Washington, D.C. 20549
Gifford R. Zimmerman
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.
Closed-End Funds
31 December 2019
Nuveen Closed-End Funds
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JRS
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Nuveen Real Estate Income Fund
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Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds annual and semi-annual
shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds website (www.nuveen.com), and you will be notified by mail each time a
report is posted and provided with a website link to access the report.
If you have already elected to receive shareholder reports electronically, you will not be
affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting the financial intermediary (such as a broker-dealer or bank) through
which you hold your Fund shares or, if you are a direct investor, by enrolling at www.nuveen.com/e-reports.
You may elect to receive all future shareholder reports
in paper free of charge at any time by contacting your financial intermediary or, if you are a direct investor, (i) by calling 800-257-8787 and selecting option #2 or (ii) by logging into your Investor Center account at
www.computershare.com/investor and clicking on Communication Preferences. Your election to receive reports in paper will apply to all funds held in your account with your financial intermediary or, if you are a direct investor, to all
your directly held Nuveen Funds and any other directly held funds within the same group of related investment companies.
Annual Report
IMPORTANT DISTRIBUTION NOTICE
for
Shareholders of the Nuveen Real Estate Income Fund (JRS)
Annual Shareholder Report for the period ending December 31, 2019
The Nuveen Real Estate Income Fund seeks to offer attractive cash flow to its shareholders, by converting the expected long-term total return potential of the
Funds investments in REITs into regular quarterly distributions. Following is a discussion of the Managed Distribution Policy the Fund uses to achieve this.
The Fund pays quarterly common share distributions that seek to convert the Funds expected long-term total return potential into regular cash flow. As a result,
the Funds regular common share distributions (presently $0.1900 per share) may be derived from a variety of sources, including:
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distributions from portfolio companies (REITs),
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realized capital gains or,
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possibly, returns of capital representing in certain cases unrealized capital appreciation.
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Such distributions are sometimes referred to as managed distributions. The Fund seeks to establish a distribution rate that roughly corresponds to the
Advisers projections of the total return that could reasonably be expected to be generated by the Fund over an extended period of time. The Adviser may consider many factors when making such projections, including, but not limited to,
long-term historical returns for the asset classes in which the Fund invests. As portfolio and market conditions change, the distribution amount and distribution rate on the Common Shares under the Funds Managed Distribution Policy could
change.
When it pays a distribution, the Fund provides holders of its Common Shares a notice of the estimated sources of the Funds distributions (i.e., what
percentage of the distributions is estimated to constitute ordinary income, short-term capital gains, long-term capital gains, and/or a non-taxable return of capital) on a year-to-date basis. It does this by posting the notice on its website
(www.nuveen.com/cef), and by sending it in written form.
You should not draw any conclusions about the Funds investment performance from the amount of this
distribution or from the terms of the Funds Managed Distribution Policy. The Funds actual financial performance will likely vary from month-to-month and from year-to-year, and there may be extended periods when the distribution rate will
exceed the Funds actual total returns. The Managed Distribution Policy provides that the Board may amend or terminate the Policy at any time without prior notice to Fund shareholders. There are presently no reasonably foreseeable circumstances
that might cause the Fund to terminate its Managed Distribution Policy.
Table of Contents
3
Chairs Letter to Shareholders
Dear Shareholders,
Financial
markets finished 2019 on a high note, despite the challenges of a weak start to the year, a slower global economy and heightened geopolitical risks. While global manufacturing languished, consumers remained resilient amid tight labor markets,
growing wages and tame inflation. Global business sentiment, however, was less optimistic due to trade frictions and weaker global demand. Across advanced economies growth in corporate profits and earnings was subdued in 2019. Nevertheless, the
Federal Reserves (Fed) pivot to easing monetary conditions, along with liquidity provided by other central banks around the world, provided confidence that the economic cycle could be extended. Additionally, the year ended with a reduction in
trade tensions and Brexit uncertainty, although the next phase of U.S.-China trade negotiations are expected to be more challenging and the U.K. has a relatively short transition window in which to redefine its relationship with the European Union.
We continue to anticipate muted economic growth and increased market volatility this year. The U.S. economy held steady in the second half of 2019, although growth
for the year overall moderated from 2018s pace. Consumer confidence remains underpinned by low unemployment and modest wage growth. Looser financial conditions, in part driven by the Feds three interest rate cuts in 2019, have revived
momentum in the housing market and should continue to encourage borrowing by consumers and businesses. Although consumer spending in Europe and Japan, like in the U.S., has remained supported by jobs growth and rising wages, economic growth there
appears more fragile. The COVID-19 coronavirus outbreak poses a new downside risk to the global economy, as disruptions to both demand and production ripple through global supply chains. We are closely monitoring the situation.
At Nuveen, we still see investment opportunities in the maturing economic environment, but we are taking a selective approach. If youre concerned about where the
markets are headed from here, we encourage you to work with your financial advisor to review your time horizon, risk tolerance and investment goals. On behalf of the other members of the Nuveen Fund Board, we look forward to continuing to earn your
trust in the months and years ahead.
Sincerely,
Terence J. Toth
Chair of the Board
February 21, 2020
4
Portfolio Managers Comments
Nuveen Real Estate Income Fund (JRS)
The Funds portfolio is managed by a team of real estate investment professionals at Security Capital Research & Management Incorporated (Security
Capital), a wholly-owned subsidiary of JPMorgan Chase & Company. Anthony R. Manno Jr., Kenneth D. Statz, Kevin W. Bedell and Nathan J. Gear, CFA, lead the team.
On September 3, 2019, Nathan J. Gear, CFA, was added as a portfolio manager on the Nuveen Real Estate Income Fund (JRS).
Here the portfolio management team reviews U. S. economic and financial markets, their management strategy and the performance of the Fund for the twelve-month
reporting period ended December 31, 2019.
What factors affected the U.S. economy and financial markets during the twelve-month reporting period ended
December 31, 2019?
The U.S. economy reached the tenth year of expansion since the previous recession ended in June 2009, marking the longest expansion in
U.S. history. In the fourth quarter of 2019, gross domestic product (GDP) grew at an annualized rate of 2.1%, according to the advance estimate by the Bureau of Economic Analysis. GDP measures the value of goods and services produced by
the nations economy less the value of the goods and services used up in production, adjusted for price changes. In the final months of the year, the economy was boosted by moderate consumer spending, along with positive contributions from
government spending and trade, which offset weakness in business investment. For 2019 as a whole, U.S. GDP grew 2.3%, a decline from 2.9% in 2018 and the slowest pace since 2016.
Consumer spending, the largest driver of the economy, remained well supported by low unemployment, wage gains and tax cuts. As reported by the Bureau of Labor
Statistics, the unemployment rate fell to 3.5% in December 2019 from 3.9% in December 2018 and job gains averaged around 176,000 per month for the past twelve months. As the jobs market has tightened, average hourly earnings grew at an annualized
rate of 2.9% in December 2019. However, inflation remained subdued. The Bureau of Labor Statistics said the Consumer Price Index (CPI) increased 2.3% over the twelve-month reporting period ended December 31, 2019 before seasonal adjustment.
Low mortgage rates and low inventory drove home prices moderately higher in this reporting period, despite declining new home sales and housing starts. The S&P
CoreLogic Case-Shiller U.S. National Home Price Index, which covers all
This material is not intended to be a recommendation or
investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances
of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investors objectives and circumstances and in consultation with his or her advisors.
Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as
recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those
anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Fund disclaims any obligation to update publicly or revise any forward-looking statements
or views expressed herein.
For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating
agencies: Standard & Poors (S&P), Moodys Investors Service (Moodys), Inc. or Fitch, Inc. (Fitch). This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies.
Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below investment grade ratings. Holdings designated N/R are not rated by these national rating agencies.
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.
5
Portfolio Managers Comments (continued)
nine U.S. census divisions, was up 3.5% year-over-year in November 2019 (most recent data
available at the time this report was prepared). The 10-City and 20-City Composites reported year-over-year increases of 2.0% and 2.6%, respectively.
As data pointed to slower momentum in the overall economy, the Federal Reserve (Fed) notably shifted its stance. Although the Fed had indicated in December 2018 that
there could be two more rate hikes in 2019, global growth concerns kept the central bank on the sidelines. As expected by the markets, the Fed left rates unchanged throughout the first half of 2019 while speculation increased that the Feds
next move would be a rate cut. At the July 2019, September 2019 and October 2019 policy committee meetings, the Fed announced a 0.25% cut to its main policy rate. Markets registered disappointment with the Feds explanation that the rate cuts
were a mid-cycle adjustment, rather than a prolonged easing period, and its signal that there would be no additional rate cuts in 2019. Also in the latter half of 2019, the Fed announced it would
stop shrinking its bond portfolio sooner than scheduled, as well as began buying short-term Treasury bills to help money markets operate smoothly and maintain short-term borrowing rates at low levels. Fed Chairman Powell emphasized that the Treasury
bill purchases were not a form of quantitative easing.
During the twelve-month reporting period, geopolitical news remained a prominent market driver. Tariff and
trade policy topped the list of concerns, most prominently the U.S.-China relations. After several rounds of talks, escalating rhetoric from both sides and a series of tariff increases, tensions appeared to ease in the later months of 2019. The U.S.
and China signaled their agreement on a partial trade deal, which included rolling back some tariffs, increasing Chinas purchases of U.S. agriculture products and the consideration of intellectual property, technology and financial services
rights. (Subsequent to the close of the reporting period, the phase one deal was signed on January 15, 2020.) While much of the focus remained on the U.S.-China relationship, trade spats between the U.S. and Mexico, the European
Union, Brazil and Argentina also arose throughout the period. More than a year after the three countries signed onto the U.S., Mexico and Canada Agreement (USMCA) trade deal, which replaces the North American Free Trade Agreement, the U.S. House of
Representatives approved the deal in December 2019 (and, subsequent to the close of the reporting period, the Senate voted in January 2020 to approve it). Global manufacturing and export data continued to show evidence of trade-related slumps, which
increased worries that the slowdown would spread into other segments of the global economy.
The Brexit saga also appeared to make a breakthrough by the end of 2019.
After former Prime Minister Theresa May was unable to secure a Brexit deal by the original March 29, 2019 deadline, she resigned as of June 7, 2019. When her successor, Boris Johnson, failed to meet the EUs first deadline extension
of October 31, 2019, the EU approved a flextension to January 31, 2020. A U.K. general election was scheduled for December 2019, wherein the Conservative Party won a large majority and bolstered Prime Minister Johnsons
mandate to get Brexit done. A few days later, the British Parliament passed the Brexit Bill. In Italy, investors worried about another potential budget clash between the eurosceptic coalition government and the EU. However, following the unexpected
resignation of the prime minister in August 2019, the newly formed coalition government appeared to take a less antagonistic stance. Europe also contended with the yellow vest protests in France, immigration policy concerns, Russian
sanctions and political risk in Turkey.
Elsewhere, anti-government protests erupted across Latin America, Hong Kong and Lebanon during 2019, and Venezuelas
economic and political crisis deepened. In Argentina, markets were shocked by the defeat of incumbent President Macri, prompting concerns about the economic policies favored by the incoming Fernandez administration. Brazils Bolsonaro
administration achieved a legislative win on pension reform and kept the economy on a path of modest growth. Europes traditional centrist parties lost seats in the May 2019 Parliamentary elections and populist parties saw marginal gains. The
ruling parties in India and South Africa maintained their majorities, where slower economic growth could complicate their respective reform mandates.
6
U.S. REITS rebounded from 2018 lows when U.S. real
estate investment trusts (REITs) common equities generated negative returns for the year. U.S. REITs were priced to generate highly attractive returns after a couple of lackluster years in an otherwise buoyant period for U.S. equities and private
real estate. To be sure, low and falling long-term interest rates during 2019 provided strong support for valuations, particularly against the backdrop of a healthy economy. The Wilshire U.S. Real Estate Securities Index ended the period up 25.79%.
What key strategies were used to manage the Fund during this twelve-month reporting period ended December 31, 2019?
The Funds investment objective is high current income and capital appreciation. The Fund is designed to invest at least 90% of its assets in income producing
common stocks, preferred stocks, convertible preferred stocks and debt securities issued by real estate companies, with at least 80% of its total assets invested in income producing equity securities issued by real estate investment trusts (REITs).
In managing the JRS portfolio, Security Capital seeks to maintain significant property type and geographic diversification while taking into account company credit
quality, sector, and security-type allocations. Investment decisions are based on a multi-layered analysis of the company, the real estate it owns, its management, and the relative price of the security, with a focus on securities that we believe
will be best positioned to generate sustainable income and potential price appreciation over the long-run. In addition to fundamental security research, the proportion of the Fund invested in common equity
versus preferred, fixed-income and cash investments is a key tactic we use to manage risk at a portfolio level. In general, in times of strong economic growth we increase the portfolio allocation to common equity. In less certain times, we tend to
increase our allocation toward preferred securities. As of December 31, 2019, the Fund was allocated 57.1% in common equity, 40.7% in preferreds and 2.2% in cash.
How did the Fund perform during this twelve-month reporting period ended December 31, 2019?
