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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, 1995
OR
/ / 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
THE JOHN NUVEEN COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3817266
(State or other jurisdiction (I.R.S. Employer
of 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. X
The aggregate market value of the outstanding Common Stock held by
non-affiliates of the Registrant on March 25, 1996 was $124,908,320.
The number of shares of the Registrant's Common Stock outstanding at March
25, 1996, was 36,608,827, consisting of 8,048,827 shares of Class A Common
Stock, $.01 par value, and 28,560,000 shares of Class B Common Stock, $.01 par
value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1995 Annual Report to Shareholders are
incorporated by reference into Parts II and IV of this report.
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PART I
ITEM 1. BUSINESS
GENERAL
The John Nuveen Company (together with its subsidiaries, the "Company"),
through its wholly-owned subsidiaries--John Nuveen & Co. Incorporated ("Nuveen
& Co."), Nuveen Advisory Corp. ("Nuveen Advisory") and Nuveen Institutional
Advisory Corp. ("Nuveen Institutional Advisory")--specializes in the
sponsorship, marketing and management of tax-free investment products, and in
municipal finance. The Company sponsors tax-free investment products
("Tax-Free Investment Products"), including unit investment trusts ("UITs"),
mutual funds and money market funds ("Money Market Funds") (together, "Mutual
Funds"), and closed-end funds that issue common stock traded on stock exchanges
in the United States and, in some cases, also issue preferred stock
("MuniPreferred(R) Stock") ("Exchange-Traded Funds").
The Company's principal businesses consist of sponsoring and providing
investment advisory, administrative and distribution services to the Mutual
Funds and Exchange-Traded Funds (together, the "Funds" or "Nuveen Funds"),
providing investment management services for individual and institutional
investment accounts, sponsoring and distributing UITs and monitoring their
portfolios, underwriting and trading municipal bonds, and providing other
municipal finance investment banking services.
The Company is the successor to a business formed in 1898 by Mr. John
Nuveen to serve as an underwriter and trader of municipal bonds. This core
business was augmented in 1961 when the Company developed and introduced its
first tax-free UIT, which is a fixed portfolio of municipal securities selected
and purchased by the Company and deposited in a trust. The Company introduced
its first tax-free Mutual Fund in 1976 (the year in which Congress first
permitted management investment companies investing in municipal securities to
pay dividends that retain their tax-exempt character), its first tax-free Money
Market Fund in 1981, and its first tax-free Exchange-Traded Fund in 1987.
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"). Nuveen
& Co., the predecessor of the Company, had been a wholly-owned subsidiary of
St. Paul since 1974. On May 19, 1992, St. Paul sold in a public offering a
portion of its ownership interest in the Company. As of the date of this
report, St. Paul owned 78% of the outstanding voting securities of the
Company.
THE NUVEEN MANAGED FUNDS
OVERVIEW
While the investment objectives of the Funds vary, each has as a primary
objective to provide as high a level of current interest income exempt from
regular federal (and in some cases, state and local) income tax with
preservation of capital, and each has historically invested substantially all
of its assets in a diversified portfolio of municipal bonds which are rated
within the four highest investment grades.
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The Mutual Funds continually offer to sell and redeem their shares at
prices based on the daily net asset values of their portfolios. The Mutual
Funds are actively managed and include insured and uninsured
nationally-diversified and state-specific portfolios, as well as several Money
Market Funds. Money Market Funds are Mutual Funds that invest solely in
short-term, liquid and relatively low-risk securities and seek to maintain a
stable net asset value of $1 per share.
The Exchange-Traded Funds also have actively-managed tax-free investment
portfolios but 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 Exchanges, at a price that may be above
or below the share's net asset value. Like the Mutual Funds, the
Exchange-Traded Funds include insured and uninsured national and single-state
funds. Most of the Exchange-Traded Funds have a "leveraged" capital structure;
these funds issue MuniPreferred Stock that pay dividends at rates based on
short-term tax-free interest rates, while the capital raised by the sale of the
MuniPreferred Stock is invested by the funds in longer-term municipal
securities. So long as the return provided by these longer-term investments,
net of expenses, exceeds the current dividend rate on the preferred stock,
investors in the common stock of leveraged funds realize a higher rate of
return than if the fund were not leveraged. Leverage results, however, in
greater volatility of the net asset value of shares of common stock of
leveraged funds and possibly in their market value as well. In addition,
fluctuations in the preferred stock dividend rate will affect the return to
holders of common stock. To the extent that the dividend rate on the preferred
stock increases (e.g., in the event of a rise in short-term interest rates),
the rate of return to fund common shareholders will be reduced. If the
preferred stock dividend rate were to exceed the rate of return on the
investment portfolio, holders of common stock would realize a lower rate of
dividend return than if the fund were not leveraged.
The Exchange-Traded Funds also include a managed fund containing bonds
with intermediate characteristics (the "Select Maturities Fund"), and the
Select Portfolios (the "Portfolios"), a series of investment portfolios which
are managed for stability of income and, unlike the other Nuveen
Exchange-Traded Funds, have a limited life and provide for a liquidating
distribution of assets to investors upon reaching a fixed termination date.
The common shares of most of the Exchange-Traded Funds are listed on the
New York Stock Exchange; the shares of the remaining Funds are listed on the
American Stock Exchange. The common shares of the Exchange-Traded Funds trade
in the open market at a price that is influenced by several factors including
supply and demand, net asset value and yield. Common shares of the
Exchange-Traded Funds may trade at a premium or a discount to net asset value
although during most of 1995 such shares traded more frequently at a discount
to net asset value. The Board of Directors of each Exchange-Traded Fund has
determined that, at least annually, it will consider action that might be taken
to reduce or eliminate any material discount to net asset value at which such
shares may be trading, which may include the repurchase of such shares in the
open market or in private transactions, the making of a tender offer for such
shares at net asset value, or a proposal to the shareholders to convert the
Fund to an open-end investment company. The consequence of any such action, if
taken, could be a reduction in both the aggregate net asset value of the
Exchange-Traded Funds and in the management fee paid by such Funds to Nuveen
Advisory or Nuveen Institutional Advisory.
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The Nuveen Funds include five Money Market Funds. Although under no legal
obligation to do so, in the past some money market fund managers, including the
Company, have voluntarily, and at their own expense, taken action to protect
the value of fund assets when portfolio bond credit or related financial
guarantees have deteriorated. These actions have included, in the case of
several money market fund sponsors, purchasing securities from the fund
portfolio at par, and in the case of the Company, arranging for supplemental
credit and liquidity enhancements in order to preserve the value of the fund's
investment. Although the Company is under no obligation to do so,
circumstances may arise in the future in which the Company may determine to
take similar action; such action could involve substantial expense to the
Company.
The Money Market Funds managed by the Company have obtained commitments
(each, a "Commitment") from MBIA Insurance Corporation ("MBIA") with respect to
certain designated bonds held by the Money Market Funds for which credit
support is furnished by banks ("Approved Banks") approved by MBIA under its
established credit approval standards. Under the terms of a Commitment, if
Nuveen Advisory were to determine that certain adverse circumstances relating
to the financial condition of an Approved Bank had occurred, it could cause
MBIA to issue a "while-in-fund" insurance policy covering the underlying bonds;
after time and subject to further terms and conditions, the advisor could
obtain from MBIA an "insured-to-maturity" insurance policy as to the covered
bonds. Each type of insurance policy would insure payment of interest on the
bonds and payment of principal at maturity. Although such insurance would not
guarantee the market value of the bonds or the value of the Money Market Funds'
shares, the Company believes that the ability to obtain insurance for such
bonds under such adverse circumstances would enable the Money Market Funds to
hold or dispose of such bonds at a price at or near their par value.
ASSETS UNDER MANAGEMENT
At December 31, 1995, there were 16 Mutual Funds, 5 Money Market Funds and
60 Exchange-Traded Funds with aggregate total net assets of approximately $32
billion. The following table shows Fund assets under management at December 31
of the past three years.
NUVEEN MANAGED FUNDS
NET ASSETS UNDER MANAGEMENT
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994 1993
---- ---- ----
(in millions)
<S> <C> <C> <C>
Mutual funds ............................. $ 5,457 $ 4,731 $ 4,962
Exchange-traded funds..................... 25,784 23,731 25,805
Money market funds ....................... 1,113 1,242 1,954
-------- -------- --------
Total .................................... $32,354 $29,704 $32,721
======== ======== ========
</TABLE>
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During 1995, 14 Exchange Traded Funds were merged into 6 funds. During
1994, 24 Exchange Traded Funds were merged into 10 funds. These combinations
result in reduced expenses and increased trading liquidity for fund
shareholders.
ADVISORY FEES
Nuveen Advisory and Nuveen Institutional Advisory provide investment
management services to the Funds and the Portfolios, pursuant to investment
management agreements, and receive fees based on each Fund's average daily net
assets or on a combination of the average daily net assets and gross interest
income. The following table shows management fees for the past three years.
NUVEEN MANAGED FUNDS
INVESTMENT ADVISORY FEES
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
MUTUAL FUNDS:
Management fees ................... $24,809 $23,535 $21,688
Less: Reimbursed expenses ......... (897) (396) (562)
-------- -------- --------
Net management fees ........... 23,912 23,139 21,126
-------- -------- --------
EXCHANGE-TRADED FUNDS:
Management fees ................... 153,777 152,078 145,197
-------- -------- --------
MONEY MARKET FUNDS:
Management fees ................... 5,359 6,843 10,125
Less: Reimbursed expenses ......... (336) (420) (494)
-------- -------- --------
Net management fees ........... 5,023 6,423 9,631
-------- -------- --------
Total .................... $182,712 $181,640 $175,954
======== ======== ========
</TABLE>
The Company's management fee schedules currently provide for maximum fees
ranging from .40 of 1% to .50 of 1% of net asset value annually in the case of
the Money Market Funds, and .50 of 1% to .55 of 1% in the case of the other
Mutual Funds. Maximum fees in the case of the Exchange-Traded Funds currently
range from .60 of 1% to .65 of 1%, except that with respect to the Select
Maturities Fund, the fee is .50 of 1%, and with respect to the Portfolios, the
investment management agreements provide for an initial portfolio structuring
fee and annual management fees ranging from .25 of 1% to .30 of 1%. In each
case, the management fee schedules provide for reductions in the fee rate at
greater asset levels.
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INVESTMENT MANAGEMENT AGREEMENTS
Each Nuveen Fund has entered into an investment management agreement with
Nuveen Advisory or, in the case of the Portfolios, with Nuveen Institutional
Advisory (each, an "Adviser"). Although the specific terms of each such
agreement vary, the basic terms of the agreements 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 fundamental investment objectives and policies.
The investment management agreements are approved 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. Amendments to such
agreements 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 and the Investment Advisers Act). Such an "assignment" will take
place in the event of a change in control of the Adviser. Under the Investment
Company Act, 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. If a
termination of the investment management agreements should occur for any
reason, there can be no assurance that the Funds would renew their investment
management agreements with the Adviser.
Each Fund bears all expenses associated with its operation and the
issuance and, in the case of the Money Market and Mutual Funds, redemption of
its securities, except for the compensation of directors and officers of the
Fund who are employed by the Company and/or the Adviser. Some 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 waive all or a portion of its advisory fee to a Fund,
and reimburse expenses, for competitive reasons. During 1995, the expense
ratios specified under these arrangements ranged from .45% for certain of the
Money Market Funds, to .75% for certain of the long-term Mutual Funds, to .975%
for the long-term Mutual Funds whose portfolio bonds are insured by a third
party insurer, and Nuveen Advisory reimbursed expenses aggregating $1,233,000
pursuant thereto. The Company does not expect that such arrangements, at
current fee and expense levels, will have any significant effect on the results
of its operations.
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PORTFOLIO MANAGEMENT AND RESEARCH
Each Adviser is responsible for the execution of the investment policy of
the various Funds it advises. Investment decisions for each Fund are made by
the portfolio manager responsible for such Fund. The Company has a very low
turnover rate for its portfolio managers, and the majority of the Company's
portfolio managers have devoted most of their professional careers to municipal
securities within the Nuveen organization, including experience in financial
analysis, research and surveillance, institutional and broker-dealer sales,
securities trading, and competitive and negotiated underwriting. To support
these managers, the Company maintains a research department devoted exclusively
to municipal securities. The Company's principal method of securities
evaluation is through fundamental research and valuation analysis. The
Research Department conducts original market and issuer research, utilizing
such sources as independent inspection of market and issuer activities,
issuer-prepared information and publicly available information. In conducting
its analyses, the Research Department also utilizes a proprietary analytical
system and commercially available data bases and analytical services.
UNIT INVESTMENT TRUSTS
OVERVIEW
The Company is a major sponsor of tax-free unit investment trusts. Each
UIT consists of a fixed portfolio of municipal bonds selected and purchased by
the Company and deposited in a trust. The trustee of the UITs is not affiliated
with the Company. Units of undivided beneficial interest in the portfolio of
municipal bonds are sold to investors at a price equal to the per unit market
price of the bonds deposited in the trust plus a sales charge. Following the
date of deposit, the Company's Research Department regularly monitors the bonds
in the portfolio. UIT portfolios are not actively traded; once the initial
portfolio is deposited, bonds can be sold only for the purpose of raising cash
to pay for units that have been redeemed or sold pursuant to the Company's
monitoring program; the proceeds of any bond sales must be distributed to unit
holders. No new bonds may be added, and bonds may be exchanged or substituted
only under extremely limited circumstances.
The Company created and introduced its first municipal bond UIT in 1961,
and since that date has deposited and sold units of more than 4,300 different
trusts with an aggregate principal value of approximately $36 billion. The
Company sponsors nationally diversified and single-state trusts, uninsured
trusts, trusts whose portfolio bonds are insured by a third party insurer, and
trusts of varying average portfolio maturities. At December 31, 1995, the
Company had 3,615 trusts outstanding with an aggregate market value of $15.5
billion.
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UIT SALES AND UIT REVENUES
The following table shows the Company's UIT sales and revenues during each
of the last three years:
UIT SALES AND REVENUES
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1995 1994 1993
----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C>
UIT SALES (par value):
Primary UITs $943,829 $1,065,656 $1,208,850
Secondary UITs 148,859 168,862 223,950
---------- ---------- ----------
Total $1,092,688 $1,234,518 $1,432,800
========== ========== ==========
UIT REVENUES:
Distribution revenues:
Primary UITs $ 12,633 $ 13,449 $ 18,210
Secondary UITs 1,565 1,576 1,938
---------- ---------- ----------
14,198 15,025 20,148
---------- ---------- ----------
Positioning profits (losses):
Municipal bonds deposited into UITs 1,929 1,334 2,544
Primary and secondary UITs 3,052 (9,571) 2,837
---------- ---------- ----------
4,981 (8,237) 5,381
---------- ---------- ----------
Total $ 19,179 $ 6,788 $ 25,529
========== ========== ==========
</TABLE>
Units of the Company's UITs are sold to the public with a sales charge.
The Company's UIT revenues include the sales charge, less an applicable
concession to dealers for the placement of UIT units based on the public
offering price of the units sold.
The Company realizes profits or incurs losses to the extent that the
market price of bonds deposited in a trust exceeds or is less than the original
cost of the bonds to the Company. After the date of deposit, the Company is
the holder of all of the units of the particular trust series and will realize
profit or incur loss depending on whether the public offering price of units
increases or decreases before the units are sold. In connection with the
accumulation of bonds for deposit into newly created UITs, the Company attempts
to manage its exposure to interest rate fluctuations by, among other practices,
coordinating inventory levels to the rate of sale of various types of UITs, and
scheduling accumulation of bonds for future trusts and the deposit of future
trusts so as to meet anticipated demand.
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CONTINUING FEES
The Company receives a continuing fee for regularly evaluating the
municipal bonds in each UIT and for its program of credit monitoring. This
fee, currently $.17 per annum per $1,000 principal amount of portfolio bonds,
is adjusted periodically to ensure that these services are, as required by
Section 26(a) of the Investment Company Act and Rule 26a-1 thereunder, provided
by the Company at no more than its cost.
MARKET MAKING
The Company maintains a secondary market in units of the UITs that it
sponsors, buying units at a price equal to their redemption value (equal to the
per unit "bid" side market price of the bonds in the trust) and selling them to
other dealers and financial intermediaries at a price equal to the per unit
"bid" side market price of the bonds in the trust plus a sales charge less a
dealer concession. The Company, like any other unitholder, can also tender
units it holds to the UIT trustee for redemption at their redemption value.
MARKETING AND DISTRIBUTION OF TAX-FREE INVESTMENT PRODUCTS
DISTRIBUTION
The Company markets its Funds and UITs through registered representatives
(the "Registered Representatives") associated with unaffiliated national and
regional broker-dealers, commercial banks and thrifts, and broker-dealer
affiliates of insurance agencies and independent insurance dealers, and
financial planners, accountants, tax consultants and advisers associated with
registered broker-dealer firms ("Retail Distribution Firms"). The Company's
distribution strategy is to maximize the liquidity and distribution potential
of its Funds and UITs by maintaining strong relationships with a broad array of
Registered Representatives. The Company has well-established relationships
with Registered Representatives in Retail Distribution Firms throughout the
country. Sales through the Registered Representatives associated with any
single Retail Distribution Firm did not account for as much as 5% of the
Company's consolidated revenues in 1995.
The Company currently has relationships with more than 100,000 Registered
Representatives at almost 4,000 Retail Distribution Firms. These Registered
Representatives participate in the Company's marketing programs to different
degrees, depending upon: their interests in distributing tax-free
investments, particularly those provided by the Company; the profiles of their
customers and their customers' needs; conditions in the financial markets; and
their views of the relative attractiveness of the Nuveen Funds and UITs.
Registered Representatives may reduce or eliminate involvement in any Nuveen
marketing activity at any time, or they may elect to emphasize the tax-free
investment products of competing sponsors, or the proprietary products of their
own firm. Registered Representatives may receive compensation incentives to
sell their firm's tax-free investment products or may choose to recommend to
their customers tax-free investment products sponsored by firms other than the
Company based on such considerations as investment performance, the amount and
types of distribution compensation, sales assistance and administrative service
payments and the level and
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quality of customer service. In addition, the ability of Registered
Representatives to distribute the Company's Mutual Funds is subject to their
firm's continuation of a selling agreement with the Company that is terminable
by either party upon 60 days notice and does not obligate the Retail
Distribution Firm to sell any specific amount of Funds. The Company currently
has such selling agreements related to the Mutual Funds with over 2,000 Retail
Distribution Firms.
Shares of the Money Market Funds are sold to the public without sales
charges. However, each Money Market Fund (except the Nuveen Tax-Exempt Money
Market Fund, which is marketed primarily to institutions) has a plan adopted in
accordance with Rule 12b-1 under the Investment Company Act (each, a "Plan")
pursuant to which distributors of the Fund's shares are compensated for costs
associated with distribution and administrative services they perform. For the
year ended December 31, 1995, approximately $700,000 in Plan fees were paid to
distributors of the Money Market Funds. Slightly more than half of such amount
was paid by the Company and the remainder was paid by the Money Market Funds.
All of the long-term Mutual Funds have adopted a Flexible Sales Charge
Program which 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. The sales charge is calculated as a percentage of the offering
price, ranging from a maximum of 4.5% to 0.50% for purchases of $5 million or
more. Most of this sales charge is reallowed as concessions to Retail
Distribution Firms: at the 4.5% sales charge level, 4.0% is typically
reallowed. From time to time, the Company reallows all of the sales charge to
Retail Distribution Firms in connection with marketing programs or special
promotions. Class C shares may be purchased without any up front sales charges
at a price equal to the Fund's net asset value but are subject to a .75% annual
Rule 12b-1 distribution fee designed to compensate securities dealers over time
for the sale of the Fund shares and a 1% continuing Deferred Sales Charge for
shares redeemed within 12 months of purchase. Class C shares automatically
convert to Class A shares six years after purchase. Both Class A shares and
Class C shares are also subject to a .25% annual Rule 12b-1 service fee, which
is used to compensate securities dealers for providing ongoing financial advice
and other services. Under the Flexible Sales Charge Program, all Fund shares
outstanding on the date the program was introduced were designated as Class R
shares. Class R shares are available for purchase at a price equal to the
Fund's net asset value only under certain limited circumstances.
Shares of the Exchange-Traded Funds are sold to the public in offerings
that are underwritten by a syndication group. During the year ended December
31, 1995 no such offerings were made.
The typical sales charge for Nuveen UITs is 4.9% of the public offering
price (5.152% of the net amount invested), with reduced sales charges for
purchases of $50,000 or more. The dealer concession is $3.20 per unit (a unit
represents $100 par value of bonds in a trust) at the maximum sales charge
level. The sales charges for UITs in the secondary market are established
based on the number of years remaining to maturity for each bond in the UIT.
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The market for the sale of tax-free unit investment trusts is relatively
concentrated, with only a few sponsors accounting for a majority of total
sales. Based upon information available to it, the Company believes it had a
leading market share in this market in each of the last three years. The
markets for tax-free mutual funds and money market funds are highly fragmented,
with many participating sponsors. Based upon information available to it, the
Company believes that it had 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.
RELATIONS WITH DISTRIBUTORS
The Company maintains a sales force of approximately 70 "wholesalers" and
sales assistants who are supported by the Company's marketing department.
Wholesalers, who are employees of the Company, work closely with individual
Registered Representatives to develop their businesses. The Company's
wholesalers regularly visit distributors of the Company's Tax-Free Investment
Products to provide product information, explain new products and discuss ideas
to respond to particular investor concerns. The Company provides individual
Registered Representatives with weekly, monthly and quarterly sales bulletins,
a monthly product statistical and performance update, product education
programs and 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.
To generate investor and registered representative interest and
understanding of its Tax-Free Investment Products, the Company augments its
marketing efforts through television, magazine and newspaper advertising,
targeted direct mail and telemarketing sales programs and the sponsoring of
certain sports and civic activities, such as the Champions Professional Tennis
Tournament, the U.S. National Senior Sports Organization (U.S. Senior Olympics)
and the Chicago Lyric Opera radio broadcasts. For the year ended December 31,
1995, the Company spent $12.7 million on advertising and promotional efforts.
INVESTMENT BANKING
The Company, through its Municipal Securities Division, underwrites and
distributes municipal bonds, trades municipal bonds in the secondary market and
serves as remarketing agent for variable rate bonds. Virtually all of its
underwritings are for governmental and not-for-profit entities and
substantially all of its sales are to institutional investors including
casualty insurance companies, managed municipal bond funds, sponsors of unit
investment trusts (including the Company), bank portfolios, trust departments
and other dealers. The constituent departments of the Division responsible for
these activities include Investment Banking, Trading and Commitments, and
Institutional Sales. Included in Investment Banking is a business unit, Health
Care Mergers and Acquisitions, which furnishes strategic financial advisory
services to not-for-profit health care corporations. In addition, Investment
Banking may, on occasion, act as financial advisor, broker or underwriter to
municipal or other not-for-profit issuers with respect to transactions in
interest rate swaps, forward transactions or other investment agreements. The
Company does not, however, presently carry such positions in its trading or
investment accounts and consequently has no exposure to market risk.
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The principal sources of revenue of the Municipal Securities Division
include underwriting profits and management fees derived from negotiated bond
underwritings, financial advisory fees, remarketing agent fees, and profits
from other principal transactions including secondary market trading and
furnishing investment securities to investment banking clients incidental to
their bond financing transactions.
In 1995 the Company served as manager, co-manager, or syndicate member in
connection with 70 underwritings, aggregating $2.7 billion par value.
Revenues from the underwriting of municipal securities and fees from
financial advisory and remarketing activities are set forth in the following
table for each of the last three years:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
(in thousands)
Underwriting Revenues $5,489 $6,082 $16,362
Merger and Acquisition and
Other Financial Advisory
Fees 3,383 4,322 2,124
Remarketing Fees 1,462 1,389 1,451
------- ------- -------
Total $10,334 $11,793 $19,937
======= ======= =======
</TABLE>
The Company is remarketing agent with respect to 80 issues of Variable
Rate Demand Obligations ("VRDOs") representing an aggregate principal value of
$1.3 billion. VRDOs are municipal bonds issued with a longer term (typically
20-30 year) maturity, having variable rates of interest and options granted to
the holders to put the obligations to the issuers on seven days notice and
receive payments of the full principal amounts. These obligations to pay are
secured by letters of credit typically issued by commercial banks.
Periodically the remarketing agents, pursuant to agreements with the issuers,
reset the interest rates at a level that the remarketing agent anticipates will
permit them, as agents, to remarket at par any VRDOs with respect to which a
notice of put has been received. Although remarketing agents, including the
Company, are only obligated to use their best efforts in locating purchasers
for the VRDOs, they frequently purchase VRDOs for resale to other buyers within
a few days. During the period that the Company holds any VRDOs, it has, like
any holder, the unconditional right secured by the letter of credit to put the
obligation to the issuer and receive payment of the full principal amount.
During temporary periods of imbalance between supply and demand for VRDOs, the
Company may hold substantial amounts of such obligations for resale. The
Company has come to expect such imbalances at year-end and, to a lesser extent,
at each calendar quarter-end.
