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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: 811-21241

RMR REAL ESTATE FUND
(Exact name of registrant as specified in charter)

400 CENTRE STREET
NEWTON, MASSACHUSETTS 02458
(Address of principal executive offices)(Zip code)

(Name and Address of Agent for Service)

Thomas M. O'Brien, President
RMR Real Estate Fund
400 Centre Street
Newton, Massachusetts 02458

Copy to:

Robert N. Hickey, Esq.
Sullivan & Worcester LLP
1666 K Street, NW
Washington, DC 20006

Thomas J. Reyes, Esq.
State Street Bank and Trust Company
One Federal Street, 9th Floor
Boston, Massachusetts 02110

Registrant's telephone number, including area code: (617) 332-9530
Date of fiscal year end: December 31
Date of reporting period: June 30, 2006



Item 1. Reports to Stockholders.



 

 

 



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SEMI-ANNUAL REPORTS
JUNE 30, 2006



 



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RMR Real Estate Fund

RMR Hospitality and Real Estate Fund

RMR F.I.R.E. Fund

RMR Preferred Dividend Fund

RMR Asia Pacific Real Estate Fund

About information contained in this report:


NOTICE CONCERNING LIMITED LIABILITY

THE DECLARATIONS OF TRUST OF RMR REAL ESTATE FUND, RMR HOSPITALITY AND REAL ESTATE FUND, RMR F.I.R.E. FUND, RMR PREFERRED DIVIDEND FUND AND RMR ASIA PACIFIC REAL ESTATE FUND, COPIES OF WHICH, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, ARE DULY FILED IN THE OFFICE OF THE SECRETARY, CORPORATIONS DIVISION, OF THE COMMONWEALTH OF MASSACHUSETTS, PROVIDE THAT THE NAMES "RMR REAL ESTATE FUND", "RMR HOSPITALITY AND REAL ESTATE FUND", "RMR F.I.R.E. FUND", "RMR PREFERRED DIVIDEND FUND" AND "RMR ASIA PACIFIC REAL ESTATE FUND" REFER TO THE TRUSTEES UNDER THE DECLARATIONS COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF ANY OF THE FUNDS SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, ANY OF THESE FUNDS. ALL PERSONS DEALING WITH ANY OF THE FUNDS IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THAT FUND WITH WHICH HE OR SHE MAY DEAL FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.


RMR Funds
June 30, 2006
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To our shareholders,

We are pleased to present you with our 2006 semi annual report for five funds:

Affiliates of our management team wasted no time becoming fellow shareholders of RMR Asia Pacific Real Estate Fund, having purchased almost $1 million of shares at the public offering price of $20/share. Our management team and their affiliates currently own shares in the RMR Funds with a market value in excess of $18 million.

We invite you to read through the information contained in this report and to view our website at www.rmrfunds.com.

Sincerely,

GRAPHIC

Thomas M. O'Brien
President


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1


RMR Real Estate Fund
June 30, 2006

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To our shareholders,

In the pages that follow, you will find data summarizing our financial results for the six months ended June 30, 2006, and our financial position as of June 30, 2006.

During the first six months of 2006, our allocation to the sub-sector of specialty real estate investment trusts, or REITs, increased from 4% to 7% of total investments, our largest sub-sector increase. During the same time period, our allocation to the diversified sub-sector decreased from 20% to 18% of total investments, our largest sub-sector decrease. These changes reflect our view of the business environments in these sub-sectors, the strengths and weaknesses of the companies that operate in those sub-sectors and the share prices of individual companies. During the remainder of 2006, we will continue to monitor market conditions and position our portfolio according to our views of market conditions.

For securities that we held continuously during the first six months of 2006, our three best performing investments were the common stocks of Home Properties, Inc., Associated Realty Corp. and Eagle Hospitality Properties Trust, Inc., with total returns during this period of 38%, 34% and 31%, respectively. Our three worst performing investments during the same period were the common stocks of The Mills Corp., U-Store-It and Trustreet Properties, Inc. with negative total returns during the period of 31%, 8% and 6%, respectively.

Thank you for your continued support. For more information, please view our website, at www.rmrfunds.com.

Sincerely,

GRAPHIC

Thomas M. O'Brien
President


2


RMR Real Estate Fund
June 30, 2006

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Relevant Market Conditions

Real Estate Industry Fundamentals.    The operating environment for real estate companies has improved in 2006. Generally, vacancy rates have been declining and rental rates have been increasing. We expect real estate industry fundamentals to remain strong for the foreseeable future.

Real Estate Industry Technicals.    We believe demand for real estate securities over the long term will continue to increase. Demographic trends in the U.S. include growth in the over age 50 population. We believe that individuals in that age category tend to focus their investments in higher yielding stocks like REITs. Institutions, too, seem to be increasing their allocations to real estate securities. Both of these are long term positive factors affecting the real estate securities market.

Fund Strategies, Techniques and Performance

Our primary investment objective is to earn and pay a high level of current income to our common shareholders by investing in real estate companies. Our secondary investment objective is capital appreciation. There can be no assurance that we will achieve our investment objectives.

During the first six months of 2006, our total return on net asset value, or NAV (including NAV changes and assuming a hypothetical reinvestment of distributions at NAV) was 10.8%. During that same period, the total return for the MSCI US REIT Total Return Index (an unmanaged index of REIT common stocks) was 13.4% and the total return for the Merrill Lynch REIT Preferred Index (an unmanaged index of REIT preferred stocks) was 1.6%. We believe these two indices are relevant to us because our investments, excluding short term investments, as of June 30, 2006, include 69% REIT common stocks and 27% REIT preferred stocks. The S&P 500 Index (an unmanaged index published as Standard and Poor's Composite Index of 500 common stocks) total return for the first six months of 2006 was 2.7%.

Portfolio holdings by sub-sector as a percentage of investments

(as of June 30, 2006) (unaudited)

REITs      
Diversified   18 %
Health care   14 %
Retail   13 %
Office   11 %
Hospitality   10 %
Others, less than 10%   30 %
   
 
  Total REITs   96 %
Other   2 %
Short term investments   2 %
   
 
  Total investments   100 %
   
 

3


RMR Real Estate Fund
Portfolio of Investments
– June 30, 2006 (unaudited)


 
Company

  Shares

  Value

 

 
Common Stocks – 99.6%
Real Estate Investment Trusts – 96.6%
           
  Apartments – 8.6%            
    Apartment Investment & Management Co.   30,100   $ 1,307,845  
    Associated Estates Realty Corp.   106,400     1,319,360  
    BNP Residential Properties, Inc.   200,000     3,410,000  
    Home Properties, Inc.   69,200     3,841,292  
       
 
          9,878,497  
  Diversified – 23.7%            
    Centracore Properties Trust   22,050     545,738  
    Colonial Properties Trust   117,900     5,824,260  
    Cousins Properties, Inc.   10,300     318,579  
    Crescent Real Estate Equities Co.   377,000     6,997,120  
    Duke Realty Corp.   5,000     175,750  
    Entertainment Properties Trust   20,400     878,220  
    iStar Financial, Inc.   3,000     113,250  
    Lexington Corporate Properties Trust   223,000     4,816,800  
    Liberty Property Trust   22,000     972,400  
    National Retail Properties   309,500     6,174,525  
    Newkirk Realty Trust, Inc.   8,000     138,880  
    Spirit Finance Corp.   17,500     197,050  
    Washington Real Estate Investment Trust   300     11,010  
       
 
          27,163,582  
  Health Care – 12.7%            
    Cogdell Spencer, Inc.   15,000     292,650  
    Health Care Property Investors, Inc.   15,080     403,239  
    Health Care REIT, Inc.   158,600     5,543,070  
    Healthcare Realty Trust, Inc.   16,200     515,970  
    Medical Properties Trust, Inc.   57,500     634,800  
    Nationwide Health Properties, Inc.   262,600     5,911,126  
    OMEGA Healthcare Investors, Inc.   83,200     1,099,904  
    Universal Health Realty Income Trust   7,000     219,450  
       
 
          14,620,209  
  Hospitality – 0.6%            
    Eagle Hospitality Properties Trust, Inc.   60,000     577,800  
    Hersha Hospitality Trust   6,100     56,669  
    Highland Hospitality Corp.   7,000     98,560  
       
 
          733,029  
See notes to financial statements and notes to portfolio of investments.  

4


  Industrial – 7.8%            
    AMB Property Corp.   7,100   $ 358,905  
    EastGroup Properties, Inc.   4,500     210,060  
    First Industrial Realty Trust, Inc.   206,640     7,839,922  
    ProLogis   11,000     573,320  
       
 
          8,982,207  
  Manufactured Homes – 2.1%            
    Sun Communities, Inc.   73,900     2,403,967  
  Mortgage – 0.8%            
    American Mortgage Acceptance Co.   23,500     346,390  
    KKR Financial Corp.   5,000     104,050  
    Newcastle Investment Corp.   17,000     430,440  
       
 
          880,880  
  Office – 14.0%            
    Columbia Equity Trust, Inc.   3,000     46,080  
    Corporate Office Properties Trust   11,500     483,920  
    Equity Office Properties Trust   152,300     5,560,473  
    Glenborough Realty Trust, Inc.   293,000     6,311,220  
    Highwoods Properties, Inc.   55,000     1,989,900  
    Maguire Properties, Inc.   46,000     1,617,820  
         
 
            16,009,413  
  Retail – 14.7%            
    CBL & Associates Properties, Inc.   12,000     467,160  
    Cedar Shopping Centers, Inc.   5,000     73,600  
    Equity One, Inc.   5,000     104,500  
    Feldman Mall Properties, Inc.   3,000     32,880  
    General Growth Properties, Inc.   7,000     315,420  
    Glimcher Realty Trust   88,400     2,193,204  
    Heritage Property Investment Trust   198,600     6,935,112  
    New Plan Excel Realty Trust   182,780     4,512,838  
    Pennsylvania Real Estate Investment Trust   10,000     403,700  
    Realty Income Corp.   14,000     306,600  
    Taubman Centers, Inc.   6,000     245,400  
    The Mills Corp.   45,100     1,206,425  
    Urstadt Biddle Properties, Inc.   6,800     110,772  
       
 
          16,907,611  
See notes to financial statements and notes to portfolio of investments.  

5


  Specialty – 9.3%            
    Alesco Financial Trust (a)   500,000   $ 5,250,000  
    Getty Realty Corp.   32,600     927,144  
    Trustreet Properties, Inc.   337,200     4,447,668  
       
 
          10,624,812  
  Storage – 2.3%            
    Extra Space Storage, Inc.   880     14,291  
    Sovran Self Storage, Inc.   50,000     2,539,500  
    U-Store-It Trust   5,000     94,300  
       
 
          2,648,091  
Total Real Estate Investment Trusts (Cost $98,560,222)         110,852,298  
  Other – 3.0%            
    American Capital Strategies, Ltd.   41,000     1,372,680  
    Iowa Telecommunication Services, Inc.   55,500     1,050,060  
    Seaspan Corp.   48,200     1,009,790  
Total Other (Cost $3,236,521)         3,432,530  
Total Common Stocks (Cost $101,796,743)         114,284,828  
Preferred Stocks – 37.2%            
Real Estate Investment Trusts – 37.2%            
  Apartments – 2.1%            
    Apartment Investment & Management Co., Series G   32,800     853,128  
    Apartment Investment & Management Co., Series T   60,000     1,497,600  
       
 
          2,350,728  
Diversified – 1.6%            
    Colonial Properties Trust, Series D   10,000     257,900  
    Colonial Properties Trust, Series E   62,910     1,601,059  
       
 
          1,858,959  
Health Care – 7.5%            
    LTC Properties, Inc., Series F   160,000     3,990,400  
    OMEGA Healthcare Investors Inc., Series D   160,000     4,099,200  
    Windrose Medical Properties Trust, Series A (b)   20,000     504,000  
       
 
          8,593,600  
See notes to financial statements and notes to portfolio of investments.  

6


  Hospitality – 13.7%            
    Ashford Hospitality Trust, Series A   107,900   $ 2,714,764  
    Eagle Hospitality Properties Trust, Inc., Series A   28,000     684,600  
    Equity Inns, Inc., Series B   34,000     860,200  
    FelCor Lodging Trust, Inc., Series A (b)   83,000     2,024,370  
    FelCor Lodging Trust, Inc., Series C   49,200     1,205,400  
    Innkeepers USA Trust, Series C   120,000     2,964,000  
    Strategic Hotels & Resorts, Inc., Series B   54,500     1,353,235  
    Winston Hotels, Inc., Series B   160,000     3,955,200  
       
 
          15,761,769  
Manufactured Homes – 5.6%            
    Affordable Residential Communities, Series A   280,000     6,398,000  
Mortgage – 3.0%            
    New Century Financial Corp., Series A   20,000     490,000  
    RAIT Investment Trust, Series A   125,000     2,981,250  
       
 
          3,471,250  
Office – 0.8%            
    Alexandria Real Estate Equities, Inc., Series B   5,000     126,550  
    Kilroy Realty Corp., Series F   30,000     739,200  
       
 
          865,750  
Retail – 2.9%            
    CBL & Associates Properties, Inc., Series B   20,000     1,016,500  
    Glimcher Realty Trust, Series F   20,000     513,800  
    Glimcher Realty Trust, Series G   50,000     1,250,000  
    The Mills Corp., Series E   7,100     163,442  
    The Mills Corp., Series G   17,000     382,500  
       
 
          3,326,242  
Total Preferred Stocks (Cost $42,180,584)         42,626,298  
Short-Term Investments – 3.1%            
  Other Investment Companies – 3.1%            
    SSgA Money Market Fund, 4.75% (c) (Cost $3,566,088)   3,566,088     3,566,088  
Total Investments – 139.9% (Cost $147,543,415)         160,477,214  
Other assets less liabilities – 3.7%         4,190,924  
Preferred Shares, at liquidation preference – (43.6)%         (50,000,000 )
Net Assets applicable to common shareholders – 100%       $ 114,668,138  

Notes to Portfolio of Investments

(a)
144A securities. Securities restricted for resale to Qualified Institutional Buyers.

(b)
Convertible into common stock.

(c)
Rate reflects 7 day yield as of June 30, 2006.

See notes to financial statements.


7



RMR Real Estate Fund
Financial Statements

Statement of Assets and Liabilities


June 30, 2006 (unaudited)

   

Assets      
  Investments in securities, at value (cost $147,543,415)   $ 160,477,214
  Cash     388
  Receivable for investment securities sold     3,390,811
  Dividends and interest receivable     1,130,292
  Other assets     11,815
   
    Total assets     165,010,520
   
Liabilities      
  Payable for investment securities purchased     89,454
  Advisory fee payable     79,369
  Distributions payable – preferred shares     46,180
  Accrued expenses and other liabilities     127,379
   
    Total liabilities     342,382
   
Preferred shares, at liquidation preference      
  Auction preferred shares, Series T;
$.001 par value per share; 2,000 shares issued and
outstanding at $25,000 per share liquidation preference
    50,000,000
   
Net assets attributable to common shares   $ 114,668,138
   
Composition of net assets      
  Common shares, $.001 par value per share;
unlimited number of shares authorized,
6,824,000 shares issued and outstanding
  $ 6,824
  Additional paid-in capital     96,710,623
  Undistributed net investment income     318,701
  Accumulated net realized gain on investment transactions     4,698,191
  Net unrealized appreciation on investments     12,933,799
   
Net assets attributable to common shares   $ 114,668,138
   
Net asset value per share attributable to common shares
(based on 6,824,000 common shares outstanding)
  $ 16.80
   

See notes to financial statements.


8



RMR Real Estate Fund
Financial Statements
— continued

Statement of Operations


 
Six Months Ended June 30, 2006 (unaudited)

   
 

 
Investment Income        
  Dividends (cash distributions received or due)   $ 5,491,574  
  Interest     142,342  
   
 
    Total investment income     5,633,916  
   
 
Expenses        
  Advisory     689,372  
  Administrative     63,480  
  Audit and legal     62,791  
  Preferred share remarketing     61,642  
  Custodian     31,896  
  Shareholder reporting     18,065  
  Compliance and internal audit     14,901  
  Trustees' fees and expenses     8,344  
  Other     47,061  
   
 
    Total expenses     997,552  
  Less: expenses waived by the Advisor     (202,757 )
   
 
    Net expenses     794,795  
   
 
      Net investment income     4,839,121  
   
 
Realized and unrealized gain on investments        
  Net realized gain on investments     3,672,512  
  Net change in unrealized appreciation/(depreciation) on investments     4,006,931  
   
 
  Net realized and unrealized gain on investments     7,679,443  
   
 
  Distributions to preferred shareholders from net investment income     (1,108,420 )
   
 
    Net increase in net assets attributable to common shares resulting from operations   $ 11,410,144  
   
 

See notes to financial statements.


9



RMR Real Estate Fund
Financial Statements
– continued

Statement of Changes in Net Assets


 
 
  Six Months
Ended
June 30,
2006

  Year Ended
December 31,
2005

 

 


 

(unaudited)


 

 


 

 
Increase (decrease) in net assets resulting from operations              
  Net investment income   $ 4,839,121   $ 4,370,527  
  Net realized gain on investments     3,672,512     6,758,346  
  Net change in unrealized appreciation/(depreciation) on investments     4,006,931     (7,347,940 )
  Distributions to preferred shareholders from:              
    Net investment income     (1,108,420 )   (667,974 )
    Net realized gain on investments         (928,346 )
   
 
 
    Net increase in net assets attributable to common shares resulting from operations     11,410,144     2,184,613  
   
 
 
  Distributions to common shareholders from:              
    Net investment income     (3,412,000 )   (3,702,553 )
    Net realized gain on investments         (5,168,647 )
   
 
 
    Total increase (decrease) in net assets attributable to common shares     7,998,144     (6,686,587 )

Net assets attributable to common shares

 

 

 

 

 

 

 
  Beginning of period     106,669,994     113,356,581  
   
 
 
  End of period (including undistributed net investment
income of $318,701 and $0, respectively)
  $ 114,668,138   $ 106,669,994  
   
 
 

Common shares issued and repurchased

 

 

 

 

 

 

 
  Shares outstanding, beginning of period     6,824,000     6,824,000  
    Shares issued          
   
 
 
  Shares outstanding, end of period     6,824,000     6,824,000  
   
 
 

See notes to financial statements.


