<PAGE> 1
SCHEDULE 14A INFORMATION
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 240.14a-11(c) or 240.14a-12
JEFFERIES GROUP, INC.
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(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):
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
JEFFERIES GROUP, INC.
11100 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, MAY 26, 2000
------------------------
To the Shareholders of Jefferies Group, Inc.:
The Annual Meeting of Shareholders of Jefferies Group, Inc. will be held at
the principal executive offices of the Company at 11100 Santa Monica Blvd., 11th
Floor, Los Angeles, California 90025, on Friday, May 26, 2000, at 10:00 a.m.,
local time, to consider and act upon:
1. Election of seven Directors to serve until the next Annual Meeting and
until their successors have been duly elected and qualified.
2. Any other business which may properly come before the meeting or any
adjournment thereof.
Shareholders of record at the close of business on March 31, 2000, are
entitled to notice of and to vote at the meeting or any adjournment thereof. A
list of such shareholders will be open to examination by any shareholder at the
Annual Meeting and for a period of ten days prior to the meeting during ordinary
business hours at the offices of the Company located at the address above.
You are cordially invited to attend the Annual Meeting. If you do not
expect to attend, we urge you to return your proxy promptly in the enclosed
envelope. The return of the proxy does not affect your right to vote in person
should you decide to attend the meeting.
For the Board of Directors,
Jerry M. Gluck
Secretary
April 3, 2000
<PAGE> 3
JEFFERIES GROUP, INC.
11100 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
APRIL 3, 2000
PROXY STATEMENT
The proxy of each shareholder of Jefferies Group, Inc. (the "Company") is
being solicited by the Board of Directors of the Company for use at the Annual
Meeting of Shareholders to be held at the offices of the Company at 11100 Santa
Monica Blvd, 11th Floor, Los Angeles, California, 90025, on Friday, May 26,
2000, at 10:00 a.m., local time, and at any adjournment thereof. All
shareholders of record at the close of business on March 31, 2000, are entitled
to notice of and to vote at the meeting. The Company is first mailing this
Notice of Annual Meeting, Proxy Statement and form of proxy to shareholders on
or about April 3, 2000.
On April 27, 1999, the Company's former corporate parent (also called
Jefferies Group, Inc., but referred to here as "Old Jefferies Group") and
Investment Technology Group, Inc. ("ITGI") completed the spin-off of Jefferies &
Company, Inc. ("Jefferies") and other subsidiaries, and the merger of ITGI with
Old Jefferies Group. As a result of the spin-off, holders of each share of Old
Jefferies Group on the record date, April 20, 1999, received one share of the
Company's Common Stock. Immediately following the spin-off and merger, the
Company was renamed "Jefferies Group, Inc." and began trading on the New York
Stock Exchange under the symbol "JEF." In addition, immediately following the
merger of ITGI with Old Jefferies Group, the surviving corporation was renamed
Investment Technology Group, Inc. and began trading on the New York Stock
Exchange under the symbol "ITG." Information on how shareholders who were
affected by these transactions should allocate tax basis between Company shares
and ITGI shares is available on the Company's website, at www.jefco.com ("News &
Events -- spin-off").
The Company is the accounting successor to Old Jefferies Group, and
continues substantially the same operations as Old Jefferies Group except that
the business of ITGI is a discontinued operation. Accordingly, information is
presented in this proxy statement for periods prior to April 27, 1999, including
compensation information and historical share and share price information. While
this information regarding pre-spin-off events enhances a shareholder's
understanding of the Company at present, it should be understood that such
information relates to Old Jefferies Group rather than the Company. For example,
information regarding a given Director or Executive Officer's service with the
Company prior to April 1999 actually relates to such person's service with Old
Jefferies Group.
The enclosed form of proxy is for use by the Board of Directors at the
meeting and any adjournment thereof. Any shareholder who signs and returns the
proxy may revoke it at any time before it has been voted by (i) delivering
written notice of its revocation to the Secretary of the Company, (ii)
delivering a duly executed proxy bearing a later date to the Secretary of the
Company, or (iii) attending the meeting and voting in person.
In the absence of contrary direction, all shares represented by valid
proxies received pursuant to this solicitation will be voted (i) for the
election of the seven nominees for Director whose names are listed herein, and
(ii) as to other matters which may properly come before the meeting, in
accordance with the best judgment of the proxy holders named in the accompanying
proxy.
Each nominee has consented to being a nominee and to serving as a Director
if elected. In the event that any nominee shall be unable to serve as a Director
(which is not now anticipated), proxies will be voted for substitute nominees
recommended by the Board of Directors of the Company.
All costs of solicitation of proxies will be borne by the Company. Although
there are no formal agreements to do so, the Company will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials and annual reports to the
beneficial owners of the Company's Common Stock. In addition to solicitation by
mail, proxies may be
<PAGE> 4
solicited in person, or by telephone, telegraph or facsimile transmission, by
Directors and Officers of the Company, who will not receive special compensation
for such solicitation.
The outstanding voting securities of the Company consisted of 24,417,431
shares of Common Stock, on March 31, 2000, which is the record date for
determining shareholders entitled to notice of and to vote at the meeting. Each
share is entitled to one non-cumulative vote for each Director to be elected and
one vote on each separate matter of business properly brought before the
meeting.
The election of Directors will be determined by a plurality of the votes of
the shares present in person or represented by proxy and entitled to vote at the
meeting, and approval of other items at the meeting will require the affirmative
vote of holders of a majority of the shares present in person or represented by
proxy and entitled to vote on such items at the meeting. Accordingly, in the
case of shares that are present or represented at the meeting for quorum
purposes, not voting such shares for a particular nominee for Director,
including by withholding authority on the proxy, will not operate to prevent the
election of such nominee if he otherwise receives affirmative votes; an
abstention on any other item will have the effect of a vote against that item; a
broker "non-vote" (which results when a broker holding shares for a beneficial
owner has not received timely voting instructions on certain matters from such
beneficial owner) on any other item will have no effect on the vote on such
item.
