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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21206
AEW Real Estate Income Fund
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(Exact name of registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
John E. Pelletier, Esq.
CDC IXIS Asset Management Services, Inc.
399 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 449-2801
Date of fiscal year end: January 31, 2005
Date of reporting period: July 31, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] AEW
AEW Real Estate Income Fund
Semiannual Report
July 31, 2004
AEW Management and Advisors
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AEW Real Estate Income Fund
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Portfolio Profile
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Objective:
High current income is a primary objective; capital appreciation is a secondary
objective
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Strategy:
Invests primarily in income-producing securities issued by real estate
companies, including REITs
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Inception Date:
November 26, 2002
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Portfolio Manager:
Matthew A. Troxell,
CFA
AEW Management and Advisors, L.P.
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Common shares American Stock Exchange Symbol:
RIF
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CUSIP Numbers
Common shares: 00104H107
Preferred shares: 00104H206
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July 31, 2004 Market Value Per Common Share: $16.59
Net Asset Value Per Common Share: $18.66
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Management Discussion
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The solid returns many REIT shareholders have enjoyed for the last several years
continued through the beginning of AEW Real Estate Income Fund's fiscal year.
However, share prices declined sharply in April and the first half of May,
reflecting a variety of factors, including concerns over near-term rising
interest rates. During this period, the Morgan Stanley REIT Index suffered five
of its eight largest single-day declines in the past ten years. Altogether, the
REIT market lost almost 18% from March 31 to May 10, although most of the losses
incurred during this span were erased by a subsequent rally of almost 15% over
the balance of the period (May 11 through July 31).
Performance facts
AEW Real Estate Income Fund's total return, based on the market price of common
shares, was -3.29% for the six months ended July 31, 2004. The fund's market
price per common share declined from $17.87 at the start of the fiscal year to
$16.59 per share at the end of the period. Changes in the market price of fund
shares reflect investor demand and are not directly linked to changes in the
fund's net asset value.
Based on the net asset value of common shares and reinvestment of $0.69 per
share in dividends, the fund's total return was -1.33% for the six months ended
July 31, 2004. The net asset value per share fell from $19.70 per common share
at January 31, 2004 to $18.66 at the end of July. The fund had approximately 3.8
million common shares outstanding at the close of the fiscal year and net assets
totaling $71.5 million.
Portfolio information
The fund's primary emphasis on income-producing stocks during the period
detracted from performance, as the prospect of increasing interest rates and
economic growth lead investors to show a preference for alternative investment
choices that might provide capital appreciation rather than income. Holdings in
the healthcare sector fared worst, while apartment and office stocks, which had
been among the worst performers of late, fared relatively well during the six
months ended July 31, 2004. Due to rising interest rates during the period,
interest rate swap agreements that we had previously entered into represented a
modest positive contribution to the fund's net asset value, while the fund's
leverage had a slightly negative impact.
While there were no significant changes to the fund's portfolio during the
period, we made several minor adjustments with the goal of strengthening the
fund's cash flow. We added several new common and preferred stock holdings in a
variety of property types and geographic regions in the United States. As of
July 31, 2004, the fund's common and preferred holdings amounted to 95.3% and
43.0% of total net assets, respectively. The ten largest holdings amounted to
42.5% of the fund's total net assets, and no single holding represented more
than 7.7%.
Outlook
For the remainder of the year we believe capital flows into REITs should remain
strong, as investors in general continue to seek diversification benefits and
dividend yield from REITs. On average, property market fundamentals seem to have
bottomed out for this cycle and appear to be improving in step with the broader
economy. In the near-term, we believe the earnings recovery will be somewhat
muted due to rising operating costs, but we think it will show steady
improvement over the next several years. Our investment process will continue to
focus on securities selection within each property sector, with the goal of
identifying real estate equity securities that provide attractive current income
and solid risk-adjusted returns.
1
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AEW Real Estate Income Fund
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Investment Results through July 31, 2004
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Performance in Perspective
The chart comparing the fund's performance to a REIT index provides a general
sense of how the fund performed for the periods shown. It may be helpful to
understand the differences between the two. The fund's total returns for the
periods shown below include fund expenses, such as management fees/1/. An index
measures the performance of a theoretical portfolio. Unlike a fund, the index is
unmanaged and does not have expenses that affect investment results. It is not
possible to invest directly in an index. Few investors could purchase all of the
securities necessary to match the index and would incur transaction costs and
other expenses even if they could. AEW Real Estate Income Fund is a leveraged
fund that invests in common and preferred shares of REITs, which makes a REIT
index composed of purely common shares less than a direct comparison.
Total Returns -- July 31, 2004
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Since
Inception/1/
6 Months/1/ 1 Year/1/ (11/26/02)
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Total return on market value -3.29% 14.42% 16.65%
Total return on net asset value -1.33 19.70 28.58
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Comparative Performance
Morgan Stanley REIT Index/2/ 1.31 20.62 25.38/3/
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Notes to Chart
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. Recent returns may be higher or lower than those shown. All results
include reinvestment of dividends and capital gains. The table represents past
performance of the fund's common shares and does not reflect taxes shareholders
might owe on any fund distributions or when they sell their shares. Periods of
less than one year are not annualized.
Total return on market value reflects, for the periods indicated, changes in the
fund's market price on the American Stock Exchange and the receipt and
reinvestment of dividends. An investor may only purchase or sell shares of the
fund based upon its market price. In general, the market price of the fund is
determined by supply and demand. An investor's actual return will vary depending
on the market price of shares on the date of purchase and/or sale. Total return
on the net asset value reflects, for the periods indicated, changes in the
fund's net asset value per share, and the receipt and reinvestment of dividends.
/1/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
/2/ Morgan Stanley REIT Index is an unmanaged index of stocks issued by real
estate investment trusts (REITs). It is not possible to invest directly in
the index.
/3/ The since-inception index comparison is calculated from 11/30/02.
