UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-10491
---------
Nuveen Real Estate Income Fund
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
-------------------
Date of fiscal year end: December 31, 2003
------------------
Date of reporting period: December 31, 2003
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Nuveen Investments
Closed-End
Exchange-Traded
Funds
ANNUAL REPORT December 31, 2003
NUVEEN
REAL ESTATE
INCOME FUND
JRS
Photo of: Man holding up small boy.
Photo of: 2 women with 2 girls looking at seashells.
HIGH CURRENT INCOME
FROM A PORTFOLIO OF
COMMERCIAL REAL ESTATE
INVESTMENTS
Logo: NUVEEN Investments
FASTER INFORMATION
RECEIVE YOUR
NUVEEN FUND REPORT
ELECTRONICALLY
By registering for electronic delivery, you will receive an e-mail as soon as
your Nuveen Fund information is available. Click on the link and you will be
taken directly to the report. Your Fund report can be viewed and saved on your
computer. Your report will arrive faster via e-mail than by traditional mail.
Registering is easy and only takes a few minutes (see instructions at right).
--------------------------------------------------------------------------------
SOME COMMON CONCERNS:
WILL MY E-MAIL ADDRESS BE DISTRIBUTED TO OTHER COMPANIES?
No, your e-mail address is strictly confidential and will not be used for
anything other than notification of shareholder information.
WHAT IF I CHANGE MY MIND AND WANT TO RECEIVE INVESTOR MATERIALS THROUGH REGULAR
MAIL DELIVERY AGAIN?
If you decide you do not like receiving your reports electronically, it's a
simple process to go back to regular mail delivery.
--------------------------------------------------------------------------------
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME FROM YOUR FINANCIAL ADVISOR OR BROKERAGE ACCOUNT,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.INVESTORDELIVERY.COM and follow the simple instructions, using
the address sheet that accompanied this report as a guide.
2 You'll be taken to a page with several options. Select the NEW
ENROLLMENT-CREATE screen and follow the simple instructions.
3 Click Submit. Confirm the information you just entered is correct, then
click Submit again.
4 You should get a confirmation e-mail within 24 hours. If you do not, go
back through these steps to make sure all the information is correct.
5 Use this same process if you need to change your registration information
or cancel internet viewing.
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME DIRECTLY TO YOU FROM NUVEEN,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.NUVEEN.COM
2 Select ACCESS YOUR ACCOUNT. Select the E-REPORT ENROLLMENT section. Click
on Enrollment Today.
3 You'll be taken to a screen that asks for your Social Security number and
e-mail address. Fill in this information, then click Enroll.
4 You should get a confirmation e-mail within 24 hours. If you do not, go
back through these steps to make sure all the information is correct.
5 Use this same process if you need to change your registration information
or cancel internet viewing.
Logo: NUVEEN Investments
Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Sidebar text: I URGE YOU TO CONSIDER RECEIVING FUTURE FUND REPORTS AND OTHER
FUND INFORMATION BY E-MAIL AND THE INTERNET .....SEE THE INSIDE FRONT COVER OF
THIS REPORT FOR STEP-BY-STEP INSTRUCTIONS.
Dear
SHAREHOLDER
Many of you recently received an annual report for your Fund for the year ended
October 31, 2003. Since then, the fiscal year for the Fund has been changed to
match the calendar year. This change in fiscal year was made strictly for
administrative reasons, and does not have any impact on the management or future
performance of your Fund. Because of this change, we have the opportunity to
send you another annual report only two months after you received the previous
one.
As noted in the previous report, your Fund continued to perform well. Detailed
information on your Fund's total return can be found in the Portfolio Managers'
Perspective and on the Performance Overview pages within this report. Please
take the time to read them.
In addition to providing regular monthly income, we believe that a real estate
oriented investment like your Fund also may offer opportunities to reduce the
risk of your overall investment portfolio. This is because the value of the
Fund's holdings may move differently than the prices of other common stocks,
bonds or mutual funds you may own. Since one part of your portfolio may be going
up when another is going down, portfolio diversification may reduce your overall
risk. Your financial advisor can explain the advantages of portfolio
diversification in more detail. I urge you to contact him or her soon for more
information on this important investment strategy.
I also urge you once again to consider receiving future Fund reports and other
Fund information by e-mail and the Internet . Not only will you be able to
receive the information faster, but this also may help lower your Fund's
expenses. Sign up is quick and easy - see the inside front cover of this report
for step-by-step instructions.
For more than 100 years, Nuveen has specialized in offering quality investments
such as your Fund to those seeking to accumulate and preserve wealth. Our
commitment to careful research, constant surveillance and judicious trading by
our seasoned portfolio management team has never been stronger. Our mission
continues to be to assist you and your financial advisor by offering the
investment solutions and services that can help you meet your financial
objectives. We thank you for choosing us as a partner as you work toward that
goal.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 18, 2004
1
Nuveen Real Estate Income Fund (JRS)
Portfolio Managers'
PERSPECTIVE
The Fund is managed by a team of real estate investment professionals at
Security Capital Research & Management Incorporated, a wholly-owned subsidiary
of Banc One Corporation. Tony Manno and Ken Statz, who each have more than 21
years of experience in managing real estate investments, lead the team. Here
they review the economic environment and performance of the Fund.
WHAT WERE THE MAJOR ECONOMIC DRIVERS OF THE REAL ESTATE AND REIT MARKETS
DURING THE QUARTER AND YEAR ENDED DECEMBER 31, 2003?
The combination of low interest rates and clearer signs of economic recovery
continued to highlight both income and growth attributes within the real estate
stock group, driving another strong performance quarter and capping off a
near-record performance year.
The performance pattern for real estate stocks by property type and by company
during 2003 and in the fourth quarter generally reflected crosscurrents evident
in both the broader stock and bond markets. Investors continued to aggressively
seek current income while also targeting investments positioned for growth in an
economic recovery. With the improving pattern of economic news as the year
progressed, investor sentiment appeared to tilt further in favor of risk-taking.
At the same time, there was a remarkable evenness to performance by property
type in 2003, with returns almost universally strong and more closely clustered
despite significant differences in fundamentals and outlook.
The standout performers by property type in 2003 were the retail companies, with
mall companies in particular generating a total return of +52.5% for the year
and +12.5% in the fourth quarter. Also part of the retail group, local shopping
center companies generated returns of +40.8% in 2003, including a +8.1% return
in the fourth quarter.
While still generating attractive total returns, the multifamily companies as a
group were underperfomers during 2003, with a total return for the year of
+25.6% including a notably modest +3.7% return for the fourth quarter.
Multifamily operating fundamentals continue to be weak, the combination of a
depressed job market, low mortgage rates driving demand for single-family homes
and continued new construction. Lodging company operations continue to be
pressured by a depressed and intensely competitive travel environment, but the
stocks benefited as 2003 progressed from a general easing of downside concerns
regarding the Iraq conflict and a refocus by investors on the prospects for a
U.S. economic recovery.
With arguably some of the most challenging operating conditions in many markets,
the resilient performance of the office companies as a group during 2003 was
impressive. Including a return of +11.2% during the fourth quarter, the office
companies generated a total return of +36.4% in 2003, in our view reflecting
stability inherent in longer lease terms for office properties and clear signs
of a market bottom as the year progressed.
The level of new equity issuance stepped up significantly during the second half
of 2003 bringing the full year total for new common equity to $7.8 billion.
While far short of 1997's $26.0 billion record, this is the highest annual level
of new common issuance since 1998 and reflects stepped up activity for IPOs as
well as follow-on activity for existing companies.
