UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21098
Real Estate Income Fund Inc.
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: December 31
Date of reporting period: June 30, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
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REAL ESTATE
Income Fund Inc.
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[GRAPHIC OMITTED]
Semi-Annual Report
June 30, 2004
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WHAT'S INSIDE
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Letter from the Chairman .................................................. 1
Schedule of Investments ................................................... 6
Statement of Assets and Liabilities ....................................... 10
Statement of Operations ................................................... 11
Statements of Changes in Net Assets ....................................... 12
Notes to Financial Statements ............................................. 13
Financial Highlights ...................................................... 18
Financial Data ............................................................ 20
Additional Shareholder Information ........................................ 21
Dividend Reinvestment Plan ................................................ 22
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LETTER FROM THE CHAIRMAN
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[PHOTO OMITTED]
R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
After a torrid second half of 2003, the equity markets took a breather in the
first half of this year. Markets typically abhor uncertainty, so as the year
progressed, investors grew increasingly lethargic amid questions over Iraq,
global terrorism, a rise in oil prices, interest rates, inflation, and the
presidential election. The good news - solid corporate earnings, the improving
economy, renewed job growth, and the still low level of interest rates - largely
was ignored. As a result, stock market returns for the first six months of 2004
generally were modest, as opposed to the strong, double-digit gains late last
year.
The Real Estate Investment Trust(i) ("REIT") market has enjoyed a prolonged
period of out-sized returns, particularly during 2003 and the first quarter of
2004. REIT shares declined sharply in April through the first half of May
reflecting a variety of factors, including concerns over near-term rising
interest rates. Since then, the market has rallied considerably, with total
returns for the first half of 2004 of more than five percent. Property market
fundamentals have, on average, bottomed out for this cycle and are beginning to
improve in step with the broader economy.
Stocks continued to outpace bonds in the first half of the year. Bonds generally
suffered, particularly during the spring, due to heightened worries about
resurgent inflation, rising rates, and anticipation that the Federal Reserve
Bank ("Fed") would begin to raise key short-term rates after a long
accommodative stance on monetary policy. Indeed, the Fed edged up its federal
funds target rate(ii) at the end of June to 1.25%. Over the six-month period,
bonds generally experienced slightly negative returns.
After a sharp drop early in the year, by the end of the period the U.S. Consumer
Confidence Index(iii) rose to levels not seen since June of 2002. The domestic
unemployment rate held steady for the six-month period, but the rate of job
growth slowed following a strong increase in the first three months of the year.
Real (inflation-adjusted) gross domestic product (GDP)(iv) increased at an
annual rate of 3.90% in the first fiscal quarter of 2004, the most recent figure
available at the close of the period, down slightly from the 4.10% increase seen
in the last quarter of 2003.(v)
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Real Estate Income Fund Inc. 1
Fund Performance
The Real Estate Income Fund returned -5.33%, based on its New York Stock
Exchange ("NYSE") market price and 2.71% based on its net asset value
("NAV")(vi) per share during the six-month period ended June 30, 2004. The
fund's Lipper sector equity closed-end funds category average was 3.23% over the
same time frame.(vii) Please note that Lipper performance returns are based on
each fund's NAV.
During this six-month period, the fund distributed dividends to shareholders
totaling $0.65 per share. The performance table shows the fund's six-month total
return based on its NAV and market price as of June 30, 2004. Past performance
is no guarantee of future results. The fund's yields will vary.
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FUND PERFORMANCE
AS OF JUNE 30, 2004
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6-Month
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Price Per Share Total Return
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$17.99 (NAV) 2.71%
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$16.00 (NYSE) -5.33%
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All figures represent past performance and are not a guarantee of future
results. Performance figures reflect fee waivers and/or expense reimbursements,
if any. In the absence of fee waivers and/or expense reimbursements, if any, the
total return would be reduced.
Total returns are based on changes in NAV or market price, respectively. Total
returns assume the reinvestment of all dividends and/or capital gains
distributions, if any, in additional shares.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees, and other mutual fund
issues in connection with various investigations. The fund has been informed
that the Adviser and its affiliates are responding to those information
requests, but are not in a position to predict the outcome of these requests and
investigations.
In November 2003, Citigroup Asset Management disclosed an investigation by the
Securities and Exchange Commission ("SEC") and the U.S. Attorney relating to
Citigroup Asset Management's entry into the transfer agency business during
1997-1999. On July 20, 2004, Citigroup disclosed that it had been notified by
the Staff of the SEC that the Staff is considering recommending a civil
injunctive action and/or an administrative proceeding against certain
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2 2004 Semi-Annual Report
advisory and transfer agent entities affiliated with Citigroup relating to the
creation and operation of its internal transfer agent unit to serve primarily
the Smith Barney family of mutual funds. This internal transfer agent did not
provide services to the fund. Citigroup is cooperating with the SEC and will
seek to resolve this matter in discussion with the SEC Staff. Although there can
be no assurance, Citigroup does not believe that this matter will have a
material adverse effect on the fund.
Looking for Additional Information?
The fund is traded under the symbol "RIT" and its closing market price is
available in most newspapers under the NYSE listings. The daily NAV is available
on-line under symbol XRITX. Barron's and The Wall Street Journal's Monday
editions carry closed-end fund tables that will provide additional information.
In addition, the fund issues a quarterly press release that can be found on most
major financial websites as well as www.citigroupassetmanagement.com.
In a continuing effort to provide information concerning the fund, shareholders
may call 1-888-735-6507, Monday through Friday from 8:00 a.m. to 6:00 p.m.
Eastern Time, for the fund's current net asset value, market price, and other
information regarding the fund's portfolio holdings and allocations.
Thank you for your investment in the Real Estate Income Fund Inc. We appreciate
that you have entrusted us to manage your money and value our relationship with
you.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
July 20, 2004
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Real Estate Income Fund Inc. 3
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
Portfolio holdings and breakdowns are as of June 30, 2004 and are subject to
change. Please refer to pages 6 through 9 for a list and percentage breakdown of
the fund's holdings.