Portfolio as of July 31, 2004
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% of Investments
as of
Ten Largest REIT Sectors 7/31/04
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Office 26.2
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Shopping Centers 15.5
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Healthcare 13.7
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Apartments 13.2
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Lodging/Resorts 7.5
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Diversified 7.3
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Regional Malls 6.3
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Industrial 6.0
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Factory Outlets 2.4
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Specialty 1.4
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% of Investments
as of
Ten Largest Holdings* 7/31/04
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Healthcare Realty Trust, Inc. 4.4
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Senior Housing Properties Trust 3.2
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iStar Financial, Inc. 3.2
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HRPT Properties Trust 3.2
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Urstadt Biddle Properties, Inc. (Pfd.) 3.0
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Camden Property Trust 2.9
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Mack-Cali Realty Corp. 2.8
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Prentiss Properties Trust 2.6
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Liberty Property Trust 2.6
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Gables Residential Trust 2.6
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*Common Shares except as noted
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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2
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AEW Real Estate Income Fund -- Schedule of Investments
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Investments as of July 31, 2004 (unaudited)
Shares Description Value (a)
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Common Stocks -- 95.3% of Total Net Assets
REAL ESTATE - 1.4%
Apartments - 1.4%
41,500 Municipal Mortgage & Equity LLC $ 977,740
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REAL ESTATE INVESTMENT TRUSTS - 93.9%
REITs - Apartments - 13.1%
52,000 Archstone Smith Trust 1,530,361
65,000 Camden Property Trust 2,925,000
78,500 Gables Residential Trust 2,594,425
40,000 Mid-America Apartment Communities, Inc. 1,434,000
34,500 Summit Properties, Inc. 890,100
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9,373,886
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REITs - Diversified - 6.3%
83,500 iStar Financial, Inc. 3,173,000
70,000 Lexington Corporate Properties Trust 1,369,200
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4,542,200
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REITs - Factory Outlets - 1.1%
20,000 Tanger Factory Outlet Centers, Inc. 793,000
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REITs - Healthcare - 15.1%
65,000 Health Care Property Investors, Inc. 1,622,400
121,000 Healthcare Realty Trust, Inc. 4,370,520
15,000 Omega Healthcare Investors, Inc. 146,250
100,000 Provident Senior Living Trust, 144A (c) 1,500,000
190,500 Senior Housing Properties Trust 3,181,350
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10,820,520
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REITs - Industrial - 6.5%
25,000 EastGroup Properties, Inc. 810,750
62,400 First Potomac Realty Trust 1,235,520
68,100 Liberty Property Trust 2,615,040
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4,661,310
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REITs - Lodging/Resorts - 3.5%
63,000 Hospitality Properties Trust 2,512,440
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REITs - Office - 27.4%
77,000 Arden Realty, Inc. 2,340,800
65,000 CarrAmerica Realty Corp. 1,981,850
77,000 Glenborough Realty Trust, Inc. 1,407,560
90,000 Highwoods Properties, Inc. 2,088,000
311,300 HRPT Properties Trust 3,134,791
70,000 Kilroy Realty Corp. 2,478,000
68,000 Mack-Cali Realty Corp. 2,781,200
30,000 Maguire Properties, Inc. 742,500
76,500 Prentiss Properties Trust 2,620,890
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19,575,591
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REITs - Regional Malls - 6.1%
150,000 Borealis Retail REIT 1,309,452
62,000 Glimcher Realty Trust 1,342,920
35,000 Macerich Co. (The) 1,676,500
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4,328,872
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REITs - Shopping Centers - 12.8%
125,000 Cedar Shopping Centers, Inc. 1,546,250
100,000 Commercial Net Lease Realty, Inc. 1,700,000
30,000 Equity One, Inc. 541,500
88,000 Heritage Property Investment Trust 2,416,480
16,300 Inland Real Estate Corp. 213,041
52,500 New Plan Excel Realty Trust 1,246,875
39,000 Ramco-Gershenson Properties Trust 1,002,690
11,200 Realty Income Corp. 453,824
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9,120,660
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REITs - Specialty - 2.0%
25,400 Correctional Properties Trust $ 657,860
22,000 Entertainment Properties Trust 777,920
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1,435,780
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Total Real Estate Investment Trusts 67,164,259
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Total Common Stocks (Identified Cost $52,886,067) 68,141,999
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Preferred Stocks - 43.0%
REAL ESTATE INVESTMENT TRUSTS - 43.0%
REITs - Apartments - 3.8%
50,000 Apartment Investment & Management Co., Series G 1,307,500
29,400 Apartment Investment & Management Co., Series R 789,684
27,000 Apartment Investment & Management Co., Series U 635,850
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2,733,034
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REITs - Diversified - 3.8%
50,000 Colonial Properties Trust, Series D 1,278,500
54,800 Crescent Real Estate Equities Co., Series B 1,408,360
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2,686,860
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REITs - Factory Outlets - 2.2%
35,500 Mills Corp. (The), Series B 935,425
25,000 Mills Corp. (The), Series E 656,000
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1,591,425
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REITs - Healthcare - 3.9%
50,000 Health Care Property Investors, Inc., Class F 1,247,500
60,000 Omega Healthcare Investors, Inc., Series D 1,505,400
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2,752,900
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REITs - Industrial - 1.8%
52,000 Keystone Property Trust, Series D 1,320,800
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REITs - Lodging/Resorts - 7.0%
75,000 Boykin Lodging Co., Series A 2,017,500
25,000 FelCor Lodging Trust, Inc., Series B 629,000
72,600 Hospitality Properties Trust, Series B 1,934,790
15,000 LaSalle Hotel Properties, Series A 403,950
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4,985,240
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REITs - Office - 9.0%
30,000 Bedford Property Investors, Inc., Series A, 144A 1,492,500
100,000 CarrAmerica Realty Corp., Series E 2,562,000
90,400 HRPT Properties Trust, Series B 2,401,928
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6,456,428
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REITs - Regional Malls - 2.7%
75,000 Glimcher Realty Trust, Series F 1,950,750
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REITs - Shopping Centers - 8.8%
27,000 Cedar Shopping Centers, Inc., Series A 676,687
42,200 Developers Diversified Realty Corp., Series F 1,126,740
21,300 Developers Diversified Realty Corp., Series G 554,865
13,000 Federal Realty Investment Trust, Series B 341,640
12,500 Ramco-Gershenson Properties Trust, Series B 337,500
9,000 Realty Income Corp., Series D 234,000
27,000 Urstadt Biddle Properties, Inc., Series C 3,007,970
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6,279,402
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Total Real Estate Investment Trusts 30,756,839
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Total Preferred Stocks (Identified Cost $29,810,222) 30,756,839
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See accompanying notes to financial statements.
