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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _________________ to _________________
Commission file number 1-11123
NUVEEN INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3817266
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 WEST WACKER DRIVE, CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 917-7700
NO CHANGES
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No[ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act.) Yes [X] No[ ]
At May 9, 2003, there were 92,368,622 shares of the Company's Common
Stock outstanding, consisting of 19,043,408 shares of Class A Common Stock, $.01
par value, and 73,325,214 shares of Class B Common Stock, $.01 par value.
NUVEEN INVESTMENTS, INC.
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited),
March 31, 2003 and December 31, 2002 3
Consolidated Statements of Income (Unaudited),
Three Months Ended March 31, 2003 and 2002 4
Consolidated Statement of Changes in Common Stockholders'
Equity (Unaudited), Three Months Ended March 31, 2003 5
Consolidated Statements of Cash Flows (Unaudited),
Three Months Ended March 31, 2003 and 2002 6
Notes to Consolidated Financial Statements
(Unaudited) 7
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk 20
ITEM 4.
Controls and Procedures 20
PART II. OTHER INFORMATION
Item 1 through Item 6 21
Signatures 23
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NUVEEN INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
2003 2002
--------- ------------
ASSETS
Cash and cash equivalents $ 81,474 $ 70,480
Management and distribution fees receivable 41,138 54,105
Other receivables 9,099 13,790
Furniture, equipment, and leasehold improvements, at cost less accumulated depreciation
and amortization of $39,921 and $38,526, respectively 31,438 31,279
Other investments 59,135 58,918
Goodwill 514,772 511,851
Other intangible assets, net of accumulated amortization of $6,728 and $5,426, respectively 62,422 63,724
Advanced sales commissions and other assets 42,144 36,895
--------- ---------
$ 841,622 $ 841,042
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable $ 305,000 $ 305,000
Accrued compensation and other expenses 33,779 56,619
Deferred compensation 29,383 27,976
Deferred income tax liability, net 15,331 12,083
Other liabilities 58,127 50,538
--------- ---------
Total liabilities 441,620 452,216
--------- ---------
Minority interest 3,634 3,063
Common stockholders' equity:
Class A Common stock, $.01 par value; 160,000,000 shares authorized; 476 476
47,586,266 shares issued
Class B Common stock, $.01 par value; 80,000,000 shares authorized; 733 733
73,325,214 shares issued
Additional paid-in capital 156,224 155,188
Retained earnings 707,935 688,325
Unamortized cost of restricted stock awards (670) (748)
Accumulated other comprehensive loss (5,231) (4,859)
--------- ---------
859,467 839,115
Less common stock held in treasury, at cost (28,534,796 and 28,184,996 shares, respectively) (463,099) (453,352)
--------- ---------
Total common stockholders' equity 396,368 385,763
--------- ---------
$ 841,622 $ 841,042
========= =========
See accompanying notes to consolidated financial statements.
3
NUVEEN INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
------------------------
2003 2002
--------- ---------
Operating revenues:
Investment advisory fees from assets under management $ 95,244 $ 85,155
Underwriting and distribution of investment products 1,584 4,871
Positioning profits/(losses), net (1) (114)
Performance fees/other revenue 4,720 2,697
--------- ---------
Total operating revenues 101,547 92,609
Operating expenses:
Compensation and benefits 28,880 22,852
Advertising and promotional costs 2,555 3,467
Occupancy and equipment costs 4,902 4,019
Amortization of intangible assets 1,302 713
Travel and entertainment 1,781 1,981
Outside services 1,898 1,914
Other operating expenses 5,924 8,080
--------- ---------
Total operating expenses 47,242 43,026
Operating income 54,305 49,583
Non-operating income/(expense) (981) (178)
--------- ---------
Income before taxes 53,324 49,405
Income taxes 20,690 19,416
--------- ---------
Net income $ 32,634 $ 29,989
========= =========
Average common and common equivalent shares outstanding:
Basic 92,566 94,922
========= =========
Diluted 95,687 99,585
========= =========
Earnings per common share:
Basic $ 0.35 $ 0.32
========= =========
Diluted $ 0.34 $ 0.30
========= =========
See accompanying notes to consolidated financial statements.
4
NUVEEN INVESTMENTS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
UNAUDITED
(IN THOUSANDS)
UNAMORTIZED
CLASS A CLASS B ADDITIONAL COST OF
COMMON COMMON PAID-IN RETAINED RESTRICTED
STOCK STOCK CAPITAL EARNINGS STOCK AWARDS
--------- --------- ---------- ---------- ------------
Balance at December 31, 2002 $ 476 $ 733 $ 155,188 $ 688,325 $ (748)
Net income 32,634
Cash dividends paid (12,030)
Amortization of restricted
stock awards 208
Purchase of treasury stock
Exercise of stock options (1,043)
Issuance of restricted stock 49 (130)
Tax benefit of options exercised 1,036
Other
--------- --------- --------- --------- ---------
Balance at March 31, 2003 $ 476 $ 733 $ 156,224 $ 707,935 $ (670)
========= ========= ========= ========= =========
ACCUMULATED
OTHER
COMPREHENSIVE TREASURY
INCOME/(LOSS) STOCK TOTAL
------------- --------- ---------
Balance at December 31, 2002 $ (4,859) $(453,352) $ 385,763
Net income 32,634
Cash dividends paid (12,030)
Amortization of restricted
stock awards 208
Purchase of treasury stock (13,746) (13,746)
Exercise of stock options 3,918 2,875
Issuance of restricted stock 81 -
Tax benefit of options exercised 1,036
Other (372) (372)
--------- --------- ---------
Balance at March 31, 2003 $ (5,231) $(463,099) $ 396,368
========= ========= =========
See accompanying notes to consolidated financial statements.