RISKS: Funds that invest in securities related to the real estate industry are
subject to the risks of real estate markets, including fluctuating property
values, changes in interest rates, and other mortgage-related risks. In
addition, investment in funds that concentrate their investments in one sector
or industry may involve greater risk than more broadly diversified funds.
(i) Real Estate Investment Trusts invest in real estate or loans secured by
real estate and issue shares in such investments, which can be illiquid.
(ii) The federal funds rate is the interest rate that banks with excess
reserves at a Federal Reserve district bank charge other banks that need
overnight loans.
(iii) Source: June 2004 Consumer Confidence Index, The Conference Board.
(iv) Gross domestic product is a market value of goods and services produced by
labor and property in a given country.
(v) Source: Bureau of Economic Analysis, U.S. Department of Commerce, June 25,
2004.
(vi) NAV is calculated by subtracting total liabilities and outstanding
preferred stock from the closing value of all securities held by the fund
(plus all other assets) and dividing the result (total net assets) by the
total number of the common shares outstanding. The NAV fluctuates with
changes in the market prices of securities in which the fund has invested.
However, the price at which an investor may buy or sell shares of the fund
is at the fund's market price as determined by supply of and demand for
the fund's shares.
(vii) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended June 30, 2004, calculated
among the 29 funds in the fund's Lipper sector equity closed-end category
including the reinvestment of dividends and capital gains, if any.
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4 2004 Semi-Annual Report
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Take Advantage of the Fund's Dividend Reinvestment Plan!
As an investor in the Fund, you can participate in its Dividend
Reinvestment Plan ("Plan"), a convenient, simple and efficient way to reinvest
your dividends and capital gains, if any, in additional shares of the Fund. A
description of the Fund's Plan begins on page 22. Below is a short summary of
how the Plan works.
Plan Summary
If you are a Plan participant who has not elected to receive your
dividends in the form of a cash payment, then your dividend and capital gain
distributions will be reinvested automatically in additional shares of the Fund.
The number of common stock shares in the Fund you will receive in lieu of
a cash dividend is determined in the following manner. If the market price of
the common stock is equal to or exceeds 98% of the net asset value ("NAV") per
share on the date of determination, you will be issued shares at a price equal
to the greater of (a) 98% of the NAVper share at the close of trading on the
determination date or (b) 95% of the market price per share of the Common Shares
on the determination date.
If 98% of the NAV per share at the time of valuation is greater than the
market price of the common stock on the determination date, the Plan Agent will
buy common stock for your account in the open market or on the New York Stock
Exchange.
If the Plan Agent begins to purchase additional shares in the open market
and the market price of the shares subsequently rises above 98% of the NAV
before the purchases are completed, the Plan Agent will attempt to cancel any
remaining orders and the Fund will issue the remaining dividend or distribution
in shares at the greater of 98% of the NAV per share at the close of trading on
the Exchange on the determination date or 95% of their current market price. In
that case, the number of Fund shares you receive will be based on the weighted
average of prices paid for shares purchased in the open market and the price at
which the Fund issues the remaining shares.
To find out more detailed information about the Plan and about how you can
participate, please call American Stock Transfer & Trust Company at
1-877-366-6441.
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Real Estate Income Fund Inc. 5
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Schedule of Investments (unaudited) June 30, 2004
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SHARES SECURITY VALUE
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COMMON STOCK -- 69.5%
Apartments -- 9.7%
36,500 Archstone-Smith Trust $ 1,070,545
190,000 Camden Property Trust 8,702,000
185,000 Gables Residential Trust 6,286,300
100,000 Mid-America Apartment Communities, Inc. 3,789,000
215,000 Summit Properties Inc. 5,512,600
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25,360,445
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Diversified -- 4.9%
50,000 Crescent Real Estate Equities Co. 806,000
210,000 iStar Financial Inc. 8,400,000
190,000 Lexington Corporate Properties, Inc. 3,782,900
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12,988,900
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Healthcare -- 8.9%
174,000 Health Care Property Investors, Inc. 4,182,960
280,000 Healthcare Realty Trust Inc. 10,494,400
22,600 Omega Healthcare Investors, Inc. 226,904
511,700 Senior Housing Properties Trust 8,591,443
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23,495,707
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Home Financing -- 1.0%
174,000 Municipal Mortgage & Equity, LLC 2,530,220
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Industrial -- 3.6%
185,000 EastGroup Properties, Inc. 6,228,950
161,700 First Potomac Realty Trust 3,099,789
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9,328,739
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Industrial/Office - Mixed -- 6.2%
50,000 Bedford Property Investors, Inc. 1,462,000
207,000 Kilroy Realty Corp. 7,058,700
190,000 Liberty Property Trust 7,639,900
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16,160,600
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Lodging/Resorts -- 2.4%
146,000 Hospitality Properties Trust 6,175,800
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Office -- 15.9%
203,000 Arden Realty Group, Inc. 5,970,230
177,000 CarrAmerica Realty Corp. 5,350,710
72,000 Glenborough Realty Trust Inc. 1,321,200
260,000 Highwoods Properties, Inc. 6,110,000
848,700 HRPT Properties Trust 8,495,487
161,000 Mack-Cali Realty Corp. 6,662,180
50,000 Maguire Properties, Inc. 1,238,500
200,000 Prentiss Properties Trust 6,704,000
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41,852,307
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6 2004 Semi-Annual Report
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Schedule of Investments (unaudited) (continued) June 30, 2004
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SHARES SECURITY VALUE
