pre-approval requirement for services other than audit, review or attest services if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid by the Funds during the fiscal year in which the services are provided; (B) the Funds did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to the Audit Committee’s attention, and the Committee (or its delegate) approves the services before the audit is completed.

The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee).

SERVICES THAT THE FUND’S AUDITOR BILLED TO THE FUND

 

Fiscal Year Ended		Audit Fees Billed to Fund 1				Audit-Related Fees Billed to Fund 2				Tax Fees Billed to Fund 3				All Other Fees Billed to Fund 4
December 31, 2016		$	26,375			$	0			$	0			$	0
Percentage approved pursuant to pre-approval exception			0	%			0	%			0	%			0	%
December 31, 2015		$	25,500			$	0			$	0			$	0
Percentage approved pursuant to pre-approval exception			0	%			0	%			0	%			0	%

 

¹ “Audit Fees” are the aggregate fees billed for professional services for the audit of the Fund’s annual financial statements and services provided in connection with statutory and regulatory filings or engagements.

² “Audit Related Fees” are the aggregate fees billed for assurance and related services reasonably related to the performance of the audit or review of financial statements that are not reported under “Audit Fees”. These fees include offerings related to the Fund’s common shares and leverage.

³ “Tax Fees” are the aggregate fees billed for professional services for tax advice, tax compliance, and tax planning. These fees include: all global withholding tax services; excise and state tax reviews; capital gain, tax equalization and taxable basis calculation performed by the principal accountant.

⁴ “All Other Fees” are the aggregate fees billed for products and services other than “Audit Fees”, “Audit-Related Fees” and “Tax Fees”. These fees represent all “Agreed-Upon Procedures” engagements pertaining to the Fund’s use of leverage.

SERVICES THAT THE FUND’S AUDITOR BILLED TO THE

ADVISER AND AFFILIATED FUND SERVICE PROVIDERS

The following tables show the amount of fees billed by KPMG LLP to Nuveen Fund Advisors, LLC (formerly Nuveen Fund Advisors, Inc.) (the “Adviser”), and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two full fiscal years.

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The tables also show the percentage of fees subject to the pre-approval exception. The pre-approval exception for services provided to the Adviser and any Affiliated Fund Service Provider (other than audit, review or attest services) waives the pre-approval requirement if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid to KPMG LLP by the Fund, the Adviser and Affiliated Fund Service Providers during the fiscal year in which the services are provided that would have to be pre-approved by the Audit Committee; (B) the Fund did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to the Audit Committee’s attention, and the Committee (or its delegate) approves the services before the Fund’s audit is completed.

 

Fiscal Year Ended		Audit-Related Fees     Billed to Adviser and     Affiliated Fund Service Providers				Tax Fees Billed to     Adviser and Affiliated Fund Service Providers				All Other Fees Billed to Adviser     and Affiliated Fund     Service Providers
December 31, 2016		$	0			$	0			$	0
Percentage approved pursuant to pre-approval exception			0	%			0	%			0	%
December 31, 2015		$	0			$	0			$	0
Percentage approved pursuant to pre-approval exception			0	%			0	%			0	%

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NON-AUDIT SERVICES

The following table shows the amount of fees that KPMG LLP billed during the Fund’s last two full fiscal years for non-audit services. The Audit Committee is required to pre-approve non-audit services that KPMG LLP provides to the Adviser and any Affiliated Fund Services Provider, if the engagement related directly to the Fund’s operations and financial reporting (except for those subject to the pre-approval exception described above). The Audit Committee requested and received information from KPMG LLP about any non-audit services that KPMG LLP rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating KPMG LLP’s independence.

 

Fiscal Year Ended		Total Non-Audit Fees     Billed to Fund				Total Non-Audit Fees billed to Adviser and Affiliated Fund Service     Providers (engagements     related directly to the operations and financial reporting of the Fund)				Total Non-Audit Fees billed to Adviser and     Affiliated Fund Service     Providers (all other engagements)				Total
December 31, 2016		$	0			$	0			$	0			$	0
December 31, 2015		$	0			$	0			$	0			$	0

“Non-Audit Fees billed to Fund” for both fiscal year ends represent “Tax Fees” and “All Other Fees” billed to Fund in their respective amounts from the previous table.

