UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
NUVEEN INVESTMENTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
NUVEEN INVESTMENTS, INC.
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 11, 2006
TO THE SHAREHOLDERS OF NUVEEN INVESTMENTS, INC.
Notice is hereby given that the annual meeting of the shareholders of
Nuveen Investments, Inc., a Delaware corporation (the "Company"), will be held
in the 6th floor auditorium of The Northern Trust Company, 50 South LaSalle
Street, Chicago, Illinois, on Thursday, May 11, 2006, at 10:30 a.m., central
time, for the following purposes:
1. To elect seven directors into three (3) classes, each director to
serve until the next annual meeting at which the class to which such
director belongs is to stand for election pursuant to the Company's
Restated Certificate of Incorporation or until his or her successor shall
have been duly elected and qualified.
2. To ratify the selection of KPMG LLP as independent auditors for the
Company for 2006.
3. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 17, 2006 are
entitled to notice of and to vote at the meeting.
The Company anticipates first mailing the accompanying proxy statement and
its 2005 Annual Report on or about April 7, 2006.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE POSTAGE PAID ENVELOPE
ENCLOSED FOR THAT PURPOSE. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS
VOTED, AND SHAREHOLDERS WHO ARE PRESENT AT THE MEETING MAY WITHDRAW THEIR
PROXIES AND VOTE IN PERSON.
April 5, 2006
ALAN G. BERKSHIRE
Secretary
NUVEEN INVESTMENTS, INC.
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Nuveen Investments, Inc. (the "Company") of proxies to
be voted at the annual meeting of the shareholders of the Company to be held on
May 11, 2006, and at any and all adjournments of such meeting. The annual
meeting will be held in the 6th floor auditorium of The Northern Trust Company,
50 South LaSalle Street, Chicago, Illinois on Thursday, May 11, 2006 at 10:30
a.m., central time. This Proxy Statement was initially mailed to shareholders on
or about April 7, 2006.
At the annual meeting, shareholders will vote on the election of directors,
the ratification of the selection of KPMG LLP as independent auditors for the
Company for 2006 and on such other matter(s) as may properly come before the
annual meeting. All duly executed proxies received by management prior to the
meeting will be voted in accordance with the choices specified by shareholders
on their proxies. If a shareholder duly executes a proxy card but no choice is
specified by a shareholder with respect to matters to be voted upon at the
annual meeting, the shares of such shareholder will be voted FOR the election of
the seven nominees for director listed in this Proxy Statement that are to be
elected by the holders of the Company's Class A Common Stock ("Common Stock"),
FOR ratification of the selection of the independent auditors of the Company for
2006 and in the proxy holders' discretion on any other matter(s) that may
properly come before the annual meeting. The Company does not currently know of
any other matters to be presented at the annual meeting. Shareholders who
execute proxies may revoke them at any time before they are voted at the annual
meeting by filing with the Company a signed, written notice of revocation
addressed to the Company's Secretary at the address above that is dated after
the date of your original proxy, by delivering a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
Proxies submitted by brokers for shares beneficially owned by other persons
may indicate that all or a portion of the shares represented by the proxies are
not being voted with respect to a particular matter. Applicable broker rules may
not permit a broker to vote shares held in street name with respect to such
matter in the absence of instructions from the beneficial owner of the shares.
The shares represented by broker proxies that are not voted with respect to such
matter will not be considered present and entitled to vote with respect to such
matter, although such shares may be considered present and entitled to vote for
other purposes and will count for purposes of determining the presence of a
quorum. If a quorum is present, these shares will not affect the determination
of whether such matter is approved.
As of March 17, 2006, there were issued and outstanding 79,127,458 shares
of Common Stock. As of such date, there were no shares of the Company's Class B
Common Stock issued and outstanding. Those persons who were shareholders of
record of Common Stock at the close of business on March 17, 2006 will be
entitled to one vote for each share held, without cumulation.
Under the Company's By-laws, a majority of the outstanding shares of the
class or classes entitled to vote on a particular matter and represented in
person or by proxy will constitute a quorum for consideration of such matter at
the annual meeting. Under the Company's Restated Certificate of Incorporation,
in the event that
any person or group becomes the beneficial owner (as defined in the Certificate
of Incorporation) of more than 20% of the outstanding shares of Common Stock,
the shares of Common Stock beneficially owned by such person or group in excess
of 20% of the outstanding shares of such class shall have no voting rights and
shall be deducted from the total number of shares of Common Stock for purposes
of determining the number of shares of Common Stock necessary to constitute a
quorum or required to approve a matter submitted for shareholder approval. To
the knowledge of the Company, on March 17, 2006 no person or group was the
beneficial owner of more than 20% of the outstanding shares of Common Stock. In
2005, all of the Company's Class B Common Stock was converted to Class A Common
Stock in connection with the sale by the Company's former majority shareholder
of its stock on the Company, and there is no longer any Class B Common Stock
outstanding. All references to Common Stock herein refer to the Class A Common
Stock, the only outstanding class of capital stock of the Company.
The cost of preparing, printing and mailing this Proxy Statement, the
accompanying notice and the enclosed proxy, and all other costs in connection
with the solicitation of proxies, will be paid by the Company. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to furnish proxy material to the beneficial
owners of the Company's Common Stock of whom they have knowledge and will
reimburse them for their expenses for so doing. Additional solicitation may be
made by letter, telephone or facsimile by officers and employees of the Company
and its affiliates.
The Company is mailing its 2005 Annual Report together with this Proxy
Statement to all shareholders of record as of the record date.
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
PRINCIPAL HOLDERS
The following table sets forth the beneficial ownership as of March 17,
2006 of the Company's Common Stock of each person who beneficially owns more
than 5% of the Common Stock. As of March 17, 2006, there were no shares of the
Company's Class B Common Stock issued and outstanding. The percent of the total
Common Stock outstanding owned by each person is based on the outstanding shares
of Common Stock as of March 17, 2006. Unless otherwise noted, the persons shown
have sole voting and investment power.
<Table>
<Caption>
NUMBER OF PERCENT OF
SHARES TOTAL COMMON
BENEFICIALLY STOCK
NAME AND ADDRESS OWNED OUTSTANDING
---------------- ------------ ------------
T. Rowe Price Associates, Inc. ............................. 4,540,667(1) 5.7%
100 East Pratt Street
Baltimore, MD 21202
FMR Corp. .................................................. 4,258,350(2) 5.6
82 Devonshire Street
Boston, MA 02109
Viking Global Performance LLC............................... 4,044,500(3) 5.1
55 Railroad Avenue
Greenwich, CT 06830
Wellington Management Company, LLP.......................... 4,009,560(4) 5.1
75 State Street
Boston, MA 02109
</Table>
2
- -------------------------
(1) According to a Schedule 13G filed on February 14, 2006. T. Rowe Price
Associates, Inc. is an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940 and serves as investment adviser for the
T. Rowe Price Funds. The ultimate power to direct the receipt of dividends
paid with respect to, and proceeds from the sale of, such securities, is
vested in the individual and institutional clients which T. Rowe Price
Associates, Inc. serves as investment adviser.
(2) According to a Schedule 13G/A filed on February 14, 2006. Fidelity
Management & Research Company ("Fidelity"), a wholly owned subsidiary of FMR
Corp. and an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is the beneficial owner of 4,109,850 shares
(5.3%) of the Company's Common Stock. Edward C. Johnson III and FMR Corp.
through its control of Fidelity each has sole voting power with respect to
4,109,850 of the shares and sole dispositive power with respect to all of
these shares. Fidelity Management Trust Company, a wholly owned subsidiary
of FMR Corp. and a bank as defined in Section 3(a)(6) of the Securities Act
of 1934, is the beneficial owner of 148,500 shares (0.2%) of the Company's
Common Stock. Edward C. Johnson III and FMR Corp. through its control of
Fidelity Management Trust Company each has sole voting power with respect to
148,500 of the shares and sole dispositive power with respect to all of
these shares.
(3) According to a Schedule 13G/A filed on February 14, 2006. Viking Global
Performance LLC ("VGP") is General Partner of Viking Global Investors LP
("VGI"). VGP and VGI beneficially own an aggregate of 4,044,500 (5.1%) of
which the Managing Directors of VGI and Members of VGP have shared power to
dispose of and shared power to vote the Common Stock beneficially owned by
VGI and VGP.
(4) According to a Schedule 13G filed on February 14, 2006. Wellington
Management Company, LLP, in its capacity as investment adviser, has the
power to dispose or to direct the disposition of 4,009,560 (5.1%) shares of
the Company's Common Stock.
3
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership, as of March 17,
2006, of the Company's Common Stock by each of the directors and nominees, each
of the executive officers named in the Summary Compensation Table below, and all
directors and executive officers as a group (13 persons). The percentage of the
total Common Stock outstanding owned by each person and group is based on the
outstanding shares of Common Stock as of such date, plus, in each case, shares
subject to stock options held by each such person or such group that are
currently exercisable or exercisable within 60 days after such date. Unless
otherwise noted, the persons shown have sole voting and investment power. Also,
unless otherwise noted, the business address for each person is c/o Nuveen
Investments, Inc., 333 West Wacker Drive, Chicago, Illinois 60606.
<Table>
<Caption>
NUMBER OF PERCENT OF
SHARES TOTAL COMMON
BENEFICIALLY STOCK
NAME OWNED OUTSTANDING(1)
---- ------------ --------------
John P. Amboian............................................. 1,852,514(2) 2.3%
Willard L. Boyd............................................. 6,161(3) *
W. John Driscoll............................................ 6,161(3) *
Connie K. Duckworth......................................... --(4) *
Duane R. Kullberg........................................... 6,161(3) *
Pierre E. Leroy............................................. --(4) *
Roderick A. Palmore......................................... 2,844(5) *
Timothy R. Schwertfeger..................................... 2,597,245(6) 3.2
William Adams IV............................................ 494,512(7) *
Alan G. Berkshire........................................... 516,703(8) *
Alan A. Brown............................................... 195,540(9) *
Directors and executive officers as a group (13 persons).... 6,046,124 7.3
</Table>
- -------------------------
* Less than 1%.
(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 issuable upon exercise of
their exercisable options and options that will become exercisable within 60
days after March 17, 2006, by the total number of outstanding shares of
Common Stock plus the number of shares issuable upon exercise of their
currently exercisable options and options that will become exercisable
within such 60 day period.
(2) Includes 1,707,633 shares subject to currently exercisable options, 52,839
shares of restricted stock over which Mr. Amboian has voting power, and
2,042 shares held in the Company's 401(k) Plan. Excludes 212,500 shares of
restricted stock granted under the Second Amendment and Restatement of the
Company's 1996 Equity Incentive Award Plan (the "1996 Equity Plan") for
which Mr. Amboian does not have voting or investment power. Of such shares
of excluded restricted stock, 144,000 shares have been deferred and the
deferral period has not ended and is not scheduled to end within 60 days,
and 68,500 shares remain subject to performance vesting and additional time
vesting.