10


RMR Real Estate Fund
Financial Highlights

Selected Data For A Common Share Outstanding Throughout Each Period


 
 
  Six Months
Ended
June 30,
2006

  Year Ended
December 31,
2005

  Year Ended
December 31,
2004

  For the
Period
December 18,
2003(a) to
December 31,
2003

 

 

 


 

(unaudited)


 

 


 

 


 

 


 
Per Common Share Operating Performance (b)                          
Net asset value, beginning of period   $ 15.63   $ 16.61   $ 14.35   $ 14.33  (c)
   
 
 
 
 
Income from Investment Operations                          
Net investment income (d)     .71  (e)   .64     .47     .10  
Net realized and unrealized appreciation/(depreciation) on investments     1.12  (e)   (.08 )   3.11     (.05 )
Distributions to preferred shareholders (common stock equivalent basis) from:                          
  Net investment income     (.16 )(e)   (.10 )   (.05 )    
  Net realized gain on investments      (e)   (.14 )   (.05 )    
   
 
 
 
 
Net increase in net asset value from operations     1.67     .32     3.48     .05  
Less: Distributions to common shareholders from:                          
  Net investment income     (.50 )(e)   (.54 )   (.53 )    
  Net realized gain on investments      (e)   (.76 )   (.57 )    
Common share offering costs charged to capital                 (.03 )
Preferred share offering costs charged to capital             (.12 )    
   
 
 
 
 
Net asset value, end of period   $ 16.80   $ 15.63   $ 16.61   $ 14.35  
   
 
 
 
 
Market price, beginning of period   $ 13.15   $ 14.74   $ 15.00   $ 15.00  
   
 
 
 
 
Market price, end of period   $ 14.38   $ 13.15   $ 14.74   $ 15.00  
   
 
 
 
 
Total Return (f)                          
Total investment return based on:                          
  Market price (g)     13.31 %   (1.96 )%   6.42 %   0.00 %
  Net asset value (g)     10.77 %   2.10 %   24.73 %   0.14 %
Ratios/Supplemental Data:                          
Preferred shares, liquidation preference ($25,000 per share) (000s)   $ 50,000   $ 50,000   $ 50,000   $  
Net assets attributable to common shares, end of period (000s)   $ 114,668   $ 106,670   $ 113,357   $ 95,776  
Ratio to average net assets attibutable to common shares of:                          
  Net investment income, before total preferred share distributions (d)     8.59 %(e)(h)   4.02 %   3.22 %   27.45 %(h)
  Total preferred share distributions     1.97 %(h)   1.47 %   0.67 %   0.00 %(h)
  Net investment income, net of preferred share distributions (d)     6.62 %(e)(h)   2.55 %   2.55 %   27.45 %(h)
  Expenses, net of fee waivers     1.41 %(h)   1.50 %   1.69 %   2.40 %(h)
  Expenses, before fee waivers     1.77 %(h)   1.87 %   2.05 %   2.65 %(h)
Portfolio turnover rate     20.70 %   22.15 %   35.52 %   17.49 %
(a)
Commencement of operations.
(b)
Based on average shares outstanding.
(c)
Net asset value at December 18, 2003, reflects the deduction of the average sales load and offering costs of $0.67 per share paid by the holders of common shares from the $15.00 offering price. We paid a sales load and offering cost of $0.68 per share on 6,660,000 common shares sold to the public and no sales load or offering costs on 7,000 common shares sold to affiliates of the RMR Advisors for $15 per share.
(d)
Amounts are net of expenses waived by RMR Advisors.
(e)
As discussed in Note A (7) to the financial statements, these amounts are subject to change to the extent 2006 distributions by the issuers of the Fund's investments are characterized as capital gains and return of capital.
(f)
Total returns for periods of less than one year are not annualized.
(g)
Total return based on per share market price assumes the purchase of common shares at the market price on the first day and sales of common shares at the market price on the last day of the period indicated; dividends and distributions, if any, are assumed to be reinvested at market prices on the ex-dividend date. The total return based on net asset value, or NAV, assumes the purchase of common shares at NAV on the first day and sales of common shares at NAV on the last day of the period indicated; distributions are assumed to be reinvested at NAV on the ex-dividend date. Results represent past performance and do not guarantee future results. Total return would have been lower if RMR Advisors had not contractually waived a portion of its investment advisory fee.
(h)
Annualized.

See notes to financial statements.


11



RMR Real Estate Fund
Notes to Financial Statements

June 30, 2006 (unaudited)

Note A

(1)  Organization

RMR Real Estate Fund, or the Fund, was organized as a Massachusetts business trust on July 2, 2002, and is registered under the Investment Company Act of 1940, as amended, as a non-diversified closed-end management investment company. The Fund had no operations prior to December 18, 2003, other than matters relating to the Fund's establishment and registration of the Fund's common shares under the Securities Act of 1933.

(2)  Interim Financial Statements

The accompanying June 30, 2006, financial statements have been prepared without audit. The Fund believes that disclosures made are adequate to make the information presented not misleading. In the opinion of the Fund's management, all adjustments, which include normal recurring adjustments considered necessary for a fair presentation, have been included. The Fund's operating results for this interim period are not necessarily indicative of the results that may be expected on an annual basis or in the future.

(3)  Use of Estimates

Preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires the Fund's management to make estimates and assumptions that may affect the amounts reported in the financial statements and related notes. The actual results could differ from these estimates particularly for reasons described in Note A(7), and for other reasons.

(4)  Portfolio Valuation

Investment securities of the Fund are valued at the latest sales price whenever that price is readily available on that day; securities for which no sales were reported on that day, unless otherwise noted, are valued at the last available bid price on that day. Securities traded primarily on the NASDAQ Stock Market, or NASDAQ, are normally valued by the Fund at the NASDAQ Official Closing Price, or NOCP, provided by NASDAQ each business day. The NOCP is the most recently reported price as of 4:00:06 p.m., eastern time, unless that price is outside the range of the "inside" bid and asked prices (i.e., the bid and asked prices that dealers quote to each other when trading for their own accounts); in that case, NASDAQ will adjust the price to equal the inside bid or asked price, whichever is closer. Because of delays in reporting trades, the NOCP may not be based on the price of the last trade to occur before the market closes. Some fixed income securities may be valued using pricing provided by a pricing service. Any of the Fund's securities which are not readily marketable, which are not traded or which have other characteristics of illiquidity are valued by the Fund at fair value as determined in good faith under the supervision of the Fund's board of trustees. Numerous factors may be considered when determining fair value of a security, including cost at date of purchase, type of security, the nature and duration of restrictions on disposition of the security and whether the issuer of the security being fair valued has other securities of the same type outstanding. Short-term debt securities with less than 60 days until maturity may be valued at cost, which when combined with interest accrued, approximates market value.

(5)  Securities Transactions and Investment Income

Securities transactions are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the


12


securities received. Interest income, including accretion of original issue discount, where applicable, and accretion of discount on short-term investments, is recorded on the accrual basis. Realized gains and losses from securities transactions are recorded on the basis of identified cost.

(6)  Federal Income Taxes

The Fund has qualified and intends to qualify in the future as a "regulated investment company" and to comply with the applicable provisions of subchapter M of the Internal Revenue Code of 1986, as amended, so that it will generally not be subject to federal income tax.

(7)  Distributable Earnings

The Fund earns income, net of expenses, daily on its investments. It is the policy of the Fund to pay a stable distribution amount to common shareholders on a monthly basis and distributions to Fund shareholders are declared pursuant to this policy. On June 26, 2006, the Fund declared distributions of $0.10 per common share payable in August, September and October 2006. Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions may consist of ordinary income (net investment income and short term capital gains), long term capital gains and return of capital. To the extent the Fund's net realized capital gains, if any, can be offset by capital loss carry-forwards, it is the policy of the Fund not to distribute such gains. Distributions to preferred shareholders are determined as described in Note D.

The Fund has substantial investments in real estate investment trusts, or REITs, which are generally not subject to federal income taxes. Distributions that the Fund received from REITs can be classified as ordinary income, capital gain income or return of capital by the REITs that make these distributions to the Fund. However, it is not possible to characterize distributions received from REITs during interim periods because the issuers do not report their tax characterization until subsequent to year end. Final characterization of the Fund's 2006 distributions to shareholders is also dependent upon the magnitude or timing of the Fund's securities transactions prior to year end. Therefore it is likely that some portion of the Fund's 2006 investment income and distributions to shareholders will be recharacterized as long term capital gain and return of capital for financial statement and federal income tax purposes subsequent to year end and reflected accordingly in the Fund's year end financial statements.

Although subject to adjustments, the cost, gross unrealized appreciation and unrealized depreciation of the Fund's investments for federal income tax purposes as of June 30, 2006, are as follows:

 
   
 
Cost   $ 147,543,415  
   
 
Gross unrealized appreciation   $ 15,294,219  
Gross unrealized depreciation     (2,360,420 )
   
 
Net unrealized appreciation/(depreciation)   $ 12,933,799  
   
 

(8)  Concentration of Risk

Under normal market conditions, the Fund's investments will be concentrated in income producing common shares, preferred shares and debt securities, including convertible preferred and debt securities, issued by real estate companies and REITs. The value of Fund shares may fluctuate more than the shares of a fund not concentrated in the real estate industry due to economic, legal, regulatory, technological or other developments affecting the United States real estate industry.


13


Note B

Advisory and Administration Agreements and Other Transactions with Affiliates

The Fund has an advisory agreement with RMR Advisors, Inc., or RMR Advisors, to provide the Fund with a continuous investment program, to make day-to-day investment decisions and to generally manage the business affairs of the Fund in accordance with its investment objectives and policies. Pursuant to the agreement, RMR Advisors is compensated at an annual rate of 0.85% of the Fund's average daily managed assets. Managed assets means the total assets of the Fund less liabilities other than any indebtedness entered into for purposes of leverage. For purposes of calculating managed assets, the liquidation preference of preferred shares are not considered liabilities.

RMR Advisors has contractually agreed to waive a portion of its annual fee equal to 0.25% of the Fund's average daily managed assets until December 18, 2008.

RMR Advisors, and not the Fund, has contractually agreed to pay the lead underwriter of the Fund's initial public offering, an annual fee equal to 0.15% of the Fund's managed assets. This fee is paid quarterly in arrears during the term of RMR Advisors' advisory agreement and is paid by the RMR Advisors, not the Fund. The aggregate fees paid pursuant to the contract plus reimbursement of legal expenses of the underwriters will not exceed 4.5% of the total price of the common shares in the initial public offering.

RMR Advisors also performs administrative functions for the Fund pursuant to an administration agreement with the Fund. RMR Advisors has entered into a subadministration agreement with State Street Bank and Trust Company, or State Street, to perform substantially all Fund accounting and other administrative services. Under the administration agreement, RMR Advisors is entitled to reimbursement of the cost of providing administrative services. The Fund reimbursed RMR advisors for $63,480 of subadministrative fees charged by State Street for the six months ended June 30, 2006.

Each trustee who is not a director, officer or employee of RMR Advisors and who is not an interested person of the Fund as defined under the Investment Company Act of 1940, as amended, is considered to be a "disinterested trustee". Disinterested trustees are each paid by the Fund an annual fee plus fees for board and committee meetings. The Fund incurred $8,344 of trustee fees and expenses during the six months ended June 30, 2006.

The Fund's board of trustees and separately the disinterested trustees authorized the Fund to make reimbursement payments to RMR Advisors for costs related to the Fund's compliance and internal audit programs. The Fund incurred $14,901 of compliance and internal audit expense during the six months ended June 30, 2006. The Fund also participates in insurance programs with RMR Advisors and other funds managed by RMR Advisors and makes payments of allocated portions of related premiums. The Fund incurred $11,257 of insurance expense during the six months ended June 30, 2006.

Note C

Securities Transactions

During the six months ended June 30, 2006, there were purchases and sales transactions (excluding short-term securities) of $32,833,244 and $32,828,374, respectively. Brokerage commissions on securities transactions amounted to $37,175 during the six months ended June 30, 2006.


14



Note D

Preferred Shares

The Fund's 2,000 outstanding Series T auction preferred shares have a liquidation preference of $25,000 per share plus an amount equal to accumulated but unpaid distributions. The preferred shares are senior to the Fund's common shares and rank on parity with any other class or series of preferred shares of the Fund as to the payment of periodic distributions, including distribution of assets upon liquidation. If the Fund does not timely cure a failure to (1) maintain asset coverage for the preferred shares as required by rating agencies, or (2) maintain asset coverage, as defined in the Investment Company Act of 1940, as amended, of at least 200%, the preferred shares will be subject to redemption at an amount equal to their liquidation preference plus accumulated but unpaid distributions. The holders of the preferred shares have voting rights equal to the holders of the Fund's common shares and generally vote together with the holders of the common shares as a single class. Holders of the preferred shares, voting as a separate class, also are entitled to elect two of the Fund's trustees. The Fund pays distributions on the preferred shares at a rate set at auctions held generally every seven days. Distributions are generally payable every seven days, on the first business day following the end of a distribution period. The preferred share distribution rate was 4.75% per annum as of June 30, 2006.

Note E

Submission of Proposals to a Vote of Shareholders

The annual meeting of Fund shareholders was held on May 9, 2006. Following is a summary of the proposals submitted to shareholders for vote at the meeting and votes cast:

Proposal

  Votes for
  Votes
withheld

  Votes
abstained

Common shares            
  Election of Frank J. Bailey as trustee until the 2009 annual meeting.   6,380,655   73,798  
Preferred shares            
  Election of Frank J. Bailey as trustee until the 2009 annual meeting.   391   47  
  Election of Gerard M. Martin as trustee until the 2009 annual meeting.   391   47  

15


RMR Hospitality and Real Estate Fund
June 30, 2006


LOGO

To our shareholders,

In the pages that follow, you will find data summarizing our financial results for the six months ended June 30, 2006, and our financial position as of June 30, 2006.

For the six months ended June 30, 2006, our investment allocation to the sub-sector of diversified real estate investment trusts, or REITs, increased from 16% to 18% of total investments, our largest sub-sector increase. During the same time period, our allocation to the hospitality sub-sector decreased from 33% to 28% of total investments, the largest sub-sector decrease. These changes reflect our view of the business environments in these sub-sectors, the strengths and weakness of the companies that operate in those sub-sectors and the share prices of individual companies. During the remainder of 2006, we will continue to monitor market conditions and position our portfolio according to our views of market conditions.

For securities that we held continuously during the first six months of 2006, our three best performing investments during the period were the common stocks of CarrAmerica Realty Corp., Eagle Hospitality Properties Trust, Inc. and Highwood Properties Inc., with total returns during this period of 32%, 31% and 30%, respectively. Our worst performing investments during the same period were The Mills Corp. common stock, LBA Realty LLC preferred stock, Series B and Trustreet Properties Inc. common stock with negative total returns of 32%, 17% and 6%, respectively.

Thank you for your continued support. For more information, please view our website, at www.rmrfunds.com.

Sincerely,

GRAPHIC

Thomas M. O'Brien
President


16


RMR Hospitality and Real Estate Fund
June 30, 2006


LOGO

Relevant Market Conditions

Hospitality Industry Fundamentals.    Strong operating fundamentals have continued into 2006. Most companies operating in the hospitality sector have seen increases in occupancy and daily rental rates. This dual combination has allowed the hospitality sector to show earnings improvements over 2005. New supply has been constrained due to high investment costs, and private equity has eliminated the public securities of several hospitality companies.

Real Estate Industry Fundamentals    The operating environment for real estate companies has improved in 2006. Generally, vacancy rates have been declining and rental rates have been increasing. We expect real estate industry fundamentals to remain strong for the foreseeable future.

Real Estate Industry Technicals.    We believe demand for real estate securities over the long term will continue to increase. Demographic trends in the U.S. include growth in the over age 50 population. We believe that individuals in that age category tend to focus their investments in higher yielding stocks like REITs. Institutions, too, seem to be increasing their allocations to real estate securities. Both of these are long term positive factors affecting the real estate securities market.

Fund Strategies, Techniques and Performance

Our primary objective is to earn and pay to our common shareholders a high level of current income by investing in hospitality and real estate companies. Our secondary objective is capital appreciation. There can be no assurance that we will achieve our investment objectives.

During the first six months of 2006, our total return on net asset value, or NAV (including NAV changes and assuming a hypothetical reinvestment of distributions at NAV) was 8.3%. During that same period, the total return for the MSCI US REIT Total Return Index (an unmanaged index of REIT common stocks) was 13.4% and the total return for the Merrill Lynch REIT Preferred Index (an unmanaged index of REIT preferred stocks) was 1.6%. We believe these two indices are relevant to us because our investments, excluding short term investments, as of June 30, 2006, include 56% REIT common stocks and 34% REIT preferred stocks. The S&P 500 Index (an unmanaged index published as Standard and Poor's Composite Index of 500 common stocks) total return for the first six months of 2006 was 2.7%.

Portfolio holdings by sub-sector as a percentage of investments

(as of June 30, 2006) (unaudited)

 
   
 
Hospitality   28 %
Diversified   18 %
Office   18 %
Health care   10 %
Others, less than 10%   25 %
Short term investments   1 %
   
 
  Total   100 %
   
 
REITs   92 %
Other   7 %
Short term investments   1 %
   
 
  Total   100 %
   
 

17


RMR Hospitality and Real Estate Fund
Portfolio of Investments
– June 30, 2006 (unaudited)


Company

  Shares

  Value


Common Stocks – 84.3%          
Real Estate Investment Trusts – 81.1%          
  Apartments – 1.9%          
    Apartment Investment & Management Co.   8,200   $ 356,290
    Associated Estates Realty Corp.   11,600     143,840
    BNP Residential Properties, Inc.   16,000     272,800
    Home Properties, Inc.   4,900     271,999
    United Dominion Realty Trust, Inc.   2,100     58,821
       
          1,103,750
  Diversified – 23.0%          
    Centracore Properties Trust   8,150     201,713
    Colonial Properties Trust   71,100     3,512,340
    Cousins Properties, Inc.   10,200     315,486
    Crescent Real Estate Equities Co.   171,000     3,173,760
    Entertainment Properties Trust   17,300     744,765
    iStar Financial, Inc.   3,000     113,250
    Lexington Corporate Properties Trust   92,000     1,987,200
    Liberty Property Trust   24,000     1,060,800
    National Retail Properties, Inc.   88,650     1,768,567
    Newkirk Realty Trust, Inc.   8,000     138,880
    Spirit Finance Corp.   12,500     140,750
    Washington Real Estate Investment Trust   300     11,010
       
          13,168,521
  Health Care – 9.8%          
    Health Care Property Investors, Inc.   2,770     74,070
    Health Care REIT, Inc.   49,150     1,717,792
    Healthcare Realty Trust, Inc.   9,300     296,205
    Medical Properties Trust, Inc.   53,750     593,400
    Nationwide Health Properties, Inc.   91,000     2,048,410
    Universal Health Realty Income Trust   5,000     156,750
    Windrose Medical Properties Trust   50,100     731,460
       
          5,618,087
  Hospitality – 2.4%          
    Ashford Hospitality Trust, Inc.   26,500     334,430
    Eagle Hospitality Properties Trust, Inc.   41,000     394,830
    Hersha Hospitality Trust   33,100     307,499
    Highland Hospitality Corp.   7,000     98,560
    Innkeepers USA Trust   5,000     86,400
    Winston Hotels, Inc.   15,000     183,750
       
          1,405,469
See notes to financial statements and notes to portfolio of investments.