IN THIS CONTEXT, HOW DID THE FUND PERFORM OVER THE PERIOD ENDED DECEMBER 31,
2003?
As noted in the chairman's letter, the Fund recently changed its fiscal year end
to December 31 from October 31. Since shareholders recently received an annual
report for the period ended October 31,
2
2003, this report covers the two months between that date and December 31, 2003.
For these two months, the Fund produced a cumulative total return on net asset
value of 8.69%, compared with 7.65% for the Wilshire Real Estate Index, an
unmanaged index comprised of publicly-traded REITs and REOCs. It is important to
note that the Fund has an active program of investing in preferred stocks, which
are not included in the index. In addition, the Fund employs financial leverage
while the index is unleveraged.
Since it is more customary in annual reports to show 12-month results, we've
also calculated fund and index total returns for the 12-month period ended
December 31, 2003. For this time frame, the Fund produced a 42.69% total return
on net asset value. This compares with a 37.07% return over the same period for
the Wilshire Real Estate Securities Index. As of December 31, 2003, the Fund
continued to trade at a premium to its net asset value.
WHAT WERE THE KEY STRATEGIES AND TACTICS USED TO MANAGE JRS OVER THIS PERIOD?
During the reporting period, we continued to focus on those preferred and common
securities that we believed were best positioned to generate sustainable income
and potential price appreciation. In managing the portfolio, we sought to
structure a diversified portfolio while taking into account company credit
quality issues, sector and geographic exposure and security-type allocations.
Each decision was based on a multi-layered analysis of the company, the real
estate it owns, its management, and the relative price of the security.
One important tool we employed in attempting to manage JRS for income and
long-term capital appreciation was the ability to shift the portfolio's
allocation between preferred and common stocks based upon the relative
attractiveness of these two distinct markets. As of December 31, 2003, the
portfolio allocations were 34% preferred and 65% common stock and 1% in cash
equivalents.
WERE THERE ANY PARTICULAR AREAS OR TYPES OF PROPERTIES YOU FOCUSED ON IN
PARTICULAR?
Throughout the reporting period, the portfolio was well diversified by property
type, geography, issuer and type of security. One example of how this
flexibility benefited JRS was our investment in apartment companies, many of
which were under significant operating stress. By adjusting the Fund's
allocation to apartments mainly through preferred stock holdings, we were able
to be much more selective in our common stock investments, and still participate
commensurately in the cash flows of this important component of the real estate
industry.
A similar strategy was employed for office companies, in which the percentage of
the allocation devoted to preferred stock ranged between 29% and 48%, and
hotels, in which 85% to 100% was in preferred stock. We believe this extra layer
of strategic flexibility enabled us to better diversify the portfolio by
property type and issuer, without adding undue risks.
3
Nuveen RealEstate Income Fund
Performance
OVERVIEW As of December 31, 2003
JRS
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $18.73
--------------------------------------------------
Common Share Net Asset Value $18.57
--------------------------------------------------
Premium/(Discount) to NAV 0.86%
--------------------------------------------------
Net Assets Attributable to
Common Shares ($000) $522,576
--------------------------------------------------
TOP 5 COMMON % OF TOTAL
STOCK ISSUERS INVESTMENTS
--------------------------------------------------
Mack-Cali Realty Corporation 8.1%
--------------------------------------------------
The Macerich Company 6.7%
--------------------------------------------------
Arden Realty, Inc. 6.0%
--------------------------------------------------
HRPT Properties Trust 5.3%
--------------------------------------------------
Nationwide Health Properties, Inc. 4.7%
--------------------------------------------------
TOP 5 PREFERRED % OF TOTAL
STOCK ISSUERS INVESTMENTS
--------------------------------------------------
Crescent Real Estate Equities Company 6.2%
--------------------------------------------------
Home Properties, Inc. 3.8%
--------------------------------------------------
Apartment Investment & Management
Company 3.7%
--------------------------------------------------
Federal Realty Investment Trust 3.2%
--------------------------------------------------
LaSalle Hotel Properties 2.4%
--------------------------------------------------
% OF TOTAL
TOP FIVE INDUSTRIES INVESTMENTS
--------------------------------------------------
Office 37.7%
--------------------------------------------------
Multifamily 17.3%
--------------------------------------------------
Malls 12.9%
--------------------------------------------------
Shopping Centers 12.2%
--------------------------------------------------
Healthcare 9.4%
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 11/15/01)
--------------------------------------------------
MARKET NAV
--------------------------------------------------
1-Year 34.54% 42.69%
--------------------------------------------------
Since Inception 20.62% 22.90%
--------------------------------------------------
Bar Chart:
2003 MONTHLY DIVIDENDS PER SHARE
Jan 0.115
Feb 0.115
Mar 0.115
Apr 0.115
May 0.115
Jun 0.115
Jul 0.115
Aug 0.115
Sep 0.115
Oct 0.115
Nov 0.115
Dec 0.115
Line Chart:
SHARE PRICE PERFORMANCE
1/01/03 15.31
15.2
15.15
15.29
15.37
15.4
15.25
15.59
15.67
15.71
15.35
15.55
15.56
15.99
16
15.88
15.77
15.99
16.43
16.46
16.95
16.65
16.73
16.8
17.07
17.22
16.6
16.5
16.43
16.4
17
16.7
17.09
16.96
17.17
16.96
17.3
17.46
17.73
17.81
18.23
17.97
17.32
18
17.94
17.88
18.08
18.45
12/31/03 18.53
Weekly Closing Price
Past performance is not predictive of future results.
Pie Chart:
PORTFOLIO HOLDINGS BY TYPE OF INVESTMENT (AS A % OF TOTAL INVESTMENTS)
Common Stocks 65%
Preferred Stocks 34%
Short-Term Investments 1%
4
Shareholder
MEETING REPORT
The annual shareholder meeting was held on January 20, 2004, in Chicago at
Nuveen's headquarters.
JRS
------------------------------------------------------------------------------------------------------------------------------------
Common and
Taxable Auctioned Taxable Auctioned
Preferred Preferred
shares voting shares voting
together as together as
a class a class
====================================================================================================================================
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT WAS REACHED AS FOLLOWS:
For 26,916,173 --
Against 228,789 --
Abstain 254,205 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
William E. Bennett
For 27,207,639 --
Withhold 191,528 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Robert P. Bremner
For 27,210,174 --
Withhold 188,993 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Lawrence H. Brown
For 27,206,506 --
Withhold 192,661 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Jack B. Evans
For 27,221,621 --
Withhold 177,546 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Anne E. Impellizzeri
For 27,186,544 --
Withhold 212,623 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
William L. Kissick
For 27,190,186 --
Withhold 208,981 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Thomas E. Leafstrand
For 27,196,038 --
Withhold 203,129 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
5
Shareholder
MEETING REPORT (continued)
JRS
------------------------------------------------------------------------------------------------------------------------------------
Common and
Taxable Auctioned Taxable Auctioned
Preferred Preferred
shares voting shares voting
together as together as
a class a class
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
Peter R. Sawers
For 27,201,531 --
Withhold 197,636 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
William J. Schneider
For -- 6,606
Withhold -- 3
------------------------------------------------------------------------------------------------------------------------------------
Total -- 6,609
====================================================================================================================================
Timothy R. Schwertfeger
For -- 6,606
Withhold -- 3
------------------------------------------------------------------------------------------------------------------------------------
Total -- 6,609
====================================================================================================================================
Judith M. Stockdale
For 27,203,704 --
Withhold 195,463 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
Sheila W. Wellington
For 27,175,029 --
Withhold 224,138 --
------------------------------------------------------------------------------------------------------------------------------------
Total 27,399,167 --
====================================================================================================================================
6
Report of
INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
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 as of December
31, 2003, and the related statements of operations for the period from November
1, 2003 through December 31, 2003 and for the year ended October 31, 2003 and
the statement of changes in net assets and the financial highlights for the
period from November 1, 2003 through December 31, 2003 and for year ended
October 31, 2003 and for the period from November 15, 2001 (commencement of
operations) through October 31, 2002. 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.