The table in the Performance Overview and Holding Summaries section of this report provides total returns for the one-year,
five-year and ten-year periods ended December 31, 2019. The Funds total returns on net asset value (NAV) are compared with the performance of a corresponding market index. For the twelve-month
reporting period ended December 31, 2019, JRS outperformed the Wilshire U.S. Real Estate Securities Index and its Blended Benchmark.
For common equity
investors in 2019, there were distinctive performance differences by property type with the underlying themes and influences reflecting company-specific factors, relative pricing and shifting investor expectations colored by macro-economic trends.
In this context, the Funds leading performance contributors relative to index by major property type in 2019 were the office, industrial and strip center
companies. Outperformance from the office companies was primarily centered on west coast focused companies. Lease and development economics continue to benefit from strong demand in primary west coast office markets and owners there are not burdened
with older buildings facing competition from new construction and creative redevelopment versus east coast/New York City offices in this segment. For the industrial segment, outperformance was driven by both the data center companies as well as the
traditional warehouse companies. Demand for data center assets and the associated operational expertise appears nearly inexhaustible. Traditional warehouse companies continue to see robust user demand, the result of a healthy economy and the
logistics demands of serving the booming online economy. While warehouse supply pipelines are active and a continued focus of wary investors, industrial markets have remained generally balanced particularly with the shift to more infill locations
closer to urban centers.
During the reporting period, the Funds relative performance was constrained by common equity investments in the hotel and
regional mall sectors, and an underweight in health care. Hotel companies have been volatile quarter-to-quarter with equity prices often moving with shifting sentiment
on the broader U.S. and global economies.
7
Portfolio Managers Comments (continued)
Investors appear increasingly focused on a number of corrosive factors for cash flow, notably
elevated levels of new hotel construction, wage and property tax pressures weighing on operating margins and the inability to acquire assets at accretive economics. The Funds cautious stance toward malls, as evidenced by its underweight, was
offset by poor performance by Taubman Centers, Inc. We believe the extremely high quality of Taubmans portfolio is not fully appreciated by the market. For the mall companies, investors have been highly cautious regarding the shifting
retailing landscape in the context of accelerating online sales and the associated shifts in strategy by retailers, including store closures and bankruptcies. In addition, gaining control and repurposing of department stores is a significant
challenge for mall companies, ballooning their capital budgets and stressing balance sheets, but with an opaque value proposition in terms of cash flow, growth and risk. Health care REIT performance was very sensitive to intermediate term moves in
interest rate levels and the underweight in the Fund was based on our forecast of fundamental value versus near-term price increases due to a decline in interest rates.
8
Fund Leverage
IMPACT OF THE FUNDS LEVERAGE STRATEGY ON PERFORMANCE
One important factor impacting the returns of the Funds common shares relative to its comparative benchmarks was the Funds use of leverage through bank
borrowings. The Fund uses leverage because our research has shown that, over time, leveraging provides opportunities for additional income. The opportunity arises when short-term rates that the Fund pays on its leveraging instruments are lower than
the interest the Fund earns on its portfolio securities that it has bought with the proceeds of that leverage. This has been particularly true in the recent market environment where short-term rates have been low by historical standards.
However, use of leverage can expose Fund common shares to additional price volatility. When the Fund uses leverage, the Funds common shares will experience a
greater increase in their net asset value if the securities acquired through the use of leverage increase in value, but will also experience a correspondingly larger decline in their net asset value if the securities acquired through leverage
decline in value, which will make the shares net asset value more volatile, and total return performance more variable, over time.
In addition, common share
income in levered funds will typically decrease in comparison to unlevered funds when short-term interest rates increase and increase when short-term interest rates decrease. In recent quarters, fund leverage expenses have generally tracked the
overall movement of short-term tax-exempt interest rates. While fund leverage expenses are somewhat higher than their all-time lows after the 2007-2009 financial crisis, which has contributed to a reduction in common share net income and long-term
total return potential, leverage nevertheless continues to provide the opportunity for incremental common share income. Management believes that the potential benefits from leverage continue to outweigh the associated increase in risk and volatility
previously described.
The Funds use of leverage had a positive impact on total return performance during this reporting period.
The Fund also continued to utilize forward starting interest rate swap contracts to partially hedge its future interest cost of leverage, which as mentioned previously,
is through the use of bank borrowings. The swap contracts impact on total return performance was negative during this reporting period.
As of December 31, 2019, the
Funds percentages of leverage are as shown in the accompanying table.
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JRS
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Effective Leverage*
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28.63
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%
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Regulatory Leverage*
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28.63
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%
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*
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Effective leverage is the Funds effective economic leverage, and includes both regulatory leverage and the leverage
effects of certain derivative and other investments in a Funds portfolio that increase the Funds investment exposure. Regulatory leverage consists of preferred shares issued or borrowings of the Fund. Both of these are part of the
Funds capital structure. The Fund, however, may from time to time borrow on a typically transient basis in connection with its day-to-day operations, primarily in connection with the need to settle portfolio trades. Such incidental borrowings
are excluded from the calculation of the Funds effective leverage ratio. Regulatory leverage is subject to asset coverage limits set forth in the Investment Company Act of 1940.
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THE FUNDS REGULATORY LEVERAGE
Bank Borrowings
As noted above, the Fund employs leverage through the use of bank borrowings. The Funds bank borrowing activities are as shown in the accompanying table.
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Current Reporting Period
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Subsequent to the Close of
the Reporting Period
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January 1, 2019
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Draws
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Paydowns
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December 31, 2019
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Average Balance
Outstanding
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Draws
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Paydowns
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February 27, 2020
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$126,000,000
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$5,500,000
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$
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$131,500,000
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$126,075,342
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$
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$
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$131,500,000
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Refer to Notes to Financial Statements, Note 8 Borrowing Arrangements for further details.
9
Common Share Information
DISTRIBUTION INFORMATION
The following 19(a) Notice presents the Funds
most current distribution information as of November 30, 2019 as required by certain exempted regulatory relief the Fund has received.
Because the ultimate tax
character of your distributions depends on the Funds performance for its entire fiscal year (which is the calendar year for the Fund) as well as certain fiscal year-end (FYE) tax adjustments, estimated distribution source information you
receive with each distribution may differ from the tax information reported to you on your Funds IRS Form 1099 statement.
DISTRIBUTION INFORMATION
AS OF NOVEMBER 30, 2019
This notice provides shareholders with information regarding fund distributions, as required by current securities laws. You
should not draw any conclusions about the Funds investment performance from the amount of this distribution or from the terms of the Funds Managed Distribution Policy.
The Fund may in certain periods distribute more than its income and net realized capital gains, and the Fund currently estimates that it has done so for the fiscal
year-to-date period. In such instances, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital
distribution does not necessarily reflect the Funds investment performance and should not be confused with yield or income.
The
amounts and sources of distributions set forth below are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Funds investment
experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax
purposes. More details about the Funds distributions and the basis for these estimates are available on www.nuveen.com/cef.
The following table provides
estimates of the Funds distribution sources, reflecting year-to-date cumulative experience through the latest month-end. The Fund attributes these estimates equally to each regular distribution throughout the year. Consequently, the estimated
information shown below is for the current distribution, and also represents an updated estimate for all prior months in the year.
Data as of
November 30, 2019
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Estimated Per Share Sources of Distribution1
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Estimated Percentage of the Distribution1
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JRS (FYE 12/31)
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Per Share
Distribution
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Net
Investment
Income
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Long-Term
Gains
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Short-Term
Gains
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Return of
Capital
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Net
Investment
Income
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Long-Term
Gains
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Short-Term
Gains
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Return of
Capital
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Current Quarter
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$0.1900
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$0.0533
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$0.1225
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$0.0062
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$0.0079
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28.1%
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64.5%
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3.3%
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4.2%
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Fiscal YTD
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$0.7600
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$0.2133
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$0.4902
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$0.0249
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$0.0317
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28.1%
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64.5%
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3.3%
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4.2%
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1
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Net investment income (NII) is a projection through the end of the current calendar quarter using actual data through the
stated month-end date above. Capital gain amounts are as of the stated date above. JRS owns REIT securities which attribute their distributions to various sources including NII, gains, and return of capital. The estimated per share sources above
include an allocation of the NII based on prior year attributions which can be expected to differ from the actual final attributions for the current year.
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10
The following table provides information regarding
JRS distributions and total return performance over various time periods. This information is intended to help you better understand whether returns for the specified time periods were sufficient to meet distributions.
Data as of November 30, 2019
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Annualized
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Cumulative
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JRS (FYE 12/31)
Inception Date
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Quarterly
Distribution
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Fiscal YTD
Distribution
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Net Asset
Value
(NAV)
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5-Year
Return
on NAV
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Fiscal YTD
Dist Rate
on NAV1
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Fiscal YTD
Return
on NAV
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Fiscal YTD
Dist Rate
on NAV1
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Nov 2001
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$0.1900
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$0.7600
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$11.40
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7.10%
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6.67%
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26.62%
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6.67%
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1
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As a percentage of 11/29/19 NAV.
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DISTRIBUTION INFORMATION AS OF DECEMBER 31, 2019
The following tables
provide information regarding the Funds common share distributions and total return performance for the fiscal year ended December 31, 2019. This information is intended to help you better understand whether the Funds returns for the
specified time period were sufficient to meet its distributions.
Data as of December 31, 2019
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Per Share Sources of Distribution
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Percentage of the Distribution
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JRS (FYE 12/31)
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Per Share
Distribution
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|
Net
Investment
Income
|
|
|
Long-Term
Gains
|
|
|
Short-Term
Gains
|
|
|
Return of
Capital1
|
|
|
Net
Investment
Income
|
|
|
Long-Term
Gains
|
|
|
Short-Term
Gains
|
|
|
Return of
Capital1
|
|
Fiscal YTD
|
|
|
$0.7600
|
|
|
|
$0.2719
|
|
|
|
$0.4167
|
|
|
|
$0.0714
|
|
|
|
$0.0000
|
|
|
|
35.78%
|
|
|
|
54.83%
|
|
|
|
9.39%
|
|
|
|
0.00%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized
|
|
JRS (FYE 12/31) Inception Date
|
|
Net Asset
Value (NAV)
|
|
|
1-Year
Return on NAV
|
|
|
5-Year
Return on NAV
|
|
|
Fiscal YTD
Dist Rate on NAV
|
|
Nov 2001
|
|
|
$11.35
|
|
|
|
28.18%
|
|
|
|
6.99%
|
|
|
|
6.70%
|
|
1
|
Return of Capital may represent unrealized gains, return of shareholders principal, or both. In certain
circumstances, all or a portion of the return of capital may be characterized as ordinary income under federal tax law. The actual tax characterization will be provided to shareholders on Form 1099-DIV shortly after calendar year-end.
|
CHANGE IN METHOD OF PUBLISHING NUVEEN CLOSED-END FUND DISTRIBUTION AMOUNTS
During November 2019, the Nuveen Closed-End Funds discontinued the practice of announcing Fund distribution amounts and timing via press release. Instead, information
about the Nuveen Closed-End Funds monthly and quarterly periodic distributions to shareholders are posted and can be found on Nuveens enhanced closed-end fund resource page, which is at www.nuveen.com/closed-end-fund-distributions, along
with other Nuveen closed-end fund product updates. Shareholders can expect regular distribution information to be posted on www.nuveen.com on the first business day of each month. To ensure that our shareholders have timely access to the latest
information, a subscribe function can be activated at this link here, or at this web page (www.nuveen.com/en-us/people/about-nuveen/for-the-media).
COMMON SHARE
REPURCHASES
During August 2019, the Funds Board of Trustees reauthorized an open-market share repurchase program, allowing the Fund to repurchase an
aggregate of up to approximately 10% of its outstanding shares.
11
Common Share Information
(continued)
As of December 31, 2019, and since the inception of the Funds repurchase program,
the Fund has cumulatively repurchased and retired common shares as shown in the accompanying table.
|
|
|
|
|
|
|
JRS
|
|
Common shares cumulatively repurchased and retired
|
|
|
0
|
|
Common shares authorized for repurchase
|
|
|
2,890,000
|
|
During the current reporting period, the Fund did not repurchase any of its outstanding shares.
OTHER COMMON SHARE INFORMATION
As of December 31, 2019, and during
the current reporting period, the Funds common share price was trading at a premium/(discount) to its common share NAV as shown in the accompanying table.
|
|
|
|
|
|
|
JRS
|
|
Common share NAV
|
|
|
$11.35
|
|
Common share price
|
|
|
$10.62
|
|
Premium/(Discount) to NAV
|
|
|
(6.43
|
)%
|
12-month average premium/(discount) to NAV
|
|
|
(6.10
|
)%
|
12
Risk Considerations and Investment Policy Updates
Risk Considerations
Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance
Corporation.
Nuveen Real Estate Income Fund (JRS)
Investing in
closed-end funds involves risk; principal loss is possible. There is no guarantee the Funds investment objectives will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. Real estate
investments may suffer due to economic downturns and changes in commercial real estate values, rents, property taxes, interest rates and tax laws. The Funds concentration in real estate may involve greater risk and volatility than
more diversified investments. Prices of equity securities may decline significantly over short or extended periods of time. Debt or fixed income securities such as those held by the Fund, are subject to market risk, credit risk,
interest rate risk, derivatives risk, liquidity risk, and income risk. As interest rates rise, bond prices fall. Leverage increases return volatility and magnifies the Funds potential return and its risks; there is no guarantee a
funds leverage strategy will be successful. For these and other risks such as preferred securities risk, see the Funds web page at www.nuveen.com/JRS.