On occasion, the Company acquires and holds temporarily U.S. government
securities which in turn are purchased by investment banking clients from the
proceeds of bond issues underwritten by Nuveen. These investments are used by
issuers for construction and reserve funds, or escrow accounts established to
secure outstanding advanced refunded debt obligations. Similarly such
transactions are also arranged for clients who have previously sold refunding
bonds to facilitate the replacement of U.S. government securities in existing
escrow accounts. The Company purchases such government securities only after
the bond issuer has agreed to
11
<PAGE> 13
purchase them at a stated price upon completion of the transaction. In
connection with escrow restructuring transactions, the Company purchases
government securities from the issuer's escrow only after it has obtained a
matching commitment to re-sell the securities to a third party. Although the
Company is at risk that proposed bond financings or the restructuring of
existing escrow accounts for which these commitments have been established will
not be completed, such risk is extremely uncommon. The Company records such
securities at the amounts due from the bond issuers under these contracts. At
December 31, 1995 the contractual value and market value of government
securities held were $1.4 million. At December 31, 1994, the Company did not
hold any U.S. government securities purchased for municipal bond escrow
accounts.
INVENTORY POSITIONS
The Company regularly purchases and holds for resale municipal securities
and UIT units. Inventory positions are recorded at market value and unrealized
gains and losses are reported in the Company's operating results. The level of
inventory maintained by the Company will fluctuate daily and is dependent upon
the need to maintain municipal inventory for future UITs, and the need to
maintain UIT inventory to support ongoing sales.
The market value of the Company's inventory at December 31 for each of the
last three years and the average daily inventory balances outstanding during
each year are set forth below:
<TABLE>
<CAPTION>
Average Daily Inventory
Inventory, at market value (par value)
on December 31, for year ended December 31,
-------------------------- -----------------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Nuveen UITs $ 39,069 $51,880 $44,575 $47,945 $44,565 $68,859
========= ========= ========= ========= ========= =========
Municipal
securities
Held for:
Deposit in UITs $ 1,000 $ - $ 3,337 $ 6,036 $ 6,849 $17,169
Resale 11,308 2,606 21,943 2,924 4,379 7,270
--------- --------- --------- --------- --------- --------
Total
Municipal
securities $ 12,308 $ 2,606 $25,280 $8,960 $11,228 $24,439
========= ========= ========= ========= ========= ========
</TABLE>
JOINT VENTURE
In 1990, Nuveen Institutional Advisory and Duff & Phelps Investment
Management Co., a registered investment adviser and wholly-owned subsidiary of
Phoenix Duff & Phelps Corp. formed Nuveen*Duff & Phelps Investment Advisors
("Nuveen*D&P"), an Illinois general partnership. Nuveen*D&P was created to
provide investment advisory services to qualified and non-qualified public
utility nuclear power plant decommissioning funds and/or their trustees. As of
December 31, 1995, Nuveen*D&P managed 34 portfolios with assets valued at
$670.1 million.
12
<PAGE> 14
During 1995, the Company announced the alliance of Nuveen Institutional
Advisory with C.H. Dean & Associates ("Dean"), a registered investment adviser,
for purposes of providing private asset management services through
individually managed municipal and balanced equity-municipal portfolios. The
portfolios use tax-conscious investment strategies to achieve enhanced
long-term after-tax returns. At December 31, 1995 there were two Municipal
Portfolios with assets totaling $524,000 and 14 Balanced Portfolios with assets
of approximately $19.0 million.
EMPLOYEES
At December 31, 1995, the Company had 537 full-time employees. Employees
are compensated with a combination of salary, cash bonus and fringe benefits.
The Company has sought to retain its senior employees through competitive
compensation arrangements.
COMPETITION
The Company is subject to substantial competition in all aspects of its
business. The Registered Representatives that distribute the Company's
Tax-Free Investment Products also distribute numerous competing products, often
including products sponsored by the Retail Distribution Firms where they are
employed. In recent years, competition among securities firms has adversely
affected the profitability associated with the underwriting of municipal
securities. There are relatively few barriers to entry by new investment
management firms. Tax-free investment products are sold to the public by
broker-dealers, banks, insurance companies and others, and many competing
tax-free investment product sponsors offer a broader array of investment
products, which may include not only tax-free investment products, but taxable
income funds, individual equities, equity funds and other investment products
as well. Many of these institutions have substantially greater resources than
the Company. The Company competes with other providers of tax-exempt 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 investors.
REGULATION
Nuveen & Co. 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 "Commission"), the National Association of Securities
Dealers, Inc., the Municipal Securities Rulemaking Board and other federal and
state agencies and self-regulatory organizations. Nuveen & Co. is subject to
the Commission'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 &
Co. Nuveen & Co.'s regulatory net capital has consistently exceeded such
minimum net capital requirements. At December 31, 1995, Nuveen & Co. had
aggregate net capital, as defined, of approximately $255 million, which
exceeded the regulatory minimum by approximately $253 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 from the securities business of a firm, its officers or employees.
13
<PAGE> 15
Each of the Advisers and Nuveen*D&P are registered with the Commission
under the Investment Advisers Act. Each Fund and UIT is registered with the
Commission under the Investment Company Act and 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 are subject to various federal and state laws and
regulations. These laws and regulations are primarily intended to benefit the
tax-free investment product holder and generally grant supervisory agencies and
bodies broad administrative powers, including the power to limit or restrict
the Company 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's officers, directors, and employees may, from time to time,
own securities which 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 municipal securities, securities of
Exchange-Traded Funds and securities of the Company, and reporting of all
securities transactions, and restrict certain transactions so as to avoid the
possibility of conflicts of interest.
ITEM 2. PROPERTIES
The Company, which is headquartered in Chicago, conducts its principal
operations through leased offices located there and in other United States
cities. The Company leases approximately 164,000 square feet of office space
across the country. Management believes that the Company's facilities are
adequate to serve its currently anticipated business needs.
ITEM 3. LEGAL PROCEEDINGS
As previously reported most recently in the Form 10-Q report for
the third quarter of 1995, a consolidated lawsuit is currently pending
in federal district court in Chicago against Nuveen & Co., Nuveen
Advisory, and current and former directors of two of the Nuveen
exchange-traded investment companies, Nuveen Municipal Value Fund, Inc.
(NUV) and Nuveen Premium Income Municipal Fund, Inc. (NPI) (the
"Funds"). The complaint, which is filed as both a direct and a
derivative action, alleges, among other things, that the defendants
violated the Investment Company Act of 1940, the Minnesota Business
Corporation Act and the Funds' articles of incorporation in announcing,
implementing, and completing (in January 1994) rights offerings for the
Funds, and seeks damages in unspecified amounts. As also previously
reported, plaintiffs subsequently brought additional lawsuits on behalf
of NUV and NPI against the Funds' outside legal counsel and inside
counsel to Nuveen & Co. alleging, among other things, negligence,
professional malpractice and breach of fiduciary duty and seeking
unspecified damages. As also previously reported, on July 1995 Ivan
Behm, an NUV shareholder represented by the same lawyers who brought the
earlier lawsuit in Chicago and other lawyers, filed a lawsuit making
similar allegations in the District Court, Fourth Judicial District,
Hennepin County, Minnesota on behalf of a purported class of certain of
the shareholders of the NUV
14
<PAGE> 16
Fund which names as defendants the same companies and individuals who
were made defendants in the Chicago lawsuits, and seeks damages in unspecified
amounts. The Minnesota case was dismissed in December 1995; the plaintiffs
have filed an appeal seeking reinstatement.
The defendants in the above-noted Chicago actions have moved to
dismiss, filed responsive pleadings in opposition to plaintiffs' motions
for partial summary judgment, and are otherwise defending the lawsuits.
In December 1995, the Court received previously requested reports from
a magistrate recommending the denial of most of defendants' motions to
dismiss and the dismissal of the plaintiffs' motion for summary
judgment. The parties have filed objections to the reports with the
Court. While the outcome of this litigation cannot be predicted with
any certainty, based on current knowledge the Company is of the opinion
that such litigation will not have a material adverse effect on the
Company's financial condition, results of operations or liquidity.
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, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the executive officers of the Company as
of December 31, 1995 are set forth below. Executive officers of the Company
serve at the discretion of the Board of Directors. Unless otherwise indicated
in the following descriptions, each of the following executive officers has
held his current position with the Company or its predecessor for more than the
past five years.
<TABLE>
<CAPTION>
Name Age Principal Position
---- --- ------------------
<S> <C> <C>
Richard J. Franke 64 Chairman, Chief Executive Officer and Director
Donald E. Sveen 63 President, Chief Operating Officer and Director
Anthony T. Dean 50 Executive Vice President and Director
Timothy R. Schwertfeger 46 Executive Vice President and Director
John P. Amboian 34 Executive Vice President and Chief Financial
Officer
William Adams IV 40 Vice President and Manager of Corporate
Marketing
Robert B. Kuppenheimer 49 Vice President and Director of Investment
Management Services for the State of California
James J. Wesolowski 45 Vice President, Secretary and General Counsel
Paul C. Williams 50 Vice President and Manager, Investment
Strategies & Research
O. Walter Renfftlen 56 Vice President and Controller
</TABLE>
15
<PAGE> 17
Messrs. Franke and Sveen will retire on June 30, 1996. The Board has
elected Timothy Schwertfeger to the offices of Chairman of the Board and Chief
Executive Officer and Anthony Dean to the offices of President and Chief
Operating Officer upon the retirement of Messrs. Franke and Sveen.
All executive officers of the Company are elected for a one-year term.
There are no family relationships between any of the Registrant's executive
officers and directors, and there are no arrangements or understandings between
any of these executive officers and any other person pursuant to which the
executive officer was selected as an officer.
Descriptions of the business experience for the past five years of Messrs.
Franke, Sveen, Dean and Schwertfeger appear under the caption "Directors of the
Registrant" in Part III below.
Mr. Amboian has been Executive Vice President and Chief Financial Officer
of the Company since June 1995; prior thereto, Senior Vice President Finance,
Strategic Planning and Systems & Chief Financial Officer for Miller Brewing
Company from June 1993 to May 1995 and from August 1984 to May 1993 he served
in several financial positions for Kraft Foods, Inc., including Vice President,
Financial Planning and Analysis.
Mr. Adams has been Vice President of the Company since March 1994. He
joined Nuveen & Co. in 1982 as an associate investment banker and was promoted
to Assistant Vice President in 1985. In 1988 Mr. Adams was named Vice
President and Manager of Product Development, and from July 1992 to May 1994,
he acted as Manager of Business Development-Western Region. In May 1994, Mr.
Adams was appointed Manager of Nuveen & Co.'s Corporate Marketing Department.
Mr. Kuppenheimer has been Vice President of the Company since December
1992. He has been Vice President of Nuveen & Co. since 1979 and has been
Director of Investment Management Services for the State of California since
1995 and prior thereto, National Sales Manager since 1986. Mr. Kuppenheimer
joined Nuveen & Co. in 1976 as an Assistant Vice President and Manager of
Insurance Industry Products.
Mr. Wesolowski has been Vice President, General Counsel and Secretary of
the Company since inception. He joined Nuveen & Co. in 1980 as Associate
Counsel, was promoted to Assistant Vice President and Associate General Counsel
in May 1982, Vice President in 1986, and to General Counsel and Secretary in
1987. Mr. Wesolowski has served as Vice President, General Counsel and
Secretary of Nuveen Advisory since 1988 and of Nuveen Institutional Advisory
since inception, and as Vice President and Secretary of each of the Nuveen
Funds since 1988.
16
<PAGE> 18
Mr. Williams has been Vice President of the Company since inception. He
joined Nuveen & Co. in 1971 and was promoted to Vice President in 1978. He
managed the General Municipal Financial Group in the Municipal Securities
Department from 1983 to 1990 and chaired Nuveen & Co.'s New Product Committee
from 1987 to 1992. Mr. Williams headed Nuveen & Co.'s Corporate Planning and
Research Department from 1991 to 1994, the Municipal Securities Department
during 1994 and currently heads Nuveen & Co.'s Investment Strategies and
Research.
Mr. Renfftlen has been Vice President and Controller of the Company since
inception, and of Nuveen & Co. since he joined the firm in 1975. He has also
served as Vice President and Controller of Nuveen Advisory, each of the Nuveen
Funds, and Nuveen Institutional Advisory since their inception. Mr. Renfftlen
is a Certified Public Accountant.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information required by this item is contained in footnote 9 on page 20 of
the Registrant's 1995 Annual Report to Shareholders (the "1995 Annual Report")
and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The "Five Year Financial Summary" section on page 22 of the 1995 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 5 through 10 of the 1995 Annual Report
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data on pages 11 through 20 of
the 1995 Annual Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<PAGE> 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE REGISTRANT
The names, ages and positions of the directors of the Company as of
December 31, 1995 are set forth below. The Directors of the Company serve at
the discretion of the Shareholders. Unless otherwise indicated, each of the
following directors who are also officers of the Company has held his current
position with the Company or its predecessor for more than five years.
Directors who are not officers of the Company have been Directors since 1992
except for Mr. Douglass who has been a director since 1994. All directors have
heretofore been elected by the Company's stockholders. Information regarding
the Registrant's executive officers is included in Part I of this report.
Name Age Principal Position
- - ----------------------- ---- -----------------------------------------------
Richard J. Franke 64 Chairman, Chief Executive Officer and Director
Donald E. Sveen 63 President, Chief Operating Officer and Director
Anthony T. Dean 50 Executive Vice President and Director
Timothy R. Schwertfeger 46 Executive Vice President and Director
Willard L. Boyd 67 Director
Duane R. Kullberg 63 Director
CLASS B DIRECTORS
Andrew I. Douglass 52 Director
W. John Driscoll 66 Director
Douglas W. Leatherdale 59 Director
Patrick A. Thiele 45 Director
All directors of the Company are elected for a one-year term. There are
no family relationships between any of the Registrant's directors and executive
officers, and there are no arrangements or understandings between any of these
directors and any other person pursuant to which the director was selected.
18
<PAGE> 20
Mr. Franke has been Chairman and Chief Executive Officer of the Company
since inception; Chairman since 1988, Chief Executive Officer since 1974, and
Director since 1969, of Nuveen & Co.; Chairman since 1988, and Director since
inception, of Nuveen Advisory Corp.; Chairman since 1988, and Director since
inception, of each of the Nuveen Funds advised by Nuveen Advisory; Chairman and
Director of Nuveen Institutional Advisory since inception; formerly Chairman
and Trustee (from each Fund's inception to August 1994), of the Nuveen Funds
advised by Nuveen Institutional Advisory.
Mr. Sveen has been President and Chief Operating Officer of the Company
since inception; President since 1989, and Director and Chief Operating Officer
since 1974, of Nuveen & Co.; President since 1988, and Director since
inception, of Nuveen Advisory; President and Director of Nuveen Institutional
Advisory since inception; Chairman since August 1994 (formerly President) and
Trustee since inception of each of the Nuveen Funds advised by Nuveen
Institutional Advisory; formerly President (from July 1988 to July 1994) and
Director (from inception to July 1994) of each of the Nuveen Funds advised by
Nuveen Advisory. Director of Hinsdale Federal Bank for Savings, Hinsdale,
Illinois; Director, Central DuPage Health System.
Mr. Dean has been Executive Vice President of the Company since inception;
Executive Vice President and Director of Nuveen & Co. since 1989; Director of
Nuveen Advisory and Nuveen Institutional Advisory since 1992; Director and
President of the Nuveen Funds advised by Nuveen Institutional Advisory since
July 1994.
Mr. Schwertfeger has been Executive Vice President of the Company since
inception; Executive Vice President and Director of Nuveen & Co. since 1989;
Director of Nuveen Advisory and Nuveen Institutional Advisory since 1992;
President and Director of the Nuveen Funds advised by Nuveen Advisory since
July 1994.
Mr. Boyd has been President, Field Museum of Natural History since 1981.
Mr. Kullberg has been retired since 1989; prior thereto, he was Managing
Partner-Chief Executive Officer of Arthur Andersen & Co., S.C. since 1980.
Director of the Chicago Board Options Exchange, Inc., Advance Ross Corporation
and Carlson Companies, Inc.
CLASS B DIRECTORS
Mr. Leatherdale has been Chairman of the Board of Directors, President and
Chief Executive Officer of The St. Paul Companies, Inc. since 1990; prior
thereto, President and Chief Operating Officer from 1989 to 1990, and Executive
Vice President from 1982 to 1989, of The St. Paul Companies, Inc. Director of
Nuveen & Co. from 1981 to 1992 and Nuveen Advisory from 1988 to 1989. Director
of United HealthCare Corporation and Northern States Power Company.
19
<PAGE> 21
Mr. Thiele has been Executive Vice President since 1991, Chief Financial
Officer since 1989 and Director since 1993, of The St. Paul Companies, Inc.;
prior thereto, Senior Vice President from 1989 to 1991, and Vice
President--Finance from 1988 to 1989, of The St. Paul Companies, Inc. Director
of Nuveen & Co. from 1988 to 1992, and Nuveen Advisory from 1989 to 1992.
Director of The Wenger Corporation.
Mr. Douglass has been Senior Vice President and General Counsel of The St.
Paul Companies, Inc. since 1993; prior thereto, Executive Vice President,
General Counsel and Secretary of Heller International Corporation from 1985 to
1993.
Mr. Driscoll was Chairman from May 1993 until his retirement in June 1994,
formerly President, of Rock Island Company, a private investment company.
Director of The St. Paul Companies, Inc., Comshare Incorporated, Northern
States Power Company and Weyerhaeuser Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file forms reporting
their affiliation with the Company and reports of ownership and changes in
ownership of the Company's equity securities with the Securities and Exchange
Commission and the New York Stock Exchange. These persons and entities are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based on a review of these forms furnished to the
Company, the Company believes that all Section 16(a) filing requirements
applicable to the Company's officers, directors and The St. Paul Companies,
Inc., were complied with for the 1995 fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table shows information concerning the annual compensation
for services in all capacities to the Company of the Chief Executive Officer
and the other four most highly compensated executive officers of the Company.
20
<PAGE> 22
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1)
- - -------- ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Richard J. Franke 1995 $500,000 $3,160,525 $21,053
Chairman & 1994 500,000 2,783,400 14,340
CEO 1993 500,000 3,514,000 28,363
Donald E. Sveen 1995 500,000 3,160,525 21,053
President & 1994 500,000 2,783,400 14,340
COO 1993 500,000 3,514,000 28,363
Anthony T. Dean 1995 250,000 3,160,525 21,053
Executive Vice 1994 250,000 2,783,400 14,340
President 1993 250,000 3,514,000 28,363
Timothy R. 1995 250,000 3,160,525 21,053
Schwertfeger 1994 250,000 2,783,400 14,340
Executive Vice 1993 250,000 3,514,000 28,363
President
Robert B. 1995 156,250 950,000 21,053
Kuppenheimer 1994 130,000 900,000 12,428
Vice President 1993 130,000 1,150,000 15,634
</TABLE>
(1) Represents contributions to the named executive officer's account
under the Company's tax-qualified Employees' Profit Sharing Plan and
reallocations of forfeitures under that Plan.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows information regarding the unexercised options to
purchase shares of the Company's Class A Common Stock granted under the
Incentive Plan to the named individuals, and held by them at December 31, 1995.
None of the named individuals exercised any stock options during fiscal 1995.
21
<PAGE> 23
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT 12/31/95 IN-THE-MONEY OPTIONS
(NUMBER OF SHARES) AT 12/31/95 (1)
----------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard J. Franke......... 220,000 0 $1,485,000 $ 0
Donald E. Sveen........... 220,000 0 1,485,000 0
Anthony T. Dean........... 183,333 36,667 1,237,498 247,502
Timothy R. Schwertfeger... 183,333 36,667 1,237,498 247,502
Robert B. Kuppenheimer.... 125,833 25,167 849,373 169,877
</TABLE>
- - ---------------
(1) Based on the New York Stock Exchange-Composite Transaction closing
price of $24 3/4 on December 30, 1995, the next preceding business day, and the
$18 exercise price.
RETIREMENT PLANS
Each of the five named executive officers participates in the Company's
non-contributory Retirement Plan, in which all employees who have completed one
year of service and attained age 21 are eligible to participate. The table
below sets forth with respect to the Retirement Plan the estimated annual
straight life annuity benefits calculated upon retirement at normal retirement
age for employees with the remuneration and years of service indicated.
<TABLE>
<CAPTION>
AVERAGE
FINAL ESTIMATED ANNUAL BENEFITS YEARS OF SERVICE
BASE -----------------------------------------------------
SALARY 15 20 25 30 35
- - ------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000 $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
$150,000 $ 33,750 $ 45,000 $ 56,250 $ 67,500 $ 78,750
$175,000 $ 39,375 $ 52,500 $ 65,625 $ 78,750 $ 91,875
$200,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $105,000
$300,000 $ 67,500 $ 90,000 $112,500 $135,000 $157,500
$400,000 $ 90,000 $120,000 $150,000 $180,000 $210,000
$500,000 $112,500 $150,000 $187,500 $225,000 $262,500
$600,000 $135,000 $180,000 $225,000 $270,000 $315,000
</TABLE>
22
<PAGE> 24
Each participant's benefits are determined under a formula which takes
into account years of credited service and the participant's average monthly
compensation during the five consecutive calendar years of highest annual
compensation in the ten consecutive calendar years prior to retirement, less a
portion of primary Social Security benefits. The maximum annual benefit payable
under the plan is not to exceed the lesser of $120,000 (subject to future
adjustments for inflation) and 100% of a participant's average aggregate
compensation for the three consecutive years in which he received the highest
aggregate compensation from the Company or such lower limit as may be imposed
by the Internal Revenue Code. Participants vest after five years of service to
the Company and its subsidiaries. The plan generally provides for payments to
or on behalf of each vested employee upon such employee's retirement at the
normal retirement age provided under the plan or later, although provision is
made for payment of early retirement benefits on a graduated reduced basis
according to provisions of the plan. Normal retirement age under the plan is
65. An employee whose age and years of service add up to 90 is entitled to an
unreduced pension despite not having attained normal retirement age.
The Company has adopted an Excess Benefit Retirement Plan, which provides
certain highly compensated employees who participate in the Retirement Plan,
including Messrs. Franke and Sveen, with additional retirement income in an
amount equal to the difference between (i) the benefits any such employee would
have received under the Retirement Plan but for limitations imposed by the
Internal Revenue Code on the amount of annual benefits payable pursuant to a
tax-qualified retirement plan and (ii) the benefits actually payable to such
employee under the Retirement Plan.
The credited years of service under the Retirement Plan for Messrs.
Franke, Sveen, Dean, Schwertfeger and Kuppenheimer are 35, 35, 18, 17 1/2 and
18, respectively. Compensation on which plan benefits are based includes only
base salary and not bonuses, incentive compensation, or profit-sharing plan
contributions. The plan compensation for these five individuals therefore is
currently $500,000, $500,000, $250,000, $250,000 and $156,250 respectively.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each Messrs.
Franke, Sveen, Dean and Schwertfeger. The agreements with Messrs. Franke and
Sveen provide for an employment term commencing on May 27, 1992 and ending on
June 30, 1996. The agreements with Messrs. Dean and Schwertfeger provide for a
five-year employment term, which commenced on May 27, 1992 and will end on May
27, 1997. The agreements provide for compensation for each executive in the
form of (i) an annual base salary (which may be increased, but not reduced,
during the employment period), (ii) the opportunity to earn an annual bonus
award in accordance with the terms and conditions of the Company's Bonus Plan,
(iii) the right to participate in the Company's executive compensation plans
and programs, including the Incentive Plan, as such plans and programs may be
in effect from time to time, and (iv) such medical, dental and disability
benefits, accident and life insurance, and other employee benefits as are
provided in accordance with the Company's plans and programs for executives in
effect from time to time.
23
<PAGE> 25
Under the terms of each employment agreement, the Company and the
executive have the right to terminate the executive's employment at any time,
provided that in the event that the executive's employment is terminated by the
Company without cause (as defined in each agreement) or by the executive on
account of constructive termination (as defined in each agreement), the Company
will be required to pay to the executive termination compensation, in addition
to any accrued and unpaid amounts, including pro-rated bonus, owed to the
executive under the agreement as of the date of termination, consisting of (i)
one year's base salary at the rate in effect on the date of termination, (ii)
an amount equal to the average of the annual bonuses paid to the executive in
the last three full fiscal years of the Company preceding the date of
termination, (iii) subject to the terms of certain benefit plans and programs,
continuation of medical and certain other employee benefits until the date on
which the employment term otherwise would have ended under the agreement, and
(iv) immediate vesting of all outstanding and previously unvested awards
granted to the executive under the Incentive Plan as of the date of
termination. In addition, the Company will be obligated to pay the executive
additional amounts to compensate the executive for any excise taxes that may be
imposed under federal or other tax laws as a result of payments made to the
executive, including an accelerated vesting of awards under the Incentive Plan,
in connection with a termination of the executive's employment by the Company
without cause or by the executive for constructive termination, or on account
of a change in control of the Company (as defined in the Incentive Plan).