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Regional Malls -- 4.3%
196,000 Glimcher Realty Trust $ 4,335,520
148,100 The Macerich Co. 7,089,547
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11,425,067
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Retail - Free Standing -- 1.6%
221,900 Commercial Net Lease Realty, Inc. 3,816,680
12,200 Realty Income Corp. 509,106
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4,325,786
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Shopping Centers -- 9.0%
250,000 Borealis Retail Real Estate Investment Trust+ 2,032,672
330,000 Cedar Shopping Centers Inc. 3,791,700
105,000 Equity One, Inc. 1,898,400
233,000 Heritage Property Investment Trust 6,304,980
182,000 New Plan Excel Realty Trust, Inc. 4,251,520
135,000 Ramco-Gershenson Properties Trust 3,271,050
52,000 Tanger Factory Outlet Centers, Inc. 2,033,200
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23,583,522
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Specialty -- 2.0%
25,000 Correctional Properties Trust 731,250
127,000 Entertainment Properties Trust 4,538,980
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5,270,230
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TOTAL COMMON STOCK
(Cost -- $140,348,852) 182,497,323
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PREFERRED STOCK -- 30.4%
Apartments -- 3.1%
Apartment Investment and Management Co.:
73,000 7.750% Cumulative, Class U 1,708,200
75,000 9.375% Cumulative, Class G 1,942,500
115,000 10.000% Cumulative, Class R 3,031,400
60,000 United Dominion Realty Trust, Inc., 8.600% Cumulative
Redeemable, Series B 1,560,600
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8,242,700
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Diversified -- 1.1%
109,400 Crescent Real Estate Equities Co., 9.500% Cumulative
Redeemable, Series B 2,881,049
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Healthcare -- 2.5%
150,000 Health Care Property Investors, Inc., 7.100% Cumulative
Redeemable, Series F 3,636,000
115,000 Omega Healthcare Investors, Inc., 8.375% Cumulative
Redeemable, Series D 2,886,500
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6,522,500
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Real Estate Income Fund Inc. 7
================================================================================
Schedule of Investments (unaudited) (continued) June 30, 2004
================================================================================
SHARES SECURITY VALUE
=============================================================================================
Industrial -- 0.7%
75,000 Keystone Property Trust, 9.125% Cumulative Redeemable, Series D $ 1,935,000
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Industrial/Office - Mixed -- 1.7%
90,000 Bedford Property Investors, Inc., 8.750% Cumulative
Redeemable, Series A+ 4,446,567
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Lodging/Resorts -- 4.4%
220,000 Boykin Lodging Co., 10.500% Cumulative, Class A 5,764,000
90,000 FelCor Lodging Trust Inc., 9.000% Cumulative Redeemable,
Series B 2,250,000
105,000 Hospitality Properties Trust, 8.875% Cumulative Redeemable,
Series B 2,766,750
26,000 LaSalle Hotel Properties, 10.250% Cumulative Redeemable,
Series A 696,150
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11,476,900
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Office -- 5.7%
275,000 CarrAmerica Realty Corp., 7.500% Cumulative Redeemable,
Series E 6,954,750
HRPT Properties Trust:
255,600 8.750% Cumulative Redeemable, Series B 6,722,280
50,000 9.875% Cumulative Redeemable, Series A 1,342,500
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15,019,530
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Regional Malls -- 2.9%
85,000 Glimcher Realty Trust, 8.750% Cumulative Redeemable, Series F 2,164,848
The Mills Corp.:
35,000 8.750% Cumulative Redeemable, Series E 917,350
91,700 9.000% Cumulative Redeemable, Series B 2,442,888
6,000 Pennsylvania Real Estate Investment Trust, 11.000%
Sr. Cumulative 353,400
32,700 Simon Property Group, Inc., 7.890%, Cumulative Step-Up
Premium Rate, Series G 1,726,969
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7,605,455
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Retail - Free Standing -- 1.1%
85,000 Commercial Net Lease Realty, Inc., 9.000% Sr. Cumulative,
Series A 2,237,200
25,200 Realty Income Corp., 7.375% Cumulative Redeemable, Class D 640,080
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2,877,280
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Self Storage -- 0.4%
35,000 Public Storage, Inc., 8.000% Cumulative, Series R 897,750
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Shopping Centers -- 6.8%
Developers Diversified Realty Corp.:
25,000 8.000% Cumulative Redeemable, Class G 635,000
130,000 8.600% Cumulative Redeemable, Class F 3,360,500
131,000 Federal Realty Investment Trust, 8.500% Cumulative Redeemable,
Series B 3,464,950
75,000 New Plan Excel Realty Trust, Inc., 7.625% Cumulative Redeemable,
Series E 1,897,500
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8 2004 Semi-Annual Report
================================================================================
Schedule of Investments (unaudited) (continued) June 30, 2004
================================================================================
SHARES SECURITY VALUE
=============================================================================================
Shopping Centers -- 6.8% (continued)
65,000 Ramco-Gershenson Properties Trust, 9.500% Cumulative
Redeemable, Series B $ 1,719,250
63,000 Urstadt Biddle Properties Inc., 8.500% Sr. Cumulative,
Series C+ 6,884,722
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17,961,922
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TOTAL PREFERRED STOCK
(Cost -- $77,630,692) 79,866,653
=============================================================================================
FACE
AMOUNT SECURITY VALUE
=============================================================================================
REPURCHASE AGREEMENT -- 0.1%
$336,000 UBS Securities LLC dated 6/30/04, 1.280% due 7/1/04;
Proceeds at maturity -- $336,012; (Fully collateralized by
U.S. Treasury Bonds, 5.500% to 13.250% due 8/15/13 to
8/15/28; Market value -- $342,721) (Cost -- $336,000) 336,000
=============================================================================================
TOTAL INVESTMENTS -- 100.0%
(Cost -- $218,315,544*) $262,699,976
=============================================================================================
+ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers. This security
has been deemed liquid pursuant to guidelines established by the Board of
Directors.
* Aggregate cost for Federal income tax purposes is substantially the same.