We conducted our audits in accordance with auditing standards generally accepted
in the 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 and financial highlights. Our procedures included
confirmation of investments owned as of December 31, 2003, by correspondence
with the custodian. 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 Nuveen
Real Estate Income Fund at December 31, 2003, and the results of its operations
for the period from November 1, 2003 through December 31, 2003 and for the year
ended October 31, 2003 and the statement of changes in its net assets and
financial highlights for the period from November 1, 2003 through December 31,
2003 and for year ended October 31, 2003 and for the period from November 15,
2001 (commencement of operations) through October 31, 2002, in conformity with
accounting principles generally accepted in the United States.
/s/Ernst & Young LLP
Chicago, Illinois
February 17, 2004
7
Nuveen Real Estate Income Fund (JRS)
Portfolio of
INVESTMENTS December 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 87.1% (65.2% OF TOTAL INVESTMENTS)
HEALTHCARE - 12.0%
1,672,300 Nationwide Health Properties, Inc. $ 32,693,465
1,740,300 Senior Housing Properties Trust 29,985,369
------------------------------------------------------------------------------------------------------------------------------------
HOTEL - 1.0%
492,564 Hersha Hospitality Trust 4,974,896
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 3.3%
517,100 First Industrial Realty Trust, Inc. 17,452,125
------------------------------------------------------------------------------------------------------------------------------------
MALLS - 12.3%
807,600 Glimcher Realty Trust 18,074,088
1,044,100 The Macerich Company 46,462,450
------------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY - 12.8%
276,300 Amli Residential Properties Trust 7,404,840
309,000 Apartment Investment & Management Company 10,660,500
870,000 Archstone-Smith Trust 24,342,600
516,400 Avalonbay Communities, Inc. 24,683,920
------------------------------------------------------------------------------------------------------------------------------------
OFFICE - 36.8%
1,388,800 Arden Realty, Inc. 42,136,192
114,900 Highwoods Properties, Inc. 2,918,460
3,642,100 HRPT Properties Trust 36,748,789
1,351,500 Mack-Cali Realty Corporation 56,249,430
907,500 Maguire Properties, Inc. 22,052,250
1,305,600 Reckson Associates Realty Corporation 31,726,080
------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTERS - 8.5%
413,800 Federal Realty Investment Trust 15,885,782
1,159,400 New Plan Excel Realty Trust 28,602,398
------------------------------------------------------------------------------------------------------------------------------------
STORAGE - 0.4%
76,900 Public Storage, Inc. 2,299,310
------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $343,971,377) 455,352,944
--------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 45.4% (33.9% OF TOTAL INVESTMENTS)
HEALTHCARE - 0.6%
32,558 Nationwide Health Properties, Inc. - Series A, 7.677% 3,122,517
------------------------------------------------------------------------------------------------------------------------------------
HOTEL - 5.2%
360,000 Boykin Lodging Company - Series A, 10.500% 10,368,000
592,000 LaSalle Hotel Properties - Series A, 10.250% 16,901,600
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 2.6%
497,623 PS Business Parks, Inc. - Series F, 8.750% 13,366,154
8
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
MALLS - 4.9%
127,000 CBL & Associates Properties, Inc. - Series B, 8.750% $ 6,959,600
Glimcher Realty Trust:
237,300 Series B, 9.250% 6,015,555
113,000 Series F, 9.250% 2,992,240
The Mills Corp.:
115,200 Series C, 9.000% 3,184,704
213,000 Series E, 8.750% 5,772,300
24,500 Taubman Centers, Inc. - Series A, 8.300% 622,790
------------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY - 10.3%
Apartment Investment & Management Company:
91,600 Series G, 9.375% 2,478,696
51,050 Series Q, 10.100% 1,380,903
803,500 Series R, 10.000% 21,831,095
970,000 Home Properties, Inc. - Series F, 9.000% 26,723,500
51,300 United Dominion Realty Trust, Inc. - Series B, 8.600% 1,405,620
------------------------------------------------------------------------------------------------------------------------------------
OFFICE - 13.7%
199,100 Alexandria Real Estate Equities, Inc. - Series B, 9.100% 5,594,710
200,000 Corporate Office Properties Trust - Series G, 8.000% 5,400,000
Crescent Real Estate Equities Company:
835,100 Series A (Convertible), 6.750% 19,532,989
850,000 Series B, 9.500% 23,842,500
Highwoods Properties, Inc.:
12,141 Series A, 8.625% 12,129,624
33,600 Series B, 8.000% 848,736
150,000 Lexington Corporate Properties Trust - Series B, 8.050% 4,012,500
------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTERS - 7.8%
Developers Diversified Realty Corporation:
86,200 Series F, 8.600% 2,301,540
480,000 Series G, 8.000% 12,950,400
808,000 Federal Realty Investment Trust - Series B, 8.500% 22,220,000
125,000 Saul Centers, Inc. - Series A, 8.000% 3,312,500
------------------------------------------------------------------------------------------------------------------------------------
STORAGE - 0.3%
Shurgard Storage Centers, Inc.:
30,000 Series C, 8.700% 759,000
24,600 Series D, 8.750% 665,430
------------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (cost $213,558,420) 236,695,203
--------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (COST $5,952,000) - 1.1% (0.9% OF TOTAL INVESTMENTS)
$ 5,952 State Street Bank Repurchase Agreement, 0.720%, dated 12/31/03, due 1/02/04, 5,952,000
============= repurchase price $5,952,238, collateralized by U.S. Treasury Bonds
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $563,481,797) - 133.6% 698,000,147
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.7)% (3,424,173)
--------------------------------------------------------------------------------------------------------------------
Taxable Auctioned Preferred Shares, at Liquidation Value - (32.9)% (172,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $522,575,974
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
See accompanying notes to financial statements.