4
(3) Includes 3,161 shares underlying Restricted Stock Units granted under the
1996 Equity Plan. These shares cannot be certificated or sold by Mr. Boyd,
Mr. Driscoll or Mr. Kullberg until six months after his service as a
director ends. The units have no voting rights.
(4) Ms. Duckworth and Mr. Leroy were elected to the Board on January 13, 2006
and March 28, 2006, respectively.
(5) Includes 2,844 shares of underlying Restricted Stock Units granted under the
1996 Equity Plan. These shares cannot be certificated or sold by Mr. Palmore
until six months after his service as a director ends. The units have no
voting rights.
(6) Includes 1,955,679 shares subject to currently exercisable options, 579,137
shares for which Mr. Schwertfeger has shared voting and investment power,
and 62,159 shares of unvested restricted stock over which Mr. Schwertfeger
has voting, but not investment, power. Excludes 323,300 shares of restricted
stock granted under the 1996 Equity Plan for which Mr. Schwertfeger does not
have voting or investment power. Of such shares of excluded restricted
stock, 242,000 shares have been deferred and the deferral period has not
ended and is not scheduled to end within 60 days, and 81,300 shares remain
subject to performance vesting and additional time vesting.
(7) Includes 431,000 shares subject to currently exercisable options and 12,512
shares of restricted stock that have not vested. Excludes 7,700 shares of
restricted stock for which Mr. Adams does not have voting or investment
power because the shares remain subject to performance vesting and
additional time vesting.
(8) Includes 466,000 shares subject to currently exercisable options, 24,488
shares of restricted stock that have not vested, 6,000 shares for which Mr.
Berkshire has shared voting and investment power and 4,104 shares held in
the Company's 401(k) Plan. Excludes 7,700 shares of restricted stock for
which Mr. Berkshire does not have voting or investment power because the
shares remain subject to performance vesting and additional time vesting.
(9) Includes 155,000 shares subject to currently exercisable options and 39,498
shares of restricted stock that have not vested. Excludes 4,000 shares of
restricted stock for which Mr. Brown does not have voting or investment
power because the shares remain subject to performance vesting and
additional time vesting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16(a)"), as
amended, requires the Company's executive officers and directors, and persons
who own more than ten percent of a registered class of the Company's equity
securities, to file reports of securities ownership and changes in such
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater than ten-percent shareholders also are required by rules
promulgated by the SEC to furnish the Company with copies of all Section 16(a)
forms they file. During 2005, to the best knowledge of the Company, based on a
review of such forms provided to us and written representations from officers
and directors, all Section 16(a) reports were filed on a timely basis.
5
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Company's Restated Certificate of Incorporation provides that,
beginning with the first annual meeting of shareholders after which holders of
the Company's Class B Common Stock are no longer entitled to elect four Class B
Directors, the Board of Directors (the "Board") will become classified. During
2005, the holder of all of the Company's Class B Common Stock sold all of such
shares and they were automatically converted into shares of Class A Common Stock
pursuant to the Company's Restated Certificate of Incorporation. As a result,
beginning with this annual meeting, the Board will consist of three classes, as
equal in size as possible.
The Nominating and Governance Committee of the Board has recommended, and
the Board has nominated for election, a total of seven persons to serve as
directors of the Company, each to hold office for the terms set forth below and
until his or her successor shall have been elected and qualified:
- Class I directors to hold office for a one year term until the 2007
annual meeting of shareholders: John P. Amboian and Willard L. Boyd;
- Class II directors to hold office for a two year term until the 2008
annual meeting of shareholders: Duane R. Kullberg and Roderick A.
Palmore; and
- Class III directors to hold office for a three year term until the 2009
annual meeting of shareholders: Connie K. Duckworth, Timothy R.
Schwertfeger and Pierre E. Leroy.
Pursuant to the Company's Restated Certificate of Incorporation, beginning
with the 2007 annual meeting of shareholders, only members of one class of
directors will be nominated for election at each annual meeting, to hold office
for a term of three years.
A holder of Common Stock may, with respect to the election of the seven
directors to be elected by the Common Stock, (i) vote for the election of all of
such nominees named herein, (ii) withhold authority to vote for all such
nominees, or (iii) vote for the election of all such nominees, other than any
nominee(s) with respect to whom the shareholder withholds authority to vote, by
so indicating in the appropriate space on the enclosed proxy. The election of
such directors requires the affirmative vote of a plurality of the shares of the
Common Stock present in person or by proxy at the meeting and entitled to vote
in such election.
Withholding authority to vote for a director nominee will not prevent such
director nominee from being elected. For purposes of determining the approval of
the matters submitted to the shareholders for a vote, abstentions and broker
non-voters will have no effect in the election of directors. Broker non-votes
are shares held by brokers or nominees typically in "street name" as to which
(i) instructions have not been received from the beneficial owners and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter.
All nominees for election have consented to being named in this Proxy
Statement and to serve if elected. Unless otherwise instructed by the
shareholders, it is the intention of the persons named in the accompanying proxy
to vote the proxies held by them for the election of each of the nominees named
above. However, if any of the nominees shall not be a candidate for election at
the time of the meeting, it is intended that either the vacancy be filled by
adoption of a resolution so providing by the Board or by the voting of such
shares for such substitute nominee as may be selected by the Board.
6
All of the nominees standing for election by the holders of the Common
Stock are currently directors of the Company, who have heretofore been elected
directors by the shareholders at an annual meeting, other than Ms. Duckworth and
Mr. Leroy who were elected by the Board on January 13, 2006 and March 28, 2006,
respectively. The term of office for Mr. W. John Driscoll, a current director,
will expire at the 2006 annual meeting and he will not stand for re-election at
the meeting.
NOMINEES FOR DIRECTORS
<Table>
<Caption>
NAME AGE PRINCIPAL OCCUPATIONS
---- --- ---------------------
John P. Amboian................ 44 Director of the Company since 1998; President since May
1999; prior thereto, Executive Vice President and Chief
Financial Officer of the Company.
Willard L. Boyd................ 78 Director of the Company since 1992; Professor of Law at the
University of Iowa Law School since 1954; President
Emeritus, Field Museum of Natural History since 1996; prior
thereto President, Field Museum of Natural History from 1981
to 1996; President Emeritus, University of Iowa since 1981.
Connie K. Duckworth............ 51 Director of the Company since January 2006; President and
Chairman of Arzu, Inc., a not-for-profit corporation
promoting economic opportunities for women in developing
countries; Member of the Board of Directors of Smurfit-Stone
Container Corporation, Northwestern Mutual Life Insurance
Company and DNP Select Fund.
Duane R. Kullberg.............. 73 Director of the Company since 1992; Retired since 1989;
prior thereto, Managing Partner-Chief Executive Officer of
Andersen Worldwide; Director of the Chicago Board Options
Exchange, Inc.
Pierre E. Leroy................ 57 Director of the Company since March 2006; Retired since
2005; President, Worldwide Construction & Forestry Division
of Deere & Company since 2001; Member of the Board of
Directors of ACCO Brands Corporation, Capital One Financial
Corporation and Fortune Brands, Inc.
Roderick A. Palmore............ 54 Director of the Company since 2002; Executive Vice
President, General Counsel and Secretary of Sara Lee
Corporation since 2004; prior thereto, Senior Vice
President, General Counsel and Secretary of Sara Lee
Corporation since 1999; Director of the Chicago Board
Options Exchange, Inc.
Timothy R. Schwertfeger........ 56 Director of the Company since 1992; Chairman and Chief
Executive Officer since 1996; prior thereto, Executive Vice
President of the Company since inception in 1992; Director
of Institutional Capital Corporation since 1996.
</Table>
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES. UNLESS
OTHERWISE INSTRUCTED, THE PROXY HOLDERS WILL VOTE THE DULY EXECUTED PROXIES
RECEIVED BY THEM FOR EACH OF THE DIRECTOR NOMINEES.
7
CORPORATE GOVERNANCE
The Company is committed to following sound corporate governance
principles. The Company regularly monitors regulatory developments and reviews
its policies and procedures in the areas of corporate governance.
CORPORATE GOVERNANCE GUIDELINES
The Board has adopted Corporate Governance Guidelines, which are posted on
the Company's website and available in print to shareholders who request a copy
by mail or telephone. Such requests can be made to the Corporate Secretary,
Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois 60606 or by
calling the Corporate Secretary's office at 312-917-7700. The guidelines set
forth the practices the Board will follow with respect to the composition of the
Board, director qualification and responsibilities, Board committees, director
access, director compensation, management succession and performance evaluation
of the Board, among other things. The Corporate Governance Guidelines can be
found at www.nuveen.com, by clicking on "About Us," then "Investor Relations,"
and finally "Corporate Governance."
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics, which
applies broadly to all employees, officers and directors and also includes
specific provisions applying to the Chief Executive Officer, the Senior Vice
President, Finance (the "Principal Financial and Accounting Officer") and other
senior financial officers, in compliance with regulatory requirements. The
Company also has a Code of Ethics and various related compliance procedures that
apply to its business as an investment manager and sponsor of investment
products, and the conduct of its employees and executives. The Company will
promptly post on its website any amendments or waivers of its Code of Business
Conduct and Ethics that apply to the Chief Executive Officer, the Principal
Financial and Accounting Officer, and other senior financial officers. The Code
of Business Conduct and Ethics, as well as any amendments or waivers thereof,
can be found at www.nuveen.com, by clicking on "About Us," then "Investors
Relations," and finally "Corporate Governance" and is also available in print to
shareholders who request a copy by mail or telephone.
DIRECTOR INDEPENDENCE GUIDELINES
The corporate governance rules adopted by the New York Stock Exchange
("NYSE") generally require that a majority of the members of the Board of
Directors of any listed company must qualify as independent directors. The
Company has adopted Director Independence Guidelines to assist it with its
director independence determinations. A copy of these Guidelines is attached
hereto as Appendix A. Pursuant to those Guidelines, the Board has determined
that Messrs. Boyd, Driscoll, Kullberg, Leroy and Palmore and Ms. Duckworth are
independent as such term is used in the NYSE Listed Company Manual, the
Company's Director Independence Guidelines and SEC rules. The Board has also
determined that (i) each of these independent directors has only immaterial
relationships with the Company (other than as a shareholder or director) that
fall well within the Company's Director Independence Guidelines and (ii) Messrs.
Amboian and Schwertfeger are not independent. Mr. Amboian is the Company's
President and Mr. Schwertfeger is the Company's Chief Executive Officer.
8
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has four standing board committees -- the Executive Committee,
the Audit Committee, the Compensation Committee and the Nominating and
Governance Committee. Current members of the committees are named below, with
the chairman of each committee indicated with an asterisk.
