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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
Commission file number 1-11123
NUVEEN INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3817266
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 WEST WACKER DRIVE 60606
CHICAGO, ILLINOIS (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 312-917-7700
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, $.01 par value New York Stock Exchange
(Title of Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None.
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 if the Act.)
Yes [X] No[ ]
The aggregate market value of the outstanding Common Stock held by
non-affiliates of the Registrant as of June 30, 2003 was $491,697,799. This
calculation does not reflect a determination that persons are affiliates for any
other purposes.
The number of shares of the Registrant's Common Stock outstanding at March
4, 2004 was 93,033,690 consisting of 19,708,476 shares of Class A Common Stock,
$.01 par value, and 73,325,214 shares of Class B Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 2003 are incorporated by reference into Parts II and IV of
this report. Portions of Registrant's Proxy Statement relating to the annual
meeting of stockholders to be held May 14, 2004 are incorporated by reference
into Part III of this report.
PART I
ITEM I. BUSINESS
GENERAL
The principal businesses of Nuveen Investments, Inc. ("The Company" or "We" or
"Our" where applicable) 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 closed-end
exchange-traded funds, mutual funds and individually managed accounts, to
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 to several institutional market
segments and channels.
The Company and its subsidiaries offer core investment capabilities through four
branded investment teams: Rittenhouse growth, NWQ value, Nuveen fixed income and
Symphony alternative investments.
Operations of the Company are organized around its principal advisory
subsidiaries, which are registered investment advisers under The Investment
Advisers Act of 1940. Nuveen Advisory Corp. ("NAC") and Nuveen Institutional
Advisory Corp. ("NIAC") manage various Nuveen mutual funds and exchange-traded
funds; and Nuveen Asset Management Inc. ("NAM"), Rittenhouse Asset Management,
Inc. ("Rittenhouse"), NWQ Investment Management Company, LLC ("NWQ") and
Symphony Asset Management LLC ("Symphony") principally provide investment
management services for individual and institutional managed accounts.
Additionally, Nuveen Investments, LLC, a registered broker and dealer in
securities under The Securities Exchange Act of 1934, provides investment
product distribution and related services for the Company's managed funds and,
through March of 2002, sponsored and distributed the Company's defined
portfolios (unit investment trusts).
COMPANY HISTORY AND ACQUISITIONS
The Company, headquartered in Chicago, is the successor to a business formed in
1898 by Mr. John Nuveen, which served as an underwriter and trader of municipal
bonds. This core business was augmented in 1961 when the Company developed and
introduced its first municipal defined portfolio, which is a fixed portfolio of
municipal securities selected and purchased by the Company and deposited in a
trust. The Company introduced its first municipal mutual fund in 1976, its first
municipal money market fund in 1981, and its first municipal exchange-traded
fund in 1987. The Company began providing individual managed account services to
investors in early 1995, sponsored its first equity mutual fund in 1996 and
offered its first equity defined portfolio in 1997.
On January 2, 1997, the Company completed the acquisition of Flagship Resources
Inc. ("Flagship") and its wholly-owned subsidiaries, Flagship Financial Inc. and
Flagship Funds Inc. Flagship managed both municipal mutual funds and municipal
managed accounts for individual investors. Upon the completion of the
acquisition, Flagship Financial Inc. became a wholly owned subsidiary of the
Company and changed its name to Nuveen Asset Management Inc. Flagship Funds Inc.
was combined into the Company's broker-dealer subsidiary.
On August 31, 1997, the Company completed the acquisition of all of the
outstanding stock of Rittenhouse, which specializes in managing individual
equity and balanced portfolios primarily for high-net-worth individuals served
by financial advisors.
During 1999, the Company expanded its product line by introducing products
comprised of senior secured corporate floating rate loans. On September 17,
1999, the Company completed the sale of its investment banking business to US
Bancorp Piper Jaffray. In conjunction with the sale, the Company ceased
underwriting and distributing municipal and corporate bonds or serving as
remarketing agent for variable rate bonds.
On July 16, 2001, the Company completed the acquisition of Symphony Asset
Management, LLC. Symphony is an institutional investment manager based in San
Francisco. As a result of the acquisition, the Company's product offerings have
expanded to include alternative investments designed to reduce risk through
market-neutral and other strategies in several equity and fixed-income asset
classes.
1
In the first quarter of 2002, the Company exited the defined portfolio product
line. As a result, the Company no longer creates and distributes new defined
portfolios. Defined portfolios previously sponsored by the Company that are
still outstanding continue to be administered by the Company.
On August 1, 2002, the Company completed the acquisition of NWQ Investment
Management, an asset management firm that specializes in value-oriented equity
investments with significant relationships among institutions and financial
advisors serving high-net-worth investors.
The Company was incorporated in the State of Delaware on March 23, 1992, as a
wholly-owned subsidiary of The St. Paul Companies, Inc. ("St. Paul"). John
Nuveen & Co. Incorporated, the predecessor of the Company (now named Nuveen
Investments, LLC), had been a wholly-owned subsidiary of St. Paul since 1974.
During 1992, St. Paul sold a portion of its ownership interest in the Company
through a public offering. As of the date of this report, St. Paul owns
approximately 79% of the outstanding voting securities of the Company. On
November 17, 2003, St. Paul announced that it had entered into a merger
agreement with Travelers Property Casualty Corp. ("Travelers") pursuant to which
the businesses of St. Paul and Travelers would be combined. Upon consummation of
the merger, the stockholders of Travelers will become stockholders of St. Paul,
which will change its name to the St. Paul Travelers Companies, Inc. and will
continue to own approximately a 79% equity interest in the Company.
LINES OF BUSINESS
We derive substantially all of our revenues from providing investment advisory,
investment management, distribution and administration services to our family of
funds and high-net-worth and institutional investors. This is our main business
activity and only operating segment.
The following series of tables, including Gross Sales of Investment Products,
Net Flows, and Net Assets Under Management provide data that should be helpful
in understanding the Company's business and should be referred to while reading
the separate discussions that follow the tables.
GROSS SALES OF INVESTMENT PRODUCTS
The following table summarizes gross sales for the Company's products for the
past three years, including managed assets and defined portfolios.
GROSS SALES OF INVESTMENT PRODUCTS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------------------------
2003 2002 2001
---- ---- ----
Managed Accounts:
Retail $ 7,943,426 $ 5,692,870 $ 6,882,639
Institutional 2,335,561 1,346,652 687,078
-------------- ------------- --------------
Total 10,278,987 7,039,522 7,569,717
Mutual Funds:
Municipal 1,428,389 1,365,144 982,323
Equity and Income 107,347 147,606 263,378
-------------- ------------- --------------
Total 1,535,736 1,512,750 1,245,701
Exchange-Traded Funds:
Common Shares 4,104,778 4,689,477 2,763,778
Preferred Shares 2,178,623 2,158,668 1,173,606
-------------- ------------- --------------
Total 6,283,401 6,848,145 3,937,384
-------------- ------------- --------------
Total Managed Assets 18,098,124 15,400,417 12,752,802
Defined Portfolio Sales - 194,117 1,481,040
-------------- ------------- --------------
Total Sales $ 18,098,124 $ 15,594,534 $ 14,233,842
============== ============= ==============
2
NET FLOWS OF INVESTMENT PRODUCTS
The following table summarizes net flows (equal to sales, reinvestments and
exchanges less redemptions) for the Company's products for the past three years.