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Real Estate Income Fund Inc. 9
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Statement of Assets and Liabilities (unaudited) June 30, 2004
================================================================================
ASSETS:
Investments, at value (Cost -- $218,315,544) $ 262,699,976
Cash 322
Dividends and interest receivable 1,600,893
Unrealized appreciation of open interest rate swap contracts (Note 6) 104,455
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Total Assets 264,405,646
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LIABILITIES:
Management fee payable 125,326
Interest payable on swap contracts (Note 6) 32,302
Unrealized depreciation of open interest rate swap contracts (Note 6) 26,645
Dividends payable to Taxable Auction Rate Preferred Stockholders 3,016
Accrued expenses 74,633
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Total Liabilities 261,922
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Series M Taxable Auction Rate Preferred Stock (2,600 shares authorized,
issued and outstanding at $25,000 per share) (Note 5) 65,000,000
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Total Net Assets $ 199,143,724
==================================================================================================
NET ASSETS:
Par value of capital shares $ 11,069
Capital paid in excess of par value 154,384,803
Undistributed net investment income 1,309,850
Accumulated net realized loss from investment transactions and swap contracts (1,024,266)
Net unrealized appreciation of investments, swap contracts
and foreign currencies 44,462,268
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Total Net Assets
(Equivalent to $17.99 per share on 11,069,242 capital shares of $0.001
par value outstanding; 100,000,000 capital shares authorized) $ 199,143,724
==================================================================================================
See Notes to Financial Statements.
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10 2004 Semi-Annual Report
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Statement of Operations (unaudited)
================================================================================
For the Six Months Ended June 30, 2004
INVESTMENT INCOME:
Dividends $ 9,228,670
Interest 5,886
Less: Foreign withholding tax (14,352)
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Total Investment Income 9,220,204
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EXPENSES:
Management fee (Note 2) 1,195,356
Auction participation fees (Note 5) 85,097
Audit and legal 67,295
Shareholder communications 43,297
Directors' fees 25,461
Stock exchange listing fees 11,026
Custody 10,337
Transfer agency services 8,085
Rating agency fees 5,470
Other 6,056
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Total Expenses 1,457,480
Less: Management fee waiver (Note 2) (425,016)
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Net Expenses 1,032,464
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Net Investment Income 8,187,740
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
SWAP CONTRACTS AND FOREIGN CURRENCIES (NOTES 3 AND 6):
Net Realized Loss From:
Investment transactions (322,124)
Swap contracts (673,481)
Foreign currency transactions (641)
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Net Realized Loss (996,246)
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Change in Net Unrealized Appreciation From:
Investments (3,031,237)
Swap contracts 1,087,988
Foreign currencies (165)
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Decrease in Net Unrealized Appreciation (1,943,414)
- --------------------------------------------------------------------------------
Net Loss on Investments, Swap Contracts and Foreign Currencies (2,939,660)
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Dividends Paid to Taxable Auction Rate Preferred Stockholders
From Net Investment Income (387,733)
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Increase in Net Assets From Operations $ 4,860,347
================================================================================
See Notes to Financial Statements.
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Real Estate Income Fund Inc. 11
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Statements of Changes in Net Assets
================================================================================
For the Six Months Ended June 30, 2004 (unaudited)
and the Year Ended December 31, 2003
2004 2003
===================================================================================================
OPERATIONS:
Net investment income $ 8,187,740 $ 11,345,382
Net realized gain (loss) (996,246) 5,439,197
Increase (decrease) in net unrealized appreciation (1,943,414) 48,936,469
Dividends Paid to Taxable Auction Rate Preferred
Stockholders from net investment income (387,733) (826,346)
- ---------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 4,860,347 64,894,702
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS PAID TO COMMON STOCK
SHAREHOLDERS FROM:
Net investment income (7,239,285) (8,815,072)
Net realized gains -- (6,785,795)
Capital -- (2,589,027)
- ---------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions
Paid to Common Stock Shareholders (7,239,285) (18,189,894)
- ---------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Underwriting commissions and offering expenses for the
issuance of Taxable Auction Rate Preferred Stock (Note 5) -- 13,177
Net asset value of shares issued for reinvestment of dividends -- 4,417,073
- ---------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions -- 4,430,250
- ---------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (2,378,938) 51,135,058
NET ASSETS:
Beginning of period 201,522,662 150,387,604
- ---------------------------------------------------------------------------------------------------
End of period* $ 199,143,724 $ 201,522,662
===================================================================================================
* Includes undistributed net investment income of: $ 1,309,850 $ 749,769
===================================================================================================
See Notes to Financial Statements.
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12 2004 Semi-Annual Report
================================================================================
Notes to Financial Statements (unaudited)
================================================================================
1. Significant Accounting Policies
The Real Estate Income Fund Inc. ("Fund"), a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company.