3
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AEW Real Estate Income Fund -- Schedule of Investments (continued)
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Investments as of July 31, 2004 (unaudited)
Principal
Amount Description Value (a)
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Short Term Investment -- 0.6%
$464,651 Repurchase Agreement with Investors Bank & Trust Co.
dated 7/30/2004 at 1.00% to be repurchased at
$464,689 on 8/02/2004, collateralized by
$474,776 Federal National Mortgage Association
Bond, 3.209% due 6/01/2018 valued at $487,937 $ 464,651
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Total Short Term Investment (Identified Cost
$464,651) 464,651
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Total Investments - 138.9% (Identified Cost
$83,160,940) (b) 99,363,489
Auction Market Preferred Shares plus cumulative
unpaid dividends (39.2)% (28,006,225)
Other assets less liabilities - 0.3% 168,193
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Total Net Assets - 100% $ 71,525,457
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At July 31, 2004, the net unrealized appreciation on
investments based on cost of $83,160,940 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 16,342,411
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (139,862)
------------
Net unrealized appreciation $ 16,202,549
============
(c) Non-income producing security.
REITs Real Estate Investment Trusts
144A Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registrations, normally to qualified institutional buyers. At the period
end, the value of these amounted to $2,992,500 or 4.2% of net assets.
Industry Holdings at July 31, 2004 as a Percentage of Net Assets
Office 36.4%
Shopping Centers 21.6
Healthcare 19.0
Apartments - REITS 16.9
Lodging/Resorts 10.5
Diversified 10.1
Regional Malls 8.8
Industrial 8.3
Factory Outlets 3.3
Specialty 2.0
Apartments - Real Estate 1.4
Short Term Investments 0.6
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Total Investments 138.9
Auction Market Preferred Shares
plus cumulative unpaid dividends (39.2)
Other Assets less Liabilities 0.3
-----
100.0
=====
See accompanying notes to financial statements.
4
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Statement of Assets & Liabilities
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July 31, 2004 (unaudited)
ASSETS
Investments at cost $ 83,160,940
Net unrealized appreciation 16,202,549
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Investments at value 99,363,489
Receivable for securities sold 828,282
Dividends and interest receivable 533,250
Receivable for open swap contracts 509,761
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TOTAL ASSETS 101,234,782
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LIABILITIES
Payable for securities purchased 1,605,705
Management fees payable 38,286
Transfer agent fees payable 8,252
Accounting and administrative fees payable 6,250
Other accounts payable and accrued expenses 44,607
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TOTAL LIABILITIES 1,703,100
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AUCTION PREFERRED SHARES 1,120 shares outstanding at
liquidation value plus cumulative unpaid dividends 28,006,225
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NET ASSETS APPLICABLE TO COMMON SHARES $ 71,525,457
============
NET ASSETS CONSIST OF:
Common Shares, $0.00001 par value; unlimited number
of shares authorized, 3,833,390 shares issued and
outstanding $ 38
Additional paid in capital 54,144,332
Undistributed (overdistributed) net investment income 220,405
Accumulated net realized gain (loss) on investments,
foreign currency transactions and interest rate
swap contracts 448,372
Net unrealized appreciation (depreciation) of
investments and swap contracts 16,712,310
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NET ASSETS APPLICABLE TO COMMON SHARES $ 71,525,457
============
COMPUTATION OF NET ASSET VALUE PER COMMON SHARE:
Net assets $ 71,525,457
============
Common Shares issued and outstanding 3,833,390
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Net asset value per share ($71,525,457/3,833,390
shares of beneficial interest) $ 18.66
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Market Value (closing price per share on American
Stock Exchange) $ 16.59
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See accompanying notes to financial statements.
5
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Statement of Operations
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For the Six Months Ended July 31, 2004 (unaudited)
INVESTMENT INCOME
Dividends $ 3,525,301
Interest 726
Less net foreign taxes withheld (8,607)
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3,517,420
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Expenses
Management fees 400,335
Trustees' fees and expenses 29,927
Accounting and administrative 75,000
Custodian 18,517
Transfer agent fees 22,009
Audit and tax services 15,232
Legal 33,414
Reports to shareholders 16,298
Preferred stock auction 35,389
Rating agency fees 5,470
American Stock Exchange fees 7,459
Miscellaneous 8,786
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Total expenses before waivers 667,836
Less waivers (212,955)
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Net expenses 454,881
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Net investment income 3,062,539
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY
TRANSACTIONS AND INTEREST RATE SWAPS
Realized gain (loss) on:
Investments - net 287,067
Interest rate swap contracts - net (265,037)
Foreign currency transactions - net (134)
Change in unrealized appreciation (depreciation) of:
Investments - net (4,705,881)
Interest rate swap contracts - net 461,814
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Net realized and unrealized gain (loss) on investments, foreign
currency transactions and interest rate swaps (4,222,171)
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NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (1,159,632)
LESS DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
Net investment income (173,103)
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NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
APPLICABLE TO COMMON SHARES $(1,332,735)
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See accompanying notes to financial statements.