9
Statement of
ASSETS AND LIABILITIES December 31, 2003
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $563,481,797) $698,000,147
Cash 924
Receivables:
Dividends 4,612,652
Interest 119
Other assets 14,756
------------------------------------------------------------------------------------------------------------------------------------
Total assets 702,628,598
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Interest rate swaps, at value 7,521,755
Accrued expenses:
Management fees 346,166
Other 172,973
Taxable Auctioned Preferred share dividends payable 11,730
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 8,052,624
------------------------------------------------------------------------------------------------------------------------------------
Taxable Auctioned Preferred shares, at liquidation value 172,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $522,575,974
====================================================================================================================================
Common shares outstanding 28,136,413
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 18.57
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 281,364
Paid-in surplus 395,008,674
Undistributed (Over-distribution of) net investment income (11,730)
Accumulated net realized gain from investment transactions --
Net unrealized appreciation of investments and interest rate swap transactions 127,297,666
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $522,575,974
====================================================================================================================================
Authorized shares:
Common Unlimited
Taxable Auctioned Preferred Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
10
Statement of
OPERATIONS
FOR THE PERIOD
11/01/03
THROUGH YEAR ENDED
12/31/03 10/31/03
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 5,013,372 $ 32,908,378
Interest 19,952 94,049
------------------------------------------------------------------------------------------------------------------------------------
Total investment income 5,033,324 33,002,427
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 1,009,960 5,379,926
Net interest expense on interest rate swap transactions 771,853 4,404,017
Taxable Auctioned Preferred shares - auction fees 71,863 425,416
Taxable Auctioned Preferred shares - dividend disbursing agent fees 3,760 22,500
Shareholders' servicing agent fees and expenses 1,270 11,241
Custodian's fees and expenses 23,260 125,759
Trustees' fees and expenses 7,799 53,314
Professional fees 14,683 92,487
Shareholders' reports - printing and mailing expenses 29,312 145,061
Stock exchange listing fees 430 2,828
Investor relations expense 8,594 85,955
Other expenses 9,343 25,830
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,952,127 10,774,334
Custodian fee credit (493) (910)
Expense reimbursement (339,109) (1,801,689)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,612,525 8,971,735
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 3,420,799 24,030,692
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain from investments 2,731,047 14,955,847
Change in net unrealized appreciation (depreciation) of investments 36,408,836 106,540,733
Change in net unrealized appreciation (depreciation) of interest rate swap transactions (30,461) 1,684,638
------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 39,109,422 123,181,218
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO TAXABLE AUCTIONED PREFERRED SHAREHOLDERS
From net investment income (205,848) (1,534,591)
From accumulated net realized gains from investments (137,777) (666,002)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from distributions
to Taxable Auctioned Preferred shareholders (343,625) (2,200,593)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $42,186,596 $145,011,317
====================================================================================================================================
See accompanying notes to financial statements.
11
Statement of
CHANGES IN NET ASSETS
FOR THE
FOR THE PERIOD PERIOD 11/15/01
11/01/03 (COMMENCEMENT
THROUGH YEAR ENDED OF OPERATIONS)
12/31/03 10/31/03 THROUGH 10/31/02
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,420,799 $ 24,030,692 $ 28,380,355
Net realized gain from investments 2,731,047 14,955,847 4,692,936
Change in net unrealized appreciation (depreciation) of investments 36,408,836 106,540,733 (8,431,219)
Change in net unrealized appreciation (depreciation) of interest rate swap transactions (30,461) 1,684,638 (8,874,861)
Distributions to Taxable Auctioned Preferred shareholders:
From net investment income (205,848) (1,534,591) (1,906,748)
From accumulated net realized gains from investments (137,777) (666,002) (620,986)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations 42,186,596 145,011,317 13,239,477
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (400,409) (27,213,445) (24,691,256)
From accumulated net realized gains from investments (2,353,670) (11,530,158) (7,070,702)
Tax return of capital (3,717,296) (1,129,210) --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from distributions to
Common shareholders (6,471,375) (39,872,813) (31,761,958)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- 401,689,500
Net proceeds from shares issued to shareholders due to reinvestment of distributions 46,398 382,555 39,666
Taxable Auctioned Preferred shares offering costs -- 3,544 (2,017,208)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from capital share transactions 46,398 386,099 399,711,958
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares 35,761,619 105,524,603 381,189,477
Net assets applicable to Common shares at the beginning of period 486,814,355 381,289,752 100,275
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $522,575,974 $486,814,355 $381,289,752
====================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of period $ (11,730) $ (2,826,809) $ 1,890,535
====================================================================================================================================
See accompanying notes to financial statements.
12
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Real Estate Income Fund (the "Fund") is a non-diversified, closed-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's Common shares are listed on the American Stock
Exchange and trade under the ticker symbol "JRS." The Fund was organized as a
Massachusetts business trust on August 27, 2001.
Prior to the commencement of operations, the Fund had no operations other than
those related to organizational matters, the initial capital contribution of
$100,275 by Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of Nuveen Investments, Inc., and the recording of the organization
expenses ($15,000) and their reimbursement by Nuveen Investments, LLC, also a
wholly owned subsidiary of Nuveen Investments, Inc.
The Fund seeks to provide high current income by investing primarily in a
portfolio of income-producing common stocks, preferred stocks, convertible
preferred stocks and debt securities issued by real estate companies, such as
Real Estate Investment Trusts ("REITs").
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
Exchange-listed securities are generally valued at the last sales price on the
securities exchange on which such securities are primarily traded. Securities
traded on a securities exchange for which there are no transactions on a given
day or securities not listed on a securities exchange are valued at the mean of
the closing bid and asked price. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. If it is determined that market prices for a
security are unavailable or inappropriate, the Board of Trustees of the Fund, or
its designee, may establish a fair value for the security. Short-term securities
are valued at amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on an accrual basis (see Dividends and Distributions to Common
Shareholders for REIT income recognition policy).
Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of its net investment income to its shareholders. Therefore, no federal income
tax provision is required.
Dividends and Distributions to Common Shareholders
Dividends to Common shareholders are declared monthly. The Fund's policy is to
pass through to its shareholders, each month, substantially all REIT
distributions it receives, together with other operating income less operating
expenses. REIT distributions received by the Fund are generally comprised of
investment income, long-term and short-term capital gains, and a return of REIT
capital. The actual character of amounts received during the period is not known
until after the fiscal year-end. For the twelve months ended December 31, 2003,
the character of distributions to the Fund from the REITs was 69.69% ordinary
income, 12.66% long-term and short-term capital gains, and 17.65% return of REIT
capital.
13
Notes to
FINANCIAL STATEMENTS (continued)
For the fiscal years ended October 31, 2002 and 2003, the Fund applied a
percentage estimate, such as those shown above, or used a similar estimation of
the breakdown of income type, to its receipts from the REITs and treated as
income in the Statement of Operations only the amount of ordinary income so
calculated. The Fund adjusted that estimated breakdown of income type (and
consequently its net investment income) as necessary early in the following
calendar year when the REITs informed their shareholders of the actual breakdown
of income type. For the fiscal period ended December 31, 2003, the Fund applied
the actual character of distributions reported by the REITs in which the Fund
invests to its receipts from the REITS. If a REIT held in the portfolio of
investments does not report the actual character of its distributions during the
period, the Fund will treat the distributions as ordinary income.
During the fiscal years ended October 31, 2002 and 2003, the Fund treated each
distribution to its shareholders from the portfolio REITs as being entirely from
net investment income. The Fund recharacterized those distributions as being
from ordinary income, long-term and short-term capital gains, and return of
capital, if necessary, at the beginning of the subsequent calendar year, based
upon the income type breakdown information conveyed at that time by the REITs
whose securities are held in the Fund's portfolio. Recharacterizations are
reflected in the accompanying financial statements. For the fiscal period ended
December 31, 2003, the Fund applied the actual character of distributions
reported by the REITs in which the Fund invests to the distributions paid to the
Fund shareholders.
The Fund may also generate capital gains from trading investments in its
portfolio which are distributed to shareholders not less frequently than
annually. Such capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
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 accounting principles generally
accepted in the United States.
Taxable Auctioned Preferred Shares
The Fund has issued and outstanding 1,720 Series M, 1,720 Series T, 1,720 Series
W and 1,720 Series F, $25,000 stated value Taxable Auctioned Preferred shares.
The dividend rate on each series may change every seven days, as set pursuant to
a dutch auction process by the auction agent, and is payable at or near the end
of each rate period.