18


  Industrial – 9.0%          
    AMB Property Corp.   7,200   $ 363,960
    EastGroup Properties, Inc.   3,700     172,716
    First Industrial Realty Trust, Inc.   106,160     4,027,711
    ProLogis   11,000     573,320
       
          5,137,707
  Mortgage – 1.3%          
    American Mortgage Acceptance Co.   13,400     197,516
    KKR Financial Corp.   5,000     104,050
    Newcastle Investment Corp.   17,000     430,440
       
          732,006
  Office – 16.9%          
    Brandywine Realty Trust   44,000     1,415,480
    CarrAmerica Realty Corp.   5,000     222,750
    Columbia Equity Trust, Inc.   3,000     46,080
    Corporate Office Properties Trust   11,500     483,920
    Equity Office Properties Trust   62,100     2,267,271
    Glenborough Realty Trust, Inc.   87,400     1,882,596
    Highwoods Properties, Inc.   45,000     1,628,100
    Maguire Properties, Inc.   4,000     140,680
    Reckson Associates Realty Corp.   38,000     1,572,440
       
          9,659,317
  Retail – 10.8%          
    CBL & Associates Properties, Inc.   2,000     77,860
    Equity One, Inc.   5,000     104,500
    Feldman Mall Properties, Inc.   2,900     31,784
    General Growth Properties, Inc.   6,000     270,360
    Glimcher Realty Trust   23,400     580,554
    Heritage Property Investment Trust   80,400     2,807,568
    New Plan Excel Realty Trust   46,270     1,142,406
    Realty Income Corp.   5,000     109,500
    Taubman Centers, Inc.   2,000     81,800
    The Mills Corp.   36,100     965,675
    Urstadt Biddle Properties, Inc.   800     13,032
       
          6,185,039
See notes to financial statements and notes to portfolio of investments.

19


  Specialty – 5.3%          
    Getty Realty Corp.   34,000   $ 966,960
    Trustreet Properties, Inc.   158,200     2,086,658
       
          3,053,618
  Storage – 0.7%          
    Extra Space Storage, Inc.   220     3,573
    Sovran Self Storage, Inc.   8,100     411,399
       
          414,972
Total Real Estate Investment Trusts (Cost $40,470,947)         46,478,486
  Other – 3.2%          
    American Capital Strategies, Ltd.   16,000     535,680
    Iowa Telecommunication Services, Inc.   25,800     488,136
    Morgans Hotel Group (a)   7,000     108,920
    Seaspan Corp.   33,400     699,730
Total Other (Cost $1,663,667)         1,832,466
Total Common Stocks (Cost $42,134,614)         48,310,952
Preferred Stocks – 49.5%          
  Real Estate Investment Trusts – 49.5%          
  Apartments – 2.7%          
    Apartment Investment & Management Co., Series R   38,000     956,650
    Apartment Investment & Management Co., Series U   24,000     590,400
       
          1,547,050
Diversified – 2.7%          
    Colonial Properties Trust, Series E   23,067     587,055
    Digital Realty Trust, Inc., Series A   15,000     379,350
    LBA Realty LLC, Series B   30,000     585,000
       
          1,551,405
See notes to financial statements and notes to portfolio of investments.

20



Company

  Shares

  Value


Preferred Stocks – continued          
Real Estate Investment Trusts – continued          
  Health Care – 4.4%          
    Health Care REIT, Inc., Series F   40,000   $ 1,005,200
    LTC Properties, Inc., Series F   40,000     997,600
    Windrose Medical Properties Trust, Series A (b)   20,000     504,000
       
          2,506,800
  Hospitality – 28.3%          
    Ashford Hospitality Trust, Series A   46,000     1,157,360
    Boykin Lodging Co., Series A   70,000     1,757,000
    Eagle Hospitality Properties Trust, Inc., Series A   28,000     684,600
    FelCor Lodging Trust, Inc., Series C   60,000     1,470,000
    Hersha Hospitality Trust, Series A   40,000     992,400
    Highland Hospitality Corp., Series A   160,000     3,840,000
    Host Marriott Corp., Series E   100,000     2,700,000
    Innkeepers USA Trust, Series C   27,000     666,900
    LaSalle Hotel Properties, Series E   5,000     126,250
    Strategic Hotels & Resorts, Inc., Series C   20,000     498,000
    Winston Hotels, Inc., Series B   95,000     2,348,400
       
          16,240,910
  Manufactured Homes – 0.4%          
    Affordable Residential Communities, Series A   9,600     219,360
  Mortgage – 1.9%          
    HomeBanc Corp., Series A   25,000     628,750
    New Century Financial Corp., Series A   20,000     490,000
       
          1,118,750
  Office – 8.6%          
    Alexandria Real Estate Equities, Inc., Series C   120,000     3,139,200
    SL Green Realty Corp., Series D   70,000     1,771,000
       
          4,910,200
  Retail – 0.5%          
    The Mills Corp., Series E   1,800     41,436
    The Mills Corp., Series G   10,000     225,000
       
          266,436
Total Preferred Stocks (Cost $28,261,761)         28,360,911
See notes to financial statements and notes to portfolio of investments.

21



 
Company

  Shares or
Principal Amount

  Value

 

 

Debt Securities – 9.3%

 

 

 

 

 

 

 
  Hospitality – 9.3%              
    American Real Estate Partners LP, 8.125%, 06/01/2012   $ 2,000,000   $ 1,995,000  
    FelCor Lodging LP, 9.00%, 06/01/2011 (c)     1,600,000     1,696,000  
    Six Flags, Inc., 9.75%, 04/15/2013     1,760,000     1,617,000  
Total Debt Securities (Cost $5,253,227)           5,308,000  
Short-Term Investments – 1.9%              
  Other Investment Companies – 1.9%              
    SSgA Money Market Fund, 4.75% (d) (Cost $1,115,883)     1,115,883     1,115,883  
Total Investments – 145.0% (Cost $76,765,485)           83,095,746  
Other assets less liabilities – 3.9%           2,214,074  
Preferred Shares, at liquidation preference – (48.9)%           (28,000,000 )
Net Assets applicable to common shareholders – 100%         $ 57,309,820  

Notes to Portfolio of Investments

(a)
Non-income producing security.
(b)
Convertible into common stock.
(c)
Also a Real Estate Investment Trust.
(d)
Rate reflects 7 day yield as of June 30, 2006.

See notes to financial statements.


22



RMR Hospitality and Real Estate Fund
Financial Statements

Statement of Assets and Liabilities


June 30, 2006 (unaudited)

   

Assets      
  Investments in securities, at value (cost $76,765,485)   $ 83,095,746
  Cash     666
  Receivable for investment securities sold     1,718,484
  Dividends and interest receivable     772,069
  Other assets     9,451
   
    Total assets     85,596,416
   
Liabilities      
  Payable for investment securities purchased     89,454
  Advisory fee payable     41,194
  Distributions payable – preferred shares     27,496
  Accrued expenses and other liabilities     128,452
   
    Total liabilities     286,596
   
Preferred shares, at liquidation preference      
  Auction preferred shares, Series Th;
$.001 par value per share; 1,120 shares issued and
outstanding at $25,000 per share liquidation preference
    28,000,000
   
Net assets attributable to common shares   $ 57,309,820
   
Composition of net assets      
  Common shares, $.001 par value per share;
unlimited number of shares authorized,
2,485,000 shares issued and outstanding
  $ 2,485
  Additional paid-in capital     47,170,770
  Undistributed net investment income     383,817
  Accumulated net realized gain on investments     3,422,487
  Net unrealized appreciation on investments     6,330,261
   
Net assets attributable to common shares   $ 57,309,820
   
Net asset value per share attributable to common shares
(based on 2,485,000 shares outstanding)
  $ 23.06
   

See notes to financial statements.


23



RMR Hospitality and Real Estate Fund
Financial Statements
– continued

Statement of Operations


 
Six Months Ended June 30, 2006 (unaudited)

   
 

 
Investment Income        
  Dividends (cash distributions received or due)   $ 2,620,821  
  Interest     442,296  
   
 
    Total investment income     3,063,117  
   
 
Expenses        
  Advisory     358,681  
  Administrative     63,444  
  Audit and legal     46,059  
  Preferred share remarketing     34,037  
  Custodian     29,294  
  Compliance and internal audit     14,901  
  Trustees' fees and expenses     8,321  
  Shareholder reporting     7,903  
  Other     44,159  
   
 
    Total expenses     606,799  
  Less: expenses waived by the Advisor     (105,494 )
   
 
  Net expenses     501,305  
   
 
    Net investment income     2,561,812  
   
 
Realized and unrealized gain on investments        
  Net realized gain on investments     1,753,008  
  Net change in unrealized appreciation/(depreciation) on investments     795,558  
   
 
  Net realized and unrealized gain on investment transactions     2,548,566  
  Distributions to preferred shareholders from net investment income     (624,870 )
   
 
    Net increase in net assets attributable to common shares resulting from operations   $ 4,485,508  
   
 

See notes to financial statements.


24



RMR Hospitality and Real Estate Fund
Financial Statements
– continued

Statement of Changes in Net Assets


 
 
  Six Months
Ended
June 30,
2006

  Year Ended
December 31,
2005

 

 

 


 

(unaudited)


 

 


 
Increase (decrease) in net assets resulting from operations              
  Net investment income   $ 2,561,812   $ 2,815,626  
  Net realized gain on investments     1,753,008     2,777,962  
  Net change in unrealized appreciation/(depreciation) on investments     795,558     (3,222,844 )
  Distributions to preferred shareholders from:              
    Net investment income     (624,870 )   (403,117 )
    Net realized gain on investments         (265,998 )
   
 
 
      Net increase in net assets attributable to common shares resulting
from operations
    4,485,508     1,701,629  
   
 
 
  Distributions to common shareholders from:              
    Net investment income     (1,553,125 )   (2,411,208 )
    Net realized gain on investments         (1,626,917 )

Capital shares transactions

 

 

 

 

 

 

 
  Net proceeds from sale of preferred shares         10,708,615  
   
 
 
    Net increase from capital share transactions         10,708,615  
  Less: Liquidation preference of preferred shares issued         (11,000,000 )
   
 
 
      Total increase (decrease) in net assets attributable to common shares     2,932,383     (2,627,881 )

Net assets attributable to common shares

 

 

 

 

 

 

 
  Beginning of period     54,377,437     57,005,318  
   
 
 
  End of period (including undistributed net investment income of
$383,817 and $0, respectively)
  $ 57,309,820   $ 54,377,437  
   
 
 
Common shares issued and repurchased              
  Shares outstanding, beginning of period     2,485,000     2,485,000  
    Shares issued          
   
 
 
  Shares outstanding, end of period     2,485,000     2,485,000  
   
 
 

See notes to financial statements.


25



RMR Hospitality and Real Estate Fund
Financial Highlights

Selected Data For A Common Share Outstanding Throughout The Period


 
 
  Six Months
Ended
June 30, 2006

  Year Ended
December 31,
2005

  For the Period
April 27,
2004(a) to
December 31,
2004

 

 

 


 

(unaudited)


 

 


 

 


 
Per Common Share Operating Performance (b)                    
Net asset value, beginning of period   $ 21.88   $ 22.94   $ 19.28  (c)
   
 
 
 
Income from Investment Operations                    
  Net investment income (d)     1.03  (e)   1.13     .71  
  Net realized and unrealized appreciation/(depreciation) on investments     1.03  (e)   (.19 )   3.95  
Distributions to preferred shareholders (common stock equivalent basis)                    
  Net investment income     (.25 )(e)   (.16 )   (.06 )
  Net realized gain on investments      (e)   (.11 )   (.01 )
   
 
 
 
Net increase in net asset value from operations     1.81     .67     4.59  
Less: Distributions to common shareholders from:                    
  Net investment income     (.63 )(e)   (.96 )   (.65 )
  Net realized gain on investments      (e)   (.65 )   (.10 )
Common shares offering costs charged to capital             (.04 )
Preferred shares offering costs charged to capital         (.12 )   (.14 )
Net asset value, end of period   $ 23.06   $ 21.88   $ 22.94  
   
 
 
 
Market price, beginning of period   $ 18.21   $ 19.98   $ 20.00  
   
 
 
 
Market price, end of period   $ 19.31   $ 18.21   $ 19.98  
   
 
 
 
Total Return (f)                    
  Total investment return based on:                    
    Market price (g)     9.53 %   (0.73 )%   3.93 %
    Net asset value (g)     8.30 %   2.54 %   23.16 %
Ratios/Supplemental Data:                    
Preferred shares, liquidation preference ($25,000 per share) (000s)   $ 28,000   $ 28,000   $ 17,000  
Net assets attributable to common shares, end of period (000s)   $ 57,310   $ 54,377   $ 57,005  
Ratio to average net assets attributable to common shares of:                    
  Net investment income, before total preferred share distributions (d)     9.05 %(e)(h)   5.04 %   4.96 %(h)
  Total preferred share distributions     2.21 %(h)   1.20 %   0.50 %(h)
  Net investment income, net of preferred share distributions (d)     6.84 %(e)(h)   3.84 %   4.46 %(h)
  Expenses, net of fee waivers     1.77 %(h)   1.80 %   1.86 %(h)
  Expenses, before fee waivers     2.14 %(h)   2.14 %   2.18 %(h)
Portfolio turnover rate     19.72 %   23.95 %   20.83 %
(a)
Commencement of operations.
(b)
Based on average shares outstanding.
(c)
Net asset value at April 27, 2004, reflects the deduction of the average sales load and offering costs of $0.72 per share paid by the holders of common shares from the $20.00 offering price. We paid a sales load and offering cost of $0.90 per share on 2,000,000 common shares sold to the public and no sales load or offering costs on 480,000 common shares sold to affiliates of RMR Advisors for $20 per share.
(d)
Amounts are net of expenses waived by RMR Advisors.
(e)
As discussed in Note A (7) to the financial statements, these amounts are subject to change to the extent 2006 distributions by the issuers of the Fund's investments are characterized as capital gains and return of capital.
(f)
Total returns for periods less than one year are not annualized.
(g)
Total return based on per share market price assumes the purchase of common shares at the market price on the first day and sales of common shares at the market price on the last day of the period indicated; distributions are assumed to be reinvested at market prices on the ex-dividend date. The total return based on net asset value, or NAV, assumes the purchase of common shares at NAV on the first day and sales of common shares at NAV on the last day of the period indicated; distributions are assumed to be reinvested at NAV on the ex-dividend date. Results represent past performance and do not guarantee future results. Total return would have been lower if RMR Advisors had not contractually waived a portion of its investment advisory fee.
(h)
Annualized.

See notes to financial statements.


26



RMR Hospitality and Real Estate Fund
Notes to Financial Statements

June 30, 2006 (unaudited)

Note A

(1)  Organization

RMR Hospitality and Real Estate Fund, or the Fund, was organized as a Massachusetts business trust on January 27, 2004, and is registered under the Investment Company Act of 1940, as amended, as a non-diversified closed-end management investment company. The Fund had no operations until April 27, 2004, other than matters relating to the Fund's establishment and registration of the Fund's common shares under the Securities Act of 1933.

(2)  Interim Financial Statements

The accompanying June 30, 2006, financial statements have been prepared without audit. The Fund believes that disclosures made are adequate to make the information presented not misleading. In the opinion of the Fund's management, all adjustments, which include normal recurring adjustments considered necessary for a fair presentation, have been included. The Fund's operating results for this interim period are not necessarily indicative of the results that may be expected on an annual basis or in the future.

(3)  Use of Estimates

Preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires the Fund's management to make estimates and assumptions that may affect the amounts reported in the financial statements and related notes. The actual results could differ from these estimates particularly for reasons described in Note A(7), and for other reasons.

(4)  Portfolio Valuation

Investment securities of the Fund are valued at the latest sales price whenever that price is readily available on that day; securities for which no sales were reported on that day, unless otherwise noted, are valued at the last available bid price on that day. Securities traded primarily on the NASDAQ Stock Market, or NASDAQ, are normally valued by the Fund at the NASDAQ Official Closing Price, or NOCP, provided by NASDAQ each business day. The NOCP is the most recently reported price as of 4:00:06 p.m., eastern time, unless that price is outside the range of the "inside" bid and asked prices (i.e., the bid and asked prices that dealers quote to each other when trading for their own accounts); in that case, NASDAQ will adjust the price to equal the inside bid or asked price, whichever is closer. Because of delays in reporting trades, the NOCP may not be based on the price of the last trade to occur before the market closes. Some fixed income securities may be valued using pricing provided by a pricing service. Any of the Fund's securities which are not readily marketable, which are not traded or which have other characteristics of illiquidity are valued by the Fund at fair value as determined in good faith under the supervision of the Fund's board of trustees. Numerous factors may be considered when determining fair value of a security, including cost at date of purchase, type of security, the nature and duration of restrictions on disposition of the security and whether the issuer of the security being fair valued has other securities of the same type outstanding. Short-term debt securities with less than 60 days until maturity may be valued at cost, which when combined with interest accrued, approximates market value.

(5)  Securities Transactions and Investment Income

Securities transactions are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the


27


securities received. Interest income, including accretion of original issue discount, where applicable, and accretion of discount on short-term investments, is recorded on the accrual basis. Realized gains and losses from securities transactions are recorded on the basis of identified cost.

(6)  Federal Income Taxes

The Fund has qualified and intends to qualify in the future as a "regulated investment company" and to comply with the applicable provisions of subchapter M of the Internal Revenue Code of 1986, as amended, so that it will generally not be subject to federal income tax.

(7)  Distributable Earnings

The Fund earns income, net of expenses, daily on its investments. It is the policy of the Fund to pay a stable distribution amount to common shareholders on a monthly basis and distributions to Fund shareholders are declared pursuant to this policy. On June 26, 2006, the Fund declared distributions of $0.125 per common share payable in August, September and October 2006. Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions may consist of ordinary income (net investment income and short term capital gains), long term capital gains and return of capital. To the extent the Fund's net realized capital gains, if any, can be offset by capital loss carry-forwards, it is the policy of the Fund not to distribute such gains. Distributions to preferred shareholders are determined as described in Note D.