<Table>
AUDIT COMMITTEE NOMINATING AND GOVERNANCE COMMITTEE
Duane R. Kullberg* Willard L. Boyd*
Willard L. Boyd W. John Driscoll
W. John Driscoll Connie K. Duckworth
Connie K. Duckworth Duane R. Kullberg
Roderick A. Palmore Roderick A. Palmore
</Table>
<Table>
COMPENSATION COMMITTEE EXECUTIVE COMMITTEE
W. John Driscoll* Timothy R. Schwertfeger*
Willard L. Boyd John P. Amboian
Connie K. Duckworth Willard L. Boyd
Duane R. Kullberg
Roderick A. Palmore
</Table>
Ms. Duckworth became a member of the Audit, Compensation and Nominating and
Governance Committees in February 2006. Mr. Driscoll's term of office will
expire at the annual meeting and he will not stand for reelection. In addition,
during 2005, Mr. John Carl served as a director and a member of the Audit,
Compensation and Nominating and Governance Committees. Mr. Carl passed away in
February 2006. Messrs. Jay S. Fishman, Jay S. Benet, William H. Heyman and
Samuel G. Liss, each an executive of The St. Paul Travelers Companies, Inc.
("STA"), served as Class B directors of the Company in 2005 until their
resignations in August 2005, in connection with the completion of STA's sale of
its shares of the Company's Common Stock. Mr. Fishman also served on the
Company's Executive Committee. (See "Certain Relationships and Related
Transactions.")
The AUDIT COMMITTEE is charged with assisting the Board in monitoring (1)
the quality and integrity of the Company's financial statements, (2) the
independent auditor's qualifications, independence and appointment, (3) the
performance of the Company's independent auditor and internal audit function,
and (4) the compliance by the Company with legal and regulatory requirements.
The Board has determined that all members of the Audit Committee are independent
and have the experience required under the NYSE and SEC rules that the Chairman
qualifies as an "audit committee financial expert" as defined by the SEC and has
accounting or related financial management expertise, and that all such members
are financially literate. The Company made minor revisions to the Audit
Committee charter, effective May 2005. A copy of the revised Audit Committee
Charter is posted on the Corporate Governance section of the Company's website
(www.nuveen.com), is attached hereto as Appendix B, and is available in print to
shareholders who request a copy. No member of the Audit Committee simultaneously
serves on the audit committees of more than three public companies.
The COMPENSATION COMMITTEE is responsible for (1) discharging the Board's
responsibility relating to the compensation of the Chief Executive Officer and
the other executive officers of the Company and the administration of equity
incentive award plans of the Company and (2) producing an annual report on
executive compensation for inclusion in the Company's proxy statement in
accordance with applicable
9
regulations. The Board has determined that each member of the Compensation
Committee is independent. A copy of the Compensation Committee Charter is posted
on the Corporate Governance section of the Company's website (www.nuveen.com)
and is available in print to shareholders who request a copy.
The NOMINATING AND GOVERNANCE COMMITTEE is responsible for (1) identifying
individuals qualified to become Board members, and recommending to the Board
director nominees for election by all shareholders of the Company voting
together at the next annual meeting of shareholders, (2) developing and
recommending to the Board, the Corporate Governance Guidelines applicable to the
Company and reviewing and assessing at least annually the adequacy of such
guidelines, and (3) recommending to the Board the formation of new Committees of
the Board or the changes to the size or purpose of any Committee of the Board. A
copy of the Nominating and Governance Committee charter is posted on the
Corporate Governance section of the Company's website (www.nuveen.com) and is
available in print to shareholders who request a copy. The Board has determined
that each member of the Nominating and Governance Committee is independent. The
Nominating and Governance Committee seeks to identify director candidates who
share high professional and personal ethics; have had broad experience in
strategic planning or policy making; and have been in senior management or other
leadership positions. The Nominating and Governance Committee has not adopted
specific minimum standards with respect to identifying director candidates.
Rather, the Nominating and Governance Committee evaluates each potential
candidate on a case by case basis based on the individual qualifications of the
candidate and the Company's needs at the time. The Nominating and Governance
Committee has retained a professional search firm to identify and evaluate
potential director nominees. Directors Connie Duckworth and Pierre Leroy were
identified to the Nominating and Governance Committee by the search firm. See
the section titled "Proposals by Shareholders for 2007 Annual Meeting" for
information concerning shareholder-recommended director nominations.
The EXECUTIVE COMMITTEE is charged with exercising the authority of the
Board in the management of the business of the Company when it is impractical in
the opinion of the Chairman of the Executive Committee to convene a quorum of
the Board for a meeting. In exercising such authority, the Executive Committee
may not amend the Certificate of Incorporation or By-laws of the Company, adopt
an agreement of merger, consolidation, or sale, lease or exchange of
substantially all of the Company's property and assets, or take action with
respect to the dissolution of the Company or the removal or indemnification of
directors. The Executive Committee may only take action by a unanimous vote of
the Executive Committee's members.
MEETING ATTENDANCE
During the last fiscal year, the full Board held nine meetings, the
Compensation Committee held seven meetings, the Audit Committee held six
meetings and the Nominating and Governance Committee held five meetings. The
Executive Committee did not hold any meetings during the last fiscal year. Each
director attended at least 75% of the total number of Board and applicable
Committee meetings in the aggregate held in 2005, while he or she was a director
(except for Mr. Fishman who is no longer a director) including the meetings of
the ad hoc committee noted below. While the Company has no formal policy
regarding attendance at the annual meeting of shareholders, directors are
encouraged to attend, and all directors attended the 2005 annual meeting (except
for Mr. Fishman).
10
In addition, in connection with the sale of the Company's Common Stock by
STA, the Board created an ad hoc committee of the independent directors to
consider the various transactions involving STA. The ad hoc committee held six
meetings during the last fiscal year.
EXECUTIVE SESSIONS
The Board regularly convenes executive sessions where directors meet
without management participation. The Chairman of the Nominating and Governance
Committee, currently Mr. Boyd, presides at these executive sessions and has been
named the Company's "Presiding Director."
11
COMPENSATION OF DIRECTORS
In May 2005, the Company revised the schedule of fees paid to its
non-employee directors. The adjustments became effective on July 1, 2005.
Non-employee directors receive an annual fee of $40,000 ($30,000 prior to the
adjustment), a fee of $2,500 for each meeting of the full Board attended, a fee
of $2,500 for each meeting of the Audit Committee attended, a fee of $1,000 for
each meeting of the Nominating and Governance or Compensation Committee attended
and a fee of $2,500 for each meeting of the ad hoc committee of the independent
directors attended. The chair of the Audit Committee receives an additional
annual fee of $10,000. The chairs of the Nominating and Governance and
Compensation Committees each receive an additional annual fee of $5,000 ($2,000
prior to the adjustment). Additionally, directors receive an annual award of
Restricted Stock Units ("RSUs") under the Company's 2005 Equity Incentive Plan
(the "2005 Equity Plan"), which has been approved by shareholders. The awards
for the director terms ending May 11, 2005 are equal to the whole number of
shares of the Company's Common Stock with a value nearest to $35,000 based on
the average closing prices for the Common Stock during the 20-trading day period
ending on the trading day prior to the award date. For director terms ending May
11, 2006 and thereafter, the awards shall be equal to the whole number of the
shares of Common Stock with a value nearest to $70,000 based on the same
calculation of average closing prices. The award is made annually on the last
business day immediately prior to the annual shareholders' meeting. A director
who resigns before the next annual shareholders' meeting will receive no award
of RSUs for the partial term service. A director who dies or becomes disabled
during his or her term receives a pro rata award of RSUs based on the number of
months served prior to death or disability. A new director who joins the Board
between annual shareholders' meetings also receives a pro rata award of RSUs
based on the number of months served prior to the next annual shareholders'
meeting. The RSUs are fully vested when awarded to the directors. However, the
RSUs must be deferred, which means that they cannot be certificated or pledged,
hypothecated or sold by a director until six months after service on the Board
by such director ends. Upon the expiration of such six-month period, a director
will receive shares of Common Stock equal to the number of RSUs that such
director received during his or her service as a director. To the extent the
Company declares and pays dividends on Common Stock during the applicable
period, a director will be paid dividend equivalent units based on the number of
RSUs held by such director. The RSUs have no voting rights. Independent
directors are also eligible to participate, along with all the Company's
employees, in the Company's charitable gift matching program, under which the
Company matches contributions by directors and employees to qualifying
charitable organizations in an amount up to $10,000 per calendar year.
12
EXECUTIVE COMPENSATION
The following table shows information concerning the annual compensation
for services to the Company in all capacities of the Chief Executive Officer and
the four other most highly compensated executive officers of the Company
(collectively the "Named Executive Officers") during the last three fiscal
years.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------- --------------------------
RESTRICTED OPTIONS
NAME AND OTHER ANNUAL STOCK (NUMBER ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) OF SHARES) COMPENSATION(6)
------------------ ---- ------ -------- --------------- ---------- ---------- ---------------
Timothy R. Schwertfeger... 2005 $750,000 $5,540,000 -- $1,362,944(4) 128,385 $25,469
Chairman and 3,090,213(5) 405,000(5)
Chief Executive Officer 2004 750,000 5,540,000 -- 1,200,584 159,543 45,822
2003 750,000 4,609,000 -- -- 317,190 43,435
John P. Amboian........... 2005 500,000 4,709,000 $6,686 1,158,634(4) 109,139 7,749
President 2,603,685(5) 342,000(5)
2004 500,000 4,709,000 -- 1,020,530 135,618 11,392
2003 500,000 3,918,000 -- -- 269,652 10,975
William Adams IV.......... 2005 325,000 950,000 -- 246,394(4) 23,211 7,749
Executive Vice President 292,677(5) 38,000(5)
2004 298,750 1,100,000 -- 265,500 35,282 11,392
2003 270,000 1,100,000 -- -- 90,000 10,975
Alan G. Berkshire......... 2005 325,000 850,000 -- 266,945(4) 25,145 7,749
Senior Executive Vice 292,677(5) 38,000(5)
President 2004 298,750 800,000 -- 265,500 35,282 11,392
2003 270,000 750,000 -- -- 90,000 10,975
Alan A. Brown............. 2005 362,500 425,000 -- 195,082(4) 18,375 7,749
Executive Vice President 152,040(5) 20,000(5)
2004 350,000 360,000 -- 194,687 25,874 11,392
2003 350,000 320,000 -- -- 60,000 10,975
</Table>
- -------------------------
(1) Except for Mr. Brown, the amounts shown were paid pursuant to the Executive
Officer Performance Plan in respect of the year shown. Mr. Brown's bonuses
for the years shown were paid from the general bonus pool as he was not an
executive officer at the time of the bonus payments.
(2) For Mr. Amboian, the amounts shown for 2005 represent the earnings in excess
of the applicable federal long-term interest rate on the portion of his
aggregate deferred compensation account under the Company's Deferred Bonus
Plan on which the Company pays interest at the prime rate as announced from
time to time by Chase Bank. The Company's Deferred Bonus Plan permits its
senior executives to defer all or a portion of their annual bonuses and
receive a return on the amounts so deferred measured by (1) the prime rate
or (2) the performance of one or more of a specified list of investment
products
13
(mutual funds and private partnerships) sponsored by the Company. For investment
returns based on the performance of a Company investment product, the Company
hedges its exposure by investing the deferred amount in such product. The table
does not include any earnings on deferred compensation account of balances
of Mr. Amboian (or for Messrs. Adams or Berkshire who also participate in
the Deferred Bonus Plan) for which a return based on a Company investment
product has been selected.