The following are significant accounting policies consistently followed by the
Fund and are in conformity with U.S. generally accepted accounting principles
("GAAP"): (a) security transactions are accounted for on trade date; (b)
securities traded on national securities markets are valued at the closing
prices on such markets or, if there were no sales during the day, at the mean
between the bid and asked prices; securities primarily traded on foreign
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges; over-the-counter securities are valued
on the basis of the bid price at the close of business on each day; securities
listed on the NASDAQ National Market System for which market quotations are
available are valued at the official closing price or, if there is no official
closing price on that day, at the last sale price; securities for which market
quotations are not readily available will be valued in good faith at fair value
by or under the direction of the Board of Directors; (c) fixed-income securities
are valued at the mean between the quoted bid and asked prices provided by an
independent pricing service that are based on transactions in corporate
obligations, quotations from corporate bond dealers, market transactions in
comparable securities and various relationships between securities; (d)
securities maturing within 60 days or less are valued at cost plus accreted
discount, or minus amortized premium, which approximates value; (e) gains or
losses on the sale of securities are calculated by using the specific
identification method; (f) dividend income is recorded by the Fund on the
ex-dividend date; foreign dividend income is recorded on the ex-dividend date or
as soon as practical after the Fund determines the existence of a dividend
declaration after exercising reasonable due diligence; (g) interest income,
adjusted for amortization of premium and accretion of discount, is recorded by
the Fund on an accrual basis; (h) dividends and distributions to shareholders
are recorded monthly by the Fund on the ex-dividend date for the shareholders of
common stock. The holders of the Taxable Auction Rate Preferred Stock shall be
entitled to receive dividends in accordance with an auction that will normally
be held weekly and out of funds legally available to shareholders; (i) the
accounting records are maintained in U.S. dollars. All assets and liabilities
denominated in foreign currencies are translated into U.S. dollars on the date
of valuation. Purchases and sales of securities and income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income or expense amounts
recorded and collected or paid are adjusted when reported by the custodian; (j)
in accordance with Statement of Position 93-2 Determination, Disclosure, and
Financial Statement
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Real Estate Income Fund Inc. 13
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies, book/tax basis differences relating to shareholder
distributions and other permanent book/tax differences are reclassified to
paid-in capital at the Fund's fiscal year end. In addition, the character of
income and gains to be distributed is determined in accordance with income tax
regulations which may differ from GAAP; (k) the Fund's policy is to pass through
to its shareholders substantially all REIT distributions and other income it
receives, less operating expenses. The character of REIT distributions received
from portfolio securities held by the Fund is generally comprised of investment
income, long-term capital gains, and return of REIT capital; (l) the Fund
intends to comply with the provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (m) the net asset value of the Fund's Common Stock is
determined no less frequently than the close of business on the Fund's last
business day of each week (generally Friday). It is determined by dividing the
value of the Fund's net assets by the total number of Common Shares outstanding;
and (n) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
2. Management Agreement and Other Transactions
Citi Fund Management Inc. ("CFM"), an affiliate of Citigroup Inc. ("Citigroup"),
acts as the investment manager of the Fund. The Fund pays CFM a management fee
calculated at an annual rate of 0.90% of the Fund's Managed Assets (which
includes assets attributable to Fund Preferred Shares). This fee is calculated
daily and paid monthly.
In addition, CFM has contractually agreed to waive a portion of its management
fee in the amount of 0.32% of the Fund's Managed Assets through July 31, 2007,
0.20% of Managed Assets for the 12-month period ending July 31, 2008, and 0.10%
of Managed Assets for the 12-month period ending July 31, 2009. The waiver will
be eliminated on August 1, 2009. For the six months ended June 30, 2004, CFM
waived a portion of its management fee amounting to $425,016.
CFM has entered into a sub-investment advisory agreement with AEW Management and
Advisors, L.P. ("AEW"). AEW is primarily responsible for overseeing the
day-to-day investment operations of the Fund. CFM pays AEW a fee at an annual
rate equal to: (a) for the first 5 years of the Fund's operation, 0.40% of the
first $100 million of the Fund's Managed Assets (which includes assets
attributable to Preferred shares), 0.35% of the next $100 million of the Fund's
Managed Assets and 0.30% of the Fund's Managed Assets in excess of $200 million;
and (b) starting 5 years after the commencement of the Fund's operations,
- --------------------------------------------------------------------------------
14 2004 Semi-Annual Report
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
50% of the management fee paid by the Fund to CFM net of any waivers. For the
six months ended June 30, 2004, AEW waived a portion of their fees pending
recoupment of certain costs incurred by CFM in connection with the initial
public offering of the Fund.
For the six months ended June 30, 2004, Citigroup Global Markets Inc. ("CGM"),
an indirect wholly-owned subsidiary of Citigroup, received brokerage commissions
of $250.
All officers but one and one Director of the Fund are employees of Citigroup or
its affiliates.
3. Investments
During the six months ended June 30, 2004, the aggregate cost of purchases and
proceeds from sales of investments (including maturities of long-term
investments, but excluding short-term investments) were as follows:
================================================================================
Purchases $8,326,519
- --------------------------------------------------------------------------------
Sales 7,230,970
================================================================================
At June 30, 2004, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 44,810,672
Gross unrealized depreciation (426,240)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 44,384,432
================================================================================
4. Repurchase Agreements
When entering into repurchase agreements, it is the Fund's policy that a
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market to
ensure the adequacy of the collateral. If the seller defaults and the value of
the collateral declines or if bankruptcy proceedings are commenced with respect
to the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
5. Taxable Auction Rate Preferred Stock
As of June 30, 2004, the Fund had 2,600 outstanding shares of Taxable Auction
Rate Preferred Stock ("TARPS"). The TARPS' dividends are cumulative at a rate
determined at an auction and the dividend period is typically seven days. The
dividend rates ranged from 1.03% to 1.48% for the six months ended June 30,
2004. At June 30, 2004, the dividend rate was 1.48%.
- --------------------------------------------------------------------------------
Real Estate Income Fund Inc. 15
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
The Fund is required to maintain certain asset coverages with respect to the
TARPS. If the Fund fails to maintain these coverages and does not cure any such
failure within the required time period, the Fund is required to redeem a
requisite number of the TARPS at a redemption price equal to $25,000 per share
plus accumulated and unpaid dividends in order to meet the applicable
requirement. The TARPS have a liquidation preference of $25,000 per share plus
accumulated and unpaid dividends. Additionally, failure to meet the foregoing
asset coverage requirements would restrict the Fund's ability to pay dividends
to common shareholders.
CGM also currently acts as a broker/dealer in connection with the auction of
TARPS. After each auction, the auction agent will pay to each participating
broker/dealer, from monies the Fund provides, a participation fee at the annual
rate of 0.25% of the purchase price of the TARPS that the broker/dealer places
at the auction. For the six months ended June 30, 2004, the Fund incurred
auction participation fees of $81,119 for CGM's services as a participating
broker/dealer.
6. Swap Contracts
The Fund has entered into interest rate swap agreements with Merrill Lynch
Capital Services, Inc. The Fund will record the difference between a
predetermined fixed interest rate and the closing value on the One-Month LIBOR.