The votes of all shareholders will be held in confidence from the Company,
its Directors, Officers and employees except (i) as necessary to meet applicable
legal requirements and to assert or defend claims for or against the Company;
(ii) in case of a contested proxy solicitation; (iii) in the event that a
shareholder makes a written comment on the proxy card or otherwise communicates
his/her vote to management; or (iv) to allow the independent inspector of
election to certify the results of the vote. The Company has retained EquiServe,
First Chicago Trust Division, its transfer agent, as independent inspector of
election to receive and tabulate the proxies, certify the results, and perform
any other acts required by the Delaware General Corporation Law.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock by (i) each person known by the Company
to beneficially own more than 5% of the Company's Common Stock, (ii) each
Director, (iii) each Executive Officer named in the Summary Compensation Table
and (iv) all Directors and Executive Officers as a group. The information set
forth below is as of March 1, 2000, unless otherwise indicated. Information
regarding shareholders other than Directors, Executive Officers and employee
benefit plans is based upon information contained in Schedules 13D or 13G filed
with the Securities and Exchange Commission ("SEC") and furnished to the Company
by such shareholders. The number of shares beneficially owned by each
shareholder and the percentage of the outstanding Common Stock those shares
represent include shares that may be acquired by that shareholder within 60 days
through the exercise of any option, warrant or right. The mailing address of the
parties listed below is the Company's principal business address unless
otherwise indicated.
<TABLE>
<CAPTION>
SHARES OF
COMMON PERCENTAGE OF
STOCK BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED BENEFICIALLY OWNED
------------------------------------ ------------------ ------------------
<S> <C> <C>
Jefferies Group, Inc. Employee Stock Ownership Plan......... 3,316,161(1) 13.6%
Frank E. Baxter............................................. 1,623,291(2) 6.7%
Tweedy, Browne Company L.L.C. and Affiliates
52 Vanderbilt Ave., 8th Floor
New York, New York 10017.................................. 1,534,924(3) 6.3%
Richard B. Handler.......................................... 967,837(4) 3.9%
Michael L. Klowden.......................................... 221,595(5) *
Clarence T. Schmitz......................................... 148,222(6) *
John C. Shaw, Jr............................................ 115,847(7) *
Richard G. Dooley........................................... 106,316(8) *
Frank J. Macchiarola........................................ 84,078(9) *
Jerry M. Gluck.............................................. 61,230(10) *
Sheldon B. Lubar............................................ 55,507(11) *
W. Patrick Campbell......................................... 5,000(12) *
All 11 Current Directors and Executive Officers............. 3,280,550(13) 13.2%
</TABLE>
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* The percentage of shares beneficially owned does not exceed one percent of
the outstanding class.
(1) The terms of the Jefferies Group, Inc. Employee Stock Ownership Plan (the
"ESOP") provide for the voting rights associated with the shares held by
the ESOP to be passed through and exercised exclusively by the participants
in the ESOP to the extent that such securities are allocated to a
participant's account. As of November 30, 1999, 3,037,417 shares of Common
Stock held in the ESOP Trust were allocated to the accounts of ESOP
participants, and 278,744 shares of Common Stock held in the ESOP Trust
were held in a leveraged account for future use. Those shares allocated to
the accounts of Directors and Executive Officers are included on their
respective entries in the table and are also included in the ESOP figure.
The ESOP and the Trustee of the ESOP (Wells Fargo Bank) may be deemed to
have shared dispositive power over the shares held by the ESOP. The Board
of Directors of the Company appoints the members of the committee which
serves as the Plan Administrator of the ESOP. Messrs. Frank E. Baxter, a
Director of the Company, Michael L. Klowden, a Director of the Company,
Joseph A. Schenk, Chief Financial Officer of the Company, and Melvin W.
Locke, Jr., Director of Human Resources of Jefferies, presently serve on
the committee. Each of these individuals disclaims beneficial ownership of
the shares held by the ESOP except those shares allocated to his ESOP
account.
(2) Includes 43,462 shares subject to immediately exercisable options; 9,026
shares Mr. Baxter holds as custodian for his children's accounts; 52,026
shares held under the ESOP; and 299,248 shares held under the Jefferies
Group, Inc. Profit Sharing Plan (the "PSP"). Participants in the ESOP have
sole
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voting power and no dispositive power over shares allocated to their ESOP
accounts. Participants in the PSP have sole voting power and limited
dispositive power over shares allocated to their PSP accounts.
(3) Tweedy, Browne Company L.L.C., a Delaware limited liability company
("TBC"), together with TBK Partners, L.P., a Delaware limited partnership
("TBK"), and Vanderbilt Partners L.P., a Delaware limited partnership
("Vanderbilt"), filed a combined statement on Schedule 13D dated and
reporting beneficial ownership at May 12, 1999, and as of the date hereof,
had not amended the Schedule 13D. The holdings for TBC and related entities
are therefore based on the May 1999 Schedule 13D amendment. As adjusted,
TBC reported beneficial ownership of 1,253,840 shares (5.2% of the
outstanding class as of March 1, 2000), with sole voting power over
1,100,766 shares and shared dispositive power over 1,253,840 shares. TBK
reported having sole voting and dispositive power over 226,040 shares.
Vanderbilt reported having sole voting and dispositive power over 55,044
shares. The aggregate number of shares with respect to which TBC, TBK and
Vanderbilt could be deemed to be the beneficial owner is 1,534,924 shares
(6.3% of the outstanding class as of March 1, 2000). As of May 12, 1999,
the three general partners in Vanderbilt (Christopher H. Browne, William H.
Browne, and John D. Spears) were three of the six members of TBC (with
Thomas H. Shrager, Robert Q. Wyckoff, Jr. and a Delaware corporation
referred to as "Holdings" in the May 1999 Schedule 13D), and are also three
of the four general partners of TBK (Thomas P. Knapp was also a general
partner of TBK, but is not a member of TBC or a partner of Vanderbilt). The
general partners in each of TBK and Vanderbilt, and the members of TBC, as
the case may be, solely by reason of their positions as such, may be deemed
to have shared power to vote and dispose of the shares held by TBC, TBK,
and Vanderbilt, respectively.
(4) Includes 285,488 shares subject to immediately exercisable options, and
15,715 shares held under the ESOP.
(5) Includes 129 shares held under the ESOP.
(6) Includes 129 shares held under the ESOP and 3,765 shares under the PSP.
(7) Includes 33,967 shares subject to immediately exercisable options; 40,622
shares held under the ESOP and 855 shares under the PSP.
(8) Includes 60,415 shares subject to immediately exercisable options.
(9) Includes 53,124 shares subject to immediately exercisable options, and 765
shares subject to options which became exercisable on March 31, 2000.