(3) The cash equivalent of dividends on the restricted stock is paid to the
recipient prior to vesting except as provided in note 5 below.
(4) Represents the value of 30,573, 25,990, 5,527, 5,988 and 4,376 shares of
restricted stock, respectively, for Messrs. Schwertfeger, Amboian, Adams,
Berkshire and Brown, all awarded under the 2005 Equity Plan with a market
value of $44.58 per share on January 13, 2006. These shares will vest in a
single installment on January 13, 2009.
(5) Represents the value of 81,300, 68,500, 7,700, 7,700 and 4,000 shares of
restricted stock, respectively, for Messrs. Schwertfeger, Amboian, Adams,
Berkshire and Brown, all awarded under the 1996 Equity Plan with a market
value of $38.01 per share on January 14, 2005. These shares of restricted
stock will vest based on a combination of the Company achieving specified
performance thresholds during a three-year period from 2005 through 2007 and
subsequent time vesting. (See "Compensation Committee Report on Executive
Compensation -- Components of Executive Compensation" for a description of
the performance vesting criteria). Assuming the performance thresholds are
met, shares of restricted stock will vest in one installment on January 14,
2011. Dividend equivalents are payable on restricted stock only when the
performance thresholds have been met. The aggregate holdings and values as
of December 31, 2005 based on a market value of $42.62 of all restricted
stock held, including all deferred restricted stock, by Messrs.
Schwertfeger, Amboian, Adams, Berkshire and Brown, respectively, are as
follows: 355,156 shares ($15,136,749), 239,349 shares ($10,201,054), 14,685
shares ($625,875), 14,685 shares ($625,875) and 9,122 shares ($388,780). The
stock options shown are subject to the same performance thresholds as the
shares of restricted stock and will vest in three installments on January
14, 2009, 2010 and 2011.
(6) In respect of calendar year 2005, includes contributions to the account of
each executive officer of $749, under the Company's tax-qualified Employees'
Profit Sharing Plan (consisting of reallocations of forfeitures under that
plan) and $7,000 for matching 401(k) contributions under that plan. For Mr.
Schwertfeger, includes payments of $17,720, $34,430, and $32,460 in 2005,
2004 and 2003, respectively, under the Company's dependent college tuition
scholarship plan, which is available to all employees.
14
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information relating to grants of stock options
made to the Named Executive Officers (1) on January 13, 2006 in respect of the
fiscal year ended December 31, 2005 pursuant to the 2005 Equity Plan and (2) on
January 14, 2005 as special long term equity performance awards pursuant to the
1996 Equity Plan.
<Table>
<Caption>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE VALUE(3)
---- ---------- ------------ ----------- ---------- ----------
Timothy R. Schwertfeger............ 128,385(1) 5.9% $44.58 1/13/2016 $1,144,681
405,000(2) 18.5% $38.01 1/14/2015 3,078,810
John P. Amboian.................... 109,139(1) 5.0% $44.58 1/13/2016 973,083
342,000(2) 15.6% $38.01 1/14/2015 2,599,884
William Adams IV................... 23,211(1) 1.1% $44.58 1/13/2016 206,949
38,000(2) 1.7% $38.01 1/14/2015 288,876
Alan G. Berkshire.................. 25,145(1) 1.1% $44.58 1/13/2016 224,193
38,000(2) 1.7% $38.01 1/14/2015 288,876
Alan A. Brown...................... 18,375(1) 0.8% $44.58 1/13/2016 163,832
20,000(2) 1.0% $38.01 1/14/2015 152,040
</Table>
- -------------------------
(1) These options, which were granted under the 2005 Equity Plan, become
exercisable for shares of the Company's Common Stock covered thereby in one
installment on January 13, 2009.
(2) These options, which were granted under the 1996 Equity Plan, become
exercisable only upon achievement of specified Company performance
thresholds during the three-year period from 2005 through 2007 and, if the
performance thresholds are achieved, subject to subsequent time vesting such
that the options become exercisable in three installments on January 14,
2009, 2010, and 2011, respectively. (See "Compensation Committee Report on
Executive Compensation-Components of Executive Compensation" for a
description of the performance vesting criteria).
(3) For options granted under the 2005 Equity Plan, the value is based on a
variation of the Black-Scholes option pricing model which assumes (1) a
weighted-average risk free interest rate of 4.2%, (2) a 2.1% dividend yield,
(3) a weighted-average expected life of 5.1 years, and (4) a volatility
factor of the Company's estimated stock price performance of 23%. For
options granted under the 1996 Equity Plan, the value is also based on a
variation of the Black-Scholes option pricing model which assumes (1) a
weighted-average risk free interest rate of 4.6%, (2) a 2.3% dividend yield,
(3) a weighted-average expected life of 8 years, and (4) a volatility factor
of the Company's estimated stock price performance of 22%. The actual value,
if any, an individual may realize will depend on the excess of the market
price of the stock over the exercise or base price on the date the option is
exercised. There is no assurance that the value realized by an executive
will be at or near the value estimated under the above-described variation
of the Black-Scholes model. The estimated values under that model are based
on subjective assumptions as to interest rates, stock price volatility and
future dividend yield.
15
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows information regarding the exercise by the Named
Executive Officers during 2005 of options to purchase shares of the Company's
Common Stock granted under the 1996 Equity Plan, the number of unexercised
options held by them at December 31, 2005 and the "in-the-money" value of such
unexercised options at that date. "In-the-money" refers to options whose
exercise price is lower than the market price of the Company's Common Stock.
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED UPON REALIZED OPTIONS AT 12/31/05 AT 12/30/05(1)
EXERCISE OF UPON --------------------------- ---------------------------
NAME OPTIONS EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- -------- ----------- ------------- ----------- -------------
Timothy R.
Schwertfeger........... 1,035,000 $31,458,825 1,708,720 1,128,692 $39,491,225 $11,041,607
John P. Amboian.......... 85,000 2,610,702 1,497,836 957,067 35,284,297 9,373,597
William Adams IV......... 120,000 3,340,225 351,000 243,282 7,325,600 2,898,430
Alan G. Berkshire........ -- -- 431,000 243,282 9,363,050 2,898,430
Alan A. Brown............ -- -- 140,000 145,874 2,370,800 1,695,479
</Table>
- -------------------------
(1) Based on the NYSE -- Composite Transaction closing price of $42.62 for the
Company's Common Stock on December 30, 2005.
LONG-TERM INCENTIVE PLAN AWARDS
There were no long-term incentive plan awards (which are defined under
applicable disclosure rules to exclude restricted stock and stock option awards)
made to any of the Named Executive Officers during the fiscal year ended
December 31, 2005.
16
RETIREMENT PLANS
Each of the Named Executive Officers participates in the Company's
non-contributory tax-qualified Employees' Retirement Plan (the "Retirement
Plan"), which is restricted to employees who qualified as plan participants
prior to March 24, 2003. Employees of certain subsidiaries of the Company are
not eligible to participate in the Retirement Plan. The table below sets forth
with respect to the Retirement Plan and the Excess Benefit Retirement Plan (the
"Excess Benefit Plan", described below) the estimated annual straight life
annuity benefits calculated upon retirement at normal retirement age for
employees with the remuneration and years of service indicated. On March 31,
2004, the Company amended the Retirement Plan such that existing participants
will not accrue any new benefits under the Retirement Plan or the Excess Benefit
Plan after March 31, 2014.
<Table>
<Caption>
AVERAGE
FINAL BASE ESTIMATED ANNUAL BENEFITS YEARS OF SERVICE
SALARY ----------------------------------------------------
- ---------- 15 20 25 30 35
----------------------------------------------------
$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
$700,000 $157,500 $210,000 $262,500 $315,000 $367,500
$800,000 $180,000 $240,000 $300,000 $360,000 $420,000
$900,000 $202,500 $270,000 $337,500 $405,000 $472,500
</Table>
Each participant's benefits under the Retirement Plan 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 was not to exceed the lesser of $170,000
in 2005, and 100% of a participant's average aggregate compensation for the
three consecutive years in which he or she 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 Excess Benefit Plan provides certain highly compensated employees who
participate in the Retirement Plan, including, but not limited to, Messrs.
Schwertfeger, Amboian, Adams, Berkshire and Brown, 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 in
that plan on the amount of annual benefits payable pursuant to that plan and
(ii) the benefits actually payable to such employee under the Retirement Plan.
17
The credited years of service under the Retirement Plan and the Excess
Benefit Plan for Messrs. Schwertfeger, Amboian, Adams, Berkshire and Brown as of
December 31, 2005 were 27, 9.5, 23.5, 7 and 4, respectively. Compensation on
which plan benefits are based includes only base salary, as shown in the Summary
Compensation Table, and not bonuses, incentive compensation, or profit-sharing
plan contributions. The annual base salaries for Messrs. Schwertfeger, Amboian,
Adams, Berkshire and Brown as of December 31, 2005 were $750,000, $500,000,
$325,000, $325,000 and $400,000, respectively.
EMPLOYMENT AGREEMENTS
Effective November 1, 2002, the Company entered into employment agreements
(each, an "Agreement") with Mr. Schwertfeger and Mr. Amboian (each, an
"Executive"). Each Agreement provides for a three-year initial term and an
automatic one-year extension on the second and subsequent anniversaries of the
Agreement if Executive remains employed by the Company. Under each Agreement,
Executive will receive (1) an annual base salary ($750,000 for Mr. Schwertfeger
and $500,000 for Mr. Amboian) which amount may be increased but cannot be
reduced during the term of the Agreement, (2) continued participation in the
Company's 2002 Executive Officer Performance Plan or its successors consistent
with past practices and competitive pay practices, and (3) a right to
participate in the Company's employee benefit programs and policies. In the
event Executive's employment is terminated (a) other than for Cause or (b) for
Good Reason (each as defined hereafter), Executive will receive (1) a pro-rated
annual bonus for the year of termination based on his average bonus for the last
three years ("Recent Average Bonus"), (2) a lump sum cash payment equal to three
times Executive's annual base salary plus his Recent Average Bonus, (3)
continuation of welfare benefits for the earlier of three years or the date of
medical or welfare benefit coverage with another employer, (4) three years of
additional age and service credit under the Company's Retirement Plan, and (5)
immediate vesting of all outstanding equity awards.