The Fund has substantial investments in real estate investment trusts or REITs, which are generally not subject to federal income taxes. Distributions that the Fund received from REITs can be classified as ordinary income, capital gain income or return of capital by the REITs that make these distributions to the Fund. However, it is not possible to characterize distributions received from REITs during interim periods because the issuers do not report their tax characterization until subsequent to year end. Final characterization of the Fund's 2006 distributions to shareholders is also dependent upon the magnitude or timing of the Fund's securities transactions prior to year end. Therefore it is likely that some portion of the Fund's 2006 investment income and distributions to shareholders will be recharacterized as long term capital gain and return of capital for financial statement and federal income tax purposes subsequent to year end and reflected accordingly in the Fund's year end financial statements.

Although subject to adjustments, the cost, gross unrealized appreciation and unrealized depreciation of the Fund's investments for federal income tax purposes as of June 30, 2006, are as follows:

Cost   $ 76,765,485  
   
 
Gross unrealized appreciation   $ 7,880,356  
Gross unrealized depreciation     (1,550,095 )
   
 
Net unrealized appreciation/(depreciation)   $ 6,330,261  
   
 

(8)  Concentration of Risk

Under normal market conditions, the Fund's investments are concentrated in income producing common shares, preferred shares and debt securities, including convertible preferred and debt securities, issued by hospitality and real estate companies and REITs. The value of Fund shares may fluctuate more than the shares of a fund not concentrated in the hospitality and real estate industries due to economic, legal, regulatory, technological or other developments affecting the United States hospitality and real estate industries.


28


Note B

Advisory and Administration Agreements and Other Transactions with Affiliates

The Fund has an advisory agreement with RMR Advisors, Inc., or RMR Advisors, to provide the Fund with a continuous investment program, to make day-to-day investment decisions and to generally manage the business affairs of the Fund in accordance with its investment objectives and policies. Pursuant to the agreement, RMR Advisors is compensated at an annual rate of 0.85% of the Fund's average daily managed assets. Managed assets means the total assets of the Fund less liabilities other than any indebtedness entered into for purposes of leverage. For purposes of calculating managed assets, the liquidation preference of preferred shares are not considered liabilities.

RMR Advisors has contractually agreed to waive a portion of its annual fee equal to 0.25% of the Fund's average daily managed assets, until April 27, 2009.

RMR Advisors, and not the Fund, has contractually agreed to pay the lead underwriters of the Fund's initial public offering, an aggregate annual fee equal to 0.15% of the Fund's managed assets. This fee is paid quarterly in arrears during the term of RMR Advisors' advisory agreement and is paid by the RMR Advisors, not the Fund. The aggregate fees paid pursuant to the contract plus reimbursement of legal expenses of the underwriters will not exceed 4.5% of the total price of the common shares in the initial public offering.

RMR Advisors also performs administrative functions for the Fund pursuant to an administration agreement with the Fund. RMR Advisors has entered into a subadministration agreement with State Street Bank and Trust Company, or State Street, to perform substantially all Fund accounting and other administrative services. Under the administration agreement, RMR Advisors is entitled to reimbursement of the cost of providing administrative services. The Fund reimbursed RMR Advisors for $63,444 of subadministrative fees charged by State Street for the six months ended June 30, 2006.

Each trustee who is not a director, officer or employee of RMR Advisors and who is not an "interested person" of the Fund as defined under the Investment Company Act of 1940, as amended, is considered to be a "disinterested trustee". Disinterested trustees are each paid by the Fund an annual fee plus fees for board and committee meetings. The Fund incurred $8,321 of trustee fees and expenses during the six months ended June 30, 2006.

The Fund's board of trustees and separately the disinterested trustees authorized the Fund to make reimbursement payments to RMR Advisors for costs related to the Fund's compliance and internal audit programs. The Fund incurred $14,901 of compliance and internal audit expense during the six months ended June 30, 2006. The Fund also participates in pooled insurance programs with RMR Advisors and other funds managed by RMR Advisors and makes payments of allocated portions of related premiums. The Fund incurred $9,554 of insurance expense during the six months ended June 30, 2006.

Note C

Securities Transactions

During the six months ended June 30, 2006, there were purchases and sales transactions (excluding short-term securities) of $16,417,517 and $18,316,286, respectively. Brokerage commissions on securities transactions amounted to $25,004 during the six months ended June 30, 2006.


29



Note D

Preferred Shares

The Fund's 1,120 outstanding Series Th auction preferred shares, have a liquidation preference of $25,000 per share, plus an amount equal to accumulated but unpaid distributions. The preferred shares are senior to the Fund's common shares and rank on parity with any other class or series of preferred shares of the Fund as to the payment of periodic distributions, including distribution of assets upon liquidation. If the Fund does not timely cure a failure to (1) maintain asset coverage for the preferred shares as required by rating agencies, or (2) maintain asset coverage, as defined in the Investment Company Act of 1940, as amended, of at least 200%, the preferred shares will be subject to redemption at an amount equal to their liquidation preference plus accumulated but unpaid distributions. The holders of the preferred shares have voting rights equal to the holders of the Fund's common shares and generally vote together with the holders of the common shares as a single class. Holders of the preferred shares, voting as a separate class, also are entitled to elect two of the Fund's trustees. The Fund pays distributions on the preferred shares at a rate set at auctions held generally every seven days. Distributions are generally payable every seven days, on the first business day following the end of a distribution period. The preferred share distribution rate was 5.05% per annum as of June 30, 2006.

Note E

Submission of Proposals to a Vote of Shareholders

The annual meeting of Fund shareholders was held on May 9, 2006. Following is a summary of the proposals submitted to shareholders for vote at the meeting and votes cast:

Proposal

  Votes for
  Votes withheld
  Votes abstained
Common shares            
  Election of Frank J. Bailey as trustee until the 2009 annual meeting.   1,978,830   15,029  
Preferred shares            
  Election of Frank J. Bailey as trustee until the 2009 annual meeting.   152   56  
  Election of Gerard M. Martin as trustee until the 2009 annual meeting.   152   56  

30


RMR F.I.R.E. Fund
June 30, 2006

    LOGO

To our shareholders,

In the pages that follow, you will find data summarizing our financial results for the six months ended June 30, 2006, and our financial position as of June 30, 2006.

For the six months ended June 30, 2006, our investment allocation to the sub-sector of specialty real estate investment trusts, or REITs, increased from 2% to 6% of total investments, the largest such increase. During the same time period, our allocation to the diversified real estate sub-sector decreased from 16% to 13% of total investments, the largest such decrease. These changes reflect our view of the business environments in these sub-sectors, the strengths and weaknesses of the companies that operate in those sub-sectors and the share prices of individual companies. During the remainder of 2006, we will continue to monitor market conditions and position our portfolio according to our views of market conditions.

For securities that we held continuously during the first six months of 2006, our three best performing investments were the common stocks of Eagle Hospitality Properties Trust Inc., Capital Trust Inc. and Iowa Telecommunication Services with total returns of 31%, 27% and 25%, respectively. Our three worst performing investments during the same period were the common stocks of The Mills Corp. and FirstMerit Corp. and the preferred stock, Series B of LBA Realty LLC with negative total returns during the same period of 31%, 18% and 17%, respectively.

Thank you for your continued support. For more information, please view our website, at www.rmrfunds.com.

Sincerely,

GRAPHIC

Thomas M. O'Brien
President


31


RMR F.I.R.E. Fund
June 30, 2006

    LOGO

Relevant Market Conditions

Financial Services Industry Fundamentals.    Generally, earnings of companies in the financial sector have increased in the first half of 2006 versus the same period in 2005. Many companies in the financial sector have successfully offset interest rate margin compression with balance sheet growth and have enjoyed high credit quality levels with limited bad debt losses.

We believe that interest rate margins will not improve for the sector overall as long as the U.S. treasury yield curve remains inverted, with longer term yield rates lower than shorter term rates, or flat. If the yield curve returns to its customary historical upright position in response to Federal Reserve policy or other market factors the interest rate margins for this sector may improve.

Real Estate Industry Fundamentals.    The operating environment for real estate companies has improved in 2006. Generally, vacancy rates have been declining and rental rates have been increasing. We expect real estate industry fundamentals to remain strong for the foreseeable future.

Real Estate Industry Technicals.    We believe demand for real estate securities over the long term will continue to increase. Demographic trends in the U.S. include growth in the over age 50 population. We believe that individuals in that age category tend to focus their investments in higher yielding stocks like REITs. Institutions, too, seem to be increasing their allocations to real estate securities. Both of these are long term positive factors affecting the real estate securities market.

Fund Strategies, Techniques and Performance

Our investment objective is to provide high total returns to our common shareholders through a combination of capital appreciation and current income. There can be no assurance that we will achieve our investment objective.

During the six months ended June 30, 2006, our total return on net asset value, or NAV (including NAV changes and assuming a hypothetical reinvestment of distributions at NAV) was 3.2%. During the same period the S&P 500 Financial Sector Index (an unmanaged index of financial services common stocks) total return was 3.1%, the total return for the MSCI US REIT Total Return Index (an unmanaged index of REIT common stocks) was 13.4% and the Merrill Lynch REIT Preferred Index (an unmanaged index of REIT preferred stocks) was 1.6%. We believe these three indices are relevant to us because our investments, excluding short-term investments, as of June 30, 2006, include 21% of financial services stocks, 36% REIT common stocks and 40% REIT preferred stocks. The S&P 500 Index (an unmanaged index published as Standard and Poor's Composite Index of 500 common stocks) total return for the first six months of 2006 was 2.7%.


32



Portfolio holdings by sub-sector as a percentage of investments

(as of June 30, 2006) (unaudited)

Banks & Thrifts   10 %
Other Financial Services   11 %
Retail REITs   15 %
Diversified REITs   13 %
Hospitality REITs   12 %
Other REITs less than 10%   36 %
Other   2 %
Short term investments   1 %
   
 
  Total   100 %
   
 

REITs

 

76

%
Financial Services   21 %
Other   2 %
Short term investments   1 %
   
 
  Total   100 %
   
 

33


RMR F.I.R.E. Fund
Portfolio of Investments
– June 30, 2006 (unaudited)


 
Company

  Shares

  Value

 

 
Common Stocks – 89.4%            
Financial Services – 29.8%            
  Banks – 8.3%            
    Comerica, Inc.   4,000   $ 207,960  
    Farmers Capital Bank Corp.   3,035     99,396  
    First Commonwealth Financial Corp.   28,000     355,600  
    First Horizon National Corp.   11,400     458,280  
    Firstmerit Corp.   12,800     268,032  
    FNB Corp.   28,500     449,445  
    National City Corp.   17,400     629,706  
    Trustco Bank Corp. NY   23,400     257,868  
       
 
          2,726,287  
  Thrifts – 7.2%            
    Beverly Hills Bancorp, Inc.   100     962  
    Capitol Federal Financial   17,400     596,646  
    Flagstar Bancorp, Inc.   25,000     399,000  
    New York Community Bancorp, Inc.   82,200     1,357,122  
       
 
          2,353,730  
  Other Financial Services – 14.3%            
    American Capital Strategies, Ltd.   51,000     1,707,480  
    Capital Trust, Inc. *   4,900     174,538  
    CharterMac   44,200     826,982  
    Fannie Mae   13,000     625,300  
    Friedman Billings Ramsey Group, Inc. *   54,000     592,380  
    MCG Capital Corp.   46,500     739,350  
       
 
          4,666,030  
Total Financial Services (Cost $11,479,642)         9,746,047  
Real Estate – 57.2%            
  Diversified – 14.8%            
    Centracore Properties Trust *   3,000     74,250  
    Cousins Properties, Inc. *   10,200     315,486  
    Crescent Real Estate Equities Co. *   98,400     1,826,304  
    Entertainment Properties Trust *   2,000     86,100  
    iStar Financial, Inc. *   14,000     528,500  
    Lexington Corporate Properties Trust *   38,500     831,600  
    Liberty Property Trust *   6,900     304,980  
    National Retail Properties *   37,150     741,142  
    Newkirk Realty Trust, Inc. *   8,000     138,880  
       
 
          4,847,242  
See notes to financial statements and notes to portfolio of investments.  

34


  Health Care – 9.0%            
    Health Care Property Investors, Inc. *   16,850   $ 450,569  
    Health Care REIT, Inc. *   28,650     1,001,318  
    Healthcare Realty Trust, Inc. *   18,500     589,225  
    Medical Properties Trust, Inc. *   11,000     121,440  
    Nationwide Health Properties, Inc. *   31,400     706,814  
    Windrose Medical Properties Trust *   5,000     73,000  
       
 
          2,942,366  
  Hospitality – 1.2%            
    Eagle Hospitality Properties Trust, Inc. *   36,500     351,495  
    Hersha Hospitality Trust *   3,000     27,870  
       
 
          379,365  
  Industrial – 6.0%            
    EastGroup Properties, Inc. *   4,500     210,060  
    First Industrial Realty Trust, Inc. *   35,700     1,354,458  
    ProLogis *   8,000     416,960  
       
 
          1,981,478  
  Manufactured Homes – 2.5%            
    Sun Communities, Inc. *   25,000     813,250  
  Mortgage – 2.3%            
    American Mortgage Acceptance Co. *   8,100     119,394  
    KKR Financial Corp. *   3,000     62,430  
    Newcastle Investment Corp. *   22,000     557,040  
       
 
          738,864  
  Office – 0.4%            
    Equity Office Properties Trust *   50     1,826  
    Maguire Properties, Inc. *   4,000     140,680  
       
 
          142,506  
  Retail – 12.3%            
    CBL & Associates Properties, Inc. *   9,000     350,370  
    Equity One, Inc. *   5,000     104,500  
    Feldman Mall Properties, Inc. *   1,000     10,960  
    Glimcher Realty Trust *   55,300     1,371,993  
    Heritage Property Investment Trust *   10,300     359,676  
    New Plan Excel Realty Trust *   40,650     1,003,648  
    Taubman Centers, Inc. *   2,000     81,800  
    The Mills Corp. *   28,100     751,675  
       
 
          4,034,622  
See notes to financial statements and notes to portfolio of investments.  

35


  Specialty – 8.6%            
    Alesco Financial Trust *(a)   150,000   $ 1,575,000  
    Getty Realty Corp. *   4,000     113,760  
    Trustreet Properties, Inc. *   84,300     1,111,917  
       
 
          2,800,677  
  Storage – 0.1%            
    Extra Space Storage, Inc. *   1,100     17,864  
Total Real Estate (Cost $19,764,872)         18,698,234  
  Other – 2.4%            
    Iowa Telecommunication Services, Inc.   42,500     804,100  
Total Other (Cost $721,192)         804,100  
Total Common Stocks (Cost $31,965,706)         29,248,381  
Preferred Stocks – 66.7%            
Real Estate – 63.7%            
  Apartments – 11.0%            
    Apartment Investment & Management Co., Series U *   32,500     799,500  
    Apartment Investment & Management Co., Series V *   27,700     691,115  
    Apartment Investment & Management Co., Series Y *   65,000     1,616,875  
    Home Properties, Inc., Series F *   18,800     479,400  
       
 
          3,586,890  
  Diversified – 5.8%            
    Cousins Properties, Inc., Series B *   20,000     500,000  
    Digital Realty Trust, Inc., Series A *   20,000     505,800  
    LBA Realty LLC, Series B *   45,000     877,500  
       
 
          1,883,300  
  Health Care – 3.5%            
    Health Care REIT, Inc., Series F *   26,900     675,997  
    OMEGA Healthcare Investors Inc., Series D *   19,000     486,780  
       
 
          1,162,777  
  Hospitality – 18.1%            
    Eagle Hospitality Properties Trust, Inc., Series A *   14,000     342,300  
    Entertainment Properties Trust, Series B *   40,000     956,000  
    Equity Inns, Inc., Series B *   50,000     1,265,000  
    FelCor Lodging Trust, Inc., Series C *   64,000     1,568,000  
    Host Marriott Corp., Series E *   10,000     270,000  
    LaSalle Hotel Properties, Series A *   36,000     925,200  
    Strategic Hotels & Resorts, Inc., Series B *   13,700     340,171  
    Winston Hotels, Inc., Series B *   10,900     269,448  
       
 
          5,936,119  
See notes to financial statements and notes to portfolio of investments.  

36


  Manufactured Homes – 0.5%            
    Affordable Residential Communities, Series A *   6,900   $ 157,665  
  Mortgage – 10.9%            
    HomeBanc Corp., Series A *   10,000     251,500  
    MFA Mortgage Investments, Inc., Series A *   13,800     334,650  
    New Century Financial Corp., Series A *   20,000     490,000  
    RAIT Investment Trust, Series B *   59,000     1,483,850  
    Thornburg Mortgage, Inc., Series C *   40,000     996,000  
       
 
          3,556,000  
  Office – 2.5%            
    Alexandria Real Estate Equities, Inc., Series C *   31,600     826,656  
  Retail – 11.4%            
    CBL & Associates Properties, Inc., Series D *   10,000     247,500  
    Glimcher Realty Trust, Series F *   26,500     680,785  
    Glimcher Realty Trust, Series G *   41,000     1,025,000  
    Ramco-Gershenson Properties Trust, Series B *   36,000     923,760  
    Taubman Centers, Inc., Series G *   15,000     382,800  
    The Mills Corp., Series E *   9,500     218,690  
    The Mills Corp., Series G *   11,500     258,750  
       
 
          3,737,285  
Total Real Estate (Cost $21,602,671)         20,846,692  
Financial Services – 3.0%            
    Corts-UNUM Provident Financial Trust   38,000     967,100  
Total Financial Services (Cost $982,300)         967,100  
Total Preferred Stocks (Cost $22,584,971)         21,813,792  
Short-Term Investments – 2.2%            
  Other Investment Companies – 2.2%            
    SSgA Money Market Fund, 4.75% (b) (Cost $724,079)   724,079     724,079  
Total Investments – 158.3% (Cost $55,274,756)         51,786,252  
Other assets less liabilities – 2.8%         922,238  
Preferred Shares, at liquidation preference – (61.1)%         (20,000,000 )
Net Assets applicable to common shareholders – 100%       $ 32,708,490  

Notes to Portfolio of Investments

*
Real estate investment trust, or REIT.
(a)
144A securities. Securities restricted for resale to Qualified Institutional Buyers.
(b)
Rate reflects 7 day yield as of June 30, 2006.

See notes to financial statements.