Less than 50 percent of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.

Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit Committee must approve (i) all non-audit services to be performed for the Fund by the Fund’s independent accountants and (ii) all audit and non-audit services to be performed by the Fund’s independent accountants for the Affiliated Fund Service Providers with respect to operations and financial reporting of the Fund. Regarding tax and research projects conducted by the independent accountants for the Fund and Affiliated Fund Service Providers (with respect to operations and financial reports of the Fund) such engagements will be (i) pre-approved by the Audit Committee if they are expected to be for amounts greater than $10,000; (ii) reported to the Audit Committee chairman for his verbal approval prior to engagement if they are expected to be for amounts under $10,000 but greater than $5,000; and (iii) reported to the Audit Committee at the next Audit Committee meeting if they are expected to be for an amount under $5,000.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

The registrant’s Board has a separately designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). The members of the audit committee are Jack B. Evans, David J. Kundert, John K. Nelson, Carole E. Stone and Terence J. Toth.

ITEM 6. SCHEDULE OF INVESTMENTS.

(a) See Portfolio of Investments in Item 1.

(b) Not applicable.

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ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Nuveen Fund Advisors, LLC is the registrant’s investment adviser (also referred to as the “Adviser”). The Adviser is responsible for the on-going monitoring of the Fund’s investment portfolio, managing the Fund’s business affairs and providing certain clerical, bookkeeping and administrative services. The Adviser has engaged Security Capital Research & Management Incorporated (“Security Capital” or “Sub-Adviser”) as Sub-Adviser to provide discretionary investment advisory services. As part of these services, the Adviser has delegated to the Sub-Adviser the full responsibility for proxy voting on securities held in the registrant’s portfolio and related duties in accordance with the Sub-Adviser’s policies and procedures. The Adviser periodically monitors the Sub-Adviser’s voting to ensure that it is carrying out its duties. The Sub-Adviser’s proxy voting policies and procedures are summarized as follows:

Security Capital may be granted by its clients the authority to vote the proxies of the securities held in client portfolios. To ensure that the proxies are voted in the best interests of its clients, Security Capital has adopted detailed proxy voting procedures (“Procedures”) that incorporate detailed proxy guidelines (“Guidelines”) for voting proxies on specific types of issues.

Pursuant to the Procedures, most routine proxy matters will be voted in accordance with the Guidelines, which have been developed with the objective of encouraging corporate action that enhances shareholder value. For proxy matters that are not covered by the Guidelines (including matters that require a case-by-case determination) or where a vote contrary to the Guidelines is considered appropriate, the Procedures require a certification and review process to be completed before the vote is cast. That process is designed to identify actual or potential material conflicts of interest and ensure that the proxy is cast in the best interest of clients. For proxy matters that are not covered by the Guidelines or where a vote contrary to the Guidelines is considered appropriate, the investment analyst who covers that company will document on a proxy summary how Security Capital is voting and that summary is signed-off by the investment analyst, as well as two Portfolio Managers. In addition, this summary is provided to Security Capital’s Chief Compliance Officer.

To oversee and monitor the proxy-voting process, Security Capital has established a proxy committee and appointed a proxy administrator. The proxy committee meets periodically to review general proxy-voting matters, review and approve the Guidelines annually, and provide advice and recommendations on general proxy-voting matters as well as on specific voting issues.

A copy of the Security Capital’s proxy voting procedures and guidelines are available upon request by contacting your client service representative.

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ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Nuveen Fund Advisors, LLC (“NFALLC”) is the registrant’s investment adviser (NFALLC is also referred to as the “Adviser”.) NFALLC is responsible for the selection and on-going monitoring of the Fund’s investment portfolio, managing the Fund’s business affairs and providing certain clerical, bookkeeping and administrative services. The Adviser has engaged Security Capital Research & Management Incorporated (“Security Capital”) for a portion of the registrant’s investments. (Security Capital is also referred to as “Sub-Adviser”.) Security Capital, as Sub-Adviser, provides discretionary investment advisory services. The following section provides information on the portfolio managers at the Sub-Adviser:

 

Item 8 (a)(1).