Cause as defined in each Agreement means (1) the willful and continued
failure of Executive to perform substantially his duties with the Company, (2)
willful engaging by Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company, (3) conviction of a felony
or a guilty or nolo contendere plea by Executive, or (4) a material breach of
Executive's responsibility under the Agreement to maintain the confidential
information. The term "Good Reason" is defined as (1) any action by the Company
which results in a material diminution of Executive's position, authority,
duties or responsibilities, (2) any failure by the Company to pay Executive the
contractually determined compensation, (3) a requirement that Executive be based
at an office or location other than Chicago, Illinois, (4) the failure by the
Company to require any successor to expressly assume and agree to perform the
Agreement, (5) a termination of Executive not permitted by the Agreement, and
(6) the failure of the Board to nominate Executive for election to the Board or
to appoint Executive, in Mr. Schwertfeger's case, to each Committee of the Board
(other than the Audit, Compensation and Nominating and Governance Committees)
and, in Mr. Amboian's case, to the Executive Committee of the Board, where
legally permitted to do so. In addition, Executive's resignation shall be deemed
to be a termination for Good Reason (a) where such termination would constitute
a "Qualifying Termination" (as defined in each Agreement), (b) where Executive
resigns for any reason during the 60 day period following the six-month
anniversary of a Change of Control of the Company (as defined under the 1996
Equity Plan) where Executive was not actively and substantially involved in the
negotiation of the terms of such Change of Control transaction, and (c) when
Executive resigns at any time during the two years following such a Change of
Control when (1) his title, position, authority, duties and
18
responsibilities are changed adversely, (2) a change is made without his consent
to the Company's business strategy or business operations which is inconsistent
in any material respect with the Company's business strategy or business
operations immediately prior to the Change of Control, and (3) Executive is
asked to report to any person other than the Board (or, in Mr. Amboian's case,
the Chief Executive Officer) of a publicly traded company that is the Company or
a successor to the Company (where the Company is publicly traded) or the Chief
Executive Officer of the ultimate parent of the acquiring Company (where the
Company is privately held). Each Agreement further provides that Executive will
not be permitted to solicit or hire any person employed by the Company for
twelve months after termination of employment and that in the event Executive
becomes entitled to benefits or payments in connection with the termination of
his employment following a Change of Control which subjects him to any excise
taxes imposed by Section 4999 of the Internal Revenue Code, the Company will
reimburse Executive in an amount necessary to fully offset such tax payments.
The Company has entered into Employment Terms (the "Terms") with Mr. Brown,
effective September 30, 2005. The Terms specify that Mr. Brown's employment
remains an at-will arrangement with no defined term. Under the Terms, Mr. Brown
will receive an annual base salary of $400,000, to be reviewed annually, and
will be eligible for an annual discretionary bonus based on Company and
individual performance. In the event Mr. Brown's employment is terminated (a)
other than for Cause (as defined in the Company's equity incentive award plan in
effect at the time of termination) or (b) for Good Reason (as defined below),
and if he signs a release, Mr. Brown will receive (1) continuation of his annual
base compensation then in effect for up to 18 months after the date of
termination, and (2) a pro-rated annual bonus for the year of termination based
on his prior year's bonus. Mr. Brown is prohibited from soliciting the Company's
clients or employees during the period in which he receives base compensation
continuation payments. He can, however, relinquish his rights to future payments
at any time and be released from this limitation. The severance rights provided
in the Terms are in lieu of any severance rights Mr. Brown would otherwise have
under the Company's severance plan.
"Good Reason," as defined in the Terms, means (1) Mr. Brown's
responsibilities are materially diminished without his consent, or (2) Mr. Brown
is required to report to any person other than the President of the Company or
other member of the Office of the Chairman without his consent. Good Reason does
not include any action not taken in bad faith that is remedied by the Company
within 30 days after the Company receives detailed written notice of the action
from Mr. Brown.
19
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2005 about the
Company's Common Stock that may be issued upon the exercise of options and
rights under the Company's existing equity compensation plans.
<Table>
<Caption>
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES FUTURE ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
------------- -------------------- -------------------- -----------------------
(A) (B) (C)
Equity compensation plans
approved by security
holders................... 17,682,537(1) $25.42 7,801,231(2)
Equity compensation plans
not approved by security
holders................... N/A N/A N/A
Total....................... 17,682,537(1) $25.42 7,801,231(2)
</Table>
- -------------------------
(1) Excludes 1,043,833 shares of restricted stock granted under the Company's
equity compensation plans, all of which have been approved by shareholders.
Of such shares of restricted stock, 332,025 shares have not been delivered
because the restrictive period has not yet lapsed, and an additional 261,600
shares have not yet been issued because certain performance criteria have
not yet been met. The receipt of the remaining shares of restricted stock
excluded from column (a) in the table above has been deferred by the
recipients.
(2) All such shares, which include forfeitures and share replenishments as
provided by the applicable equity compensation plan, are available for
future issuance pursuant to equity awards. Of these shares, 3,449,472 may be
issued pursuant to future restricted stock awards.
20
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
ROLE OF THE COMMITTEE
The Compensation Committee of the Board (the "Committee") administers the
Company's executive compensation program, including the oversight of executive
compensation policies and decisions, administration of the annual cash incentive
award plan applicable to executive officers and administration of the Company's
equity incentive plans, under which awards have historically been made to a
broad group of employees. The Committee's responsibilities are reflected in its
Charter, which is reviewed and approved annually by the Committee and the full
Board. The Committee's membership is determined annually by the full Board and
includes only independent directors. The Committee meets regularly throughout
the year and reports on its activities and recommendations at each regular
quarterly meeting of the Board. From time to time the Committee may delegate
authority to fulfill various functions of administering the Company's plans to
employees of the Company. In addition, the Committee has authority to engage the
services of outside advisers to assist the Committee. In recent years, the
Committee has regularly engaged an independent compensation consulting firm to
assist the Committee in its review of compensation arrangements or plans.
GENERAL COMPENSATION PHILOSOPHY
The Committee's general compensation philosophy is that incentive
compensation should vary with the Company's financial performance and that
equity incentive awards should be used to closely align employees' interests
with those of shareholders. The total amount paid to all employees as annual
incentive compensation, including cash and equity awards, has historically been
approximately 25% of the Company's pre-incentive, pre-tax net operating income.
This provides a strong incentive for profitability and cost control as the
compensation of executives and all other employees is directly related to
Company earnings.
COMPONENTS OF EXECUTIVE COMPENSATION
Total compensation for executives is comprised of base salaries, benefits
and perquisites, annual incentive awards and long-term incentive awards. The
various components of executive compensation reflect the following policies:
- The Committee has set base salaries set near the median level for the
asset management industry, as the Company has emphasized annual cash
incentive awards and long-term equity incentive awards to provide
total compensation levels sufficient to attract and retain talented
and productive executives. The Committee has not adjusted annual base
salaries of the Chief Executive Officer ("CEO") and President, as
reflected in the "Salary" column of the Summary Compensation Table
included elsewhere in this Proxy Statement, since 2002.
- The executive officers participate in a wide array of benefit plans
that are available to all employees of the Company generally,
including health and welfare benefit plans, pension and retirement
savings plans and a dependent college tuition scholarship plan. Each
executive officer also participates in a supplemental retirement plan,
the Excess Benefit Plan, which is designed to make up for the benefits
lost under the Company's tax-qualified defined benefit plan because of
limitations imposed by the Internal Revenue Code on the amount of
benefits that can be accrued
21
under the tax-qualified plan. Certain executive officers receive
reimbursement, pursuant to applicable Company policies, for certain
luncheon and health club dues and parking expenses and/or participate
in the Company's non-qualified deferred compensation program, under
which receipt of annual incentive awards may be deferred.
- The Committee has made annual incentive awards for the CEO and
President and for the other executive officers under a formula-based
plan approved by shareholders that calculates awards, subject in some
cases to negative discretion, based on specific Company-wide financial
results. For 2005, the Executive Officer Performance Plan provided for
an award payable to the CEO equal to the sum of (I) 2.0% of the
Company's pre-incentive, pre-tax net operating income in excess of 20%
of the average stockholders' equity for the year and (II) 8.5% of the
increase in the Company's 2005 after-incentive, pre-tax net operating
income over the same measure for the prior year. The Committee
believes that this mix of performance criteria is appropriate to
incent the efficient use of the Company's capital and the pursuit of
profitable growth opportunities for the Company's businesses. As
provided in the plan, the award payable to the President (the next
most senior officer-director) was 85% of the award for the CEO. For
all other plan participants, the formula maximum of 60% of the CEO's
award was reduced by the Committee in its discretion, taking into
consideration an assessment of individual and group performance as
well as market-based pay practices. The cash component of the formula
award for the CEO and President is reflected in the "Bonus" column of
the Summary Compensation Table included elsewhere in this Proxy
Statement.
- For many years, annual incentive awards for the CEO and President and
for the other executive officers have included an equity component.
For 2005, the Committee continued its practice of paying approximately
30% of the formula award for the CEO and President under the Executive
Officer Performance Plan in the form of equity. As we did in 2004, the
Committee split the equity award for 2005 in approximately equal value
between restricted shares and at-the-money, ten-year stock options
valued on a modified Black-Scholes basis, all of which vest in one
installment at the end of three years. The stock options have no
realizable value to an executive unless the Company's stock price
increases. Those awards are reflected in the "Long-Term Compensation"
columns of the Summary Compensation Table included elsewhere in this
Proxy Statement.
- From time to time, the Committee has made long-term, equity-based
incentive awards to executives outside of the Company's annual awards
under the Executive Officer Performance Plan. These awards have been
made either in connection with a change in executive compensation
approach or plans or to incent executive management to achieve
specified Company long-term performance goals, by including
performance-based vesting criteria. In early 2005, the Committee made
long-term equity performance share and stock option awards to a group
of approximately 25 senior managers, including each executive officer.
These awards will vest only if specified Company-wide performance
criteria are met by the end of 2007 and are subject to additional
time-based vesting if the performance criteria are met. The long-term
equity performance ("LTEP") awards were not part of any annual
incentive program and were not made pursuant to the Executive Officer
Performance Plan. The performance vesting criteria for these awards
include (1) the growth in two earnings measures at a compound annual
rate of 11% or higher through 2007 and (2) the growth in assets under
management with a revenue-producing profile
22
consistent with the Company's assets at January 2005 to at least $150
billion by the end of 2007. One-half of the LTEP awards could become
vested if the Company meets only one of the performance criteria. The
Committee believes these multi-year performance criteria, and the
time-based vesting requirement of up to six years, are appropriate and
well aligned with shareholder interests.
Beginning in 2006, the Committee will make annual incentive compensation
awards to executive officers pursuant to the 2005 Executive Performance Plan,
which the Company's shareholders approved in May of 2005, to be effective
beginning in 2006. Under the new Executive Performance Plan, the maximum award
payable to any participant will be equal to 3% of the Company's pre-incentive
earnings before interest and taxes for the year, and the Committee has
discretion to reduce all awards from the maximum amount. For 2006, the Committee
also has approved a formula guideline to be used in determining the amount of
the annual incentive compensation award for the CEO and President based on the
percentage change in the Company's fully diluted earnings per share during the
year. The Committee's consultant participated in the formulation of these
guidelines.