COMPENSATION OF DIRECTORS
Except for directors employed either by the Company or The St. Paul
Companies, Inc., directors receive an annual fee of $20,000, a fee of $1,000
for every board meeting attended in person, and a fee of $500 for each
telephone meeting of the Board. The chairmen of the Audit, Nominating and
Personnel Committees each receive an additional annual fee of $2,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL HOLDERS
The following table sets forth the beneficial ownership as of December 31,
1995, unless otherwise indicated, of the Company's Class A and Class B Common
Stock of each person known by the Company to own beneficially more than 5% of
each such class:
24
<PAGE> 26
BENEFICIAL OWNERSHIP OF COMMON STOCK
<TABLE>
<CAPTION>
NUMBER PERCENTAGE OF
OF SHARES PERCENT OF TOTAL COMMON
BENEFICIALLY CLASS OF CLASS STOCK
NAME AND ADDRESS OWNED COMMON STOCK OUTSTANDING(1) OUTSTANDING(1)
- - ---------------- ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
The St. Paul Companies, Inc.
385 Washington St.
St. Paul, MN 55102......... 28,560,000(2) B 100% 77.9%
Ryback Management, Inc.
7711 Carondelet Ave.
Suite 700
St. Louis, MO 63105 1,132,300(3) A 14.0 3.1
John A. Levin
One Rockefeller Plaza
New York, NY 10020......... 891,585(4) A 11.0 2.4
Donald E. Sveen
333 W. Wacker Drive
Chicago, IL 60606.......... 832,144(5) A 10.1 2.3
Richard J. Franke
333 W. Wacker Drive
Chicago, IL 60606.......... 804,130(6) A 9.9 2.2
Peter A. Hochfelder
Robert J. Soble
Michael A. Kuflik
277 Park Avenue
26th Floor
New York, NY 10017 553,200(7) A 6.8 1.5
</TABLE>
- - -------------------
(1) For the directors and executive officers of the Company, the
percentage of outstanding stock is determined by dividing the total number of
shares beneficially owned, which includes the shares that would be issued upon
exercise of their vested options, by the total number of outstanding shares
plus the additional number of shares that would be outstanding if the options
were exercised as of December 31, 1995.
(2) As reported in a Schedule 13G dated February 11, 1993 filed with
the Securities and Exchange Commission, The St. Paul Companies, Inc. has sole
voting and investment power with respect to 14,880,000 of the shares of Class A
Common Stock listed as beneficially owned and shared voting and investment
power (with St. Paul Fire and Marine Insurance Company, a wholly owned
subsidiary of The St. Paul Companies, Inc.) with respect to 13,680,000 of the
shares of Class A Common Stock, in both cases by virtue of their ownership of
Class B Common Stock convertible into an equal number of shares of Class A
Common Stock.
25
<PAGE> 27
(3) As reported in the Semi-Annual report dated February 12, 1996 for the
Lindner Funds, advised by Ryback Management Corporation, Lindner Growth Fund
owned 593,900 shares of Class A Common Stock and Lindner Dividend Fund owned
538,400 shares of Class A Common Stock as of December 31, 1995.
(4) John Levin individually, and as President, sole Director and sole
Shareholder of John Levin & Co., Inc., has reported that, pursuant to his
personal holdings and those of his investment advisory clients, he has sole
power to vote and dispose of 22,500 shares of the Company's Class A Common
Stock, shared voting power as to 408,100 shares, no voting power as to 460,985
shares, shared dispositive power as to 869,085 shares and beneficially owns
891,585 shares of the Company's Class A Common Stock. The foregoing is based on
the content of an amended Schedule 13G, dated February 10, 1995, as filed with
the Securities and Exchange Commission.
(5) Mr. Sveen has sole voting and investment power with respect to all
shares beneficially owned, other than 322,070 shares of Class A Common Stock
held in a charitable trust of which Mr. Sveen is a trustee with shared voting
and investment power.
(6) Mr. Franke has sole voting and investment power with respect to all
shares beneficially owned, other than 266,556 shares of Class A Common Stock
held in a charitable trust of which Mr. Franke is a trustee with shared voting
and investment power.
(7) Peter A. Hochfelder ("Hochfelder"), Robert J. Sobel ("Sobel"),
Mitchell A. Kuflik ("Kuflik"), Brahman Partners II, L.P. ("Brahman II"), B-Y
Partners, L.P. ("B-Y"), Brahman Capital Corp. ("Capital") and Brahman Partners,
L.P. ("BP") reported that:
1. Brahman II has shared voting and dispositive power over and
beneficially owns 210,000 shares of the Company's Class A Common
Stock;
2. B-Y has shared voting and dispositive power over and beneficially
owns 114,900 shares of the Company's Class A Common Stock;
3. BP as the General Partner of B-Y and Brahman II has shared voting and
dispositive power over and beneficially owns 324,900 shares of the
Company's Class A Common Stock;
4. Capital has shared voting and dispositive power over and beneficially
owns 343,200 shares of the Company's Class A Common Stock; and
5. Hochfelder, Sobel and Kuflik, respectively, have shared voting and
dispositive power over and beneficially owns 553,200 shares of the
Company's Class A Common Stock.
BP is the general partner of B-Y and Brahman II. Capital is the investment
manager for B-Y, Offshore Fund Ltd. ("Offshore"), Genesis Capital Fund
("Genesis") and Quota Fund N.V. ("Quota"). Hochfelder, Sobel and Kuflik are
the sole General Partners of BP, the sole stockholders of Capital and are in a
position to directly and indirectly determine the investment and voting
decisions made by BP and Capital, and consequently, B-Y,
Brahman II, Offshore, Quota and Genesis. The foregoing is based on the content
of a Schedule 13D, dated May 16, 1995, as filed with the Securities and
Exchange Commission.
26
<PAGE> 28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FILED DOCUMENTS. The following documents are filed as part of
this report:
Page
1. Financial Statements: Number
------
Consolidated Balance Sheets - December 31, 1995 and 1994 *
Consolidated Statements of Income - Years ended
December 31, 1995, 1994 and 1993 *
Consolidated Statement of Changes in Stockholders' Equity -
December 31, 1995, 1994 and 1993 *
Consolidated Statements of Cash Flows - Years ended
December 31, 1995, 1994 and 1993 *
Notes to Consolidated Financial Statements *
______________________
* Incorporated by reference to the 1995 Annual Report,
which, except as specifically incorporated by reference
in this Form 10-K, shall not be deemed to be filed with
the Commission.
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.
27
<PAGE> 29
3. Exhibits:
See Exhibit Index on pages E-1 through E-3 hereof.
The following management contracts and compensatory plans and
arrangements have previously been filed as Exhibits 10.1 through
10.3, 10.6 and 10.7 to the Company's 1992 Form 10-K filed on March
30, 1993 and are incorporated herein by reference:
Nuveen 1992 Special Incentive Plan
Form of Employment Agreement with Executive Officers
Annual Cash Bonus Plan
Excess Benefit Retirement Plan
Deferred Bonus Plan
The following management contracts and compensatory plans and
arrangements have previously been filed as Exhibits 10.4 and 10.5
to the Company's 1994 Form 10-K filed on March 29, 1995 and are
incorporated herein by reference:
Employees' Profit Sharing Plan
Employees' Retirement Plan
(b) REPORTS ON FORM 8-K.
None.
28
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the 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 20, 1996.
THE JOHN NUVEEN COMPANY
By /s/ James J. Wesolowski
-----------------------------
James J. Wesolowski
Vice President, General Counsel
and Secretary
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 20,
1996.
Signature Title
--------- -----
* Chairman, Chief Executive Officer
- - ---------------------------- and Director (Principal Executive
Richard J. Franke Officer)
* President, Chief Operating Officer
- - ---------------------------- and Director (Principal Financial
Donald E. Sveen Officer)
* Executive Vice President and Director
- - ----------------------------
Anthony T. Dean
* Executive Vice President and Director
- - ----------------------------
Timothy R. Schwertfeger
* Director
- - ----------------------------
Willard L. Boyd
* Director
- - ----------------------------
Andrew I. Douglass
29
<PAGE> 31
Signature Title
--------- -----
* Director
- - -----------------------------
W. John Driscoll
* Director
- - -----------------------------
Duane R. Kullberg
* Director
- - -----------------------------
Douglas W. Leatherdale
* Director
- - -----------------------------
Patrick A. Thiele
/s/ O. Walter Renfftlen Vice President and Controller
- - ----------------------------- (Principal Accounting Officer)
O. Walter Renfftlen
*By /s/ James J. Wesolowski
--------------------------
James J. Wesolowski
As Attorney-in-Fact for each
of the persons indicated
30
<PAGE> 32
EXHIBIT INDEX
to
ANNUAL REPORT ON FORM 10-K
for the
FISCAL YEAR ENDED DECEMBER 31, 1995
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.
<TABLE>
<CAPTION>
Page No. of
Exhibit in
Sequential
Exhibit Exhibit No. Numbering
Designation Exhibit and Location System
- - ----------- ---------------------- -------------------- -----------
<S> <C> <C> <C>
* 3.1 Restated Certificate Exhibit 3.1 to
of Incorporation of Registration
The John Nuveen Statement on Form
Company S-1 filed on April
2, 1992, File No.
33-46922 (the "S-1
Registration
Statement")
* 3.2 Amended and Restated Exhibit 3.2 to the
By-Laws of The John Company's Form 10-K
Nuveen Company for year ended
December 31, 1993
filed on March 29,
1994 (the "1993
Form 10-K")
*10.1 Nuveen 1992 Special Exhibit 10.1 to
Incentive Plan Company's Form 10-K
for the year ended
December 31, 1992
filed on March 30,
1993 (the "1992
Form 10-K")
*10.2 Form of Employment Exhibit 10.2 to
Agreements with top Pre-effective
five executive Amendment No. 1
officers
*10.3 Annual Cash Bonus Plan Exhibit 10.3 to
1992 Form 10-K
</TABLE>
E-1
<PAGE> 33
PAGE NO. OF
EXHIBIT IN
<TABLE> SEQUENTIAL
EXHIBT EXHIBIT NO. NUMBERING
DESIGNATION EXHIBIT AND LOCATION SYSTEM
- - ----------- ------- ------------ -----------
<S> <C> <C>
*10.4 Amended and Restated Exhibit 10.4 to
Profit Sharing Plan 1994 Form 10-K
*10.5 Amended and Restated Exhibit 10.5 to
Retirement Plan 1994 Form 10-K
*10.6 Excess Benefit Exhibit 10.6 to the
Retirement Plan S-1 Registration
Statement
*10.7 Deferred Bonus Plan Exhibit 10.7 to the
S-1 Registration
Statement
*10.8(a) Lease dated August Exhibit 10.8 to the
10, 1984 between S-1 Registration
333 Wacker Drive Statement
Venture and John
Nuveen & Co.
Incorporated, as
amended
*10.8(b) Amendment dated Exhibit 10.8(b) to
January 1, 1993 to 1992 Form 10-K
lease between 333
Wacker Drive
Venture and John
Nuveen & Co.,
Incorporated
**10.9 Investment Exhibit 10.9 to
Management Pre-effective
Agreements between Amendment No. 1 and
Nuveen Advisory Exhibits 10.9 to
Corp. and each both the 1992 and
Nuveen Fund 1993 Forms 10-K
**10.10 Investment Exhibit 10.10 to
Management Pre-effective
Agreement between Amendment No. 1 and
Nuveen Exhibits 10.10 to
Institutional both the 1992 and
Advisory Corp. and 1993 Forms 10-K
each Nuveen Select
Tax-Free Income
Portfolio
*10.11 Joint Venture Exhibit 10.11 to
Agreement, dated S-1 Registration
May 9, 1990, Statement
between Nuveen
Institutional
Advisory Corp. and
Duff & Phelps
Investment
Management Co.
</TABLE>
E-2
<PAGE> 34
<TABLE>
<S> <C> <C>
10.11(a) Joint Venture --
Advisory and
Administration
Agreement dated
September 29, 1995
between Nuveen
Institutional
Advisory Corp. and
C.H. Dean &
Associates, Inc.
*10.12 Tax Sharing Exhibit 10.13 to
Agreement between S-1 Registration
The St. Paul Statement
Companies, Inc. and
John Nuveen & Co.
Incorporated
*10.13 Registration Rights Exhibit 10.13 to
Agreement between 1992 Form 10-K
The John Nuveen
Company and The St.
Paul Companies,
Inc.
*10.14 Indemnity Agreement Exhibit 10.14 to
between The St. 1992 Form 10-K
Paul Companies,
Inc. and The John
Nuveen Company
13 Annual Report to --
Shareholders for
the fiscal year
ended December 31,
1995
*21 List of Exhibit 22 to the
Subsidiaries of The S-1 Registration
John Nuveen Company Statement
23 Consent of --
Independent Auditor
24.1 Powers of Attorney --
24.2 Certified Copy of --
Resolutions of
Board of Directors
Authorizing
Signatures
27 Financial Data --
Schedule
</TABLE>
* Previously filed; incorporated herein by reference.
** Previously filed, other than Form of Renewal of Investment Management
Agreement, which are filed herewith.
E-3
<PAGE> 1
EXHIBIT 10.9
FORM OF RENEWAL OF INVESTMENT MANAGEMENT AGREEMENTS
DATED MAY 9, 1995
BETWEEN THE FUNDS LISTED BELOW AND NUVEEN ADVISORY CORP.
Attached is a copy of a Form of Renewal of Investment Management Agreement,
dated May 9, 1995, by and between each of the funds listed below (which were
active as of December 31, 1995) and Nuveen Advisory Corp. Copies of
agreements, identical in nature except for the name of the fund, were entered
into by the following funds:
FUND NAME
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Florida Investment Quality Municipal Fund, Inc.
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Select Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Insured Municipal Opportunity Fund, Inc.
Nuveen Florida Quality Income Municipal Fund, Inc.
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen Ohio Quality Income Municipal Fund, Inc.
Nuveen Texas Quality Income Municipal Fund
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Arizona Premium Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund, Inc.
Nuveen Insured Premium Income Municipal Fund, Inc.
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen Michigan Premium Income Municipal Fund, Inc.
Nuveen Insured New York Premium Income Municipal Fund, Inc.
<PAGE> 2
FUND NAME (CON'T)
Nuveen New Jersey Premium Income Municipal Fund, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen Maryland Premium Income Municipal Fund
Nuveen Massachusetts Premium Income Municipal Fund
Nuveen Pennsylvania Premium Income Municipal Fund 2
Nuveen Virginia Premium Income Municipal Fund
Nuveen Washington Premium Income Municipal Fund
Nuveen Connecticut Premium Income Municipal Fund
Nuveen Georgia Premium Income Municipal Fund
Nuveen Missouri Premium Income Municipal Fund
Nuveen North Carolina Premium Income Municipal Fund
Nuveen California Premium Income Municipal Fund
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Municipal Value Fund, Inc.
Nuveen California Municipal Value Fund, Inc.
Nuveen New York Municipal Value Fund, Inc.
Nuveen Municipal Income Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
Nuveen Select Maturities Municipal Fund
Pursuant to the instructions to Item 601 of Regulation S-K, the Registrant is
filing only the representative of the Renewal of Investment Management
Agreement by and between each of the above listed funds, as of December 31,
1995, and Nuveen Advisory Corp. Copies of the actual Renewal of Investment
Management Agreements by and between each of the above funds and Nuveen
Advisory Corp. have not been attached.
<PAGE> 3
EXHIBIT 10.9
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENTS
DATED JULY 27, 1995
BETWEEN THE FUNDS LISTED BELOW AND NUVEEN ADVISORY CORP.
Attached is a copy of a Form of Renewal of Investment Management Agreement,
dated July 27, 1995, by and between each of the funds listed below (which were
active as of December 31, 1995) and Nuveen Advisory Corp. Copies of
agreements, identical in nature except for the name of the fund, were entered
into by the following funds:
FUND NAME
Nuveen Municipal Bond Fund, Inc.
Nuveen Tax-Exempt Money Market Fund, Inc.
Nuveen Tax-Free Reserves, Inc.
Nuveen California Tax-Free Fund, Inc.
Nuveen Tax-Free Bond Fund, Inc.
Nuveen Insured Tax-Free Bond Fund, Inc.
Nuveen Tax-Free Money Market Fund, Inc.
Nuveen Multistate Tax-Free Trust
Pursuant to the instructions to Item 601 of Regulation S-K, the Registrant is
filing only the representative of the Renewal of Investment Management
Agreement by and between each of the above listed funds, as of December 31,
1995, and Nuveen Institutional Advisory Corp. Copies of the actual Renewal of
Investment Management Agreements by and between each of the above funds and
Nuveen Advisory Corp. have not been attached.
<PAGE> 4
[NAME OF FUND]
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this day of , 199 by and between [Name of Fund] a
corporation (the "Fund"), and Nuveen Advisory Corp., a Delaware corporation
(the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates , 199 unless continued in the
manner required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors, at a meeting called for the purpose of
reviewing the Agreement, have approved the Agreement and its continuance until
, 199 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
, 199 and ratify and confirm the Agreement in all respects.
[NAME OF FUND]
By:
----------------------
Vice President
ATTEST:
- - -----------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:
----------------------
Vice President
ATTEST:
- - -----------------------------
Assistant Secretary
<PAGE> 1
EXHIBIT 10.10
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENTS
DATED JULY 27, 1995
BETWEEN THE FUNDS LISTED BELOW AND NUVEEN INSTITUTIONAL ADVISORY CORP.
Attached is a copy of a Form of Renewal of Investment Management Agreement,
dated July 27, 1995, by and between each of the funds listed below (which were
active as of December 31, 1995) and Nuveen Institutional Advisory Corp. Copies
of agreements, identical in nature except for the name of the fund, were
entered into by the following funds:
FUND NAME
Nuveen Select Tax-Free Income Portfolio
Nuveen Select Tax Free Income Portfolio 2
Nuveen Insured California Select Tax-Free Income Portfolio
Nuveen Insured New York Select Tax-Free Income Portfolio
Nuveen Select Tax-Free Income Portfolio 3
Pursuant to the instructions to Item 601 of Regulation S-K, the Registrant is
filing only the representative of the Renewal of Investment Management
Agreement by and between each of the above listed funds, as of December 31,
1995, and Nuveen Institutional Advisory Corp. Copies of the actual Renewal of
Investment Management Agreements by and between each of the above funds and
Nuveen Advisory Corp. have not been attached.
<PAGE> 2
[NAME OF FUND]
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this day of , 199 by and between [Name
of Fund], a business trust (the "Fund"), and Nuveen Institutional Advisory
Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates , 199 unless continued in the
manner required by the Investment Company Act of 1940; and
WHEREAS, the Board of Trustees, at a meeting called for the purpose of
reviewing the Agreement, have approved the Agreement and its continuance until
, 199 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
, 199 and ratify and confirm the Agreement in all respects.
[NAME OF FUND]
By:
-------------------------
Vice President
ATTEST:
- - --------------------------------
Assistant Secretary
NUVEEN INSTITUTIONAL
ADVISORY CORP.
By:
-------------------------
Vice President
ATTEST:
- - --------------------------------
Assistant Secretary
<PAGE> 1
EXHIBIT 10.11(a)
JOINT INVESTMENT ADVISORY
AND
ADMINISTRATION AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of this 29th day of September,
1995, by and between C.H. Dean & Associates, Inc., a Nevada corporation
("Dean") and Nuveen Institutional Advisory Corp., a Delaware corporation
("Nuveen"). Collectively, Dean and Nuveen are referred to herein as the
"parties" or the "Advisers".
RECITALS
WHEREAS, Dean is registered under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), as an investment adviser and engages in the
business of acting as an investment adviser;
WHEREAS, Dean has substantial expertise, research capability and technical
resources in the area of investment advisory and account administration
services related to individual balanced accounts comprised of equity securities
("Equity Securities"), government and corporate fixed income securities and
cash and cash equivalents ("Liquidity Assets");
WHEREAS, Nuveen is registered under the Advisers Act as an investment
adviser and engages in the business of acting as an investment adviser;
WHEREAS, Nuveen has substantial expertise, research capability and
technical resources in the area of investment advisory services related to
municipal securities and tax-free investment products (collectively, "Municipal
Securities") and Liquidity Assets;
WHEREAS, Dean and Nuveen intend to enter into Investment Advisory
Agreements (collectively the "Investment Advisory Agreements") jointly with
certain individuals, organizations or institutions (collectively, "Principals")
whereby such Principals will place cash and/or securities (hereafter referred
to with respect to each Principal as the "Portfolio Assets") under Dean's
management with respect to Equity Securities (the "Equity Portion") and
Nuveen's management with respect to Municipal Securities (the "Bond Portion"
and collectively with the Equity Portion and the Liquidity Assets, the
"Tax-Advantaged Balanced Accounts"), and the Tax-Advantaged Balanced Accounts
shall include the Portfolio Investment Strategies specified on EXHIBIT A
hereto, together with any other Portfolio Investment Strategy as may from time
to time be offered by the parties.
WHEREAS, Nuveen intends to enter into Investment Advisory Agreements with
certain Principals whereby such Principals will place Portfolio Assets under
Nuveen's management to invest exclusively in Municipal Securities and Liquidity
Assets (collectively, the "Municipal Accounts"), and the Municipal Accounts
shall include the Portfolio Investment Strategies specified on EXHIBIT A
hereto, together with any other Portfolio Investment Strategy as may be offered
by Nuveen from time to time.
WHEREAS, Dean and Nuveen previously entered into an Investment
Sub-Advisory Agreement, dated as of May 24, 1995, and an Administration
Agreement, dated as of May 24, 1995 (the "Prior Agreements"), pursuant to which
Dean and Nuveen specified their respective responsibilities with respect to the
establishment, management and administration of certain Tax-Advantaged Balanced
Accounts and Municipal Accounts on a trial basis (the "Trial Accounts"), and
the parties desire that the Prior Agreements
<PAGE> 2
be terminated and that the Trial Accounts be managed and administered pursuant
to, in accordance with and consistent with the terms of, this Agreement.
WHEREAS, the parties desire to enter into this Agreement in order to
specify the responsibilities of Dean and Nuveen with respect to operation of
the Tax-Advantaged Balanced Accounts and the Municipal Accounts (collectively,
the "Business") from and after the date hereof.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Responsibilities of Dean. Dean's responsibilities with respect to (i)
the Tax-Advantaged Balanced Accounts shall be as set forth on EXHIBIT B and
(ii) the Municipal Accounts shall be as set forth on EXHIBIT C, both of which
Exhibits are attached hereto and made a part hereof.
2. Responsibilities of Nuveen. Nuveen's responsibilities with respect to
(i) the Tax-Advantaged Balanced Accounts shall be as set forth on EXHIBIT D and
(ii) the Municipal Accounts shall be as set forth on EXHIBIT E, both of which
Exhibits are attached hereto and made a part hereof.
3. Expenses. Except for brokerage commissions and custodial fees (which
are the responsibility of each Principal), if any, and subject to Section 11
hereof, Dean and Nuveen shall each be responsible for all expenses incurred by
them in connection with, and incident to, the performance of its obligations
hereunder and under the Investment Advisory Agreements.
4. Compensation. As compensation for the administrative services provided
by Dean under this Agreement, Dean shall be entitled to an Administrative Fee
Reallowance out of the Investment Management Fees charged pursuant to the
Investment Advisory Agreements entered into with respect to the Tax-Advantaged
Balanced Accounts and the Municipal Accounts, which Administrative Fee
Reallowance shall be in accordance with EXHIBIT F attached hereto and made a
part hereof.
Dean and Nuveen shall each receive the portion of the Investment
Management Fees specified on EXHIBIT F attached hereto and made a part hereof;
provided, however, that with respect to an investment advisory client of Dean
as of the date of this Agreement who establishes a Tax-Advantaged Balanced
Account prior to October 1, 1997 (an "Existing Dean Client"), Dean shall
receive, in addition to the portion of the Investment Management Fees specified
on EXHIBIT F, an additional amount equal to one-half the portion of the
Investment Management Fees due to Nuveen as specified on EXHIBIT F with respect
to such Existing Dean Client; provided, further, however, that such additional
payment to Dean shall (i) be paid only with respect to assets of the Existing
Dean Client that were under Dean's investment management as of the date of this
Agreement and (ii) cease as of the earlier to occur of (x) December 31, 1997 or
(y) the date which is 12 months from the date of the establishment of the
Tax-Advantaged Balanced Account, and thereafter Dean and Nuveen shall each
receive the portion of the Investment Management Fees specified on EXHIBIT F.
5. Standard of Care. Each party shall perform its duties and
responsibilities hereunder with the standard of care and diligence which one
would expect of a reasonably prudent person who is skilled at the tasks or
responsibilities assigned to it hereunder.
<PAGE> 3
6. Books and Records. Dean and Nuveen each agree to maintain such books
and records with respect to their services as is required by Rule 204 under the
Advisers Act, and by other applicable laws, rules and regulations, and to
preserve such records for the periods and in the manner required by that Rule,
and those laws, rules and regulations; provided, however, that Dean shall
maintain on Nuveen's behalf those journals, ledgers, statements, records and
other documents that Nuveen is required to maintain by any state or federal
law, rule or regulation, and which Nuveen requests Dean to maintain on its
behalf, in the manner specified in, and pursuant to the terms and conditions
of, such law, rule or regulation. Dean and Nuveen further agree to furnish to
the appropriate regulatory authorities any information or reports in connection
with their services hereunder which may be properly requested in order to
confirm that the Equity Portion, the Bond Portion, or the Liquidity Assets as
the case may be, of each Principal's Portfolio Assets are being managed in
accordance with applicable laws, rules and regulations.