Portfolio management team from SECURITY CAPITAL RESEARCH & MANAGEMENT INCORPORATED

ANTHONY R. MANNO JR. is CEO, President and Chief Investment Officer of Security Capital Research & Management Incorporated. He is Chairman, President and Managing Director of SC-Preferred Growth LLC. Prior to joining Security Capital in 1994, Mr. Manno spent 14 years with LaSalle Partners Limited as a Managing Director, responsible for real estate investment banking activities. Mr. Manno began his career in real estate finance at The First National Bank of Chicago and has 43 years of experience in the real estate investment business. He received an MBA in Finance with honors (Beta Gamma Sigma) from the University of Chicago and graduated Phi Beta Kappa from Northwestern University with a BA and MA in Economics. Mr. Manno is a Certified Public Accountant and was awarded an Elijah Watt Sells Award and is a recipient of the President’s Call to Service Award, December 2008.

KENNETH D. STATZ is a Managing Director and Senior Market Strategist of Security Capital Research & Management Incorporated where he is responsible for the development and implementation of portfolio investment strategy. Prior to joining Security Capital in 1995, Mr. Statz was a Vice President in the Investment Research Department of Goldman, Sachs & Co., concentrating on research and underwriting for the REIT industry. Previously, he was a REIT Portfolio Manager and a Managing Director of Chancellor Capital Management. Mr. Statz has 35 years of experience in the real estate securities industry and received an MBA and a BBA in Finance from the University of Wisconsin.

KEVIN W. BEDELL is a Managing Director of Security Capital Research & Management Incorporated where he directs the Investment Analysis Team, which provides in-depth proprietary research on publicly listed companies. Prior to joining Security Capital in 1996, Mr. Bedell spent nine years with LaSalle Partners Limited where he was Equity Vice President and Portfolio Manager, with responsibility for strategic, operational and financial management of a private real estate investment trust with commercial real estate investments in excess of $1 billion. Mr. Bedell has 29 years of experience in the real estate securities industry and received an MBA in Finance from the University of Chicago and a BA from Kenyon College.

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Item 8 (a)(2).

OTHER ACCOUNTS MANAGED BY SECURITY CAPITAL RESEARCH & MANAGEMENT INCORPORATED – AS OF DECEMBER 31, 2016

 

Nuveen Real Estate Income Fund and Nuveen Diversified Dividend and Income Fund (“Funds”) Security Capital Research & Management Incorporated (“Adviser”)
(a)(1) Identify portfolio manager(s) of the Adviser to be named in the Fund prospectus		(a)(2) For each person identified in column (a)(1), provide number of accounts other than the Funds managed by the person within each category below and the total assets in the accounts managed within each category below
		Registered Investment Companies								Other Pooled Investment Vehicles								Other Accounts
		Number of Accounts				Total Assets ($billions)				Number of Accounts				Total Assets ($billions)				Number of Accounts				Total Assets ($billions)
Anthony R. Manno Jr.			4			$	0.4				2			$	0.9				170			$	2.5
Kenneth D. Statz			4			$	0.4				2			$	0.9				170			$	2.5
Kevin W. Bedell			4			$	0.4				2			$	0.9				170			$	2.5
		(a)(3) Performance Fee Accounts. For each of the categories in column (a)(2), provide number of accounts and the total assets in the accounts with respect to which the advisory fee is based on the performance of the account
		Registered Investment Companies								Other Pooled Investment Vehicles								Other Accounts
		Number of Accounts				Total Assets				Number of Accounts				Total Assets				Number of Accounts				Total Assets ($billions)
Anthony R. Manno Jr.			—				—				—				—				3			$	0.3
Kenneth D. Statz			—				—				—				—				3			$	0.3
Kevin W. Bedell			—				—				—				—				3			$	0.3

Potential Material Conflicts of Interest

As shown in the above tables, the portfolio managers may manage accounts in addition to the Nuveen Funds (the “Funds”). The potential for conflicts of interest exists when portfolio managers manage other accounts with similar investment objectives and strategies as the Funds (“Similar Accounts”). Potential conflicts may include, for example, conflicts between investment strategies and conflicts in the allocation of investment opportunities.