REVIEW OF CEO COMPENSATION
The Committee regularly asks its independent compensation consultant to
conduct a benchmarking analysis of the compensation of the Company's executive
officers against executives with similar responsibilities at peer companies in
the asset management industry. In addition, the Committee has recently reviewed
all elements of compensation of the CEO under different scenarios, including a
voluntary resignation, a qualifying retirement under the Company's pension plan,
an involuntary termination by the Company, without cause, and upon a change of
control of the Company. This review included salary, annual bonus, equity and
long-term incentive compensation, stock option and restricted stock values, the
dollar value of all perquisites, the actual projected payout obligations under
the Company's tax-qualified pension plan and non-qualified supplemental
retirement plan and contractual arrangements relating to termination of
employment and change of control. The relevant contractual arrangements are set
forth in the CEO's employment agreement, which the Board considered and approved
in 2002.
DEDUCTIBILITY OF COMPENSATION
The Committee is aware that the Internal Revenue Code provides a $1 million
limit on the deductibility for federal tax law purposes of compensation paid to
top executives of publicly-traded companies, subject to certain exceptions. One
of the exceptions is for compensation based on attainment of objective
performance standards that have been approved by stockholders. The Company's
Executive Performance Plan is designed to qualify for this exception and to
permit the full deductibility by the Company of compensation paid to executive
officers thereunder. Stock options granted to executive officers under the
Company's equity-based plans are also intended to qualify for this exception.
Restricted shares granted to executive officers under these plans do not qualify
for this exception, unless they are granted in payment of an award under the
Executive Performance Plan or unless specified performance-based vesting
criteria are established at the time of grant. The Committee intends to continue
to pursue compensation strategies and programs designed to permit the Company to
retain federal tax benefits while providing appropriate performance incentives.
The Committee may from time to time award compensation that is not fully
deductible for tax purposes in circumstances it deems appropriate.
23
CONCLUSIONS
The Committee believes that the Company's profitability-linked annual
incentive programs and use of equity-based awards for a significant portion of
executive incentive compensation have served the Company well and will continue
to do so. We believe that the caliber and motivation of the Company's executive
officers and other employees are particularly important factors affecting the
Company's long-term performance.
As the Company's business continues to evolve, we will regularly review the
Company's executive compensation programs and make appropriate changes to try to
ensure that the specific programs and performance objectives in effect best fit
the Company's strategies and operating environment.
W. John Driscoll, Chairman
Willard L. Boyd
Connie K. Duckworth
Duane R. Kullberg
Roderick A. Palmore
24
STOCKHOLDER RETURN INFORMATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock to the
Russell 2000 Index and to the internally calculated Peer Group for the 5-year
period commencing December 31, 2000 and ending December 31, 2005. In each case,
the chart assumes a $100 investment on December 31, 2000 and that all dividends
are reinvested. The Average Annual Return on JNC for the period is 21.73%.
COMPARISON OF CUMULATIVE TOTAL RETURN
(PERFORMANCE GRAPH)
<Table>
<Caption>
- --------------------------------------------------------------------------------------------
DEC-2000 DEC-2001 DEC-2002 DEC-2003 DEC-2004 DEC-2005
- --------------------------------------------------------------------------------------------
JNC $100 $143 $138 $148 $225 $248
Russell 2000 100 103 82 120 142 149
Peer Group 100 91 70 101 133 172
- --------------------------------------------------------------------------------------------
</Table>
The Company's Peer Group includes all domestic publicly traded investment
management firms with a market capitalization of at least 1% of the Peer Group.
The results are included for each full year in which the firm was publicly
traded and met the minimum capitalization requirements. The return of the Peer
Group is weighted by the market capitalization of each firm at the beginning of
each year such firms are included in the Peer Group. The following companies are
included in the Peer Group for all of the years of the comparison, unless
otherwise noted:
<Table>
INVESTMENT MANAGEMENT FIRM STOCK TRADING SYMBOL
----------------------------------------------------------- --------------------
Affiliated Managers Group Inc. ............................ AMG
AllianceBernstein Holding L.P. ............................ AB
BlackRock, Inc. ........................................... BLK
Eaton Vance Corp. ......................................... EV
Federated Investors Inc. .................................. FII
Franklin Resources Inc. ................................... BEN
GAMCO Investors, Inc. ..................................... GBL
Legg Mason Inc. ........................................... LM
Neuberger Berman Inc. ..................................... NEU (2001-2002)
SEI Investments Co. ....................................... SEIC
Janus Capital Group Inc. .................................. JNS/SV
T. Rowe Price Group, Inc. ................................. TROW
Waddell & Reed Financial Inc. ............................. WDR
</Table>
25
AUDIT COMMITTEE REPORT
The Audit Committee of the Board is responsible for assisting the Board in
monitoring (1) the quality and integrity of the Company's financial statements,
(2) the independent auditor's qualifications, independence and appointment (3)
the performance of the Company's independent auditor and internal audit
function, and (4) the compliance by the Company with legal and regulatory
requirements. Among other responsibilities, we review, in our oversight
capacity, the Company's annual financial statements with both management and the
independent auditors and we meet periodically with the independent and internal
auditors to consider their evaluation of the Company's financial and internal
controls. We also select, subject to shareholder ratification, the Company's
independent auditors. Our Committee is composed of five independent directors
and operates under a written charter adopted and approved by the Board. Pursuant
to the Company's Director Independence Guidelines, NYSE rules and SEC rules, the
Board has determined that each Committee member is independent.
In discharging our duties, we have met with, and held discussions with,
management and the Company's independent and internal auditors regarding, among
other things, the audited financial statements. Management has represented to
the independent auditors that the Company's consolidated financial statements
were prepared in accordance with generally accepted accounting principles. We
have also discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communications with Audit
Committees). The Company's independent auditors provided to the Committee the
written disclosure required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and we discussed with
representatives of the independent auditor their firm's independence. As
provided in the Audit Committee Charter, it is not the Committee's
responsibility to determine, and the considerations and discussions referenced
above do not ensure, that the Company's financial statements are complete and
accurate and presented in accordance with generally accepted accounting
principles.
We have reviewed and discussed with senior management their assertion and
opinion regarding internal controls included in the Company's 2005 Annual Report
on Form 10-K as required by Section 404 of the 2002 Sarbanes-Oxley Act.
Management has confirmed to the Committee that internal controls over financial
reporting have been appropriately designed, and are operating effectively to
prevent or detect any material financial statement misstatements. We have also
reviewed and discussed with KPMG LLP its audit and opinion regarding the
Company's internal controls as required by Section 404, which opinion is
included in the 2005 Annual Report on Form 10-K.
Based on our review and discussions with management and the independent
auditors, the representations of management and the report of the independent
auditors to our committee, we have recommended that the Board include the
audited consolidated financial statements in the Company's Annual Report on Form
10-K.
Duane R. Kullberg, Chairman
Willard L. Boyd
W. John Driscoll
Connie K. Duckworth
Roderick A. Palmore
26
FEES AND SERVICES OF INDEPENDENT AUDITORS
FEES PAID TO INDEPENDENT AUDITORS. The following table shows the fees paid
by the Company for audit and other services provided by KPMG LLP for fiscal
years 2005 and 2004.
<Table>
<Caption>
2004 2005
---- ----
Audit Fees(1)............................................... $454,000 $ 582,321
Audit Related Fees(2)....................................... 66,300 71,500
Tax Fees(3)................................................. 92,750 96,250
All Other Fees(4)........................................... -0- 289,000
-------- ----------
Total:...................................................... $613,050 $1,039,071
</Table>
- -------------------------
(1) For 2005 and 2004, Audit Fees include fees for the internal control audit
required by Section 404 of Sarbanes-Oxley Act of 2002.
(2) For 2005 and 2004, Audit Related Fees primarily consisted of fees for
professional services relating to executive compensation reports, the debt
covenant compliance report, acquisition research, the Company's benefit plan
audits and other accounting related matters.
(3) For 2005 and 2004, Tax Fees consisted of principally of professional
services relating to the Company's federal and state tax returns and also
included miscellaneous tax related services.
(4) For 2005, All Other Fees consisted of fees incurred in connection with the
offering of the Company's Common Stock by a selling stockholder and the
Company's issuance of senior notes. $219,000 of these fees were reimbursed
to the Company by STA pursuant to a Separation Agreement. (See "Certain
Relationships and Related Transactions.")
PRE-APPROVAL POLICIES AND PROCEDURES. The Audit Committee Charter provides
that the Committee is responsible for pre-approving all audit services and
permitted non-audit services to be performed for the Company by the independent
auditor. In addition, the Audit Committee has adopted a standing resolution that
authorizes the Chairman of the Audit Committee, between meetings of the
Committee, to pre-approve fees and expenses of any permitted non-audit services
to be performed for the Company by its independent auditor, including tax
services, provided (1) that such non-audit services are not services that relate
to regularly recurring needs of the Company of the type covered by an annual
engagement and (2) that the total value of such services, together with other
non-audit services pre-approved by the Chairman pursuant to this delegation of
authority subsequent to the most recent meeting of the Committee, does not
exceed 20% of the estimated cost of the annual audit services of the independent
auditors most recently approved by the Committee. All of the fees paid to the
independent auditors in 2005 were pre-approved in accordance with these
provisions.
SELECTION OF AUDITORS
(PROPOSAL NO. 2)
The independent certified public accounting firm of KPMG LLP, a member of
the international accounting firm Klynveld Peat Marwick Goerdeler, has been
selected by the Audit Committee of the Board to act as the auditors for the
Company and its subsidiaries for the current fiscal year. At the annual meeting,
the shareholders will be asked to ratify the selection of KPMG LLP. A holder of
Common Stock may, with
27
respect to the selection of independent auditors, (i) vote "FOR" such selection,
(ii) vote "AGAINST" such selection or (iii) "ABSTAIN" from voting on the
selection. A vote to abstain from voting on this matter will have the effect of
a vote against such selection. Broker non-votes are not considered shares
entitled to vote and will not affect the outcome of the vote. Approval of this
proposal requires the affirmative vote of holders of a majority of the shares
represented in person or by proxy and entitled to vote on this item at the
annual meeting.
KPMG LLP, which has served as independent auditors of the Company and its
subsidiaries since the Company's inception in March 1992, is expected to have a
representative present at the annual meeting. The representative will have the
opportunity to make a statement and will be available to respond to appropriate
questions of shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR 2006. UNLESS OTHERWISE
INSTRUCTED, THE PROXY HOLDERS WILL VOTE THE DULY EXECUTED PROXIES RECEIVED BY
THEM FOR RATIFICATION OF THE SELECTION OF KPMG LLP.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 7, 2005, STA which owned approximately 78% of the outstanding
Common Stock of the Company, sold approximately 40 million shares of Common
Stock of the Company in a secondary underwritten public offering at $34.00 per
share. In addition, the Company repurchased $600 million of its Common Stock
directly from STA at a price of $32.98 per share, or approximately 18.2 million
shares. The repurchase of these shares was completed through two steps -- a $200
million (6.0 million shares) repurchase was completed on April 7, 2005, and a
$400 million forward purchase (plus interest) was settled on July 28, 2005.