Investment Policy Updates
Change in Investment Policy
The Fund has recently adopted the following policy regarding limits to investments in illiquid securities:
While there are no such limits imposed by applicable regulations, certain Nuveen Closed-End Funds formerly had investment policies that placed limits on a Funds
ability to invest in illiquid securities. All exchange-listed Nuveen Closed-End Funds now have no formal limit on their ability to invest in such illiquid securities, but the Funds portfolio management team will monitor such investments in the
regular, overall management of the Funds portfolio securities.
13
|
|
|
JRS
|
|
Nuveen Real Estate Income Fund
Performance Overview and Holding
Summaries as of December 31, 2019
|
Refer to the Glossary of Terms
Used in this Report for further definitions of terms used in this section.
Average Annual Total Returns as of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual
|
|
|
|
1-Year
|
|
|
5-Year
|
|
|
10-Year
|
|
JRS at Common Share NAV
|
|
|
28.18%
|
|
|
|
6.99%
|
|
|
|
12.56%
|
|
JRS at Common Share Price
|
|
|
34.80%
|
|
|
|
7.13%
|
|
|
|
12.04%
|
|
Wilshire U.S. Real Estate Securities Index (WILRESI)
|
|
|
25.79%
|
|
|
|
7.21%
|
|
|
|
12.11%
|
|
Blended Benchmark1
|
|
|
23.35%
|
|
|
|
7.08%
|
|
|
|
11.13%
|
|
Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not
reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses and assume reinvestment of distributions. Comparative index return information is
provided for the Funds shares at NAV only. Indexes are not available for direct investment.
Common Share Price Performance Weekly Closing Price
1
|
The Blended Benchmark consists of: 1) 60% Wilshire U.S. Real Estate Securities Index (WILRESI), 2) 40% Wells Fargo Hybrid
and Preferred Securities REIT Index (inception date 5/31/2007).
|
14
This data relates to the securities held in the
Funds portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.
For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poors Group,
Moodys Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment
grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Holdings designated N/R are not rated by these national rating agencies.
Fund Allocation
(% of net
assets)
|
|
|
|
|
Real Estate Investment Trust Common Stocks
|
|
|
79.7%
|
|
Real Estate Investment Trust Preferred Stocks
|
|
|
56.8%
|
|
Repurchase Agreements
|
|
|
3.1%
|
|
Other Assets Less Liabilities
|
|
|
0.5%
|
|
Net Assets Plus Borrowings
|
|
|
140.1%
|
|
Borrowings
|
|
|
(40.1)%
|
|
Net Assets
|
|
|
100%
|
|
Portfolio Credit Quality
(% of total
fixed-income securities)
|
|
|
|
|
A
|
|
|
13.5%
|
|
BBB
|
|
|
38.4%
|
|
BB or Lower
|
|
|
21.2%
|
|
N/R (not rated)
|
|
|
26.9%
|
|
Total
|
|
|
100%
|
|
Portfolio Composition
(% of
total investments)
|
|
|
|
|
Specialized
|
|
|
20.8%
|
|
Office
|
|
|
20.0%
|
|
Retail
|
|
|
19.1%
|
|
Residential
|
|
|
16.5%
|
|
Industrial
|
|
|
7.3%
|
|
Health Care
|
|
|
5.9%
|
|
Hotels, Restaurants & Leisure
|
|
|
5.0%
|
|
Diversified
|
|
|
3.2%
|
|
Repurchase Agreements
|
|
|
2.2%
|
|
Total
|
|
|
100%
|
|
Top Five Common Stock Issuers
(% of total investments)
|
|
|
|
|
Prologis Inc.
|
|
|
5.4%
|
|
Equinix Inc.
|
|
|
4.2%
|
|
Apartment Investment & Management Co.
|
|
|
3.4%
|
|
AvalonBay Communities Inc.
|
|
|
3.3%
|
|
Healthpeak Properties Inc.
|
|
|
3.2%
|
|
Top Five Preferred Stock Issuers
(% of
total investments)
|
|
|
|
|
Public Storage
|
|
|
5.5%
|
|
Taubman Centers Inc.
|
|
|
4.5%
|
|
Vornado Realty Trust
|
|
|
3.6%
|
|
Highwoods Properties Inc.
|
|
|
3.5%
|
|
American Homes 4 Rent
|
|
|
2.8%
|
|
15
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
Nuveen Real Estate Income Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Nuveen Real Estate Income Fund (the Fund), including the portfolio of investments, as of
December 31, 2019, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the
related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights
present fairly, in all material respects, the financial position of the Fund as of December 31, 2019, the results of its operations and cash flows for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting
principles.
Basis for Opinion
These financial statements and financial
highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of
the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements and financial highlights. Such procedures also included confirmation of securities owned as of December 31, 2019, by correspondence with custodians and brokers or other appropriate auditing procedures. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable
basis for our opinion.
/s/ KPMG LLP
We have served as the
auditor of one or more Nuveen investment companies since 2014.
Chicago, Illinois
February 27, 2020
16
|
|
|
JRS
|
|
Nuveen Real Estate Income Fund
Portfolio of Investments December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Description (1)
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
|
|
|
|
|
|
LONG-TERM INVESTMENTS 136.5% (97.8% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
REAL ESTATE INVESTMENT TRUST COMMON STOCKS 79.7% (57.1% of Total
Investments)
|
|
|
|
|
|
|
|
|
|
|
Health Care 8.1% (5.8% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
430,110
|
|
|
Healthpeak Properties Inc., (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,825,892
|
|
|
142,070
|
|
|
Welltower Inc., (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,618,484
|
|
|
|
|
|
Total Health Care
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,444,376
|
|
|
|
|
|
|
|
|
Hotels, Restaurants & Leisure 3.6% (2.6% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
419,220
|
|
|
DiamondRock Hospitality Co
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,644,957
|
|
|
389,945
|
|
|
Host Hotels & Resorts Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,233,480
|
|
|
|
|
|
Total Hotels, Restaurants & Leisure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,878,437
|
|
|
|
|
|
|
|
|
|
|
Industrial 7.5% (5.4% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,473
|
|
|
Prologis Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,644,803
|
|
|
|
|
|
|
|
|
|
|
Office 16.1% (11.5% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
Alexandria Real Estate Equities Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,310,600
|
|
|
75,200
|
|
|
Boston Properties Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,367,072
|
|
|
288,320
|
|
|
Brandywine Realty Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,541,040
|
|
|
51,339
|
|
|
Cousins Properties Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,115,167
|
|
|
134,195
|
|
|
Douglas Emmett Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,891,161
|
|
|
287,245
|
|
|
Hudson Pacific Properties Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,814,774
|
|
|
83,665
|
|
|
SL Green Realty Corp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,687,140
|
|
|
|
|
|
Total Office
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,726,954
|
|
|
|
|
|
|
|
|
|
|
Residential 18.4% (13.2% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519,615
|
|
|
American Homes 4 Rent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,619,109
|
|
|
298,494
|
|
|
Apartment Investment & Management Co., (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,417,215
|
|
|
72,013
|
|
|
AvalonBay Communities Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,101,126
|
|
|
97,750
|
|
|
Equity Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,909,930
|
|
|
279,790
|
|
|
Invitation Homes Inc., (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,385,307
|
|
|
|
|
|
Total Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,432,687
|
|
|
|
|
|
|
|
|
|
|
Retail 8.8% (6.3% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,845
|
|
|
Regency Centers Corp., (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,308,661
|
|
|
521,305
|
|
|
Retail Properties of America Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,985,487
|
|
|
64,714
|
|
|
Simon Property Group Inc., (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,639,797
|
|
|
158,665
|
|
|
Weingarten Realty Investors, (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,956,695
|
|
|
|
|
|
Total Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,890,640
|
|
|
|
|
|
|
|
|
|
|
Specialized 17.2% (12.3% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,165
|
|
|
CoreSite Realty Corp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,848,740
|
|
|
335,845
|
|
|
CubeSmart
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,572,400
|
|
|
86,720
|
|
|
Digital Realty Trust Inc., (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,383,853
|
|
|
32,660
|
|
|
Equinix Inc., (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,063,642
|
|
|
97,560
|
|
|
Life Storage Inc., (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,563,797
|
|
|
|
|
|
Total Specialized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,432,432
|
|
|
|
|
|
Total Real Estate Investment Trust Common Stocks
(cost $201,726,964)
|
|
|
|
261,450,329
|
|
|
|
|
|
|
|
Shares
|
|
|
Description (1)
|
|
Coupon
|
|
|
|
|
|
Ratings (3)
|
|
|
Value
|
|
|
|
|
|
|
|
REAL ESTATE INVESTMENT TRUST PREFERRED STOCKS 56.8% (40.7% of Total
Investments)
|
|
|
|
|
|
|
|
|
|
|
Diversified 4.5% (3.2% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,200
|
|
|
Armada Hoffler Properties Inc.
|
|
|
6.750%
|
|
|
|
|
|
|
|
N/R
|
|
|
$
|
89,824
|
|
|
122,845
|
|
|
PS Business Parks Inc., (2)
|
|
|
4.875%
|
|
|
|
|
|
|
|
Baa2
|
|
|
|
3,045,328
|
|
|
75,665
|
|
|
PS Business Parks Inc.
|
|
|
5.200%
|
|
|
|
|
|
|
|
Baa2
|
|
|
|
1,943,077
|
|
|
4,585
|
|
|
PS Business Parks Inc.
|
|
|
5.200%
|
|
|
|
|
|
|
|
BBB
|
|
|
|
118,201
|
|
|
72,945
|
|
|
PS Business Parks Inc.
|
|
|
5.250%
|
|
|
|
|
|
|
|
BBB
|
|
|
|
1,903,865
|
|
|
296,257
|
|
|
VEREIT Inc.
|
|
|
6.700%
|
|
|
|
|
|
|
|
BB+
|
|
|
|
7,554,553
|
|
|
|
|
|
Total Diversified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,654,848
|
|
17
|
|
|
|
|
JRS
|
|
Nuveen Real Estate Income Fund (continued)
|
|
Portfolio of Investments December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Description (1)
|
|
Coupon
|
|
|
|
|
|
Ratings (3)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
Health Care 0.1% (0.1% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,450
|
|
|
Senior Housing Properties Trust
|
|
|
6.250%
|
|
|
|
|
|
|
|
BBB
|
|
|
$
|
451,431
|
|
|
|
|
|
|
|
|
|
|
Hotels, Restaurants & Leisure 3.3% (2.4% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,235
|
|
|
Ashford Hospitality Trust Inc.
|
|
|
8.450%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
636,174
|
|
|
6,460
|
|
|
Hersha Hospitality Trust
|
|
|
6.500%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
160,854
|
|
|
57,425
|
|
|
Hersha Hospitality Trust
|
|
|
6.875%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
1,436,773
|
|
|
7,375
|
|
|
Pebblebrook Hotel Trust
|
|
|
6.375%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
190,570
|
|
|
78,300
|
|
|
Pebblebrook Hotel Trust
|
|
|
6.500%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
1,988,820
|
|
|
3,175
|
|
|
Sunstone Hotel Investors Inc.
|
|
|
6.450%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
81,852
|
|
|
249,555
|
|
|
Sunstone Hotel Investors Inc.
|
|
|
6.950%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
6,490,926
|
|
|
|
|
|
Total Hotels, Restaurants & Leisure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,985,969
|
|
|
|
|
|
|
|
|
|
|
Industrial 2.7% (1.9% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,100
|
|
|
Monmouth Real Estate Investment Corp., (2)
|
|
|
6.125%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
2,170,532
|
|
|
59,877
|
|
|
Prologis Inc., (4)
|
|
|
8.540%
|
|
|
|
|
|
|
|
BBB
|
|
|
|
4,251,267
|
|
|
35,589
|
|
|
Rexford Industrial Realty Inc.
|
|
|
5.875%
|
|
|
|
|
|
|
|
BB+
|
|
|
|
918,997
|
|
|
57,851
|
|
|
Rexford Industrial Realty Inc.
|
|
|
5.875%
|
|
|
|
|
|
|
|
BB+
|
|
|
|
1,497,184
|
|
|
|
|
|
Total Industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,837,980
|
|
|
|
|
|
|
|
|
|
|
Office 11.8% (8.5% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,713
|
|
|
Highwoods Properties Inc., (4)
|
|
|
8.625%
|
|
|
|
|
|
|
|
Baa3
|
|
|
|
15,891,250
|
|
|
244,585
|
|
|
SL Green Realty Corp
|
|
|
6.500%
|
|
|
|
|
|
|
|
Ba1
|
|
|
|
6,214,905
|
|
|
224,011
|
|
|
Vornado Realty Trust
|
|
|
5.250%
|
|
|
|
|
|
|
|
Baa3
|
|
|
|
5,721,241
|
|
|
155,409
|
|
|
Vornado Realty Trust
|
|
|
5.400%
|
|
|
|
|
|
|
|
Baa3
|
|
|
|
3,917,861
|
|
|
275,625
|
|
|
Vornado Realty Trust
|
|
|
5.700%
|
|
|
|
|
|
|
|
Baa3
|
|
|
|
6,948,506
|
|
|
|
|
|
Total Office
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,693,763
|
|
|
|
|
|
|
|
|
|
|
Residential 4.6% (3.3% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,950
|
|
|
American Homes 4 Rent
|
|
|
5.875%
|
|
|
|
|
|
|
|
BB
|
|
|
|
1,490,951
|
|
|
65,105
|
|
|
American Homes 4 Rent
|
|
|
5.875%
|
|
|
|
|
|
|
|
BB
|
|
|
|
1,702,496
|
|
|
132,810
|
|
|
American Homes 4 Rent, (2)
|
|
|
6.250%
|
|
|
|
|
|
|
|
Ba1
|
|
|
|
3,535,402
|
|
|
100,592
|
|
|
American Homes 4 Rent, (2)
|
|
|
6.350%
|
|
|
|
|
|
|
|
BB
|
|
|
|
2,606,339
|
|
|
126,100
|
|
|
American Homes 4 Rent
|
|
|
6.500%
|
|
|
|
|
|
|
|
BB
|
|
|
|
3,302,559
|
|
|
34,373
|
|
|
Mid-America Apartment Communities Inc.