5
NUVEEN INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
THREE MONTHS ENDED MARCH 31,
----------------------------
2003 2002
--------- ---------
Cash flows from operating activities:
Net income $ 32,634 $ 29,989
Adjustments to reconcile net income to net cash
provided from operating activities:
Deferred income taxes 3,486 1,688
Depreciation of office property and equipment 1,887 1,627
Amortization of intangible assets 1,302 713
Net (increase) decrease in assets:
Management and distribution fees receivable 12,967 11,681
Other receivables 4,691 3,288
Advanced sales commissions and other assets (5,249) 13,810
Net increase (decrease) in liabilities:
Accrued compensation and other expenses (22,840) (18,841)
Deferred compensation 1,407 482
Security purchase obligations - (739)
Other liabilities 8,159 3,331
Other 1,052 11,043
--------- ---------
Net cash provided from operating activities 39,496 58,072
--------- ---------
Cash flows from financing activities:
Dividends paid (12,030) (11,444)
Proceeds from stock options exercised 2,875 17,683
Proceeds from Rittenhouse stock options exercised - 40,504
Acquisition of treasury stock (13,746) (56,810)
--------- ---------
Net cash used for financing activities (22,901) (10,067)
--------- ---------
Cash flows from investing activities:
Net purchase of office property and equipment (2,046) (1,222)
Proceeds from sales of investment securities 48 526
Purchases of investment securities (613) (802)
Contingent consideration for Symphony acquisition (2,921) -
Other (69) (407)
--------- ---------
Net cash used for investing activities (5,601) (1,905)
--------- ---------
Increase in cash and cash equivalents 10,994 46,100
Cash and cash equivalents:
Beginning of year 70,480 83,659
--------- ---------
End of period $ 81,474 $ 129,759
--------- ---------
Supplemental Information:
Taxes paid $ 8,419 $ 1,729
Interest paid $ 2,008 $ 1,392
See accompanying notes to consolidated financial statements.
6
NUVEEN INVESTMENTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2003
NOTE 1 BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Nuveen
Investments, Inc. and its wholly owned subsidiaries ("the Company" or "Nuveen
Investments") and have been prepared in conformity with accounting principles
generally accepted in the United States of America. These financial statements
have also been prepared in accordance with the instructions to Form 10-Q
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). Certain information and footnote disclosures have been omitted pursuant
to such rules and regulations. As a result, these financial statements should be
read in conjunction with the audited consolidated financial statements and
related notes included in the Company's latest annual report on Form 10-K.
Certain amounts in the prior year financial statements have been reclassified to
conform to the 2003 presentation. These reclassifications had no effect on
previously reported net income or stockholders' equity.
These financial statements rely, in part, on estimates. In the opinion of
management, all necessary adjustments (consisting of normal recurring accruals)
have been reflected for a fair presentation of the results of operations,
financial position and cash flows in the accompanying unaudited consolidated
financial statements. The results for the period are not necessarily indicative
of the results to be expected for the entire year.
NOTE 2 EARNINGS PER COMMON SHARE
On May 9, 2002, the Company's Board of Directors declared a 2-for-1 stock split
to be effected as a dividend to shareholders of record as of June 3, 2002. All
references in the consolidated financial statements and notes as to number of
shares, per share amounts and market prices of the Company's common stock have
been restated to reflect the increased number of shares outstanding.
The following table sets forth a reconciliation of net income and the weighted
average common shares used in the basic and diluted earnings per share
computations for the three-month periods ended March 31, 2003 and March 31,
2002.
- ---------------------------------------------------------------------------------------------------------------------
In thousands, For the three months ended
except per share data March 31, 2003 March 31, 2002
- ---------------------------------------------------------------------------------------------------------------------
Net Per-share Net Per-share
income Shares amount income Shares amount
-------------------------------------------------------------------------------
Net income $32,634 $29,989
Less: Preferred stock dividends - (70)
------ -------
Basic EPS 32,634 92,566 $0.35 29,919 94,922 $0.32
Dilutive effect of:
Restricted stock - 463 - 275
Employee stock options - 2,658 - 3,770
Assumed conversion of
preferred stock - - 70 618
------- ------ ------- ------
Diluted EPS $32,634 95,687 $0.34 $29,989 99,585 $0.30
- ---------------------------------------------------------------------------------------------------------------------
7
Options to purchase 8,558,600 and 2,972,000 shares of the Company's common stock
were outstanding at March 31, 2003 and 2002, respectively, but were not included
in the computation of diluted earnings per share because the options' respective
weighted average exercise prices of $26.69 and $27.12 per share were greater
than the average market price of the Company's common shares during the
applicable period.
NOTE 3 NET CAPITAL REQUIREMENT
Nuveen Investments, LLC, the Company's wholly owned broker/dealer subsidiary, is
subject to the Securities and Exchange Commission Rule 15c3-1, the "Uniform Net
Capital Rule," which requires the maintenance of minimum net capital and
requires that the ratio of aggregate indebtedness to net capital, as these terms
are defined in the Rule, shall not exceed 15 to 1. At March 31 2003, Nuveen
Investments, LLC's net capital ratio was 1.43 to 1 and its net capital was
$16,083,000, which is $14,553,000 in excess of the required net capital of
$1,530,000.
