Travelers 2001 Annual Report Download - page 35

Nuveen provides consultative services to financial advisors on man-
aged assets for fee-based customers, and structured investment
services for transaction-based advisors. These activities generate
three principal sources of revenue: (1) ongoing advisory fees earned
on assets under management, including individually managed
accounts, mutual funds and exchange-traded funds; (2) distribu-
tion revenues earned upon the sale of defined portfolio and mutual
fund products and (3) fees earned on certain institutional accounts
based on the performance of such accounts.
In July 2001, Nuveen acquired Symphony Asset Management LLC
(“Symphony”), an institutional investment manager based in
San Francisco with approximately $4 billion in assets under
management. As a result of the acquisition, Nuveen’s product offer-
ings were expanded to include managed accounts and funds
designed to reduce risk through market-neutral and other strate-
gies in several equity and fixed-income asset classes for
institutional investors.
In 2001, gross sales of investment products increased 32% to $14.2
billion, driven by continuing success with exchange-traded funds.
Nuveen launched 20 new municipal funds, as well as a REIT-based
fund, issuing approximately $2.8 billion of new municipal exchange-
traded fund common shares and $1.2 billion in MuniPreferred™
shares. Reflecting the strength of Nuveen’s consultative platform,
managed account sales were very strong, growing 39% for the year.
Mutual fund sales grew 22% mainly as a result of an increase in
municipal fund sales. Nuveen’s strong sales in exchange-traded
funds, managed accounts and mutual funds were partially offset by
lower equity defined portfolio sales as a result of equity market
volatility, particularly in the technology sector. Nuveen’s net flows
(equal to the sum of sales, reinvestments and exchanges, less
redemptions) totaled $7.7 billion in 2001, a 64% increase over net
flows of $4.7 billion in 2000.
Total assets under management grew 10% to $68.5 billion at the
end of 2001, compared with $62.0 billion a year earlier. The increase
was due to the addition of Symphony and Nuveen’s strong net flows
for the year. At the end of 2001, managed assets consisted of
$32.0 billion of exchange-traded funds, $24.7 billion of managed
accounts, and $11.8 billion of mutual funds. Municipal securities
accounted for 70% of assets under management at Dec. 31, 2001.
Including defined portfolios, Nuveen managed or oversaw approx-
imately $76 billion in assets at Dec. 31, 2001.
Operating revenues totaled $371 million in 2001, an increase of 4%
over 2000. Growth in advisory fees of 6%, which occurred as a result
of an increase in average assets under management, was offset
slightly by a decline in distribution revenue related to lower defined
portfolio sales.
Operating expenses for the year declined 4%. Excluding the impact
of the Symphony acquisition, operating expenses declined 9%. The
decline from 2000 was largely due to a reduction in advertising and
promotional spending, which had been higher in 2000 due to
Nuveen’s brand awareness campaign.
During 2001, Nuveen utilized a portion of its $250 million revolving
line of credit for general corporate purposes, including day-to-day
cash requirements, share repurchases and funding a portion of the
$208 million acquisition of Symphony. At the end of 2001, $183 mil-
lion was outstanding under the line of credit, and that entire
amount is included in The St. Paul’s reported consolidated debt out-
standing at Dec. 31, 2001.
Nuveen repurchased common shares from minority shareholders
in 2001, 2000 and 1999 for total costs of $172 million, $51 million
and $36 million, respectively. No shares were repurchased from
The St. Paul in those years; however, our percentage ownership fell
from 78% in 2000 to 77% at the end of 2001 due to Nuveen’s
issuance of additional shares under various stock option and
incentive plans and the issuance of common shares upon the con-
version of a portion of its preferred stock. As part of an ongoing
repurchase program, Nuveen had authority from its board of direc-
tors at Dec. 31, 2001 to repurchase up to approximately 2.4 million
additional common shares.
On August 9, 2001, Nuveen announced a 3-for-2 split of its common
stock. The stock split was effected as a dividend to shareholders of
record as of Sept. 20, 2001. Shareholders received one additional
share of Nuveen common stock for every two shares they owned as
of the record date.
2000 vs. 1999 – In 2000, Nuveen’s 7% revenue growth over 1999
was driven by a significant increase in distribution revenues result-
ing from strong sales of defined investment portfolios. In addition,
advisory fees increased over 1999 due to the 4% growth in assets
under management. Gross sales of investment products of
$10.8 billion in 2000 were 23% below the comparable 1999 total of
$14.1 billion, primarily due to a decline in managed account sales
in a volatile market environment. That decline was partially offset,
however, by strong growth in defined portfolio sales. The 4%
increase in expenses over 1999 was primarily due to advertising
expenses associated with Nuveen’s brand awareness campaign.
Nuveen’s consolidated net flows totaled $4.7 billion in 2000, com-
pared with $9.6 billion in 1999.
2002 Outlook – Nuveen’s positioning as a premier investment man-
agement firm with a specialty focus on risk management and
tax-sensitivity in equity and fixed-income holdings is expected to
serve its advisor customers and institutional investors well in 2002.
Nuveen will continue to strengthen its customer relationships,
build on and extend its premium brands, and leverage its proven
distribution and service platforms.
The St. Paul Companies 2001 Annual Report 33