NET FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------------------------
2003 2002 2001
---- ---- ----
Managed Accounts:
Retail $ 2,921,607 $ 343,314 $ 3,127,157
Institutional (20,835) (281,361) (1,070,021)
------------- ------------- -------------
Total 2,900,772 61,953 2,057,136
Mutual Funds:
Municipal 372,709 666,192 432,443
Equity and Income (140,007) (488,663) (185,104)
------------- ------------- -------------
Total 232,702 177,529 247,339
Exchange-Traded Funds 6,304,661 6,868,361 3,954,632
------------- ------------- -------------
Total Managed Assets 9,438,135 7,107,843 6,259,107
Defined Portfolios - 194,117 1,481,040
------------- ------------- -------------
Total $ 9,438,135 $ 7,301,960 $ 7,740,147
============= ============= =============
NET ASSETS UNDER MANAGEMENT
The following table shows net assets managed by the Company at December 31 for
each of the past three years. Defined portfolio assets under surveillance are
not included in net assets under management since the portfolios are not
actively managed and generally generate up-front distribution revenues rather
than ongoing advisory fees.
NET ASSETS UNDER MANAGEMENT
(IN MILLIONS)
DECEMBER 31,
-----------------------------------
2003 2002 2001
---- ---- ----
Managed Accounts:
Retail $ 25,676 $ 19,403 $ 18,959
Institutional 10,301 8,523 5,712
--------- --------- ---------
Total 35,977 27,926 24,671
Mutual Funds:
Municipal 11,101 10,759 9,834
Equity and Income 1,184 1,090 1,980
--------- --------- ---------
Total 12,285 11,849 11,814
Exchange-Traded Funds 47,094 39,944 32,000
--------- --------- ---------
Total Managed Assets $ 95,356 $ 79,719 $ 68,485
========= ========= =========
3
ASSET MANAGEMENT
INVESTMENT CAPABILITIES OVERVIEW
The Company, through its advisory subsidiaries, offers four core investment
styles: growth equities through Rittenhouse, value equities through NWQ, fixed
income through Nuveen and hedged alternative investments through Symphony.
Within these core investment styles, the Company sponsors several product
alternatives including separately managed accounts, closed-end exchange-traded
funds and open-end mutual funds. In its capacity as an adviser, the Company is
responsible for the execution of the investment policies of the various funds or
managed accounts it advises. Investment decisions for each fund or account are
made by the portfolio manager responsible for the fund or managed account.
Our Rittenhouse portfolio team follows a core growth stock strategy that centers
generally on identifying large capitalization companies that are financially
strong, are global leaders in their industries and generally have demonstrated
consistent and predictable above-average long-term growth in earnings and, if
applicable, in dividends. Our NWQ portfolio team specializes in value-oriented
equity investments with a philosophy of investing in undervalued companies with
identified catalysts to improve profitability and/or unlock value. Symphony's
hedged alternative investment disciplines are designed to reduce the systematic
risk of investing in several equity and fixed-income asset classes with the goal
of producing positive returns regardless of broad market direction. Our Nuveen
fixed income style concentrates primarily on the research, selection, and
management of municipal bond portfolios with the goal of generating attractive
current income. The Company also offers investment products in a variety of
taxable fixed income styles including preferred securities, convertible bonds,
real estate investment trusts ("REITs"), senior loans and emerging market debt.
Several of these styles provide access to other specialized unaffiliated
investment managers through sub-advisory arrangements.
The Company has traditionally had a very low employment turnover rate for its
portfolio managers. The majority of the Company's portfolio managers, as well as
those employed by sub-advisers, have devoted most of their professional careers
to the analysis, selection and surveillance of the types of securities held in
the funds or accounts they manage.
SPONSORED PRODUCTS
The Company provides tailored investment management services for individuals and
institutions (managed accounts). Managed accounts are customized portfolios of
stocks and bonds that offer investors a degree of tax planning flexibility and
greater transparency than traditional mutual funds. Our managed account
offerings include large-cap growth and value accounts, small-cap and mid-cap
value accounts, international equity accounts, blends of stocks and bonds and
market-neutral and fixed income accounts. Accounts managed by Symphony include
privately offered hedge funds. Symphony offers both directional and
market-neutral hedge-fund portfolios across different asset classes: Large Cap
U.S. Equities, Small Cap U.S. Equities, Convertible-bond Arbitrage, Credit
Arbitrage and Senior Loans. Portfolios are managed through privately offered
on-shore limited partnerships, off-shore funds, and separately managed accounts.
Some separate accounts, partnerships, and funds employ investment leverage. In
addition, some clients may choose to overlay Symphony's strategies with futures
contracts. At December 31, 2003, Rittenhouse, NAM, NWQ and Symphony managed 33%,
23%, 37% and 7% of these assets, respectively. Rittenhouse and NWQ manage
accounts on both a discretionary and non-discretionary basis, while NAM and
Symphony accounts are managed on a discretionary basis.
As of December 31, 2003, the Company sponsored 106 closed-end exchange-traded
funds that are actively managed. Of these funds, 98 funds invest exclusively in
municipal securities. Of the remaining eight funds, one invests in senior loans,
one invests in REITs, one invests in a blend of fixed income and equity
strategies, two invest in preferred and convertible securities and three invest
solely in preferred securities. Close-end exchange-traded funds do not
continually offer to sell and redeem their shares. Rather, daily liquidity is
provided by the ability to trade the shares of these funds on the New York or
American Stock Exchange, at prices that may be above or below the shares' net
asset value. The municipal exchange-traded funds include insured and uninsured
national and single-state funds. Most of the municipal exchange-traded funds
have a "leveraged" capital structure through the issuance of both common and
preferred stock offerings. The dividends paid to preferred shareholders are
based on short-term tax-free interest rates, while the proceeds from the
issuance of preferred shares are invested by the funds in longer-term municipal
securities, which is designed to generate additional dividend potential for the
common shareholders based on historical differences between short-term and
long-term interest rates. The exchange-traded funds that invest in senior loans,
REITs, fixed income and equity strategies, preferred and convertible securities
and preferred securities also have a leveraged capital
4
structure. If the preferred stock dividend rate were to exceed the net rate of
return earned by a fund's investment portfolio for an extended period, the
exchange-traded fund's Board of Directors may consider redeeming the outstanding
preferred stock. In addition, the Fund Board may consider converting a fund from
its exchange-traded status into an open-end fund if the fund persistently trades
on the stock exchange at deep discounts to its net asset value per share. Either
of these situations may negatively affect total assets under management.
As of December 31, 2003, the Company offered 36 equity, balanced and municipal
open-end mutual funds. These funds are actively managed and continuously offer
to sell their shares at prices based on the daily net asset values of their
portfolios. Daily redemption at net asset value is offered by all 36 funds. The
investment objectives and asset mixes of the mutual funds vary; however, most
are managed with a view towards reduced risk and tax efficient results for the
investor. During 2003, we closed the Nuveen Floating Rate Fund, merged the
Nuveen European Value Fund into the Nuveen NWQ International Value Fund and
merged the Nuveen Innovation Fund into the Nuveen Rittenhouse Growth Fund.
Of the 36 funds noted above, the Company offers 30 national and state-specific
municipal mutual funds that invest substantially all of their assets in
diversified portfolios of limited-term, intermediate-term or long-term municipal
bonds. The Company offers 6 mutual funds that invest exclusively in U.S.
equities, international equities, or in portfolios combining equity with taxable
fixed-income or municipal securities.
The relative attractiveness of the Company's mutual funds and exchange-traded
funds to investors depends upon many factors, including current and expected
market conditions, the performance histories of the funds, their current yields
and the availability of viable alternatives, and the level of continued
participation by the unaffiliated, third party firms that distribute the
Company's funds to their customers.
The assets under management of managed accounts, mutual funds and
exchange-traded funds are affected by changes in the market values of these
assets. Changing market conditions may cause positive or negative shifts in
valuation, and subsequently in the advisory fees earned from these assets.
ADVISORY FEES
The Company provides investment management services to funds, accounts and
portfolios pursuant to investment management agreements. With respect to managed
accounts, Rittenhouse, NAM, Symphony, and NWQ generally receive fees, on a
quarterly basis, based on the value of the assets managed on a particular date,
such as the first or last calendar day of a quarter, or on the average asset
value for the period. Symphony also receives incentive fees earned on certain
institutional accounts and hedge funds based on the performance of the accounts.