(10) Includes 6,545 shares subject to immediately exercisable options; 30,756
shares under the ESOP and 667 shares under the PSP.
(11) Includes 6,367 shares held by Mr. Lubar's spouse and 20,630 shares subject
to immediately exercisable options.
(12) Shares subject to options which will become exercisable on April 26, 2000.
(13) Includes 510,176 shares subject to immediately exercisable options; 5,765
shares subject to options which will become exercisable within 60 days of
March 1, 2000; 170,966 shares held under the ESOP for all Executive
Officers as a group; and 301,801 shares under the PSP for Executive
Officers as a group.
ELECTION OF DIRECTORS
Under the Company's By-Laws, the Board of Directors is authorized to
determine the number of Directors of the Company, which may not be less than six
nor more than seventeen Directors. The number of authorized Directors to be
elected at the Annual Meeting has been fixed at seven. Such Directors will be
elected to serve until the next Annual Meeting and until their successors shall
be elected and qualify.
All of the nominees for election as a Director are present members of the
Board of Directors. Mr. Baxter was elected by Written Consent of the Sole
Incorporator of the Company on February 25, 1999. Messrs. Dooley, Handler, Lubar
and Macchiarola were elected to their positions by a Unanimous Written
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Consent of the Board of Directors on March 17, 1999, effective immediately after
the Spin-Off. Mr. Shaw was elected to his position at the regular meeting of the
Board of Directors on January 25, 2000. Mr. Campbell was elected to his position
by Unanimous Written Consent of the Board of Directors on January 26, 2000. Mr.
Klowden, a current member of the Board of Directors, will not stand for
re-election.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR AND
EXECUTIVE OFFICERS
NOMINEES
The following information is submitted concerning the nominees for election
as Directors:
FRANK E. BAXTER, 63, a nominee, has been Chairman of the Board since
September 26, 1990, Chief Executive Officer since March 19, 1987, and a Director
of the Company and of Jefferies since 1975. Mr. Baxter has previously served as
President of the Company and of Jefferies from January 1986 until December 1996,
Executive Vice President, National Sales Manager and New York Branch Manager of
Jefferies, and Managing Director of the Company's U.K. subsidiary. Mr. Baxter
has been a Director of ITGI since March 1994, and was a Director of ITG Inc.
("ITG"), ITGI's wholly owned broker-dealer subsidiary, from January 1994 through
January 1997. Mr. Baxter has also been a member of the Board of Governors of the
National Association of Securities Dealers, Inc. since January 1998, and a
member of the Board of Directors of the Securities Industry Association since
November 1995.
W. PATRICK CAMPBELL, 54, a nominee, has been a Director of the Company
since January 26, 2000. From 1994 until October, 1999, Mr. Campbell was
Executive Vice President of Corporate Strategy and Business Development at
Ameritech Corp. where he was a member of the Management Committee and directed
all corporate strategy and merger and acquisition activity. From 1989 to 1994,
Mr. Campbell served as President and Chief Executive Officer of Columbia TriStar
Home Video, a Sony Pictures Entertainment Company, and has previously been
President of RCA/Columbia Pictures International Video. Mr. Campbell has also
been a director of Black & Veatch since November 1999. Mr. Campbell is also a
trustee for the Museum of Science and Industry in Chicago.
RICHARD G. DOOLEY, 70, a nominee, has been a Director of the Company since
November 1993. From 1978 until his retirement in June 1993, Mr. Dooley was
Executive Vice President and Chief Investment Officer of Massachusetts Mutual
Life Insurance Company ("Mass Mutual"); Mr. Dooley is currently a consultant to
Mass Mutual. Mr. Dooley has also been a director of Advest Group, Inc. since
1983, HSB Group, Inc. since 1984, Kimco Realty Corporation since 1990, and
various Mass Mutual sponsored investment companies. Mr. Dooley is also a trustee
of Saint Anselm College and Chairman of the Board of The New England Education
Loan Marketing Corporation. Mr. Dooley is Chairman of the Company's Compensation
Committee and a member of the Audit Committee.
RICHARD B. HANDLER, 38, has been Co-President and Co-Chief Operating
Officer of the Company since January 2000, and of Jefferies since February 2000.
Mr. Handler has been a Director of the Company since May 1998, and a Director of
Jefferies since May 1993. Mr. Handler is the Manager of the High Yield Division
of Jefferies and has previously served as Executive Vice President of Jefferies
from April 1990 until January 2000. Mr. Handler is also a director of Automated
Trading Systems, Inc. and of Wayland Investment Fund, LLC.
SHELDON B. LUBAR, 70, a nominee, has been a director of the Company since
January, 1998. He is currently Chairman of the Board of Lubar & Co.
Incorporated, an investment banking firm, where he has served in that capacity
since 1977. From 1986 to 1999, he was Chairman of the Board of Christiana
Companies, Inc., a New York Stock Exchange listed company that provides
refrigerated warehousing and logistics. Mr. Lubar is also a Director of C2, Inc.
since 1998, Weatherford International, Inc. since 1995, MGIC Investment
Corporation since 1991, Firstar Corporation since 1986, Massachusetts Mutual
Insurance Co. since 1977, and Grant Prideco, Inc. since 2000.
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<PAGE> 8
FRANK J. MACCHIAROLA, 58, a nominee, has been a Director of the Company
since August 1991. He is currently the President of St. Francis College, where
he has served in that capacity since July 1996. He also serves as special
counsel to the law firm of Tannenbaum, Halpern, Syracuse & Hirschtritt LLP.
Previously, Mr. Macchiarola was a Professor of Law and Political Science and the
Dean of the Benjamin N. Cardozo School of Law at Yeshiva University in New York
City from 1991 to 1996, Professor of Business in the Graduate School of Business
at Columbia University from 1987 to 1991, and President and Chief Executive
Officer of the New York City Partnership, Inc. from 1983 to 1987. Prior to 1985,
he was a faculty member at the City University of New York and Chancellor of the
New York City Public School System. Mr. Macchiarola has been a Trustee of the
Manville Personal Injury Trust since 1991. Mr. Macchiarola is Chairman of the
Company's Audit Committee and a member of the Compensation Committee.