7. Good Faith Efforts; Further Assurances.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use good faith efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement.
(b) Each party agrees to cooperate in good faith to develop and implement
comprehensive marketing and customer service programs in support of the
Business. The customer service program will be designed to provide each
Principal and its financial adviser the necessary information and assistance to
permit the financial adviser to (i) advise the Principal regarding an
appropriate Portfolio Investment Strategy in light of the Principal's financial
and personal circumstances and investment objectives; (ii) through regular and
periodic contact with the Principal and review of the investment performance
of the Principal's account, assess the continued appropriateness of the
Portfolio Investment Strategy chosen by the Principal, based upon the
Principal's current circumstances and objectives, as they may change from time
to time; and (iii) communicate to the Advisers any change in the Principal's
Portfolio Investment Strategy or in the specific investment restrictions
relating to the purchase or sale of securities by the Advisers for the
Principal's account.
(c) Dean shall accommodate reasonable requests from Nuveen's management or
its independent auditors to (i) evaluate and test the Municipal Investment
Management Systems Software and review supporting documentation related
thereto, (ii) evaluate and/or test the systems of internal control relating to
the calculation of management fees and the collection and transfer of monies
between the parties with respect to the Business, and (iii) review Dean's books
and records relating to the Business on an as needed basis.
(d) In the event that issues arise after the date hereof with respect to
the conduct of the Business which the parties did not anticipate and which have
not been addressed in this Agreement (or any of the other agreements executed
by the parties relating to the Business), each party agrees to cooperate with
the other to implement procedures which address any such issues in an equitable
manner.
(e) In the event either party's status as an approved investment adviser
is suspended or revoked by a wrap program sponsor, the chief executive officers
(or their designees) of each party shall meet in person within 30 days of such
suspension or revocation and attempt in good faith to agree upon and implement
corrective actions in response to such suspension or revocation.
8. Non-Exclusivity. Except as provided in Sections 9 and 12 hereof, the
services of the parties hereunder are not deemed to be exclusive, and each
party and its respective officers, directors,
<PAGE> 4
employees and affiliates shall be free to render investment advisory and client
account administration or other services to others (including to other
investment advisers) and to engage in activities other than the Business.
9. Non-Compete.
(a) Each party agrees that (i) during the term of this Agreement and (ii)
for three years following termination of this Agreement, neither party will,
anywhere in the United States, offer, directly or indirectly, Tax-Advantaged
Managed Account services (as defined below), except (x) pursuant to this
Agreement during the term hereof, (y) in the case of Nuveen, pursuant to the
activities of Nuveen/Duff and Phelps Investment Advisors, or any successor
thereto and (z) in the case of Dean, with respect to any existing accounts
managed by Dean as of the date of this Agreement in which Principals have
requested Municipal Securities to be a part of their fixed income holdings. A
party will be deemed to be offering services indirectly if it or any holder(s)
of five (5) percent or more of such party's equity securities, directly or
through a direct or indirect majority-owned subsidiary of such holder(s),
renders investment advice or provides administrative services to Tax-Advantaged
Managed Accounts or to persons who render investment advice to Tax-Advantaged
Managed Accounts. For purposes of this Agreement, a "Tax-Advantaged Managed
Account" shall be an account of any individual, corporation, partnership, trust
or other entity, other than an investment company registered as such under the
Investment Company Act of 1940, that invests in both Equity Securities and
Municipal Securities and has investment objectives and policies substantially
similar to those of the Tax-Advantaged Balanced Accounts described on EXHIBIT A
hereto.
Notwithstanding the foregoing, in the event this Agreement is terminated
pursuant to Section 13, the restrictions set forth in clause (ii) of this
Section 9(a) shall not apply to the party not causing such termination, in the
case of a termination under paragraphs (b) or (d) of Section 13; to the
non-breaching party, in the case of a termination under paragraph (c) of
Section 13; or to either party, in the case of a termination under
paragraph (a) of Section 13.
(b) Nuveen and Dean agree that during the term of this Agreement and
thereafter (i) Nuveen shall not, without written consent of Dean and except in
connection with the promotion of the Business, utilize or refer to the
investment results of the Equity Portion (as such term is defined on page 1
hereto) of the Business and (ii) Dean shall not, without the written consent of
Nuveen and except in connection with the promotion of the Business, utilize or
refer to the investment results of the Bond Portion (as such term is defined on
page 1 hereof) of the Business.
(c) By way of clarification, in the event either party terminates this
Agreement by providing twelve (12) months advance written notice to the other
party, as permitted by Section 13(a) hereof, it is the intention of the parties
that the non-competition provision set forth in paragraph (a) of this Section 9
shall terminate at the same time as the termination of this Agreement and
either party shall be free thereafter to offer Tax-Advantaged Managed Account
services.
<PAGE> 5
10. Representations, Warranties and Covenants.
(a) Dean represents, warrants and covenants as follows:
(i) Dean has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Nevada, with
corporate power and authority to own its properties and conduct its
business as presently conducted and as anticipated to be conducted with
respect to the Business, and Dean is duly qualified to transact business
in all jurisdictions in which the conduct of the Business requires such
qualification.
(ii) This Agreement has been duly authorized, executed and delivered
on behalf of Dean, and, assuming due authorization, execution and
delivery by Nuveen, is the valid and binding obligation of Dean
enforceable in accordance with its terms.
(iii) Dean is in full compliance with all applicable provisions of
the Advisers Act and all other applicable state and federal laws.
(iv) There is no action or proceeding pending or, to the knowledge
of Dean after due inquiry, threatened against Dean before any court or
administrative agency which might result in any material adverse change
in the business, condition or prospects of Dean.
(v) During the period commencing January 1, 1995 through and
including the date hereof, there has not been any material adverse change
in or affecting the condition, financial or otherwise, of Dean or the
earnings, business affairs, management or business prospects of Dean,
whether or not occurring in the ordinary course of business, and there
has not been any material transaction entered into by Dean other than
transactions in the ordinary course of business. Dean has no material
contingent liabilities.
(vi) Dean is not in default under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by
which it or any of its properties are bound and which default is of
material significance in respect of the business or financial condition
of Dean. The execution and delivery of this Agreement and the
fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, any material indenture, mortgage, deed of trust or other agreement
or instrument to which Dean is a party, or of the Certificate of
Incorporation or By-Laws of Dean or any order, rule or regulation
applicable to Dean of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction over
it.
(vii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the conduct of the
Business and the execution and delivery by Dean of this Agreement, and
the fulfillment of the terms hereof by Dean has been obtained or made and
is in full force and effect.
(viii) Dean is the holder of all material licenses, certificates and
permits from governmental authorities which are necessary to the conduct
of the Business.
<PAGE> 6
(ix) Dean is duly registered with the Securities and Exchange
Commission (the "Commission") under the Advisers Act as an investment
adviser, and there does not exist any proceeding or any facts or
circumstances the existence of which could reasonably be expected to lead
to any proceeding which could adversely affect the registration or good
standing of Dean with the Commission.
(x) Dean is properly registered as an investment adviser in each
state where the nature of the Business requires such registration.
(xi) Dean shall promptly notify Nuveen in the event (x) that Dean or
any of its affiliates (i) becomes subject to a statutory disqualification
that prevents Dean from serving as an investment adviser pursuant to the
Investment Advisory Agreements, or (ii) becomes the subject of an
administrative proceeding or enforcement action by the Commission or
other regulatory authority, or (y) of the occurrence of any fact or
circumstance which could materially impair the ability of Dean to perform
its obligations hereunder or under the Investment Advisory Agreements.
(xii) Dean shall conform to the rules and regulations applicable to
an investment adviser under the Advisers Act.
(xiii) Dean shall conform to any other applicable provisions of
state or federal law.
(xiv) Dean shall maintain "liquid net working capital" (as
hereinafter defined) in an amount not less than $5,000,000 and, if at any
time Dean's liquid net working capital shall fall below $5,000,000, Dean
shall (i) notify Nuveen immediately of such fact and (ii) deliver to
Nuveen within 5 business days of such occurrence an irrevocable letter of
credit in an amount not less than $5,000,000. Such letter of credit
shall (i) be renewed annually during the term of this Agreement, (ii) be
maintained for a period of 6 months after this Agreement terminates,
(iii) name Nuveen (and its successors) as the Beneficiary thereunder, and
(iv) permit drawings by Nuveen thereunder of any amounts due Nuveen
pursuant to Section 11(a) hereof if such amounts remain unpaid for 5
business days after demand for payment is made.
For purposes of this Section 10(a)(xiv), "liquid net working
capital" shall mean the difference between (x) the sum of (i) cash and
cash equivalents, (ii) available for sale securities and (iii) accounts
receivable and (y) current liabilities, as each such item is determined
in accordance with Generally Accepted Accounting Principles or, in the
case of "available for sale securities", as determined in accordance with
SFAS Statement No. 115.
(b) Nuveen represents, warrants and covenants as follows:
(i) Nuveen has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as presently conducted and, except with respect to certain
states in which Nuveen is currently in the process of registering to
conduct business and/or as an investment adviser, Nuveen is duly
qualified to transact business in all jurisdictions in which the conduct
of the Business requires such qualification.
(ii) This Agreement has been duly authorized, executed and delivered
on behalf of Nuveen, and, assuming due authorization, execution and
delivery on behalf of Dean, is the valid and binding obligation of Nuveen
enforceable in accordance with its terms.
<PAGE> 7
(iii) Nuveen is in full compliance with all applicable provisions of
the Advisers Act and all other applicable state and federal laws.
(iv) There is no action or proceeding pending or, to the knowledge
of Nuveen after due inquiry, threatened against Nuveen before any court
or administrative agency which might result in any material adverse
change in the business, condition or prospects of Nuveen.
(v) Nuveen is not in default under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by
which it or any of its properties is bound and which default is of
material significance in respect of the business or financial condition
of Nuveen. The execution and delivery of this Agreement and the
fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, any material indenture, mortgage, deed of trust or other agreement
or instrument to which Nuveen is a party, or of the Certificate of
Incorporation or By-Laws of Nuveen or any order, rule or regulation
applicable to Nuveen of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction over
it.
(vi) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery
by Nuveen of this Agreement, and the fulfillment of the terms hereof has
been obtained or made and is in full force and effect; except however,
with respect to certain state filings required in connection with
Nuveen's registration to conduct business and/or as an investment adviser
in certain states.
(vii) Except for registrations described in subsection 10(b)(vi)
above, Nuveen holds all material licenses, certificates and permits from
governmental authorities which are necessary to the conduct of its
business.
(viii) Nuveen is duly registered with the Commission under the
Advisers Act as an investment adviser, and there does not exist any
proceeding or any facts or circumstances the existence of which could
reasonably be expected to lead to any proceeding which could adversely
affect the registration or good standing of Nuveen with the Commission.
(ix) Nuveen is properly registered as an investment adviser in each
state where the nature of its business currently requires such
registration and will promptly so register in each other state in which
the conduct of the Business requires such registration.
(x) Nuveen shall promptly notify Dean in the event (x) that Nuveen
or any of its affiliates (i) becomes subject to a statutory
disqualification that prevents Nuveen from serving as an investment
adviser pursuant to the Investment Advisory Agreements, or (ii) becomes
the subject of an administrative proceeding or enforcement action by the
Commission or other regulatory authority, or (y) of the occurrence of any
fact or circumstance which could materially impair the ability of Nuveen
to perform its obligations hereunder or under the Investment Advisory
Agreements.
(xi) Nuveen shall conform to the rules and regulations applicable to
an investment adviser under the Advisers Act.
(xii) Nuveen shall conform to any other applicable provisions of
state or federal law.
<PAGE> 8
(c) The representations, warranties and covenants contained in this
Section 10 shall survive for a period of six (6) months following the
termination of this Agreement.
11. Indemnification.
(a) Dean agrees to indemnify and hold harmless Nuveen, its directors,
officers, employees, agents and affiliates, against any losses, claims,
damages, liabilities or expenses (including reasonable attorney's fees) to
which Nuveen, such director, officer, employee, agent or affiliate may become
subject insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) arise out of or are based upon
(i) the failure of Dean to comply with the Advisers Act or any other applicable
federal or state securities laws, rules or regulations, (ii) the breach or
inaccuracy of or non-compliance by Dean with the terms and conditions of this
Agreement (including, without limitation, the failure of Dean to promptly
perform in accordance with Section 5 hereof the duties assigned to it under
Section 1 hereof), any Investment Advisory Agreement or any representation,
warranty or covenant contained herein or therein by Dean or (iii) any suit,
action, proceeding or threatened suit, action or proceeding by any third party
arising out of or relating to acts or omissions of Dean in fulfilling its
responsibilities under Section 1 hereof.
(b) Nuveen agrees to indemnify and hold harmless Dean, its directors,
officers, employees, agents and affiliates, against any losses, claims,
damages, liabilities or expenses (including reasonable attorney's fees) to
which Dean, such director, officer, employee, agent or affiliate may become
subject insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) arise out of or are based upon
(i) the failure of Nuveen to comply with the Advisers Act or any other
applicable federal or state securities laws, rules and regulations, (ii) the
breach or inaccuracy of or non-compliance by Nuveen with the terms and
conditions of this Agreement (including, without limitation, the failure of
Nuveen to promptly perform in accordance with Section 5 hereof the duties
assigned to it under Section 2 hereof), any Investment Advisory Agreement or
any representation, warranty or covenant contained herein or therein by Nuveen
or (iii) any suit, action, proceeding or threatened suit, action or proceeding
by any third party arising out of or relating to acts or omissions of Nuveen in
fulfilling its responsibilities under Section 2 hereof.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 11, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for hereunder
shall be available to any party who shall fail to give notice as provided in
this Section 11 if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, but the failure to give such notice shall not
relieve the indemnifying party or parties from any liability which it or they
may have to the indemnified party for contribution or otherwise on account of
the provisions of Section 11(a) or (b). In case any such proceeding shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party
and shall pay as incurred the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred the fees and expenses
of the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is
<PAGE> 9
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm for all such indemnified
parties. Such firm shall be designated in writing by Nuveen in the case of
parties indemnified pursuant to Section 11(a) and by Dean in the case of parties
indemnified pursuant to Section 11(b). The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment.
(d) If the indemnification provided for in this Section 11 is judicially
determined (or determined in a final and binding arbitration) to be unavailable
to hold harmless an indemnified party under Section 11(a) or 11(b) above in
respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then the indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to take account of (i) the relative fault
of both parties in causing such loss and (ii) any other equitable
considerations.
12. Confidentiality.
(a) Except as otherwise provided in Section 12(b), Nuveen and Dean each
agree to treat as confidential and to use exclusively for purposes directly
related to the Business (i) any confidential information about the other party
which is furnished to it pursuant to the establishment and operation of the
Business and (ii) any information jointly developed for use in the Business,
except in each case such information as is required by law to be disclosed in
connection with offering investment advisory services to Municipal Accounts or
Tax-Advantaged Balanced Accounts and except as may be required to be disclosed
to any regulatory or self-regulatory organization or pursuant to a subpoena.
(b) The parties agree that (i) the rules, procedures and strategies
relating to investments in Municipal Securities (collectively, the "Municipal
Investment Program"), are integral to the business of Nuveen apart from the
joint investment advisory relationship established by this Agreement and are
currently in use by Nuveen in business contexts other than the Business (as
defined on page 2 hereof), (ii) the Municipal Investment Program constitutes
confidential business information of Nuveen which it may use in any business
venture (in addition to the Business) during the term hereof or thereafter so
long as such use does not violate the terms of the non-competition provision
contained in Section 9 hereof and (iii) Dean shall not use the Municipal
Investment Program except (x) during the term of this Agreement and
(y) exclusively in connection with the Business.
(c) The parties agree that (i) the rules, procedures and strategies
relating to (w) investments in Equity Securities, including those relating to
the Dean tactical asset allocation models and any proprietary software related
thereto (collectively, the "Equity Investment Program") and (x) the proprietary
software and procedures used in the administration of client accounts
("POEMS"), are integral to the business of Dean apart from the joint investment
advisory relationship established by this Agreement and are currently in use by
Dean in business contexts other than the Business (as defined on page 2
hereof), (ii) the Equity Investment Program and POEMS constitute confidential
business information of Dean which it may use in any business venture (in
addition to the Business) during the term hereof or thereafter so long as such
use does not violate the terms of the non-competition provision contained in
Section 9 hereof and (iii) Nuveen shall not use the Equity Investment Program
or POEMS except (y) during the term of this Agreement and (z) exclusively in
connection with the Business.
<PAGE> 10
13. Termination. This Agreement may be terminated as follows:
(a) at any time, without the payment of any penalty, by Dean or Nuveen
upon providing twelve (12) months' written notice to the other party. The
notice provided for herein may be waived by the party entitled to receive such
notice;
(b) automatically in the event of its "assignment" by Dean or Nuveen at
the election of the non-assigning party. The term "assignment" for purposes of
this Agreement shall have the meaning set forth in Section 205 of the Advisers
Act and the rules and regulations thereunder;
(c) at any time by a party upon a breach of this Agreement by the other
party, which breach is not cured within 20 days following notice of such breach
by the non-breaching party; and
(d) automatically in the event that either party shall dissolve or file a
petition in bankruptcy or for reorganization under the Federal Bankruptcy Act
or any federal or state law for the relief of debtors or shall be adjudicated a
bankrupt or insolvent or shall make an assignment for the benefit of creditors
or shall suffer the appointment of a receiver or trustee for its business or
properties or shall be named as a debtor in possession or alleged debtor in
possession in proceedings following the filing against it of an involuntary
petition in bankruptcy or for reorganization under the Federal Bankruptcy Act
or any federal or state law for the relief of debtors.
Upon termination of this Agreement (i) each party agrees to cooperate with
the other to facilitate the orderly termination of Investment Advisory
Agreements entered into with Principals and Nuveen and Dean and the transfer of
investment management responsibilities with respect to Portfolio Assets to a
third party or to Nuveen or Dean, as the case may be, if either or both parties
are permitted under Section 9 hereof to render services to Tax Advantaged
Managed Accounts following termination of this Agreement, (ii) Dean agrees to
deliver to Nuveen at Nuveen's request within twenty (20) business days, copies
of all books and records maintained by Dean in connection with providing
investment management and administrative services to Principals pursuant to
Investment Advisory Agreements contemplated by this Agreement and any
confidential information provided by Nuveen to Dean in connection with the
Business, (iii) Nuveen agrees to deliver to Dean at Dean's request within
twenty (20) business days, copies of all books and records maintained by Nuveen
in connection with providing investment management services to Principals
pursuant to Investment Advisory Agreements contemplated by this Agreement and
any confidential information provided by Dean to Nuveen in connection with the
Business.
Sections 9, 11, 12 and 19 hereof shall survive termination of this
Agreement.
14. Term. This Agreement shall become effective on the date hereof and
shall continue unless and until terminated by either party as hereinafter
provided.
15. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
16. Survival. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
<PAGE> 11
17. Notices. All notices, consents, requests, reports and other documents
authorized or required to be given pursuant to this Agreement shall be given in
writing and either personally served on an officer of the party to whom it is
given or mailed by registered or certified first class mail, postage prepaid,
or sent by telecopy, and addressed as follows:
If to Dean:
Dean Investment Associates
Division of C.H. Dean & Associates, Inc.
2480 Kettering Tower
Dayton, Ohio 45423-2480
Telecopier: 513-227-9310
Attention: John C. Riazzi
With a copy to:
Dean Investment Associates
Division of C.H. Dean & Associates, Inc.
2480 Kettering Tower
Dayton, Ohio 45423-2480
Telecopier: 513-227-9310
Attention: Frank H. Scott
If to Nuveen:
Nuveen Institutional Advisory Corp.
Suite 3200
333 West Wacker Drive
Chicago, Illinois 60606
Telecopier: 312-917-7952
Attention: James J. Wesolowski
With a copy to:
Nuveen Institutional Advisory Corp.
Suite 3300
333 West Wacker Drive
Chicago, Illinois 60606
Telecopier: 312-917-8243
Attention: Ronald E. Toupin
Notices, consents, requests, reports and other documents shall be deemed
given or served when delivered or, if mailed by registered or certified first
class mail, on the third day after the day of mailing and, if sent by
telecopier, upon confirmation of receipt. A party may change its address for
the receipt of notices, consents, requests, reports and other documents at any
time by giving notice thereof to the other party.
<PAGE> 12
18. Questions of Interpretation; Applicable Law. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the Advisers Act shall be
resolved by reference to such term or provision of the Advisers Act and to
interpretations thereof, if any, by the United States courts or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
issued pursuant to said Advisers Act. In addition, where the effect of a
requirement of the Advisers Act reflected in any provision of this Agreement is
revised by a rule, regulation or order of the Commission, such provision shall
be deemed to incorporate the effect of such revision.
Other than as set forth above in this Section 18, this Agreement shall be
governed by the internal laws (as opposed to conflicts of laws principles) of
the State of Delaware, provided that nothing herein shall be construed in a
manner inconsistent with the Advisers Act, or rules, regulations or orders of
the Commission thereunder.
19. Arbitration. Any dispute or difference between the parties arising
out of, or in connection with, this Agreement or as to the construction hereof
or as to the rights or liabilities of any party hereunder shall be referred to
and settled by binding arbitration. Any such arbitration shall only be
commenced after the chief executive officers (or their designees) of each party
shall have met in person and attempted in good faith to resolve any such
dispute or difference. In the event that such persons are unsuccessful in
resolving any such dispute or difference after a reasonable period of time,
either party may commence an arbitration proceeding with respect to any such
dispute or difference by notice in writing to the other party, and each party
shall thereupon or promptly thereafter choose an arbitrator and a third
arbitrator shall be chosen by the two so chosen. If either party fails to
choose an arbitrator within 15 days after notice of commencement of
arbitration, or if the two arbitrators fail to choose a third arbitrator within
15 days after their appointment, the American Arbitration Association ("AAA")
shall, upon the request of either party, appoint the arbitrator or arbitrators
to constitute or complete the board as the case may be. The arbitration shall
be held in Dayton, Ohio or Chicago, Illinois at the election of any such party
bringing such action and shall be under the Securities Arbitration Rules of the
AAA. Unless the arbitrators otherwise determine, (i) the costs of arbitration
shall be borne equally by each party and (ii) each party shall be responsible
for its own legal fees and other expenses incurred in prosecuting or defending
claims in arbitration. The arbitration award shall be final and binding upon
the parties and judgment thereon may be entered in any court having
jurisdiction.
20. Miscellaneous.
(a) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(b) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be identical and all of which, when taken
together, will constitute one and the same instrument, and each party may
execute this Agreement by signing any such counterpart.
<PAGE> 13
22. Entire Agreement. This Agreement represents the entire agreement
between the parties relating to the subject matter hereof and can be modified
or amended only in writing signed by both parties. The parties acknowledge and
agree that the Prior Agreements are hereby terminated and that the Trial
Accounts, and the respective rights, responsibilities, duties and obligations
of the parties with respect thereto, are governed by and should be construed in
accordance with the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective duly authorized officers as of the
day and year first written above.
NUVEEN INSTITUTIONAL ADVISORY CORP.
By:/c/ James J. Wesolowski
------------------------------
Title: Vice President
---------------------------
Attest:
/c/ Larry W. Martin
- - ----------------------------
Title: Vice President
----------------------
C.H. DEAN & ASSOCIATES, INC.
By:/c/ Chauncey H. Dean
------------------------------
Title: Chairman & CEO
---------------------------
Attest:
/c/ Frank H. Scott
- - ----------------------------
Title: Senior Vice President
- - ----------------------------
<PAGE> 14
EXHIBIT A
TAX-ADVANTAGED BALANCED ACCOUNTS
1. Tax-Advantaged Balanced: Capital Appreciation
2. Tax-Advantaged Balanced: Capital Appreciation and Income
3. Tax-Advantaged Balanced: Income
MUNICIPAL ACCOUNTS
1. Municipal: Capital Preservation Portfolio
2. Municipal: Laddered Portfolio
3. Municipal: Income Portfolio
Reference shall be made to the following descriptions of the investment
objectives and policies of Dean and Nuveen for purposes of determining whether
a managed account constitutes a "Tax-Advantaged Managed Account" for purposes
of Section 9 of the Agreement.
Nuveen
Nuveen employs a value-oriented investment philosophy in structuring and
managing municipal bond portfolios. Nuveen's approach focuses on higher
quality, more liquid securities to achieve a client's specific investment
objectives consistent with a secondary emphasis on capital preservation. The
cornerstone of Nuveen's value-oriented philosophy is a reliance on fundamental
credit research on individual municipal issues coupled with general market
analysis designed to identify technical and structural inefficiencies that
create opportunities to enhance investment returns.