These differences are netted out in a cash settlement made monthly, with the
Fund receiving or paying, as the case may be, only the net amount of the two
differences. The Fund is exposed to credit loss in the event of nonperformance
by the swap counterparty.
As of June 30, 2004, the Fund held the following interest rate swap agreements:
Swap Counterparty: Merrill Lynch Capital Services, Inc.
Effective Date: 11/25/02
Notional Amount: $6,500,000
Payments Made by Fund: Fixed Rate, 2.9325%
Payments Received by Fund: Floating Rate (One-Month LIBOR)
Termination Date: 11/25/05
Unrealized Depreciation as of 6/30/04: $(26,645)
========
Swap Counterparty: Merrill Lynch Capital Services, Inc.
Effective Date: 11/25/02
Notional Amount: $26,000,000
Payments Made by Fund: Fixed Rate, 3.6335%
Payments Received by Fund: Floating Rate (One-Month LIBOR)
Termination Date: 11/25/07
Unrealized Appreciation as of 6/30/04: $2,292
======
- --------------------------------------------------------------------------------
16 2004 Semi-Annual Report
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
Swap Counterparty: Merrill Lynch Capital Services, Inc.
Effective Date: 11/25/02
Notional Amount: $19,500,000
Payments Made by Fund: Fixed Rate, 4.1170%
Payments Received by Fund: Floating Rate (One-Month LIBOR)
Termination Date: 11/25/09
Unrealized Appreciation as of 6/30/04: $102,163
========
At June 30, 2004, the Fund had total unrealized appreciation of $77,810 from
swap contracts.
7. Capital Shares
Capital stock transactions were as follows:
Six Months Ended Year Ended
June 30, 2004 December 31, 2003
----------------- -----------------------
Shares Amount Shares Amount
================================================================================
Shares issued on reinvestment -- -- 292,538 $4,417,073
================================================================================
8. Additional Information
Citigroup has been notified by the Staff of the Securities and Exchange
Commission ("SEC") that the Staff is considering recommending a civil injunctive
action and/or an administrative proceeding against Citigroup Asset Management
("CAM"), including its applicable investment advisory companies and Citicorp
Trust Bank ("CTB"), an internal transfer agent, relating to the creation and
operation of the internal transfer agent unit to serve certain CAM-managed
funds. CTB did not provide services to the Fund. This notification arises out of
a previously disclosed investigation by the SEC and the U.S. Attorney and
relates to CTB's entry in 1999 into the transfer agency business, CAM's
retention of, and agreements with an unaffiliated sub transfer agent, the
adequacy of the disclosures made to the fund boards that approved the transfer
agency arrangements, (including CAM's failure to disclose a related revenue
guarantee agreement benefiting CAM and its affiliates), and CAM's operation of
and compensation for the transfer agency business. The revenue guarantee
described above was terminated in 1999 and CAM will be paying the applicable
funds, primarily through fee waivers, a total of approximately $17 million (plus
interest) that is the amount of the revenue received by Citigroup relating to
the revenue guarantee. The Fund did not implement the contractual arrangement
described above and therefore will not receive any portion of the payment.
Citigroup is cooperating fully in the investigation and will seek to resolve the
matter in discussions with the SEC Staff. Although there can be no assurance,
Citigroup does not believe that this matter will have a material adverse effect
on the Fund.
- --------------------------------------------------------------------------------
Real Estate Income Fund Inc. 17
================================================================================
Financial Highlights
================================================================================
For a share of capital stock outstanding throughout each year ended December 31,
unless otherwise indicated:
2004(1) 2003 2002(2)(3)
===============================================================================================
Net Asset Value, Beginning of Period $ 18.21 $ 13.95 $ 14.30
- -----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.74 1.04 0.38
Net realized and unrealized gain (loss) (0.27) 4.96 (0.18)
Dividends Paid to Taxable Auction Rate Preferred
Stockholders from net investment income (0.04) (0.08) (0.03)
- -----------------------------------------------------------------------------------------------
Total Income From Operations 0.43 5.92 0.17
- -----------------------------------------------------------------------------------------------
Underwriting Commissions and Expenses for the
Issuance of Taxable Auction Rate Preferred Stock -- 0.00* (0.09)
- -----------------------------------------------------------------------------------------------
Distributions Paid To Common Stock Shareholders From:
Net investment income (0.65) (0.80) (0.31)
Net realized gains -- (0.62) (0.07)
Capital -- (0.24) (0.05)
- -----------------------------------------------------------------------------------------------
Total Distributions (0.65) (1.66) (0.43)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 17.99 $ 18.21 $ 13.95
- -----------------------------------------------------------------------------------------------
Total Return, Based on Market Price(5) (5.33)%++ 39.42% (3.59)%++
- -----------------------------------------------------------------------------------------------
Total Return, Based on Net Asset Value(5) 2.71%++ 45.12% 0.69%++
- -----------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $ 199 $ 202 $ 150
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets(6):
Expenses(4) 1.03%+ 1.11% 1.11%+
Net investment income 8.15+ 6.60 6.66+
- -----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 3% 27% 13%
- -----------------------------------------------------------------------------------------------
Market Price, End of Period $ 16.00 $ 17.57 $ 14.01
===============================================================================================
(1) For the six months ended June 30, 2004 (unaudited).
(2) For the period July 31, 2002 (commencement of operations) to December 31,
2002.
(3) Due to a change in the accounting method that requires the Fund to
classify periodic payments made under interest rate swap agreements,
certain amounts have been reclassified among net investment income and net
realized and unrealized loss in order to conform to the current
presentation. Without the effect of these reclassifications, for the
period ended December 31, 2002, the amounts for net investment income and
net realized and unrealized loss would have been $0.51 and $(0.31),
respectively. In addition, the ratio of net investment income to average
net assets would have been 8.91%. These reclassifications had no impact on
the net asset value of the Fund or the amount and character of
distributions.