37



RMR F.I.R.E. Fund
Financial Statements

Statement of Assets and Liabilities


 
June 30, 2006 (unaudited)

   
 

 
Assets        
  Investments in securities, at value (cost $55,274,756)   $ 51,786,252  
  Cash     305  
  Receivable for investment securities sold     997,860  
  Dividends and interest receivable     520,640  
  Other assets     13,608  
   
 
    Total assets     53,318,665  
   
 
Liabilities        
  Payable for investment securities purchased     432,956  
  Advisory fees payable     25,786  
  Distributions payable – preferred shares     19,640  
  Accrued expenses and other liabilities     131,793  
   
 
    Total liabilities     610,175  
   
 
Preferred shares, at liquidation preference        
  Auction preferred shares, Series W;
$.001 par value per share; 800 shares issued and
outstanding at $25,000 per share liquidation preference
    20,000,000  
   
 
Net assets attributable to common shares   $ 32,708,490  
   
 
Composition of net assets        
  Common shares, $.001 par value per share;
unlimited number of shares authorized,
1,484,000 shares issued and outstanding
  $ 1,484  
  Additional paid-in capital     35,211,654  
  Undistributed net investment income     35,112  
  Accumulated net realized gain on investments     948,744  
  Net unrealized depreciation on investments     (3,488,504 )
   
 
Net assets attributable to common shares   $ 32,708,490  
   
 
Net asset value per share attributable to common shares
(based on 1,484,000 common shares outstanding)
  $ 22.04  
   
 

See notes to financial statements.


38


Statement of Operations


 
Six Months Ended June 30, 2006 (unaudited)

   
 

 
Investment Income        
  Dividends (cash distributions received or due)   $ 1,932,501  
  Interest     31,620  
   
 
    Total investment income     1,964,121  
   
 
Expenses        
  Advisory     225,665  
  Administrative     63,590  
  Audit and legal     46,162  
  Custodian     30,067  
  Preferred share remarketing     24,761  
  Compliance and internal audit     14,961  
  Trustees' fees and expenses     8,390  
  Shareholder reporting     7,274  
  Other     41,278  
   
 
    Total expenses     462,148  
  Less: expenses waived by the Advisor     (66,371 )
   
 
    Net expenses     395,777  
   
 
      Net investment income     1,568,344  
   
 
Realized and unrealized gain (loss) on investments        
  Net realized gain on investments     576,747  
  Net change in unrealized appreciation/(depreciation) on investments     (648,308 )
   
 
  Net realized and unrealized loss on investment transactions     (71,561 )
  Distributions to preferred shareholders from net investment income     (449,912 )
   
 
    Net increase in net assets attributable to common shares resulting from operations   $ 1,046,871  
   
 

See notes to financial statements.


39


Statement of Changes in Net Assets


 
 
  Six Months
Ended
June 30,
2006

  Year Ended
December 31,
2005

 

 
 
  (unaudited)

   
 
Increase (decrease) in net assets resulting from operations              
  Net investment income   $ 1,568,344   $ 1,904,958  
  Net realized gain on investments     576,747     1,463,461  
  Net change in unrealized appreciation/(depreciation) on investments     (648,308 )   (2,981,612 )
  Distributions to preferred shareholders from:              
    Net investment income     (449,912 )   (417,797 )
    Net realized gain on investments         (217,867 )
   
 
 
      Net increase (decrease) in net assets attributable to common shares resulting from operations     1,046,871     (248,857 )
   
 
 
  Distributions to common shareholders from:              
    Net investment income     (1,083,320 )   (1,621,681 )
    Net realized gain on investments         (978,287 )
   
 
 
    Total decrease in net assets attributable to common shares     (36,449 )   (2,848,825 )
Net assets attributable to common shares              
  Beginning of period     32,744,939     35,593,764  
   
 
 
  End of period (including undistributed net investment income of
$35,112 and $0, respectively)
  $ 32,708,490   $ 32,744,939  
   
 
 
Common shares issued and repurchased              
  Shares outstanding, beginning of period     1,484,000     1,484,000  
    Shares issued          
   
 
 
  Shares outstanding, end of period     1,484,000     1,484,000  
   
 
 

See notes to financial statements.


40


Selected Data For A Common Share Outstanding Throughout Each Period


 
 
  Six Months
Ended
June 30,
2006

  Year Ended
December 31,
2005

  For the Period
November 22,
2004(a) to
December 31,
2004

 

 
 
  (unaudited)

   
   
 
Per Common Share Operating Performance (b)                    
Net asset value, beginning of period   $ 22.07   $ 23.99   $ 24.03  (c)
   
 
 
 
Income from Investment Operations                    
Net investment income (d)     1.06  (e)   1.28     .10  
Net realized and unrealized appreciation/(depreciation) on investments     (.06 )(e)   (1.01 )   .17  
Distributions to preferred shareholders (common stock equivalent basis) from:                    
  Net investment income     (.30 )(e)   (.28 )   (.02 )
  Net realized gain on investments      (e)   (.15 )    
   
 
 
 
Net increase (decrease) in net asset value from operations     .70     (.16 )   .25  
Less: Distributions to common shareholders from:                    
  Net investment income     (.73 )(e)   (1.09 )    
 
Net realized gain on investments

 

 


 (e)

 

(.67

)

 


 

Common share offering costs charged to capital

 

 


 

 


 

 

(.04

)
Preferred share offering costs charged to capital             (.25 )
   
 
 
 
Net asset value, end of period   $ 22.04   $ 22.07   $ 23.99  
   
 
 
 
Market price, beginning of period   $ 18.99   $ 24.05   $ 25.00  
   
 
 
 
Market price, end of period   $ 19.29   $ 18.99   $ 24.05  
   
 
 
 

 
Total Return (f)                    
Total investment return based on:                    
  Market price (g)     5.43 %   (14.00 )%   (3.80 )%
  Net asset value (g)     3.16 %   (0.64 )%   (0.17 )%

 
Ratios/Supplemental Data:                    
Preferred shares, liquidation preference ($25,000 per share) (000s)   $ 20,000   $ 20,000   $ 20,000  
Net assets attributable to common shares, end of period (000s)   $ 32,708   $ 32,745   $ 35,594  
Ratio to average net assets attributable to common shares of:                    
  Net investment income, before total preferred share distributions (d)     9.43 %(e)(h)   5.64 %   3.92 %(h)
  Total preferred share distributions     2.71 %(h)   1.88 %   0.58 %(h)
  Net investment income, net of preferred share distributions (d)     6.72 %(e)(h)   3.76 %   3.34 %(h)
  Expenses, net of fee waivers     2.38 %(h)   2.63 %   3.45 %(h)
  Expenses, before fee waivers     2.78 %(h)   3.03 %   3.73 %(h)
Portfolio turnover rate     30.50 %   64.96 %   0.00 %
(a)
Commencement of operations.
(b)
Based on average shares outstanding.
(c)
Net asset value at November 22, 2004, reflects the deduction of the average sales load and offering costs of $0.97 per share paid by the holders of common share from the $25.00 offering price. We paid a sales load and offering cost of $1.125 per share on 1,280,000 common shares sold to the public and no sales load or offering costs on 200,000 common shares sold to affiliates of RMR Advisors for $25 per share.
(d)
Amounts are net of expenses waived by RMR Advisors.
(e)
As discussed in Note A (7) to the financial statements, these amounts are subject to change to the extent 2006 distributions by the issuers of the Fund's investments are characterized as capital gains and return of capital.
(f)
Total returns for periods less than one year are not annualized.
(g)
Total return based on per share market price assumes the purchase of common shares at the market price on the first day and sales of common shares at the market price on the last day of the period indicated; dividends and distributions, if any, are assumed to be reinvested at market prices on the ex-dividend date. The total return based on net asset value, or NAV, assumes the purchase of common shares at NAV on the first day and sales of common shares at NAV on the last day of the period indicated; distributions are assumed to be reinvested at NAV on the ex-dividend date. Results represent past performance and do not guarantee future results. Total return would have been lower if RMR Advisors had not contractually waived a portion of its investment advisory fee.
(h)
Annualized.

See notes to financial statements.


41



RMR F.I.R.E. Fund
Notes to Financial Statements

June 30, 2006 (unaudited)

Note A

(1)  Organization

RMR F.I.R.E. Fund, or the Fund, was organized as a Massachusetts business trust on August 6, 2004, and is registered under the Investment Company Act of 1940, as amended, as a non-diversified closed-end management investment company. The Fund had no operations until November 22, 2004, other than matters relating to the Fund's establishment and registration of the Fund's common shares under the Securities Act of 1933.

(2)  Interim Financial Statements

The accompanying June 30, 2006, financial statements have been prepared without audit. The Fund believes that disclosures made are adequate to make the information presented not misleading. In the opinion of the Fund's management, all adjustments, which include normal recurring adjustments considered necessary for a fair presentation, have been included. The Fund's operating results for this interim period are not necessarily indicative of the results that may be expected on an annual basis or in the future.

(3)  Use of Estimates

Preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires the Fund's management to make estimates and assumptions that may affect the amounts reported in the financial statements and related notes. The actual results could differ from these estimates particularly for reasons described in Note A(7), and for other reasons.

(4)  Portfolio Valuation

Investment securities of the Fund are valued at the latest sales price whenever that price is readily available on that day; securities for which no sales were reported on that day, unless otherwise noted, are valued at the last available bid price on that day. Securities traded primarily on the NASDAQ Stock Market, or NASDAQ, are normally valued by the Fund at the NASDAQ Official Closing Price, or NOCP, provided by NASDAQ each business day. The NOCP is the most recently reported price as of 4:00:06 p.m., eastern time, unless that price is outside the range of the "inside" bid and asked prices (i.e., the bid and asked prices that dealers quote to each other when trading for their own accounts); in that case, NASDAQ will adjust the price to equal the inside bid or asked price, whichever is closer. Because of delays in reporting trades, the NOCP may not be based on the price of the last trade to occur before the market closes. Some fixed income securities may be valued using pricing provided by a pricing service. Any of the Fund's securities which are not readily marketable, which are not traded or which have other characteristics of illiquidity are valued by the Fund at fair value as determined in good faith under the supervision of the Fund's board of trustees. Numerous factors may be considered when determining fair value of a security, including cost at date of purchase, type of security, the nature and duration of restrictions on disposition of the security and whether the issuer of the security being fair valued has other securities of the same type outstanding. Short-term debt securities with less than 60 days until maturity may be valued at cost, which when combined with interest accrued, approximates market value.


42


(5)  Securities Transactions and Investment Income

Securities transactions are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, including accretion of original issue discount, where applicable, and accretion of discount on short-term investments, is recorded on the accrual basis. Realized gains and losses from securities transactions are recorded on the basis of identified cost.

(6)  Federal Income Taxes

The Fund has qualified and intends to qualify in the future as a "regulated investment company" and to comply with the applicable provisions of subchapter M of the Internal Revenue Code of 1986, as amended, so that it will generally not be subject to federal income tax.

(7)  Distributable Earnings

The Fund earns income, net of expenses, daily on its investments. It is the policy of the Fund to pay a stable distribution amount to common shareholders on a monthly basis and distributions to Fund shareholders are declared pursuant to this policy. On June 26, 2006, the Fund declared distributions of $0.146 per common share payable in August, September and October 2006. Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions may consist of ordinary income (net investment income and short term capital gains), long term capital gains and return of capital. To the extent the Fund's net realized capital gains, if any, can be offset by capital loss carry-forwards, it is the policy of the Fund not to distribute such gains. Distributions to preferred shareholders are determined as described in Note D.

The Fund has substantial investments in real estate investment trusts, or REITs, which are generally not subject to federal income taxes. Distributions that the Fund received from REITs can be classified as ordinary income, capital gain income or return of capital by the REITs that make these distributions to the Fund. However, it is not possible to characterize distributions received from REITs during interim periods because the issuers do not report their tax characterization until subsequent to year end. Final characterization of the Fund's 2006 distributions to shareholders is also dependent upon the magnitude or timing of the Fund's securities transactions prior to year end. Therefore it is likely that some portion of the Fund's 2006 investment income and distributions to shareholders will be recharacterized as long term capital gain and return of capital for financial statement and federal income tax purposes subsequent to year end and reflected accordingly in the Fund's year end financial statements.

Although subject to adjustments, the cost, gross unrealized appreciation and unrealized depreciation of the Fund's investments for federal income tax purposes as of June 30, 2006, are as follows:

Cost   $ 55,274,756  
   
 
Gross unrealized appreciation   $ 315,052  
Gross unrealized depreciation     (3,803,556 )
   
 
Net unrealized appreciation/(depreciation)   $ (3,488,504 )
   
 

(8)  Concentration of Risk

Under normal market conditions, the Fund's investments will be concentrated in income producing common shares and preferred shares issued by F.I.R.E. companies. F.I.R.E. is a commonly used acronym for the


43


combined financial services, insurance and real estate companies. The value of Fund shares may fluctuate more than the shares of a fund not concentrated in the F.I.R.E. industries due to economic, legal, regulatory, technological or other developments affecting the United States F.I.R.E. industries.

Note B

Advisory and Administration Agreements and Other Transactions with Affiliates

The Fund has an advisory agreement with RMR Advisors, Inc., or RMR Advisors, to provide the Fund with a continuous investment program, to make day to day investment decisions and to generally manage the business affairs of the Fund in accordance with its investment objectives and policies. Pursuant to this agreement, RMR Advisors is compensated at an annual rate of 0.85% of the Fund's average daily managed assets. Managed assets means the total assets of the Fund less liabilities other than any indebtedness entered for purposes of leverage. For purposes of calculating managed assets, the liquidation preference of preferred shares are not considered liabilities.

RMR Advisors has contractually agreed to waive a portion of its annual fee equal to 0.25% of the Fund's average daily managed assets, until November 22, 2009.

RMR Advisors, and not the Fund, has contractually agreed to pay the lead underwriter of the Fund's initial public offering, an annual fee equal to 0.15% of the Fund's managed assets. This fee is paid quarterly in arrears during the term of RMR Advisors' advisory agreement and is paid by the RMR Advisors, not the Fund. The aggregate fees paid pursuant to the contract plus reimbursement of legal expenses of the underwriters will not exceed 4.5% of the total price of the common shares in the initial public offering.

RMR Advisors also performs administrative functions for the Fund pursuant to an administration agreement with the Fund. RMR Advisors has entered into a subadministration agreement with State Street Bank and Trust Company, or State Street, to perform substantially all Fund accounting and other administrative services. Under the administration agreement, RMR Advisors is entitled to reimbursement of the cost of providing administrative services. The Fund reimbursed RMR Advisors for $63,590 of subadministrative fees charged by State Street for the six months ended June 30, 2006.

Each trustee who is not a director, officer or employee of RMR Advisors and who is not an interested person of the Fund as defined under the Investment Company Act of 1940, as amended, is considered to be a "disinterested trustee". Disinterested trustees are each paid by the Fund an annual fee plus fees for board and committee meetings. The Fund incurred $8,390 of trustee fees and expenses during the six months ended June 30, 2006.

The Fund's board of trustees and separately the disinterested trustees authorized the Fund to make reimbursement payments to RMR Advisors for costs related to the Fund's compliance and internal audit programs. The Fund incurred $14,961 of compliance and internal audit expense during the six months ended June 30, 2006. The Fund also participates in pooled insurance programs with RMR Advisors and other funds managed by RMR Advisors and makes payments of allocated portions of related premiums. The Fund incurred $10,850 of insurance expense during the six months ended June 30, 2006.


44



Note C

Securities Transactions

During the six months ended June 30, 2006, there were purchases and sales transactions (excluding short-term securities) of $16,165,048 and $15,879,063, respectively. Brokerage commissions on securities transactions amounted to $22,922 during the six months ended June 30, 2006.

Note D

Preferred Shares

The Fund's 800 outstanding Series W auction preferred shares have a liquidation preference of $25,000 per share plus an amount equal to accumulated but unpaid distributions. The preferred shares are senior to the Fund's common shares and rank on parity with any other class or series of preferred shares of the Fund as to the payment of periodic distributions, including distribution of assets upon liquidation. If the Fund does not timely cure a failure to (1) maintain asset coverage for the preferred shares as required by rating agencies, or (2) maintain asset coverage, as defined in the Investment Company Act of 1940, as amended, of at least 200%, the preferred shares will be subject to redemption at an amount equal to their liquidation preference plus accumulated but unpaid distributions. The holders of the preferred shares have voting rights equal to the holders of the Fund's common shares and generally vote together with the holders of the common shares as a single class. Holders of the preferred shares, voting as a separate class, also are entitled to elect two of the Fund's trustees. The Fund pays distributions on the preferred shares at a rate set at auctions held generally every seven days. Distributions are generally payable every seven days, on the first business day following the end of a distribution period. The preferred share distribution rate was 5.05% per annum as of June 30, 2006.

Note E

Submission of Proposals to a Vote of Shareholders

The annual meeting of Fund shareholders was held on May 9, 2006. Following is a summary of the proposals submitted to shareholders for vote at the meeting and the votes cast:

Proposal

  Votes for
  Votes withheld
  Votes abstained
Common shares            
  Election of Frank J. Bailey as trustee until the 2009 annual meeting.   1,440,285   13,029  
Preferred shares            
  Election of Frank J. Bailey as trustee until the 2009 annual meeting.   134   13  
  Election of Gerard M. Martin as trustee until the 2009 annual meeting.   134   13  

45


RMR Preferred Dividend Fund
June 30, 2006

    LOGO

To our shareholders,

In the pages that follow, you will find data summarizing our financial results for the six months ended June 30, 2006, and our financial position as of June 30, 2006.

During the first six months of 2006, our allocation to the sub-sector of retail real estate investment trusts, or REITs, increased from 11% to 13% of total investments, our largest sub-sector increase. During the same time period, our allocation to the diversified sub-sector decreased from 13% to 9% of total investments, our largest sub-sector decrease. These changes reflect our view of the business environments in these sub-sectors, the strengths and weaknesses of the companies that operate in those sub-sectors and the share prices of individual companies. During the remainder of 2006, we will continue to monitor market conditions and position our portfolio according to our view of market conditions.

For securities that we held continuously during the first six months of 2006, our three best performing investments were the preferred stock of General Motors Corp. and Affordable Residential Communities and the common stock of Iowa Telecommunications Services Inc., with total returns during this period of 27%, 24% and 14%, respectively. Our three worst performing investments during the same period were the The Mills Corp., Series C, The Mills Corp., Series E and DRA CRT Acquisition Corp., Series A preferred stocks with negative total returns during the period of 6%, 5% and 1% respectively.

Thank you for your continued support. For more information, please view our website, at www.rmrfunds.com.

Sincerely,

GRAPHIC

Thomas M. O'Brien
President


46


RMR Preferred Dividend Fund
June 30, 2006

    LOGO

Relevant Market Conditions

Real Estate Industry Fundamentals.    The operating environment for real estate companies has improved in 2006. Generally, vacancy rates have been declining and rental rates have been increasing. We expect real estate industry fundamentals to remain strong for the foreseeable future.