Interest Rate Swap Transactions
The Fund is authorized to enter into hedging transactions, including interest
rate swap transactions. The Fund uses interest rate swaps with the intent to
reduce or eliminate the risk that an increase in short-term interest rates could
have on Common share net earnings as a result of leverage. Interest rate swaps
involve the Fund's agreement with the swap counterparty to pay a fixed rate
payment in exchange for the counterparty paying the Fund a variable rate payment
that is intended to approximate the Fund's variable rate payment obligation on
Taxable Auctioned Preferred shares or any variable rate borrowing. The payment
obligation is based on the notional amount of the swap. Interest rate swaps do
not involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of credit loss with respect to the swap counterparty on
interest rate swaps is limited to the net amount of interest payments that the
Fund is to receive. The Fund has instructed the custodian to segregate assets
with a current value at least equal to the amount of the net payment obligations
under any interest rate swap transactions. Interest rate swap positions are
marked to market daily. Although there are economic advantages of entering into
interest rate swap transactions, there are also additional risks. The Fund helps
manage the credit risks associated with interest rate swap transactions by
entering into agreements only with counterparties the Adviser believes have the
financial resources to honor their obligations, by having the Adviser
continually monitor the financial stability of the swap counterparties.
14
At December 31, 2003, the Fund had open interest rate swap agreements with
Citibank NA as follows:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
AMOUNT FIXED RATE FLOATING RATE* DATE (DEPRECIATION)
--------------------------------------------------------------------------------------------------
$43,000,000 4.0225% 1.1700% 2/06/05 $(1,203,061)
43,000,000 4.8000 1.1700 2/06/07 (2,677,808)
43,000,000 5.1900 1.1700 2/06/09 (3,339,815)
--------------------------------------------------------------------------------------------------
$(7,220,684)
==================================================================================================
*Based on LIBOR (London Interbank Offered Rate)
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on the Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Offering Costs
Nuveen Investments, LLC has agreed to pay all Common share offering costs (other
than the sales load) that exceed $.03 per Common share. The Fund's share of
Common share offering costs ($843,000) were recorded as a reduction of the
proceeds from the sale of the Common shares.
Costs incurred by the Fund in connection with its offering of Taxable Auctioned
Preferred shares ($2,013,664) were recorded as a reduction to paid-in surplus.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual amounts may differ from those estimates.
2. FUND SHARES
During the two months ended December 31, 2003, 2,658 Common shares were issued
to shareholders due to reinvestment of distributions.
During the fiscal year ended October 31, 2003, 24,199 Common shares were issued
to shareholders due to reinvestment of distributions.
During the period November 15, 2001 (commencement of operations) through October
31, 2002, 28,100,000 Common shares and 6,880 Taxable Auctioned Preferred shares
were sold. In addition, 2,556 Common shares were issued to shareholders due to
reinvestment of distributions during the period November 15, 2001 (commencement
of operations) through October 31, 2002.
3. SECURITIES TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
two months ended December 31, 2003, aggregated $22,019,073 and $14,771,752,
respectively.
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to timing differences in recording income and in recognizing
certain gains and losses on security transactions.
At December 31, 2003, the cost of investments was as follows:
--------------------------------------------------------------------------------
Cost of investments $563,481,797
================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
and interest rate swap transactions at December 31, 2003, were as follows:
-------------------------------------------------------------------------------
Gross unrealized:
Appreciation $135,456,388
Depreciation (8,158,722)
-------------------------------------------------------------------------------
Net unrealized appreciation of investments and interest
rate swap transactions $127,297,666
===============================================================================
15
Notes to
FINANCIAL STATEMENTS (continued)
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2003, were as follows:
--------------------------------------------------------------------------------
Undistributed net ordinary income * $--
Undistributed net long-term capital gains --
================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
The tax character of distributions paid during the fiscal years ended December
31, 2003, October 31, 2003 and October 31, 2002, was designated for purposes of
the dividends paid deduction as follows:
FOR THE TWO MONTHS ENDED
DECEMBER 31, 2003
--------------------------------------------------------------------------------
Distributions from net ordinary income * $3,904,970
Distributions from net long-term capital gains 2,435,010
Tax return of capital 3,717,296
================================================================================
FISCAL YEAR ENDED OCTOBER 31, 2003
--------------------------------------------------------------------------------
Distributions from net ordinary income * $33,787,266
Distributions from net long-term capital gains 7,156,788
Tax return of capital 1,129,210
================================================================================
FISCAL YEAR ENDED OCTOBER 31, 2002
--------------------------------------------------------------------------------
Distributions from net ordinary income * $25,313,542
Distributions from net long-term capital gains 5,722,287
================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
The Fund designated as a long-term capital gain dividend, pursuant to Internal
Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and
profits of the Fund related to net capital gain to zero for the tax years ended
December 31, 2003, October 31, 2003 and October 31, 2002, respectively.
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, at the rates set forth below, which
are based upon the Fund's average daily managed assets. "Managed assets" means
the average daily net assets of the Fund including assets attributable to
Taxable Auctioned Preferred shares and the principal amount of borrowings, if
any.
AVERAGE DAILY MANAGED ASSETS MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $500 million .9000%
For the next $500 million .8750
For the next $500 million .8500
For the next $500 million .8250
For Managed Assets over $2 billion .8000
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Security Capital Research & Management
Incorporated ("Security Capital"), under which Security Capital manages the
investment portfolio of the Fund. Security Capital is compensated for its
services to the Fund from the management fee paid to the Adviser.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates.
16
For the first ten years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
NOVEMBER 30, NOVEMBER 30,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond November 30, 2011.
Subadvisor Acquisition
On November 24, 2003, Banc One Investment Advisors Corporation, an indirect,
wholly-owned subsidiary of Bank One Corporation acquired Security Capital.
Pursuant to the Investment Company Act of 1940, the change in ownership of
Security Capital caused the existing sub-advisory agreement to terminate, and
shareholders of the Fund were required to approve a new subadvisory agreement
with Security Capital. At the Fund's annual shareholder meeting on January 20,
2004, shareholders approved the new sub-advisory agreement.
On January 14, 2004 Bank One Corporation and J.P. Morgan Chase & Co. ("J.P.
Morgan") announced that they have agreed to merge in a strategic business
combination. The proposed merger is subject to approval of shareholders of Bank
One Corp. and J.P. Morgan and approval of U.S. federal and state and foreign
regulatory authorities. The transaction is expected to occur in mid-2004. In the
event that the merger between Bank One Corp. and J.P. Morgan is deemed a change
in control of the Sub-Adviser, shareholder approval of a new subadvisory
agreement will be necessary.
6. SUBSEQUENT EVENT - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Fund declared a dividend distribution of $.1150 per Common share which was
paid on February 2, 2004, to shareholders of record on January 15, 2004.
17
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
Investment Operations
-----------------------------------------------------------------
Distributions Distributions
from Net from
Investment Capital
Income to Gains to
Beginning Net Taxable Taxable
Common Realized/ Auctioned Auctioned
Share Net Unrealized Preferred Preferred
Net Asset Investment Investment Share- Share-
Value Income(a) Gain (Loss) holders+ holders+ Total
==================================================================================================
11/01/03-12/31/03 $17.30 $ .12 $1.38 $ (.01) $ -- $1.49
11/01/02-10/31/03 13.56 .85 4.38 (.05) (.02) 5.16
11/15/01-10/31/02 14.33 1.02 (.46) (.07) (.02) .47
==================================================================================================
Less Distributions Total Returns
------------------------------------------- -----------------------
Offering
Costs and
Net Taxable Based
Investment Capital Auctioned Ending on
Income to Gains to Tax Preferred Common Based Common
Common Common Return Share Share Ending on Share Net
Share- Share- of Underwriting Net Asset Market Market Asset
holders holders Capital Total Discounts Value Value Value** Value**
===================================================================================================================================
11/01/03-12/31/03 $(.01) $(.08) $(.13) $ (.22) $ -- $18.57 $18.73 6.49% 8.69%
11/01/02-10/31/03 (.97) (.41) (.04) (1.42) -- 17.30 17.81 35.40 39.80
11/15/01-10/31/02 (.89) (.25) -- (1.14) (.10) 13.56 14.40 3.30 2.09
===================================================================================================================================
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
------------------------------ -------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
================================================================================================================
11/01/03-12/31/03 $522,576 2.31%* 4.07%* 1.91%* 4.47%* 2%
11/01/02-10/31/03 486,814 2.51 5.17 2.09 5.59 26
11/15/01-10/31/02 381,290 2.12* 6.71* 1.72* 7.11* 37
================================================================================================================
Cumulative Taxable Auctioned
Preferred at End of Period
-------------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
===============================================================
11/01/03-12/31/03 $172,000 $25,000 $100,956
11/01/02-10/31/03 172,000 25,000 95,758
11/15/01-10/31/02 172,000 25,000 80,420
===============================================================
(a) Per share Net Investment Income is calculated using the average daily
shares method.