6
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Statement of Changes in Net Assets
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For the Six Months
Ended July 31, 2004 For the Year Ended
(unaudited) January 31, 2004
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FROM OPERATIONS:
Net investment income $ 3,062,539 $ 3,811,296
Net realized gain (loss) on investments, foreign currency transactions
and interest rate swap contracts 21,896 3,796,947
Net change in unrealized appreciation (depreciation) of investments
and interest rate swap contracts (4,244,067) 21,906,703
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Increase (decrease) in net assets resulting from operations (1,159,632) 29,514,946
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LESS DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
Net investment income (173,103) (193,478)
Short-Term capital gain -- (122,163)
Long-Term capital gain -- (14,621)
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Increase (decrease) in net assets from operations
applicable to common shares (1,332,735) 29,184,684
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LESS DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income (2,645,039) (3,820,972)
Short-Term capital gain -- (2,753,072)
Long-Term capital gain -- (291,479)
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(2,645,039) (6,865,523)
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INCREASE (DECREASE) IN NET ASSETS DERIVED FROM
CAPITAL STOCK TRANSACTIONS: -- 9,467
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Offering costs and preferred shares underwriting commissions -- (601,187)
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Total increase (decrease) in net assets (3,977,774) 21,727,441
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Beginning of period 75,503,231 53,775,790
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End of period $71,525,457 $75,503,231
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME $ 220,405 $ (23,992)
=========== ===========
See accompanying notes to financial statements.
7
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Financial Highlights
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For a share outstanding throughout each period.
For the Period
For the Six Months Ended November 26, 2002*
July 31, 2004 For the Year Ended to
(unaudited) January 31, 2004 January 31, 2003
------------------------ ------------------ ------------------
Net Asset Value, Beginning of Period (Common Shares) $ 19.70 $ 14.03 $ 14.33(a)
------- ------- -------
Income From Investment Operations:
Net Investment Income (b) 0.80 0.99 0.09
Net Realized and Unrealized Gain (Loss) on Investments (1.10) 6.71 (0.24)
------- ------- -------
Total From Investment Operations (0.30) 7.70 (0.15)
------- ------- -------
Less Distributions to Preferred Shareholders:
Dividends From Net Investment Income (0.05) (0.05) --
Distributions From Net Realized Short-Term Gains -- (0.03) --
Distributions From Net Realized Long-Term Gains -- 0.00(f) --
Total From Investment Operations Applicable to Common ------- ------- -------
Shareholders (0.35) 7.62 (0.15)
------- ------- -------
Less Distributions to Common Shareholders:
Dividends From Net Investment Income (0.69) (1.00) (0.09)
Distributions From Net Realized Short-Term Gains -- (0.72) (0.00)(f)
Distributions From Net Realized Long-Term Gains -- (0.07) (0.01)
Distributions From Paid In Capital -- -- (0.02)
------- ------- -------
Total Distributions to Common Shareholders (0.69) (1.79) (0.12)
------- ------- -------
Common Shares Offering Costs Charged to Paid-in Capital -- -- (0.03)
------- ------- -------
Preferred Shares Underwriting Commissions and Offering Costs -- (0.16) --
------- ------- -------
Net Asset Value, End of the Period (Common Shares) $ 18.66 $ 19.70 $ 14.03
======= ======= =======
Market Value, End of Period (Common Shares) $ 16.59 $ 17.87 $ 14.55
======= ======= =======
Total Return on Market Value (%) (j) (3.29) 37.45 (2.23)(c)
Total Return on Net Asset Value (%) (i) (j) (1.33) 56.84 (1.29)(c)
Ratio of Expenses to Average Net Assets Applicable to
Common Shares, Before Waivers (%) (e) 1.85 2.00 1.85
Ratio of Expenses to Average Net Assets Applicable to
Common Shares, After Waivers (%) (d)(e) 1.26 1.38 1.37
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares, Before Waivers (%) (e) 7.89 5.35 2.80
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares, After Waivers (%) (e) 8.48 5.97 3.28
Portfolio Turnover Rate (%) 5 31 1
Net Assets Applicable to Common Shares, End of Period (000) $71,525 $75,503 $53,776
Auction Market Preferred Shares
Total Shares Outstanding 1,120 1,120 --
Asset Coverage Per Share (g) $88,862 $92,414 $ --
Involuntary Liquidation Preference Per Share (h) $25,000 $25,000 $ --
Approximate Market Value Per Share $25,000 $25,000 $ --
* Commencement of operations
(a) Net asset value at beginning of period reflects the deduction of the sales
load of $0.675 per share paid by the shareholder from the $15.00 offering
price.
(b) Calculated using the average common shares outstanding during the period.
(c) Total return on net asset value is calculated assuming a purchase at the
offering price of $15.00 less the sales load of $0.675 paid by the
shareholder on the first day and the ending net asset value per share.
Total return on market value is calculated assuming a purchase at the
offering price of $15.00 on the first day and a sale at the current market
price of the last day of the period.
(d) The investment adviser and the Fund's administrator agreed to waive a
portion of their fees during the period. Without these waivers, expense
ratios would have been higher.
(e) Computed on an annualized basis for periods less than one year.
(f) Amount rounds to less than $0.01 per share.
(g) Calculated by subtracting the Fund's total liabilities (not including the
preferred shares) from the Fund's total assets, and dividing this by the
number of preferred shares outstanding.
(h) Plus accumulated and unpaid dividends.
(i) Had certain expenses not been reduced during the period total return would
have been lower.
(j) Periods less than one year are not annualized.
See accompanying notes to financial statements.
8
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Notes to Financial Statements
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For the Six Months Ended July 31, 2004 (unaudited)
1. Organization. AEW Real Estate Income Fund, (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as a
non-diversified closed-end management investment company. The Fund is organized
under the laws of the Commonwealth of Massachusetts by an amended and restated
Agreement and Declaration of Trust dated October 10, 2002. The Fund's primary
investment objective is high current income; the Fund's secondary investment
objective is capital appreciation. The Fund seeks to achieve its objective by
concentrating its investments in the United States real estate industry.