|
|
|
8.500%
|
|
|
|
|
|
|
|
BBB
|
|
|
|
2,268,274
|
|
|
2,250
|
|
|
UMH Properties Inc.
|
|
|
6.750%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
58,815
|
|
|
|
|
|
Total Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,964,836
|
|
|
|
|
|
|
|
|
|
|
Retail 17.9% (12.8% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229,800
|
|
|
Brookfield Property REIT Inc.
|
|
|
6.375%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
5,770,278
|
|
|
216,715
|
|
|
Federal Realty Investment Trust
|
|
|
5.000%
|
|
|
|
|
|
|
|
Baa1
|
|
|
|
5,578,244
|
|
|
129,192
|
|
|
Kimco Realty Corp
|
|
|
5.125%
|
|
|
|
|
|
|
|
Baa2
|
|
|
|
3,325,402
|
|
|
127,855
|
|
|
Kimco Realty Corp
|
|
|
5.250%
|
|
|
|
|
|
|
|
Baa2
|
|
|
|
3,311,445
|
|
|
118,096
|
|
|
National Retail Properties Inc., (2)
|
|
|
5.200%
|
|
|
|
|
|
|
|
Baa2
|
|
|
|
3,003,181
|
|
|
72,200
|
|
|
Pennsylvania Real Estate Investment Trust
|
|
|
7.200%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
1,345,086
|
|
|
28,250
|
|
|
Pennsylvania Real Estate Investment Trust
|
|
|
7.375%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
566,695
|
|
|
129,000
|
|
|
Saul Centers Inc.
|
|
|
6.000%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
3,392,700
|
|
|
5,494
|
|
|
Simon Property Group Inc.
|
|
|
8.375%
|
|
|
|
|
|
|
|
BBB+
|
|
|
|
397,766
|
|
|
101,850
|
|
|
SITE Centers Corp
|
|
|
6.250%
|
|
|
|
|
|
|
|
Ba1
|
|
|
|
2,582,916
|
|
|
194,400
|
|
|
SITE Centers Corp
|
|
|
6.375%
|
|
|
|
|
|
|
|
BB+
|
|
|
|
5,093,280
|
|
|
451,717
|
|
|
Taubman Centers Inc.
|
|
|
6.250%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
11,703,988
|
|
|
344,475
|
|
|
Taubman Centers Inc.
|
|
|
6.500%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
8,939,126
|
|
|
84,400
|
|
|
Urstadt Biddle Properties Inc.
|
|
|
5.875%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
2,150,512
|
|
|
57,375
|
|
|
Urstadt Biddle Properties Inc.
|
|
|
6.250%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
1,527,896
|
|
|
|
|
|
Total Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,688,515
|
|
|
|
|
|
|
|
|
|
|
Specialized 11.9% (8.5% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,035
|
|
|
Digital Realty Trust Inc., (2)
|
|
|
5.200%
|
|
|
|
|
|
|
|
Baa3
|
|
|
|
2,659,333
|
|
|
27,075
|
|
|
Digital Realty Trust Inc.
|
|
|
5.850%
|
|
|
|
|
|
|
|
Baa3
|
|
|
|
744,562
|
|
|
65,075
|
|
|
Digital Realty Trust Inc.
|
|
|
5.875%
|
|
|
|
|
|
|
|
Baa3
|
|
|
|
1,652,905
|
|
|
35,155
|
|
|
Digital Realty Trust Inc.
|
|
|
6.350%
|
|
|
|
|
|
|
|
Baa3
|
|
|
|
907,351
|
|
|
129,000
|
|
|
Digital Realty Trust Inc., (2)
|
|
|
6.625%
|
|
|
|
|
|
|
|
Baa3
|
|
|
|
3,397,860
|
|
|
54,456
|
|
|
National Storage Affiliates Trust
|
|
|
6.000%
|
|
|
|
|
|
|
|
N/R
|
|
|
|
1,449,619
|
|
|
46,000
|
|
|
Public Storage
|
|
|
4.750%
|
|
|
|
|
|
|
|
A3
|
|
|
|
1,176,680
|
|
|
44,825
|
|
|
Public Storage
|
|
|
4.900%
|
|
|
|
|
|
|
|
A3
|
|
|
|
1,142,141
|
|
|
167,850
|
|
|
Public Storage, (2)
|
|
|
4.950%
|
|
|
|
|
|
|
|
A3
|
|
|
|
4,275,139
|
|
|
147,424
|
|
|
Public Storage, (2)
|
|
|
5.050%
|
|
|
|
|
|
|
|
A3
|
|
|
|
3,813,859
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Description (1)
|
|
Coupon
|
|
|
|
|
|
Ratings (3)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
Specialized (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,375
|
|
|
Public Storage
|
|
|
5.125%
|
|
|
|
|
|
|
|
A3
|
|
|
$
|
266,637
|
|
|
52,025
|
|
|
Public Storage
|
|
|
5.200%
|
|
|
|
|
|
|
|
A3
|
|
|
|
1,316,753
|
|
|
128,025
|
|
|
Public Storage
|
|
|
5.200%
|
|
|
|
|
|
|
|
A3
|
|
|
|
3,236,472
|
|
|
187,200
|
|
|
Public Storage, (2)
|
|
|
5.375%
|
|
|
|
|
|
|
|
A3
|
|
|
|
4,723,056
|
|
|
33,825
|
|
|
Public Storage
|
|
|
5.400%
|
|
|
|
|
|
|
|
A3
|
|
|
|
873,700
|
|
|
157,385
|
|
|
Public Storage, (2)
|
|
|
5.600%
|
|
|
|
|
|
|
|
A3
|
|
|
|
4,357,991
|
|
|
18,100
|
|
|
QTS Realty Trust Inc.
|
|
|
6.500%
|
|
|
|
|
|
|
|
B
|
|
|
|
2,337,977
|
|
|
23,605
|
|
|
QTS Realty Trust Inc.
|
|
|
7.125%
|
|
|
|
|
|
|
|
B
|
|
|
|
642,056
|
|
|
|
|
|
Total Specialized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,974,091
|
|
|
|
|
|
Total Real Estate Investment Trust Preferred Stocks
(cost $178,983,712)
|
|
|
|
186,251,433
|
|
|
|
|
|
Total Long-Term Investments (cost $380,710,676)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
447,701,762
|
|
|
|
|
|
|
|
Principal
Amount (000)
|
|
|
Description (1)
|
|
Coupon
|
|
|
Maturity
|
|
|
|
|
|
Value
|
|
|
|
|
|
|
|
|
SHORT-TERM INVESTMENTS 3.1% (2.2% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REPURCHASE AGREEMENTS 3.1% (2.2% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,006
|
|
|
Repurchase Agreement with Fixed Income Clearing
Corporation,
dated 12/31/19, repurchase price $10,005,978,
collateralized by $9,175,000, U.S. Treasury Bonds,
2.875%, due 8/15/45, value $10,210,940
|
|
|
0.650%
|
|
|
|
1/02/20
|
|
|
|
|
|
|
$
|
10,005,617
|
|
|
|
|
|
Total Short-Term Investments (cost $10,005,617)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,005,617
|
|
|
|
|
|
Total Investments (cost $390,716,293)
139.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
457,707,379
|
|
|
|
|
|
Borrowings (40.1)% (5), (6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(131,500,000
|
)
|
|
|
|
|
Other Assets Less Liabilities 0.5% (7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,580,407
|
|
|
|
|
|
Net Assets 100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
327,787,786
|
|
Investments in Derivatives
Interest Rate
Swaps OTC Uncleared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty
|
|
Notional
Amount
|
|
|
Fund
Pay/Receive
Floating Rate
|
|
|
Floating Rate Index
|
|
|
Fixed Rate
(Annualized)
|
|
|
Fixed Rate
Payment
Frequency
|
|
|
Effective
Date (8)
|
|
|
Optional
Termination
Date
|
|
|
Maturity
Date
|
|
|
Value
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
Morgan Stanley Capital Services LLC
|
|
$
|
72,400,000
|
|
|
|
Receive
|
|
|
|
1-Month LIBOR
|
|
|
|
1.994
|
%
|
|
|
Monthly
|
|
|
|
6/01/18
|
|
|
|
7/01/25
|
|
|
|
7/01/27
|
|
|
$
|
(2,219,012
|
)
|
|
$
|
(2,219,012
|
)
|
For Fund portfolio compliance purposes, the Funds industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine
industry sub-classifications into sectors for reporting ease.
(1)
|
All percentages shown in the Portfolio of Investments are based on net assets applicable to common shares unless otherwise
noted.
|
(2)
|
Investment, or portion of investment, is hypothecated as described in Notes to Financial Statements, Note 8
Borrowing Arrangements, Rehypothecation. The total value of investments hypothecated as of the end of the reporting period was $105,166,077.
|
(3)
|
For financial reporting purposes, the ratings disclosed are the highest of Standard & Poors Group
(Standard & Poors), Moodys Investors Service, Inc. (Moodys) or Fitch, Inc. (Fitch) rating. This treatment of split-rated securities may differ from that used for other purposes, such as
for Fund investment policies. Ratings below BBB by Standard & Poors, Baa by Moodys or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
Ratings are not covered by the report of independent registered public accounting firm.
|
(4)
|
For fair value measurement disclosure purposes, investment classified as Level 2. See Notes to Financial Statements,
Note 3 Investment Valuation and Fair Value Measurements for more information.
|
(5)
|
Borrowings as a percentage of Total Investments is 28.7%.
|
(6)
|
The Fund may pledge up to 100% of its eligible investments (excluding any investments separately pledged as collateral for
specific investments in derivatives, when applicable) in the Portfolio of Investments as collateral for borrowings. As of the end of the reporting period investments with a value of $318,618,843 have been pledged as collateral for borrowings.
|
(7)
|
Other assets less liabilities includes the unrealized appreciation (depreciation) of certain over-the-counter
(OTC) derivatives as presented on the Statement of Assets and Liabilities, when applicable. The unrealized appreciation (depreciation) of OTC cleared and exchange-traded derivatives is recognized as part of the cash collateral at brokers
and/or the receivable or payable for variation margin as presented on the Statement of Assets and Liabilities, when applicable.
|
(8)
|
Effective date represents the date on which both the Fund and counterparty commence interest payment accruals on each
contract.
|
LIBOR
|
London Inter-Bank Offered Rate
|
REIT
|
Real Estate Investment Trust
|
See accompanying notes to financial statements.
19
Statement of Assets and Liabilities
December 31, 2019
|
|
|
|
|
Assets
|
|
|
|
|
Long-term investments, at value (cost $380,710,676)
|
|
$
|
447,701,762
|
|
Short-term investments, at value (cost approximates value)
|
|
|
10,005,617
|
|
Cash collateral at brokers for investments in
swaps(1)
|
|
|
2,460,745
|
|
Receivable for:
|
|
|
|
|
Dividends
|
|
|
2,020,169
|
|
Interest
|
|
|
181
|
|
Other assets
|
|
|
108,682
|
|
Total assets
|
|
|
462,297,156
|
|
Liabilities
|
|
|
|
|
Borrowings
|
|
|
131,500,000
|
|
Unrealized depreciation on interest rate swaps
|
|
|
2,219,012
|
|
Accrued expenses:
|
|
|
|
|
Management fees
|
|
|
327,048
|
|
Interest on borrowings
|
|
|
260,961
|
|
Trustees fees
|
|
|
109,759
|
|
Other
|
|
|
92,590
|
|
Total liabilities
|
|
|
134,509,370
|
|
Net assets applicable to common shares
|
|
$
|
327,787,786
|
|
Common shares outstanding
|
|
|
28,892,471
|
|
Net asset value (NAV) per common share
outstanding
|
|
$
|
11.35
|
|
Net assets applicable to common shares consist of:
|
|
|
|
|
Common shares, $.01 par value per share
|
|
$
|
288,925
|
|
Paid-in surplus
|
|
|
254,444,778
|
|
Total distributable earnings
|
|
|
73,054,083
|
|
Net assets applicable to common shares
|
|
$
|
327,787,786
|
|
Authorized shares:
|
|
|
|
|
Common
|
|
|
Unlimited
|
|
Preferred
|
|
|
Unlimited
|
|
(1)
|
Cash pledged to collateralize the net payment obligations for investments in derivatives.
|
See accompanying notes to financial statements.