NOTE 4 ACQUISITION OF NWQ INVESTMENT MANAGEMENT COMPANY, INC.
On August 1, 2002, Nuveen Investments completed the acquisition of NWQ
Investment Management Company, Inc. ("NWQ"). The results of NWQ's operations
have been included in Nuveen Investments' consolidated financial statements from
the date of acquisition. Nuveen Investments has engaged external valuation
experts to determine the final purchase price allocation. The purchase price
allocation has not been finalized as of this date.
The following table presents unaudited actual results of operations for the
three-month periods ended March 31, 2003 and 2002 and unaudited pro-forma
information for the three-month period ended March 31, 2002 . The unaudited
pro-forma information as of March 31, 2002 reflects a summary of the
consolidated results of operations of Nuveen Investments and NWQ as if the NWQ
acquisition had occurred on January 1, 2002. (In thousands, except per share
data).
- ------------------------------------------------------------------------------------------
Actual Actual Pro-Forma
Three Months Ended Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002 March 31, 2002
--------------------------------------------------------------
Revenues $101,547 $92,609 $101,373
Net Income $ 32,634 $29,989 $ 30,542
Earnings per common share
(diluted) $ 0.34 $ 0.30 $ 0.30
- ------------------------------------------------------------------------------------------
NOTE 5 GOODWILL AND INTANGIBLE ASSETS
The following table presents a reconciliation of activity in goodwill from
December 31, 2002, amounts to March 31, 2003, amounts presented on our
consolidated balance sheets (in thousands):
Goodwill
- --------
Balance at December 31, 2002 $ 511,851
Symphony acquisition - contingent consideration 2,921
----------
Balance at March 31, 2003 $ 514,772
----------
8
The following table presents gross carrying amounts and accumulated amortization
amounts for intangible assets presented on our consolidated balance sheets at
March 31, 2003 and December 31, 2002 (in thousands):
At March 31, 2003 At December 31, 2002
----------------- --------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amortizable Intangible Assets Amount Amortization Amount Amortization
- ----------------------------- -------- ------------ -------- ------------
Various previous acquisitions $ 459 $ 459 $ 459 $ 459
Symphony-
Customer relationships 43,800 3,778 43,800 3,223
Internally developed software 1,622 539 1,622 458
Favorable lease 369 256 369 226
NWQ customer contracts 22,900 1,696 22,900 1,060
------- ------ ------- ------
Total $69,150 $6,728 $69,150 $5,426
------- ------ ------- ------
The projected amortization for the next five years is approximately $3.9 million
for the remaining nine months of 2003, and annual amortization of $5.1 million
for each of 2004 and 2005, $5.0 million for 2006, and $4.8 million for 2007.
NOTE 6 STOCK-BASED COMPENSATION
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of Financial Accounting Standards Board Statement No.
123," was issued in December 2002 and amends the disclosure requirements of SFAS
No. 123, "Accounting for Stock Based Compensation" to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results.
As discussed in the Company's latest annual report on Form 10-K, the Company
accounts for stock-based compensation plans in accordance with Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value recognition
provisions of SFAS No. 123 (as amended by SFAS No. 148) (in thousands, except
per share data):
Three Months Ended March 31
---------------------------
2003 2002
---------- ----------
Net income, as reported $ 32,634 $ 29,989
Deduct: Total stock-based
employee compensation expense
determined under fair value based
method for all awards, net of
related tax effects (2,596) (2,001)
Pro forma net income $ 30,038 $ 27,988
Earnings per common share:
Basic - as reported $ 0.35 $ 0.32
Basic - pro forma $ 0.32 $ 0.30
Diluted - as reported $ 0.34 $ 0.30
Diluted - pro forma $ 0.31 $ 0.28
9
NOTE 7 NOTES PAYABLE
On August 10, 2000, the Company entered into a $250 million revolving line of
credit with a group of banks that extends through August 2003. The committed
line is divided into two equal facilities-- one with a three-year term and one
that is renewable every 364 days. On August 8, 2002, Nuveen Investments renewed
its 364-day credit facility. Proceeds from borrowings under the facility are
used for fulfilling day to day cash requirements and general corporate purposes
including acquisitions, share repurchases and asset purchases. The rate of
interest payable under the agreement is, at the Company's option, a function of
one of various floating rate indices. The agreement requires the Company to pay
a facility fee at an annual rate of .105% of the committed amount for the
three-year facility and .08% of the committed amount for the 364-day facility.
For the three-month periods ended March 31, 2003 and 2002, the weighted-average
interest rate on the committed line was 1.601% and 2.060%, respectively, for the
three-year facility and 1.523% and 2.075%, respectively, for the 364-day
facility. At March 31, 2003, the total amount of debt outstanding under this
revolving line of credit was $200 million.
On July 31, 2002, Nuveen Investments entered into, and borrowed the total amount
available under, a $250 million revolving loan agreement with its majority
shareholder, The St. Paul Companies, Inc. ("St. Paul"). This loan facility
expires on July 15, 2003 and carries a floating interest rate of LIBOR plus a
margin of up to 0.25%. A portion of the proceeds from this $250 million loan was
used to repay $128 million of the previous outstanding debt of $183 million
under the bank facility discussed above, while the remainder of the proceeds was
used to help fund the NWQ acquisition. During March 2003, the Company paid down
$145 million of the total debt that was outstanding under the St. Paul debt
facility. At March 31, 2003, the total amount of debt outstanding under the St.