Dean
Dean employs a value-oriented investment philosophy in structuring balanced
portfolios with an emphasis on balancing superior capital appreciation
potential with an underlying objective of capital preservation. Dean's
approach focuses on mid to large capital equities and relies on analysis of a
security's fundamental, financial and qualitative position relative to the
market's expectations to identify attractive issues for purchase. Dean seeks
to enhance portfolio investment returns by gradually adjusting a client's asset
allocation mix over time within an established portfolio-specific range to
emphasize either capital appreciation or capital preservation as appropriate
for current market conditions. Dean adjusts asset allocation mixes based upon
proprietary econometric models which forecast the relative expected returns
between equities, fixed-income securities and cash.
<PAGE> 15
EXHIBIT B
DEAN RESPONSIBILITIES WITH RESPECT TO TAX-ADVANTAGED BALANCED ACCOUNTS
In connection with the operation of the Tax-Advantaged Balanced Accounts by
Dean and Nuveen, Dean will be responsible for the provision of (i) asset
allocation services, (ii) investment advisory and trade execution services
relating to Equity Securities, and (iii) account administration and reporting
services (except those specifically allocated to Nuveen in Exhibit D hereto),
although Dean may seek the assistance of Nuveen in fulfilling such
responsibilities. Capitalized terms not otherwise defined in this Exhibit
shall have the meaning given to them in this Agreement of which this Exhibit is
a part. Dean's responsibilities with respect to the Tax-Advantaged Balanced
Accounts are as follows:
1. determine the initial allocation of each Principal's Portfolio Assets among
Equity Securities, Municipal Securities and Liquidity Assets based upon the
Principal's Questionnaire and Portfolio Investment Strategy chosen by the
Principal;
2. develop and maintain, in a manner mutually agreed upon by Dean and Nuveen,
Dean's investment management and account administration computer systems
supporting the operation of the Tax-Advantaged Balanced Accounts:
(a) to permit the accurate tracking and account reporting of the Bond
Portion, Equity Portion and Liquidity Assets of each Principal's
Portfolio Assets;
(b) to permit Nuveen to access electronically such current and historical
information on each Principal's account as Nuveen may reasonably request;
when such electronic access is not feasible or practicable, Dean will
make available such information to Nuveen on electronic media or other
media mutually agreed upon by Nuveen and Dean;
(c) to provide Nuveen with such information and in such detail as Nuveen
may reasonably request and as mutually agreed upon by Nuveen and Dean
related to activity in or performance of each Principal's account, that
would in Nuveen's view enhance the sales and marketing programs developed
to support the Tax-Advantaged Balanced Accounts or to support the
development of new tax-advantaged products; and
(d) to enhance the operation of the Tax-Advantaged Balanced Accounts upon
the mutual determination by both parties from time to time that such
enhancements are warranted;
3. develop and maintain, in a manner mutually agreed upon by Dean and Nuveen,
Dean's investment management computer systems to incorporate the procedures and
guidelines for the purchase and sale of Municipal Securities for each
Principal's account, described in Procedures and Guidelines Relating to the
Purchase and Sale of Municipal Securities, as may be amended from time to time
(the "Procedures"), and take the following actions with respect to the purchase
and sale of Municipal Securities for each Principal's account:
(a) determine each Principal's potential investment needs for Municipal
Securities, based upon the Portfolio Investment Strategy selected by the
Principal and such Principal's Portfolio Management Planning
Questionnaire (the "Questionnaire") and the portion of the Principal's
<PAGE> 16
Portfolio Assets to be invested in Municipal Securities in connection
with a contribution of additional capital or a reallocation of Portfolio
Assets;
(b) communicate such potential investment needs for Municipal Securities
to Nuveen, according to the Procedures;
(c) determine each Principal's potential sale needs for Municipal
Securities, based upon the Portfolio Investment Strategy selected by the
Principal and such Principal's Questionnaire and the portion of the
Principal's Portfolio Assets invested in Municipal Securities to be sold
in connection with a withdrawal of capital or a reallocation of Portfolio
Assets;
(d) communicate such potential sale needs for Municipal Securities to
Nuveen, according to the Procedures;
(e) following the purchase or sale of Municipal Securities by Nuveen,
timely communicate to Nuveen sufficient information regarding the
allocation of such purchases or sales to each Principal (including the
identity of each custodian and all necessary account information at such
custodian) to permit Nuveen to generate the necessary trade tickets
relating to such purchases or sales of Municipal Securities for the
Principal's account;
(f) following the purchase or sale of Municipal Securities by Nuveen,
timely communicate to each Principal's brokerage firm or custodian bank
sufficient information regarding the allocation of such purchases or
sales to the Principal's account to permit the custodian to generate the
necessary offsetting trade ticket relating to such purchase or sale of
Municipal Securities by Nuveen;
(g) following the purchase or sale of Municipal Securities by Nuveen,
communicate to Nuveen any remaining investment and/or sale needs for
Municipal Securities, according to the Procedures; and
(h) ensure that in allocating purchases of Municipal Securities to each
Principal's account, all investment restrictions imposed by such
Principal are adhered to;
4. provide systems access via a dedicated data line or network for multiple
Nuveen users in support of the on-line, real-time communication activities
described in item 3 above;
5. manage the Equity Portion in accordance with Dean's established investment
policies with respect to Equity Securities, the Portfolio Investment Strategy
selected by the Principal, as described in Portfolio Investment Strategies for
Tax-Advantaged Balanced Accounts, and any investment restrictions imposed by
the Principal, as described in the Questionnaire;
6. modify Dean's Questionnaire as necessary to reflect the inclusion of
Municipal Securities as the Bond Portion of each Principal's Portfolio Assets;
7. Compare the Questionnaire as completed by the Principal with the Portfolio
Investment Strategy selected by the Principal to confirm that the investment
objectives and risk/return tolerance of each are consistent;
8. establish new client accounts on Dean's account administration computer
systems, based upon account information obtained from the brokerage firm or
custodian bank at which the Principal's Portfolio
<PAGE> 17
Assets will be held, as specified by the Principal in the Investment Advisory
Agreement executed by Dean, Nuveen and the Principal;
9. evaluate on an on-going basis the allocation of each Principal's Portfolio
Assets in light of current and anticipated financial market conditions and
periodically reallocate such Portfolio Assets among Equity Securities,
Municipal Securities and Liquidity Assets in accordance with the Principal's
investment objectives, as described in the Principal's Questionnaire and the
Investment Advisory Agreement executed by Dean, Nuveen and the Principal;
10. if Principal has authorized Nuveen to invest any Liquidity Assets
(including Liquidity Assets that represent uninvested Portfolio Assets to be
allocated to the Equity Portion) in municipal auction rate preferred shares or
similar securities, advise Nuveen of the amount of Liquidity Assets available
for such investment;
11. reconcile periodically, pursuant to Dean's current procedures but no less
frequently than quarterly, each Principal's account records maintained in
Dean's account administration computer systems with the account records
maintained by the Principal's brokerage firm or custodian bank;
12. develop and maintain the form and content of quarterly account performance
reports in a manner mutually agreed upon by Dean and Nuveen to reflect
inclusion of Municipal Securities as the Bond Portion of a Principal's
Portfolio Assets;
13. produce and distribute quarterly performance reports to each Principal,
pursuant to Dean's current practices;
14. prepare and distribute year-end realized gain/loss reports to each
Principal, pursuant to Dean's current practices;
15. unless Principal has directed Dean to use a specified broker-dealer, assist
Principal to negotiate commissions and/or markups for the purchase and sale of
Equity Securities and select broker-dealers for execution of such purchases and
sales pursuant to Dean's normal policies and procedures, as such may be amended
from time to time, and consistent with the rules, regulations and publicly
available interpretations of the Advisers Act;
16. make available to Nuveen upon its request such information or copies of
Dean's investment records and ledgers with respect to the Equity Portion of
each Principal's Portfolio Assets as may be required to assist Nuveen in
achieving the investment objectives of the Tax-Advantaged Balanced Accounts,
and complying with any applicable laws, rules and regulations;
17. in the event that Dean or its affiliates purchases or sells Equity
Securities for their own or affiliated accounts or for the accounts of clients
other than the Principals, and at the same time Dean or its affiliates
purchases or sells the same Equity Securities with respect to the Portfolio
Assets, Dean will, in the event that all advisory clients of Dean and its
affiliates are unable to purchase or sell securities in the desired quantities,
allocate such transactions equitably among all such advisory clients (including
the Principals); and
18. cooperate with Nuveen in implementing the comprehensive marketing and
customer service programs described in Section 7(b) of the Agreement.
<PAGE> 18
EXHIBIT C
DEAN RESPONSIBILITIES WITH RESPECT TO MUNICIPAL ACCOUNTS
In connection with the operation of the Municipal Accounts by Dean and Nuveen,
Dean will be responsible for the provision of account administration and
reporting services, although Dean may seek the assistance of Nuveen in
fulfilling such responsibilities. Capitalized terms not otherwise defined in
this Exhibit shall have the meaning given to them in this Agreement of which
this Exhibit is a part. Dean's responsibilities with respect to the Municipal
Accounts are as follows:
1. develop and maintain, in a manner mutually agreed upon by Dean and
Nuveen, Dean's investment management and account administration computer
systems supporting the operation of the Business:
(a) to permit the accurate tracking and account reporting of the
Municipal Securities and Liquidity Assets comprising each Principal's
Portfolio Assets;
(b) to permit Nuveen to access electronically such current and historical
information on each Principal's account as Nuveen may reasonably request;
when such electronic access is not feasible or practicable, Dean will
make available such information to Nuveen on electronic media or other
media mutually agreed upon by Nuveen and Dean;
(c) to provide Nuveen with such information and in such detail as Nuveen
may reasonably request and as mutually agreed upon by Nuveen and Dean
related to activity in or performance of each Principal's account, that
would in Nuveen's view enhance the sales and marketing programs developed
to support the Municipal Accounts or to support the development of new
municipal products; and
(d) to enhance the operation of the Municipal Accounts by Nuveen, upon
the determination by Nuveen from time to time that such enhancements are
warranted;
2. develop and maintain, in a manner mutually agreed upon by Dean and Nuveen,
Dean's investment management computer systems to incorporate the procedures and
guidelines for the purchase and sale of Municipal Securities for each
Principal's account, described in Procedures and Guidelines Relating to the
Purchase and Sale of Municipal Securities, as may be amended from time to time
(the "Procedures"), and take the following actions with respect to the purchase
and sale of Municipal Securities for each Principal's account:
(a) determine each Principal's potential investment needs for Municipal
Securities, based upon the Portfolio Investment Strategy selected by the
Principal and such Principal's Portfolio Management Planning
Questionnaire (the "Questionnaire") and the portion of the Principal's
Portfolio Assets to be invested in Municipal Securities in connection
with a contribution of additional capital or a reallocation of Portfolio
Assets;
(b) communicate such potential investment needs for Municipal Securities
to Nuveen, according to the Procedures;
(c) determine each Principal's potential sale needs for Municipal
Securities, based upon the Portfolio Investment Strategy selected by the
Principal and such Principal's Questionnaire and the
<PAGE> 19
portion of the Principal's Portfolio Assets invested in Municipal
Securities to be sold in connection with a withdrawal of capital or a
reallocation of Portfolio Assets;
(d) communicate such potential sale needs for Municipal Securities to
Nuveen, according to the Procedures;
(e) following the purchase or sale of Municipal Securities by Nuveen,
timely communicate to Nuveen sufficient information regarding the
allocation of such purchases or sales to each Principal (including the
identity of each Principal's custodian and all necessary account
information at such custodian) to permit Nuveen to generate the necessary
trade tickets relating to such purchases or sales of Municipal Securities
for the Principal's account;
(f) following the purchase or sale of Municipal Securities by Nuveen,
timely communicate to each Principal's brokerage firm or custodian bank
sufficient information regarding the allocation of such purchases or
sales to the Principal's account to permit the custodian to generate the
necessary offsetting trade ticket relating to such purchase or sale of
Municipal Securities by Nuveen;
(g) following the purchase or sale of Municipal Securities by Nuveen,
communicate to Nuveen any remaining investment and/or sale needs for
Municipal Securities, according to the Procedures;
(h) ensure that in allocating purchases of Municipal Securities to each
Principal's account, all investment restrictions imposed by such
Principal are adhered to;
3. provide systems access via a dedicated data line or network for multiple
Nuveen users in support of the on-line, real-time communication activities
described in item 2 above;
4. establish new client accounts on Dean's account administration computer
systems, based upon account information obtained from the brokerage firm or
custodian bank at which the Principal's Portfolio Assets will be held, as
specified by the Principal in the Investment Advisory Agreement executed
between Nuveen and the Principal;
5. cooperate with Nuveen in connection with preparation by Nuveen of a
Questionnaire for Municipal Accounts;
6. reconcile periodically, pursuant to Dean's current procedures, each
Principal's account records maintained in Dean's account administration
computer systems with the account records maintained by the Principal's
brokerage firm or custodian bank;
7. develop and maintain the form and content of the quarterly account
performance reports as Nuveen may reasonably request;
8. produce and distribute quarterly performance reports to each Principal,
pursuant to Dean's current practices;
9. prepare and distribute year-end realized gain/loss reports to each
Principal, pursuant to Dean's current practices; and
10. cooperate with Nuveen in implementing the comprehensive marketing and
customer service programs described in Section 7(b) of the Agreement.
<PAGE> 20
EXHIBIT D
NUVEEN RESPONSIBILITIES WITH RESPECT TO TAX-ADVANTAGED BALANCED ACCOUNTS
In connection with the operation of the Tax-Advantaged Balanced Accounts by
Dean and Nuveen, Nuveen will be responsible for the provision of investment
advisory and trade execution services relating to Municipal Securities. Nuveen
will also provide Dean with assistance relating to the fulfillment of Dean's
responsibilities with respect to account administration and reporting services
as outlined in EXHIBIT B of this Agreement. Capitalized terms not otherwise
defined in this Exhibit shall have the meaning given to them in this Agreement
of which this Exhibit is a part. Nuveen's responsibilities with respect to the
Tax-Advantaged Balanced Accounts are as follows:
1. assist Dean in connection with the maintenance of Dean's investment
management and account administration systems to accurately track and generate
account statements for the Bond Portion and Liquidity Assets of each
Principal's Portfolio Assets. Such assistance may include, but will not be
limited to, information relating to the following:
(a) the operation of the municipal market, including organizational
structure, participants and general practices;
(b) the general features, characteristics, trading and pricing of
Municipal Securities; and
(c) the applicable regulatory and accounting guidelines affecting issuers
of and investors in Municipal Securities;
2. provide Dean with the Procedures and Guidelines for the Purchase and Sale of
Municipal Securities, as may be amended from time to time (the "Procedures"),
describing the procedures and guidelines for the purchase and sale of Municipal
Securities for each Principal's account;
3. assist Dean in connection with the incorporation of the Procedures into
Dean's investment management and account administration systems;
4. establish and administer a securities clearance operation to facilitate the
purchase and sale of Municipal Securities for each Principal's account;
5. maintain Nuveen's portfolio management and municipal securities trading
systems as necessary to accommodate the Procedures and to permit Nuveen to
perform on-going analysis, evaluation and surveillance of the Municipal
Securities held in a Principal's account;
6. manage the Bond Portion in accordance with Nuveen's established investment
policies with respect to Municipal Securities and the Portfolio Investment
Strategy selected for a Principal's account, as described in Portfolio
Investment Strategies for Tax-Advantaged Balanced Accounts;
7. assist Dean's modification of its Portfolio Management Planning
Questionnaire (the "Questionnaire") as necessary to reflect the inclusion of
Municipal Securities as the Bond Portion of each Principal's Portfolio Assets;
<PAGE> 21
8. assist Dean in evaluating each Principal's Questionnaire and in identifying
a Portfolio Investment Strategy for the Principal's account consistent with the
financial objective and risk/return tolerance as indicated by the Principal's
Questionnaire;
9. provide such information, assistance or recommendations as Dean may
reasonably request relating to current and anticipated municipal market
conditions so as to permit Dean to determine the initial allocation, and any
periodic subsequent reallocation, of each Principal's Portfolio Assets among
Equity Securities, Municipal Securities and Liquidity Assets, in accordance
with the Portfolio Investment Strategy selected by the Principal for its
account;
10. develop a municipal section for the Market and Financial Digest commentary
and a brief current summary to be included in the quarterly account performance
reports produced and distributed by Dean to each Principal;
11. report to Dean such information at such times and in such detail as Dean
may reasonably request, in order to permit Dean to confirm that investments
within the Bond Portion are in conformity with the investment objectives
established for the Portfolio Assets in the Investment Advisory Agreement
executed by Dean, Nuveen and each Principal;
12. furnish to Dean whatever statistical information Dean may reasonably
request with respect to investments in, or contemplated for, the Bond Portion
of each Principal's Portfolio Assets; inform Dean on a timely basis of
developments materially affecting the Municipal Securities; and furnish to Dean
from time to time whatever information Nuveen believes is appropriate or
desirable for such purpose;
13. negotiate commissions and/or markups for the purchase and sale of Municipal
Securities and select broker-dealers for execution of such purchases and sales
pursuant to Nuveen's normal policies and procedures, as such may be amended
from time to time, and consistent with the rules, regulations and publicly
available interpretations of the Advisers Act;
14. if requested by Principals, assist Principals in establishing commission
rates for directed brokerage transactions;
15. arrange for the clearing of purchases and sales of Municipal Securities
through a Clearing Agent (which Clearing Agent may be an affiliate of Nuveen)
in a manner which is consistent with its obligation to obtain on behalf of each
Principal the best execution of each trade;
16. make available to Dean upon its request such copies of Nuveen's investment
records and ledgers with respect to the Bond Portion of each Principal's
Portfolio Assets as may be required to assist Dean in achieving the investment
objectives of the Tax-Advantaged Balanced Accounts, and complying with any
applicable laws, rules and regulations;
17. in the event that Nuveen purchases or sells Municipal Securities for its
own or affiliated accounts or for the accounts of clients other than the
Principals, and at the same time Nuveen purchases or sells the same Municipal
Securities with respect to the Portfolio Assets, Nuveen will, in the event that
all advisory clients of Nuveen and its affiliates are unable to purchase or
sell securities in the desired quantities, allocate such transactions equitably
among all such advisory clients (including the Principals); and
18. cooperate with Dean in implementing the comprehensive marketing and
customer service programs described in Section 7(b) of the Agreement.
D-2
<PAGE> 22
EXHIBIT E
NUVEEN RESPONSIBILITIES WITH RESPECT TO MUNICIPAL ACCOUNTS
In connection with the operation of the Municipal Accounts by Dean and Nuveen,
Nuveen will be responsible for the provision of investment advisory and trade
execution services relating to Municipal Securities. Nuveen will also provide
Dean with assistance relating to the fulfillment of Dean's responsibilities
with respect to account administration and reporting services as outlined in
EXHIBIT C of this Agreement. Capitalized terms not otherwise defined in this
Exhibit shall have the meaning given to them in this Agreement of which this
Exhibit is a part. Nuveen's responsibilities with respect to the Municipal
Accounts are as follows:
1. assist Dean in connection with the modification of Dean's investment
management and account administration systems to accurately track and generate
account statements for the Municipal Securities and Liquidity Assets comprising
each Principal's Portfolio Assets. Such assistance may include, but not be
limited to, information relating to the following:
(a) the operation of the municipal market, including organizational
structure, participants and general practices;
(b) the general features, characteristics, trading and pricing of
Municipal Securities; and
(c) the applicable regulatory and accounting guidelines affecting issuers
of and investors in Municipal Securities;
2. maintain the Procedures and Guidelines for the Purchase and Sale of
Municipal Securities, as may be amended from time to time (the "Procedures"),
describing the procedures and guidelines for the purchase and sale of Municipal
Securities for each Principal's account;
3. assist Dean in connection with the incorporation of the Procedures into
Dean's investment management and account administration systems;
4. establish and administer a securities operation to facilitate the purchase
and sale of Municipal Securities for each Principal's account;
5. maintain Nuveen's portfolio management and municipal securities trading
systems as necessary to accommodate the Procedures and to permit Nuveen to
perform on-going analysis, evaluation and surveillance of the Municipal
Securities held in a Principal's account;
6. develop (with cooperation and assistance from Dean) a Portfolio Management
Planning Questionnaire to permit Nuveen to evaluate each Principal's investment
objectives and risk/return tolerance in connection with the determination of an
appropriate Portfolio Investment Strategy for the Principal's Portfolio Assets;
7. manage the Municipal Accounts in accordance with Nuveen's established
investment policies with respect to Municipal Securities, the Portfolio
Investment Strategy selected for a Principal's account, as
<PAGE> 23
described in Portfolio Investment Strategies for Municipal Accounts, and any
investment restrictions imposed by the Principal, as described in the Portfolio
Management Planning Questionnaire;
8. compare the Portfolio Management Planning Questionnaire as completed by the
Principal with the Portfolio Investment Strategy selected by Principal to
confirm that the investment objectives and risk return tolerance of each are
consistent;
9. provide such information and in such detail as Dean may reasonably request
in order to establish new client accounts on Dean's account administration
computer systems, based upon the information provided by the Principal in the
Investment Advisory Agreement executed between Nuveen and the Principal;
10. develop a municipal section for the Market and Financial Digest commentary
and a brief current summary to be included in the quarterly account performance
reports produced and distributed by Dean to each Principal;
11. negotiate commissions and/or markups for the purchase and sale of Municipal
Securities and select broker-dealers for execution of such purchases and sales
pursuant to Nuveen's normal policies and procedures, as such may be amended
from time to time, and consistent with the rules, regulations and publicly
available interpretations of the Advisers Act;
12. if requested by Principals, assist Principals in establishing commission
rates for directed brokerage transactions; and
13. arrange for the clearing of purchases and sales of Municipal Securities
through a Clearing Agent (which Clearing Agent may be an affiliate of Nuveen)
in a manner which is consistent with its obligation to obtain on behalf of each
Principal the best execution of each trade.
<PAGE> 24
EXHIBIT F
SCHEDULE OF INVESTMENT MANAGEMENT FEES
DIRECT COMMISSION ACCOUNTS
INDIVIDUAL ACCOUNT FEE SCHEDULE
<TABLE>
<CAPTION>
Tax-Advantaged Tax-Advantaged Balanced Municipal
Balanced Accounts Accounts-Select Sponsor Acounts
----------------- ----------------------- -------
Investment Investment Investment
Management Admin. Fee Management Admin. Fee Management Admin. Fee
Breakpoint Fee Reallowance Fee Reallowance Fee Reallowance
- - ---------- -------------------- ----------- -------------------- ----------- -------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
First $2 million 1.00% 0.200% 0.75% 0.150% 0.60% 0.120%
Next $1 million 0.70% 0.140% 0.75% 0.150% 0.50% 0.100%
Next $2 million 0.50% 0.100% 0.50% 0.100% 0.40% 0.080%
Next $5 million 0.40% 0.080% 0.40% 0.080% 0.35% 0.070%
Amounts Above $10 0.35% 0.070% 0.35% 0.070% 0.30% 0.060%
million
</TABLE>
Split of Investment Management Fees Net of Administration Fee
Reallowance
<TABLE>
<CAPTION>
Tax-Advantaged
Tax-Advantaged Balanced: Tax-Advantaged
Balanced: Capital Appreciation Balanced: Municipal
Capital Appreciation and Income Income Accounts
-------------------- -------------------- -------------------- --------
<S> <C> <C> <C> <C>
DEAN 50% 50% 50% 0%
NUVEEN 50% 50% 50% 100%
</TABLE>
Dean will distribute invoices with respect to both Tax-Advantaged
Balanced Accounts and Municipal Accounts. Dean will receive the
Investment Management Fee paid by Principals on both Tax-Advantaged
Balanced Accounts and Municipal Accounts. Upon receipt, Dean shall
remit to Nuveen, on a net basis and within 15 days of the end of each
month, that portion of such fees due Nuveen according to the foregoing
schedule. Dean shall provide Nuveen and its representatives and
advisers, including its independent auditors, with any information and
access to its books and records as may be reasonably requested by Nuveen
and its representatives and advisers, including its independent
auditors, in order to verify the accuracy of the payments made to it.
<PAGE> 1
-----------------------
THE JOHN NUVEEN COMPANY
-----------------------
ANNUAL REPORT 1995
-----------------------
<PAGE> 2
THE JOHN NUVEEN COMPANY was founded in Chicago in 1898 as an investment bank
specializing in underwriting municipal securities and offering financial advice
to municipalities. Since its inception, Nuveen has played a key role in the
development of the municipal bond market, which has become the most important
source of capital for the growth and improvement of the nation's cities,
counties, and states.
From this core discipline, Nuveen has evolved into one of the country's
leading specialists in designing, marketing, and managing a wide range of
high-quality tax-free investment products that provide secure income and
conservative capital management for prudent investors and their families.
Since 1960, more than 1,000,000 individuals have invested over $60 billion
in Nuveen's tax-free trusts and funds through independent broker-dealers,
banks, insurance companies, accountants, and financial planners.
The John Nuveen Company is listed on the New York Stock Exchange and trades
under the symbol "JNC."