Real Estate Industry Technicals.    We believe demand for real estate securities over the long term will continue to increase. Demographic trends in the U.S. include growth in the over age 50 population. We believe that individuals in that age category tend to focus their investments in higher yielding stocks like REITs. Institutions, too, seem to be increasing their allocations to real estate securities. Both of these are long term positive factors affecting the real estate securities market.

Fund Strategies, Techniques and Performance

Our primary investment objective is to provide our common shareholders high current income. Our secondary investment objective is capital appreciation. There can be no assurance that we will achieve our investment objectives.

During the first six months of 2006 our total return on net asset value, or NAV, was 6.5%. During that same period, the total return for the Merrill Lynch REIT Preferred Index (an unmanaged index of REIT preferred stocks) was 1.6%. We believe this index is relevant to us because our investments as of June 30, 2006, excluding short-term investments, include 81% REIT preferred stocks. The S&P 500 Index (an unmanaged index published as Standard and Poor's Composite Index of 500 common stocks) total return for the first six months of 2006 was 2.7%.

Portfolio holdings by sub-sector as a percentage of investments

(as of June 30, 2006) (unaudited)

Hospitality   32 %
Mortgage   17 %
Retail   13 %
Other, less than 10%   37 %
Short term investments   1 %
   
 
  Total   100 %
   
 
REITs   84 %
Other   15 %
Short term investments   1 %
   
 
  Total   100 %
   
 

47


RMR Preferred Dividend Fund
Portfolio of Investments
– June 30, 2006 (unaudited)


Company

  Shares

  Value


Preferred Stocks – 126.3%
Real Estate Investment Trusts – 119.4%
         
  Apartments – 9.1%          
    Apartment Investment & Management Co., Series G   56,400   $ 1,466,964
    Apartment Investment & Management Co., Series R   68,000     1,711,900
    Associated Estates Realty Corp., Series B   39,800     1,024,850
    United Dominion Realty Trust, Inc., Series B   800     20,400
       
          4,224,114
  Diversified – 12.4%          
    Crescent Real Estate Equities Co., Series B   163,700     4,272,570
    Digital Realty Trust, Inc., Series A   40,000     1,011,600
    LBA Realty LLC, Series B   25,000     487,500
       
          5,771,670
  Health Care – 0.2%          
    OMEGA Healthcare Investors Inc., Series D   3,200     81,984
  Hospitality – 46.5%          
    Ashford Hospitality Trust, Series A   58,000     1,459,280
    Boykin Lodging Co., Series A   39,000     978,900
    Eagle Hospitality Properties Trust, Inc., Series A   95,000     2,322,750
    Entertainment Properties Trust, Series A   145,200     3,721,476
    Equity Inns, Inc., Series B   83,800     2,120,140
    FelCor Lodging Trust, Inc., Series C   167,400     4,101,300
    Hersha Hospitality Trust, Series A   99,500     2,468,595
    Highland Hospitality Corp., Series A   120,000     2,880,000
    Host Marriott Corp., Series E   15,000     405,000
    LaSalle Hotel Properties, Series A   25,100     645,070
    Strategic Hotels & Resorts, Inc., Series B   6,800     168,844
    Strategic Hotels & Resorts, Inc., Series C   4,000     99,600
    Sunstone Hotel Investors, Inc., Series A   12,500     315,000
       
          21,685,955
  Manufactured Homes – 4.8%          
    Affordable Residential Communities, Series A   97,200     2,221,020
  Mortgage – 24.5%          
    Accredited Mortgage Loan REIT Trust, Series A   1,500     37,950
    American Home Mortgage Investment Corp., Series A   92,000     2,415,000
    Anthracite Capital, Inc., Series C   3,000     77,130
    Impac Mortgage Holdings, Inc., Series B   54,900     1,331,325
    Impac Mortgage Holdings, Inc., Series C   42,400     987,920
    MFA Mortgage Investments, Inc., Series A   40,000     970,000
    New Century Financial Corp., Series A   100,000     2,450,000
    Newcastle Investment Corp., Series B   120,000     3,066,000
    Thornburg Mortgage, Inc., Series C   2,500     62,250
       
          11,397,575
  Office – 2.9%          
    Alexandria Real Estate Equities, Inc., Series B   17,600     445,456
    DRA CRT Acquisition Corp., Series A   40,060     921,380
       
          1,366,836
See notes to financial statements and notes to portfolio of investments.

48



 
Company

  Shares

  Value

 

 
Preferred Stocks – continued
Real Estate Investment Trusts – continued
             
  Retail – 19.0%              
    CBL & Associates Properties, Inc., Series B     14,600   $ 742,045  
    Glimcher Realty Trust, Series F     30,000     770,700  
    Pennsylvania Real Estate Investment Trust, Series A     59,000     3,221,400  
    The Mills Corp., Series B     6,000     137,100  
    The Mills Corp., Series C     107,500     2,477,875  
    The Mills Corp., Series E     13,600     313,072  
    The Mills Corp., Series G     52,500     1,181,250  
         
 
            8,843,442  
Total Real Estate Investment Trusts (Cost $58,161,732)           55,592,596  
Other – 6.9%              
    Ford Motor Co., 6/15/43 Series     9,400     157,920  
    General Motors Corp., 5/15/48 Series     26,100     458,838  
    Great Atlantic & Pacific Tea Co., 8/01/39 Series     87,800     2,195,000  
    Red Line Hotels Corp., 2/19/44 Series     15,925     426,392  
Total Other (Cost $3,333,721)           3,238,150  
Total Preferred Stocks (Cost $61,495,453)           58,830,746  
Common Stocks – 6.1%
Real Estate Investment Trusts – 4.7%
             
  Diversified – 0.1%              
    Crescent Real Estate Equities Co.     3,000     55,680  
  Hospitality – 0.1%              
    Hersha Hospitality Trust     4,700     43,663  
  Industrial – 0.3%              
    First Industrial Realty Trust, Inc.     3,000     113,820  
  Mortgage – 0.8%              
    American Mortgage Acceptance Co.     5,900     86,966  
    Newcastle Investment Corp.     12,000     303,840  
         
 
            390,806  
  Specialty – 3.4%              
    Alesco Financial Trust (a)     150,000     1,575,000  
Total Real Estate Investment Trusts (Cost $2,103,358)           2,178,969  
See notes to financial statements and notes to portfolio of investments.  

49


Common Stocks – continued
Other – 1.4%
             
    Iowa Telecommunication Services, Inc.     34,500   $ 652,740  
    Seaspan Corp.     1,650     34,568  
Total Other (Cost $675,949)           687,308  
Total Common Stocks (Cost $2,779,307)           2,866,277  
Debt Securities – 13.1%              
    Ford Motor Co., 7.75%, 06/15/2043   $ 2,210,000     1,524,900  
    Ford Motor Co., 8.90%, 01/15/2032     557,000     444,207  
    General Motors Corp., 8.375%, 07/15/2033     2,000,000     1,610,000  
    Six Flags, Inc., 9.75%, 04/15/2013     2,740,000     2,517,375  
Total Debt Securities (Cost $6,496,582)           6,096,482  
Short-Term Investments – 1.4%              
  Other Investment Companies – 1.4%              
    SSgA Money Market Fund, 4.75% (b) (Cost $641,989)     641,989     641,989  
Total Investments – 146.9% (Cost $71,413,331)           68,435,494  
Other assets less liabilities – 1.4%           637,616  
Preferred Shares, at liquidation preference – (48.3)%           (22,500,000 )
Net Assets applicable to common shareholders – 100%         $ 46,573,110  

Notes to Portfolio of Investments

(a)
144A securities. Securities restricted for resale to Qualified Institutional Buyers.
(b)
Rate reflects 7 day yield as of June 30, 2006.

See notes to financial statements.


50



RMR Preferred Dividend Fund
Financial Statements

Statement of Assets and Liabilities


 
June 30, 2006 (unaudited)

   
 

 
Assets        
  Investments in securities, at value (cost $71,413,331)   $ 68,435,494  
  Cash     611  
  Dividends and interest receivable     605,132  
  Receivable for investment securities sold     245,515  
   
 
    Total assets     69,286,752  
   
 
Liabilities        
  Payable for investment securities purchased     74,946  
  Distributions payable – preferred shares     24,003  
  Advisory fee payable     17,013  
  Accrued expenses and other liabilities     97,680  
   
 
    Total liabilities     213,642  
   
 
Preferred shares, at liquidation preference        
  Auction preferred shares, Series M;
$.001 par value per share; 900 shares issued and
outstanding at $25,000 per share liquidation preference
    22,500,000  
   
 
Net assets attributable to common shares   $ 46,573,110  
   
 
Composition of net assets        
  Common shares, $.001 par value per share;
unlimited number of shares authorized,
2,600,901 shares issued and outstanding
  $ 2,601  
  Additional paid-in capital     49,182,270  
  Undistributed net investment income     293,235  
  Accumulated net realized gain on investments     72,841  
  Net unrealized depreciation on investments     (2,977,837 )
   
 
Net assets attributable to common shares   $ 46,573,110  
   
 
Net asset value per share attributable to common shares
(based on 2,600,901 common shares outstanding)
  $ 17.91  
   
 

See notes to financial statements.


51



RMR Preferred Dividend Fund
Financial Statements
– continued

Statement of Operations


 
Six Months Ended June 30, 2006 (unaudited)

   
 

 
Investment Income        
  Dividends (cash distributions received or due)   $ 2,684,343  
  Interest     384,038  
   
 
    Total investment income     3,068,381  
   
 
Expenses        
  Advisory     290,537  
  Administrative     63,327  
  Audit and legal     46,113  
  Custodian     28,887  
  Preferred share remarketing fee     27,846  
  Compliance and internal audit     15,253  
  Trustees' fees and expenses     8,395  
  Shareholder reporting     7,274  
  Other     41,042  
   
 
    Total expenses     528,674  
  Less: expenses waived by the Advisor     (187,995 )
   
 
    Net expenses     340,679  
   
 
      Net investment income     2,727,702  
   
 
Realized and unrealized gain on investments        
  Net realized gain on investments     42,139  
  Net change in unrealized appreciation/(depreciation) on investments     648,918  
   
 
  Net realized and unrealized gain on investment transactions     691,057  
  Distributions to preferred shareholders from net investment income     (487,179 )
   
 
    Net increase in net assets attributable to common shares resulting from operations   $ 2,931,580  
   
 

See notes to financial statements.


52



RMR Preferred Dividend Fund
Financial Statements
— continued

Statement of Changes in Net Assets


 
 
  Six Months
Ended
June 30,
2006

  For the Period
May 25,
2005(a) to
December 31,
2005

 

 
 
  (unaudited)

   
 
Increase (decrease) in net assets resulting from operations              
  Net investment income   $ 2,727,702   $ 2,327,865  
  Net realized gain on investment transactions     42,139     428,154  
  Net change in unrealized appreciation/(depreciation) on investments     648,918     (3,626,755 )
  Distributions to preferred shareholders from:              
    Net investment income     (487,179 )   (339,732 )
    Net realized gain on investments         (58,005 )
   
 
 
      Net increase (decrease) in net assets attributable to common shares resulting from operations     2,931,580     (1,268,473 )
   
 
 
  Distributions to common shareholders from:              
    Net investment income     (1,947,288 )   (1,988,133 )
    Net realized gain on investments         (339,447 )

Capital shares transactions

 

 

 

 

 

 

 
  Net proceeds from sale of common shares         49,138,250  
  Net proceeds from reinvestment of distributions     208,892     171,883  
  Net proceeds from sale of preferred shares         22,065,846  
   
 
 
    Net increase from capital transactions     208,892     71,375,979  
  Less: Liquidation preference of preferred shares issued         (22,500,000 )
   
 
 
    Total increase in net assets attributable to common shares     1,193,184     45,279,926  

Net assets attributable to common shares

 

 

 

 

 

 

 
  Beginning of period     45,379,926     100,000  
   
 
 
  End of period (including undistributed net investment income of
$293,235 and $0, respectively)
  $ 46,573,110   $ 45,379,926  
   
 
 

Common shares issued and repurchased

 

 

 

 

 

 

 
  Shares outstanding, beginning of period     2,589,311     5,000  
    Shares sold         2,575,000  
    Shares issued (reinvestment of distributions)     11,590     9,311  
   
 
 
  Shares outstanding, end of period     2,600,901     2,589,311  
   
 
 
(a)
Commencement of operations.

See notes to financial statements.


53


RMR Preferred Dividend Fund
Financial Highlights

Selected Data For A Common Share Outstanding Throughout Each Period


 
 
  Six Months
Ended
June 30,
2006

  For the Period
May 25,
2005(a) to
December 31,
2005

 

 
 
  (unaudited)

   
 
Per Common Share Operating Performance (b)              
Net asset value, beginning of period   $ 17.53   $ 19.09  (c)
   
 
 
Income from Investment Operations              
Net investment income (d)     1.05  (e)   .93  
Net realized and unrealized appreciation/(depreciation) on investments     .27  (e)   (1.28 )
Distributions to preferred shareholders (common stock equivalent basis) from:              
  Net investment income     (.19 )(e)   (.14 )
  Net realized gain on investments      (e)   (.02 )
   
 
 
Net increase (decrease) in net asset value from operations     1.13     (.51 )
Less: Distributions to common shareholders from:              
  Net investment income     (.75 )(e)   (.77 )
  Net realized gain on investments      (e)   (.13 )
  Common share distributions reinvested at net asset value         .06  
Common share offering costs charged to capital         (.04 )
Preferred share offering costs charged to capital         (.17 )
   
 
 
Net asset value, end of period   $ 17.91   $ 17.53  
   
 
 
Market price, beginning of period   $ 16.35   $ 20.00  
   
 
 
Market price, end of period   $ 18.18   $ 16.35  
   
 
 
Total Return (f)              
Total investment return based on:              
  Market price (g)     15.79 %   14.10 %
  Net asset value (g)     6.50 %   3.50 %
Ratios/Supplemental Data:              
Preferred shares, liquidation preference ($25,000 per share) (000s)   $ 22,500   $ 22,500  
Net assets attributable to common shares, end of period (000s)   $ 46,573   $ 45,380  
Ratio to average net assets attributable to common shares (h) of:              
  Net investment income, before total preferred share distributions (d)     11.85 %(e)   8.22 %
  Total preferred share distributions     2.12 %   1.40 %
  Net investment income, net of preferred share distributions (d)     9.73 %(e)   6.82 %
  Expenses, net of fee waivers     1.48 %   1.54 %
  Expenses, before fee waivers     2.30 %   2.29 %
Portfolio turnover rate     8.80 %   5.60 %
(a)
Commencement of operations.
(b)
Based on average shares outstanding.
(c)
Net asset value at May 25, 2005, reflects the deduction of the average sales load and offering costs of $0.91 per share paid by the holders of common shares from the $20.00 offering price. We paid a sales load and offering cost of $0.94 per share on 2,237,500 common shares sold to the public and no sales load or offering costs on 67,500 common shares sold to affiliates of RMR Advisors for $20 per share.
(d)
Amounts are net of expenses waived by RMR Advisors.
(e)
As discussed in Note A (7) to the financial statements, these amounts are subject to change to the extent 2006 distributions by the issuers of the Fund's investments are characterized as capital gains and return of capital.
(f)
Total returns for periods less than one year are not annualized.
(g)
Total return based on per share market price assumes the purchase of common shares at the market price on the first day and sales of common shares at the market price on the last day of the period indicated; dividends and distributions, if any, are assumed to be reinvested at market prices on the ex-dividend date. The total return based on net asset value, or NAV, assumes the purchase of common shares at NAV on the first day and sales of common shares at NAV on the last day of the period indicated; distributions are assumed to be reinvested at NAV on the ex-dividend date. Results represent past performance and do not guarantee future results. Total return would have been lower if RMR Advisors had not contractually waived a portion of its investment advisory fee.
(h)
Annualized.

See notes to financial statements.


54



RMR Preferred Dividend Fund
Notes to Financial Statements

June 30, 2006 (unaudited)

Note A

(1)  Organization

RMR Preferred Dividend Fund, or the Fund, was organized as a Massachusetts business trust on November 8, 2004, and is registered under the Investment Company Act of 1940, as amended, as a non-diversified closed-end management investment company. The Fund had no operations until May 25, 2005, other than matters relating to the Fund's establishment and registration of the Fund's common shares under the Securities Act of 1933.

(2)  Interim Financial Statements

The accompanying June 30, 2006, financial statements have been prepared without audit. The Fund believes that disclosures made are adequate to make the information presented not misleading. In the opinion of the Fund's management, all adjustments, which include normal recurring adjustments considered necessary for a fair presentation, have been included. The Fund's operating results for this interim period are not necessarily indicative of the results that may be expected on an annual basis or in the future.

(3)  Use of Estimates

Preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires the Fund's management to make estimates and assumptions that may affect the amounts reported in the financial statements and related notes. The actual results could differ from these estimates particularly for reasons described in Note A(7), and for other reasons.

(4)  Portfolio Valuation

Investment securities of the Fund are valued at the latest sales price whenever that price is readily available on that day; securities for which no sales were reported on that day, unless otherwise noted, are valued at the last available bid price on that day. Securities traded primarily on the NASDAQ Stock Market, or NASDAQ, are normally valued by the Fund at the NASDAQ Official Closing Price, or NOCP, provided by NASDAQ each business day. The NOCP is the most recently reported price as of 4:00:06 p.m., eastern time, unless that price is outside the range of the "inside" bid and asked prices (i.e., the bid and asked prices that dealers quote to each other when trading for their own accounts); in that case, NASDAQ will adjust the price to equal the inside bid or asked price, whichever is closer. Because of delays in reporting trades, the NOCP may not be based on the price of the last trade to occur before the market closes. Some fixed income securities may be valued using pricing provided by a pricing service. Any of the Fund's securities which are not readily marketable, which are not traded or which have other characteristics of illiquidity are valued by the Fund at fair value as determined in good faith under the supervision of the Fund's board of trustees. Numerous factors may be considered when determining fair value of a security, including cost at date of purchase, type of security, the nature and duration of restrictions on disposition of the security and whether the issuer of the security being fair valued has other securities of the same type outstanding. Short-term debt securities with less than 60 days until maturity may be valued at cost, which when combined with interest accrued, approximates market value.


55


(5)  Securities Transactions and Investment Income

Securities transactions are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, including accretion of original issue discount, where applicable, and accretion of discount on short-term investments, is recorded on the accrual basis. Realized gains and losses from securities transactions are recorded on the basis of identified cost.

(6)  Federal Income Taxes

The Fund has qualified and intends to qualify in the future as a "regulated investment company" and to comply with the applicable provisions of subchapter M of the Internal Revenue Code of 1986, as amended, so that it will generally not be subject to federal income tax.