JOHN C. SHAW, Jr., 53, a nominee, has been a Director of the Company since
January 2000, and a Director of Jefferies since 1983. Mr. Shaw has also been
Co-President and Co-Chief Operating Officer of the Company since January 2000,
and of Jefferies since February 2000. Previously, Mr. Shaw was Executive Vice
President of Jefferies from August 1997 until January 2000, National Sales
Manager of Jefferies from August 1997 until January 2000, and Assistant National
Sales Manager of Jefferies from May 1994 until August 1997.
OTHER EXECUTIVE OFFICERS
The Executive Officers of the Company are appointed by the Board of
Directors and serve at the discretion of the Board. Other than Messrs. Baxter,
Handler and Shaw, for whom information is provided above, the following sets
forth information as to the Executive Officers:
JERRY M. GLUCK, 52, has been Secretary and General Counsel of the Company
and Jefferies since May 1985 and a Director of Jefferies since November 1984.
MICHAEL L. KLOWDEN, 54, a present Director who is not standing for
re-election, has been a Director of the Company since May 1987 and Vice Chairman
of the Company since December 1999 and of Jefferies since February 2000. Mr.
Klowden was the President and Chief Operating Officer of the Company from
December 1996 until December 1999, and of Jefferies from December 1996 until
February 2000. From May 1995 until December 1996, he was Vice Chairman of the
Company and of Jefferies. Mr. Klowden has been a Director of Jefferies since May
1995, and has been a trustee of the University of Chicago since 1986. From 1978
until May 1995, Mr. Klowden was a senior partner of Morgan, Lewis & Bockius LLP.
JOSEPH A. SCHENK, 41, has been Chief Financial Officer of the Company since
January 2000, and Executive Vice President of Jefferies since February 2000.
Previously, Mr. Schenk was a Senior Vice President, Corporate Services, of
Jefferies from September 1997 through December 1999. From January 1996 through
September 1997, Mr. Schenk was Chief Financial Officer and Treasurer of Tel-Save
Holdings, Inc., now Talk.com Inc. From September 1993 to January 1996, Mr.
Schenk was Vice President, Capital Markets Group, with Jefferies.
MAXINE SYRJAMAKI, 55, has been Controller of the Company since May 1987, an
Executive Vice President of Jefferies since November 1986 and Chief Financial
Officer of Jefferies since September 1984.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors of the Company held eight meetings during 1999. Each
incumbent member of the Board of Directors attended, during his term of office,
at least 75% of the total number of meetings of the Board of Directors and
Committees thereof of which such Director was a member.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board does not have an Executive Committee or a Nominating Committee.
The current Audit Committee members are Frank J. Macchiarola, Chairman,
Richard G. Dooley and Sheldon B. Lubar. The Audit Committee is responsible for
reviewing with the independent auditors of the Company the independent auditors'
audit and review programs and procedures, the financial statements and
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the adequacy of the Company's system of internal accounting controls. The
Committee also reviews the professional services provided by the independent
auditors and makes recommendations to the Board as to the auditors' engagement
or discharge. During 1999, there were four meetings of the Audit Committee.
The current Compensation Committee members are Richard G. Dooley, Chairman,
Sheldon B. Lubar, Frank J. Macchiarola. The Compensation Committee develops and
implements compensation policies, plans and programs for the Company's Executive
Officers. During 1999, there were seven meetings of the Compensation Committee.
DIRECTOR COMPENSATION
Each non-employee Director (Messrs. Campbell, Dooley, Lubar and
Macchiarola) receives an annual retainer of $20,000, paid quarterly, $4,000 for
attendance at each of six regular meetings of the Board, and $2,000 for
attendance at each special meeting of the Board. In addition, the Chairmen of
the Audit and Compensation Committees are each paid an annual fee of $3,000, and
Directors receive $750 for each Committee meeting attended.
Under the Company's current compensation policy implementing the 1999
Directors' Stock Compensation Plan (the "DSCP"), each non-employee Director may
elect to receive annual retainer fees and Chairman's fees in the form of cash,
stock options, deferred cash, or deferred shares. If a Director elects to be
paid in the form of options, the number of options granted is determined using
an option valuation methodology determined by the Board. The value of such
options is equal to the amount of such fees. Such options have a term of ten
years, and an exercise price determined in accordance with the option valuation
methodology used by the Board. Each option will vest and become exercisable as
to 25% of the underlying shares on the June 30, September 30, December 31, and
March 31 following the date of grant (or at a faster rate if options are granted
at times other than the customary annual meeting date), except that an option
will become fully exercisable at the end of the plan year if the Director serves
through such date. Options will expire ten years after the date of grant, except
that any part of the option not exercisable at the time a Director ceases to
serve as a Director will expire at that time, regardless of the reason for the
Director's termination, and the part of an unexercisable option attributable to
fees for service as Chairman of a committee will expire at the time committee
service terminates.
A non-employee Director may elect to defer receipt of annual retainer fees
(other than fees paid in the form of options), fees for service as chairman of a
Board committee, and Board and committee meeting fees by filing an election
prior to the beginning of the plan year. If such fees are deferred in the form
of cash, the Company will credit a cash account established for the Director
with the amount of fees deferred, at the date such fees otherwise would be
payable to the Director. Interest will be credited to such account for a plan
year at the prime interest rate in effect at the date of the preceding annual
meeting of stockholders.
If Directors' fees are deferred in the form of deferred shares, the Company
will credit a deferral account established for the Director with a number of
deferred shares equal to the number of shares (including fractional shares)
having an aggregate fair market value at the date fees otherwise would be
payable equal to the amount of fees deferred in such form. Dividend equivalents
equal to dividends declared and paid on the Common Stock will be credited on
deferred shares then credited to a Director's account, which amounts will be
deemed to be reinvested in additional deferred shares.
In addition, under the DSCP, an option to purchase 4,000 shares of stock
will be granted each year to each Director of the Company who is then eligible
to receive an option grant at the close of business on the day of the Company's
annual meeting of stockholders at which Directors are elected by the Company's
stockholders. A newly elected Director is also automatically granted an option
to purchase 5,000 shares under the plan. No director may be granted an option
more than once during any one calendar year under the plan. These options
granted under the DSCP will expire at the earlier of (i) five years after the
date of grant, (ii) twelve months after the recipient ceases to serve as a
Director due to death, disability, or retirement at or after age 65, or (iii)
sixty days after the recipient ceases to serve as a Director for any other
reason. Options will become exercisable three months after the date of grant,
provided that the recipient is a Director on the
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<PAGE> 10
date the option becomes exercisable, and are exercisable at a price per share
equal to 100% of the fair market value per share at the date of grant.