20
Statement of Operations
Year Ended December 31, 2019
|
|
|
|
|
Investment Income
|
|
|
|
|
Dividends
|
|
$
|
15,271,516
|
|
Interest
|
|
|
208,597
|
|
Other
|
|
|
47,360
|
|
Total investment income
|
|
|
15,527,473
|
|
Expenses
|
|
|
|
|
Management fees
|
|
|
3,827,097
|
|
Interest expense on borrowings
|
|
|
3,674,674
|
|
Custodian fees
|
|
|
58,092
|
|
Trustees fees
|
|
|
11,331
|
|
Professional fees
|
|
|
47,536
|
|
Shareholder reporting expenses
|
|
|
60,214
|
|
Shareholder servicing agent fees
|
|
|
3,263
|
|
Stock exchange listing fees
|
|
|
8,130
|
|
Investor relations expense
|
|
|
128,319
|
|
Other
|
|
|
19,321
|
|
Total expenses
|
|
|
7,837,977
|
|
Net investment income (loss)
|
|
|
7,689,496
|
|
Realized and Unrealized Gain (Loss)
|
|
|
|
|
Net realized gain (loss) from:
|
|
|
|
|
Investments
|
|
|
26,212,630
|
|
Swaps
|
|
|
257,258
|
|
Change in net unrealized appreciation (depreciation) of:
|
|
|
|
|
Investments
|
|
|
45,818,744
|
|
Swaps
|
|
|
(3,848,333
|
)
|
Net realized and unrealized gain (loss)
|
|
|
68,440,299
|
|
Net increase (decrease) in net assets applicable to common shares
from operations
|
|
$
|
76,129,795
|
|
See accompanying notes to financial statements.
21
Statement of Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
12/31/19
|
|
|
Year
Ended
12/31/18
|
|
Operations
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
$
|
7,689,496
|
|
|
$
|
9,421,122
|
|
Net realized gain (loss) from:
|
|
|
|
|
|
|
|
|
Investments
|
|
|
26,212,630
|
|
|
|
13,632,959
|
|
Swaps
|
|
|
257,258
|
|
|
|
62,771
|
|
Change in net unrealized appreciation (depreciation) of:
|
|
|
|
|
|
|
|
|
Investments
|
|
|
45,818,744
|
|
|
|
(53,852,326
|
)
|
Swaps
|
|
|
(3,848,333
|
)
|
|
|
857,866
|
|
Net increase (decrease) in net assets applicable to common shares
from operations
|
|
|
76,129,795
|
|
|
|
(29,877,608
|
)
|
Distributions to Common Shareholders
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
(21,958,278
|
)
|
|
|
(20,237,545
|
)
|
Return of capital
|
|
|
|
|
|
|
(4,176,593
|
)
|
Decrease in net assets applicable to common shares from distributions
to common shareholders
|
|
|
(21,958,278
|
)
|
|
|
(24,414,138
|
)
|
Net increase (decrease) in net assets applicable to common shares
|
|
|
54,171,517
|
|
|
|
(54,291,746
|
)
|
Net assets applicable to common shares at the beginning of
period
|
|
|
273,616,269
|
|
|
|
327,908,015
|
|
Net assets applicable to common shares at the end of
period
|
|
$
|
327,787,786
|
|
|
$
|
273,616,269
|
|
See accompanying notes to financial statements.
22
Statement of Cash Flows
Year Ended December 31, 2019
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
Net Increase (Decrease) in Net Assets Applicable to Common Shares from Operations
|
|
$
|
76,129,795
|
|
Adjustments to reconcile the net increase (decrease) in net assets applicable to common shares from
operations to
net cash provided by (used in) operating activities:
|
|
|
|
|
Purchases of investments
|
|
|
(454,551,526
|
)
|
Proceeds from sales and maturities of investments
|
|
|
467,618,488
|
|
Proceeds from (Purchases of) short-term investments, net
|
|
|
(7,448,938
|
)
|
Capital gain and return of capital distributions from investments
|
|
|
4,866,462
|
|
Amortization (Accretion) of premiums and discounts, net
|
|
|
(216
|
)
|
(Increase) Decrease in:
|
|
|
|
|
Receivable for dividends
|
|
|
181,715
|
|
Receivable for interest
|
|
|
(181
|
)
|
Other assets
|
|
|
(3,084
|
)
|
Increase (Decrease) in:
|
|
|
|
|
Accrued management fees
|
|
|
23,903
|
|
Accrued interest on borrowings
|
|
|
219,036
|
|
Accrued Trustees fees
|
|
|
4,186
|
|
Accrued other expenses
|
|
|
3,948
|
|
Net realized (gain) loss from investments
|
|
|
(26,212,630
|
)
|
Change in net unrealized appreciation (depreciation) of:
|
|
|
|
|
Investments
|
|
|
(45,818,744
|
)
|
Swaps
|
|
|
3,848,333
|
|
Net cash provided by (used in) operating activities
|
|
|
18,860,547
|
|
Cash Flow from Financing Activities:
|
|
|
|
|
Proceeds from borrowings
|
|
|
5,500,000
|
|
Cash distributions paid to common shareholders
|
|
|
(21,958,278
|
)
|
Net cash provided by (used in) financing activities
|
|
|
(16,458,278
|
)
|
Net Increase (Decrease) in Cash and Cash Collateral at Brokers
|
|
|
2,402,269
|
|
Cash and cash collateral at brokers at the beginning of
period
|
|
|
58,476
|
|
Cash and cash collateral at brokers at the end of period
|
|
$
|
2,460,745
|
|
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
Cash paid for interest on borrowings (excluding borrowing
costs)
|
|
$
|
3,455,638
|
|
See accompanying notes to financial statements.
23
Financial Highlights
Selected data for a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations
|
|
|
Less Distributions to
Common Shareholders
|
|
|
Common Shares
|
|
|
|
Beginning
Common
Share
NAV
|
|
|
Net
Investment
Income
(Loss)(a)
|
|
|
Net
Realized/
Unrealized
Gain (Loss)
|
|
|
Total
|
|
|
From
Net
Investment
Income
|
|
|
From
Accumulated
Net Realized
Gains
|
|
|
Return
of
Capital
|
|
|
Total
|
|
|
Ending
NAV
|
|
|
Ending
Share
Price
|
|
Year Ended 12/31:
|
|
2019
|
|
$
|
9.47
|
|
|
$
|
0.27
|
|
|
$
|
2.37
|
|
|
$
|
2.64
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
|
|
|
$
|
(0.76
|
)
|
|
$
|
11.35
|
|
|
$
|
10.62
|
|
2018
|
|
|
11.35
|
|
|
|
0.33
|
|
|
|
(1.36
|
)
|
|
|
(1.03
|
)
|
|
|
(0.33
|
)
|
|
|
(0.37
|
)
|
|
|
(0.15
|
)
|
|
|
(0.85
|
)
|
|
|
9.47
|
|
|
|
8.46
|
|
2017
|
|
|
11.39
|
|
|
|
0.41
|
|
|
|
0.55
|
|
|
|
0.96
|
|
|
|
(0.62
|
)
|
|
|
|
|
|
|
(0.38
|
)
|
|
|
(1.00
|
)
|
|
|
11.35
|
|
|
|
11.26
|
|
2016
|
|
|
11.71
|
|
|
|
0.39
|
|
|
|
0.27
|
|
|
|
0.66
|
|
|
|
(0.98
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.98
|
)
|
|
|
11.39
|
|
|
|
10.77
|
|
2015
|
|
|
12.08
|
|
|
|
0.38
|
|
|
|
0.21
|
|
|
|
0.59
|
|
|
|
(0.89
|
)
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
(0.96
|
)
|
|
|
11.71
|
|
|
|
10.62
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings at End of Period
|
|
|
|
Aggregate
Amount
Outstanding
(000)
|
|
|
Asset
Coverage
Per $1,000
|
|
Year Ended 12/31:
|
|
|
|
|
|
|
|
|
2019
|
|
$
|
131,500
|
|
|
$
|
3,493
|
|
2018
|
|
|
126,000
|
|
|
|
3,172
|
|
2017
|
|
|
145,300
|
|
|
|
3,257
|
|
2016
|
|
|
144,750
|
|
|
|
3,274
|
|
2015
|
|
|
140,000
|
|
|
|
3,417
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Share Supplemental Data/
Ratios Applicable to Common Shares
|
|
Common Share
Total Returns
|
|
|
|
|
|
Ratios to Average Net Assets(c)
|
|
|
|
|
Based
on
NAV(b)
|
|
|
Based
on
Share
Price(b)
|
|
|
Ending
Net
Assets
(000)
|
|
|
Expenses
|
|
|
Net
Investment
Income (Loss)
|
|
|
Portfolio
Turnover
Rate(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28.18
|
%
|
|
|
34.80
|
%
|
|
$
|
327,788
|
|
|
|
2.45
|
%
|
|
|
2.40
|
%
|
|
|
104
|
%
|
|
(9.44
|
)
|
|
|
(17.93
|
)
|
|
|
273,616
|
|
|
|
2.43
|
|
|
|
3.10
|
|
|
|
67
|
|
|
8.72
|
|
|
|
14.23
|
|
|
|
327,908
|
|
|
|
2.13
|
|
|
|
3.56
|
|
|
|
52
|
|
|
5.53
|
|
|
|
10.43
|
|
|
|
329,121
|
|
|
|
1.81
|
|
|
|
3.33
|
|
|
|
101
|
|
|
5.24
|
|
|
|
0.99
|
|
|
|
338,333
|
|
|
|
1.81
|
|
|
|
3.19
|
|
|
|
56
|
|
(a)
|
Per share Net Investment Income (Loss) is calculated using the average daily shares method.
|
(b)
|
Total Return Based on Common Share NAV is the combination of changes in common share NAV, reinvested dividend income at
NAV and reinvested capital gains distributions at NAV, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending NAV. The actual reinvest
price for the last dividend declared in the period may often be based on the Funds market price (and not its NAV), and therefore may be different from the price used in the calculation. Total returns are not annualized.
|
Total Return Based on Common Share Price is the combination of changes in the market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be
reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be
different from the price used in the calculation. Total returns are not annualized.
(c)
|
Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to borrowings (as
described in Note 8 Borrowing Arrangements).
|
|
|
Each ratio includes the effect of all interest expense paid and other costs related to borrowings as follows:
|
|
|
|
|
|
Ratios of Borrowings Interest Expense
to Average Net Assets Applicable
to Common Shares
|
|
Year Ended 12/31:
|
|
2019
|
|
|
1.15
|
%
|
2018
|
|
|
1.14
|
|
2017
|
|
|
0.79
|
|
2016
|
|
|
0.50
|
|
2015
|
|
|
0.44
|
|
(d)
|
Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 4
Portfolio Securities and Investments in Derivatives, Investment Transactions) divided by the average long-term market value during the period.
|
See accompanying notes to financial statements.
25
Notes to Financial Statements
1. General Information
Fund Information
Nuveen Real Estate Income Fund (the Fund) is
registered under the Investment Company Act of 1940 (the 1940 Act), as amended, as a diversified closed-end management investment company. The Funds common shares are listed on the New York Stock Exchange (NYSE) and
trade under the ticker symbol JRS. The Fund was organized as a Massachusetts business trust on August 27, 2001.
The end of the reporting period for
the Fund is December 31, 2019, and the period covered by these Notes to Financial Statements is the fiscal year ended December 31, 2019 (the current fiscal period).
Investment Adviser and Sub-Adviser
The Funds investment adviser is
Nuveen Fund Advisors, LLC (the Adviser), a subsidiary of Nuveen, LLC (Nuveen). Nuveen is the investment management arm of Teachers Insurance and Annuity Association of America (TIAA). The Adviser has overall responsibility
for management of the Fund, oversees the management of the Funds portfolio, manages the Funds business affairs and provides certain clerical, bookkeeping and other administrative services, and, if necessary, asset allocation decisions.
The Adviser has entered into a sub-advisory agreement with Security Capital Research & Management Incorporated (Security Capital). Security Capital manages the Funds investment portfolio, while the Adviser manages the
Funds investments in swap contracts.
2. Significant Accounting Policies
The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America
(U.S. GAAP), which may require the use of estimates made by management and the evaluation of subsequent events. Actual results may differ from those estimates. The Fund is an investment company and follows the accounting guidance in
the Financial Accounting Standards Board (FASB) Accounting Standards Codification 946, Financial Services Investment Companies. The net asset value (NAV) for financial reporting purposes may differ from the NAV for
processing security and common share transactions. The NAV for financial reporting purposes includes security and common share transactions through the date of the report. Total return is computed based on the NAV used for processing security and
common share transactions. The following is a summary of the significant accounting policies consistently followed by the Fund.
Compensation
The Fund pays no compensation directly to those of its trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their
services to the Fund from the Adviser or its affiliates. The Funds Board of Trustees (the Board) has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion
of the annual compensation they are entitled to receive from certain Nuveen-advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen-advised funds.