With respect to mutual funds and exchange-traded funds, the Company receives
fees based either on each fund's average daily net assets or on a combination of
the average daily net assets and gross interest income.
Pursuant to sub-advisory agreements with NIAC, Institutional Capital Corporation
("ICAP") performs portfolio management services on behalf of three of the
equity-based mutual funds, Security Capital Research & Management Incorporated
("SC") performs portfolio management services for our REIT exchange-traded fund
and diversified dividend and income exchange-traded fund, Wellington Management
Company, LLP ("WM") performs portfolio management services for the diversified
dividend and income exchange-traded fund, Spectrum Asset Management, Inc. ("SM")
performs portfolio management services for the three preferred securities
exchange-traded funds and two preferred and convertible income exchange-traded
funds and Froley, Revy Investment Co., Inc. ("FR") performs portfolio management
services for the two preferred and convertible income exchange-traded funds. The
Company has a 20% minority equity ownership interest in ICAP, but has no equity
ownership interest in SC, WM, SM or FR.
5
Advisory fees, net of sub-advisory fees and expense reimbursements, earned on
managed assets for each of the past three years are shown in the following
table:
MANAGED ASSETS - INVESTMENT ADVISORY FEES
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------------------
2003 2002 2001
---- ---- ----
Managed account advisory fees $ 122,961 $ 104,480 $ 97,956
Exchange-traded fund advisory fees 220,701 191,567 174,543
Mutual fund advisory fees 61,612 60,449 58,677
Less: reimbursed expenses (427) (1,020) (1,662)
----------- ----------- -----------
Net advisory fees 61,185 59,429 57,015
Money market fund advisory fees -- -- 1,177
Less: reimbursed expenses -- -- (103)
----------- ----------- -----------
Net advisory fees 1,074
Total $ 404,847 $ 355,476 $ 330,588
=========== =========== ===========
The Company's advisory fee schedules currently provide for maximum annual fees
ranging from .45% to .60% in the case of the municipal mutual funds and .75% to
1.05% in the case of the equity and taxable income mutual funds. Maximum fees in
the case of the exchange-traded funds currently range from .35% to .90% of total
net assets, except with respect to the five exchange-traded select portfolios.
The investment management agreements for the exchange-traded select portfolios
provide for annual advisory fees ranging from .25% to .30%. Additionally, for
fifty-three funds offered since 1999, the investment management agreement
specifies that for the first five years the Company will waive management fees
or reimburse other expenses. The investment management agreement provides for
waived management fees or reimbursements of other expenses ranging from .30% to
..45% for the first five years. In each case, the management fee schedules
provide for reductions in the fee rate at increased asset levels. For the
separately managed accounts, fees are negotiated and are based primarily on
asset size, portfolio complexity and individual needs. These fees can range from
0.17% to 1.18% of net asset value annually, with the majority of the assets
falling between 0.27% to 0.60%.
The Company, through its Symphony subsidiary, earns performance fees for
performance above specifically defined benchmarks. These fees are recognized
only at the performance measurement date contained in the individual account
management agreement. The underlying measurement dates for approximately 79% of
investors' capital fall in the second half of the year.
The Company pays ICAP, SC, WM, SM and FR a portfolio advisory fee for
sub-advisory services. The sub-advisory fees are based on the percentage of the
aggregate amount of average daily net assets in the funds they sub-advise. The
fee schedules provide for rate declines when specified asset levels are reached.
INVESTMENT MANAGEMENT AGREEMENTS
Each managed fund has entered into an investment management agreement with NAC
or NIAC (each, an "Adviser"). Although the specific terms of each agreement
vary, the basic terms are similar. Pursuant to the agreements, the Adviser
provides overall management services to each of the funds, subject to the
supervision of each fund's Board of Directors and in accordance with each fund's
investment objectives and policies. The investment management agreements are
approved initially by fund shareholders and their continuance must be approved
annually by the directors of the respective funds, including a majority of the
directors who are not "interested persons" of the Adviser, as defined in the
Investment Company Act of 1940. Amendments to such agreements typically must be
approved by fund shareholders. Each agreement may be terminated without penalty
by either party upon 60 days written notice, and terminates automatically upon
its assignment (as defined in the Investment Company Act of 1940). Such an
"assignment" will take
6
place in the event of a change in control of the Adviser. Under the Investment
Company Act of 1940, a change in control of the Adviser would be deemed to occur
in the event of certain changes in the ownership of the Company's voting stock.
The termination of all or a portion of the investment management agreements, for
any reason, could have a material adverse effect on the Company's business and
results of operations.
Each fund bears all expenses associated with its operations, including the costs
associated with the issuance and redemption of securities, where applicable. The
fund does not bear compensation expenses of directors and officers of the fund
who are employed by the Company or its subsidiaries. Some of the Company's
investment management agreements provide that, to the extent certain enumerated
expenses exceed a specified percentage of a fund's or a portfolio's average net
assets for a given year, the Adviser will absorb such excess through a reduction
in the management fee and, if necessary, pay such expenses so that the
year-to-date net expense will not exceed the specified percentage. In addition,
the Company may voluntarily waive all or a portion of its advisory fee from a
fund, and/or reimburse expenses, for competitive reasons. Reimbursed expenses
for mutual funds, including voluntary waivers, totaled $0.4 million during the
year ended December 31, 2003. The Company expects to continue voluntary waivers
at its discretion. The amount of such waivers may be more or less than
historical amounts.
Services provided by Rittenhouse, NAM, Symphony, and NWQ to each of the
individual accounts are also governed by management contracts, which are
customized to suit a particular account. A majority of these contracts and of
Rittenhouse's, NAM's and NWQ's assets under management involve investment
management services provided to clients who are participants in "wrap-fee"
programs sponsored by unaffiliated investment advisers or broker/dealers. Such
agreements, and the other investment agreements to which Rittenhouse, NWQ and
NAM are parties, generally provide that they can be terminated without penalty
upon written notice by either party within any specified period. Under the
provisions of the Investment Advisers Act of 1940, such investment management
agreements may not be assigned to another manager without the client's consent.
The term "assignment" is broadly defined under this Act to include any direct or
indirect transfer of the contract or of a controlling block of the adviser's
stock by a security holder.
OVERVIEW OF DISTRIBUTION AND RELATIONSHIPS WITH DISTRIBUTORS
The Company distributes its investment products and services, including
separately managed accounts, exchange-traded funds and mutual funds, through
registered representatives associated with unaffiliated national and regional
broker/dealers, commercial banks and thrifts, broker/dealer affiliates of
insurance agencies and independent insurance dealers, financial planners,
accountants, and tax consultants ("retail distribution firms") and through
unaffiliated consultants serving the institutional market. The Company also
provides investment products and services directly to institutional markets. The
Company's distribution strategy is to maximize the liquidity and distribution
potential of its investment products by maintaining strong relationships with a
broad array of registered representatives and independent advisors and
consultants. The Company has well-established relationships with registered
representatives in retail distribution firms throughout the country. These
registered representatives participate to varying degrees in the Company's
marketing programs, depending upon: their interests in distributing investments
provided by the Company; their perceptions of the relative attractiveness of the
Company's managed funds and accounts; the profiles of their customers and their
clients' needs; and the conditions prevalent in financial markets. Registered
representatives may reduce or eliminate their involvement in marketing the
Company's products at any time, or may elect to emphasize the investment
products of competing sponsors, or the proprietary products of their own firms.
Registered representatives may receive compensation incentives to sell their
firm's investment products or may choose to recommend to their customers
investment products sponsored by firms other than the Company. This decision may
be based on such considerations as investment performance, types and amount of
distribution compensation, sales assistance and administrative service payments
and level and quality of customer service. In addition, a registered
representative's ability to distribute the Company's mutual funds is subject to
the continuation of a selling agreement between the firm with which the
representative is affiliated and the Company. A selling agreement does not
obligate the retail distribution firm to sell any specific amount of products
and typically can be terminated by either party upon 60 days notice. Redeemable
managed assets (consisting of managed accounts and open-end mutual funds) held
in accounts at Merrill Lynch produced 9% of consolidated operating revenue in
2003, the largest percentage of any of our distribution firms.