These transactions were completed pursuant to a Registration Rights Agreement
dated May 19, 1992 and a Repurchase Agreement dated March 29, 2005 between the
Company and STA. On April 7, 2005, the Company was no longer a majority-owned
subsidiary of STA, and, at the end of August 2005, all of STA's remaining
Company Common Stock had been sold.
In connection with the transactions described above, on April 1, 2005 the
Company entered into a Separation Agreement with STA that addressed the
separation of the Company and STA. Under the terms of the Separation Agreement,
the Company and STA agreed to cooperate with, and provide indemnification to,
each other on certain tax matters, including with respect to a restoration
election under the Internal Revenue Code and in respect of Illinois state
corporate income taxes paid on a unitary basis for periods prior to the
separation. The Company and STA also agreed to cooperate following the
separation with respect to providing necessary information about each other, and
the Company agreed to use reasonable efforts to provide STA with information
necessary for STA's legal and regulatory filings. STA agreed to reimburse the
Company's out-of-pocket fees and expenses associated with the transactions
described in the preceding paragraph. STA also agreed to use best efforts to
obtain and maintain directors and officers insurance coverage at no cost to the
Company for six years on behalf of the Company for occurrences prior to the time
that the Company ceased to be a subsidiary of STA.
In connection with the transactions contemplated under the Separation
Agreement, the Company and STA separately agreed to terminate a $250 million
revolving loan agreement, as amended. No amounts were drawn under such facility
as of the date of termination.
28
From time to time, one or more of the Company's registered investment
advisers managed assets for STA or its affiliates (including its pension funds
and/or insurance accounts) on arm's length terms in a collective investment
vehicle offered to others as well as STA or in a separate account pursuant to a
customary investment advisory agreement with STA. As of December 31, 2005, the
Company managed approximately $153 million in assets for STA pursuant to these
arrangements.
PROPOSALS BY SHAREHOLDERS FOR 2007 ANNUAL MEETING
Proposals of shareholders intended to be presented at the Company's 2007
annual meeting of shareholders pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934 must be received by the Company by December 8, 2006 in
order to be considered for inclusion in the Company's 2007 Annual Meeting Proxy
Statement and form of proxy to be mailed in April 2007. Such proposal must be in
writing and comply with the proxy rules of the SEC.
Notice of any proposal to be presented by any shareholder at any meeting of
shareholders, as set forth in the By-laws of the Company, shall be given to the
Secretary of the Company not less than 60 nor more than 90 days prior to the
date of the meeting: provided however, that if the date of the meeting is first
publicly announced or disclosed less than 70 days prior to the date of the
meeting, such notice shall be given not more than ten days after such date is
first so announced or disclosed. Any shareholder who gives notice of any such
proposal shall deliver therewith the text of the proposal to be presented and a
brief written statement of the reasons why such shareholder favors the proposal
and setting forth shareholder's name and address, the number and class of all
shares beneficially owned and any material interest of such shareholder in the
proposal. The person presiding at the meeting shall determine whether such
notice has been duly given and shall direct that proposal not to be considered
if such notice has not been duly given.
The Nominating and Governance Committee has not adopted a formal policy
regarding the consideration of persons recommended by shareholders as candidates
for election to the Board beyond what is contained in the By-laws of the
Company. However, the Nominating and Governance Committee will consider such
recommendations on a case by case basis, and the credentials of such candidates
will be reviewed in the same manner as those of other candidates, based on their
qualifications and the needs of the Company at the time. The By-laws provide
that a shareholder wishing to nominate a candidate for election to the Board is
required to give notice to the Secretary of the Company of such nomination. The
notice of nomination must be received by the Company not less than 60 days nor
more than 90 days prior to the shareholders' meeting, or if less than 70 days'
notice or prior disclosure of the meeting date is given or made, the notice of
nomination must be received within ten days after the meeting date is announced.
The notice of nomination is required to contain certain information as set forth
in the By-laws about both the nominee and the shareholder making the nomination.
The Company may require that the proposed nominee furnish other information to
determine that person's eligibility to serve as director. The Nominating and
Governance Committee will consider such a nomination as it deems appropriate in
its discretion. A nomination that does not comply with the above requirements
will not be considered.
Such proposals or nominations should be addressed to Corporate Secretary,
Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois 60606.
29
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
Shareholders who wish to communicate with one or more directors of the
Company may do so as in the following manner. All such communications should be
addressed to: Nuveen Investments, Inc. Board of Directors, c/o Corporate
Secretary, Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois,
60606. The Corporate Secretary will relay the communications to the Chairman of
the Nominating and Governance Committee, provided that the Corporate Secretary
may exercise his discretion not to forward (1) communications that do not relate
specifically to the Company or its business operations, including solicitations
and invitations to seminars or other events, and (2) communications that do not
present credible evidence that they are from a Company shareholder.
Communications of a confidential nature can be made directly to the
Company's non-management directors or the Chairman of the Audit Committee
regarding any matter, including any accounting, internal control or auditing
matter, by submitting such concerns to the Audit Committee or Presiding
Director. Any such submissions should be marked confidential and addressed to
the Chairman of the Audit Committee or the Presiding Director, as the case may
be, c/o Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois
60606.
GENERAL
Management does not intend to present and does not have reason to believe
that others will present any other items of business at the meeting. However, if
other matters are properly presented at the meeting for a vote, the persons
named in the proxies will have discretion to vote in accordance with their own
judgment on such matters.
A list of shareholders entitled to be present and to vote at the meeting
will be available at the offices of the Company, 333 West Wacker Drive, Chicago,
Illinois, for inspection by any shareholder during regular business hours for
ten days prior to the date of the meeting.
A COPY (EXCLUDING EXHIBITS) OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2005 AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION MAY BE OBTAINED, WITHOUT CHARGE, BY WRITING TO THE SECRETARY
AT NUVEEN INVESTMENTS, INC., 333 WEST WACKER, CHICAGO, ILLINOIS 60606.
Failure of a quorum to be present at the meeting will necessitate
adjournment. The persons named in the enclosed proxy may also move for an
adjournment of the meeting to permit further solicitation of proxies with
respect to any of the proposals if they determine that adjournment and further
solicitation is reasonable and in the best interests of the shareholders. Under
the Company's By-laws, an adjournment of a meeting requires the affirmative vote
of a majority of the shares present in person or represented by proxy at the
meeting.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
ALAN G. BERKSHIRE
Secretary
30
APPENDIX A
DIRECTOR INDEPENDENCE GUIDELINES
A member of the Nuveen Investments, Inc. Board of Directors (the "Board")
will be considered independent only if the Board affirmatively determines that
the director has no direct or indirect material relationship with the Company,
other than as a director or stockholder. To make its determination, the Board
will broadly consider facts and circumstances it deems relevant. The Board has
adopted the following guidelines to assist it in making determinations of
whether a director has a material relationship with the Company, and the Board
may revise these guidelines from time to time as it deems appropriate, subject
to applicable stock exchange listing requirements. Under these guidelines, each
of the following relationships (unless required to be disclosed pursuant to Item
404 of Regulation S-K promulgated under the Securities Act of 1933, as amended)
shall be deemed immaterial so that a director who satisfies the specific
independence criteria of the NYSE Listing Requirements will not be considered to
have a material relationship with the Company solely as a result of any such
relationship:
1. BUSINESS RELATIONSHIPS. A director is a director, trustee,
executive officer or an employee, or has an immediate family member who is
an executive officer, of another company that makes payments to, or
receives payments from the Company for property or services, unless the
amount of such payments in any single fiscal year during the preceding
three fiscal years exceeds the greater of $750,000 or 1% of such other
company's consolidated gross revenues.
2. CHARITABLE RELATIONSHIPS. A director is active in a charitable
organization that receives contributions from the Company, unless the
director is a director, trustee or officer of that charitable organization
and the contributions in any single fiscal year during the preceding three
fiscal years exceed the greater of $750,000 or 1% of such charitable
organization's consolidated gross revenues (the Company's automatic
matching of employee charitable contributions will not be included in the
amount of the Company's contributions for this purpose).
3. INDEBTEDNESS. A director is a director, trustee, executive officer
or an employee, or has an immediate family member who is an executive
officer, of another company which is indebted to, or to which the Company
is indebted, unless the amount of such indebtedness exceeds the greater of
$750,000 or 1% of the other company's total consolidated assets at any time
during the preceding three fiscal years.
In addition, members of Audit Committee must also satisfy the independence
requirements of Section 10A of the Securities Exchange Act of 1934.
The types of relationships described above are not intended to be
comprehensive, and no inference should be drawn that a director having a
relationship of the type described in items (1) through (3) above that fails to
satisfy any of the criteria in items (1) through (3) above is not independent.
If a director has a relationship that fails to satisfy any of the criteria set
forth in items (1) through (3) above, the Board may still determine that such
director is independent so long as the NYSE Listing Requirements do not preclude
a finding of independence as a result of such relationship. The Company shall
disclose such determinations in accordance with applicable law and stock
exchange listing requirements. The Company intends for the foregoing guidelines
to comply with both the NYSE Listing Requirements in effect as of the date of
adoption of these
A-1
guidelines and as such NYSE Listing Requirements are proposed to be amended (as
such proposed amendments were filed by the NYSE with the SEC on November 23,
2005.)
For purposes of these independence guidelines, the term "immediate family
member" shall include a person's spouse, parents, children, siblings, mothers
and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and
anyone (other than domestic employees) who shares such person's home; provided,
however, that "immediate family member" shall exclude stepchildren that do not
share a stepparent's home, or the in-laws of such stepchildren.
A-2
APPENDIX B
NUVEEN INVESTMENTS, INC.
AUDIT COMMITTEE CHARTER
A. NAME
There shall be a committee of the Board of Directors of Nuveen Investments,
Inc. (hereinafter referred to as the "Company") to be known as the Audit
Committee.
B. PURPOSE
The Audit Committee shall assist the Board in monitoring (1) the quality
and integrity of the financial statements of the Company, (2) the independent
auditor's qualifications and independence, (3) the performance of the Company's
independent auditor and internal audit function, and (4) the compliance by the
Company with legal and regulatory requirements. In doing so, the Audit Committee
shall seek to maintain free and open means of communication among the Directors,
the independent auditors, the internal auditors, the Director of Compliance and
the management of the Company. The members of the Audit Committee shall be
appointed by the Board on the recommendation of the Nominating Committee. The
Audit Committee serves at the pleasure of the Board of Directors.
C. MEMBERSHIP
The Audit Committee shall be composed of at least three directors. The
members of the Audit Committee shall meet the independence and experience
requirements of the New York Stock Exchange, Section 10A of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Securities and Exchange Commission (the "Commission"). It is the intention of
the Board that at least one member of the Audit Committee shall be a "financial
expert" as defined by the Commission and determined by the Board of Directors,
exercising its business judgment. Audit Committee members shall not
simultaneously serve on the audit committees of more than two other
publicly-traded companies.