Distributions to Common Shareholders
Distributions to common shareholders are
recorded on the ex-dividend date. The amount, character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
The Fund makes quarterly cash distributions to common shareholders of a stated dollar amount per share. Subject to approval and oversight by the Board, the Fund seeks to
maintain a stable distribution level designed to deliver the long-term return potential of the Funds investment strategy through regular quarterly distributions (a Managed Distribution Program). Total distributions during a
calendar year generally will be made from the Funds net investment income, net realized capital gains and net unrealized capital gains in the Funds portfolio, if any. The portion of distributions paid attributed to net unrealized gains,
if any, is distributed from the Funds assets and is treated by shareholders as a nontaxable distribution (return of capital) for tax purposes. In the event that total distributions during a calendar year exceed the Funds
total return on NAV, the difference will reduce NAV per share. If the Funds total return on NAV exceeds total distributions during a calendar year, the excess will be reflected as an increase in NAV per share. The final determination of the
source and character of all distributions paid by the Fund during the fiscal year is made after the end of the fiscal year and is reflected in the financial statements contained in the annual report as of December 31 each year.
The tax character of Fund distributions for a fiscal year is dependent upon the amount and tax character of distributions received from securities held in the Funds
portfolio. Distributions received from certain securities in which the Fund invests, most notably real estate investment trust securities, may be characterized for tax purposes as ordinary income, long-term capital gain and/or a return of capital.
The issuer of a security reports the tax character of its distributions only once per year, generally during the first two months of the calendar year. The distribution is included in the Funds ordinary income until such time the Fund is
notified by the issuer of the actual tax character. Dividend income, net realized gain (loss) and unrealized appreciation (depreciation)
26
recognized on the Statement of Operations reflect the
amounts of ordinary income, capital gain, and/or return of capital as reported by the issuers of such securities for distributions during the current fiscal period.
Indemnifications
Under the Funds organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide general indemnifications to other
parties. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
Investments and Investment Income
Securities transactions are accounted for as of the trade date for financial reporting purposes. Realized gains and losses on securities transactions are based upon the
specific identification method. Dividend income is recorded on the ex-dividend date or, for certain foreign securities, when information is available. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date
and recorded at fair value. Interest income, which reflects the amortization of premiums and accretion of discounts for financial reporting purposes and is recorded on an accrual basis. Interest income also reflects payment-in-kind (PIK)
interest and paydown gains and losses, if any. PIK interest represents income received in the form of securities in lieu of cash.
Netting Agreements
In the ordinary course of business, the Fund may enter into transactions subject to enforceable master repurchase agreements, International Swaps and Derivatives
Association, Inc. (ISDA) master agreements or other similar arrangements (netting agreements). Generally, the right to offset in netting agreements allows the Fund to offset certain securities and derivatives with a specific
counterparty, when applicable, as well as any collateral received or delivered to that counterparty based on the terms of the agreements. Generally, the Fund manages its cash collateral and securities collateral on a counterparty basis.
The Funds investments subject to netting agreements as of the end of the reporting period, if any, are further described in Note 4 Portfolio Securities and
Investments in Derivatives.
New Accounting Pronouncements and Rule Issuances
Fair Value Measurement: Disclosure Framework
During August 2018, the FASB
issued Accounting Standards Update (ASU) 2018-13 (ASU 2018-13), Fair Value Measurement: Disclosure Framework Changes to the Disclosure
Requirements for Fair Value Measurements. ASU 2018-13 modifies the disclosures required by Topic 820, Fair Value Measurements. The amendments in ASU 2018-13 are
effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has early implemented this guidance and it did not have a material impact on the Funds financial
statements.
3. Investment Valuation and Fair Value Measurements
The fair
valuation input levels as described below are for fair value measurement purposes.
The Funds investments in securities are recorded at their estimated fair
value. Fair value is defined as the price that would be received upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier
hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market
participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entitys own assumptions about the
assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The following is a summary of the three-tiered hierarchy of valuation input levels.
|
|
|
Level 1
|
|
Inputs are unadjusted and prices are determined using quoted prices in active markets for identical securities.
|
Level 2
|
|
Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, credit spreads, etc.).
|
Level 3
|
|
Prices are determined using significant unobservable inputs (including managements assumptions in determining the fair value of investments).
|
Common stocks and other equity-type securities are valued at the last sales price on the securities exchange on which such securities are
primarily traded and are generally classified as Level 1. Securities primarily traded on the Nasdaq National Market (Nasdaq) are valued at the Nasdaq Official Closing Price and are generally classified as Level 1. However, securities
traded on a securities exchange or Nasdaq for which there were no transactions on a given day or securities not listed on a securities exchange or Nasdaq are valued at the quoted bid price and are generally classified as Level 2.
27
Notes to Financial Statements (continued)
Prices of fixed-income securities are provided by an independent pricing service (pricing
service) approved by the Board. The pricing service establishes a securitys fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity
and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligors credit characteristics
considered relevant. These securities are generally classified as Level 2. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer or market
activity, provided by the Adviser. These securities are generally classified as
Level 2 or Level 3 depending on the observability of the significant inputs.
Prices of swap contracts are also provided by a pricing service approved by the Board using the same methods as described above, and are generally classified as Level 2.
Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Board and/or its
appointee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is
unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a
pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Funds NAV (as may be the case in
non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the securitys fair
value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such
securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated
cash flows or collateral, general market conditions and other information and analysis, including the obligors credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the
observability of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Board and/or its appointee.
The inputs or methodologies used for valuing securities are not an indication of the risks associated with investing in those securities. The following is a summary of
the Funds fair value measurements as of the end of the reporting period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Long-Term Investments*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Investment Trust Common Stocks
|
|
$
|
261,450,329
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
261,450,329
|
|
Real Estate Investment Trust Preferred Stocks
|
|
|
166,108,916
|
|
|
|
20,142,517
|
**
|
|
|
|
|
|
|
186,251,433
|
|
|
|
|
|
|
Short-Term Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase Agreements
|
|
|
|
|
|
|
10,005,617
|
|
|
|
|
|
|
|
10,005,617
|
|
|
|
|
|
|
Investments in Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps***
|
|
|
|
|
|
|
(2,219,012
|
)
|
|
|
|
|
|
|
(2,219,012
|
)
|
Total
|
|
$
|
427,559,245
|
|
|
$
|
27,929,122
|
|
|
$
|
|
|
|
$
|
455,488,367
|
|
*
|
Refer to the Funds Portfolio of Investments for industry classifications.
|
**
|
Refer to the Funds Portfolio of Investments for securities classified as Level 2.
|
***
|
Represents net unrealized appreciation (depreciation) as reported in the Funds Portfolio of Investments.
|
4. Portfolio Securities and Investments in Derivatives
Portfolio Securities
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Funds policy that its custodian take possession of the underlying collateral securities, the
fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or
limited.
28
The following table presents the repurchase
agreements for the Fund that are subject to netting agreements as of the end of the reporting period, and the collateral delivered related to those repurchase agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty
|
|
Short-Term
Investments, at Value
|
|
|
Collateral
Pledged (From)
Counterparty*
|
|
|
Net
Exposure
|
|
Fixed Income Clearing Corporation
|
|
$
|
10,005,617
|
|
|
$
|
(10,005,617
|
)
|
|
$
|
|
|
*
|
As of the end of the reporting period, the value of the collateral pledged from the counterparty exceeded the value of the
repurchase agreements. Refer to the Funds Portfolio of Investments for details on the repurchase agreements.
|
Investment Transactions
Long-term purchases and sales (excluding derivative transactions) during the current fiscal period aggregated $454,551,526 and $467,618,488, respectively.
The Fund may purchase securities on a when-issued or delayed-delivery basis. Securities purchased on a when-issued or delayed-delivery basis may have extended settlement
periods; interest income is not accrued until settlement date. Any securities so purchased are subject to market fluctuation during this period. The Fund has earmarked securities in its portfolio with a current value at least equal to the amount of
the when-issued/delayed-delivery purchase commitments. If the Fund has outstanding when-issued/delayed-delivery purchases commitments as of the end of the reporting period, such amounts are recognized on the Statement of Assets and Liabilities.
Investments in Derivatives
The Fund is authorized to invest in certain
derivative instruments, such as futures, options and swap contracts. The Fund limits its investments in futures, options on futures and swap contracts to the extent necessary for the Adviser to claim the exclusion from registration by the Commodity
Futures Trading Commission as a commodity pool operator with respect to the Fund. The Fund records derivative instruments at fair value with changes in fair value recognized on the Statement of Operations, when applicable. Even though the
Funds investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes.
Interest
Rate Swap Contracts
Interest rate swap contracts involve the Funds agreement with the counterparty to pay or receive a fixed rate payment in exchange for
the counterparty receiving or paying a variable rate payment. Forward interest rate swap contracts involve the Funds agreement with a counterparty to pay, in the future, a fixed or variable rate payment in exchange for the counterparty paying
the Fund a variable or fixed rate payment, the accruals for which would begin at a specified date in the future (the effective date).
The amount of the
payment obligation for an interest rate swap is based on the notional amount and the termination date of the contract. Interest rate swap contracts do not involve the delivery of securities or other underlying assets or principal. Accordingly, the
risk of loss with respect to the swap counterparty on such transactions is limited to the net amount of interest payments that the Fund is to receive.
Interest rate
swap contracts are valued daily. Upon entering into an interest rate swap contract (and beginning on the effective date for a forward interest rate swap contract), the Fund accrues the fixed rate payment expected to be paid or received and the
variable rate payment expected to be received or paid on the interest rate swap contracts on a daily basis, and recognizes the daily change in the fair value of the Funds contractual rights and obligations under the contracts. For an
over-the-counter (OTC) swap that is not cleared through a clearing house (OTC Uncleared), the amount recorded on these transactions is recognized on the Statement of Assets and Liabilities as a component of Unrealized
appreciation or depreciation on interest rate swaps.
Upon the execution of an OTC swap cleared through a clearing house (OTC Cleared), the Fund is
obligated to deposit cash or eligible securities, also known as initial margin, into an account at its clearing broker equal to a specified percentage of the contract amount. Cash deposited by the Fund to cover initial margin
requirements on open swap contracts, if any, is recognized as a component of Cash collateral at brokers for investments in swaps on the Statement of Assets and Liabilities. Investments in OTC Cleared swaps obligate the Fund and the
clearing broker to settle monies on a daily basis representing changes in the prior days mark-to-market of the swap contract. If the Fund has unrealized appreciation, the clearing broker will credit the Funds account with an
amount equal to the appreciation. Conversely, if the Fund has unrealized depreciation, the clearing broker will debit the Funds account with an amount equal to the depreciation. These daily cash settlements are also known as variation
margin. Variation margin for OTC Cleared swaps is recognized as a receivable and/or payable for Variation margin on swap contracts on the Statement of Assets and Liabilities. Upon the execution of an OTC Uncleared swap, neither the
Fund nor the counterparty is required to deposit initial margin as the trades are recorded bilaterally between both parties to the swap contract, and the terms of the variation margin are subject to a predetermined threshold negotiated by the Fund
and the counterparty. Variation margin for OTC Uncleared swaps is recognized as a component of Unrealized appreciation or depreciation on interest rate swaps as described in the preceding paragraph.
29
Notes to Financial Statements (continued)
The net amount of periodic payments settled in cash are recognized as a component of Net
realized gain (loss) from swaps on the Statement of Operations, in addition to the net realized gain or loss recorded upon the termination of the swap contract. For tax purposes, payments expected to be received or paid on the swap contracts
are treated as ordinary income or expense, respectively. Changes in the value of the swap contracts during the fiscal period are recognized as a component of Change in net unrealized appreciation (depreciation) of swaps on the Statement
of Operations. In certain instances, payments are made or received upon entering into the swap contract to compensate for differences between the stated terms of the swap agreements and prevailing market conditions (credit spreads, currency exchange
rates, interest rates, and other relevant factors). Payments received or made at the beginning of the measurement period, if any, are recognized as Interest rate swaps premiums received and/or paid on the Statement of Assets and
Liabilities.
During the current fiscal period, the Fund continued to utilize forward starting interest rate swap contracts to partially hedge its future interest
cost of leverage, which is through the use of bank borrowings.