Paul debt facility was $105 million. For the three months ended March 31, 2003,
the weighted average annual interest rate on the St. Paul debt facility was
1.603%.
NOTE 8 RELATED PARTY TRANSACTIONS
On June 30, 2002, the Company made a loan of approximately $2.1 million to one
of Symphony's prior owners, Maestro LLC. The members of Maestro LLC are also
employees of Symphony. This uncollateralized, interest-bearing loan is payable
on or before December 31, 2006 and carries an interest rate equal to the
Applicable Federal Rate published by the Secretary of the Treasury (as of March
2003, the applicable interest rate was 3.24% per annum). Any contingent
consideration payments required to be made by the Company relating to the
Symphony acquisition may be used to offset this loan obligation. As of March 31,
2003 and December 31, 2002, the remaining note receivable of approximately $2.1
million is included in other assets on our consolidated balance sheet.
NOTE 9 SUBSEQUENT EVENTS
On April 11, 2003, options to purchase 391,122 shares of Rittenhouse non-voting
Class B common stock were exercised under the Rittenhouse Asset Management, Inc.
1997 Equity Incentive Award Plan. Rittenhouse accounted for these options in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees."
As a result of this exercise, the Company has recorded approximately $42.5
million of minority interest on its April 2003 consolidated balance sheet. The
minority interest will remain in place as long as the stock is outstanding. In
the event that the stock is repurchased, any purchase price in excess of the
exercise price will be added to goodwill associated with the Company's
acquisition of Rittenhouse.
10
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MARCH 31, 2003
DESCRIPTION OF THE BUSINESS
Our principal businesses are asset management and related research as well as
the development, marketing and distribution of investment products and services
for the affluent, high-net-worth and the institutional market segments. We
distribute our investment products and services, including individually managed
accounts, closed-end exchange-traded funds, and mutual funds, to the affluent
and high-net-worth market segments through unaffiliated intermediary firms
including broker/dealers, commercial banks, affiliates of insurance providers,
financial planners, accountants, consultants and investment advisors. We also
provide managed account services, including privately offered hedge fund
partnerships, to several institutional market segments and channels.
Our primary business activities generate three principal sources of revenue: (1)
ongoing advisory fees earned on assets under management, including separately
managed accounts, exchange-traded funds and mutual funds, (2) underwriting and
distribution revenues earned upon the sale of certain investment products and
(3) incentive fees earned on certain institutional accounts based on the
performance of such accounts.
Sales of our products, and our profitability, are directly affected by many
variables, including investor preferences for equity, fixed-income or other
investments, the availability and attractiveness of competing products, market
performance, continued access to distribution channels, changes in interest
rates, inflation, and income tax rates and laws.
RELEVANT EVENTS
The following events reported in our 2002 annual report are relevant to the
interpretation of our first quarter 2003 results:
On August 1, 2002, we finalized the acquisition of NWQ Investment Management
Company, Inc. ("NWQ"), an asset management firm based in Los Angeles with
approximately $7 billion of assets under management in both retail and
institutional managed accounts. NWQ specializes in value-oriented equity
investments and has significant relationships among institutions and financial
advisors. Cash payments totaling approximately $145 million will be made to the
seller, which includes up to a maximum of $20.5 million to be paid over a
five-year period under the terms of a strategic alliance agreement.
On May 9, 2002, we announced a 2-for-1 split of our common stock. The stock
split was effected as a dividend to shareholders of record as of June 3, 2002.
For comparability, all prior period share information has been restated for the
split.
In early 2002, we announced our intention to stop depositing continuously
offered equity and fixed-income defined portfolio products. The discontinuation
of this product line was completed in the first quarter of 2002.
11
SUMMARY OF OPERATING RESULTS
The table presented below highlights the results of our operations for the first
quarters of 2003 and 2002:
FINANCIAL RESULTS SUMMARY
COMPANY OPERATING STATISTICS
(in millions, except per share amounts)
- --------------------------------------------------------------------------------------
QUARTER ENDED MARCH 31, 2003 2002 % CHANGE
---------- ---------- ----------
Gross sales of investment products $ 4,196 $ 3,389 24%
Net flows of investment products 2,105 1,875 12
Assets under management (1) (2) 81,360 69,538 17
Operating revenues 101.5 92.6 10
Operating expenses 47.2 43.0 10
Net income 32.6 30.0 9
Basic earnings per share (3) .35 .32 9
Diluted earnings per share(3) .34 .30 13
Dividends per share(3) .13 .12 8
- --------------------------------------------------------------------------------------
(1) At period end.
(2) Excludes defined portfolio assets under surveillance.
(3) The prior period has been adjusted to reflect the 2-for-1 stock split that
occurred in June of 2002.
RESULTS OF OPERATIONS
The following discussion and analysis contains important information that should
be helpful in evaluating our results of operations and financial condition, and
should be read in conjunction with the consolidated financial statements and
related notes.
Total advisory fee income earned during any period is directly related to the
market value of the assets we manage. Advisory fee income will increase with a
rise in the level of assets under management. Assets under management rise with
the addition of new managed accounts or deposits into existing managed accounts,
the sale of fund shares, the addition of assets under management from the
acquisition of other advisory companies, or through increases in the value of
portfolio investments. Assets under management may also increase as a result of
reinvestment of distributions from funds and accounts, and from reinvestment of
distributions from defined portfolio products we sponsor into shares of mutual
funds. Fee income will decline when managed assets decline, as would occur when
the values of fund portfolio investments decrease or when managed account
withdrawals or mutual fund redemptions exceed sales and reinvestments.