The Company employs external and internal sales and service professionals who
work closely with intermediary distribution partner firms and consultants to
offer customized solutions for high-net-worth and institutional investors. These
professionals regularly meet with independent advisors and consultants, who
distribute the Company's products, to help them develop investment portfolio and
risk-management strategies designed around the core elements of a diversified
portfolio. The Company also employs several professionals who provide education
and training to the same
7
independent advisors and consultants. These professionals offer expertise and
guidance on a number of topics including wealth management strategies, practice
management development, asset allocation and portfolio construction.
DISTRIBUTION REVENUE
As part of the Company's asset management business, the Company earns revenue
upon the distribution of the Company's mutual funds and upon the public offering
of new closed-end exchange-traded funds. The Company does not earn distribution
revenue upon the establishment of individual or institutional managed accounts.
Common shares of the exchange-traded funds are initially sold to the public in
offerings that are underwritten by a syndication group, including the Company,
through our Nuveen Investments, LLC broker-dealer. Underwriting fees earned are
dependent upon our level of participation in the syndicate. During the year
ended December 31, 2003, there were four new exchange-traded fund offerings.
All of the Company's mutual funds have adopted a Flexible Sales Charge Program
that provides investors with alternative ways of purchasing fund shares based
upon their individual needs and preferences.
Class A shares may be purchased at a price equal to the fund's net asset value
plus an up-front sales charge ranging from 2.5% of the public offering price for
limited-term municipal funds to 5.75% for equity funds. At the maximum sales
charge level, approximately 90% to 95% of the sales charge is typically
reallowed as concessions to retail distribution firms. From time to time, the
Company may reallow all of the sales charge to retail distribution firms or
waive the sales charge and advance a sales commission to such firms in
connection with marketing programs or special promotions. Additionally,
purchases of Class A shares that equal or exceed $1 million may be made without
an up-front sales charge, but are subject to a Contingent Deferred Sales Charge
("CDSC") ranging from .50% to 1% for shares redeemed within 18 months. In order
to compensate retail distribution firms for Class A share sales that are $1
million or greater, the Company advances a sales commission ranging from .50% to
1% at the time of sale. Class A shares are also subject to an annual Rule 12b-1
service fee of between .20% and .25% of assets, which is used to compensate
securities dealers for providing ongoing financial advice and other services to
investors.
Class B shares may be purchased at a price equal to the fund's net asset value
without an up-front sales charge. Class B shares are subject to an annual Rule
12b-1 distribution fee of .75% of assets to compensate the Company for costs
incurred in connection with the sale of such shares, an annual Rule 12b-1
service fee of between .20% and .25% of assets for the ongoing services of
securities dealers and a CDSC, which declines from 5% to 1%, for shares redeemed
within a period of 5 or 6 years. The Company compensates retail distribution
firms for sales of Class B shares at the time of sale at the rate of 4% of the
amount of Class B shares sold, which represents a sales commission plus an
advance of the first year's annual Rule 12b-1 service fee. Class B shares
convert to Class A shares after they are held for eight years.
Class C shares may be purchased without an up-front sales charge at a price
equal to the fund's net asset value. However, these shares are subject to an
annual Rule 12b-1 distribution fee of .35% to .75% of assets designed to
compensate securities dealers over time for the sale of the fund shares, an
annual Rule 12b-1 service fee of between .20% and .25% of assets used to
compensate securities dealers for providing continuing financial advice and
other services and a 1% CDSC for shares redeemed within 12 months of purchase.
In addition, the Company advances a 1% sales commission to retail distribution
firms at the time of sale and, in return, receives the first year's Rule 12b-1
distribution fee and Rule 12b-1 service fee.
Class R shares are available for purchase at a price equal to the fund's net
asset value with no ongoing fees or CDSCs. These shares are available primarily
to clients of fee-based advisers, wrap programs and others under certain limited
circumstances.
The markets for mutual funds are highly competitive, with many participating
sponsors. Based upon the information available, the Company believes that it
held much less than a 5% share of the market with respect to net sales of mutual
funds and money market funds in each of the last three years.
8
DEFINED PORTFOLIOS
OVERVIEW
Prior to discontinuing this business in the first quarter of 2002, the Company
was a major sponsor of defined portfolios (unit investment trusts). Each defined
portfolio consists of a fixed portfolio of securities selected and purchased by
the sponsor and deposited in a trust. The trustee of the portfolio is not
affiliated with the Company. Units of undivided beneficial interests in the
portfolio are sold to investors at a price equal to the per unit market price of
the securities deposited in the trust plus a sales charge. Defined portfolios
are not actively managed after the initial deposit. New securities are not added
to municipal defined portfolios after the date of deposit, and may be exchanged
or substituted only under extremely limited circumstances. Securities from the
portfolios can only be sold pursuant to the Company's monitoring program or for
the purpose of raising cash to pay for units that have been redeemed. The
proceeds of any security sales must be distributed to unit holders.
Although the Company no longer creates and distributes new defined portfolios,
accepts deposits into existing portfolios or maintains a secondary market for
sponsored portfolios, it has continued to maintain and administer previously
distributed defined portfolios. At December 31, 2003, 1,872 municipal trusts
sponsored by the Company were outstanding with an aggregate market value of $4.3
billion and 116 equity and taxable fixed-income trusts sponsored by the Company
were outstanding with an aggregate market value of $0.6 billion.
DEFINED PORTFOLIO DISTRIBUTION REVENUE
Units of the Company's sponsored defined portfolios were sold to the public
through financial advisors. For these sales, the Company earned a sales charge
based on the public offering price of the units sold. The Company's distribution
revenues include the sales charge, less an applicable concession to the
distributor firm through which the units were placed. For certain equity trusts,
the Company received a deferred sales charge over a period of months following
the initial sale date.
The Company maintained a secondary market for some of the defined portfolios it
sponsored. For transactions in the secondary market, the Company earned a sales
charge less a concession reallowed to dealers. The Company, like any other
unitholder, could also tender units it held to the defined portfolio trustee for
redemption at their redemption value. The sales charges for fixed income defined
portfolios in the secondary market were established based on the number of years
remaining to maturity.
The following table shows the Company's defined portfolio distribution revenues
during each of the last three years:
DEFINED PORTFOLIO DISTRIBUTION REVENUES
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
------------------------------------
2003 2002 2001
--------- --------- ---------
Distribution Revenues:
Primary - Municipal $ - $ 1,529 $ 9,118
Primary - Equity and Income - 425 1,477
Secondary - 644 2,506
--------- --------- ---------
Total $ - $ 2,958 $ 13,101
========= ========= =========
9
GENERAL BUSINESS DISCUSSIONS
ADVERTISING AND PROMOTION
The Company provides individual registered representatives with daily prices,
weekly, monthly and quarterly sales bulletins, monthly product statistical and
performance updates, product education programs, product training seminars, and
promotional programs coordinated with its advertising campaigns. In addition,
the Company regularly coordinates its marketing and promotional efforts with
individual registered representatives. The Company also augments its marketing
efforts through magazine, newspaper and television advertising, targeted direct
mail and telemarketing sales programs and sponsorship of certain sports and
civic activities.
EMPLOYEES
At December 31, 2003, the Company had 627 full-time employees. Employees are
compensated with a combination of salary, cash bonus and fringe benefits. In
addition, the Company has sought to retain its key and senior employees through
competitive compensation arrangements, which include equity-based incentive
awards. The Company considers its relations with its employees to be good.
COMPETITION
The Company is subject to substantial competition in all aspects of its
business. The registered representatives that distribute the Company's
investment products also distribute numerous competing products, often including
products sponsored by the retail distribution firms where they are employed.