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Common Share Net Asset
Value is the combination of reinvested dividend income at net asset value,
reinvested capital gains distributions at net asset value, if any, and
changes in Common share net asset value per share. Total returns are not
annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Taxable Auctioned
Preferred shareholders; income ratios reflect income earned on assets
attributable to Taxable Auctioned Preferred shares. Each Ratio of Expenses
to Average Net Assets Applicable to Common Shares and each Ratio of Net
Investment Income to Average Net Assets Applicable to Common Shares
includes the effect of the net interest expense paid on interest rate swap
transactions as follows:
11/01/03 - 12/31/03 .91*
11/01/02 - 10/31/03 1.03
11/15/01 - 10/31/02 .68*
See accompanying notes to financial statements.
18-19 SPREAD
Trustees
AND OFFICERS
The management of the Fund, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board of
Trustees of the Fund. The number of trustees of the Fund is currently set at
twelve. None of the trustees who are not "interested" persons of the Fund has
ever been a trustee or employee of, or consultant to, Nuveen or its affiliates.
The names and business addresses of the trustees and officers of the Fund, their
principal occupations and other affiliations during the past five years, the
number of portfolios each oversees and other directorships they hold are set
forth below.
NUMBER OF
PORTFOLIOS
POSITION(S) IN FUND
HELD YEAR FIRST PRINCIPAL OCCUPATION(S) COMPLEX
NAME, BIRTHDATE WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN
AND ADDRESS THE FUND APPOINTED(2) DURING PAST 5 YEARS BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
TRUSTEE WHO IS AN INTERESTED PERSON OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger (1) Chairman 1994 Chairman and Director (since 1996) of Nuveen 143
3/28/49 of the Investments, Inc. and Nuveen Investments, LLC;
333 W. Wacker Drive Board and Director (since 1992) and Chairman (since 1996) of
Chicago, IL 60606 Trustee Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp.; Chairman and Director (since 1997)
of Nuveen Asset Management, Inc.; Director (since 1996)
of Institutional Capital Corporation; Chairman and Director
(since 1999) of Rittenhouse Asset Management, Inc.;
Chairman of Nuveen Investments Advisers Inc. (since 2002).
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
William E. Bennett Trustee 2001 Private Investor; previously, President and Chief Executive 143
10/16/46 Officer, Draper & Kramer, Inc., a private company that
333 W. Wacker Drive handles mortgage banking, real estate development, pension
Chicago, IL 60606 advisory and real estate management (1995-1998). Prior
thereto, Executive Vice President and Chief Credit Officer of
First Chicago Corporation and its principal subsidiary, The
First National Bank of Chicago.
------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Trustee 1997 Private Investor and Management Consultant. 143
8/22/40
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown Trustee 1993 Retired (since 1989) as Senior Vice President of The Northern 143
7/29/34 Trust Company; Director, Community Advisory Board for
333 W. Wacker Drive Highland Park and Highwood, United Way of the North Shore
Chicago, IL 60606 (since 2002).
------------------------------------------------------------------------------------------------------------------------------------
Jack B. Evans Trustee 1999 President, The Hall-Perrine Foundation, a private philanthropic 143
10/22/48 corporation (since 1996); Director, Alliant Energy; Director and
333 W. Wacker Drive Vice Chairman, United Fire & Casualty Company; Director,
Chicago, IL 60606 Federal Reserve Bank of Chicago; formerly, President and Chief
Operating Officer, SCI Financial Group, Inc., a regional financial
services firm.
------------------------------------------------------------------------------------------------------------------------------------
Anne E. Impellizzeri Trustee 1994 Retired, formerly, Executive Director (since 1998) of Manitoga/ 143
1/26/33 The Russel Wright Design Center; prior thereto, President and
333 W. Wacker Drive Chief Executive Officer of Blanton-Peale Institute (since 1990);
Chicago, IL 60606 prior thereto, Vice President, Metropolitan Life Insurance Co.
------------------------------------------------------------------------------------------------------------------------------------
William L. Kissick Trustee 1992 Professor Emeritus, School of Medicine and the Wharton 143
7/29/32 School of Management and former Chairman, Leonard Davis
333 W. Wacker Drive Institute of Health Economics, University of Pennsylvania;
Chicago, IL 60606 Adjunct Professor, Health Policy and Management, Yale University.
20
NUMBER OF
PORTFOLIOS
POSITION(S) IN FUND
HELD YEAR FIRST PRINCIPAL OCCUPATION(S) COMPLEX
NAME, BIRTHDATE WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN
AND ADDRESS THE FUND APPOINTED(2) DURING PAST 5 YEARS BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
Thomas E. Leafstrand Trustee 1992 Retired; previously, Vice President in charge of Municipal 143
11/11/31 Underwriting and Dealer Sales at The Northern Trust
333 W. Wacker Drive Company.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Peter R. Sawers Trustee 1991 Adjunct Professor of Business and Economics, University of 143
4/3/33 Dubuque, Iowa; formerly (1991-2000) Adjunct Professor, Lake
333 W. Wacker Drive Forest Graduate School of Management, Lake Forest, Illinois;
Chicago, IL 60606 prior thereto, Executive Director, Towers Perrin Australia, a
management consulting firm; Chartered Financial Analyst;
Certified Management Consultant; Director, Executive
Service Corps of Chicago, a not-for-profit organization.
------------------------------------------------------------------------------------------------------------------------------------
William J. Schneider Trustee 1997 Senior Partner and Chief Operating Officer, Miller-Valentine 143
9/24/44 Group, Vice President, Miller-Valentine Realty, a construction
333 W. Wacker Drive company; Chair, MiamiValley Hospital; Chair, Dayton
Chicago, IL 60606 Development Coalition; formerly, Member, Community
Advisory Board, National City Bank, Dayton, Ohio and
Business Advisory Council, Cleveland Federal Reserve Bank.
------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Trustee 1997 Executive Director, Gaylord and Dorothy Donnelley Foundation 143
12/29/47 (since 1994); prior thereto, Executive Director, Great Lakes
333 W. Wacker Drive Protection Fund (1990-1994).
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Sheila W. Wellington Trustee 1994 Clinical Professor of Management, Stern/NYU Business School 143
2/24/32 (since 2003); formerly, President (1993-2003) of Catalyst (a
333 W. Wacker Drive not-for-profit organization focusing on women's leadership
Chicago, IL 60606 development in business and the professions).