In connection with the spin-off (described on page 1 of this Proxy
Statement), directors of Old Jefferies Group were permitted to elect either to
"roll over" their options in a manner complying with accounting rules so as to
preserve the intrinsic value of the options and the ratio of exercise price to
market price without enhancing the rights of the optionee, or to not roll over
the options but instead to receive "make-whole" options. The nature of such
"make-whole" options and the manner in which they were granted was the same as
for employees, as described in the "REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION -- Compensation Matters Relating to the Spin-Off."
Directors and former Directors who elected to receive "make-whole" options, and
the number received, were as follows: Mr. Dooley, option to purchase 13 shares;
Mr. Macchiarola, option to purchase 102 shares; and Tracy Herrick, option to
purchase 13 shares.
Directors who are also employees of the Company are not paid Directors'
fees and are not granted options for serving as Directors.
Each Director may participate in the Company's Charitable Gifts Matching
Program pursuant to which the Company will match 50% of charitable contributions
made by a Director, up to a maximum dollar amount of $1,500 per person per year.
The children of Directors may also participate (along with the children of
all employees of the Company) in the Stephen A. Jefferies Educational Grant
Program which provides scholarship awards for secondary and post-secondary
education based on factors such as financial need, academic merit and personal
statements. The grants are made by an independent scholarship committee, none of
whose members are affiliated with the Company.
EXECUTIVE COMPENSATION
Shown below is information concerning the annual and long-term compensation
for services in all capacities to the Company for the fiscal years ended
December 31, 1999, 1998, and 1997, of those persons who were, during 1999, the
Chief Executive Officer and the other four most highly compensated Executive
Officers of the Company specified by SEC rules (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
-------------------------------- --------------------------- ---------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
SECURITIES
OTHER UNDER-
ANNUAL RESTRICTED LYING ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S)(2) SARS(3) PAYOUTS SATION(4)
- ------------------------- ---- ------- ---------- ------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank E. Baxter.......... 1999 400,000 3,378,000 -- -- 44,462 -- 388,367
Chairman and Chief 1998 400,000 818,918 15,848 1,638,082 -- 1,487,660 81,004
Executive Officer 1997 400,000 818,918 16,228 2,088,082 72,000 2,628,322 90,940
Jerry M. Gluck........... 1999 214,000 185,460 -- -- 17,545 -- 11,610
Secretary and General 1998 214,000 166,000 4,299 79,448 -- -- 33,172
Counsel 1997 214,000 161,000 3,842 -- 10,000 -- 30,527
Richard B. Handler....... 1999 250,000 8,531,838 -- 2,571,264 101,000 -- 11,610
Co-President and Co- 1998 250,000 8,135,197 15,963 3,320,061 -- -- 78,485
Chief Operating Officer 1997 500,000 17,105,403 14,971 -- -- -- 82,826
Michael L. Klowden....... 1999 300,000 1,640,000 -- -- (5) -- 11,610
Vice Chairman 1998 300,000 1,023,000 15,664 826,411 -- -- 62,662
1997 300,000 1,050,750 13,405 650,250 40,000 -- 54,239
Clarence T. Schmitz...... 1999 275,000 1,552,000 -- -- (6) -- 11,610
Chief Financial Officer 1998 275,000 756,750 14,596 294,969 -- -- 36,740
1997 275,000 703,500 13,538 234,500 10,000 -- 31,273
</TABLE>
- ---------------
(1) The amounts shown include cash and non-cash compensation earned by the Named
Executive Officers as well as amounts earned but deferred at the election of
those Named Executive Officers.
8
<PAGE> 11
(2) As a result of the Spin-Off, Named Executive Officers with restricted common
stock of Old Jefferies Group prior to the Spin-Off now hold one share of
restricted ITG stock and one share of restricted common stock of the Company
for each share of Old Jefferies Group restricted stock. On December 31,
1999, the following Named Executive Officers held restricted stock of each
of the Company and ITG: Mr. Gluck: 1,585 shares with an aggregate market
value of $34,870 of the Company and $45,569 of ITG; Mr. Handler: 76,903
shares with an aggregate market value of $1,691,866 of the Company and
$2,210,961 of ITG; Mr. Klowden: 20,240 shares with an aggregate market value
of $445,280 of the Company and $581,900 of ITG; Mr. Schmitz: 7,105 shares
with an aggregate market value of $156,310 of the Company and $204,269 of
ITG. Restrictions on 10,556 of Mr. Klowden's shares granted on February 18,
1999 will lapse two years from the date of grant, and on 9,684 shares
granted on January 27, 1999, lapsed on January 26, 2000. Restrictions on all
of Mr. Schmitz' restricted shares lapsed on January 3, 2000. Restrictions on
Mr. Gluck's restricted stock granted January 27, 1999 will lapse three years
from the date of grant. Restrictions on 66,903 of Mr. Handler's shares
granted February 25, 1999 will lapse on June 30, 2001, and on 10,000 shares
granted March 31, 1999 will lapse on March 31, 2002.
(3) All options shown as compensation for 1997 and 1998 were exercised prior to
the Spin-Off and are no longer outstanding, therefore the number of such
options has not been adjusted to give effect to the Spin-Off.
(4) The total amounts for 1999 shown in the "All Other Compensation" column
include the following:
(a) The Company's matching contributions under the Company's Section
401(k)/Profit Sharing Plan ("PSP"). During the plan year ended November
30, 1999, Mr. Baxter received $7,194, and Messrs. Handler, Klowden,
Schmitz and Gluck each received $6,641 as the Company's matching
contributions.
(b) Forfeitures under the Company's Employee Stock Ownership Plan ("ESOP").
During the plan year ended November 30, 1999, each Named Executive
Officer's account was credited with .446 shares of the Company's common
stock at an original cost of $.9505 per share, and with .1628 shares of
ITG common stock at an original cost of $1.6775 per share, for a total
value of $14 as a result of such forfeitures as of December 31, 1999.
(c) Forfeitures under the PSP. During the plan year ended November 30,
1999, the account of each of the Named Executive Officers was credited
with $244.93 as a result of PSP forfeitures.