There are relatively few barriers to entry for new investment management firms.
The Company's managed account business is also subject to substantial
competition from other investment management firms seeking to be approved as
managers in the various "wrap-fee" programs. The sponsor firms have a limited
number of approved managers at the highest and most attractive levels of their
programs and closely monitor the investment performance of such firms on an
on-going basis as they evaluate which firms are eligible for continued
participation in these programs. The Company is also subject to competition in
obtaining the commitment of underwriters to underwrite its exchange-traded fund
offerings. To the extent the increased competition for underwriting and
distribution causes higher distribution costs, the Company's net revenue and
earnings will be reduced. Investment products are sold to the public by
broker/dealers, banks, insurance companies and others, and many competing
investment product sponsors offer a broader array of investment products. Many
of these institutions have substantially greater resources than the Company. In
addition, continuing consolidation in the financial services industry is
altering the landscape in which the Company's distributors compete and the
economics of many of the products they offer. The effect that these continuing
changes in the brokerage and investment management industries will have on the
Company and its competitors cannot be predicted. The Company competes with other
providers of products primarily on the basis of the range of products offered,
the investment performance of such products, quality of service, fees charged,
the level and type of broker compensation, the manner in which such products are
marketed and distributed, and the services provided to registered
representatives and investors.
REGULATORY
Nuveen Investments, LLC is registered as a broker/dealer under the Securities
Exchange Act of 1934 and is subject to regulation by the Securities and Exchange
Commission (the "SEC"), the NASD Regulation, Inc. and other federal and state
agencies and self-regulatory organizations. Nuveen Investments, LLC is subject
to the SEC's Uniform Net Capital Rule, designed to enforce minimum standards
regarding the general financial condition and liquidity of a broker/dealer.
Under certain circumstances, this rule may limit the ability of the Company to
make withdrawals of capital and receive dividends from Nuveen Investments, LLC.
Nuveen Investments, LLC's regulatory net capital has consistently exceeded such
minimum net capital requirements. At December 31, 2003, Nuveen Investments, LLC
had aggregate net capital, as defined, of approximately $14.8 million, which
exceeded the regulatory minimum by approximately $12.8 million. The securities
industry is one of the most highly regulated in the United States, and failure
to comply with related laws and regulations can result in the revocation of
broker/dealer licenses, the imposition of censures or fines, and the suspension
or expulsion of a firm and/or its employees from the securities business.
10
Each of our investment adviser subsidiaries (and each of the previously
identified unaffiliated sub-advisers to certain of the Company's funds) is
registered with the Commission under the Investment Advisers Act. Each fund and
defined portfolio is registered with the Commission under the Investment Company
Act. Each national fund is qualified for sale (or not required to be so
qualified) in all states in the United States and the District of Columbia. Each
single-state fund is qualified for sale (or not required to be so qualified) in
the state for which it is named and other designated states. Virtually all
aspects of the Company's investment management business including the business
of the sub-advisers are subject to various federal and state laws and
regulations. These laws and regulations are primarily intended to benefit the
investment product holder and generally grant supervisory agencies and bodies
broad administrative powers, including the power to limit or restrict the
Company (and any sub-adviser) from carrying on its investment management
business in the event that it fails to comply with such laws and regulations. In
such event, the possible sanctions, which may be imposed, include the suspension
of individual employees, limitations on the Company's engaging in the investment
management business for specified periods of time, the revocation of the
Advisers' registrations as investment advisers or other censures and fines.
The Company has received from the SEC the following requests for information,
each of which we believe was sent broadly to several investment-management
firms: a September 4, 2003 letter regarding mutual fund "market timing" and
related topics, a September 11, 2003 letter regarding the valuation of portfolio
securities of funds that invest at least a majority of assets in securities that
trade in non-US markets and frequent trading in such funds, a January 29, 2004
letter regarding mutual fund revenue sharing and fund portfolio brokerage
commissions, and a February 4, 2004 letter regarding high yield municipal bond
funds. In addition, the Company received a subpoena dated November 4, 2003 from
the Securities Division of the Commonwealth of Massachusetts in connection with
a proceeding brought by the Securities Division against the Boston,
Massachusetts office of a national broker-dealer firm. The Company has responded
to the SEC requests of September 4, September 11, January 29 and February 4 and
is continuing to respond to various related follow up requests. The Company has
also responded to the subpoena from the Massachusetts Securities Division. In
responding to these various requests, the Company has identified certain
deficiencies in its historical e-mail archives, and the Company is taking steps
to improve its overall record retention practices. The Company has from time to
time discovered instances where fund shareholders traded in and out of a fund
more frequently than appropriate. In addition, during the process of responding
to the requests referenced above, the Company identified certain additional
instances where fund shareholders were able to trade in and out of a fund more
frequently than appropriate, which occurred in most cases because they traded in
dollar amounts below the monitoring threshold established to implement the
funds' policy. In the regular course of its business, whenever the Company has
identified inappropriate trading activity in a fund, it has taken steps to
terminate the related account.
The Company's officers, directors, and employees may, from time to time, own
securities that are also held by one or more of the funds. The Company's
internal policies with respect to individual investments require prior clearance
of all transactions in securities of the Company and other restrictions are
imposed with respect to transactions in the Company's exchange-traded fund
securities. Employees who are access persons of Rittenhouse, Symphony, NWQ, or
the Nuveen investment disciplines are subject to additional restrictions with
respect to the pre-clearance of the purchase or sale of securities held in, or
considered for, investor accounts and funds. These restrictions are based on the
position of the employee and his or her access to or participation in the
investment process of the adviser. The Company also requires employees to report
all securities transactions, and restricts certain transactions so as to avoid
the possibility of conflicts of interest.
FORWARD-LOOKING INFORMATION
From time to time, information we provide or information included in our filings
with the SEC (including this report on Form 10-K) 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
11
securities markets on our assets under management and future offerings; (3) the
adverse effects of 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, or may in the future impose, numerous obligations
on investment advisers and managed funds and accounts and the Securities
Exchange Act of 1934 and other federal and state securities laws and the rules
of the NASD Regulation, Inc. that impose, or may in the future impose, numerous
obligations on our broker dealer Nuveen Investments, LLC, where the failure to
comply with such requirements could cause the SEC or other regulatory
authorities 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) the loss of key employees that could lead to loss of assets; (10)
burdensome regulatory developments brought in response to perceived
industry-wide regulatory violations, including possible government regulation of
the amount and level of fees charged by investment advisers; (11) the impact of
recent accounting pronouncements; and (12) unforeseen developments in litigation
involving the securities industry or the Company.
AVAILABLE INFORMATION
The Company's website is www.nuveen.com. The Company makes available free of
charge through its internet site, via a link to a third party provider, its
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, Forms 3, 4 and 5 filed on behalf of directors and executive officers,
and any amendments to these reports filed or furnished pursuant to the
Securities Exchange Act of 1934 as soon as reasonably practicable after such
material is electronically filed with or furnished to the SEC.
ITEM 2. PROPERTIES
The Company, headquartered in Chicago, has offices in New York, NY, Irvine, CA,
Los Angeles, CA, San Francisco, CA and Radnor, PA and has sales representatives
located nationally. The Company leases approximately 253,000 square feet of
office space across the country. Management believes that the Company's
facilities are adequate to serve its currently anticipated business needs. The
Company has also used, registered, and/or applied to register certain service
marks to distinguish its investment products and services from its competitors
in the U.S. and in foreign countries and jurisdictions. The Company enforces its
service marks and other intellectual property rights in the U.S. and abroad.
ITEM 3. LEGAL PROCEEDINGS
From time to time in the ordinary course of business, the Company is involved in
legal matters such as disputes with employees or customers. There are currently
no such significant matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter ended
December 31, 2003.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the executive officers of the Company as of
December 31, 2003, are set forth below. Unless otherwise indicated in the
following descriptions, each of the following executive officers and other key
officers has held his or her current position with the Company or its
predecessor for more than the past five years.