NUMBER OF
PORTFOLIOS
POSITION(S) IN FUND
HELD YEAR FIRST COMPLEX
NAME, BIRTHDATE WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS THE FUND APPOINTED(3) DURING PAST 5 YEARS BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant Secretary 143
9/9/56 Administrative and Associate General Counsel, formerly, Vice President
333 W. Wacker Drive Officer and Assistant General Counsel of Nuveen Investments, LLC;
Chicago, IL 60606 Managing Director (since 2002), General Counsel and
Assistant Secretary, formerly, Vice President of Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp.;
Managing Director (since 2002), Assistant Secretary and
Associate General Counsel, formerly, Vice President (since
2000), of Nuveen Asset Management, Inc.; Assistant
Secretary of Nuveen Investments, Inc. (since 1994);
Assistant Secretary of NWQ Investment Management
Company, LLC (since 2002); Vice President and
Assistant Secretary of Nuveen Investments Advisers Inc.
(since 2002); Managing Director, Associate General
Counsel and Assistant Secretary of Rittenhouse Asset
Management, Inc. (since 2003); Chartered
Financial Analyst.
21
Trustees
AND OFFICERS (CONTINUED)
NUMBER OF
PORTFOLIOS
POSITION(S) IN FUND
HELD YEAR FIRST COMPLEX
NAME, BIRTHDATE WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS THE FUND APPOINTED(3) DURING PAST 5 YEARS BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice 2000 Vice President (since 2002), formerly, Assistant 143
2/3/66 President Vice President (since 2000), previously, Associate of
333 W. Wacker Drive and Assistant Nuveen Investments, LLC.
Chicago, IL 60606 Secretary
------------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice 1999 Vice President of Nuveen Investments, LLC (since 1999), 143
11/28/67 President prior thereto, Assistant Vice President (since 1997); Vice
333 W. Wacker Drive and Treasurer President and Treasurer of Nuveen Investments, Inc. (since
Chicago, IL 60606 1999); Vice President and Treasurer of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp. (since 1999); Vice
President and Treasurer of Nuveen Asset Management,
Inc. (since 2002) and of Nuveen Investments Advisers
Inc. (since 2002); Assistant Treasurer of NWQ Investment
Management Company, LLC (since 2002); Chartered
Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Susan M. DeSanto Vice 2001 Vice President of Nuveen Advisory Corp. (since 2001); 143
9/8/54 President previously, Vice President of Van Kampen Investment
333 W. Wacker Drive Advisory Corp. (since 1998); Vice President of Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (since 2002); prior thereto,
Assistant Vice President of Van Kampen Investment
Advisory Corp. (since 1994).
------------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice 2000 Vice President (since 2002) and Assistant General Counsel 143
9/24/64 President (since 1998); formerly, Assistant Vice President (since 1998)
333 W. Wacker Drive and Secretary of Nuveen Investments, LLC; Vice President (since 2002)
Chicago, IL 60606 and Assistant Secretary (since 1998), formerly Assistant
Vice President of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.
------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice 1998 Managing Director (since 2003), formerly, Vice President (since 143
10/24/45 President 1998) of Nuveen Investments, LLC; Vice President (since 1998)
333 W. Wacker Drive of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice 1995 Managing Director (since 2002) of Nuveen Investments, 143
3/2/64 President LLC; Managing Director (since 2001), formerly Vice
333 W. Wacker Drive President of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (since 1995); Managing
Director of Nuveen Asset Management, Inc. (since 2001);
Vice President of Nuveen Investment Advisers Inc.
(since 2002); Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice 1998 Vice President (since 1993) and Funds Controller (since 143
5/31/54 President 1998) of Nuveen Investments, LLC and Vice President and
333 W. Wacker Drive and Controller Funds Controller (since 1998) of Nuveen Investments, Inc.;
Chicago, IL 60606 Certified Public Accountant.
22
NUMBER OF
PORTFOLIOS
POSITION(S) IN FUND
HELD YEAR FIRST COMPLEX
NAME, BIRTHDATE WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS THE FUND APPOINTED(3) DURING PAST 5 YEARS BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice 2000 Vice President (since 2000) of Nuveen Investments, LLC, 143
3/22/63 President previously Assistant Vice President (since 1999); prior
333 W. Wacker Drive thereto, Associate of Nuveen Investments, LLC; Certified
Chicago, IL 60606 Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice 2002 Vice President (since 1999), previously, Assistant Vice 143
8/27/61 President President (since 1993) of Nuveen Investments, LLC.
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice 1988 Vice President, Assistant Secretary and Assistant General 143
7/27/51 President Counsel of Nuveen Investments, LLC; Vice President and
333 W. Wacker Drive and Assistant Assistant Secretary of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Secretary Institutional Advisory Corp.; Assistant Secretary of Nuveen
Investments, Inc. and (since 1997) Nuveen Asset Management,
Inc.; Vice President (since 2000), Assistant Secretary and
Assistant General Counsel (since 1998) of Rittenhouse Asset
Management, Inc.; Vice President and Assistant Secretary of
Nuveen Investments Advisers Inc. (since 2002); Assistant
Secretary of NWQ Investment Management Company, LLC
(since 2002).
------------------------------------------------------------------------------------------------------------------------------------
Edward F. Neild, IV Vice 1996 Managing Director (since 2002) of Nuveen Investments, 143
7/7/65 President LLC; Managing Director (since 1997), formerly Vice
333 W. Wacker Drive President (since 1996) of Nuveen Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional Advisory Corp.; Managing Director
of Nuveen Asset Management, Inc. (since 1999).
Chartered Financial Analyst.
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, because he is an officer and trustee of the
Adviser.
(2) Trustees serve a one-year term until his/her successor is elected. The year
first elected or appointed represents the year in which the Trustee was
first elected or appointed to any fund in the Nuveen Complex.
(3) Officers serve a one-year term through July 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.
23
Build Your Wealth
AUTOMATICALLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of shares may increase before purchases
are completed, the average purchase price per share may exceed the market price
at the time of valuation, resulting in the acquisition of fewer shares than if
the dividend or distribution had been paid in shares issued by the Fund. A pro
rata portion of any applicable brokerage commissions on open market purchases
will be paid by Plan participants. These commissions usually will be lower than
those charged on individual transactions.
FLEXIBILITY
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
24
Fund
INFORMATION
BOARD OF TRUSTEES
William E. Bennett
Robert P. Bremner
Lawrence H. Brown
JackB. Evans
Anne E. Impellizzeri
William L. Kissick
Thomas E. Leafstrand
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Sheila W. Wellington
FUND MANAGER
Nuveen Institutional
Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
SUBADVISOR
Security Capital Research &
Management Incorporated
11 South LaSalle Street
Chicago, IL 60603
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, IL
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (i) without
charge, upon request, by calling Nuveen Investments at (800) 257-8787; and (ii)
on the Commission's website at http://www.sec.gov.
QUALIFIED DIVIDEND TAX DISCLOSURE
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during the calendar year ended
December 31, 2003. For corporate shareholders none of the distributions qualify
for the dividend received deduction. Certain dividends paid by the Fund may be
subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax
Relief Reconciliation Act of 2003. The Fund intends to designate up to a maximum
of 9.45% of the ordinary income as taxed at a maximum of 15%.
GLOSSARY OF TERMS USED IN THIS REPORT
Average Annual Total Return: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return (including change in NAV and reinvested dividends) that
would have been necessary on an annual basis to equal the investment's actual
performance over the time period being considered.
Net Asset Value (NAV): A fund's NAV is calculated by subtracting the liabilities
of the fund from its total assets and then dividing the remainder by the number
of shares outstanding. Fund NAVs are calculated at the end of each business day.