Distribution revenue is earned as defined portfolio and mutual fund products are
sold to the public through financial advisors. Correspondingly, distribution
revenue will rise and fall with the level of our sales of these products, and
has been impacted by our decision to discontinue the defined portfolio product
line in 2002. Underwriting fees are earned on the initial public offerings of
our exchange-traded funds. The level of fees earned in any given year will
12
fluctuate depending on the number of new funds offered, the size of the funds
offered and the extent to which we participate as a member of the syndicate
group underwriting the fund.
Gross sales of investment products for first quarters of 2003 and 2002 are shown
below:
GROSS INVESTMENT PRODUCT SALES
(in millions)
QUARTER ENDED MARCH 31, 2003 2002
------ -----
Managed Assets:
Exchange-Traded Funds $1,728 $1,108
Mutual Funds 384 287
Managed Accounts 2,084 1,801
------ ------
Total Managed Assets 4,196 3,196
Defined Portfolios - 193
------ ------
Total $4,196 $3,389
====== ======
Gross sales increased 24% for the quarter. Driving the increase was our
continued success with exchange-traded products. In March of 2003, we introduced
the first closed-end exchange-traded fund to invest in a blend of taxable
investment-grade preferred securities, convertible bonds and a small amount of
high yield bonds, raising approximately $1.3 billion in assets through the
issuance of the fund. The leveraging of our fourth quarter 2002 exchange-traded
fund offerings added an additional $0.4 billion in assets. Sales of our mutual
fund products increased 34%, driven by a 50% increase in municipal mutual fund
sales. Retail managed account sales declined 7% as the addition of NWQ value
accounts and a 40% increase in municipal account sales could not offset the
sales decline on our equity growth accounts. Institutional managed account sales
increased significantly during the quarter. While the NWQ acquisition
contributed significantly to this growth, our institutional sales excluding NWQ
grew 11% due mainly to an increase in equity growth sales. There were no defined
portfolio sales in the quarter due to our decision to exit this product line in
2002.
Net flows of investment products for first quarters of 2003 and 2002 are shown
below:
NET FLOWS
(in millions)
QUARTER ENDED MARCH 31, 2003 2002
------ ------
Managed Assets:
Exchange-Traded Funds $1,732 $1,115
Mutual Funds 89 38
Managed Accounts 284 528
------ ------
Total Managed Assets 2,105 1,681
Defined Portfolios - 194
------ ------
Total $2,105 $1,875
====== ======
Net flows for the quarter were positive across all product categories, totaling
$2.1 billion, an increase of 12% versus the prior year. Very strong fixed-income
managed account and mutual fund flows and our newly created fixed-income
exchanged-traded fund flows, together with
13
positive flows of value oriented equity managed account flows more than offset
outflows from growth equity managed accounts.
The following table summarizes net assets under management:
NET ASSETS UNDER MANAGEMENT (1)
(in millions)
MARCH 31, DECEMBER 31, MARCH 31,
2003 2002 2002
------ ------ ------
Exchange-Traded Funds $41,565 $39,944 $32,965
Mutual Funds 11,889 11,849 11,775
Managed Accounts - Retail 19,321 19,403 19,243
Managed Accounts - Institutional 8,585 8,523 5,555
------- ------- -------
Total $81,360 $79,719 $69,538
======= ======= =======
(1) Excludes defined portfolio product assets under surveillance
Assets under management rose $11.8 billion or 17% since the end of the first
quarter of the prior year. Positive drivers were the acquisition of NWQ,
positive net flows and municipal market appreciation. These increases were
partially offset by fairly significant equity market depreciation ($4.5
billion). Assets under management grew $1.6 billion or 2% since the end of 2002
driven mainly by positive net flows.
Investment advisory fee income, net of sub-advisory fees and expense
reimbursements, is shown in the following table:
INVESTMENT ADVISORY FEES
(in thousands)
QUARTER ENDED MARCH 31, 2003 2002
------- -------
Exchange-Traded Funds $51,434 $44,868
Mutual Funds 14,636 14,219
Managed Accounts 29,174 26,068
------- -------
Total $95,244 $85,155
======= =======
Advisory fees increased 12% for the quarter driven mainly by the inclusion of
NWQ advisory fees. Excluding the impact of the NWQ acquisition, advisory fees
grew 1% as increases in advisory fees on exchange-traded products, municipal
mutual funds and municipal managed accounts were mostly offset by a decline in
fees on equity mutual funds and equity growth managed accounts. Base fees on our
alternative investment managed accounts also declined.
14
Underwriting and distribution revenue for the three-month periods ended March
31, 2003 and 2002 is shown in the following table:
UNDERWRITING AND DISTRIBUTION REVENUE
(in thousands)
QUARTER ENDED MARCH 31, 2003 2002
------ ------
Exchange-Traded Funds $1,555 $1,501
Mutual Funds 22 814
Defined Portfolios 7 2,556
------ ------
Total $1,584 $4,871
====== ======
Underwriting and distribution revenue declined fairly significantly mainly as a
result of our decision to discontinue the defined portfolio product line. Mutual
fund distribution revenue also declined despite an increase in sales due to an
increase in commissions paid to distributors on high dollar value sales and a
shift in sales by share class.