(d) Compensation to Mr. Baxter, in the amount of $376,204, resulting from a
split-dollar insurance policy purchased by the Company in 1999 for his
benefit. In accordance with Securities and Exchange Commission rules,
the amount of compensation is calculated on the assumption that most of
the premiums paid by the Company represent a long-term, no-interest
loan to the executive, the principal amount of which will be fully
repaid to the Company fifteen years after purchase of the policy. The
amount calculated under this method has been reduced to reflect the
amount of a deferred compensation liability of the Company to Mr.
Baxter canceled in 1999. The amount of the canceled liability, assuming
interest accruing at a non-preferential rate, is being applied
proportionately over the five years during which the Company will pay
premiums under the insurance policy, as an offset reducing the
reportable compensation resulting from the policy.
(5) Mr. Klowden was granted options to purchase an aggregate of 230,137 shares
of common stock which he agreed to relinquish as of January 3, 2000 in
connection with a change of responsibilities and title from President and
Chief Operating Officer to Vice Chairman.
(6) Mr. Schmitz was granted options to purchase an aggregate of 157,036 shares
of common stock, 117,667 of which he agreed to relinquish as of January 3,
2000 in connection with his resignation as Chief Financial Officer effective
December 31, 1999.
9
<PAGE> 12
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS/ MARKET ASSUMED ANNUAL RATES OF
UNDERLYING SARS EXERCISE PRICE ON STOCK PRICE APPRECIATION
OPTIONS/ GRANTED TO OR BASE DATE OF FOR OPTION TERM
SARS EMPLOYEES IN PRICE GRANT EXPIRATION -------------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) ($) DATE 0% 5% 10%
---- ----------- ------------ -------- -------- ---------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank E. Baxter...... 1,000 0.07% $22.56 $22.56 4/28/2004 -- $ 6,233 $ 13,773
43,462 2.86% $22.56 $22.56 4/28/2004 -- $270,895 $ 598,607
Clarence T.
Schmitz............ 33,333(2) 2.19%(2) $22.56 $22.56 4/28/2004 -- $207,762(2) $ 459,099(2)
6,036(2) 0.43%(2) $22.56 $22.56 4/28/2004 -- $ 37,622(2) $ 83,134(2)
Jerry M. Gluck....... 1,000 0.07% $22.56 $22.56 4/28/2004 -- $ 6,233 $ 13,773
6,545 0.43% $22.56 $22.56 4/28/2004 -- $ 40,794 $ 90,145
10,000 0.66% $22.56 $22.56 4/28/2004 -- $ 62,329 $ 137,731
Richard B. Handler... 1,000 0.07% $22.56 $22.56 4/28/2004 -- $ 6,233 $ 13,773
100,000 6.58% $22.56 $22.56 4/28/2004 -- $623,291 $1,377,311
55,000 3.62% $27.31 $27.31 8/09/2004 -- $415,027 $ 917,100
130,488(3) 8.58% $19.02 $19.02 12/31/2003 -- $633,586 $1,387,762
Michael L. Klowden... (4) (4) $22.56 $22.56 4/28/2004 -- (4) (4)
</TABLE>
- ---------------
(1) The options are non-qualified options which expire at the earlier of the
date indicated in the table, the date of termination of the executive's
employment for any reason if before vesting of the option, or the date 60
days after termination of employment if after vesting of the option. The
options are vested and immediately exercisable, except (i) Mr. Gluck's
10,000 share option and each 1,000-share option vests and becomes
exercisable on the third anniversary of the date of grant, and (ii) as
otherwise indicated in notes (2) and (4) below. The exercise price may be
paid in cash, by surrender of previously acquired shares, or in any other
manner permitted by the Compensation Committee, and the executive may elect
to pay applicable withholding taxes in cash, by having option shares
withheld by the Company, or by surrendering previously acquired shares to
the Company.
(2) Mr. Schmitz was granted an option to purchase 1,000 shares of common stock
which he agreed to relinquish as of January 3, 2000. The option would have
constituted .07% of the total number of options granted during fiscal 1999,
and would have had a potential realizable value at a 5% assumed annual rate
of stock price appreciation of $6,233, and at a 10% assumed annual rate of
stock price appreciation, of $13,773. The option would have become
exercisable three years from the date of grant. Mr. Schmitz was also granted
an option to purchase 150,000 shares of common stock, 116,667 of which he
agreed to relinquish as of January 3, 2000. The option would have
constituted 10.79% of the total number of options granted during fiscal
1999, and would have had a potential realizable value at a 5% assumed annual
rate of stock price appreciation of $934,937, and at a 10% assumed annual
rate of stock price appreciation, of $2,065,966. The option was immediately
vested and exercisable with respect to 33,333 shares which were retained by
Mr. Schmitz and which are reflected on the table, and would have become
exercisable with respect to 33,333 shares on April 28, 2000, 33,334 shares
on April 28, 2001, and 25,000 shares on each of April 28, 2002 and April 28,
2003. The exercise price of all Mr. Schmitz' options was $22.56.
(3) Option was "rolled over" from an option Mr. Handler was entitled to receive
during fiscal 1999 in lieu of a portion of his 1998 bonus. See "REPORT OF
THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION -- Compensation Matters
Relating to the Spin-Off."
(4) Mr. Klowden was granted an option to purchase 1,000 shares of common stock
which he agreed to relinquish as of January 3, 2000. The option would have
constituted .07% of the total number of options granted during fiscal 1999,
and would have had a potential realizable value at a 5% assumed annual rates
10
<PAGE> 13
of stock price appreciation of $6,233, and at a 10% assumed annual rate of
stock price appreciation, of $13,773. The option would have become
exercisable three years from the date of grant. Mr. Klowden was also granted
an option to purchase 41,637 shares of common stock which he agreed to
relinquish as of January 3, 2000. The option would have constituted 3.00% of
the total number of options granted during fiscal 1999, and would have had a
potential realizable value at a 5% assumed annual rate of stock price
appreciation of $259,520, and at a 10% assumed annual rate of stock price
appreciation, of $573,471. The option was immediately vested and
exercisable. Mr. Klowden was also granted an option to purchase 187,500
shares of common stock which he agreed to relinquish as of January 3, 2000.