12
EXECUTIVE OFFICERS AGE PRINCIPAL POSITION
------------------ --- ------------------
Timothy R. Schwertfeger........................ 54 Chairman, Chief Executive Officer and Director
John P. Amboian................................ 42 President and Director
Allen J. Williamson............................ 49 Group President, Managed Assets
William Adams IV............................... 48 Executive Vice President, Structured Investments
Alan G. Berkshire.............................. 43 Senior Vice President and General Counsel
Margaret E. Wilson............................. 48 Senior Vice President, Finance
All executive officers of the Company serve at the pleasure of the Company's
board of directors. There are no family relationships between any of the
Company's executive officers, key officers and directors, and there are no
arrangements or understandings between any of these executive officers and any
other persons pursuant to which the executive officer was appointed. Each of Mr.
Schwertfeger and Mr. Amboian is party to an employment agreement with the
Company for a three-year term ending October 31, 2005, subject to automatic
one-year extensions if the executive remains employed by the Company.
Mr. Schwertfeger has been Chairman and Chief Executive of the Company and its
various subsidiaries since 1996. He also served as Chairman of the Nuveen Funds
and as a Director of Institutional Capital Corporation for the same period.
Mr. Amboian has been President of the Company and its various subsidiaries since
May 1999. Prior thereto, he served as Executive Vice President of the Company
and its various subsidiaries since June 1995.
Mr. Williamson has been Group President, Managed Assets since joining the
Company in August 2000. Prior thereto, Mr. Williamson served as Director of
Sales and Marketing for Merrill Lynch Client Advisory Services since August
1998. Prior thereto, he was a Managing Director.
Mr. Adams has been Executive Vice President, U.S. Fund Products of the Company
since December 1999. Prior thereto, Mr. Adams was Managing Director of
Structured Investments effective September 1997 and Vice President and Manager,
Corporate Marketing effective August 1994.
Mr. Berkshire has been Senior Vice President and General Counsel of the Company
since April 1999 and Secretary since May 1998. He joined the Company in
September 1997 as Vice President and General Counsel. Prior thereto he was a
Partner at the law firm of Kirkland & Ellis since October 1992.
Mrs. Wilson has been Senior Vice President, Finance since April of 1999. She
joined the Company as Vice President and Controller in February 1998. Prior
thereto, Mrs. Wilson was Chief Financial Officer at Sara Lee Bakery, a division
of Sara Lee Corporation, from November 1996 until February 1998 and a Controller
with Kraft Foods from September 1991 until November 1996.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At December 31, 2003, there were approximately 5,100 shareholders of record of
the Company's Class A common stock. Other information required by this item is
contained in footnote 14 on page 31 of the Registrant's 2003 Annual Report to
Shareholders (the "2003 Annual Report") and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The "Five Year Financial Summary" section on page 32 of the 2003 Annual Report
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The "Management's Discussion and Analysis of Financial Condition and Results of
Operations" section on pages 7 through 13 of the 2003 Annual Report is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The "Market Risk" section on page 12 of the 2003 Annual Report is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data on pages 14 through 31 of the
2003 Annual Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Effective as of December 31, 2003, 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-15(b). 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 and no changes
are required at this time. In connection with management's evaluation, pursuant
to Exchange Act Rule 13a-15(d), no changes during the quarter ended December 31,
2003 were identified that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Registrant's executive officers is included in Part I
of this report. Information concerning our directors is incorporated by
reference to the 2004 Proxy Statement under the "Nominees for Directors"
subsection and the "Nominees for Class B Directors" subsection in the "Election
of Directors" section. Information concerning the compliance of our officers,
directors and 10% stockholders with Section 16(a) of the Securities Exchange Act
of 1934 is incorporated by reference to the information contained in the 2004
Proxy Statement under the heading "Section 16(a) Beneficial Ownership Reporting
Compliance". The information regarding Audit Committee members and "audit
committee financial experts" is incorporated by reference to the information
contained in the 2004 Proxy Statement under the "Audit Committee" subsection of
the "Committees of the Board of Directors" subsection of the "Corporate
Governance" Section. Information regarding the Company's Corporate Governance
Guidelines is incorporated by reference to the information contained in the 2004
Proxy Statement under the "Corporate Governance Guidelines" subsection of the
"Corporate Governance" section. The Company has not yet adopted a code of ethics
for the Chief Executive Officer and the Chief Financial Officer. The Company
expects to adopt at the annual meeting of shareholders, a Code of Business
Conduct and Ethics, which will apply broadly to all employees, officers and
directors and will also include specific provisions applying to the Chief
Executive Officer, Chief Financial Officer and other senior financial officers,
in compliance with regulatory requirements. The Company has an existing Code of
Ethics and various related compliance procedures that apply to its business as
an investment manager and sponsor of investment products, and the conduct of its
employees and executives. Upon its adoption, the Company will promptly post its
Code of Business Conduct and Ethics on its website at www.nuveen.com and make it
available in print to shareholders who request a copy. In addition, the Company
will promptly post on its website any amendments or waivers of its Code of
Business Conduct and Ethics which apply to the Chief Executive Officer, Chief
Financial Officer, and other senior financial officers.
ITEM 11. EXECUTIVE COMPENSATION
The "Executive Compensation", "Retirement Plans" and "Employment Agreements"
sections, and the "Compensation of Directors" subsection in the "Election of
Directors" section of the 2004 Proxy Statement are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The "Beneficial Ownership of the Company's Common Stock" section of the 2004
Proxy Statement is incorporated herein by reference.
The following table sets forth certain information as of December 31, 2003 about
equity compensation plans at December 31, 2003 that have been approved by
security holders. The Company has no such plans that have not been approved by
security holders.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
BE ISSUED UPON EXERCISE EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
------------------- ------------------- ------------------------
(a) (b) (c)
Equity compensation
plans approved by
security holders.......... 17,725,490(1) $19.85 4,107,408(2)
Equity compensation
plans not approved by
security holders.......... N/A N/A N/A
Total....................... 17,725,490 $19.85 4,107,408
(1) Excludes 513,042 shares of restricted stock granted under the compensation
plan approved by shareholders. Of such shares, 50,542 shares have not been
delivered because the restrictive period has not yet lapsed, and the
receipt of the remaining shares has been deferred by the recipient beyond
the expiration of the restrictive period.
(2) All such shares are available for issuance pursuant to stock option awards.
Of these shares, 1,731,958 are also available for issuance pursuant to
restricted stock awards.
15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The "Certain Relationships and Related Transactions" section of the 2004 Proxy
Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The "Fees and Services of Independent Auditors" section the 2004 Proxy Statement
is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FILED DOCUMENTS. The following documents are filed as part of this report:
1. Financial Statements:
NUMBER
------
Consolidated Balance Sheets -- December 31, 2003 and 2002 *
Consolidated Statements of Income -- Years ended December 31, 2003, 2002 and 2001 *
Consolidated Statements of Changes in Common Stockholders' Equity - December 31, 2003, 2002 and 2001 *
Consolidated Statements of Cash Flows -- Years ended December 31, 2003, 2002 and 2001 *
Notes to Consolidated Financial Statements *
- ------------------
* Incorporated by reference to the 2003 Annual Report, which, except as
specifically incorporated by reference in this Form 10-K, shall not be
deemed to be filed with the SEC.
2. Financial Statement Schedules: None
All schedules are omitted because they are not required, are not applicable
or the information is otherwise shown in the financial statements or notes
thereto.
3. Exhibits:
See Exhibit Index on pages E-1 through E-8 hereof.
The management contracts and compensatory plans and arrangements have been
filed as Exhibits and are identified as such in the Exhibit Index which
follows.
(b) REPORTS ON FORM 8-K.
On October 21, 2003, a report was furnished to the SEC on Form 8-K relating
to the Company's October 21, 2003 press release announcing the Company's
third quarter 2003 earnings results.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on March 12, 2004.