2. Significant Accounting Policies. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The Fund's financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America
which require the use of management estimates that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
a. Security Valuation. Equity securities for which market quotations are readily
available are valued at market price on the basis of valuations furnished to the
Fund by a pricing service, which has been authorized by the Board of Trustees.
The pricing service provides the last reported sale price for securities listed
on an applicable securities exchange or on the NASDAQ National Market system,
or, if no sale was reported and in the case of over-the-counter securities not
so listed, the last reported bid price. Securities traded on the NASDAQ National
Market are valued at the NASDAQ Official Closing Price ("NOCP"), or if lacking
an NOCP, at the most recent bid quotation on the NASDAQ National Market. Short-
term obligations with a remaining maturity of less than sixty days are stated at
amortized cost, which approximates market value. All other securities and assets
are valued at their fair value as determined in good faith by the Fund's
investment adviser pursuant to the procedures approved by the Board of Trustees.
Fair valuation may also be used by the Board of Trustees if extraordinary events
occur after the close of the relevant market prior to the close of the New York
Stock Exchange.
The Fund may hold securities traded in foreign markets. Foreign securities are
valued at the market price in the foreign market. However, if events occurring
after the close of the foreign market (but before the close of regular trading
on the New York Stock Exchange) are believed to materially affect the value of
those securities, such securities are fair valued pursuant to procedures
approved by the Fund's Board of Trustees.
b. Security Transactions and Related Investment Income. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified, and interest income is recorded on an accrual basis. Dividend income
received by the Fund from its investment in REITs may consist of ordinary
income, capital gains and return of capital. Interest income is increased by the
accretion of discount and decreased by the amortization of premium. Investment
income is recorded net of foreign taxes withheld when recovery of such taxes is
uncertain. In determining net gain or loss on securities sold, the cost of
securities has been determined on an identified cost basis. Potential return of
capital adjustments on the Fund's investments are not reflected in the financial
statements.
c. Foreign Currency Translation. The books and records of the Fund are
maintained in U.S. dollars. The value of securities, currencies and other assets
and liabilities denominated in currencies other than U.S. dollars are translated
into U.S. dollars based upon foreign exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates from
fluctuations arising from changes in market prices of the investment securities.
Such changes are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities at the end of the fiscal periods, resulting from changes
in exchange rates.
d. Federal and Foreign Income Taxes. The Fund intends to meet the requirements
of the Internal Revenue Code applicable to regulated investment companies, and
to distribute to its shareholders substantially all of its net investment income
and any net realized capital gains at least annually. Accordingly, no provision
for federal income tax has been made. The Fund may be subject to foreign taxes
on income and gains on investments that are accrued based upon the Fund's
understanding of the tax rules and regulations that exist in the countries in
which the Fund invests. Foreign governments may also impose taxes or other
payments on investments with respect to foreign securities, such taxes are
accrued as applicable.
e. Dividends and Distributions to Shareholders. The Fund intends to make regular
monthly cash distributions to common shareholders at a level rate based on the
projected performance of the Fund. Distributions to common shareholders are
recorded on the ex-dividend date. Distributions to preferred shareholders are
recorded daily and are payable at the end of each dividend period. Each dividend
period for Auction Market Preferred Shares ("AMPS") is generally seven days. For
the six months ended July 31, 2004, the dividend rates for AMPS ranged from
0.79% to 1.60%. The dividend rate for AMPS on July 31, 2004 was 1.60%. In
addition, at least annually, the Fund intends to distribute net capital gains,
if any. The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from accounting principles generally accepted in the United States of
America. These differences are primarily due to differing treatments for
distributions from real estate investment trusts for book and tax purposes.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to the capital accounts. Distributions from net
investment income and short-term capital gains are considered to be ordinary
income for tax purposes.
9
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
For the Six Months Ended July 31, 2004 (unaudited)
f. Swap Agreements. The Fund may enter into swap agreements to manage its
exposure to the financial markets. A swap is an agreement to exchange the return
generated by one instrument for the return generated by another instrument. The
Fund may enter into interest rate, total return and forward swap spread lock
swap agreements to manage its exposure to interest rates. Interest rate swap
agreements involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal.
Swaps are marked to market daily based upon quotations from market makers and
the change in value, if any, is recorded as unrealized gain or loss in the
Statement of Operations. Payments received or made at the end of the measurement
period are recorded as realized gain or loss in the Statement of Operations.
These financial instruments are not actively traded on financial markets. The
values assigned to these instruments are based upon the best available
information and because of the uncertainty of the valuation, these values may
differ significantly from the values that would have been realized had a ready
market for these instruments existed, and the differences could be material.
Entering into these agreements involves, to varying degrees, elements of credit,
legal, market and documentation risk in excess of the amounts recognized on the
Statement of Assets and Liabilities. Such risks involve the possibility that
there will be no liquid market for these agreements, that the counterparty to
the agreements may default on its obligation to perform or disagree as to the
meaning of contractual terms in the agreements, or that there may be unfavorable
changes in interest rates. See Note 7 for a summary of the open swap agreements
as of July 31, 2004.
g. Repurchase Agreements The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The Fund's investment adviser is
responsible for determining that the value of the collateral is at all times at
least equal to 102% of the repurchase price, including interest. Repurchase
agreements could involve certain risks in the event of default or insolvency of
the counterparty including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities.
3. Auction Market Preferred Shares The Fund is authorized to issue an unlimited
number of preferred shares, par value $0.00001 per share. On February 10, 2003,
the Fund issued 1,120 shares of Series M AMPS with proceeds of $28,000,000 in a
public offering. Underwriting commissions and offering costs of $601,187 ($0.16
per common share) were incurred in connection with the offering and were charged
directly to paid-in-capital of the common shares. Dividends on the AMPS are
cumulative at a rate which was established at the offering of the AMPS and has
been reset every seven days thereafter by an auction. The Fund pays annual fees
equivalent to 0.25% of the preferred shares' liquidation value for the
remarketing efforts associated with the preferred auctions.