---------
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period ended December 31, 2003. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
25
Serving Investors
FOR GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
Managing $90 billion in assets, Nuveen Investments offers access to
a number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in tax-free investments; NWQ, a leader in value-style
equities; Rittenhouse, a leader in growth-style equities; and Symphony, a
leading institutional manager of market-neutral alternative investment
portfolios.
To learn more about the products and services Nuveen Investments offers and for
a prospectus, where applicable, talk to your financial advisor, or call us at
(800) 257-8787. Please read the information carefully before you invest.
Distributed by
NUVEEN INVESTMENTS, LLC | 333 West Wacker Drive | Chicago, Illinois 60606
| www.nuveen.com
EAN-A-1203D
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. The registrant has posted such code of
ethics on its website at www.nuveen.com/etf.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of directors has 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 expert is William E. Bennett, who is "independent" for purposes of
Item 3 of Form N-CSR.
Mr. Bennett was formerly Executive Vice President and Chief Credit Officer of
First Chicago Corporation and its principal subsidary, The First National Bank
of Chicago. As part of his role as Chief Credit Officer, Mr. Bennett set policy
as to accrual of assets/loans; designated performing/non-performing assets; set
the level of reserves against the credit portfolio; and determined the carrying
value of credit related assets and exposure. Among other things, Mr. Bennett was
also responsible for the oversight of the internal analysis function including
setting ground rules for the review and preparation of financial analysis and
financial statements for use in making credit and risk decisions for clients.
Mr. Bennett has significant experience reviewing, analyzing and evaluating
financial statements of domestic and international companies in a variety of
industries with complex accounting issues.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NUVEEN REAL ESTATE INCOME FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years and
more recent stub period. For engagements with Ernst & Young, LLP entered into on
or after May 6, 2003, the Audit Committee approved in advance all audit services
and non-audit services that Ernst & Young LLP provided to the Fund, 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 pre-approval
exception for services provided directly to the Fund 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 fund during the fiscal year in which
the services are provided; (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 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
----------------------- --------------------- -------------------- --------------------- --------------------
Audit Fees Billed Audit-Related Fees Tax Fees Billed to All Other Fees
Fiscal Year Ended to Fund Billed to Fund Fund Billed to Fund
----------------------- --------------------- -------------------- --------------------- --------------------
December 31, 2003* $6,300 $0 $0 $850
----------------------- --------------------- -------------------- --------------------- --------------------
Percentage approved N/A 0% 0% 0%
pursuant to
pre-approval
exception
----------------------- --------------------- -------------------- --------------------- --------------------
October 31, 2003 $15,677 $0 $10,170 $3,250
----------------------- --------------------- -------------------- --------------------- --------------------
Percentage approved N/A N/A N/A N/A
pursuant to
pre-approval exception
----------------------- --------------------- -------------------- --------------------- --------------------
October 31, 2002 $11,004 $0 234 $775
----------------------- --------------------- -------------------- --------------------- --------------------
Percentage approved N/A N/A N/A N/A
pursuant to
pre-approval exception
----------------------- --------------------- -------------------- --------------------- --------------------
*Nuveen Real Estate Income Fund changed its fiscal year end from October 31 to
December 31, therefore, these numbers represent the period 11/1/03-12/31/03.
The above "Tax Fees" were billed for professional services for tax advice, tax
compliance and tax planning. The "Other Fees" were billed for agreed
upon procedures for the FundPreferred Shares.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following table shows the amount of fees billed by Ernst & Young LLP to
Nuveen Institutional Advisory Corp. ("NIAC" or the "Adviser"), and any entity
controlling, controlled by or under common control with NIAC ("Control
Affiliate") 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 and for the
more recent stub period.
The table also shows the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to Adviser and any
Affiliated Fund Service Provider
1
(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 Ernst &
Young 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 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 audit is completed.
----------------------- --------------------- -------------------- ---------------------
Fiscal Year Ended Audit-Related Fees Tax Fees Billed to All Other Fees
Billed to Adviser Adviser and Billed to Adviser
and Affiliated Fund Affiliated Fund and Affiliated Fund
Service Providers Service Providers Service Providers
----------------------- --------------------- -------------------- ---------------------
December 31, 2003* $0 $0 $0
----------------------- --------------------- -------------------- ---------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
----------------------- --------------------- -------------------- ---------------------
October 31, 2003 $0 $0 $0
----------------------- --------------------- -------------------- ---------------------
Percentage approved N/A N/A N/A
pursuant to
pre-approval exception
----------------------- --------------------- -------------------- ---------------------
October 31, 2002 $0 $0 $0
----------------------- --------------------- -------------------- ---------------------
Percentage approved N/A N/A N/A
pursuant to
pre-approval exception
----------------------- --------------------- -------------------- ---------------------
*Nuveen Real Estate Income Fund changed its fiscal year end from October 31 to
December 31.
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years and more recent stub period for
non-audit services. For engagements entered into on or after May 6, 2003, the
Audit Committee is required to pre-approve non-audit services that Ernst & Young
LLP provides to the Adviser and any Affiliated Fund Service Provider, if the
engagement relates directly to the Fund's operations and financial reporting
(except for those subject to the de minimis exception described above). The
Audit Committee requested and received information from Ernst & Young LLP about
any non-audit services that Ernst & Young 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 Ernst & Young LLP's
independence.
2
----------------------- --------------------- -------------------- --------------------- --------------------
Fiscal Year Ended Total Non-Audit Total Non-Audit Total Non-Audit Total of (A), (B)
Fees Billed to Fund Fees billed to Fees billed to and (C)
(A) Adviser and Adviser and
Affiliated Fund Affiliated Fund
Service Providers Service Providers
(engagements (all other
related directly engagements)
to the operations (C)
and financial
reporting of the
Fund)
(B)
----------------------- --------------------- -------------------- --------------------- --------------------
December 31, 2003* $850 $0 $0 $850
----------------------- --------------------- -------------------- --------------------- --------------------
October 31, 2003 $13,420 $0 $0 $13,420
----------------------- --------------------- -------------------- --------------------- --------------------
October 31, 2002 $1,009 $0 $0 $1,009
----------------------- --------------------- -------------------- --------------------- --------------------
*Nuveen Real Estate Income Fund changed its fiscal year end from October 31 to
December 31, therefore, these numbers represent the period 11/1/03-12/31/03.
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
Services 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 Services 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.
3
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
In the rare event that a municipal issuer held by the Fund were to issue a proxy
or that the Fund were to receive a proxy issued by a cash management security,
Nuveen Advisory Corp. (the "Adviser") would either engage an independent third
party to determine how the proxy should be voted or vote the proxy with the
consent, or based on the instructions, of the Fund's Board of Trustees or its
representative. In the case of a conflict of interest, the proxy would be
submitted to the applicable Fund's Board to determine how the proxy should be
voted. A member of the Adviser's legal department would oversee the
administration of the voting, and ensure that records were maintained in
accordance with Rule 204-2(c)(2) under the Investment Advisers Act of 1940 (17
CFR 275.204-2(c)(2)), reports were filed with the SEC on Form N-PX, and the
results were provided to the Board of Trustees and made available to
shareholders as required by applicable rules.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable at this time.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable at this time.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")(17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal half-year (the registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(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 posted on registrant's website at www.nuveen.com/etf.
(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 (17CFR 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
at this time.
(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 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Real Estate Income Fund
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: March 9, 2004
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(Principal Executive Officer)
Date: March 9, 2004
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(Principal Financial Officer)
Date: March 9, 2004
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.