(4) The Manager has agreed to waive a portion of its management fees for the
six months ended June 30, 2004, the year ended December 31, 2003 and the
period ended December 31, 2002. In addition, the manager has reimbursed
the Fund for $20,000 in expenses for the period ended December 31, 2002.
If such fees were not waived and/or expenses reimbursed, the per share
decreases to net investment income and the actual expense ratios would
have been as follows:
Expense Ratios Without
Per Share Decreases to Fees Waivers and/or
Net Investment Income Reimbursement
--------------------------- ----------------------------
2004 2003 2002 2004 2003 2002
----- ----- ----- ------ ----- ------
$0.04 $0.07 $0.03 1.45%+ 1.55% 1.55%+
(5) The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan. Performance figures
may reflect fee waivers and/or expense reimbursements. Past performance is
no guarantee of future results. In the absence of fee waivers and/or
expense reimbursements, the total return would be reduced.
(6) Calculated on the basis of average net assets of common stock
shareholders. Ratios do not reflect the effect of dividend payments to
preferred shareholders.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
18 2004 Semi-Annual Report
================================================================================
Financial Highlights (continued)
================================================================================
The table below sets out information with respect to Taxable Auction Rate
Preferred Stock as of December 31, unless otherwise noted:
2004(1) 2003 2002
================================================================================
Taxable Auction Rate Preferred Stock(2):
Total Amount Outstanding (000s) $ 65,000 $ 65,000 $ 65,000
Asset Coverage Per Share 101,594 102,509 82,841
Involuntary Liquidating Preference Per Share(3) 25,000 25,000 25,000
Average Market Value Per Share(3) 25,000 25,000 25,000
================================================================================
(1) As of June 30, 2004 (unaudited).
(2) On September 30, 2002, the Fund issued 2,600 shares of Taxable Auction
Rate Preferred Stock at $25,000 a share.
(3) Excludes accrued interest or accumulated undeclared dividends.
- --------------------------------------------------------------------------------
Real Estate Income Fund Inc. 19
================================================================================
Financial Data (unaudited)
================================================================================
For a share of capital stock outstanding throughout each period:
Dividend
NYSE Net Asset Dividend Reinvestment
Record Date Closing Price Value Paid Price
================================================================================
Fiscal Year 2002
September 24 $13.89 $14.11 $0.1063 $13.83
October 22 12.57 13.00 0.1063 12.67
November 25 13.64 13.75 0.1063 13.48
December 23 13.94 13.82 0.1063 13.54
Fiscal Year 2003
January 28 13.40 13.34 0.1063 13.07
February 25 14.13 13.59 0.1063 13.42
March 25 14.21 14.00 0.1063 13.72
April 22 14.65 14.75 0.1063 14.46
May 27 14.88 15.42 0.1063 15.03
June 24 14.87 15.33 0.1090 15.02
July 22 15.02 16.21 0.1090 15.55
August 26 15.06 16.19 0.1090 15.62
September 23 15.60 16.86 0.1090 15.72
October 28 16.56 17.15 0.1090 16.81
November 24 16.25 17.65 0.1090 17.02
December 22 16.92 18.02 0.4771 17.52
Fiscal Year 2004
January 27 17.56 18.71 0.1090 17.86
February 24 16.82 19.00 0.1090 17.64
March 23 17.82 19.56 0.1090 18.13
April 27 15.03 17.33 0.1090 15.45
May 25 15.40 17.16 0.1090 15.94
June 22 15.56 17.91 0.1090 15.98
================================================================================
- --------------------------------------------------------------------------------
20 2004 Semi-Annual Report
================================================================================
Additional Shareholder Information (unaudited)
================================================================================
Result of Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Real Estate Income Fund Inc. was held on
April 26, 2004, for the purpose of considering and voting upon the election of
Directors. The following table provides information concerning the matter voted
upon at the Meeting:
1. Election of Directors
Common
Shares Common Preferred Preferred
Voted Shares Shares Shares
Nominees For Withheld For Withheld
- -------- ---------- -------- --------- ---------
Allan J. Bloostein 10,754,570 66,810 2,600 0
R. Jay Gerken 10.754,570 66,810 2,600 0
George M. Pavia 10.754,570 66,810 2,600 0
The following Directors, representing the balance of the Board of Directors,
continue to serve as Directors: Dwight B. Crane, Paolo M. Cucchi, Robert A.
Frankel, Paul Hardin and William R. Hutchinson.
- --------------------------------------------------------------------------------
Real Estate Income Fund Inc. 21
================================================================================
Dividend Reinvestment Plan (unaudited)
================================================================================
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose shares
of Common Stock are registered in his own name will have all distributions from
the Fund reinvested automatically by American Stock Transfer & Trust Company
("AST"), as agent under the Plan, unless the shareholder elects to receive cash.
Distributions with respect to shares registered in the name of a broker-dealer
or other nominee (that is, in "street name") will be reinvested by the broker or
nominee in additional shares under the Plan, unless the service is not provided
by the broker or nominee or the shareholder elects to receive distributions in
cash. Investors who own Common Stock registered in street name should consult
their broker-dealers for details regarding reinvestment. All distributions to
Fund shareholders who do not participate in the Plan will be paid by check
mailed directly to the record holder by or under the direction of AST as
dividend-paying agent.
If the Fund declares a dividend or capital gains distribution payable either in
Common Shares or in cash, shareholders who are not Plan participants will
receive cash, and Plan participants will receive the equivalent amount in Common
Shares. When the market price of the Common Shares is equal to or exceeds 98% of
the net asset value per share of the Common Shares on the Determination Date (as
defined below), Plan participants will be issued Common Shares valued at a price
equal to the greater of (a) 98% of the net asset value per share at the close of
trading on the Determination Date or (b) 95% of the market price per share of
the common stock on the Determination Date. The Determination Date is the
dividend or capital gains distribution record date or, if that date is not a New
York Stock Exchange ("NYSE") trading day, the immediately preceding trading day.