<PAGE> 3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
In thousands exept per share data
- - -------------------------------------------------------------------------------------------
Year ended December 31 1991 1992 1993 1994 1995
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $180,238 $221,212 $245,234 $220,301 $236,230
Net income $ 47,886 $ 59,440 $ 70,444 $ 58,211 $ 70,620
Capital $218,193 $211,169* $275,200 $285,932 $322,856
Return on equity 28.1% 33.6% 33.3% 21.2% 24.7%
Earnings per share $ 1.31 $ 1.58 $ 1.76 $ 1.52 $ 1.87
- - -------------------------------------------------------------------------------------------
</TABLE>
[BAR CHART]
* Reflects the payment of a $65 million special cash dividend to The St. Paul
Companies, Inc. prior to the public offering of the firm's stock.
<PAGE> 4
Dear Shareholder:
We are very pleased and proud to report that in 1995 Nuveen achieved record net
income and earnings per share for the second time in the past three years.
Net income totaled $70.6 million, an increase of 21% over the $58.2 million
earned in 1994. This translates into earnings of $1.87 per share, compared with
$1.52 in the previous year. Revenues were a very healthy $236.2 million,
compared with $220.3 million in 1994.
These results represent a 25% return on beginning equity, in line with our
20-year average and well above the norm for our industry.
STRONG PRODUCT PERFORMANCE
Perhaps most gratifying, we were able to achieve these record results while
delivering superior performance to our fund investors. Based on share price, 50
of the 60 Nuveen exchange-traded funds posted total returns of more than 20%
for the year, and 12 reported returns in excess of 30%. As a comparison, the
widely followed Bond Buyer 20 Index of quality municipal bonds showed a 19%
gain in 1995.
In addition to above-market returns, our exchange-traded funds also continued
to outperform many of their competitors. At the end of 1995, Nuveen's
exchange-traded funds on average were trading at higher prices relative to
their net asset values than other sponsors' funds. This resulted in more than
$1 billion in additional market value for Nuveen fund shareholders.
While the generally rising bond prices experienced in 1995 provided a more
favorable environment than the falling prices of 1994, the prominent discussion
of various tax-reform proposals and competition from record-setting equity
markets produced their own set of challenges. Nuveen funds achieved strong
results over both of these years, with 11 of the 14 national Nuveen funds
ranked in the first third in total return for the two-year period. This
performance shows how these investments are fulfilling their goal of providing
investors with both superior returns and relatively low risk over a full market
cycle.
DISCIPLINED FINANCIAL MANAGEMENT
At Nuveen, we believe one of the keys to our success is our commitment to
prudent financial management, which includes adapting to changing market
conditions. In response to the recent market and business conditions, we have
carefully managed our discretionary spending, such as advertising and
promotional costs, resulting in a reduction in total expenses.
As a result, Nuveen's financial condition remains extremely strong. Our
balance sheet is nearly debt-free, with shareholders' equity now close to $325
million.
In July 1995, the Board of Directors announced a 12.5% dividend increase,
bringing the quarterly payout to $0.18 per share from $0.16. This was the
second $0.02 quarterly dividend increase within 18 months.
Nuveen also continued its program to repurchase Class A common shares.
In May, the company announced completion of the third phase of the plan and
initiated a fourth that is scheduled to repurchase an additional 600,000
shares. When this fourth phase is completed, the company will have bought a
total of 2.4 million shares. As of December 31, 1995, the company had
repurchased more than 2.1 million shares of Class A common stock, or 20% of the
Class A shares issued at the time of the 1992 initial public offering.
Dividend increases and share repurchases are just two of the many strategies
we're following to build shareholder value over time. Our financial strength
gives Nuveen the flexibility to continue balancing current returns to
shareholders with our longer-term commitment to growing and building our
businesses.
WELL POSITIONED FOR GROWTH
Record earnings, increased dividends, and a strong capital structure do not
spring by chance from the favorable events of one or two quarters. Rather, they
are the product of a series of decisions and activities pursued over a number
of years. Creating sustainable, long-term value is the core of our operating
strategy, and helps maintain our focus on the major opportunities that lie
ahead.
One example is our commitment to meeting the needs of mature investors.
Through the years, Nuveen funds and trusts have attracted a high concentration
of investors among those individuals who are approaching or are in their
retirement years. Currently, about 75% of Nuveen investors are over 55.
Our close identity with this age cohort puts us directly in the path of a
truly historic demographic phenomenon. During the next five years, the
population aged 55 and over is projected to grow at double the national
average. After the turn of the century, this group will grow at more than five
times the national rate.
History suggests that as people mature, they look increasingly for dependable
investments that provide steady, secure income. Nuveen, with its emphasis on
conservative, long-term, and value-oriented investments, is well positioned to
be an
2
<PAGE> 5
increasingly important partner for this rapidly growing segment of investors.
Our firm's brand recognition, marketing and product development skills, and
broad distribution relationships all help us serve the needs of this important
group.
To prepare for the opportunities like those represented by the country's
changing demographics, Nuveen is continuing to introduce new products and
services. In just the past year, this has included:
- - - Creating Nuveen Private Investment Management (NPIM), a new division within
the firm dedicated to providing personal portfolio management to more affluent
individual investors, a highly fragmented and under-served market. NPIM offers
all-municipal portfolios guided by experienced Nuveen managers, as well as
balanced municipal bond-equity portfolios managed jointly by Nuveen and Dean
Investment Associates, an equity manager based in Dayton, Ohio;
- - - Becoming the first major adviser-distributed mutual fund sponsor to offer
investments through both Schwab Institutional and Fidelity Investment Advisers
Group, thereby expanding the availability of Nuveen funds for the growing
number of investors working with fee-based financial planners; and
- - - Combining fund management and underwriting expertise to benefit investment
banking clients. We used our portfolio management expertise to convince the
AAA-rated Alaska Housing Finance Corporation to add key security features to a
major bond issue. This broadened potential distribution, lowered yields, and
earned "Deal of the Year" recognition from Institutional Investor magazine.
In addition, we maintained our focus in 1995 on the basic strengths that have
played such an important role in our success over the years. Two notable areas
include:
Continued commitment to research. Nuveen research reports on the various flat
tax proposals were lauded by Barron's and other news media as well reasoned and
courageous in addressing this evolving issue. Reports on Medicaid and the
demand for senior housing linked our understanding of the mature market with
the identification of investment risks and opportunities. Our analysis of the
20-year risk-adjusted, after-tax returns of various asset classes provided
financial advisers with greater insight in planning and structuring portfolios
to ensure their clients' future financial security.
Managing information and technology. The introduction of an internal,
computer-based data retrieval system moved us a step closer to bringing on-line
Nuveen information directly to our clients' desktops. In October, Nuveen was
recognized as one of Computerworld Magazine's annual Premier 100, an award that
placed us among the 100 most effective companies at managing information.
MANAGEMENT CONTINUITY
Nuveen's continuing commitment to building long-term value-for our adviser and
broker/dealer customers, our public finance clients, our fund and trust
investors, and our shareholders is and remains the key to our success. This
strategy, while simple to state, requires the dedication, hard work, and
coordination of our entire organization.
It also relies on long-term management continuity. As announced recently, on
July 1, 1996, Tim Schwertfeger and Tony Dean will assume senior management
responsibilities for leading the firm.
We have been working closely with Tim and Tony for a number of years to plan
for an orderly and smooth leadership transition. We have every confidence in
them, and believe they have the leadership capacity, management ability,
industry knowledge, and clear vision needed to serve investors and shareholders
well. We know they share the values that have guided this company successfully
for nearly 100 years. We are honored to have played a role in the company's
success to date, and look forward to its continued success in the future.
Richard J. Franke
---------------------------
Richard J. Franke, Chairman
Donald E. Sveen
--------------------------
Donald E. Sveen, President
[PHOTO OF RICHARD J. FRANKE & DONALD E. SVEEN]
Richard J. Franke & Donald E. Sveen
3
<PAGE> 6
FINANCIAL REVIEW Contents
5 Management's Discussion and Analysis
11 Consolidated Balance Sheets
12 Consolidated Statements of Income
13 Consolidated Statements of Changes in Stockholders'
Equity
14 Consolidated Statements of Cash Flows
15 Notes to Consolidated Financial Statements
21 Report of Independent Auditors
22 Five Year Financial Summary
4
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - DECEMBER 31, 1995
OVERVIEW
The Company's core businesses are asset management and the related credit
research and surveillance; the development, marketing, and distribution of
tax-free investment products; and investment banking. The profitability of each
of these lines of business, and the volume of sales of the Company's products,
are directly affected by many variables, including municipal bond new issue
supply, interest rates and expected changes in interest rate levels, investor
preferences for fixed-income investments versus equity or other investments,
the rate of inflation, and changes or expected changes in income tax rates and
laws.
The economy during 1995 can best be described as one of moderate to declining
economic growth with few signs of inflationary pressure. This environment
prompted the Federal Reserve Board to lower short-term interest rates in an
effort to avoid slipping into a recession. In contrast, during 1994, robust
economic growth and the resultant concern over unwanted inflation caused the
Board to increase interest rates on multiple occasions. The general economy and
the municipal market can be viewed in terms of the dramatic volatility of
long-term interest rates over the past two years. During 1995, yields on the
benchmark 30-year U.S. Treasury bond declined 190 basis points to 5.97% from
7.87% in 1994 while during 1994 yields increased over 180 basis points to a
high of 8.17%. The Bond Buyer 20, a frequently quoted index of long-term
municipal yields, declined 127 basis points to 5.44% in 1995 from 6.71% in
1994, while this index rose 178 basis points during 1994 to a high of 7.06%.
The movement of interest rates during 1995 and 1994 is shown in the
accompanying table.
Investors in 1995 were rewarded in both the equity and bond markets with
outstanding one-year returns. The Dow Jones Industrial Average, a popular
measure of the equity markets, recorded a return in excess of 30% during the
year. Total returns on many bond funds (including those sponsored by the
Company) during 1995 exceeded 20% and in some instances 30%. Higher returns in
the equity markets compared with the bond markets were in part caused by the
uncertainty over the Federal budget discussions in Washington and, for the
municipal markets, discussions of tax reform including "flat tax" proposals.
[CHART -- "YIELD COMPARISON--1993 TO 1995
30-YEAR U.S. TREASURY BONDS vs. BOND BUYER 20]
<TABLE>
<CAPTION>
Bond Bond
WEEK- Buyer 30 Year WEEK- Buyer 30 Year
ENDED 20 Treasury ENDED 20 Treasury
<S> <C> <C> <C> <C> <C>
1/1/93 6.17 7.37 7/8/94 6.27 7.68
1/8/93 6.17 7.46 7/15/94 6.22 7.54
1/15/93 6.19 7.34 7/22/94 6.22 7.55
1/22/93 6.16 7.29 7/29/94 6.22 7.38
1/29/93 6.10 7.19 8/5/94 6.16 7.54
2/5/93 6.04 7.15 8/12/94 6.25 7.49
2/12/93 5.97 7.12 8/19/94 6.22 7.42
2/19/93 5.85 7.00 8/26/94 6.21 7.47
2/26/93 5.60 6.90 9/2/94 6.16 7.48
3/5/93 5.47 6.73 9/9/94 6.18 7.7
3/12/93 5.58 6.86 9/16/94 6.24 7.76
3/19/93 5.71 6.80 9/23/94 6.37 7.78
3/26/93 5.78 6.93 9/30/94 6.43 7.81
4/2/93 5.86 7.04 10/7/94 6.5 7.9
4/8/93 5.84 6.85 10/14/94 6.44 7.82
4/16/93 5.70 6.75 10/21/94 6.49 7.97
4/23/93 5.67 6.79 10/28/94 6.64 8.04
4/30/93 5.75 6.92 11/4/94 6.83 8.1
5/7/93 5.71 6.84 11/11/94 6.96 8.15
5/14/93 5.69 6.94 11/18/94 7.06 8.16
5/21/93 5.77 7.02 11/25/94 7.03 7.93
5/28/93 5.73 6.97 12/2/94 6.9 8.01
6/4/93 5.73 6.97 12/9/94 6.88 7.85
6/11/93 5.73 6.97 12/16/94 6.77 7.84
6/18/93 5.61 6.80 12/23/94 6.74 7.82
6/25/93 5.57 6.70 12/30/94 6.71 7.87
7/2/93 5.55 6.67 1/6/95 6.66 7.85
7/9/93 5.55 6.63 1/13/95 6.53 7.78
7/16/93 5.50 6.53 1/20/95 6.44 7.88
7/23/93 5.61 6.69 1/27/95 6.49 7.71
7/30/93 5.65 6.56 2/3/95 6.40 7.61
8/9/93 5.61 6.46 2/10/95 6.18 7.66
8/13/93 5.45 6.37 2/17/95 6.18 7.58
8/20/93 5.40 6.21 2/24/95 6.11 7.52
8/27/93 5.35 6.13 3/3/95 6.08 7.54
9/3/93 5.35 5.93 3/10/95 6.18 7.46
9/10/93 5.24 5.96 3/17/95 6.06 7.36
9/17/93 5.27 6.03 3/24/95 6.09 7.44
9/24/93 5.30 5.96 3/31/95 6.07 7.41
10/1/93 5.30 5.98 4/7/95 6.03 7.35
10/8/93 5.30 5.91 4/13/95 6.01 7.33
10/15/93 5.20 5.78 4/21/95 5.96 7.33
10/22/93 5.20 5.97 4/28/95 6.06 7.33
10/29/93 5.31 5.96 5/5/95 6.10 7.17
11/5/93 5.45 6.20 5/12/95 5.96 6.98
11/12/93 5.46 6.14 5/19/95 5.92 6.92
11/19/93 5.46 6.33 5/26/95 5.83 6.75
11/26/93 5.49 6.30 6/2/95 5.79 6.53
12/3/93 5.46 6.23 6/9/95 5.75 6.72
12/10/93 5.33 6.23 6/16/95 5.86 6.61
12/17/93 5.36 6.27 6/23/95 5.82 6.53
12/24/93 5.34 6.2 6/30/95 5.97 6.64
12/31/93 5.28 6.33 7/7/95 5.91 6.52
1/7/94 5.34 6.22 7/14/95 5.81 6.6
1/14/94 5.31 6.28 7/21/95 5.99 6.95
1/21/94 5.29 6.27 7/28/95 5.97 6.9
1/28/94 5.28 6.21 8/4/95 6.03 6.91
2/4/94 5.25 6.34 8/11/95 6.07 6.99
2/11/94 5.36 6.4 8/18/95 6.12 6.9
2/18/94 5.42 6.62 8/25/95 6.08 6.7
2/25/94 5.58 6.7 9/1/95 5.98 6.6
3/4/94 5.84 6.83 9/8/95 5.90 6.59
3/11/94 5.88 6.89 9/15/95 5.83 6.48
3/18/94 5.84 6.91 9/22/95 5.91 6.59
3/25/94 5.92 7 9/29/95 6.00 6.49
4/1/94 6.07 7.08 10/6/95 5.88 6.42
4/8/94 6.34 7.24 10/13/95 5.82 6.31
4/15/94 6.22 7.27 10/20/95 5.72 6.35
4/22/94 6.19 7.22 10/27/95 5.76 6.36
4/29/94 6.16 7.29 11/3/95 5.70 6.27
5/6/94 6.18 7.53 11/10/95 5.68 6.33
5/13/94 6.32 7.49 11/17/95 5.65 6.23
5/20/94 6.14 7.3 11/24/95 5.65 6.25
5/27/94 6.13 7.38 12/1/95 5.54 6.09
6/3/94 6.09 7.26 12/8/95 5.35 6.05
6/10/94 5.96 7.3 12/15/95 5.51 6.09
6/17/94 6.04 7.44 12/22/95 5.51 6.1
6/24/94 6.16 7.51 12/29/95 5.44 5.98
7/1/94 6.28 7.6
</TABLE>
Municipal bond new issue volume, which is comprised of new-money financings,
refunding transactions, and issues that have an element of both new-money and
refunding was $156 billion in 1995 compared with $164 billion underwritten in
1994. New-money financings by issuers were $111 billion in 1995 and $116
billion in 1994. Refunding transactions, which are generally entered into for
the purpose of redeeming outstanding bond issues under conditions more
favorable to the issuer, such as lower financing rates, totaled $33 billion in
1995 compared with $39 billion in 1994 and $150 billion in 1993. The
accompanying graph contrasts new issue volume during the past five years:
<TABLE>
<CAPTION>
NEW ISSUE VOLUME
- - ---------------------------------------------
Total New Money Refunding
- - ---------------------------------------------
<S> <C> <C> <C>
1991 175 120 42
1992 234 112 91
1993 292 97 150
1994 164 116 38
1995 156 111 33
- - ---------------------------------------------
</TABLE>
5
<PAGE> 8
This market environment impacted the operations of the Company in several
ways. Lower interest rates caused an increase in the net asset value of the
funds managed by the Company, producing an increase in the investment advisory
fee income earned. Rising bond prices throughout the year also enabled the
Company to realize profits from the municipal bonds and unit investment trusts
(UITs) positioned to support ongoing UIT sales. Realized and unrealized
positioning profits for the year ended December 31, 1995, were $5.0 million in
contrast to losses of $8.2 million for the prior year when bond prices were
generally falling as interest rates rose. Continuing investor concern over the
potential effects that tax reform might have on municipal bond investments
lowered the demand for tax-free, fixed-income products throughout the industry
and for the Company resulting in a decline in sales and a reduction in
underwriting and distribution revenues. Consistent with industry trends, the
Company's investment banking group also experienced a reduction in the volume
of underwritings it initiated or participated in during 1995.
The Company's return on beginning equity was 24.7% in 1995, compared with
21.2% in 1994 and 33.3% in 1993. The Company's pretax operating income earned
during 1995 increased 20.3% to $113.8 million, compared with $94.6 million in
1994 and $111.7 million earned in 1993. The Company's net income for the year
ended December 31, 1995, increased 21.3% to a record $70.6 million from $58.2
million earned in 1994. Net income in 1994 was 17.3% less than 1993 net income
of $70.4 million. Earnings per share increased 23.0% to a record $1.87 in 1995
from $1.52 in 1994 and $1.76 in 1993. The Company increased its quarterly
dividend to $0.18 per share in the third quarter of 1995 from $0.16 per share
paid in each of the first two quarters of 1995 and each of the four quarters of
1994. The Company paid a $0.14 dividend in each quarter of 1993.
Gross revenues for the year ended December 31, 1995, increased 7.2% over
1994. This increase is attributable to the increased investment advisory fees
earned on the assets under management, the gains on municipal bond and UIT
inventory positions, and increased interest earnings, offset by a decline in
distribution revenues and decreased earnings of the Company's investment
banking division. Gross revenues reported in 1994 declined 10.3% from 1993,
largely due to the realization of substantial positioning losses on the
municipal bond and UIT inventory held to support ongoing UIT sales, coupled
with the decline in distribution revenues and investment banking revenues.
The market value of net assets under management increased during the year to
$32.4 billion at December 31, 1995, from $29.7 billion at December 31, 1994,
and $32.7 billion at December 31, 1993. The increase in net assets during 1995
was primarily the result of appreciation in the market value of the funds'
investment portfolios due to the decline in interest rates.
During 1995, the Company announced its entry into private asset management
with the launch of Nuveen Private Investment Management (NPIM). NPIM offers
individuals municipal portfolios managed by Nuveen portfolio managers as well
as balanced municipal bond-equity portfolios managed jointly by Nuveen and Dean
Investment Associates, an equity manager based in Dayton, Ohio.
Operating expenses decreased in each of the last two years. Compensation and
benefits decreased 3.3% in 1995, compared to 1994 reflecting lower costs
associated with the Company's 1992 Special Incentive Plan. Compensation and
benefits decreased 1.9% in 1994, compared to 1993 reflecting lower profit
sharing expense that is directly related to the corresponding decline in 1994
pretax revenues. Recognizing that 1995 and 1994 were periods of reduced demand
for tax-exempt packaged products, the Company in each year reduced advertising
and promotional budgets from the prior year's level. Income tax expense
increased in 1995, reflecting the corresponding increase in pretax operating
profits, and likewise decreased in 1994 from 1993 due to the decrease in pretax
operating earnings.
Sales of long-term tax-free investments in 1995 were $1.3 billion compared to
$2.0 billion during 1994 and $6.4 billion in 1993. Included in 1994 sales are
shares, with a value of approximately $403 million, issued in rights offerings
conducted in the first quarter of 1994 by two of the Company's exchange-traded
funds.
Consolidated equity capital at December 31, 1995, was $323 million compared
with $286 million in 1994 and $275 million in 1993. Book value per share at
December 31, 1995, was $8.80 compared with $7.68 and $7.12 at
<PAGE> 9
December 31, 1994, and 1993, respectively. On May 25, 1995, the Company
announced its intention to acquire an additional 600,000 shares of treasury
stock. Through the end of the year, 348,200 shares had been acquired under this
recent program. The Company held 1,978,829 shares of Class A common stock in
its treasury at December 31, 1995.
The following discussion and analysis contains important information that
should be helpful in evaluating the Company's results of operations and
financial condition, and should be read in conjunction with the consolidated
financial statements and related notes.
RESULTS OF OPERATIONS
Total advisory fee income realized during the fiscal year is directly related
to the weighted average market value of the assets managed by the Company's two
investment advisory subsidiaries, Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. Advisory fee income will increase with an increase
in the value of managed assets, either as a result of increases in the value of
portfolio investments, as occur during periods of decreasing interest rates, or
as a result of additional sales of the Company's products. Additional sales may
include shares of new funds or existing funds. Fund shares may be sold either
to new or existing shareholders, and may include reinvestment of fund
dividends. Shares may also be sold as a result of reinvestment of
distributions from unit investment trusts sponsored by the Company or the
issuance of additional shares pursuant to dividend reinvestment plans. Fee
income will decline when managed assets decline, as would occur when the value
of fund portfolio investments decreases in a rising interest-rate environment
or when open-end fund redemptions exceed sales.
Investment advisory fee income, net of expense reimbursements, is shown in
the following table for each of the last three years:
<TABLE>
<CAPTION>
NUVEEN MANAGED FUNDS
INVESTMENT ADVISORY FEES
- - ---------------------------------------------------------------
IN THOUSANDS
- - ---------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- - ---------------------------------------------------------------
<S> <C> <C> <C>
Mutual funds $ 23,912 $ 23,139 $ 21,126
Exchange-traded funds 153,777 152,078 145,197
Money market funds 5,023 6,423 9,631
- - ---------------------------------------------------------------
Total $182,712 $181,640 $175,954
- - ---------------------------------------------------------------
</TABLE>
Investment advisory fee income for the mutual funds and exchange-traded funds
increased in 1995 primarily as a result of the appreciation of the value of net
assets under management due to the increase in municipal bond prices. The
mutual funds also experienced an increase in fee revenue due to fund share
sales in 1995 and 1994. The sale of mutual fund and exchange-traded fund
products in 1994 and 1993 produced an increase in fee income in 1994, offset by
a decline in the value of the funds' net assets resulting from higher interest
rates in 1994. The money market funds experienced a decrease in fee revenue in
both 1995 and 1994 as the funds encountered overall net redemptions for the
year.
The following table summarizes net assets under management:
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MANAGED FUNDS
NET ASSETS UNDER MANAGEMENT
- - ---------------------------------------------------------------
IN MILLIONS
- - ---------------------------------------------------------------
DECEMBER 31, 1995 1994 1993
- - ---------------------------------------------------------------
<S> <C> <C> <C>
Mutual funds $ 5,457 $ 4,731 $ 4,962
Exchange-traded funds 25,784 23,731 25,805
Money market funds 1,113 1,242 1,954
- - ---------------------------------------------------------------
Total $32,354 $29,704 $32,721
- - ---------------------------------------------------------------
</TABLE>
The Company markets its tax-free investment products through a network of
registered representatives associated with unaffiliated firms including
broker-dealers, commercial banks, affiliates of insurance providers, financial
planners, accountants, consultants and financial advisers. Distribution
revenues include the portion of the sales charge the Company earns on UIT and
mutual fund sales and a portion of the underwriting commission on newly offered
exchange-traded products. The Company also realizes positioning profits or
losses from changes in the market value of UIT inventories and municipal bond
inventories held for future UIT products. These market values are directly
affected by the movement of interest rates during the period beginning with the
acquisition of a municipal bond for a future UIT and ending with the sale of
that UIT. In a declining interest rate environment, the Company could realize
gains from carrying fixed-income securities in its inventory and, conversely,
in a rising interest-rate environment, the Company could incur losses. The
Company manages this interest-rate risk by controlling inventory levels for
both municipal bonds and UITs and by timing
7
<PAGE> 10
deposits of new UITs to coincide closely with expected demand. In an
environment of generally declining interest rates, the Company will likely
realize positioning profits, as it did during 1995, in contrast to the losses
incurred during 1994 when interest rates were rising.
The following table summarizes the Company's revenues from distribution and
positioning of UITs.
<TABLE>
<CAPTION>
DISTRIBUTION REVENUES AND POSITIONING PROFITS
- - ---------------------------------------------------------------
IN THOUSANDS
- - ---------------------------------------------------------------
DECEMBER 31, 1995 1994 1993
- - ---------------------------------------------------------------
<S> <C> <C> <C>
Distribution revenues $14,198 $15,025 $20,148
Positioning profits (losses) 4,981 (8,237) 5,381
- - ---------------------------------------------------------------
Total $19,179 $ 6,788 $25,529
- - ---------------------------------------------------------------
</TABLE>
Sales of tax-free investment products, including shares issued pursuant to
two rights offerings in January of 1994, are shown below.