The AMPS are redeemable at the option of the Fund, at a redemption price equal
to $25,000 per share, plus accumulated and unpaid dividends, on any dividend
payment date. The AMPS may also be subject to mandatory redemption at a
redemption price equal to $25,000 per share, plus accumulated and unpaid
dividends, if the Fund defaults on its asset maintenance requirements with
respect to the AMPS and fails to cure such a default within the time permitted.
If the dividends on the AMPS shall remain unpaid in an amount equal to two full
years' dividends, the holders of the AMPS as a class have the right to elect a
majority of the Board of Trustees. In general, the holders of the AMPS and the
common shares have equal voting rights of one vote per share, except that the
holders of the AMPS, as a separate class, have the right to elect at least two
members of the Board of Trustees and to vote under certain other circumstances
specified in the Fund's By-Laws. The AMPS have a liquidation preference of
$25,000 per share. The Fund is required to maintain certain asset coverage with
respect to the AMPS as defined in the Fund's By-Laws.
4. Purchases and Sales of Securities. For the six months ended July 31, 2004,
purchases and sales of securities (excluding short-term investments) were
$5,656,813 and $4,918,421, respectively.
5. Management Fees and Other Transactions with Affiliates.
a. Management Fees. AEW Management and Advisors, L.P. ("AEW") serves as the
investment adviser to the Fund. AEW is an affiliate of AEW Capital Management,
L.P., a wholly owned subsidiary of CDC IXIS Asset Management North America, L.P.
("CDC IXIS North America"). Under the terms of the management agreement, the
Fund pays a monthly management fee computed at the annual rate of 0.80% of the
average daily managed assets of the Fund (which include the liquidation
preference of any preferred shares and the principal amount of any borrowings
used for leverage).
AEW has contractually agreed to waive a portion of its management fees in the
amount of 0.25% of average daily managed assets during the first five years of
the Fund's operations, 0.20% of average daily managed assets in year six, 0.15%
of average daily managed assets in year seven, 0.10% of average daily managed
assets in year eight, and 0.05% of average daily managed assets in year nine.
AEW has also agreed to waive an additional portion of its management fees in the
amount of 0.10% of average daily managed assets. This waiver is voluntary and
may be terminated by the investment adviser at any time without notice.
For the six months ended July 31, 2004, management fee and waiver for the Fund
were as follows:
Percentage of Average
Gross Waiver of Net Daily Managed Assets*
Management Management Management ---------------------
Fee Fee Fee Gross Net
---------- ---------- ---------- ----- ----
$400,335 $175,455 $224,880 0.80% 0.45%
*Annualized
b. Accounting and Administrative Expense. CDC IXIS Asset Management Services,
Inc. ("CIS"), a wholly owned subsidiary of CDC IXIS North America, performs
certain accounting and administrative services for the Fund and has
subcontracted with Investors Bank & Trust Company ("IBT") to serve as
subadministrator. The Fund pays CIS a fee for these services based on the Fund's
average daily managed assets, or if higher, the minimum fee set forth below:
10
--------------------------------------------------------------------------------
Notes To Financial Statements (continued)
--------------------------------------------------------------------------------
For the Six Months Ended July 31, 2004 (unaudited)
(1) Percentage of Eligible Average Daily Net Assets
First Over
$300 million $300 million
------------ ------------
0.0600% 0.0575%
or
(2) An annual minimum fee of $150,000.
CIS has currently agreed to voluntarily waive a portion of its administrative
services fee. This waiver is voluntary and may be terminated by CIS at any time
without notice.
For the six months ended July 31, 2004, the following was paid to CIS for
accounting and administrative services:
Gross Waiver of Net Percentage of Average
Accounting Accounting Accounting Daily Managed Assets*
And And And ---------------------
Administrative Administrative Administrative Gross Net
-------------- -------------- -------------- ----- ----
$75,000 $37,500 $37,500 0.15% 0.07%
*Annualized
Please note, Effective November 1, 2004, the name of the Fund's administrator
will change to IXIS Asset Management Services Company.
c. Trustees Fees and Expenses. The Fund does not pay any compensation directly
to its officers or Trustees who are directors, officers or employees of CDC IXIS
North America or its affiliates. Each other Trustee receives a retainer fee at
the annual rate of $2,000 and meeting attendance fees of $375 for each meeting
of the Board of Trustees attended. Each committee member receives an additional
retainer fee at the annual rate of $2,000 while each committee chairman receives
a retainer fee (beyond the $2,000 fee) at the annual rate of $1,000. The
retainer fees assume four Board or Committee meetings per year; Trustees are
compensated for each additional Board or Committee meeting in excess of four
meetings per year, at the rate of $375 and $200, respectively. Trustees are
reimbursed for travel expenses in connection with attendance at meetings.
6. Shares of Beneficial Interest. The Agreement and Declaration of Trust permits
the Fund's Trustees to issue an unlimited number of common shares, $0.00001 par
value per share. Transactions in common shares were as follows:
Six Months Ended Year Ended
July 31, 2004 January 31, 2004
---------------- ----------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares issued pursuant to the
Fund's dividend reinvestment plan -- $-- 676 $9,467
--- --- --- ------
Increase derived from capital shares
transactions -- $-- 676 $9,467
=== === === ======
11
--------------------------------------------------------------------------------
Notes To Financial Statements (continued)
--------------------------------------------------------------------------------
For the Six Months Ended July 31, 2004 (unaudited)
7. Swap Contracts.
Unrealized
Notional Amount Expiration Date Description Appreciation/(Depreciation)
------------------- --------------- --------------------------------------------------------- ---------------------------
Interest Rate Swaps
2,800,000 USD 3/1/2006 Agreement with Fleet National Bank dated 2/28/2003 to pay $ 15,382
the notional amount multiplied by 2.345% and to receive
the notional amount multiplied by the 1 week Floating
Rate London Interbank Offering Rate ("LIBOR") adjusted by
a specific spread.