POSITIONING PROFITS/(LOSSES)
We recorded positioning profits or losses from changes in the market value of
the inventory of unsold investment products and other securities held by our
broker/dealer subsidiary, Nuveen Investments, LLC. In the first quarter of 2002,
we recorded net positioning losses of $0.1 million. As a result of our decision
to discontinue the defined portfolio product line, we no longer hold inventory
of unsold products.
PERFORMANCE FEES/OTHER OPERATING REVENUE
Performance fees/other operating revenue consists of performance fees earned on
institutional assets managed by Symphony and various fees earned in connection
with services provided on behalf of our defined portfolio assets under
surveillance. The $2.0 million increase in other operating revenue for the first
quarter of 2003 is primarily due to an increase of $2.7 million in Symphony
performance fees. This increase was partially offset by a decline in fees earned
on defined portfolio assets under surveillance as a result of a decline in the
overall level of assets.
15
OPERATING EXPENSES
The following table summarizes operating expenses for the three-month periods
ended March 31, 2003 and 2002:
OPERATING EXPENSES
(in thousands)
QUARTER ENDED MARCH 31, 2003 2002
------- -------
Compensation and benefits $28,880 $22,852
Advertising and promotional costs 2,555 3,467
Occupancy and equipment costs 4,902 4,019
Amortization of intangible assets 1,302 713
Travel and entertainment 1,781 1,981
Outside services 1,898 1,914
Other operating expenses 5,924 8,080
------- -------
Total $47,242 $43,026
======= =======
As a % of Operating Revenues 46.5% 46.5%
SUMMARY
Operating expenses for the quarter increased 10% driven entirely by the
inclusion of expenses for NWQ. Excluding the impact of the NWQ acquisition,
operating expenses declined 7% due mainly to expense reductions as a result of
the discontinuation of the defined portfolio business and decline in fund
organization costs.
COMPENSATION AND BENEFITS
Excluding NWQ, compensation and benefits increased slightly. Base compensation
was flat as salary increases were completely offset by headcount reductions made
in connection with the exit of the defined portfolio business. Profit sharing
expense increased due primarily to an increase in expense at Symphony as a
result of the increase in performance fees.
ADVERTISING AND PROMOTIONAL COSTS
Advertising and promotional expenditures decreased $0.9 million due to a
reduction in spending as a result of a more focused deployment of our marketing
resources and the discontinuation of our defined portfolio business.
AMORTIZATION OF INTANGIBLES
Amortization of intangibles increased $0.6 million for the quarter due to an
increase in amortization of intangible assets related to the NWQ acquisition.
ALL OTHER OPERATING EXPENSES
All other operating expenses, including occupancy and equipment costs, travel
and entertainment, outside service fees, fund organization costs and other
expenses decreased $1.5 million despite the inclusion of NWQ expenses. Excluding
NWQ, expenses declined $3.0 million due to a decline in fund organization costs
as expenses relating to the 2003 exchange-traded fund offering were covered by
the fund itself due to the size of the fund. Additionally expenses declined due
to the recording of severance in the first quarter of 2002 related to the
discontinuation of the defined portfolio business.
16
NON-OPERATING INCOME/(EXPENSE)
Non-operating income/(expense) includes investment and other income and interest
expense. Investment and other income is comprised primarily of dividends and
interest income from investments, realized gains and losses on investments and
miscellaneous income, including gain or loss on the disposal of property.
The overall increase in non-operating expense of approximately $0.8 million in
the first quarter of 2003 was primarily the result of an increase in net
interest expense. Interest and dividend revenues declined $0.6 million due
primarily to a decline in cash on hand as a result of the NWQ acquisition, the
stock repurchase program and a reduction in interest rates earned. Interest
expense for the quarter increased $0.3 million compared with the prior year as a
result of the debt incurred in association with the acquisition of NWQ.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
Our principal businesses are not capital intensive and, historically, we have
met our liquidity requirements through cash flow generated by operations. In
addition, our broker/dealer subsidiary occasionally utilizes available,
uncommitted lines of credit, which approximate $120 million, to satisfy
periodic, short-term liquidity needs. As of March 31, 2003, no borrowings were
outstanding on these uncommitted lines of credit. In August 2000, we entered
into a $250 million committed line of credit with a group of banks to ensure an
ongoing liquidity source for general corporate purposes including acquisitions.
This committed line is divided into two equal facilities -- one with a
three-year term and one that is renewable every 364 days. The 364-day facility
was renewed in both August 2001 and August 2002. The terms of the facility fee
and interest rate payable remain unchanged from the previous agreement. At March
31, 2003, there was $200 million of debt outstanding under this revolving line
of credit. All of this debt will become due in August of 2003.
On July 31, 2002, we entered into a $250 million revolving loan agreement with
our majority shareholder, The St. Paul Companies, Inc. ("St. Paul"). This loan
facility expires on July 15, 2003, and carries a floating interest rate of LIBOR
plus a margin of up to 0.25%. During March of 2003, we paid down $145 million of
the total debt that was outstanding under the St. Paul debt facility. At March
31, 2003 the total amount of debt outstanding under this facility was $105
million. All of this debt will become due in July of 2003.
The Company expects to refinance substantially all of its indebtedness maturing
in 2003 with the proceeds of new credit facilities or new debt securities
offerings. There can be no assurances that the terms will not be less favorable
than the terms of the indebtedness to be refinanced.