<TABLE>
<CAPTION>
NUVEEN TAX-FREE INVESTMENT PRODUCT SALES
- - ---------------------------------------------------------------
IN MILLIONS
- - ---------------------------------------------------------------
DECEMBER 31, 1995 1994 1993
- - ---------------------------------------------------------------
<S> <C> <C> <C>
Unit investment trusts $1,093 $1,235 $1,433
Mutual funds (1) 236 285 1,039
Money market funds (2) (129) (713) (680)
Exchange-traded funds (3) 19 470 3,962
- - ---------------------------------------------------------------
$1,219 $1,277 $5,754
- - ---------------------------------------------------------------
(1) Mutual fund sales, reinvestment of UIT principal and income distributions
and mutual fund dividend reinvestments, less redemptions.
(2) Money market fund sales, dividend reinvestments, less redemptions.
(3) 1995 balance represents dividend reinvestment; 1994 includes dividend
reinvestment and $403 million raised in rights offerings; 1993 includes
dividend reinvestment and $3,824 million of new fund sales.
</TABLE>
Consistent with industry trends, sales of municipal UITs and mutual funds
were lower in 1995 primarily due to lower interest rates, investor uncertainty
about potential changes to the tax code, and competition with a robust equity
market. Mutual fund sales include the reinvestments of UIT principal and
interest distributions and the reinvestment by mutual fund shareholders of fund
dividends. Reinvestment of UIT principal distributions were lower in 1995 and
1994, due to the lower volume of bond call activity experienced by
Company-sponsored UITs.
There were no new exchange-traded tax-exempt funds sold by the Company during
1994 or 1995. Shares issued by the exchange-traded funds during this period
were limited to reinvestment of fund dividends and the issuance of shares
pursuant to rights offerings in 1994. To the Company's knowledge, no new
exchange-traded tax-free funds were brought to market by other sponsors during
1995, and only a few, relatively small funds were brought to market during
1994. Whether this trend continues into 1996 will depend, in large part, on the
interest-rate environment, the prospects for tax reform, the relationship of
the current market prices to the net asset values of fund shares now trading in
secondary markets, as well as the extent to which the Company's products
encounter competition from other financial markets and tax-free products of
other sponsors. Industry sales of exchange-traded bond funds, including the
Company's exchange-traded products, are influenced by the level of and
relationship between taxable and tax-free interest rates, the relationship
between long-term and short-term rates, and the expectations of market
participants concerning the direction of future interest-rate levels.
Average money market net assets under management during the year ended
December 31, 1995, were $1.3 billion which compares with $1.8 billion during
the same period of 1994 and $2.5 billion in 1993. This segment of the mutual
fund industry remains highly competitive as more sponsors offer proprietary
funds, and low interest rates cause investors to redeem money market shares to
participate in the equity and other markets.
Investment banking revenues include both new issue underwriting profits and
fee income earned from various financial advisory activities. During 1995, the
industry experienced a 5% decline in the volume of new-issue underwritings,
including a significant decline in advance refunding issues. Due to the low
municipal bond new issuance, the Company experienced a decrease in activity
that is reflected in significantly lower underwriting profits in 1995. Fee
income earned from merger and acquisition activity in the healthcare industry
increased over the prior year.
Compensation and related benefits are the largest component of operating
expense and are comprised of three distinct categories: salary costs; profit
sharing; and the expense associated with the 1992 Special Incentive Plan.
Salary costs, which include such items as salaries, overtime, payroll taxes and
the costs associated with the various employee benefit plans, remained level in
1995. Such costs increased 7.5% in 1994. The Company had 537 full-time
employees at December 31, 1995, compared with 558 at December 31, 1994, and 565
at December 31, 1993. Profit sharing expense, which is derived by formula as a
percentage of pretax operating income, increased in 1995 as a
8
<PAGE> 11
result of increased operating income for the year and decreased in 1994.
Expenses resulting from the 1992 Special Incentive Plan recorded by the Company
during 1995 were $7.3 million compared with $14.1 million recorded in 1994 and
$12.8 million in 1993. Costs associated with the program are recorded as
compensation expense over the periods during which employees earned such
compensation, which typically coincides with the program vesting period. The
decrease in 1995 expense reflects completion of the amortization in July 1995
of certain of the 1992 restricted stock grants.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
Management believes that its capital resources are more than adequate to
finance its daily operations. The Company's primary businesses are not capital
intensive and the Company has no current need to obtain long-term financing.
Throughout 1995 and 1994, a large percentage of the Company's assets were
comprised of cash and cash equivalents, highly liquid temporary investments in
variable rate demand obligations (VRDOs) arising from remarketing activities,
and short-term receivables, including amounts related to the Company's managed
fund advisory services. The financing requirements of the Company are almost
entirely satisfied from equity capital as reported in its consolidated balance
sheet. The Company, however, occasionally utilizes available lines of credit,
which exceed $450 million, to satisfy additional periodic short-term financing
requirements arising from its obligations as remarketing agent for VRDOs and to
acquire U.S. government securities held for advance refunding escrow accounts.
The Company is remarketing agent for various issuers of VRDOs with an
aggregate principal value in excess of $1.3 billion at December 31, 1995.
Although remarketing agents, including the Company, are only obligated to use
their best efforts in locating purchasers for the VRDOs, they frequently
repurchase VRDOs for resale to other buyers within a few days. During temporary
periods of imbalance between supply and demand for VRDOs, the Company may hold
larger balances of such obligations for resale. Substantially all VRDOs for
which the Company is remarketing agent are secured by letters of credit
obtained by the issuer from top-rated third-party providers, including major
commercial banks and insurance companies. At December 31, 1995, and December
31, 1994, the Company held $198 million and $94 million, respectively, of
VRDOs, which are classified in its consolidated balance sheets as "Temporary
investments arising from remarketing obligations." In contrast, the Company's
average daily inventory of VRDOs was $36 million during 1995 and $28 million
during 1994.
As a function of its investment banking business, the Company periodically
acquires and temporarily holds U.S. government securities pending delivery to
municipal bond issuers' escrow accounts established for the purpose of
advance-refunding outstanding debt obligations. The Company acquires such
government securities only after the bond issuer has agreed to purchase them
from the Company at a stated price upon completion of the refunding
transaction. The Company records such securities at the amounts due from the
bond issuers under these contracts. The Company held $1.4 million of such U.S.
government securities at December 31, 1995 and none at December 31, 1994.
At December 31, 1995, the Company held in its treasury 1,978,829 shares of
its Class A Common Stock acquired in open market transactions as part of stock
repurchase programs to provide shares for the firm's employee stock option
program. On May 25, 1995, the Company authorized the acquisition of an
additional 600,000 shares of Class A Common Stock. Through the end of the year,
348,200 shares have been acquired under this recent program.
In January, 1995, to avail itself of the benefits of higher interest rates
available in the market, the Company committed approximately $130 million of
its available funds, previously invested short-term, in a portfolio of U.S.
government securities having an average maturity of approximately one year. The
Company has held and intends to hold these securities to maturity. The balance
of U.S. government securities owned at December 31, 1995, was $60.0 million.
In recent years, participants in the financial services industry including,
but not limited to, securities dealers and underwriters, mutual fund managers
and, notably, money market fund managers, have received much attention in the
media relating to the use of certain types of derivative financial instruments
in the management of
9
<PAGE> 12
portfolios for individual investors, as well as institutional and corporate
accounts. There are many different types of derivative investments available in
the market, including those derivatives whose market values respond to interest
rate changes with greater volatility than do others. In general, derivatives
used to speculate on the future course of interest rates pose the greatest
risk, while derivatives used for hedging purposes typically present less risk.
Furthermore, synthetic money market securities generally offer the least risk
to investors. Although the Company is not prohibited from investing in
derivative financial instruments, and may make such investments in the future,
it did not purchase any derivative securities in managing its operations during
1995 or 1994 and therefore, had no exposure to market risk from derivative
financial instruments. The Company's investment banking group did, on occasion,
act as financial adviser, broker, or underwriter to municipal or other
not-for-profit issuers with respect to transactions in interest rate swaps,
forward delivery transactions or other investment agreements. The Company's
investment advisory subsidiaries did not invest in derivative securities, other
than high quality synthetic money market securities, for the funds they manage.
John Nuveen & Co. Incorporated, 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, shall not exceed 15 to 1. At December 31, 1995, its
net capital ratio was 0.16 to 1 and its net capital was $255.4 million which is
$252.7 million in excess of the required net capital of $2.7 million.
During the year ended December 31, 1995, the Company's net worth increased by
$36.9 million after payment of dividends of $25.1 million and the purchase of
treasury stock of $16.2 million.
TAX REFORM
Tax reform has become a recent topic of heated national debate and is expected
to be a key campaign issue in the 1996 Presidential elections. Advocates of tax
reform have proposed various tax structures including a flat tax, a national
sales tax, a consumed income tax and a progressive income tax. At the present
time, management of the Company cannot predict with any certainty whether
provisions contained in any of these proposals will be adopted, and if adopted,
what impact such provisions may have on the operations of the Company.
INFLATION
The Company's assets are, to a large extent, liquid in nature and therefore not
significantly affected by inflation. However, inflation may result in
increases in the Company's 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 the Company's financial condition and results of
operations. A substantial decline in the value of fixed income investments
could adversely affect the net asset value of funds managed by the Company,
which in turn would result in a decline in investment advisory fee income.
10
<PAGE> 13
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- - --------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Cash $ 5,036 $ 4,777
Securities purchased under agreements to resell 11,000 114,000
Short-term investments, at cost which approximates market value - 2,813
Temporary investments arising from remarketing obligations 198,285 93,545
U.S. government securities purchased for municipal bond escrow accounts 1,385 -
Investment in U.S. government securities, at fair value 60,039 -
Receivables:
Nuveen management investment companies 19,633 20,954
Brokers and dealers 283 2,680
Customers 8,828 10,549
Interest 2,694 1,287
Other 3,387 4,922
Securities owned (trading account), at market value:
Nuveen tax-exempt unit trusts 39,069 51,880
Tax-exempt bonds and notes 12,308 2,606
Deferred income tax charges 12,919 8,292
Furniture, equipment, and leasehold improvements, at cost less accumulated depreciation
and amortization of $14,413 and $10,599, respectively 16,337 17,615
Other assets 11,309 12,927
- - --------------------------------------------------------------------------------------------------------------------
$402,512 $348,847
- - --------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Securities sold under agreements to repurchase $ 25,000 $ -
Security purchase obligations 7,174 14,639
Payables:
Brokers and dealers 767 7,509
Customers 524 573
Income taxes 4,355 190
Accrued compensation and other expenses 14,489 15,554
Deferred compensation 22,816 19,303
Other liabilities 4,531 5,147
- - --------------------------------------------------------------------------------------------------------------------
Total liabilities 79,656 62,915
- - --------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued - -
Class A Common stock, $.01 par value; 150,000,000 shares
authorized, 10,094,356 shares issued 101 101
Class B Common stock, $.01 par value; 40,000,000 shares
authorized, 28,560,000 shares issued 286 286
Additional paid-in capital 50,122 49,873
Retained earnings 319,705 274,606
Unamortized cost of restricted stock awards (1,611) (6,615)
- - --------------------------------------------------------------------------------------------------------------------
368,603 318,251
Less common stock held in treasury, at cost (1,978,829 and 1,431,629 shares, respectively) (45,747) (32,319)
- - --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 322,856 285,932
- - --------------------------------------------------------------------------------------------------------------------
$402,512 $348,847
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE> 14
CONSOLIDATED STATEMENTS OF INCOME
IN THOUSANDS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Investment advisory fees from assets under management $183,135 $181,918 $176,105
Underwriting and distribution of investment products 15,339 18,149 27,698
Positioning profits (losses) 4,981 (8,237) 5,381
Investment banking 10,334 11,793 19,937
Interest 19,445 13,686 12,434
All other 2,996 2,992 3,679
- - ----------------------------------------------------------------------------------------------------------------------
Total revenues 236,230 220,301 245,234
- - ----------------------------------------------------------------------------------------------------------------------
Expenses:
Compensation and benefits 80,366 83,079 84,665
Advertising and promotional costs 12,677 16,151 24,360
Occupancy and equipment costs 11,668 10,811 9,518
Interest 2,641 2,493 2,371
Other operating expenses 15,108 13,132 12,657
- - ----------------------------------------------------------------------------------------------------------------------
Total expenses 122,460 125,666 133,571
- - ----------------------------------------------------------------------------------------------------------------------
Income before taxes 113,770 94,635 111,663
- - ----------------------------------------------------------------------------------------------------------------------
Income taxes:
Current 47,777 40,597 44,695
Deferred (4,627) (4,173) (3,476)
- - ----------------------------------------------------------------------------------------------------------------------
Total income taxes 43,150 36,424 41,219
- - ----------------------------------------------------------------------------------------------------------------------
Net income $ 70,620 $ 58,211 $ 70,444
- - ----------------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------------------------
Average common and common equivalent shares outstanding 37,702 38,377 40,118
- - ----------------------------------------------------------------------------------------------------------------------
Earnings per common share $ 1.87 $ 1.52 $ 1.76
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 15
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
IN THOUSANDS
- - ----------------------------------------------------------------------------------------------------------------------
Unamortized
Cost of
Class A Class B Additional Restricted
Preferred Common Common Paid-In Retained Stock Treasury
Stock Stock Stock Capital Earnings Awards Stock Total
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 $ - $ 99 $ 286 $42,984 $192,785 $(24,985) $ - $211,169
Net income - - - - 70,444 - - 70,444
Cash dividends paid - - - - (21,616) - - (21,616)
Amortization of
restricted stock awards - - - - - 9,098 - 9,098
Exercise of stock options - 2 - 3,486 - - - 3,488
Other - - - 2,617 - - - 2,617
- - ----------------------------------------------------------------------------------------------------------------------
Balance at
December 31, 1993 - 101 286 49,087 241,613 (15,887) - 275,200
Net income - - - - 58,211 - - 58,211
Cash dividends paid - - - - (24,169) - - (24,169)
Amortization of
restricted stock awards - - - - - 9,272 - 9,272
Purchase of treasury stock - - - - - - (33,638) (33,638)
Exercise of stock options - - - 676 (1,049) - 1,319 946
Other - - - 110 - - - 110
- - ----------------------------------------------------------------------------------------------------------------------
Balance at
December 31, 1994 - 101 286 49,873 274,606 (6,615) (32,319) 285,932
Net income - - - - 70,620 - - 70,620
Cash dividends paid - - - - (25,116) - - (25,116)
Issuance of restricted
stock awards - - - - 36 (719) 683 -
Amortization of
restricted stock awards - - - - - 5,723 - 5,723
Purchase of treasury stock - - - - - - (16,182) (16,182)
Exercise of stock options - - - - (441) - 2,071 1,630
Other - - - 249 - - - 249
- - ----------------------------------------------------------------------------------------------------------------------
Balance at
December 31, 1995 $ - $ 101 $ 286 $50,122 $319,705 $ (1,611) $(45,747) $322,856
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
IN THOUSANDS
- - ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 70,620 $ 58,211 $ 70,444
Adjustments to reconcile net income to net cash provided
from (used for) operating activities:
Deferred income taxes (4,627) (4,173) (3,476)
Depreciation and amortization 4,598 3,944 2,655
Net (increase) decrease:
Accrued investment advisory fees 1,321 2,276 (9,557)
Accrued interest receivable (1,291) 557 (370)
Accounts receivable other 1,635 5,013 (807)
Net increase (decrease):
Current taxes payable 4,414 (4,476) 1,213
Accrued compensation and other expenses (1,064) 1,594 (6,841)
Net change in receivables and payables from/to brokers, dealers,
customers, and other assets/other liabilities (1,432) (3,198) (3,845)
Amortization of restricted stock awards 5,723 9,272 9,098
Net (increase) decrease in assets:
Temporary investments arising from remarketing obligations (104,740) (33,415) 88,155
U.S. government securities (escrow accounts) (1,385) 175,695 (166,244)
Securities owned (trading account) 3,109 15,369 (1,346)
Net increase (decrease) in liabilities:
Security purchase obligations (7,465) 9,141 1,133
Deferred compensation 3,513 1,456 3,978
Other - 676 -
- - ----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) operating activities (27,071) 237,942 (15,810)
- - ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net payments on short-term borrowings:
Securities sold under agreements to repurchase 25,000 (80,383) 80,383
Secured short-term bank loans - - (20,000)
Dividends paid (25,116) (24,169) (21,616)
Proceeds from stock options exercised 1,528 270 3,488
Acquisition of treasury stock (16,355) (32,739) -
- - ----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (14,943) (137,021) 42,255
- - ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of U.S. Treasury securities (126,854) (7,647) (4,844)
Proceeds from maturity of U.S. Treasury securities 69,513 9,678 4,796
Purchases of office furniture and equipment (3,350) (6,017) (9,040)
Proceeds from sale of office furniture and equipment 29 152 362
Other (65) 3,135 (916)
- - ----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (60,727) (699) (9,642)
- - ----------------------------------------------------------------------------------------------------------------------
Increase/(decrease) in cash and cash equivalents (102,741) 100,222 16,803
Cash and cash equivalents:
Beginning of year 118,777 18,555 1,752
- - ----------------------------------------------------------------------------------------------------------------------
End of year $ 16,036 $ 118,777 $ 18,555
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Information and Basis of Presentation
The consolidated financial statements include the accounts of The John Nuveen
Company (together with its subsidiaries, the "Company" or "Nuveen") and its
wholly owned subsidiaries, John Nuveen & Co. Incorporated ("Nuveen & Co."),
Nuveen Advisory Corp. ("Nuveen Advisory"), and Nuveen Institutional Advisory
Corp. ("Nuveen Institutional Advisory"). The Company is majority owned by The
St. Paul Companies. All material intercompany accounts and transactions have
been eliminated in consolidation.
Nuveen & Co., a registered broker and dealer in securities under the
Securities Exchange Act of 1934, trades, underwrites, and markets municipal
bonds, and is sponsor/underwriter of the Nuveen tax-exempt unit trusts (a
series of unit investment trusts) and Nuveen tax-exempt open-end and
exchange-traded (closed-end) management investment companies (funds). Nuveen
Advisory and Nuveen Institutional Advisory are registered investment advisers
under the Investment Advisers Act of 1940 and their principal business is
providing investment advice to and administering the business affairs of the
Nuveen family of management investment companies. Nuveen Institutional Advisory
also provides investment management services for individuals and public utility
nuclear power plant decommissioning and postretirement benefits trust funds.
Certain amounts in the prior year financial statements have been reclassified
to correspond to the 1995 presentation. These reclassifications had no effect
on net income or retained earnings as previously reported for those years.
Securities Transactions
Securities transactions are recorded on a settlement date basis, which is
generally three business days after the trade date. Securities owned (trading
accounts) are valued at market value and realized and unrealized gains and
losses are reflected in income. Profits and losses are accrued on unsettled
securities transactions based on trade dates and, to the extent determinable,
on underwriting commitments, purchase and sale commitments of when-issued
securities, and delayed delivery contracts.
In connection with underwriting activities, contracts
are entered into with other brokers and dealers to jointly purchase and sell
securities. When the Company takes possession of a portion or all of the
securities purchased for such "joint accounts," it records as inventory its
share of such securities.
In the normal course of business, the Company purchases municipal bonds, unit
investment trusts, and, from time to time, U.S. government obligations. The
Company also invests funds not currently used in its operations in securities
purchased under agreements to resell. At December 31, 1995, the Company's
inventory of securities owned did not contain any significant concentrations of
credit risk relating to either individual issues or to issuers (or groups of
issuers) located in any state or region of the country.
Temporary Investments Arising from
Remarketing Obligations
The Company is remarketing agent for various issuers of variable rate demand
obligations (VRDOs) with an aggregate principal value in excess of $1.3 billion
at December 31, 1995. Although remarketing agents, including the Company, are
only obligated to use their best efforts in locating purchasers for the VRDOs,
they frequently purchase VRDOs for resale to other buyers within a few days.
During temporary periods of imbalance between supply and demand for VRDOs, the
Company may hold substantial amounts of such obligations for resale. The
Company has come to expect such imbalances at year end and, to a lesser extent,
at each calendar quarter end. Substantially all VRDOs for which the Company is
remarketing agent are secured by letters of credit obtained by the issuer from
top rated third party providers including major commercial banks and insurance
companies. At December 31, 1995, and 1994, the Company held VRDOs with a cost
and market value of $198.3 million and $93.5 million, respectively. In
comparison, the Company's average daily temporary investment in VRDOs was $35.8
million during 1995 and $27.6 million during 1994.
Securities Purchased Under Agreements to Resell and
Securities Sold Under Agreements to Repurchase
Securities purchased under agreements to resell and securities sold under
agreements to repurchase are treated as collateralized financing transactions
and are carried at the amounts at which such securities will be subsequently
resold or reacquired, including accrued interest, as specified in the respective
agreements. The Company's exposure to credit risks associated with the
nonperformance of counterparties in fulfilling these contractual obligations can
be directly impacted by market fluctuations that may impair the counter-
15
<PAGE> 18
parties' ability to satisfy their obligations. It is the Company's policy to
take possession of the securities underlying the agreements to resell. The
Company monitors the value of these securities daily and, if necessary, obtains
additional collateral to assure that the agreements are fully secured.
The Company utilizes resale agreements as a vehicle to invest capital not
required to fund daily operations. The level of such investments will fluctuate
on a daily basis as the Company commits capital to carry temporary investments
in VRDOs and inventory positions and to finance new issue municipal
underwritings. Such agreements typically mature on the day following the day in
which the Company enters into such agreements. Since these agreements are
highly liquid investments, readily convertible to cash, and mature in less than
three months, the Company includes these amounts in cash equivalents for cash
flow purposes.
U.S. Government Securities Purchased for
Municipal Bond Escrow Accounts
Related to its investment banking business, the Company periodically acquires
and temporarily holds U.S. government securities pending delivery to municipal
bond issuers' escrow accounts established for the purpose of advance refunding
outstanding debt obligations. The Company purchases such government securities
only after the bond issuer has agreed to purchase them at a stated price upon
completion of the refunding transaction. The Company records such securities at
the amounts due from the bond issuers under these contracts. At December 31,
1995, the contractual and market value of government securities held was $1.4
million. At December 31, 1994, the Company did not hold any U.S. government
securities purchased for municipal bond escrow accounts.
Furniture, Equipment, and Leasehold Improvements
Furniture and equipment, primarily computer equipment, are depreciated on a
straight-line basis over estimated useful lives ranging from three to ten
years. Leasehold improvements are amortized over the lesser of the economic
useful life of the improvement or the remaining term of the lease.
Security Purchase Obligations
As sponsor/underwriter of the Nuveen tax-exempt unit trusts, the Company enters
into trust agreements that obligate it to purchase certain municipal
when-issued bonds reported as security purchase obligations on the consolidated
balance sheets, and deliver such bonds together with any "regular way" bonds on
hand or receivable from brokers to the trustee. The commitments to deliver
these bonds are secured by irrevocable bank letters of credit drawn by the
Company in favor of the trustee. These letters of credit are collateralized by
securities owned by the Company. The liabilities reported in the consolidated
balance sheets are the amounts the Company is contractually obligated to pay at
the future settlement date of the purchase transactions, including interest
accrued through the balance sheet dates.
Derivative Financial Instruments
In October 1994, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FASB) No. 119, Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including futures, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Company is not
prohibited from investing in derivative financial instruments, and may make
such investments in the future, it did not purchase any derivative securities
in managing its operations during 1995 or 1994 and therefore, had no exposure
to market risk from derivative financial instruments. The Company's investment
banking group, however, acts as financial adviser, broker, or underwriter to
municipal or other not-for-profit issuers with respect to transactions in
interest rate swaps, forward delivery transactions or other investment
agreements.
Advertising and Promotional Costs
Advertising and promotional costs include amounts related to the marketing and
distribution of specific products offered by the Company as well as expenses
associated with promoting the brand name and Company image. The Company's
policy is to expense such costs as incurred.
Supplemental Cash Flow Information
The Company paid interest of $1.4 million in 1995, $2.4 million in 1994 and
$1.7 million in 1993.
2. INCOME TAXES
The provision for income taxes is different from that which would be computed
by applying the statutory federal income tax rate to income before taxes. The
principal reasons for these differences are as follows:
16
<PAGE> 19
<TABLE>
- - --------------------------------------------------------------
1995 1994 1993
- - --------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate applied
to income before taxes 35.0% 35.0% 35.0%
State and local income taxes,
net of federal income
tax benefit 4.1 4.5 4.0
Tax-exempt interest income,
net of disallowed
interest expense (1.4) (1.4) (1.7)
Other, net .2 .4 (.4)
- - --------------------------------------------------------------
Effective tax rate 37.9% 38.5% 36.9%
- - --------------------------------------------------------------
</TABLE>
The tax effect of significant items that gives rise to the net deferred tax
asset recorded on the Company's consolidated balance sheets are shown below:
<TABLE>
<CAPTION>
IN THOUSANDS
- - ---------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- - ---------------------------------------------------------------------------
<S> <C> <C>
Gross deferred tax asset:
Deferred compensation $ 9,404 $ 7,991
Accrued postretirement
benefit obligation 2,209 2,013
Unfunded accrued pension cost
(nonqualified plan) 1,217 1,085
Book amortization in excess of tax amortization 1,235 841
Other 647 801
- - ---------------------------------------------------------------------------
Gross deferred tax asset 14,712 12,731
- - ---------------------------------------------------------------------------
Gross deferred tax liability:
Special Incentive Plan 296 3,162
Tax depreciation in excess of book depreciation 723 727
Prepaid pension costs (qualified plan) 436 427
State taxes 263 17
Other 75 106
- - ---------------------------------------------------------------------------
Gross deferred tax liability 1,793 4,439
- - ---------------------------------------------------------------------------
Net deferred tax asset $12,919 $ 8,292
- - ---------------------------------------------------------------------------
</TABLE>
The future realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary
differences become deductible. Management believes it is more likely than not
the Company will realize the benefits of these future tax deductions.