D. MEETINGS AND ACCESS TO ADVISORS AND OTHERS
The Audit Committee shall meet as often as it determines, but no less
frequently than quarterly. The Audit Committee shall meet separately,
periodically, with management, with the internal auditors, with the Director of
Compliance and with the independent auditor. The Audit Committee shall have the
authority to retain, at the expense of the Company, separate legal, accounting
or other consultants to advise the Committee, in its discretion, and may request
any officer or employee of the Company or the Company's independent auditors or
outside counsel to attend a meeting of the Committee or to meet with any members
of, or consultants to, the Committee. The Company's independent auditors and
internal auditors shall have unrestricted access at any time to committee
members.
E. AUTHORITY AND RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes that its
policies and procedures should remain flexible, in order to react to changing
conditions and requirements applicable to the Company. To the
B-1
extent that responsibilities of the Committee relate specifically to applicable
requirements of stock exchange rules or provisions of the Exchange Act, such
responsibilities shall be subject to the effective date of such requirements and
any subsequent amendment to, or interpretation of, such requirements.
The Audit Committee shall be responsible for the following:
Financial Statements and Disclosure Matters
1. Reviewing and discussing with management and the independent auditors
the Company's annual audited financial statements, including disclosures made in
"Management's Discussion and Analysis," the results of the audit, and any
matters required to be discussed pursuant to Statement on Auditing Standards No.
61. The Committee shall recommend to the Board of Directors whether the audited
financial statements should be included in the Company's Annual Report on Form
10-K.
2. Reviewing and discussing with management and the independent auditor the
Company's quarterly financial statements, including disclosures made in
"Management's Discussion and Analysis," the results of the independent auditor's
review of the quarterly financial statements, and any matters required to be
discussed pursuant to Statement of Auditing Standards No. 61, prior to the
filing of the Company's Form 10-Q.
3. Discussing with management and, if available, the independent auditor,
the Company's earnings press releases, as well as financial information and
earnings guidance provided to analysts and rating agencies. Such discussion may
be done generally, consisting of discussing the types of information to be
disclosed and the types of presentations to be made. The Chairman of the Audit
Committee shall be authorized to have such discussions with management on behalf
of the Audit Committee.
4. Discussing with management and the independent auditor significant
financial reporting issues and judgments made in connection with the preparation
of the Company's financial statements, including any significant changes in the
Company's selection or application of accounting principles and any major issues
as to the adequacy of the Company's internal controls and any special audit
steps adopted in light of control deficiencies.
5. Discussing with management and the independent auditor the effect of
regulatory and accounting initiatives, as well as any "off-balance sheet"
structures used by the Company, on the Company's financial statements.
6. Reviewing and discussing reports from the independent auditor regarding
(a) all critical accounting policies and practices to be used; (b) all
alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management, ramifications of
the use of such alternative treatments and disclosures, and the treatment
preferred by the independent auditor; and (c) other material written
communications between the independent auditor and management, such as any
management letter or schedule of unadjusted differences.
7. Discussing with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies.
B-2
8. Reviewing disclosures made to the Audit Committee by the Company's
principal executive officer and principal financial officer during their
certification process for the Company's periodic reports about any significant
deficiencies in the design or operation of internal controls or material
weaknesses therein and any fraud involving management or other employees who
have a significant role in the Company's internal controls.
Independent Auditors
9. Having the sole authority to appoint or replace the independent auditor,
subject, if applicable, to shareholder ratification (it being understood that
any engagement letter with the independent auditors may be signed on behalf of
the Company by an officer of the Company at the direction of the Audit Committee
or its Chairman); and compensating and overseeing the work of the independent
auditor (including the resolution of disagreements between management and the
independent auditor regarding financial reporting), who shall report directly to
the Audit Committee, for the purpose of preparing or issuing an audit report or
related work.
10. Meeting periodically with the independent auditor to review its audit
plans and staffing for the audit, and at the completion of its annual
examination, to review (a) its evaluation of the financial and internal controls
of the Company and (b) any significant changes required in the originally
planned audit program.
11. Pre-approving all audit services and permitted non-audit services
(including the fees and terms thereof) to be performed for the Company by its
independent auditor, subject to the de minimus exceptions for non-audit services
described in Section 10A of the Exchange Act, which are approved by the Audit
Committee prior to the completion of the audit.
12. Obtaining and reviewing at least annually any report required to be
provided by the independent auditor or requested by the Committee in its
discretion (including a formal written statement delineating all relationships
between the auditors and the Company) regarding (a) the independent auditor's
internal quality-control procedures; (b) any material issues raised by the most
recent internal quality-control review, or peer review, of the firm, or by an
inquiry or investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried out by
the firm; (c) any steps taken to deal with any such issues; and (d) all
relationships between the independent auditor and the Company and its
affiliates; and evaluating the qualifications, performance and independence of
the independent auditor, including a review and evaluation of the lead partner,
taking into account the opinions of management and the Company's internal
auditors. The Audit Committee shall present its conclusions with respect to the
independent auditor to the Board.
13. Reviewing any reports from the independent auditor mandated by Section
10A of the Exchange Act, and obtaining from the independent auditor any
information with respect to illegal acts in accordance with such Section 10A.
14. Ensuring the rotation of the lead (or coordinating) audit partner
having primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law, and further considering the rotation
of the independent auditing firm itself.
15. Recommending to the Board of Directors policies for the Company's
hiring of employees or former employees of the independent auditor who
participated in the audit of the Company.
B-3
Internal Audit Matters
16. Reviewing with management and the internal auditor the Company's
procedures for the monitoring of its system of internal controls, and approving,
in advance, any termination and replacement of the Company's Director of
Internal Audit, who shall have a direct reporting relationship with the
Committee (and shall report administratively to an appropriate corporate
officer.
17. Meeting periodically with the Director of Internal Audit to review the
internal audit plans and staffing and, with respect to internal audit work that
has been completed, to review (a) audit results, (b) reports on
exposures/controls, irregularities and control failures, (c) the disposition of
recommendations for improvements in internal controls made by internal and
external auditors and (d) any significant change in audit plans as originally
made.
18. Monitoring the Company's policies and procedures for the review of
expenses of selected members of senior management.
Other Responsibilities
19. Reviewing with the Company's General Counsel legal matters that may
have a material impact on the Company's financial statements or the Company's
compliance policies.
20. Reviewing at least annually any reports of regular examinations of the
Company by regulatory authorities.
21. Reviewing with the Company's General Counsel or Director of Compliance
on a quarterly basis the status of any pending examination of the Company by
regulatory authorities that is not regular in nature and receiving a report from
the Company upon the substantial completion of such examination.
22. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies which raise material issues regarding
the Company's financial statements or accounting policies.
23. Obtaining reports from management with respect to the Company's
policies and procedures regarding compliance with applicable laws and
regulations and with the Company's code of business conduct and ethics.
24. Establishing procedures, as required by Section 10A of the Exchange
Act, for the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or auditing matters,
and the confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
25. Performing any special reviews, investigations or oversight
responsibilities requested by the Board of Directors.
26. Reporting to the Board of Directors regularly on the activities of the
Audit Committee.
27. Preparing the report required by the rules of the SEC to be included in
the Company's annual proxy statement.
28. Reviewing annually the Audit Committee's own performance.
B-4
29. Reviewing and reassessing annually the adequacy of this Charter and
recommending to the Board of Directors for approval any proposed changes deemed
necessary or advisable by the Committee.
Responsibilities of Others
Although the Audit Committee shall have the authority and responsibilities
set forth in this Charter, it is not the responsibility of the Audit Committee
to plan or conduct audits or to determine that the Company's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. That is the responsibility of management and the
independent auditors.
B-5
(NUVEEN LOGO)
Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
NUVEEN INVESTMENTS, INC.
PROXY FOR 2006 ANNUAL MEETING OF STOCKHOLDERS
to be held at 10:30 a.m., Chicago time, in the 6th floor auditorium of
The Northern Trust Company, 50 South LaSalle St., Chicago,
Illinois on May 11, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Timothy R. Schwertfeger and John P.
Amboian, and either of them, with full power of substitution, proxies for the
undersigned to represent and vote as specified in this proxy all shares of Class
A Common Stock that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Nuveen Investments, Inc. to be held on May 11, 2006, and at any
adjournment or adjournments thereof, including authority to vote on (1) the
election of directors, (2) ratification of the selection of KPMG LLP as
independent auditors for 2006 and (3) on any other matters that may properly
come before the annual meeting.
UNLESS OTHERWISE INSTRUCTED ON THE REVERSE SIDE, ALL SHARES WILL BE
VOTED (1) FOR THE ELECTION OF EACH OF THE DIRECTOR NOMINEES, (2) FOR
RATIFICATION OF THE SELECTION OF KPMG LLP AS INDEPENDENT AUDITORS FOR 2006 AND
(3) IN SUCH PROXY HOLDERS' DISCRETION ON ANY OTHER MATTER(S) THAT MAY BE
PROPERLY COME BEFORE THE ANNUAL MEETING.
(THIS PROXY CONTINUES AND MUST BE DATED, VOTED AND SIGNED ON THE REVERSE SIDE)
Change of Address NUVEEN INVESTMENTS, INC.
P.O. BOX 11116
- ----------------------------------------- NEW YORK, N.Y. 10203-0116
- -----------------------------------------
- -----------------------------------------
- -----------------------------------------
-- DETACH PROXY CARD HERE --
- --------------------------------------------------------------------------------
SIGN, DATE AND RETURN THE
[ ] PROXY CARD PROMPTLY USING THE [X]
ENCLOSED ENVELOPE. PLEASE INDICATE YOUR CHOICE BY MARKING
AN "X" IN EITHER BLACK OR BLUE INK.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR:
1. Election of seven directors
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] (*)EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees: John P. Amboian and Willard L. Boyd as Class I directors for a term of
office of one (1) year; Duane R. Kullberg and Roderick A. Palmore as Class II
directors for a term of office of two (2) years; and Connie K. Duckworth,
Timothy R. Schwertfeger and Pierre E. Leroy as Class III directors for a term of
office of three (3) years.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE OR
MULTIPLE NOMINEES, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S OR
NOMINEES' NAME IN THE SPACE PROVIDED BELOW.)
(*)Exceptions
-------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of the selection of KPMG LLP as [ ] [ ] [ ]
independent auditors for 2006.
3. In their discretion, the proxies are authorized [ ] [ ] [ ]
to vote upon such other business as may
properly come before the meeting.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT.
To change your address, please mark this box. [ ]
- --------------------------------------------------------------------------------
S C A N L I N E
- --------------------------------------------------------------------------------
Note: Please sign exactly as your name appears on this proxy. If signing for
estates, trusts or corporations, title or capacity should be stated. If shares
are held jointly, each holder should sign.
Date Share Owner sign here Co-Owner sign here
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------