The option would have constituted 13.49% of the total number of options
granted during fiscal 1999, and would have had a potential realizable value
at a 5% assumed annual rate of stock price appreciation of $1,168,671, and
at a 10% assumed annual rate of stock price appreciation, of $2,582,457. The
option was immediately vested and exercisable with respect to 41,666 shares,
and would have become exercisable with respect to 41,666 shares on April 28,
2000, 41,667 shares on April 28, 2001, and 31,250 shares on each of April
28, 2002 and April 28, 2003. The exercise price of all Mr. Klowden's options
was $22.56.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS/ OPTIONS/SARS AT
ACQUIRED ON VALUE SARS AT FY-END (#) FY-END ($)
EXERCISE REALIZED EXERCISABLE(E)/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE (U) UNEXERCISABLE(1)
---- ----------- ---------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Frank E. Baxter........... 72,000 $1,887,750 43,462(E) --
1,000(U) --
Clarence T. Schmitz....... 186,000 $5,716,750 39,369(E)(2) --
Jerry M. Gluck............ 10,000 $ 130,938 6,545(E) --
11,000(U) --
Richard B. Handler........ -- -- 285,488(E) $388,854
1,000(U)
Michael L. Klowden........ 254,000 $6,832,313 (2) --
</TABLE>
- ---------------
(1) At December 31, 1999, the closing price of the Company's Common Stock was
$22.00, which was the price used to determine the year-end value tables in
Column (e)
(2) See footnotes (2) and (4) to the Options/SAR Grants Table above.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and Executive Officers, and persons who beneficially own
more than 10% of the Company's outstanding Common Stock, to file with the SEC,
by a specified date, initial reports of beneficial ownership and reports of
changes in beneficial ownership of Common Stock and other equity securities of
the Company on Forms 3, 4 and 5. Directors, Executive Officers, and
greater-than-10% shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION AND THE PERFORMANCE GRAPH ON
PAGE 16 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
11
<PAGE> 14
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, the members of which
in 1999 were Messrs. Dooley, Macchiarola, and Lubar, has furnished the following
report on executive compensation:
To: The Board of Directors and Shareholders of Jefferies Group, Inc.
Under the supervision of the three members of the Compensation Committee
(the "Committee"), each of whom is a non-employee Director, the Company has
developed and implemented compensation policies, plans and programs which seek
to enhance the profitability of the Company and thus shareholder value. The
Committee has established compensation policies, plans and programs for the
Company's executive officers which are designed to provide competitive levels of
compensation, reward productivity and profitability, and encourage long-term
service to the Company.
As described elsewhere in this Proxy Statement, in April 1999 the Company's
former corporate parent (also called Jefferies Group, Inc. but referred to here
as "Old Jefferies Group") and Investment Technology Group, Inc. ("ITGI")
consummated a series of transactions that resulted in the separation of ITGI
from the other businesses of Old Jefferies Group. Prior to these transactions
(the "Spin-Off"), the Compensation Committee of Old Jefferies Group performed
the same functions as the Committee now performs for the Company. All three
Directors now serving on the Committee also served on the Old Jefferies Group
Compensation Committee. Where this Report describes Committee determinations and
actions that occurred prior to the Spin-Off, those were the responsibility of
the Old Jefferies Group Compensation Committee (the "Old Committee").
The Committee administers the Company's 1999 Incentive Compensation Plan,
as amended and restated (the "1999 Plan"). The 1999 Plan provides for cash-based
incentive awards, which constitute a major component of the Company's executive
compensation program. The Plan also provides for grants of stock options and
other share-based awards. The Committee believes that such awards, which provide
substantial rewards to executives if the value of the Company's stock rises
during the life of the award, can be beneficial in aligning the interests of
executive officers with the interests of shareholders.
In implementing compensation policies, plans, and programs for 1999, the
Committee considered the effects of Section 162(m) of the Internal Revenue Code.
Section 162(m) generally disallows a public company's tax deduction for
compensation to its chief executive officer and four other most highly
compensated executive officers in excess of $1 million in any tax year. Under
Section 162(m), compensation that qualifies as "performance-based compensation"
is excluded from the $1 million deductibility cap, and therefore remains fully
deductible even though such compensation may (together with other compensation)
exceed $1 million in a given year. The Committee intends to seek to preserve the
tax deductibility of compensation to executive officers, to the extent that this
objective does not impair the operation and effectiveness of the Company's
compensation policies and programs. To this end, the 1999 Plan was designed and
implemented in a manner that should enable the Committee to grant annual
incentive awards, stock options, and other awards as qualifying
"performance-based compensation" that will remain fully deductible by the
Company. The Committee retains the flexibility, however, to enter into
arrangements that may result in nondeductible compensation to executive
officers. The Committee believes that no compensation otherwise deductible for
1999 was subject to the Section 162(m) deductibility limit.
COMPENSATION MATTERS RELATING TO THE SPIN-OFF
The Old Committee took a number of actions in connection with the Spin-Off
which were ratified by the Board of Directors of the Company. With regard to
most stock options outstanding before the Spin-Off, the Old Committee determined
not to have the options "rolled over" as new options after the Spin-Off, but
instead took steps to encourage the exercise of such options. To facilitate
this, the Old Committee accelerated the vesting of 5,000 Old Jefferies Group
options held by each of three executive officers, including Mr. Gluck, a Named
Executive Officer. This approach resulted in substantial option exercises by
executive officers prior to the Spin-Off, but added to the capital of the
Company and reduced the number of shares necessary to be
12
<PAGE> 15
reserved for option exercises after the Spin-Off. Some options which had been
granted shortly prior to the Spin-Off were replaced by new options at the time
of the Spin-Off in a manner complying with accounting rules so as to preserve
the intrinsic value of the options and the ratio of exercise price to market
price without enhancing the rights of the optionee. Certain options held by Mr.
Handler, a Named Executive Officer, were "rolled over" resulting in a new option
to purchase 130,488 shares at $19.02 per share. The term and vesting of rollover
options is the same as the employee's corresponding Old Jefferies Group option.
The Old Committee authorized the grant of options, referred to as
"Make-Whole Options," in recognition of the fact that employees who exercised
options before the Spin-Off were giving up a right which had value in excess of
the option's then "in-the-money" value. The Old Committee calculated the amount
by which these exercised options had a value, under the methodology generally
used by the Company to value employee options, in excess of the value realized
by the employee upon exercise in the period leading up to the Spin-Off.