(7)  Distributable Earnings

The Fund earns income, net of expenses, daily on its investments. It is the policy of the Fund to pay a stable distribution amount to common shareholders on a monthly basis and distributions to Fund shareholders are declared pursuant to this policy. On June 26, 2006, the Fund declared distributions of $0.15 per common shares payable in August, September and October, 2006. Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions may consist of ordinary income (net investment income and short term capital gains), long term capital gains and return of capital. To the extent the Fund's net realized capital gains, if any, can be offset by capital loss carry-forwards, it is the policy of the Fund not to distribute such gains. Distributions to preferred shareholders are determined as described in Note D.

The Fund has substantial investments in real estate investment trusts, or REITs, which are generally not subject to federal income taxes. Distributions that the Fund received from REITs can be classified as ordinary income, capital gain income or return of capital by the REITs that make these distributions to the Fund. However, it is not possible to characterize distributions received from REITs during interim periods because the issuers do not report their tax characterization until subsequent to year end 2006. Final characterization of the Fund's 2006 distributions to shareholders is also dependent upon the magnitude or timing of the Fund's securities transactions prior to year end. Therefore it is likely that some portion of the Fund's 2006 investment income and distributions to shareholders will be recharacterized as long term capital gain and return of capital for financial statement and federal income tax purposes subsequent to year end and reflected accordingly in the Fund's year end financial statements.

Although subject to adjustments, the cost, gross unrealized appreciation and unrealized depreciation of the Fund's investments for federal income tax purposes as of June 30, 2006, are as follows:

Cost   $ 71,413,331  
   
 
Gross unrealized appreciation   $ 135,470  
Gross unrealized depreciation     (3,113,307 )
   
 
Net unrealized appreciation/(depreciation)   $ (2,977,837 )
   
 

(8)  Concentration of Risk

Under normal market conditions, the Fund's investments will be concentrated in preferred securities issued by real estate investment trusts. The value of Fund shares may fluctuate more than the shares of a fund not


56


concentrated in the real estate industry due to economic, legal, regulatory, technological or other developments affecting the United States real estate industry.

Note B

Advisory and Administration Agreements and Other Transactions with Affiliates

The Fund has an advisory agreement with RMR Advisors, Inc., or RMR Advisors, to provide the Fund with a continuous investment program, to make day to day investment decisions and to generally manage the business affairs of the Fund in accordance with its investment objectives and policies. Pursuant to this agreement, RMR Advisors is compensated at an annual rate of 0.85% of the Fund's average daily managed assets. Managed assets means the total assets of the Fund less liabilities other than any indebtedness entered into for purposes of leverage. For purposes of calculating managed assets, the liquidation preference of preferred shares are not considered liabilities.

RMR Advisors has contractually agreed to waive a portion of its annual fee equal to 0.55% of the Fund's average daily managed assets, until May 24, 2010.

RMR Advisors also performs administrative functions for the Fund pursuant to an administration agreement with the Fund. RMR Advisors has entered into a subadministration agreement with State Street Bank and Trust Company, or State Street, to perform substantially all Fund accounting and other administrative services. Under the administration agreement, RMR Advisors is entitled to reimbursement of the cost of providing administrative services. The Fund reimbursed RMR Advisors for $63,327 of subadministrative fees charged by State Street for the six months ended June 30, 2006.

Each trustee who is not a director, officer or employee of RMR Advisors and who is not an "interested person" of the Fund as defined under the Investment Company Act of 1940, as amended, is considered to be a "disinterested trustee". Disinterested trustees are each paid by the Fund an annual fee plus fees for board and committee meetings. The Fund incurred $8,395 of trustee fees and expenses during the six months ended June 30, 2006.

The Fund's board of trustees and separately the disinterested trustees authorized the Fund to make reimbursement payments to RMR Advisors for costs related to the Fund's compliance and internal audit programs. The Fund incurred $15,253 of compliance and internal audit expense during the six months ended June 30, 2006. The Fund also participates in pooled insurance programs with RMR Advisors and other funds managed by RMR Advisors and makes payments of allocated portions of related premiums. The Fund incurred $10,117 of insurance expense during the six months ended June 30, 2006.

Note C

Securities Transactions

During the six months ended June 30, 2006, there were purchases and sales transactions (excluding short-term securities) of $6,046,889 and $5,923,015, respectively. Brokerage commissions on securities transactions amounted to $4,212 during the six months ended June 30, 2006.


57



Note D

Preferred Shares

The Fund's 900 outstanding Series M auction preferred shares have a liquidation preference of $25,000 per share plus an amount equal to accumulated plus unpaid distributions. The preferred shares are senior to the Fund's common shares and rank on parity with any other class or series of preferred shares of the Fund as to the payment of periodic distributions, including distribution of assets upon liquidation. If the Fund does not timely cure a failure to (1) maintain asset coverage for the preferred shares as required by rating agencies, or (2) maintain asset coverage, as defined in the Investment Company Act of 1940, as amended, of at least 200%, the preferred shares will be subject to redemption at an amount equal to their liquidation preference plus accumulated but unpaid distributions. The holders of the preferred shares have voting rights equal to the holders of the Fund's common shares and will generally vote together with the holders of the Fund's common shares and generally vote together with the holders of the common shares as a single class. Holders of the preferred shares, voting as a separate class, also are entitled to elect two of the Fund's trustees. The Fund pays distributions on the preferred shares at a rate set at auctions held generally every seven days. Distributions are generally payable every seven days, on the first business day following the end of a distribution period. The preferred share distribution rate was 4.80% per annum as of June 30, 2006.

Note E

Submission of Proposals to a Vote of Shareholders

The annual meeting of Fund shareholders was held on May 9, 2006. Following is a summary of the proposals submitted to shareholders for vote at the meeting and the votes cast:

Proposal

  Votes for
  Votes
withheld

  Votes
abstained

Common shares            
  Election of Frank J. Bailey as trustee until the 2009 annual meeting.   2,491,311   29,891  
Preferred shares            
  Election of Frank J. Bailey as trustee until the 2009 annual meeting.   95   14  
  Election of Gerard M. Martin as trustee until the 2009 annual meeting.   95   14  

58


RMR Asia Pacific Real Estate Fund
June 30, 2006

    LOGO

To our shareholders,

In the pages that follow, you will find data summarizing our financial results for the period from May 25, 2006, the date we commenced operations, through June 30, 2006, and our financial position as of June 30, 2006.

Although our fund has been in operation for only a short time, we have taken the steps to build what we believe will be a sound long term investment portfolio.

Thank you for your continued support. For more information, please view our website, at www.rmrfunds.com.

Sincerely,

GRAPHIC

Thomas M. O'Brien
President


59


RMR Asia Pacific Real Estate Fund
June 30, 2006

    LOGO

Relevant Market Conditions

Real Estate Industry Fundamentals.    We believe that the operating environment for real estate companies in the Asia Pacific region will continue to improve in 2006. We expect office vacancy rates to decline, commercial rental rates to improve and the urbanization process to create demand for residential housing. We expect some Asia Pacific real estate companies may increase distributions to shareholders. Also, many public real estate companies in the Asia Pacific region have ample liquidity to make acquisitions to further increase their earnings potential.

Real Estate Industry Technicals.    We believe demand for real estate securities over the long term will continue to increase. Worldwide demographic trends are causing investors to seek relatively high yield securities like real estate investment trusts, and a strong cultural preference for real estate investment in Asia are both stimulating demand for Asia Pacific real estate securities. We believe these are long term positive factors for the Asia Pacific real estate securities market.

Fund Strategies, Techniques and Performance

Our primary investment objective is capital appreciation. There can be no assurance that we will achieve our investment objective.

During the period from May 25, 2006, through June 30, 2006, our total return on net asset value, or NAV, was 2.9%. During that same period, the total return for the EPRA NAREIT Asia Index (an unmanaged index of Asia Pacific real estate common stocks) was 2.5%. We believe this index is relevant to our investments because all our investments as of June 30, 2006, excluding short-term investments, were in securities of real estate companies in countries covered by this index. The S&P 500 Index (an unmanaged index published as Standard and Poor's Composite Index of 500 common stocks) total return for the same period was negative 0.03%.


60



Portfolio holdings by sub-sector as a percentage of investments

(as of June 30, 2006) (unaudited)

Diversified   52 %
Retail   17 %
Office   13 %
Other, less than 10%   9 %
Short term investments   9 %
   
 
  Total   100 %
   
 
Real Estate   91 %
Short term investments   9 %
   
 
  Total   100 %
   
 

Portfolio holdings by country

(as of June 30, 2006) (unaudited)

Japan   39 %
Hong Kong   27 %
Australia   17 %
Other, less than 10%   8 %
Short term investments   9 %
   
 
  Total   100 %
   
 

61


RMR Asia Pacific Real Estate Fund
Portfolio of Investments
– June 30, 2006 (unaudited)


Company

  Shares

  Value


Common Stocks – 91.6%
Australia – 17.4%
         
  Diversified – 14.9%          
    Australand Property Group   770,000   $ 1,184,427
    Babcock & Brown Japan Property Trust *   360,000     449,427
    FKP Property Group   170,000     663,217
    GPT Group *   430,000     1,386,773
    Multiplex Group *   600,000     1,457,962
       
          5,141,806
  Hospitality – 1.7%          
    Grand Hotel Group *   900,000     578,503
  Residential – 0.8%          
    Peet, Ltd.   92,502     278,390
Total Australia (Cost $5,926,296)         5,998,699
Hong Kong – 26.8%          
  Diversified – 5.9%          
    Hysan Development Co., Ltd   330,000     934,808
    Shun TAK Holdings, Ltd.   840,000     1,092,412
       
          2,027,220
  Hospitality – 4.8%          
    Cheung Kong Holdings, Ltd.   26,000     281,885
    Sun Hung Kai Properties, Ltd.   135,000     1,376,717
       
          1,658,602
  Office – 6.9%          
    Champion Real Estate Investment Trust (a)*   1,700,000     848,216
    Great Eagle Holdings, Ltd.   365,000     1,250,145
    GZI Real Estate Investment Trust (a)*   740,000     295,379
       
          2,393,740
  Retail – 9.2%          
    Hang Lung Properties, Ltd.   960,000     1,736,734
    The Link REIT (a)*   720,000     1,441,613
       
          3,178,347
Total Hong Kong (Cost $9,123,846)         9,257,909

See notes to financial statements and notes to portfolio of investments.


62



 
Company

  Shares or
Principal
Amounts

  Value

 

 
Common Stocks – continued
Japan – 39.0%
             
  Diversified – 28.0%              
    Daiwasystems Co., Ltd.     26,000   $ 613,422  
    Mitsubishi Estate Co., Ltd.     155,000     3,291,244  
    Mitsui Fudosan Co., Ltd     125,000     2,714,305  
    Sumitomo Realty & Development Co., Ltd.     123,000     3,030,933  
         
 
            9,649,904  
  Office – 6.0%              
    NTT Urban Development Corp.     190     1,480,950  
    Tokyu REIT, Inc. *     70     574,974  
         
 
            2,055,924  
  Retail – 5.0%              
    ASK Planning Center, Inc.     84,000     576,197  
    Diamond City Co., Ltd.     29,000     1,145,404  
         
 
            1,721,601  
Total Japan (Cost $12,784,953)           13,427,429  
Singapore – 6.4%              
  Diversified – 3.6%              
    Capitaland, Ltd.     440,000     1,250,908  
  Industrial – 1.7%              
    Mapletree Logistics Trust *     980,000     575,797  
  Retail – 1.1%              
    Frasers Centrepoint Trust (a)*     580,000     381,194  
Total Singapore (Cost $2,097,768)           2,207,899  
Thailand – 2.0%              
  Retail – 2.0%              
    Central Pattana Public Co., Ltd.     1,375,000     685,336  
Total Thailand (Cost $737,324)           685,336  
Total Common Stocks (Cost $30,670,187)           31,577,272  
Short-Term Investments – 9.3%              
  Commercial Paper – 9.3%              
    Citigroup Funding, Inc., 4.15%, 07/03/2006   $ 1,500,000     1,499,654  
    San Paolo U.S. Finance Co., 4.15%, 07/03/2006     1,500,000     1,499,654  
    State Street Boston Corp., 4.15%, 07/03/2006     210,000     209,952  
Total Short-Term Investments (Cost $3,209,260)           3,209,260  
Total Investments – 100.9% (Cost $33,879,447)           34,786,532  
Other assets less liabilities – (0.9)%           (315,587 )
Net Assets – 100%         $ 34,470,945  

Notes to Portfolio of Investments

*
Company is organized as a real estate investment trust as defined by the law of its country of domicile.
(a)
Non-income producing security.

See notes to financial statements.


63



RMR Asia Pacific Real Estate Fund
Financial Statements

Statement of Assets and Liabilities


 
June 30, 2006 (unaudited)

   
 

 
Assets        
  Investments in securities, at value (cost $33,879,447)   $ 34,786,532  
  Cash     5,557  
  Dividends and interest receivable     108,024  
   
 
    Total assets     34,900,113  
   
 
Liabilities        
  Payable for investment securities purchased     381,195  
  Advisory fee payable     20,321  
  Accrued expenses and other liabilities     27,652  
   
 
    Total liabilities     429,168  
   
 
Net assets   $ 34,470,945  
   
 
Composition of net assets        
  $.001 par value per share;
unlimited number of shares authorized,
1,755,000 shares issued and outstanding
  $ 1,755  
  Additional paid-in capital     33,490,845  
  Undistributed net investment income     81,123  
  Accumulated net realized loss on foreign currency transactions     (8,704 )
  Net unrealized appreciation on investments     907,085  
  Net unrealized depreciation on foreign currency transactions     (1,159 )
   
 
Net assets   $ 34,470,945  
   
 
Net asset value per share
(based on 1,755,000 shares outstanding)
  $ 19.64  
   
 

See notes to financial statements.


64



RMR Asia Pacific Real Estate Fund
Financial Statements
– continued

Statement of Operations


 
For the Period May 25, 2006(a) to June 30, 2006 (unaudited)

   
 

 
Investment Income        
  Dividends (cash distributions received or due, net of foreign taxes withheld of $40,267)   $ 109,782  
  Interest     33,426  
   
 
    Total investment income     143,208  
   
 
Expenses        
  Advisory     28,941  
  Administrative     10,309  
  Audit and legal     9,982  
  Custodian     5,154  
  Shareholder reporting     3,273  
  Compliance and internal audit     2,946  
  Trustees' fees and expenses     2,406  
  Other     6,309  
   
 
    Total expenses     69,320  
  Less: expenses waived by the Advisor     (7,235 )
   
 
    Net expenses     62,085  
   
 
      Net investment income     81,123  
   
 
Realized and unrealized gain (loss) on investments        
  Net realized loss on foreign currency transactions     (8,704 )
  Net change in unrealized appreciation/(depreciation) on investments     907,085  
  Net change in unrealized appreciation/(depreciation) on foreign currency transactions     (1,159 )
   
 
    Net increase in net assets resulting from operations   $ 978,345  
   
 
(a)
Commencement of operations.

See notes to financial statements.


65



RMR Asia Pacific Real Estate Fund
Financial Statements — continued

Statement of Changes in Net Assets


 
For the Period May 25, 2006(a) to June 30, 2006 (unaudited)

   
 

 
Increase (decrease) in net assets resulting from operations        
  Net investment income   $ 81,123  
  Net realized loss on foreign currency transactions     (8,704 )
  Net change in unrealized appreciation/(depreciation) on investments     907,085  
  Net change in unrealized appreciation/(depreciation) on foreign currency transactions     (1,159 )
   
 
    Net increase in net assets resulting from operations     978,345  
   
 
Capital shares transactions        
  Net proceeds from sale of common shares     33,392,600  
  Cost of shares redeemed      
   
 
    Net increase from capital transactions     33,392,600  
   
 
    Total increase in net assets attributable to common shares     34,370,945  
Net assets        
  Beginning of period     100,000  
   
 
  End of period (including undistributed net investment income of $81,123)   $ 34,470,945  
   
 
Common shares        
  Shares outstanding, beginning of period     5,000  
    Shares issued     1,750,000  
   
 
  Shares outstanding, end of period     1,755,000  
   
 
(a)
Commencement of operations.

See notes to financial statements.


66


RMR Asia Pacific Real Estate Fund
Financial Highlights

Selected Data For A Common Share Outstanding Throughout The Period


 
 
  For the Period
May 25,
2006(a) to
June 30,
2006

 

 
 
  (unaudited)

 
Per Common Share Operating Performance (b)        
Net asset value, beginning of period   $ 19.08  (c)
   
 
Income from Investment Operations        
Net investment income (d)     .05  
Net realized and unrealized appreciation/(depreciation) on investments     .51  
   
 
Net increase in net asset value from operations     .56  
   
 
Net asset value, end of period   $ 19.64  
   
 
Market price, beginning of period   $ 20.00  
   
 
Market price, end of period   $ 19.75  
   
 
Total Return (e)        
Total investment return based on:        
  Market price (f)     (1.25 )%
  Net asset value (f)     2.94 %
Ratios/Supplemental Data:        
Net assets attributable to common shares, end of period (000s)   $ 34,471  
Ratio to average net assets attributable to common shares (g) of:        
  Net investment income (d)(f)     2.80 %
  Expenses, net of fee waivers     2.15 %
  Expenses, before fee waivers     2.40 %
Portfolio turnover rate     0.00 %
(a)
Commencement of operations.
(b)
Based on average shares outstanding.
(c)
Net asset value at May 25, 2006, reflects the deduction of the average sales load and offering costs of $0.92 per share paid by the holders of common shares from the $20.00 offering price. We paid a sales load and offering cost of $0.94 per share on 1,710,000 common shares sold to the public and no sales load or offering costs on 40,000 common shares sold to affiliates of RMR Advisors for $20 per share.
(d)
Amounts are net of expenses waived by RMR Advisors.
(e)
Total returns for periods less than one year are not annualized.
(f)
Total return based on per share market price assumes the purchase of common shares at the market price on the first day and sales of common shares at the market price on the last day of the period indicated; dividends and distributions, if any, are assumed to be reinvested at market prices on the ex-dividend date. The total return based on net asset value, or NAV, assumes the purchase of common shares at NAV on the first day and sales of common shares at NAV on the last day of the period indicated; distributions, if any, are assumed to be reinvested at NAV on the ex-dividend date. Results represent past performance and do not guarantee future results. Total return would have been lower if RMR Advisors had not contractually waived a portion of its investment advisory fee.
(g)
Annualized.

See notes to financial statements.