If 98% of the net asset value per share of the Common Shares exceeds the market
price of the Common Shares on determination date, the Plan Agent will receive
the dividend or distribution in cash and will buy Common Shares in the open
market, on the Exchange or elsewhere, for your account as soon as practicable
commencing on the trading day following the determination date and terminating
no later than the earlier of (a) 30 days after the dividend or distribution
payment date, or (b) the record date for the next succeeding dividend or
distribution to be made to the Common Shareholders; except when necessary to
comply with applicable provisions of the federal securities laws. If during this
period: (i) the market price rises so that it equals or exceeds 98% of the net
asset value per share of the Common Shares at the close of trading on the
Exchange on the determination date before the Plan Agent has completed the open
market purchases or (ii) if the Plan Agent is unable to invest the full amount
eligible to be reinvested in open market purchases, the Plan agent will cease
purchasing Common Shares in the open market and the Fund shall issue the
remaining Common Shares at a price per share equal to the greater of (a) 98% of
the net asset value per share at the close of trading on the Exchange on the
determination date or (b) 95% of the then current market price per share. You
may withdraw from the Plan by notifying the Plan Agent in writing at P.O. Box
922, Wall Street Station, New York, New York 10269-0560, by logging
- --------------------------------------------------------------------------------
22 2004 Semi-Annual Report
================================================================================
Dividend Reinvestment Plan (unaudited) (continued)
================================================================================
onto your account and following the directions at www.Investpower.com or by
calling the Plan Agent at 1-877-366-6441. Such withdrawal will be effective
immediately if notice is received by the Plan Agent not less than ten business
days prior to any dividend or distribution record date; otherwise such
withdrawal will be effective as soon as practicable after the Plan Agent's
investment of the most recently declared dividend or distribution on the Common
Shares.
AST will maintain all shareholder accounts in the Plan and will furnish written
confirmations of all transactions in each account, including information needed
by a shareholder for personal and tax records. The automatic reinvestment of
dividends and capital gains distributions will not relieve Plan participants of
any income tax that may be payable on the dividends or capital gains
distributions. Common Shares in the account of each Plan participant will be
held by AST on behalf of the Plan participant, and each shareholder's proxy will
include those shares purchased pursuant to the Plan.
Plan participants are subject to no charge for reinvesting dividends and capital
gains distributions. AST's fees for handling the reinvestment of dividends and
capital gains distributions will be paid by the Fund. No brokerage charges apply
with respect to Common Shares issued directly by the Fund as a result of
dividends or capital gains distributions payable either in Common Shares or in
cash. Each Plan participant will, however, bear a proportionate share of
brokerage commissions incurred with respect to open market purchases made in
connection with the reinvestment of dividends or capital gains distributions.
Experience under the Plan may indicate that changes to it are desirable. The
Fund reserves the right to amend or terminate the Plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The Plan also may be amended or
terminated by AST, with the Fund's prior written consent, on at least 30 days'
written notice to Plan participants. Upon any termination, you will be sent a
certificate or certificates for the full Common Shares held for you under the
Plan and cash for any fractional Common Shares. You may elect to notify the Plan
Agent in advance of such termination to have the Plan Agent sell part or all of
your shares on your behalf. The Plan Agent is authorized to deduct brokerage
commissions actually incurred for this transaction from the proceeds. All
correspondence concerning the Plan should be directed by mail to American Stock
Transfer & Trust Company, 59 Maiden Lane, New York, New York 10038, by logging
onto your account and following the directions at www.Investpower.com or by
telephone at 1-877-366-6441.
------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
- --------------------------------------------------------------------------------
Real Estate Income Fund Inc. 23
(This page intentionally left blank.)
[GRAPHIC OMITTED]
REAL ESTATE
- -----------------
Income Fund Inc.
DIRECTORS
Allan J. Bloostein
Dwight B. Crane
Paolo M. Cucchi
Robert A. Frankel
R. Jay Gerken, CFA
Chairman
Paul Hardin
William R. Hutchinson
George M. Pavia
OFFICERS
R. Jay Gerken, CFA
President and Chief Executive Officer
Andrew B. Shoup
Senior Vice President and
Chief Administrative Officer
James M. Giallanza*
Chief Financial Officer and Treasurer
Kevin Kennedy
Vice President and Investment Officer
Matthew A. Troxell, CFA
Investment Officer
Andrew Beagley*
Chief Compliance Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer
- ----------
* As of August 12, 2004.
RIT
- ---------------------------
Listed
- ---------------------------
NYSE
THE NEW YORK STOCK EXCHANGE
INVESTMENT MANAGER
Citi Fund Management Inc.
100 First Stamford Place
Stamford, Connecticut 06902
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
This report is intended only for the shareholders of the Real Estate Income Fund
Inc. It is not a Prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or of any securities mentioned in the
report.
Beginning August 31, 2004, information on how the Fund voted proxies relating to
portfolio securities during the 12 month period ended June 30, 2004 will be
available (1) without charge, upon request, by calling 1-800-451-2010 and (2) on
the SEC's website at www.sec.gov.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the fund (toll-free) at 1-800-451-2010 and by
visiting the SEC's website at www.sec.gov.
REAL ESTATE INCOME
FUND INC.
125 Broad Street
10th Floor, MF-2
New York, New York 10004
FD02814 8/04
04-7071
ITEM 2. CODE OF ETHICS.
Not Applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an
annual report) that have materially affected, or are likely to
materially affect the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, there unto duly authorized.
Real Estate Income Fund Inc.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Real Estate Income Fund Inc.
Date: September 9, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Real Estate Income Fund Inc.
Date: September 9, 2004
By: /s/ Robert J. Brault
Robert J. Brault
Chief Financial Officer of
Real Estate Income Fund Inc.
Date: September 9, 2004