The average notional amount of interest rate swap contracts outstanding during the current fiscal
period was as follows:
|
|
|
|
|
Average notional amount of interest
rate swap contracts outstanding*
|
|
|
$72,400,000
|
|
*
|
The average notional amount is calculated based on the outstanding notional at the beginning of the current fiscal period
and at the end of each fiscal quarter within the current fiscal period.
|
The following table presents the fair value of all swap contracts held by
the Fund as of the end of the reporting period, the location of these instruments on the Statement of Assets and Liabilities and the primary underlying risk exposure.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location on the Statements of Assets and
Liabilities
|
|
Underlying
Risk Exposure
|
|
Derivative
Instrument
|
|
Asset Derivatives
|
|
|
|
|
|
(Liability) Derivatives
|
|
|
Location
|
|
Value
|
|
|
|
|
|
Location
|
|
Value
|
|
Interest rate
|
|
Swaps (OTC Uncleared)
|
|
|
|
$
|
|
|
|
|
|
|
|
Unrealized depreciation on interest rate swaps**
|
|
$
|
(2,219,012
|
)
|
**
|
Some swap contracts require a counterparty to pay or receive a premium, which is disclosed in the Statement of Assets and
Liabilities, when applicable, and is not reflected in the cumulative unrealized appreciation (depreciation) presented above.
|
The following table
presents the swap contracts subject to netting agreements and the collateral delivered related to those swap contracts as of the end of the reporting period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts not offset
on the Statement of
Assets and Liabilities
|
|
|
|
|
Counterparty
|
|
Gross
Unrealized
Appreciation on
Interest Rate
Swaps***
|
|
|
Gross
Unrealized
(Depreciation) on
Interest Rate
Swaps***
|
|
|
Net Unrealized
Appreciation
(Depreciation) on
Interest Rate
Swaps
|
|
|
Interest Rate
Swaps
Premiums
Paid
|
|
|
Collateral
Pledged
to (from)
Counterparty
|
|
|
Net
Exposure
|
|
Morgan Stanley Capital Services LLC
|
|
$
|
|
|
|
$
|
(2,219,012
|
)
|
|
$
|
(2,219,012
|
)
|
|
$
|
|
|
|
$
|
2,219,012
|
|
|
$
|
|
|
***
|
Represents gross unrealized appreciation (depreciation) for the counterparty as reported in the Funds Portfolio of
Investments.
|
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation)
recognized on swap contracts on the Statement of Operations during the current fiscal period, and the primary underlying risk exposure.
|
|
|
|
|
|
|
Underlying
Risk Exposure
|
|
Derivative
Instrument
|
|
Net Realized
Gain (Loss) from
Swaps
|
|
Change in Net
Unrealized
Appreciation
(Depreciation) of
Swaps
|
Interest rate
|
|
Swaps
|
|
$257,258
|
|
$(3,848,333)
|
Market and Counterparty Credit Risk
In the
normal course of business the Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform
(counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose the Fund to counterparty credit risk, consist principally of cash due from
counterparties on forward, option and swap transactions, when applicable. The extent of the Funds exposure to counterparty credit risk in respect to these financial assets approximates its carrying value as recorded on the Statement of Assets
and Liabilities.
30
The Fund helps manage counterparty credit risk by
entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be
required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of the Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when the Fund has
an unrealized loss, the Fund has instructed the custodian to pledge assets of the Fund as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and
subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
5. Fund Shares
Common Shares Transactions
The Fund did not have any transactions in common
shares during current and prior fiscal period.
6. Income Tax Information
The Fund intends to distribute substantially all of its net investment company taxable income to shareholders and to otherwise comply with the requirements of Subchapter
M of the Internal Revenue Code applicable to regulated investment companies. In any year when the Fund realizes net capital gains, the Fund may choose to distribute all or a portion of its net capital gains to shareholders, or alternatively, to
retain all or a portion of its net capital gains and pay federal corporate income taxes on such retained gains.
For all open tax years and all major taxing
jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e.,
generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will
significantly change in the next twelve months.
The following information is presented on an income tax basis. Differences between amounts for financial statement
and federal income tax purposes are primarily due to timing differences in recognizing certain gains and losses on investment transactions. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the
capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the NAV of the Fund.
The
table below presents the cost and unrealized appreciation (depreciation) of the Funds investment portfolio, as determined on a federal income tax basis, as of December 31, 2019.
For purposes of this disclosure, derivative tax cost is generally the sum of any upfront fees or premiums exchanged and any amounts unrealized for income statement
reporting but realized in income and/or capital gains for tax reporting. If a particular derivative category does not disclose any tax unrealized appreciation or depreciation, the change in value of those derivatives have generally been fully
realized for tax purposes.
|
|
|
|
|
Tax cost of investments
|
|
$
|
395,682,491
|
|
Gross unrealized:
|
|
|
|
|
Appreciation
|
|
$
|
67,304,318
|
|
Depreciation
|
|
|
(7,498,442
|
)
|
Net unrealized appreciation (depreciation) of investments
|
|
$
|
59,805,876
|
|
Permanent differences, primarily due to distribution reallocations, investments in corporate stock and treatment of notional principal
contracts, resulted in reclassifications among the Funds components of common share net assets as of December 31, 2019, the Funds tax year end.
|
|
|
|
|
|
The tax components of undistributed net ordinary income and net long-term capital gains as of December 31, 2019, the Funds tax year end, were as follows:
|
|
Undistributed net ordinary income
|
|
$
|
|
|
Undistributed net long-term capital gains
|
|
|
13,339,678
|
|
31
Notes to Financial Statements (continued)
|
|
|
|
|
|
The tax character of distributions paid during the Funds tax years ended December 31, 2019 and December 31, 2018 was designated for purposes of the dividends paid deduction as follows:
|
|
2019
|
|
|
|
Distributions from net ordinary income¹
|
|
$
|
9,920,415
|
|
Distributions from net long-term capital gains2
|
|
|
12,037,863
|
|
Return of capital
|
|
|
|
|
|
|
2018
|
|
|
|
Distributions from net ordinary income1
|
|
$
|
9,528,426
|
|
Distributions from net long-term capital gains
|
|
|
10,709,119
|
|
Return of capital
|
|
|
4,176,593
|
|
|
1 Net ordinary income consists of
net taxable income derived from dividends, interest, and net short term capital gains, if any.
2 The Fund hereby designates as long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce earnings and profits of the Fund
related to net capital gain to zero for the tax year ended December 31, 2019.
|
|
7. Management Fees
The Funds management
fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. Security Capital is compensated for its services to the Fund from the management fees paid to the Adviser.
The Funds management fee consists of two components a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on
the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within the Fund as well as from growth in the amount of complex-wide assets managed by the
Adviser.
The annual fund-level fee, payable monthly, is calculated according to the following schedule:
|
|
|
|
|
Average Daily Managed Assets*
|
|
Fund-Level Fee Rate
|
|
For the first $500 million
|
|
|
0.7000
|
%
|
For the next $500 million
|
|
|
0.6750
|
|
For the next $500 million
|
|
|
0.6500
|
|
For the next $500 million
|
|
|
0.6250
|
|
For managed assets over $2 billion
|
|
|
0.6000
|
|
The annual complex-level fee, payable monthly, is calculated by multiplying the current complex-wide fee rate, determined according to the
following schedule by the Funds daily managed assets:
|
|
|
|
|
Complex-Level Eligible Asset Breakpoint Level*
|
|
Effective Complex-Level Fee Rate at Breakpoint Level
|
|
$55 billion
|
|
|
0.2000
|
%
|
$56 billion
|
|
|
0.1996
|
|
$57 billion
|
|
|
0.1989
|
|
$60 billion
|
|
|
0.1961
|
|
$63 billion
|
|
|
0.1931
|
|
$66 billion
|
|
|
0.1900
|
|
$71 billion
|
|
|
0.1851
|
|
$76 billion
|
|
|
0.1806
|
|
$80 billion
|
|
|
0.1773
|
|
$91 billion
|
|
|
0.1691
|
|
$125 billion
|
|
|
0.1599
|
|
$200 billion
|
|
|
0.1505
|
|
$250 billion
|
|
|
0.1469
|
|
$300 billion
|
|
|
0.1445
|
|
*
|
For the complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to
certain types of leverage. For these purposes, leverage includes the funds use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond
(TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trusts issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such
assets for determining managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen open-end and closed-end funds that constitute eligible assets. Eligible
assets do not include assets attributable to investments in other Nuveen funds or assets in excess of a determined amount (originally $2 billion) added to the Nuveen fund complex in connection with the Advisers assumption of the management of
the former First American Funds effective January 1, 2011, but do not include certain assets of certain Nuveen funds that were reorganized into funds advised by an affiliate of the Adviser during the 2019 calendar year. As of December 31, 2019,
the complex-level fee for the Fund was 0.1562%.
|
32
8. Borrowing Arrangements
Borrowings
The Fund has entered into a borrowing arrangement as a means of
leverage.
As of the end of the reporting period, the Fund has a $150,000,000 (maximum commitment amount) committed financing agreement (Borrowings). As
of the end of the reporting period, the outstanding balance on these Borrowings was $131,500,000.
Interest is charged on these Borrowings at 1-Month LIBOR (London
Inter-Bank Offered Rate) plus 0.65% per annum on the amount borrowed. The Fund is typically charged an undrawn fee of 0.50% per annum undrawn fee if the undrawn portion of the Borrowings on that day is more than 20% of the maximum commitment amount,
however these fees were waived in 2019. During the current fiscal period, the average daily balance outstanding (which was for the entire current reporting period) and average annual interest rate on these Borrowings were $126,075,342 and 2.87%,
respectively.
In order to maintain these Borrowings, the Fund must meet certain collateral, asset coverage and other requirements. Borrowings outstanding are fully
secured by securities specifically identified in the Funds portfolio of investments (Pledged Collateral).
Borrowings outstanding are recognized as
Borrowings on the Statement of Assets and Liabilities. Interest expense incurred on the drawn amount and undrawn balance are recognized as a component of Interest expense on borrowings on the Statement of Operations.
Rehypothecation
The Fund has entered into a Rehypothecation Side Letter
(Side Letter) with its prime brokerage lender, allowing it to re-register the Pledged Collateral in its own name or in a name other than the Funds to pledge, repledge, hypothecate, rehyphothecate, sell, lend or otherwise transfer
or use the Pledged Collateral (the Hypothecated Securities) with all rights of ownership as described in the Side Letter. Subject to certain conditions, the total value of the outstanding Hypothecated Securities shall not exceed the
lesser of (i) 98% of the outstanding balance on the Borrowings to which the Pledged Collateral relates and (ii) 331⁄3% of the Funds total assets.
The Fund may designate any Pledged Collateral as ineligible for rehypothecation. The Fund may also recall Hypothecated Securities on demand.
The Fund also has the
right to apply and set-off an amount equal to one-hundred percent (100%) of the then-current fair market value of such Pledged Collateral against the current Borrowings under the Side Letter in the event that prime brokerage lender fails to
timely return the Pledged Collateral and in certain other circumstances. In such circumstances, however, the Fund may not be able to obtain replacement financing required to purchase replacement securities and, consequently, the Funds income
generating potential may decrease. Even if the Fund is able to obtain replacement financing, it might not be able to purchase replacement securities at favorable prices.
The Fund will receive a fee in connection with the Hypothecated Securities (Rehypothecation Fees) in addition to any principal, interest, dividends and other
distributions paid on the Hypothecated Securities.
As of the end of the reporting period, the Fund had Hypothecated Securities totaling $105,166,077. During the
current fiscal period, the Fund earned Rehypothecation Fees of $47,360, which is recognized as Other income on the Statement of Operations.
Inter-Fund
Borrowing and Lending
The Securities and Exchange Commission (SEC) has granted an exemptive order permitting registered open-end and closed-end
Nuveen funds to participate in an inter-fund lending facility whereby the Nuveen funds may directly lend to and borrow money from each other for temporary purposes (e.g., to satisfy redemption requests or when a sale of securities fails,
resulting in an unanticipated cash shortfall) (the Inter-Fund Program). The closed-end Nuveen funds, including the Fund covered by this shareholder report, will participate only as lenders, and not as borrowers, in the Inter-Fund Program
because such closed-end funds rarely, if ever, need to borrow cash to meet redemptions. The Inter-Fund Program is subject to a number of conditions, including, among other things, the requirements that (1) no fund may borrow or lend money through
the Inter-Fund Program unless it receives a more favorable interest rate than is typically available from a bank or other financial institution for a comparable transaction; (2) no fund may borrow on an unsecured basis through the Inter-Fund Program
unless the funds outstanding borrowings from all sources immediately after the inter-fund borrowing total 10% or less of its total assets; provided that if the borrowing fund has a secured borrowing outstanding from any other lender, including
but not limited to another fund, the inter-fund loan must be secured on at least an equal priority basis with at least an equivalent percentage of collateral to loan value; (3) if a funds total outstanding borrowings immediately after an
inter-fund borrowing would be greater than 10% of its total assets, the fund may borrow through the inter-fund loan on a secured basis only; (4) no fund may lend money if the loan would cause its aggregate outstanding loans through the Inter-Fund
Program to exceed 15% of its net assets at the time of the loan; (5) a funds inter-fund loans to any one fund shall not exceed 5% of the lending funds net assets; (6) the duration of inter-fund loans will be limited to the time required
to receive payment for securities sold, but in no event more than seven days; and (7) each interfund loan may be called on one business days notice by a lending fund and may be repaid on any day by a borrowing fund. In addition, a Nuveen fund
may participate in the Inter-Fund Program only if and to the extent that such participation is consistent with the funds investment objective and investment policies. The Board is responsible for overseeing the Inter-Fund Program.
33
Notes to Financial Statements (continued)
The limitations detailed above and the other conditions of the SEC exemptive order permitting the
Inter-Fund Program are designed to minimize the risks associated with Inter-Fund Program for both the lending fund and the borrowing fund. However, no borrowing or lending activity is without risk. When a fund borrows money from another fund, there
is a risk that the loan could be called on one days notice or not renewed, in which case the fund may have to borrow from a bank at a higher rate or take other actions to payoff such loan if an inter-fund loan is not available from another
fund. Any delay in repayment to a lending fund could result in a lost investment opportunity or additional borrowing costs.
During the current reporting period, the
Fund did not enter into any inter-fund loan activity.