As part of the NWQ acquisition, key management purchased a non-controlling,
member interest in NWQ Investment Management Company, LLC. The non-controlling
interest of $3.3 million as of March 31, 2003, is reflected in minority interest
in the consolidated balance sheet. This purchase allows management to
participate in profits of NWQ above specified levels beginning January 1, 2003.
During the first quarter of 2003, we recorded approximately $0.3 million of
minority interest expense, which reflects the portion of profits, applicable to
the
17
minority interest. Beginning in 2004 and continuing through 2008, we have
the right to purchase the non-controlling members' respective interests in NWQ.
At March 31, 2003, we held in treasury 28,534,796 shares of Class A common stock
acquired in open market transactions. During the first quarter, we repurchased
597,200 Class A common shares in open market transactions. As part of a new
share repurchase program approved on August 9, 2002, we are authorized to
purchase up to 7.0 million shares of common stock. As of March 31, 2003, there
were 5.3 million shares remaining under the new share repurchase plan.
During the first quarter of 2003, we paid out dividends on common shares
totaling $12.0 million.
Our broker/dealer subsidiary is subject to requirements of the Securities and
Exchange Commission relating to liquidity and capital standards (See Note 3 to
Consolidated Financial Statements).
Management believes that cash provided from operations and borrowings available
under its uncommitted and committed credit facilities will provide us with
sufficient liquidity to meet our operating needs for the foreseeable future.
INFLATION
Our assets are, to a large extent, liquid in nature and therefore not
significantly affected by inflation. However, inflation may result in increases
in our expenses, such as employee compensation, advertising and promotional
costs, and office occupancy costs. To the extent inflation, or the expectation
thereof, results in rising interest rates or has other adverse effects upon the
securities markets and on the value of financial instruments, it may adversely
affect our financial condition and results of operations. A substantial decline
in the value of fixed-income or equity investments could adversely affect the
net asset value of funds we manage, which in turn would result in a decline in
investment advisory and performance fee revenue.
Forward-Looking Information and Factors That May Affect Our Future Results
From time to time, information we provide or information included in our filings
with the SEC (including Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Notes to Consolidated Financial
Statements in this report on Form 10-Q) may contain statements that are not
historical facts, but are "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
relate to future events or future financial performance and reflect management's
expectations and opinions. In some cases, you can identify forward-looking
statements by terminology such as "may", "will", "could", "would", "should",
"expect", "plan", "anticipate", "intend", "believe", "estimate", "predict" or
"potential" or comparable terminology. These statements are only predictions,
and our actual future results may differ significantly from those anticipated in
any forward-looking statements due to numerous known and unknown risks,
uncertainties and other factors. All of the forward-looking statements are
qualified in their entirety by reference to the factors discussed below. These
factors may not be exhaustive, and we cannot predict the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those predicted in any forward-looking statements. We undertake no
responsibility to update publicly or revise any forward-looking statements.
Risks, uncertainties and other factors that pertain to our business and the
effects of which may cause our assets under management, earnings, revenues,
profit margins, and/or our stock price to decline include: (1) the effects of
the substantial competition that we, like all market participants, face in the
investment management business, including competition for continued access to
the brokerage firms' retail distribution systems and "wrap fee" managed account
programs where the loss of such access would cause a resulting loss of assets;
(2) the adverse effects of declines in securities markets on our assets under
management and future offerings; (3) the adverse effects of
18
increases in interest rates from their present levels on the net asset value of
our assets under management that are invested in fixed income securities and the
magnifying effect such increases in interest rates may have on our leveraged
closed end exchange traded funds; (4) the adverse effects of poor investment
performance by our managers or declining markets resulting in redemptions, loss
of clients, and declines in asset values; (5) our failure to comply with
contractual requirements and/or guidelines in our client relationships, which
could result in losses that the client could seek to recover from us and in the
client withdrawing its assets from our management; (6) the competitive pressures
on the management fees we charge; (7) our failure to comply with various
government regulations such as the Investment Advisers Act and the Investment
Company Act of 1940 and other federal and state securities laws that impose
numerous obligations on investment firms and the Securities Exchange Act of 1934
and other federal and state securities laws and the rules of National
Association of Securities Dealers that impose numerous obligations on our broker
dealer Nuveen Investments, LLC where the failure to comply with such
requirements could cause the SEC to institute proceedings against our investment
advisers and/or broker dealer and impose sanctions ranging from censure and
fines to termination of an investment adviser or broker dealer's registration
and otherwise prohibiting an adviser from serving as an adviser; (8) our
reliance on revenues from investment management contracts that are subject to
annual renewal by the independent board of trustees overseeing the related funds
according to their terms; (9) loss of key employees that could lead to loss of
assets; (10) burdensome regulatory developments; (11) the impact of recent
accounting pronouncements; and (12) unforeseen developments in litigation
involving the securities industry.
19
PART I. FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARCH 31, 2003
MARKET RISK
In addition to the various risks previously discussed in this report, we are
exposed to market risk from changes in interest rates, which may adversely
affect our results of operations and financial condition. In the past, we were
exposed to this risk primarily in our fixed-income defined portfolio inventory
and, at times, sought to minimize the risks from these interest rate
fluctuations through the use of derivative financial instruments. As a result of
our decision to discontinue our defined portfolio product line, we no longer
regularly purchase and hold for resale municipal securities and defined
portfolio units. Therefore, it is no longer necessary to utilize futures
contracts to minimize risk. Correspondingly, there were no open derivative
financial instruments at March 31, 2003.