NUVEEN INVESTMENTS, INC
By: /s/ Margaret E. Wilson
------------------------------------
Margaret E. Wilson
Senior Vice President, Finance
Principal Financial and Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on March 12, 2004.
SIGNATURE TITLE
--------- -----
* Chairman, Chief Executive Officer and
- ------------------------------------- Director (Principal Executive Officer)
Timothy R. Schwertfeger
* President, and Director
- -------------------------------------
John P. Amboian
* Director
- -------------------------------------
Willard L. Boyd
* Director
- -------------------------------------
Thomas A. Bradley
* Director
- -------------------------------------
John L. Carl
* Director
- -------------------------------------
W. John Driscoll
* Director
- -------------------------------------
Jay S. Fishman
* Director
- -------------------------------------
William H. Heyman
* Director
- -------------------------------------
Duane R. Kullberg
* Director
- -------------------------------------
Roderick A. Palmore
/s/ Margaret E. Wilson Senior Vice President, Finance
- ------------------------------------- (Principal Financial and Accounting Officer)
Margaret E. Wilson
*By /s/Alan G. Berkshire
---------------------------------
Alan G. Berkshire
As Attorney-in-Fact for each
of the persons indicated
17
EXHIBIT INDEX
to
ANNUAL REPORT ON FORM 10-K
for the
FISCAL YEAR ENDED DECEMBER 31, 2003
Copies of the documents listed below which are identified with an asterisk (*)
have heretofore been filed with the Commission as exhibits to registration
statements or reports filed with the Commission and are incorporated herein by
reference and made a part hereof; the exhibit number and location of each
document so filed and incorporated herein by reference are set forth opposite
each such exhibit. Exhibits not so identified are filed herewith.
Exhibit Exhibit No.
Designation Exhibit and Location
- ----------- ------- ------------
*3.1 Restated Certificate of Incorporation of the Exhibit 3.1 to Registration Statement on Form
Company S-1 filed on April 2, 1992, File No. 33-46922
(the "S-1 Registration Statement")
*3.2 Certificate of Designations, Preferences and Exhibit 3.1(a) to the Company's Form 10-Q for
Rights of 5% Cumulative convertible Preferred quarter ended September 30, 2000 filed on
Stock of the Company November 11, 2000
*3.3 Amendment to Restated Certificate of Exhibit 3.1(b) to the Company's Form 10-K for
Incorporation of the Company 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 filed on March
29, 1994
*+10.1 Amended and Restated Nuveen 1996 Equity Exhibit A to Company's Schedule 14A,
Incentive Award Plan Definitive Proxy Statement filed on March 31,
1999
*+10.1(a) Second Amendment and Restatement of the Exhibit 10.1(c) to the Company's Form 10-K for
Company's 1996 Equity Incentive Award Plan year ended December 31, 2001
*+10.2 Employment Agreement between the Company and Exhibit 10.1 to the Company's 2002 Third
Timothy R. Schwertfeger, dated November 1, 2002 Quarter Form 10-Q
*+10.3 Employment Agreement between the Company and Exhibit 10.2 to the Company's 2002 Third
John P. Amboian, dated November 1, 2002 Quarter Form 10-Q
E-1
Exhibit Exhibit No.
Designation Exhibit and Location
- ----------- ------- ------------
*+10.4 Nuveen 1999 Executive Officer Performance Plan Exhibit 10.3(b) to the Company's Form 10-K
for year ended December 31, 1999
*+10.5 Nuveen 2002 Executive Officer Performance Plan Exhibit 10.3(a) to the Company's Form 10-K for
year ended December 31, 2001
*+10.6 Amended and Restated Profit Sharing Plan Exhibit 10.4 to the Company's 1996 Form 10-K
*+10.7 Amended and Restated Rittenhouse Financial Exhibit 10.4(a) to the Company's 1998 Form
Services, Inc. 1997 Equity Incentive Award Plan 10-K
*+10.8 Nuveen Investments, LLC Employees' Retirement Exhibit 10.5 to the Company's Form 10-K for
Plan, as amended and restated effective January year ended December 31, 2001 1,
1997
*+10.9 Excess Benefit Retirement Plan Exhibit 10.6 to the S-1 Registration Statement
*+10.10 The Company Deferred Bonus Plan Exhibit 10.7(a) to the Company's 1999 Form
10-K
*10.11 Lease dated January 22, 1998 between Overseas Exhibit 10.8(c) to the Company's 1998 Form
Partners (333), Inc. and Nuveen Investments, LLC 10-K
*10.12 Form of Investment Management Agreement and Exhibit 10.9 to the Company's Form 10-K for
Expense Reimbursement Agreement between Nuveen year ended December 31, 2001
Advisory Corp. and each Nuveen Closed-End Fund
managed by Nuveen Advisory Corp.
*10.13 Form of Investment Management Agreement between Exhibit 10.9(a) to the Company's Form 10-K for
Nuveen Advisory Corp. and each Nuveen Open-End year ended December 31, 2001
Municipal Fund managed by Nuveen Advisory Corp.
*10.14 Form of Annual Renewal of Investment Management Exhibit 10.9(b) to the Company's Form 10-K for
Agreement between Nuveen Advisory Corp. and year ended December 31, 2001
Nuveen Closed/Open-End Municipal Fund managed by
Nuveen Advisory Corp.
*10.15 Investment Management Agreement between Nuveen Exhibit 10.10 to the Company's Form 10-K for
Institutional Advisory Corp. and each Nuveen year ended December 31, 2001
Select Tax-Free Income Portfolio
E-2
Exhibit Exhibit No.
Designation Exhibit and Location
- ----------- ------- ------------
*10.15(a) Form of Annual Renewal of Investment Management Exhibit 10.10(a) to the Company's Form 10-K
Agreement between Nuveen Institutional Advisory for year ended December 31,
2001 Corp. and each Nuveen Select Tax-Free Income
Portfolio
*10.16 Investment Management Agreement between Nuveen Exhibit 10.10(a) to the Company's Form 10-K
Investment Trust and Nuveen Institutional for year ended December 31, 1996
Advisory Corp.
*10.16(a) Form of Annual Renewal of Investment Management Exhibit 10.11(a) to the Company's Form 10-K
Agreement between Nuveen Investment Trust and for year ended December 31, 2001
Nuveen Institutional Advisory Corp.
*10.16(b) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.11(b) to the Company's Form 10-K
Institutional Advisory Corp. and Institutional for year ended December 31, 2001
Capital Corporation
*10.16(c) Addendum to Investment Sub-Advisory Agreement Exhibit 10.11(c) to the Company's Form 10-K
between Nuveen Institutional Advisory Corp. and for year ended December 31, 2001
Institutional Capital Corp.
*10.16(d) Form of Notice of Continuance of Investment Exhibit 10.11(d) to the Company's Form 10-K
Sub-Advisory Agreement between Nuveen for year ended December 31, 2001
Institutional Advisory Corp. and Institutional
Capital Corporation
*10.16(e) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.11(e) to the Company's Form 10-K
Institutional Advisory Corp. and NWQ Investment for year ended December 31, 2002
Management Company, LLC
*10.17 Investment Management Agreement between Nuveen Exhibit 10.12 to the Company's Form 10-K for
Investment Trust II and Nuveen Institutional year ended December 31, 2001
Advisory Corp.
*10.17(a) Form of Annual Renewal of Investment Management Exhibit 10.12(a) to the Company's Form 10-K
Agreement between Nuveen Investment Trust II and for year ended December 31,2001
Nuveen Institutional Advisory Corp.
*10.17(b) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.10 (d)(i) to the Company's 1999
Institutional Advisory Corp. and Columbus Circle Form 10-K
Investors LLC
E-3
Exhibit Exhibit No.
Designation Exhibit and Location
- ----------- ------- ------------
*10.17(c) Form of Notice of Continuance of Investment Exhibit 10.12(c) to the Company's Form 10-K
Sub-Advisory Agreement between Columbus Circle for year ended December 31, 2001
Investors LLC and Nuveen Institutional Advisory
Corp.