34
Additional Fund Information (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Board of Trustees
|
|
|
|
|
|
|
|
|
|
|
Jack B. Evans
|
|
William C. Hunter
|
|
Albin F. Moschner
|
|
John K. Nelson
|
|
Judith M. Stockdale
|
|
Carole E. Stone
|
Terence J. Toth
|
|
Margaret L. Wolff
|
|
Robert L. Young*
|
|
|
|
|
|
|
*
|
Effective February 27, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Adviser
Nuveen Fund Advisors, LLC
333 West Wacker Drive
Chicago, IL 60606
|
|
Custodian
State Street Bank
&
Trust Company
One Lincoln Street
Boston, MA 02111
|
|
Legal Counsel
Chapman and Cutler LLP
Chicago, IL 60603
|
|
Independent Registered
Public Accounting Firm
KPMG
LLP
200 East Randolph Street
Chicago, IL 60601
|
|
Transfer Agent and
Shareholder Services
Computershare
Trust
Company, N.A.
250 Royall Street
Canton, MA 02021
(800) 257-8787
|
Distribution Information
The Fund hereby designates its percentage of dividends paid from net ordinary income as dividends qualifying for the dividends received deduction
(DRD) for corporations, its percentage of qualified dividend income (QDI) for individuals under Section 1(h)(11) of the Internal Revenue Code, and its percentage of qualified business income (QBI) for individuals
under Section 199A of the Internal Revenue Code as shown in the accompanying table. The actual qualified dividend and business income distributions will be reported to shareholders on Form 1099-DIV which will be sent to shareholders shortly after
calendar year end.
|
|
|
|
|
|
|
JRS
|
|
% DRD
|
|
|
5.3%
|
|
% QDI
|
|
|
5.3%
|
|
% QBI
|
|
|
78.6%
|
|
Portfolio of Investments Information
The Fund is required to file its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third
quarters of each fiscal year as an exhibit to its report on Form N-PORT. You may obtain this information on the SECs website at http://www.sec.gov.
Nuveen Funds Proxy Voting Information
You may obtain (i) information regarding how each fund voted proxies relating to portfolio securities held during the most recent twelve-month period
ended June 30, without charge, upon request, by calling Nuveen toll-free at (800) 257-8787 or on Nuveens website at www.nuveen.com and (ii) a description of the policies and procedures that each
fund used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen toll free at (800) 257-8787. You may also obtain this information directly from the SEC. Visit the SEC on-line at
http://www.sec.gov.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The Adviser has engaged Security Capital Research & Management Incorporated (Security Capital) as Sub-Adviser to provide discretionary
investment advisory services. As part of these services, the Adviser has also delegated to the Sub-Adviser the full responsibility for proxy voting and related duties in accordance with the Sub-Advisers policy and procedures. The Adviser
periodically will monitor the Sub-Advisers voting to ensure that they are carrying out their duties. The Sub-Advisers proxy voting policies and procedures are summarized as follows:
Security Capital may be granted by its clients the authority to vote the proxies of the securities held in client portfolios. To ensure that the proxies are
voted in the best interests of its clients, Security Capital has adopted detailed proxy voting procedures (Procedures) that incorporate detailed proxy guidelines (Guidelines) for voting proxies on specific types of issues.
Pursuant to the Procedures, most routine proxy matters will be voted in accordance with the Guidelines, which have been developed with the objective of
encouraging corporate action that enhances shareholder value. For proxy matters that are not covered by the Guidelines (including matters that require a case-by-case determination) or where a vote contrary to the Guidelines is considered
appropriate, the Procedures require a certification and review process to be completed before the vote is cast. That process is designed to identify actual or potential material conflicts of interest and ensure that the proxy is cast in the best
interest of clients. For proxy matters that are not covered by the Guidelines or where a vote contrary to the Guidelines is considered appropriate, the investment analyst who covers that company will document on a proxy summary how Security Capital
is voting and that summary is signed-off by the investment analyst, as well as two Portfolio Managers. In addition, this summary is provided to Security Capitals Chief Compliance Officer.
To oversee and monitor the proxy-voting process, Security Capital has established a proxy committee and appointed a proxy administrator. The proxy committee
meets periodically to review general proxy-voting matters, review and approve the Guidelines annually, and provide advice and recommendations on general proxy-voting matters as well as on specific voting issues.
A copy of the Security Capitals proxy voting procedures and guidelines are available upon request by contacting your client service representative.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Nuveen Fund Advisors, LLC is the registrants investment adviser (also referred to as the Adviser.) The Adviser is responsible for the
selection and on-going monitoring of the Funds investment portfolio, managing the Funds business affairs and providing certain clerical, bookkeeping and administrative services. The Adviser has engaged Security Capital Research &
Management Incorporated (Security Capital or Sub-Adviser) for a portion of the registrants investments. Security Capital, as Sub-Adviser, provides discretionary investment advisory services. The following section
provides information on the portfolio managers at the Sub-Adviser:
Item 8 (a)(1).
|
Portfolio management team from SECURITY CAPITAL RESEARCH & MANAGEMENT INCORPORATED
|
As of the date of filing this report, the following individuals at the Sub-Adviser have primary responsibility for the day-to-day implementation of the
Funds investment strategy:
ANTHONY R. MANNO JR. is CEO, President and Chief Investment Officer of Security Capital Research & Management
Incorporated. He is Chairman, President and Managing Director of SC-Preferred Growth LLC. Prior to joining Security Capital in 1994, Mr. Manno spent 14 years with LaSalle Partners Limited as a Managing Director, responsible for real estate
investment banking activities. Mr. Manno began his career in real estate finance at The First National Bank of Chicago and has 46 years of experience in the real estate investment business. He received an MBA in Finance with honors (Beta Gamma
Sigma) from the University of Chicago and graduated Phi Beta Kappa from Northwestern University with a BA and MA in Economics. Mr. Manno is a Certified Public Accountant and was awarded an Elijah Watt Sells Award and is a recipient of the
Presidents Call to Service Award, December 2008.
KENNETH D. STATZ is a Managing Director and Senior Market Strategist of Security Capital
Research & Management Incorporated where he is responsible for the development and implementation of portfolio investment strategy. Prior to joining Security Capital in 1995, Mr. Statz was a Vice President in the Investment Research Department
of Goldman, Sachs & Co., concentrating on research and underwriting for the REIT industry. Previously, he was a REIT Portfolio Manager and a Managing Director of Chancellor Capital Management. Mr. Statz has 38 years of experience in the real
estate securities industry and received an MBA and a BBA in Finance from the University of Wisconsin.
KEVIN W. BEDELL is a Managing
Director of Security Capital Research & Management Incorporated where he directs the Investment Analysis Team, which provides in-depth proprietary research on publicly listed
companies. Prior to joining Security Capital in 1996, Mr. Bedell spent nine years with LaSalle Partners Limited where he was Equity Vice President and Portfolio Manager, with responsibility for
strategic, operational and financial management of a private real estate investment trust with commercial real estate investments in excess of $1 billion. Mr. Bedell has 32 years of experience in the real estate securities industry and received an
MBA in Finance from the University of Chicago and a BA from Kenyon College.
NATHAN J. GEAR is an Executive Director of Security Capital
Research & Management Incorporated where, as a senior member of the Investment Analysis Team, he leads the fundamental analysis and pricing of REIT fixed income senior securities. Prior to joining Security Capital in 2006, Mr. Gear was involved
in the underwriting and analysis of real estate loans for JPMorgan. Mr. Gear received his BS with honors from Pensacola Christian College and is a member of the Chartered Financial Analyst Institute.
Item 8 (a)(2).
|
Other Accounts Managed by Security Capital Research & Management Incorporated As of December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuveen Real Estate Income Fund
(Fund)
Security Capital Research & Management Incorporated (Adviser)
|
|
(a)(1) Identify portfolio
manager(s) of the
Adviser to be named in
the Fund prospectus
|
|
(a)(2) For each person identified in column (a)(1), provide number of
accounts other than the Fund managed by the person within each
category below
and the total assets in the accounts managed within
each category below
|
|
|
(a)(3) Performance Fee Accounts. For each of the categories in column
(a)(2), provide number of accounts and the total assets in the accounts
with
respect to which the advisory fee is based on the performance of
the account
|
|
|
|
Registered Investment
Companies
|
|
|
Other Pooled Investment
Vehicles
|
|
|
Other Accounts
|
|
|
Registered Investment
Companies
|
|
|
Other Pooled Investment
Vehicles
|
|
|
Other Accounts
|
|
|
|
Number of
Accounts
|
|
|
Total Assets
($billions)
|
|
|
Number of
Accounts
|
|
|
Total Assets
($billions)
|
|
|
Number of
Accounts
|
|
|
Total Assets
($billions)
|
|
|
Number of
Accounts
|
|
|
Total
Assets
|
|
|
Number of
Accounts
|
|
|
Total
Assets
|
|
|
Number of
Accounts
|
|
|
Total Assets
($billions)
|
|
Anthony R. Manno Jr.
|
|
|
2
|
|
|
$
|
0.5
|
|
|
|
2
|
|
|
$
|
0.8
|
|
|
|
45
|
|
|
$
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
$
|
0.4
|
|
Kenneth D. Statz
|
|
|
2
|
|
|
$
|
0.5
|
|
|
|
2
|
|
|
$
|
0.8
|
|
|
|
45
|
|
|
$
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
$
|
0.4
|
|
Kevin W. Bedell
|
|
|
2
|
|
|
$
|
0.5
|
|
|
|
2
|
|
|
$
|
0.8
|
|
|
|
45
|
|
|
$
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
$
|
0.4
|
|
Nathan J. Gear
|
|
|
2
|
|
|
$
|
0.5
|
|
|
|
2
|
|
|
$
|
0.8
|
|
|
|
45
|
|
|
$
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
$
|
0.4
|
|
Potential Material Conflicts of Interest
As shown in the above tables, the portfolio managers may manage accounts in addition to the Nuveen Funds (the Funds). The potential for conflicts
of interest exists when portfolio managers manage other accounts with similar investment objectives and strategies as the Funds (Similar Accounts). Potential conflicts may include, for example, conflicts between investment strategies and
conflicts in the allocation of investment opportunities.
Responsibility for managing Security Capitals clients portfolios is organized
according to investment strategies within asset classes. Generally, client portfolios with similar strategies are managed using the same objectives, approach and philosophy. Therefore, portfolio holdings, relative position sizes and sector exposures
tend to be similar across similar portfolios, which minimizes the potential for conflicts of interest.
Security Capital may receive more compensation
with respect to certain Similar Accounts than that received with respect to the Nuveen Funds or may receive compensation based in part on the performance of certain Similar Accounts. This may create a potential conflict of interest for Security
Capital or its portfolio managers by providing an incentive to favor these Similar Accounts when, for example, placing securities transactions. Potential conflicts of interest may arise with both the aggregation and allocation of securities
transactions and allocation of limited investment opportunities. Allocations of aggregated trades, particularly trade orders that were only partially completed due to limited availability, and allocation of investment opportunities generally, could
raise a potential conflict of interest, as Security Capital may have an incentive to allocate securities that are expected to increase in value to favored accounts. Initial public offerings, in particular, are frequently of very limited
availability. Security Capital may be perceived as causing accounts it manages to participate in an offering to increase Security Capitals overall allocation of securities in that offering. A potential conflict of interest also may be
perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by another account, or when a sale in one account lowers the
sale price received in a sale by a second account. If Security Capital manages accounts that engage in short sales of securities of the type in which the Funds invests, Security Capital could be seen as harming the performance of the Funds for the
benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall.
Security Capital has policies and
procedures designed to manage these conflicts described above such as allocation of investment opportunities to achieve fair and equitable allocation of investment opportunities among its clients over time. For example:
Orders placed for the same equity security within a reasonable time period are aggregated consistent with Security Capitals duty of best execution for
its clients. If aggregated trades are fully executed, accounts participating in the trade will be allocated their pro rata share on an average price basis. Partially completed orders will be allocated among the participating accounts on a pro-rata
average price basis as well.
Item 8 (a)(3).
|
Fund Manager Compensation
|
As of the most recently completed fiscal year end, the primary portfolio managers compensation is as follows:
The principal form of compensation of Security Capitals professionals is a base salary and annual bonus. Base salaries are fixed for each portfolio
manager. Each professional is paid a cash salary and, in addition, a year-end bonus based on achievement of specific objectives that the professionals
manager and the professional agree upon at the commencement of the year. The annual bonus is paid partially in cash and partially in either: (i) restricted stock of Security Capitals parent
company, JPMorgan Chase & Co., and/or (ii) in self-directed parent company mutual funds, all vesting over a three-year period (50% each after the second and third years). The annual bonus is a function of Security Capital achieving its
financial, operating and investment performance goals, as well as the individual achieving measurable objectives specific to that professionals role within the firm and the investment performance of all accounts managed by the portfolio
manager. None of the portfolio managers compensation is based on the performance of, or the value of assets held in, the Funds.
Item 8 (a)(4).
|
Ownership of JRS Securities as of December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
None
|
|
$1-
$10,000
|
|
|
$10,001-
$50,000
|
|
$50,001-
$100,000
|
|
|
$100,001-
$500,000
|
|
|
$500,001 -
$1,000,000
|
|
|
over $1,000,000
|
|
Anthony R. Manno Jr.
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth D. Statz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Kevin W. Bedell
|
|
X
|
|
|
|
|
|
|
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Nathan J. Gear
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X
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ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED
PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may recommend nominees to the
registrants Board implemented after the registrant last provided disclosure in response to this Item.