Responsibility for managing Security Capital’s clients’ portfolios is organized according to investment strategies within asset classes. Generally, client portfolios with similar strategies are managed using the same objectives, approach and philosophy. Therefore, portfolio holdings, relative position sizes and sector exposures tend to be similar across similar portfolios, which minimizes the potential for conflicts of interest.

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Security Capital may receive more compensation with respect to certain Similar Accounts than that received with respect to the Nuveen Funds or may receive compensation based in part on the performance of certain Similar Accounts. This may create a potential conflict of interest for Security Capital or its portfolio managers by providing an incentive to favor these Similar Accounts when, for example, placing securities transactions. Potential conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of limited investment opportunities. Allocations of aggregated trades, particularly trade orders that were only partially completed due to limited availability, and allocation of investment opportunities generally, could raise a potential conflict of interest, as Security Capital may have an incentive to allocate securities that are expected to increase in value to favored accounts. Initial public offerings, in particular, are frequently of very limited availability. Security Capital may be perceived as causing accounts it manages to participate in an offering to increase Security Capital’s overall allocation of securities in that offering. A potential conflict of interest also may be perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by another account, or when a sale in one account lowers the sale price received in a sale by a second account. If Security Capital manages accounts that engage in short sales of securities of the type in which the Funds invests, Security Capital could be seen as harming the performance of the Funds for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall.

Security Capital has policies and procedures designed to manage these conflicts described above such as allocation of investment opportunities to achieve fair and equitable allocation of investment opportunities among its clients over time. For example:

Orders placed for the same equity security within a reasonable time period are aggregated consistent with Security Capital’s duty of best execution for its clients. If aggregated trades are fully executed, accounts participating in the trade will be allocated their pro rata share on an average price basis. Partially completed orders will be allocated among the participating accounts on a pro-rata average price basis as well.

 

Item 8 (a)(3).

Fund Manager Compensation

The principal form of compensation of Security Capital’s professionals is a base salary and annual bonus. Base salaries are fixed for each portfolio manager. Each professional is paid a cash salary and, in addition, a year-end bonus based on achievement of specific objectives that the professional’s manager and the professional agree upon at the commencement of the year. The annual bonus is paid partially in cash and partially in either: (i) restricted stock of Security Capital’s parent company, JPMorgan Chase & Co., (ii) in self-directed parent company mutual funds, and/or (iii) mandatory notional investment in selected mutual funds advised by Security Capital, all vesting over a three-year period (50% each after the second and third years). The annual bonus is a function of Security Capital achieving its financial, operating and investment performance goals, as well as the individual achieving measurable objectives specific to that professional’s role within the firm and the investment performance of all accounts managed by the portfolio manager. None of the portfolio managers’ compensation is based on the performance of, or the value of assets held in, the Funds.

 

Item 8 (a)(4).

Ownership of JRS Securities as of December 31, 2016.

 

Portfolio Manager

None

$1- $10,000

$10,001-       $50,000

$50,001-       $100,000

$100,001- $500,000

$500,001 - $1,000,000

over $1,000,000

Anthony R. Manno Jr.

X

Kenneth D. Statz

X

Kevin W. Bedell

X

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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.

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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 because the code is posted on registrant’s website at www.nuveen.com/CEF/Shareholder/FundGovernance.aspx and there were no amendments during the period covered by this report. (To view the code, click on Code of Conduct.)

(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.

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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/ Gifford R. Zimmerman
		Gifford R. Zimmerman
		Vice President and Secretary
Date: March 9, 2017

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/ Cedric H. Antosiewicz
		Cedric H. Antosiewicz
		Chief Administrative Officer
		(principal executive officer)
Date: March 9, 2017
By (Signature and Title)		/s/ Stephen D. Foy
		Stephen D. Foy
		Vice President and Controller
		(principal financial officer)
Date: March 9, 2017