14,000,000 USD 3/3/2008 Agreement with Fleet National Bank dated 2/28/2003 to pay 257,824
the notional amount multiplied by 3.104% and to receive
the notional amount multiplied by the 1 week Floating
Rate LIBOR adjusted by a specific spread.
8,400,000 USD 3/1/2010 Agreement with Fleet National Bank dated 2/28/2003 to pay 236,555
the notional amount multiplied by 3.622% and to receive
the notional amount multiplied by the 1 week Floating
Rate LIBOR adjusted by a specific spread.
--------
$509,761
========
8. Other. On July 1, 2004, the Fund declared three monthly dividends of $0.115
per common share for the months of July, August and September payable on July
23, August 27 and September 24, respectively.
12
--------------------------------------------------------------------------------
Shareholder proxy results
--------------------------------------------------------------------------------
It is currently anticipated that the Fund's 2005 annual meeting of Shareholders
will be held in May 2005. Shareholders submitting any proposals for the Fund
intended to be presented at the 2005 annual meeting must ensure that such
proposals are received by the Fund, in good order and in compliance with all
applicable legal requirements and the requirements of the Fund's Bylaws, no
later than February 9, 2005 and not earlier than January 25, 2005. If a
Shareholder who wishes to present a proposal fails to notify the Fund within
these dates, the proxies solicited for the meeting will have discretionary
authority to vote on the Shareholder's proposal if it is properly brought before
the meeting. The submission by a Shareholder of a proposal for inclusion in the
proxy materials does not guarantee that it will be included. Shareholder
proposals are subject to certain requirements under the federal securities laws
and must be submitted in accordance with the Fund's Bylaws. Shareholder pro-
posals should be addressed to the attention of the Secretary of the Fund.
In accordance with Section 23(c) of the Investment Company Act of 1940, as
amended, the Fund hereby gives notice that it may, from time to time, repurchase
its shares in the open market at the option of the Board of Trustees and on such
terms as the Board of Trustees shall determine.
Shareholder Meeting (unaudited). At the annual meeting (the "Meeting") of
shareholders held on May 20, 2004, shareholders of the AEW Real Estate Income
Fund voted for the following proposal:
1. Election of Trustees
For Against Abstained Total Votes
--------- ------- --------- -----------
Edward A. Benjamin 2,531,149 35,173 0 2,566,322
Kenneth J. Cowan 2,537,173 29,149 0 2,566,322
John T. Hailer 2,367,773 198,549 0 2,566,322
Daniel M. Cain* 520 0 0 520
* Preferred Shares Trustee.
Messrs. Graham T. Allison, Robert J. Blanding, Paul G. Chenault, Richard Darman,
John A. Shane, Peter S. Voss and Ms. Sandra O. Moose, Trustees of the Fund, each
have terms of office as Trustee that continued after the Meeting.
The statement of additional information includes additional information about
Trustees of the Fund and is available, without charge, upon request, by calling
(800) 862-4863.
13
--------------------------------------------------------------------------------
Additional information
--------------------------------------------------------------------------------
CDC IXIS Asset Management Services, Inc.
AEW Real Estate Income Fund
Notice of Privacy Policies and Practices
We/1/ consider shareholder relationships to be the hallmark of our business and
are dedicated to protecting the confidentiality of any nonpublic personal
information provided by our customers/2/. We understand the trust that our
customers place in us and are committed to earning that trust well into the
future.
Types of Information Gathered
We collect personal information on applications, forms, documents, transaction
histories and correspondence (electronic, written and telephonic) with
customers. Through our Web sites we gather information about visitors and their
needs submitted through answers to surveys, data input to calculators and
information entered onto forms. This information includes but is not limited to
name, postal address, e-mail address and social security number. Much of the
data collected is statistical in nature and is not generally attributable to any
specific customer.
How We Use the Information
We use the information gathered to service your account and to provide you with
additional information about products and services. We do not disclose any
nonpublic information about current or former customers to any unaffiliated
third party except as permitted by law, or at the specific request of the
customer. The information we collect, as described above, may be shared with our
corporate affiliates in the financial services industry in order to enhance and
improve customer communications, services, and products designed to meet our
customers' needs. We may disclose some or all of the above information to
affiliated and unaffiliated companies that perform marketing and other services
(such as preparing and mailing prospectuses, reports and account statements,
conducting research on client satisfaction, and gathering votes for shareholder
proxies) on our or the Funds' behalf or to other financial institutions with
whom we have joint marketing agreements. These parties that are not affiliated
with us have agreed not to use this information for any other purpose.
Policies and Practices to Protect Confidential Information
Only those employees that have a business need for personally identifiable data
about our customers are given access to that information. We maintain physical,
electronic and procedural safeguards that comply with federal standards to
protect your nonpublic personal information. For example, we take precautions to
help keep our information systems secure, including the use of firewalls for our
Internet-based systems. We also use, when appropriate, encryption technologies,
user authentication systems and access control mechanisms.
/1/ For purposes of this notice the term "We" includes AEW Real Estate Income
Fund and CDC IXIS Asset Management Services, Inc.
/2/ For purposes of this notice, the terms customer or customers include both
shareholders of AEW Real Estate Income Fund and individuals who provide
nonpublic personal information, but do not invest in the Fund.
Proxy voting information
A description of the Fund's proxy voting policies and the procedures that the
Fund uses to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, by calling CDC Nvest Funds at
800-225-5478; on the Fund's web site, www.cdcnvestfunds.com; and on the
Securities and Exchange's website at www.sec.gov. Information describing how the
Fund voted proxies relating to portfolio securities during the 12-month period
ended June 30, 2004 is available from the Fund's website and the SEC website.