*10.17(d) Investment Sub-Advisory Agreement between Exhibit 10.12(d) to the Company's Form 10-K
Nuveen Institutional Advisory Corp. and NWQ for year ended December 31, 2002
Investment Management Company, LLC
*10.18 Investment Management Agreement between Nuveen Exhibit 10.13 to the Company's Form 10-K for
Senior Income Fund and Nuveen Institutional year ended December 31, 2002
Advisory Corp.
*10.18(a) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.13(a) to the Company's Form 10-K
Institutional Advisory Corp. and Symphony Asset for year ended December 31, 2002
Management LLC
*10.19 Investment Management Agreement between Nuveen Exhibit 10.14 to the Company's Form 10-K for
Floating Rate Fund and Nuveen Institutional year ended December 31, 2002
Advisory Corp.
*10.19(a) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.14(a) to the Company's Form 10-K
Institutional Advisory Corp. and Symphony Asset for year ended December 31, 2002
Management LLC
*10.20 Investment Management Agreement between Nuveen Exhibit 10.15 to the Company's Form 10-K for
Real Estate Income Fund and Nuveen Institutional year ended December 31, 2001
Advisory Corp.
*10.20(a) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.15(a) to the Company's Form 10-K
Institutional Advisory Corp. and Security for year ended December 31, 2001
Capital Research & Management Incorporated
*10.21 Investment Management Agreement between Nuveen Exhibit 10.3 to the Company's 2002 Third
Quality Preferred Income Fund and Nuveen Quarter 10-Q
Institutional Advisory Corp.
*10.21(a) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.3(a) to the Company's 2002 Third
Institutional Advisory Corp. and Spectrum Asset Quarter 10-Q
Management, Inc.
E-4
Exhibit Exhibit No.
Designation Exhibit and Location
- ----------- ------- ------------
*10.22 Investment Management Agreement between Nuveen Exhibit 10.4 to the Company's 2002 Third
Quality Preferred Income Fund and Nuveen Quarter 10-Q
Institutional Advisory Corp. 2
*10.22(a) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.4(a) to the Company's 2002 Third
Institutional Advisory Corp. and Spectrum Asset Quarter 10-Q
Management, Inc.
*10.23 Investment Management Agreement between Nuveen Exhibit 10.18 to the Company's Form 10-K for
Quality Preferred Income Fund 3 and Nuveen year ended December 31, 2002
Institutional Advisory Corp.
*10.23(a) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.18(a) to the Company's Form 10-K
Institutional Advisory Corp. and Spectrum Asset for year ended December 31, 2002
Management, Inc.
*10.24 Investment Management Agreement between Nuveen Exhibit 10.1 to the Company's 2003 First
Preferred and Convertible Income Fund and Nuveen Quarter 10-Q
Institutional Advisory Corp.
*10.24(a) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.2 to the Company's 2003 First
Institutional Advisory Corp. and Spectrum Asset Quarter 10-Q
Management, Inc.
*10.24(b) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.3 to the Company's 2003 First
Institutional Advisory Corp. and Froley, Revy Quarter 10-Q
Investment Co., Inc.
*10.25 Investment Management Agreement between Nuveen Exhibit 10.1 to the Company's 2003 Second
Preferred and Convertible Income Fund 2 and Quarter 10-Q
Nuveen Institutional Advisory Corp.
*10.25(a) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.2 to the Company's 2003 Second
Institutional Advisory Corp. and Spectrum Asset Quarter 10-Q
Management, Inc.
*10.25(b) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.3 to the Company's 2003 Second
Institutional Advisory Corp. and Froley, Revy Quarter 10-Q
Investment Co., Inc.
E-5
Exhibit Exhibit No.
Designation Exhibit and Location
- ----------- ------- ------------
*10.26 Investment Management Agreement between Nuveen Exhibit 10.1 to the Company's 2003 Third
Diversified Dividend and Income Fund and Nuveen Quarter 10-Q
Institutional Advisory Corp.
*10.26(a) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.2 to the Company's 2003 Third
Institutional Advisory Corp. and NWQ Investment Quarter 10-Q
Management Company, Inc.
*10.26(b) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.3 to the Company's 2003 Third
Institutional Advisory Corp. and Security Quarter 10-Q
Capital Research & Management Incorporated
*10.26(c) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.4 to the Company's 2003 Third
Institutional Advisory Corp. and Symphony Asset Quarter 10-Q
Management, LLC
*10.26(d) Investment Sub-Advisory Agreement between Nuveen Exhibit 10.5 to the Company's 2003 Third
Institutional Advisory Corp. and Wellington Quarter 10-Q
Management Company, LLP
10.27 Investment Management Agreement and Expense --
Reimbursement Agreement between Nuveen Municipal
High Income Opportunity Fund and Nuveen Advisory
Corp.
*10.28 Registration Rights Agreement between the Exhibit 10.13 to the Company's Form 10-K for
Company and The St. Paul Companies, Inc. year ended December 31, 1992
*10.29 Acquisition Agreement, dated as of June 15, Exhibit 2.1 to the Company's Form 8-K filed on
2001, by and among the Company, Barra, Inc., June 20, 2001
Symphony Asset Management, Inc., Maestro, LLC,
Symphony Asset Management LLC, Praveen K.
Gottipalli, Michael J. Henman, Neil L. Rudolph
and Jeffrey L. Skelton
E-6
Exhibit Exhibit No.
Designation Exhibit and Location
- ----------- ------- ------------
*10.30 Amendment to Acquisition Agreement, dated as of Exhibit 10.4 to the Company's 2003 First
February 1, 2003, by and among the Company, Quarter 10-Q
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
*10.31 Revolving Loan Agreement, dated as of July 29, Exhibit 10.21 to the Company's 2002 Second
2002, between The St. Paul Companies, Inc. and Quarter 10-Q
the Company
*10.32 Amendment to Revolving Loan Agreement, dated as Exhibit 10.4 to the Company's 2003 Second
of July 15, 2003, between The St. Paul Quarter 10-Q
Companies, Inc. and the Company
*10.33 Stock Purchase Agreement, dated as of May 28, Exhibit 2.1 to the Company's Form 8-K filed on
2002, by and among Old Mutual (US) Holdings August 14, 2002
Inc., NWQ Investment Management Company, Inc.
and the Company
*10.34 3-Year Credit Agreement, dated as of August 7, Exhibit 10.6 to the Company's 2003 Third
2003, among the Company, Bank of America, N.A., Quarter 10-Q
Citibank, N.A. and Bank One, N.A.
*10.35 364 Day Credit Agreement, dated as of August 7, Exhibit 10.7 to the Company's 2003 Third
2003, among the Company, Bank of America, N.A., Quarter 10-Q
Citibank, N.A. and Bank One, N.A.
*10.36 Note Purchase Agreement, dated as of September Exhibit 10.8 to the Company's 2003 Third
19, 2003, relating to $300,000,000 principal Quarter 10-Q
amount of 4.22% Senior Notes Due September 19,
2008.
13 Annual Report to Shareholders for the fiscal --
year ended December 31, 2003
21 Subsidiaries of the Company --
23 Independent Auditors' Consent --
24 Power of Attorney --
E-7
Exhibit Exhibit No.
Designation Exhibit and Location
- ----------- ------- ------------
31.1 Certification of Chief Executive Officer --
pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934
31.2 Certification of President pursuant to Rule --
13a-14(a) of the Securities Exchange Act of 1934
31.3 Certification of Principal Financial and --
Accounting Officer pursuant to Rule 13a-14(a) of
the Securities Exchange Act of 1934
32.1 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.
32.2 Certification of President pursuant to 18 U.S.C. Section --
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.3 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
* Previously filed; incorporated herein by reference.
+ Management contracts and compensatory plans and arrangements.
E-8