67



RMR Asia Pacific Real Estate Fund
Notes to Financial Statements

June 30, 2006 (unaudited)

Note A

(1)  Organization

RMR Asia Pacific Real Estate Fund, or the Fund, was organized as a Massachusetts business trust on February 14, 2006, and is registered under the Investment Company Act of 1940, as amended, as a non-diversified closed-end management investment company. The Fund had no operations prior to May 25, 2006, other than matters relating to the Fund's establishment, registration of the Fund's common shares under the Securities Act of 1933, and the sale of 5,000 common shares for $100,000 to RMR Advisors, Inc., or RMR Advisors. On May 25, 2006, the Fund sold 1,750,000 common shares in an initial public offering including 40,000 shares sold to affiliates of RMR Advisors. Proceeds to the Fund were $33,392,600 after deducting underwriting commissions and $68,400 of offering expenses. There was no underwriting commission or offering expenses paid on shares sold to the affiliates of RMR Advisors.

(2)  Interim Financial Statements

The accompanying June 30, 2006, financial statements have been prepared without audit. The Fund believes that disclosures made are adequate to make the information presented not misleading. In the opinion of the Fund's management, all adjustments, which include normal recurring adjustments considered necessary for a fair presentation, have been included. The Fund's operating results for this interim period are not necessarily indicative of the results that may be expected on an annual basis or in the future.

(3)  Use of Estimates

Preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires the Fund's management to make estimates and assumptions that may affect the amounts reported in the financial statements and related notes.

(4)  Portfolio Valuation

Investment securities of the Fund are valued at the latest sales price reflected on the consolidated tape of the foreign exchange that reflects the principal market for such securities whenever that price is readily available on that day; securities for which no sales were reported on that day, unless otherwise noted, are valued at the last available bid price on that day. Any of the Fund's securities which are not readily marketable, which are not traded or which have other characteristics of illiquidity are valued by the Fund at fair value as determined in good faith under the supervision of the Fund's board of trustees. Numerous factors may be considered when determining fair value of a security, including cost at date of purchase, type of security, the nature and duration of restrictions on disposition of the security and whether the issuer of the security being fair valued has other securities of the same type outstanding. Short term debt securities with less than 60 days until maturity may be valued at cost, which when combined with interest accrued, approximates market value.

Some foreign markets close before the close of customary trading sessions on the American Stock Exchange or AMEX (normally 4:00 p.m. eastern time). Occasionally, events occur after the principal foreign exchange on which the foreign securities trade has closed but before the AMEX closes and the Fund determines net asset value, or NAV, that could affect the value of the securities the Fund owns or cause their prices to be unreliable. If these events are expected to materially affect the Fund's NAV, the prices of such securities will be adjusted to reflect their estimated fair value as of the close of the AMEX, as determined in good faith under procedures established by the Fund's board of trustees.


68



(5)  Securities Transactions and Investment Income

Securities transactions are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, including accretion of original issue discount, where applicable, and accretion of discount on short-term investments, is recorded on the accrual basis. Realized gains and losses from securities transactions are recorded on the basis of identified cost.

(6)  Income Taxes

The Fund has qualified and intends to qualify in the future as a "regulated investment company" and to comply with the applicable provisions of subchapter M of the Internal Revenue Code of 1986, as amended, so that it will generally not be subject to United States federal income tax.

Some Asia Pacific governments may subject the Fund's investment income and securities sales to withholding or other taxes. For the period ended June 30, 2006, $40,267 of foreign taxes has been withheld from distributions to the Fund and has been recorded as a reduction of dividend income.

(7)  Distributable Earnings

The Fund intends to make distributions of its income at least annually in amounts at least equal to the amount necessary to maintain its status as a registered investment company. The Fund's distributions may consist of ordinary income (net investment income and short term capital gains) and long term capital gains. Distributions to shareholders are recorded on the ex-dividend date. The Fund has not declared any distributions.

The cost, gross unrealized appreciation and unrealized depreciation of the Fund's investments for federal income tax purposes as of June 30, 2006, are as follows:

Cost   $ 33,879,447  
   
 
Gross unrealized appreciation   $ 1,137,097  
Gross unrealized depreciation     (230,012 )
   
 
Net unrealized appreciation/(depreciation)   $ 907,085  
   
 

(8)  Concentration of Risk

Under normal market conditions, the Fund's investments will be concentrated in common shares, preferred shares and debt securities, including convertible preferred and debt securities, issued by Asia Pacific real estate companies and REITs. The value of Fund shares may fluctuate more than the shares of a fund not concentrated in the real estate industry or in the Asia Pacific region due to economic, legal, regulatory, technological or other developments affecting the Asia Pacific real estate industry and securities market.

(9)  Foreign Securities Risk

As compared to U.S. securities, foreign securities may be issued by companies which provide less financial and other information, and which are subject to less developed and difficult to access legal systems, less stringent accounting, auditing and financial reporting standards or different governmental regulations. As compared to U.S. securities markets, foreign securities markets may have different settlement procedures, may have higher transaction costs, may be conducted in a less regulated manner, are generally smaller and may be less liquid


69


and more volatile than securities markets in the U.S. The value of foreign securities may also decline or be unstable because of political, social or economic events or instability outside of the U.S.

(10)   Foreign Currency Translations

The accounting records of the Fund are maintained in U.S. dollars. Portfolio securities and other assets and liabilities denominated in a foreign currency are translated daily into U.S. dollars at the prevailing rates of exchange. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rates on the respective transaction dates.

The Fund does not isolate the portion of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in their market prices. Such fluctuations are included in net realized and unrealized gain (loss) on investments. Net realized gain (loss) on foreign currency transactions represents net foreign currency gain (loss) from forward currency contracts, disposition of foreign currencies, currency gain (loss) realized between the trade and settlement dates on securities transactions, and the difference between the amount of dividends, interest and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid. Net unrealized foreign currency appreciation/(depreciation) arises from changes in the value of assets and liabilities, other than investments in securities, as a result of changes in exchange rates.

Note B

Advisory, Subadvisory and Administration Agreements and Other Transactions with Affiliates

The Fund has an advisory agreement with RMR Advisors to provide the Fund with a continuous investment program, oversee the subadvisor and generally manage the business affairs of the Fund in accordance with its investment objectives and policies. Pursuant to the agreement, RMR Advisors is compensated at an annual rate of 1% of the Fund's average daily net assets.

RMR Advisors has contractually agreed to waive a portion of its annual fee equal to 0.25% of the Fund's average daily managed assets until May 25, 2011.

RMR Advisors has entered into a subadvisory agreement with MacarthurCook Investment Managers Ltd., or MacarthurCook, to make day-to-day investment decisions and to generally manage the business affairs of the Fund in accordance with its investment objective and policies. Pursuant to the agreement, RMR Advisors, and not the Fund, will pay the subadvisor a monthly fee equal to an annual rate of 0.375% of the Fund's average daily managed assets. MacarthurCook has agreed to waive a portion of the fee payable by RMR Advisors such that until May 25, 2011, the fee payable will be equal to 0.25% of the Fund's average daily managed assets.

RMR Advisors also performs administrative functions for the Fund pursuant to an administration agreement with the Fund. RMR Advisors has entered into a subadministration agreement with State Street Bank and Trust Company, or State Street, to perform substantially all Fund accounting and other administrative services. Under the administration agreement, RMR Advisors is entitled to reimbursement of the cost of providing administrative services. The Fund reimbursed RMR advisors for $10,309 of subadministrative fees charged by State Street for the period ended June 30, 2006.


70



Each trustee who is not a director, officer or employee of RMR Advisors and who is not an "interested person" of the Fund as defined under the Investment Company Act of 1940, as amended, is considered to be a "disinterested trustee". Disinterested trustees are each paid by the Fund an annual fee plus fees for board and committee meetings. The Fund incurred $2,406 of trustee fees and expenses during the period ended June 30, 2006.

The Fund's board of trustees and separately the disinterested trustees authorized the Fund to make reimbursement payments to RMR Advisors for costs related to the Fund's compliance and internal audit programs. The Fund incurred $2,946 of compliance and internal audit expense during the period ended June 30, 2006. The Fund also participates in pooled insurance programs with RMR Advisors and other funds managed by RMR Advisors and makes payments of allocated portions of related premiums. The Fund incurred $1,908 of insurance expense during the period ended June 30, 2006.

Note C

Securities Transactions

During the period ended June 30, 2006, there were purchases and sales transactions (excluding short-term securities) of $30,670,187 and $0, respectively. Brokerage commissions on securities transactions amounted to $50,339 during the period ended June 30, 2006.


71


RMR Real Estate Fund
RMR Hospitality and Real Estate Fund
RMR F.I.R.E. Fund
RMR Preferred Dividend Fund
RMR Asia Pacific Real Estate Fund
June 30, 2006

For the purposes of the following, RMR Real Estate Fund (RMR), RMR Hospitality and Real Estate Fund (RHR), RMR F.I.R.E. Fund (RFR), RMR Preferred Dividend Fund (RDR) and RMR Asia Pacific Real Estate Fund (RAP) are each referred to as a "Fund" or collectively as the "Funds".

Consideration of the Investment Advisory and Investment Sub-Advisory Agreements for RAP

RMR Advisors serves as the investment advisor to RAP, and MacarthurCook Investment Managers Limited ("MacarthurCook") serves as the sub-advisor to RAP. On April 20, 2006, the RAP board of trustees (the "board") entered into investment advisory and investment sub-advisory agreements for a period of two years to expire on April 19, 2008.

Investment Advisory Agreement. In making their determination to approve the RAP investment advisory agreement, the board, including the disinterested trustees, considered all of the factors described below.

The board considered the anticipated benefits to RAP shareholders from appointing RMR Advisors as investment advisor. The board's considerations included, among others: the nature, scope and quality of services that RMR Advisors was expected to provide to RAP; the advisory and other fees to be paid; the fact that RMR Advisors has agreed to waive a portion of its fee during the first five years of the RAP's existence in order to reduce RAP's operating expenses; the quality and depth of personnel of RMR Advisors' organization; the capacity and future commitment of RMR Advisors to perform its duties; the financial condition and anticipated profitability of RMR Advisors; the experience and expertise of RMR Advisors as an investment adviser; the level of fees to be paid to RMR Advisors as compared to similar funds; the potential for economies of scale; and any indirect benefits expected to be derived by RMR Advisors' relationship with RAP.

The board considered the level and depth of knowledge of RMR Advisors. In evaluating the quality of services to be provided by RMR Advisors, the board took into account its familiarity with RMR Advisors' management through board meetings, conversations and reports of other funds managed by RMR Advisors. The board also considered the historical performance of the other funds managed by RMR Advisors. The board also took into account RMR Advisors' compliance policies and procedures.

The board compared the proposed advisory fees and the estimated total expense ratio of RAP with various comparative fund data. The board considered RAP's investment objective. The board also considered the RAP's model portfolio composition and investment strategy.

The board considered the potential economies of scale that may be realized if the assets of RAP grow. The board noted that shareholders might benefit from lower operating expenses as a result of an increasing amount of assets being spread over RAP's fixed expenses.

In considering the approval of the investment advisory agreement, the board, including the disinterested trustees, did not identify any single factor as controlling. Based on the board's evaluation of all the factors that it deemed to be relevant, the board, including the disinterested trustees of the board, concluded that: RMR Advisors has demonstrated that it possesses the capability and resources to perform the duties required of it under the investment advisory agreement for the Fund; RMR Advisors maintains an appropriate compliance


72



program; and the proposed advisory fee rate is fair and reasonable, given the scope and quality of the services to be rendered by RMR Advisors.

Investment Sub-Advisory Agreement. In making their determination to approve the RAP investment sub-advisory agreement, the board, including the disinterested trustees, considered all of the factors described below.

The board considered the anticipated benefits to RAP shareholders from appointing MacarthurCook as investment sub-advisor. The board's considerations included, among others: the nature, scope and quality of services that MacarthurCook was expected to provide; the sub-advisory fees to be paid by RMR Advisors to MacarthurCook; the fact that MacarthurCook has agreed to waive a portion of its fee during the first five years of RAP's existence; the quality and depth of personnel of MacarthurCook's organization; the capacity and future commitment of MacarthurCook to perform its duties; and the experience and expertise of MacarthurCook as an investment adviser.

The board considered the level and depth of knowledge of MacarthurCook, noting that MacarthurCook specialized in the area of real estate investment management. The board also took into account MacarthurCook's compliance policies and procedures.

The board compared the proposed sub-advisory fees and the estimated total expense ratio of RAP with various comparative fund data. The board considered RAP's investment objective. The board also took into consideration the performance of a model portfolio on which RAP's initial holdings would be based as well as the performance of other funds managed by MacarthurCook.

The board noted that sub-advisory fees under the investment sub-advisory agreement would be paid by RMR Advisers and not by RAP and therefore were the product of arm's-length negotiations between RMR Advisors and MacarthurCook. For these reasons, the anticipated profitability to MacarthurCook from its relationship with RAP was not a material factor in the board's deliberations. For similar reasons, the board did not consider the potential economies of scale in MacarthurCook's management of RAP to be a material factor in its consideration.

In considering the approval of the investment sub-advisory agreement, the board, including the disinterested trustees, did not identify any single factor as controlling. Based on the board's evaluation of all the factors that it deemed to be relevant, the board, including the disinterested trustees of the board, concluded that: MacarthurCook possesses the capability and resources to perform the duties required of it under the investment sub-advisory agreement; MacarthurCook maintains an appropriate compliance program; and the proposed sub-advisory fee rate is fair and reasonable, given the scope and quality of the services to be rendered by MacarthurCook.

Privacy Policy

Each of the Funds is committed to maintain shareholder privacy and to safeguard shareholder nonpublic personal information.

The Funds do not receive any nonpublic personal information relating to shareholders who purchase Fund shares through an intermediary that acts as the record owner of the shares. If a shareholder is the record owner of any Fund's shares, that Fund may receive nonpublic personal information on shareholder account documents or otherwise and also has access to specific information regarding shareholder Fund share transactions, either directly or through the Fund's transfer agent.

The Funds do not disclose any nonpublic personal information about shareholders or any former shareholders to anyone, except as permitted by law or as is necessary to service shareholder accounts. The Funds restrict


73



access to nonpublic personal information about shareholders to employees of the Funds and RMR Advisors with a legitimate business need for the information.

Proxy Voting Policies and Procedures

A description of the policies and procedures that are used to vote proxies relating to each Fund's portfolio securities is available: (1) without charge, upon request, by calling us at 1-866-790-8165; and (2) as an exhibit to each Fund's annual report on Form N-CSR, which is available on the website of the U.S. Securities and Exchange Commission (the "Commission") at http://www.sec.gov. Information regarding how proxies received by each Fund during the most recent 12 month period ended June 30, 2006, have been voted is available (1) without charge, on request, by calling us at 1-866-790-3165, or (2) by visiting the Commission's website at http://www.sec.gov and accessing each Fund's Form N-PX.

Procedures for the Submission of Confidential and Anonymous Concerns or Complaints about Accounting, Internal Accounting Controls or Auditing Matters

The Funds are committed to compliance with all applicable securities laws and regulations, accounting standards, accounting controls and audit practices and have established procedures for handling concerns or complaints about accounting, internal accounting controls or auditing matters. Any shareholder or other interested party who desires to communicate with our independent trustees or any other trustees, individually or as a group, may do so by filling out a report at the "Contact Us" section of our website (www.rmrfunds.com), by calling our toll-free confidential message system at 866-511-5038, or by writing to the party for whom the communication is intended, care of our director of internal audit, RMR Funds, 400 Centre Street, Newton, MA 02458. Our director of internal audit will then deliver any communication to the appropriate party or parties.

Portfolio Holdings Reports

Each Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q, which are available on the Commission's website at http://www.sec.gov. The Funds' Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Each Fund provides additional data at its website at www.rmrfunds.com.

Certifications

Each Fund's principal executive officer and principal financial officer certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 and filed with the Fund's N-CSR are available on the Securities and Exchange Commission's website http://www.sec.gov.


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Item 2. Code of Ethics.

The information is only required for the annual report on Form N-CSR.

Item 3. Audit Committee Financial Expert.

The information is only required for the annual report on Form N-CSR.

Item 4. Principal Accountant Fees and Services.

The information is only required for the annual report on Form N-CSR.

Item 5. Audit Committees of Listed Registrants.

The information is only required for the annual report on Form N-CSR.

Item 6. Schedule of Investments

        The information required under Item 6 is included as part of the report to shareholders filed under Item 1 of this Form N-CSR.


Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

The information is only required for the annual report on Form N-CSR.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

The information is only required for the annual report on Form N-CSR.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

        During the six months ended June 30, 2006, there were no purchases made by or on behalf of the registrant or any "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (17 CFR 240.10b-18(a)(3)), of shares of the registrant's equity securities that are registered by the registrant pursuant to Section 12 of the Exchange Act.


Item 10. Submission of Matters to a Vote of Security Holders.

        There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of trustees.


Item 11. 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, based on their evaluation of these controls and procedures.

(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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.


Item 12. Exhibits.

(a)
(2) Certifications of principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act are attached hereto.

(b)
Certifications of principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.


SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RMR REAL ESTATE FUND

By:

 

/s/  
THOMAS M. O'BRIEN      
Thomas M. O'Brien
President
Date: August 21, 2006

        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/  
THOMAS M. O'BRIEN      
Thomas M. O'Brien
President
Date: August 21, 2006

By:

 

/s/  
MARK L. KLEIFGES      
Mark L. Kleifges
Treasurer
Date: August 21, 2006



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NOTICE CONCERNING LIMITED LIABILITY
RMR Real Estate Fund Financial Statements
RMR Real Estate Fund Financial Statements — continued
RMR Real Estate Fund Financial Statements – continued
RMR Real Estate Fund Notes to Financial Statements June 30, 2006 (unaudited)
RMR Hospitality and Real Estate Fund Financial Statements
RMR Hospitality and Real Estate Fund Financial Statements – continued
RMR Hospitality and Real Estate Fund Financial Statements – continued
RMR Hospitality and Real Estate Fund Financial Highlights
RMR Hospitality and Real Estate Fund Notes to Financial Statements June 30, 2006 (unaudited)
RMR F.I.R.E. Fund Financial Statements
RMR F.I.R.E. Fund Notes to Financial Statements June 30, 2006 (unaudited)
RMR Preferred Dividend Fund Financial Statements
RMR Preferred Dividend Fund Financial Statements – continued
RMR Preferred Dividend Fund Financial Statements — continued
RMR Preferred Dividend Fund Notes to Financial Statements June 30, 2006 (unaudited)
RMR Asia Pacific Real Estate Fund Financial Statements
RMR Asia Pacific Real Estate Fund Financial Statements – continued
RMR Asia Pacific Real Estate Fund Financial Statements — continued
RMR Asia Pacific Real Estate Fund Notes to Financial Statements June 30, 2006 (unaudited)
SIGNATURES