We invest in short-term debt instruments, classified as "Cash and cash
equivalents" on our consolidated balance sheets. The investments are treated as
collateralized financing transactions and are carried at the amounts at which
they will be subsequently resold, including accrued interest. We also invest in
certain Company-sponsored managed investment funds that invest in a variety of
asset classes.
We do not believe that the effect of any reasonably likely near-term changes in
interest rates would be material to our financial position, results of
operations or cash flows.
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the filing of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chairman and Chief Executive Officer,
President, and Senior Vice President, Finance, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Company's
Chairman and Chief Executive Officer, President, and Senior Vice President,
Finance concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) required to be included in the
Company's periodic SEC filings. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date the Company carried out its evaluation.
20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Certain of the following exhibits, as indicated
parenthetically, were previously filed as exhibits to
registration statements or reports filed by the Company with
the Commission and are incorporated herein by reference to
such statements or reports and made a part hereof. Exhibit
numbers which are identified with an asterisk (*) have such
documents filed herewith.
3.1 Restated Certificate of Incorporation of the Company
(Exhibit 3.1 to Registration Statement on Form S-1
filed on April 2, 1992, File No. 33-46922).
3.2 Certificate of Designations, Preferences and Rights
of 5% Cumulative Convertible Preferred Stock of the
Company (Exhibit 3.1(a) to the Company's Form 10-Q
for quarter ended September 30, 2000).
3.3 Amendment to Restated Certificate of Incorporation of
the Company (Exhibit 3.1(b) to the Company's Form
10-K for year ended December 31, 2002).
3.4 Certificate of Ownership and Merger (Exhibit 3.1(c)
to the Company's Form 10-K for year ended December
31, 2002).
3.5 Amended and Restated By-Laws of the Company (Exhibit
3.2 to the Company's Form 10-K for year ended
December 31, 1993, File No. 1-11123).
21
10.1* Investment Management Agreement and Expense
Reimbursement Agreement between Nuveen Preferred and
Convertible Income Fund and Nuveen Institutional
Advisory Corp.
10.2* Investment Sub-Advisory Agreement between Nuveen
Institutional Advisory Corp., as investment manager
of Nuveen Preferred and Convertible Income Fund, and
Spectrum Asset Management, Inc.
10.3* Investment Sub-Advisory Agreement between Nuveen
Institutional Advisory Corp., as investment manager
of Nuveen Preferred and Convertible Income Fund, and
Froley, Revy Investment Co., Inc.
10.4* Amendment to Acquisition Agreement, by and among the
Company, Barra, Inc., Symphony Asset Management,
Inc., Maestro, LLC, Symphony Asset Management, LLC,
Praveen K. Gottipalli, Michael J. Henman, Neil L.
Rudolph and Jeffrey L. Skelton.
99.1* Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.2* Certification of Principal Financial and Accounting
Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
b) Reports on Form 8-K
On January 22, 2003, a report on Form 8-K relating to the
Company's January 22, 2003 press release was filed with the
Securities and Exchange Commission. The press release
announced both the Company's fourth quarter and 2002 earnings
results as well as the fact that the Company had changed its
name from "The John Nuveen Company" to "Nuveen Investments,
Inc." effective January 31, 2003.
On April 16, 2003, a report on Form 8-K relating to the
Company's April 15, 2003 press release was filed with the
Securities and Exchange Commission. The press release
announced the Company's first quarter 2003 earnings results.
22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NUVEEN INVESTMENTS, INC.
(Registrant)
DATE: May 15, 2003 By /s/ John P. Amboian
----------------------
John P. Amboian
President
DATE: May 15, 2003 By /s/ Margaret E. Wilson
-------------------------
Margaret E. Wilson
Senior Vice President, Finance
(Principal Financial and Accounting Officer)
23
CERTIFICATIONS
I, Timothy R. Schwertfeger, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Nuveen
Investments, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Timothy R. Schwertfeger
----------------------------------
Name: Timothy R. Schwertfeger
Title: Chief Executive Officer
I, John P. Amboian, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Nuveen
Investments, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ John P. Amboian
------------------------------
Name: John P. Amboian
Title: President
I, Margaret E. Wilson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Nuveen
Investments, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Margaret E. Wilson
-----------------------------------
Name: Margaret E. Wilson
Title: Senior Vice President, Finance
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.1 Investment Management Agreement and Expense Reimbursement
Agreement between Nuveen Preferred and Convertible Income
Fund and Nuveen Institutional Advisory Corp.
10.2 Investment Sub-Advisory Agreement between Nuveen
Institutional Advisory Corp., as investment manager of Nuveen
Preferred and Convertible Income Fund, and Spectrum Asset
Management, Inc.
10.3 Investment Sub-Advisory Agreement between Nuveen
Institutional Advisory Corp., as investment manager of Nuveen
Preferred and Convertible Income Fund, and Froley, Revy
Investment Co., Inc.
10.4 Amendment to Acquisition Agreement, by and among the Company,
Barra, Inc., Symphony Asset Management, Inc., Maestro, LLC,
Symphony Asset Management, LLC, Praveen K. Gottipalli,
Michael J. Henman, Neil L. Rudolph and Jeffrey L. Skelton.
99.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
99.2 Certification of Principal Financial and Accounting Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
E-1