Not included in income tax expense for 1995, 1994, and 1993 are income tax
benefits of $249,000, $110,000, and $2,617,000, respectively, attributable to
the vesting of restricted stock and the exercise of stock options. Such amounts
are reported in the consolidated statements of changes in stockholders' equity.
Federal and state income taxes paid for the years ending December 31, 1995,
1994, and 1993, amounting to $43,375,000, $45,065,000, and $43,528,000,
respectively, include required payments on estimated taxable income and final
payments of prior year taxes required to be paid upon filing the final federal
and state tax returns, reduced by refunds received, if any.
3. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company enters into when-issued, delayed
delivery, and underwriting commitments. Estimated profits and losses on those
commitments are reflected in the consolidated financial statements at year end.
Rent expense for office space and equipment was $6,085,000, $5,965,000, and
$5,917,000 for the years ended December 31, 1995, 1994, and 1993, respectively.
Minimum rental commitments for office space and equipment, including estimated
escalation for insurance, taxes, and maintenance for the years 1996 through
2003, the last year for which there is a commitment, are as follows:
<TABLE>
<CAPTION>
IN THOUSANDS
- - --------------------------------------------------------------------------
Year Commitment
- - --------------------------------------------------------------------------
<S> <C>
1996 $ 6,682
1997 6,619
1998 6,565
1999 6,462
2000 1,873
Thereafter 1,805
- - --------------------------------------------------------------------------
</TABLE>
In connection with rights offerings made on behalf of two funds managed by
Nuveen Advisory, certain legal actions have been filed by fund shareholders
against the Company, Nuveen Advisory, and directors and officers of the funds,
alleging violation of federal and state laws and the funds' articles of
incorporation. The Company is vigorously defending the litigation and has
asserted substantial defenses. While the outcome of this litigation cannot be
predicted with any certainty, based on current knowledge, the Company is of the
opinion that such litigation will not have a material adverse effect on the
Company's financial condition, results of operations, or liquidity.
4. EMPLOYEE RETIREMENT AND INCENTIVE COMPENSATION PROGRAM
The Company has a noncontributory retirement plan covering substantially all
employees, including employees of its subsidiaries. Pension benefits are based
on years of service and the employee's average compensation during the highest
consecutive five years of the employee's last ten years of employment. The
Company's funding policy is to con-
17
<PAGE> 20
tribute annually at least the minimum amount that can be deducted for federal
income tax purposes.
The following table sets forth the components of the net pension expense
(benefit) as reflected in the consolidated statements of income:
<TABLE>
<CAPTION>
IN THOUSANDS
- - ---------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994 1993
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the year $ 750 $ 854 $ 723
Interest cost on projected
benefit obligation 960 1,044 971
Actual return on plan assets (3,626) 1,034 (2,016)
Net amortization 1,889 (2,912) 307
- - ---------------------------------------------------------------------------------------
Net pension expense (benefit) $ (27) $ 20 $ (15)
- - ---------------------------------------------------------------------------------------
</TABLE>
The following table summarizes the funded status at December 31, 1995, and
1994. Prepaid pension cost is recorded in other assets on the consolidated
balance sheets.
<TABLE>
<CAPTION>
IN THOUSANDS
- - ---------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value, primarily common
stocks, U.S. government obligations, and
corporate bonds $21,259 $17,882
- - ---------------------------------------------------------------------------------------
Actuarial present value of benefits for services
rendered to date:
Accumulated benefits based on salaries paid
to date:
Vested 11,160 9,442
Nonvested 648 683
- - ---------------------------------------------------------------------------------------
Accumulated benefit obligation 11,808 10,125
Additional benefits based on estimated
future salary levels 3,333 3,495
- - ---------------------------------------------------------------------------------------
Projected benefit obligation 15,141 13,620
- - ---------------------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 6,118 4,262
Unrecognized net asset at
January 1, 1987, being recognized over 15 years (1,729) (2,020)
Unrecognized net gain from past experience (3,150) (1,018)
Unrecognized prior service cost (180) (192)
- - ---------------------------------------------------------------------------------------
Prepaid pension cost $ 1,059 $ 1,032
- - ---------------------------------------------------------------------------------------
</TABLE>
The funded status is determined using assumptions at the end of the year.
Pension cost is determined using assumptions at the beginning of the year.
Assumptions as of December 31 used to determine projected benefit obligations
and pension costs are as follows:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994 1993
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7 1/4% 8% 7 1/4%
Rate of increase in compensation 5 1/2% 6% 6%
Expected rate of return on plan assets 8% 8% 8%
- - ---------------------------------------------------------------------------------------
</TABLE>
The Company also maintains a noncontributory pension plan for certain employees
whose pension benefits exceed the Section 415 limitations of the Internal
Revenue Code. Pension benefits for this plan follow the vesting provisions of
the funded plan. Funding is not made under this plan until benefits are paid.
The following table sets forth the components of the net pension expense for
the unfunded plan as reflected in the consolidated statements of income:
<TABLE>
<CAPTION>
IN THOUSANDS
- - ---------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994 1993
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the year $ 26 $ 29 $ 7
Interest cost on projected
benefit obligation 230 224 235
Net amortization 78 132 112
- - ---------------------------------------------------------------------------------------
Net pension expense $334 $385 $354
- - ---------------------------------------------------------------------------------------
</TABLE>
The following table reconciles the accumulated benefit obligation of the
unfunded plan at December 31, with the amount of liability included in accrued
compensation and other expenses in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
IN THOUSANDS
- - ---------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits
for services rendered to date:
Accumulated benefits
based on salaries paid to date,
all vested benefits $3,072 $2,889
Additional benefits
based on estimated future salary levels 251 219
- - ---------------------------------------------------------------------------------------
Projected benefit obligation 3,323 3,108
Unrecognized net (gain) loss from past experience 554 547
Unrecognized prior service cost (270) (270)
Unrecognized net obligation
at January 1, 1987, being
recognized over 15 years (653) (765)
- - ---------------------------------------------------------------------------------------
Unfunded plan accrued pension cost $2,954 $2,620
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligations
were the same rates as disclosed under the funded pension plan.
The Company has a profit sharing plan that covers substantially all employees,
including employees of its subsidiaries. Amounts determinable under the plan
are contributed in part to a profit sharing trust qualified under the Internal
Revenue Code with the remainder paid as cash bonuses.
18
<PAGE> 21
The Company has a nonqualified deferred compensation program whereby certain
key employees can elect to defer receipt of all or a portion of their cash
bonus until retirement, termination, death, or disability. The deferred
compensation liabilities incur interest expense at the prime rate.
5. POSTRETIREMENT BENEFITS OTHER THAN PENSION
The Company currently maintains plans providing certain life insurance and
health care benefits for retired employees and their eligible dependents. A
portion of the cost of these benefits is shared by the Company and the retiree.
The following table sets forth the components of the net postretirement
benefit expense as reflected in the consolidated statements of income:
<TABLE>
<CAPTION>
IN THOUSANDS
- - -------------------------------------------------------------
DECEMBER 31, 1995 1994 1993
- - -------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during
the year $246 $295 $323
Interest cost-on accumulated benefit
obligation 335 332 329
Net amortization (19) -- --
- - -------------------------------------------------------------
Net postretirement benefit expense $562 $627 $652
- - -------------------------------------------------------------
</TABLE>
The following table reconciles the accumulated postretirement benefit obligation
with amounts included in accrued compensation and other expenses in the
Company's consolidated balance sheets:
<TABLE>
<CAPTION>
IN THOUSANDS
- - ------------------------------------------------------------------
December 31, 1995 1994
- - ------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees eligible for benefits $1,320 $1,404
Fully eligible active plan participants 845 665
Other active plan participants 3,139 2,119
- - ------------------------------------------------------------------
Accumulated postretirement benefit obligation 5,304 4,188
Unrecognized net gain 57 673
- - ------------------------------------------------------------------
Accrued postretirement benefit cost $5,361 $4,861
</TABLE>
An 11.5% and 9.5% annual rate of increase in the per capita costs of covered
medical benefits for pre-65 and post-65 participants, respectively, was assumed
for 1995. These rates gradually decrease to 5.5% by the year 2002. Increasing
the assumed health care cost trend rates by one percentage point in each year
would result in an increase in the Accumulated Postretirement Benefit Obligation
(APBO) as of December 31, 1995, of $816,000 and an increase in the aggregate of
the service cost and interest cost for the period ended December 31, 1995, of
$120,000. A discount rate of 7.25% was used to determine the APBO.
6. SPECIAL INCENTIVE PLAN
In 1992, in connection with its public offering of stock, the Company issued
common stock and deferred units to certain employees pursuant to the Nuveen
1992 Special Incentive Plan (1992 Plan). During 1995, the Company issued 30,000
shares of restricted stock on terms substantially identical to the terms of the
1992 Plan. Awards issued are subject to restrictions on transferability, a risk
of forfeiture, and certain other terms and conditions. The value of such awards
is reported as compensation expense during the period beginning on the date of
grant and ending on the last vesting date. Included in stockholders' equity at
December 31, 1995, is $1,611,000 of unamortized cost relating to the issuance
of restricted stock.
The Company has also granted certain employees options to purchase the
Company's Class A stock at a price equal to the market price of the stock on
the day the options were granted. Options granted before 1995 were issued in
connection with the initial public offering of the Company's stock and were
granted at $18 per share, the public offering price of the Company's stock.
These options vest fully on July 1, 1996 and remain exercisable through May 27,
2002. During 1995, the Company granted options for 50,000 shares of Class A
stock at a price of $24 per share. These options vest in quarterly installments
through July 1, 1999 and remain exercisable through May 27, 2002.
The following table sets forth activity relating to the number of shares
covered by stock options:
<TABLE>
<CAPTION>
IN THOUSANDS
- - ------------------------------------------------------------------
DECEMBER 31, 1995 1994 1993
- - ------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at
beginning of year 3,222,100 3,387,100 3,617,000
Granted 50,000 -- --
Exercised (90,500) (165,000) (193,788)
Forfeited (15,000) -- (36,112)
- - ------------------------------------------------------------------
Options outstanding at
end of year 3,166,600 3,222,100 3,387,100
- - ------------------------------------------------------------------
Options exercisable at 2,643,000 1,968,000 1,253,000
end of year
- - ------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
7. COMMON STOCK REPURCHASES
During 1993, the Company initiated a program to repurchase 500,000 shares of
Class A Common Stock in open market transactions to provide for the firm's
employee stock option program. During 1994 and 1995, the Company continued this
program by authorizing additional purchases of 1,300,000 and 600,000,
respectively. As of December 31, 1995, the Company has acquired 2,148,200
shares of treasury stock.
8. NET CAPITAL REQUIREMENT
Nuveen & Co. 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, shall not exceed 15 to 1. At December 31, 1995, the
Company's net capital ratio was 0.16 to 1 and its net capital was $255,367,000
which is $252,705,000 in excess of the required net capital of $2,662,000.
9. QUARTERLY RESULTS (UNAUDITED)
The following tables set forth selected quarterly financial information for each
quarter in the two year period ending December 31, 1995.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 1995
- - ------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- - ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $57,011 $57,926 $58,873 $62,420
Net income 15,528 15,734 17,850 21,508
Per common share:
Net income .41 .42 .47 .57
Cash dividends .16 .16 .18 .18
Stock price range:
High 24 1/4 24 3/4 24 3/4 27 1/4
Low 22 3/4 20 3/4 22 1/2 23 1/2
- - ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 1994
- - ------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- - ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $54,925 $54,905 $57,169 $53,302
Net income 14,262 14,688 15,332 13,929
Per common share:
Net income .37 .38 .40 .37
Cash dividends .16 .16 .16 .16
Stock price range:
High 27 1/8 23 3/4 22 7/8 23
Low 21 1/2 19 3/4 19 1/8 19 3/4
- - ------------------------------------------------------------------
</TABLE>
The John Nuveen Company Class A Common Stock, representing approximately 22% of
the Company's issued and outstanding common stock at December 31, 1995, is
listed on the New York Stock Exchange under the symbol "JNC." Trading of the
Company's Class A Common Stock began on May 20, 1992. At December 31, 1995,
there were approximately 4,200 shareholders of record. There are no
restrictions on the Company's present ability to pay dividends on its common
stock.
20
<PAGE> 23
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
THE JOHN NUVEEN COMPANY:
We have audited the accompanying consolidated balance sheets of The John Nuveen
Company (the Company) and subsidiaries as of December 31, 1995, and 1994, and
the related consolidated statements of income, changes in stockholders' equity,
and cash flows for each of the years in the three-year period ended December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The John Nuveen
Company and subsidiaries as of December 31, 1995, and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Chicago, Illinois
January 17, 1996
21
<PAGE> 24
FIVE YEAR FINANCIAL SUMMARY
IN THOUSANDS, UNLESS OTHERWISE INDICATED
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994 1993 1992 1991
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Investment advisory fees from
assets under management $183,135 $181,918 $176,105 $147,019 $ 93,841
Underwriting and distribution of
investment products 15,339 18,149 27,698 36,080 47,093
Positioning profit/(loss) 4,981 (8,237) 5,381 3,394 7,119
Investment banking 10,334 11,793 19,937 18,224 13,685
Interest 19,445 13,686 12,434 12,340 14,626
All other 2,996 2,992 3,679 4,155 3,874
- - -------------------------------------------------------------------------------------------------------------------------------
Total revenues 236,230 220,301 245,234 221,212 180,238
- - -------------------------------------------------------------------------------------------------------------------------------
Expenses:
Compensation and benefits 80,366 83,079 84,665 75,094 58,326
Advertising and promotional costs 12,677 16,151 24,360 24,494 17,757
All other 29,417 26,436 24,546 23,757 26,674
- - -------------------------------------------------------------------------------------------------------------------------------
Total expenses 122,460 125,666 133,571 123,345 102,757
- - -------------------------------------------------------------------------------------------------------------------------------
Income before taxes and cumulative
effect of accounting changes 113,770 94,635 111,663 97,867 77,481
Income taxes 43,150 36,424 41,219 35,294 29,595
- - -------------------------------------------------------------------------------------------------------------------------------
Net income before cumulative effect
of accounting changes 70,620 58,211 70,444 62,573 47,886
Cumulative effect of
accounting changes --- --- --- 3,133 ---
- - -------------------------------------------------------------------------------------------------------------------------------
Net income $ 70,620 $ 58,211 $ 70,444 $ 59,440 $ 47,886
- - -------------------------------------------------------------------------------------------------------------------------------
Earnings per common share:
Net income before cumulative effect
of accounting changes $ 1.87 $ 1.52 $ 1.76 $ 1.66 $ 1.31
Net income $ 1.87 $ 1.52 $ 1.76 $ 1.58 $ 1.31
Return on equity 24.7% 21.2% 33.3% 33.6% 28.1%
- - -------------------------------------------------------------------------------------------------------------------------------
Total dividends per share(1) $ .68 $ .64 $ .56 $ .24 ---
- - -------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Total assets $402,512 $348,847 $410,641 $294,148 $311,420
Total liabilities 79,656 62,915 135,441 82,979 93,227
- - -------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity $322,856 $285,932 $275,200 $211,169 $218,193
- - -------------------------------------------------------------------------------------------------------------------------------
NUVEEN MANAGED FUNDS
(IN MILLIONS):
Net assets under management:
Mutual funds $ 5,457 $ 4,731 $ 4,962 $ 3,767 $ 2,603
Money market funds 1,113 1,242 1,954 2,634 3,110
Exchange-traded funds
and portfolios 25,784 23,731 25,805 20,851 16,289
- - -------------------------------------------------------------------------------------------------------------------------------
Total $ 32,354 $ 29,704 $ 32,721 $ 27,252 $ 22,002
- - -------------------------------------------------------------------------------------------------------------------------------
Nuveen managed fund sales:
Mutual funds(2) $ 236 $ 285 $ 1,039 $ 1,094 $ 581
Money market funds(2) (129) (713) (680) (476) 241
Exchange-traded funds and portfolios 19 470 3,962 4,162 7,254
- - -------------------------------------------------------------------------------------------------------------------------------
Total $ 126 $ 42 $ 4,321 $ 4,780 $ 8,076
- - -------------------------------------------------------------------------------------------------------------------------------
NUVEEN UNIT INVESTMENT
TRUSTS (IN MILLIONS):
Market value outstanding $ 15,517 $ 16,793 $ 20,019 $ 22,419 $ 24,371
Total sales (par value) $ 1,093 $ 1,235 $ 1,433 $ 1,923 $ 2,311
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Excluding payment of a $65 million special cash dividend to St. Paul Fire
and Marine Insurance Company in March 1992.
(2)Sales and dividend reinvestments less redemptions.
22
<PAGE> 25
THE JOHN NUVEEN COMPANY
BOARD OF DIRECTORS
Richard J. Franke
Chairman and
Chief Executive Officer
Donald E. Sveen
President and
Chief Operating Officer
Anthony T. Dean
Executive Vice President
Timothy R. Schwertfeger
Executive Vice President
Willard L. Boyd
President
Field Museum of Natural History
Andrew I. Douglass
Senior Vice President and
General Counsel
The St. Paul Companies
W. John Driscoll
Chairman/Retired
Rock Island Company
Duane R. Kullberg
Managing Partner/Chief
Executive Officer/Retired
Arthur Andersen & Co., S.C.
Douglas W. Leatherdale
Chairman and
Chief Executive Officer
The St. Paul Companies
Patrick A. Thiele
Executive Vice President
and Chief Financial Officer
The St. Paul Companies
EXECUTIVE OFFICERS
Richard J. Franke
Chairman and
Chief Executive Officer
Donald E. Sveen
President and
Chief Operating Officer
John P. Amboian
Executive Vice President and
Chief Financial Officer
Anthony T. Dean
Executive Vice President
Timothy R. Schwertfeger
Executive Vice President
William Adams IV
Vice President and Manager
Corporate Marketing
Robert B. Kuppenheimer
Vice President and Manager
California Investment
Management Services
O. Walter Renfftlen
Vice President and Controller
James J. Wesolowski
Vice President, Secretary,
and General Counsel
Paul C. Williams
Vice President and Manager
Investment Strategies and Research
MANAGEMENT SUCCESSION
On February 26, 1996, the Company confirmed that Richard J. Franke and Donald
E. Sveen will retire on June 30, 1996. The Board elected Timothy R.
Schwertfeger to become Chairman and Chief Executive Officer and Anthony T. Dean
to become President and Chief Operating Officer upon the retirements of Mr.
Franke and Mr. Sveen.
23
<PAGE> 26
SHAREHOLDER INFORMATION
Headquarters
The John Nuveen Company
333 West Wacker Drive
Chicago, IL 60606
312-917-7700
Transfer Agent and Registrar
The Bank of New York
Shareholder Relations
Church Street Station
P.O. Box 11258
New York, NY 10286-1258
1-800-524-4458
Stock Exchange Listing
New York Stock Exchange
trading symbol: JNC
Form 10-K
The annual report to the
Securities and Exchange
Commission on Form 10-K
for the fiscal year ended
December 31, 1995,
will be provided upon
written request to:
Jeffrey Kratz
Investor Relations
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606
ANNUAL MEETING
The annual shareholder's meeting for The John Nuveen Company will be Tuesday,
July 9, 1996 at 10:30 am in the auditorium at The Northern Trust Company, 50
South LaSalle Street, Chicago, IL.
24
<PAGE> 1
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
The John Nuveen Company:
We consent to incorporation by reference in the registration statement
(No. 33-46922) on Form S-8 of The John Nuveen Company of our reports
dated January 17, 1996, relating to the consolidated balance sheets of
The John Nuveen Company as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in stockholders'
equity, and cash flows and related financial statement schedules for
each of the years in the three-year period ended December 31, 1995,
which reports appear in or are incorporated by reference in the December
31, 1995 annual report on Form 10-K of The John Nuveen Company.
Chicago, Illinois
March 26, 1996
<PAGE> 1
EXHIBIT 24.1
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ Richard J. Franke
----------------------------------
Richard J. Franke
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
- - -------------------------------- ----------------------------------
"Official Seal" Notary Public
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 2
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ Donald E. Sveen
----------------------------------
Donald E. Sveen
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
----------------------------------
- - --------------------------------- Notary Public
"Official Seal"
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 3
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ Anthony T. Dean
----------------------------------
Anthony T. Dean
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
----------------------------------
- - --------------------------------- Notary Public
"Official Seal"
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 4
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ Timothy R. Schwertfeger
----------------------------
Timothy R. Schwertfeger
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
----------------------------
Notary Public
- - ---------------------------------
"Official Seal"
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 5
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ Willard L. Boyd
---------------------------
Willard L. Boyd
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
---------------------------
Notary Public
- - ---------------------------------
"Official Seal"
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 6
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ Andrew I. Douglass
---------------------------
Andrew I. Douglass
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
---------------------------
Notary Public
- - ---------------------------------
"Official Seal"
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 7
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ W. John Driscoll
---------------------------
W. John Driscoll
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
---------------------------
Notary Public
- - ---------------------------------
"Official Seal"
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 8
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ Duane R. Kullberg
---------------------------
Duane R. Kullberg
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
---------------------------
Notary Public
- - ---------------------------------
"Official Seal"
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 9
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ Douglas W. Leatherdale
---------------------------
Douglas W. Leatherdale
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
---------------------------
Notary Public
- - ---------------------------------
"Official Seal"
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 10
THE JOHN NUVEEN COMPANY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JAMES J. WESOLOWSKI
and LARRY W. MARTIN, and each of them (with full power to each of them
to act alone) his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf
and in his name, place and stead, in any and all capacities, to execute
any such annual, periodic or special report pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, including any and
all amendments thereto, with all exhibits thereto, and any and all other
documents in connection therewith, and to file the same with the
Securities and Exchange Commission and any regulatory authority, federal
or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company
has hereunto set his hand this 23rd day of February, 1996.
/s/ Patrick A. Thiele
---------------------------
Patrick A. Thiele
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 23rd day of February, 1996, personally appeared before me, a
Notary Public in and for said County and State, the person named above
who is known to me to be the person whose name and signature is affixed
to the foregoing Power of Attorney and who acknowledged the same to be
his voluntary act and deed for the intent and purposes therein set
forth.
(SEAL) /S/ Robin D. Freeman
---------------------------
Notary Public
- - ---------------------------------
"Official Seal"
Robin D. Freeman
Notary Public, State of
Illinois
My Commission Expires: 10/31/99
- - ---------------------------------
My Commission Expires: October 31, 1999
<PAGE> 1
EXHIBIT 24.2
CERTIFIED COPY OF RESOLUTION
The undersigned, James J. Wesolowski, Secretary of The John Nuveen
Company, a Delaware corporation (the "Company"), does hereby certify:
1. That he is the duly elected, qualified and acting Secretary
of the Company, and has custody of the corporate records and is a
proper officer to make this certification.
2. That at a meeting of the Board of Directors of the Company
duly called, convened and held on February 23, 1996, at which a
quorum was present and voted throughout, the following resolution
was duly adopted by said board and said resolution has not been
amended, altered or repealed and remains in full force and effect
on the date hereof:
RESOLVED, that each member of the Board of Directors and any
officer of the Company who may be required to execute any such
annual, periodic or special report, or any amendment or
amendments thereto, be, and each of them hereby is, authorized
to execute a power of attorney appointing James J. Wesolowski
and Larry W. Martin, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him on his behalf and in his name,
place and stead, in any and all capacities, to sign the report
and any and all amendments thereto, and to file the same, with
all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or
could do in person, and ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done
by virtue thereof.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
executed and the seal of the Company to be hereunto appended this 19th
day of March, 1996.
(SEAL)
/s/ James J. Wesolowski
---------------------------------
James J. Wesolowski, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JOHN
NUVEEN COMPANY'S FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 16,036
<SECURITIES> 31,086
<RECEIVABLES> 34,825
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 361,947
<PP&E> 30,750
<DEPRECIATION> (14,413)
<TOTAL-ASSETS> 402,512
<CURRENT-LIABILITIES> 52,309
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 322,755
<TOTAL-LIABILITY-AND-EQUITY> 402,513
<SALES> 0
<TOTAL-REVENUES> 236,230
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 119,819
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,641
<INCOME-PRETAX> 113,770
<INCOME-TAX> 43,150
<INCOME-CONTINUING> 70,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,620
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 0
</TABLE>