Quarterly portfolio schedule
Beginning next quarter, the Fund will file a complete schedule of portfolio
holdings with the SEC for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q will be available on the SEC's website and may be
reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
14
--------------------------------------------------------------------------------
Dividend reinvestment plan
--------------------------------------------------------------------------------
The Fund has a Dividend Reinvestment Plan (the "Plan") commonly referred to
as an "opt-out" plan. Each Common Shareholder will have all distributions of
dividends and capital gains automatically reinvested in additional Common Shares
by EquiServe Trust Company, N.A., as agent for shareholders pursuant to the Plan
(the "Plan Agent"), unless they elect to receive cash. The Plan Agent will
either (i) effect purchases of Common Shares under the Plan in the open market
or (ii) distribute newly issued Common Shares of the Fund. Shareholders who
elect not to participate in the Plan will receive all distributions in cash paid
by check mailed directly to the shareholder of record (or if the shares are held
in street or other nominee name, then to the nominee) by the Plan Agent, as
dividend disbursing agent. Shareholders whose Common Shares are held in the name
of a broker or nominee should contact the broker or nominee to determine whether
and how they may participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the
Plan. After the Fund declares a dividend or makes a capital gain distribution,
the Plan Agent will, as agent for the participants, either (i) receive the cash
payment and use it to buy Common Shares in the open market, on the American
Stock Exchange or elsewhere, for the participants' accounts or (ii) distribute
newly issued Common Shares of the Fund on behalf of the participants. The Plan
Agent will receive cash from the Fund with which to buy Common Shares in the
open market if, on the determination date, the net asset value per share exceeds
the market price per share plus estimated brokerage commissions on that date.
The Plan Agent will receive the dividend or distribution in newly issued Common
Shares of the Fund if, on the determination date, the market price per share
plus estimated brokerage commissions equals or exceeds the net asset value per
share of the Fund on that date. The number of shares to be issued will be
computed at a per share rate equal to the greater of (i) the net asset value or
(ii) 95% of the closing market price per share on the payment date.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent. Such withdrawal will be effective immediately if received not
less than ten days prior to a distribution record date; otherwise, it will be
effective for all subsequent dividend record dates. When a participant withdraws
from the Plan or upon termination of the Plan as provided below, certificates
for whole Common Shares credited to his or her account under the Plan will be
issued and a cash payment will be made for any fraction of a Common Share
credited to such account. In the alternative, upon receipt of the participant's
instructions, Common Shares will be sold and the proceeds sent to the
participant less brokerage commissions and any applicable taxes.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes confirmations of all acquisitions made for the participant. Common
Shares in the account of each Plan participant will be held by the Plan Agent on
behalf of the participant. Proxy material relating to shareholders' meetings of
the Fund will include those shares purchased as well as shares held pursuant to
the Plan.
In the case of shareholders, such as banks, brokers or nominees, which hold
Common Shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of Common Shares certified from
time to time by the record shareholders as representing the total amount
registered in the record shareholder's name and held for the account of
beneficial owners who are participants in the Plan.
The Plan Agent's fees for the handling of reinvestment of dividends and
other distributions will be paid by the Fund. Each participant will pay a pro
rata share of brokerage commissions incurred with respect to the Plan Agent's
open market purchases in connection with the reinvestment of distributions.
There are no other charges to participants for reinvesting dividends or capital
gain distributions; however, the Fund reserves the right to amend the Plan to
include a service charge payable by the participants.
The automatic reinvestment of dividends and other distributions will not
relieve participants of any income tax that may be payable or required to be
withheld on such dividends or distributions.
The Fund and the Plan Agent reserve the right to amend or terminate the
Plan. All correspondence concerning the Plan should be directed to the Plan
Agent by telephone at (800) 730-6001.
15
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[LOGO] AEW
CEAEW58-0704
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. SCHEDULE OF INVESTMENTS.
Filed as a part of report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES*
-------------------------------------------------------------------------------------------------------------------------
Maximum Number (or
Approximate Dollar
Total Number of Value) of Shares that
Shares Purchased as may yet be purchased
Total Number Average Price Part of Publicly under the Plans or
Period of Shares Paid Per Share Announced Plans* Programs
-------------------------------------------------------------------------------------------------------------------------
February 1 through February 29 1,335.721 $ 17.96 1,335.721 N/A
-------------------------------------------------------------------------------------------------------------------------
March 1 through March 31 1,315.546 $ 18.06 1,315.546 N/A
-------------------------------------------------------------------------------------------------------------------------
April 1 through April 30 2,990.084 $ 16.93 2,990.084 N/A
-------------------------------------------------------------------------------------------------------------------------
May 1 through May 31 N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------
June 1 through June 30 1,529.064 $ 16.29 1,529.064 N/A
-------------------------------------------------------------------------------------------------------------------------
July 1 through July 31 3,069.135 $ 16.38 3,069.135 N/A
-------------------------------------------------------------------------------------------------------------------------
Total 10,239.550 $ 16.95 10,239.550 N/A
-------------------------------------------------------------------------------------------------------------------------
*Includes shares purchased by the Dividend Reinvestment Plan Agent pursuant to
the Dividend Reinvestment Plan.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
There were no material changes to the procedures by which shareholders may
recommend nominees to the Trust's Board of Trustees.
ITEM 10. CONTROLS AND PROCEDURES.
The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.
ITEM 11. EXHIBITS.
(a) (1) Not applicable.
(a) (2) Certifications of Principal Executive Officer and Principal
Financial Officer pursuant to 30a-2 under the Investment Company
Act of 1940 (17 CFR 270.30a-2), as herewith as exhibit (a)(2)
(a) (3) Not applicable.
(b) Certifications of Principal Executive Officer and Principal
Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of
2002 are filed herewith as Exhibit (b)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AEW Real Estate Income Fund
By: /s/ JOHN T. HAILER
-------------------------------
Name: John T. Hailer
Title: President and Chief Executive
Officer
Date: September 23, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ JOHN T. HAILER
---------------------------------
Name: John T. Hailer
Title: President and Chief Executive
Officer
Date: September 23, 2004
By: /s/ NICHOLAS H. PALMERINO
---------------------------------
Name: Nicholas H. Palmerino
Title: Treasurer
Date: September 23, 2004