Consistent with the actions of the Old Committee, the Board of Directors of the
Company granted Make-Whole Options at the time of the Spin-Off which had a
value, determined in the same way, equal to the excess value of the exercised
options. Make-Whole Options have a stated expiration date of five years after
grant, and an exercise price equal to the market value of common stock at the
time of the Spin-Off. The Make-Whole Option grants to named executive officers
are shown in the Summary Compensation Table and the table entitled Option/SAR
Grants in last Fiscal Year.
The Old Committee also authorized a broad-based grant of options to more
than 150 senior employees, effective at the time of the Spin-Off. The Company
committed to making this option grant in connection with the termination of Old
Jefferies Group's Capital Accumulation Plan (the "CAP") at the end of 1998, to
offset the loss of the compensation opportunities under that plan. Each
participating employee, including each Named Executive Officer, received an
option to purchase 1,000 shares, with a five-year stated term and an exercise
price equal to the market value of common stock at the time of the Spin-Off.
The Old Committee authorized new option grants to most executive officers
and to other key employees, effective at the time of the Spin-Off. The Old
Committee's policies under which these grants were determined are described
below under the caption "Compensation Paid to Executive Officers Generally."
Prior to the Spin-Off, the Company distributed shares in an early
settlement of common stock units acquired by employees, including the executive
officers, under the CAP and paid cash in an early settlement of cash-denominated
deferrals under the CAP. In the case of Messrs. Baxter, Handler, Klowden and
Schmitz, amounts credited in settlement of CAP account balances were transferred
as cash balances into a deferred compensation arrangement. The Company settled
its deferred compensation obligation to Mr. Baxter under the CAP plan through
the purchase of a Split-Dollar Life Insurance Policy.
In view of the upcoming Spin-Off, the Old Committee converted any phantom
shares credited in payment of annual incentive compensation in 1997 and 1998
into a cash amount for each of the executive officers using the closing price as
of February 5, 1999. On February 18, 1999, the cash amounts for Mr. Klowden and
Mr. Schmitz were converted into Restricted Stock at the fair market value of a
share of Common Stock on February 18, 1999.
Restricted stock awards held by executive officers at the time of the
Spin-Off were rolled over into corresponding shares of Company stock and shares
of ITGI, which shares remained subject to the restrictions applicable before the
Spin-Off.
The Company adopted a new Employee Stock Purchase Plan and Supplemental
Stock Purchase Plan to replace a similar plan of Old Jefferies Group.
COMPENSATION PAID TO EXECUTIVE OFFICERS GENERALLY
Annual compensation paid to executive officers in 1999, including the named
executive officers, generally consisted of a base salary and/or draw and an
annual bonus which was determined (i) in whole or in part by reference to net
earnings of the Company, and (ii), in the case of executive officers with
responsibility for revenue-producing departments or divisions, in whole or in
part by reference to departmental or divisional profitability, and, in some
cases, revenues or other measures of performance. In addition, in the case of
certain
13
<PAGE> 16
executive officers with predominantly administrative functions, in determining
the amount of annual bonus payable, the Committee considered individual
initiative and performance. For 1999, earnings attributable to ITGI were not
included in assessing performance for purposes of determining any annual bonus.
The amount of each executive officer's base salary or draw is intended by
the Committee to provide a level of income that is predictable, so that such
executive officer will be able to meet living expenses and financial
commitments. Certain executive officers receive draws against potential bonus
amounts, which are forfeitable. Although the Committee considers competitive
practices in this regard, its determination of the level of base salary or draw
generally is a subjective one.
The 1999 Plan, approved by shareholders of Old Jefferies Group shortly
before the Spin-Off, contains broad authority to implement annual and long-term
incentive awards. The Pay-For-Performance Incentive Plan, formerly a stand-alone
plan of Old Jefferies Group, now implements annual bonuses under the 1999 Plan.
In accordance with the Pay-For-Performance Plan, the Committee determined
formulas for payment of an annual bonus to each such executive officer in early
1999 with a view to providing overall compensation which would provide the
executive with a competitive compensation package and align the interests of the
executive with those of the Company's shareholders. The Committee also received
significant input from the Chief Executive Officer in determining the formulas
for such executive officers' compensation. The Committee may also consider
requests from the affected executive in setting the elements and amounts of the
executive's compensation. In the case of executive officers with responsibility
for revenue-producing departments or divisions, the Committee assessed the
contribution such department or division could make to the Company's overall
financial performance and sought to provide a substantial incentive to the
executive officer to maximize such contribution. In determining amounts of bonus
potentially payable under the Pay-For-Performance Incentive Plan, although the
Committee considered competitive practices, its determinations for individuals
were generally subjective. The Committee in some cases requires or permits
portions of annual bonus to be deferred, and to be deemed invested in specified
investment vehicles during the period of deferral.
The Committee granted equity-based awards during 1999 to executive
officers, primarily in the form of option grants at the time of the Spin-Off and
restricted stock. Most restricted stock grants to executive officers, and some
grants of options, represent an alternative form of payout of a cash-denominated
annual bonus. These grants in lieu of annual bonus generally have short vesting
periods, and usually are made with the concurrence of the affected executive
officer. Where equity awards are intended as an additional element of long-term
compensation, the grant generally is based on the Committee's review of trends
in the compensation of executives in the securities industry and its subjective
judgment as to the appropriate level of total compensation for the executive
officer. Long-term equity-based awards serve both to align the interests of
executive officers with those of shareholders and to promote retention and
long-term service to the Company.
The Committee considers competitive compensation data, but does not attempt
to target total compensation or particular elements of compensation to a
percentile of a group of comparable companies.
COMPENSATION PAID TO THE CHIEF EXECUTIVE OFFICER IN 1999
As members of the Compensation Committee, it is our responsibility to
evaluate the performance and establish the compensation level of the Company's
CEO, Mr. Frank E. Baxter. The Committee has retained William M. Mercer,
Incorporated to assist it in setting the compensation of the Chief Executive
Officer.
Mr. Baxter's compensation package for 1999 was intended to motivate and
reward Mr. Baxter for achieving levels of net earnings, which the Committee
believes promotes the best interests of the Company's shareholders and
encourages Mr. Baxter to continue to serve the Company. In setting Mr. Baxter's
compensation for 1999, the Committee intended that Mr. Baxter's compensation
would be competitive with that of CEOs of other companies of comparable size in
the securities industry, but that a large percentage of his target compensation
would be based upon objective performance criteria, specifically, the net
earnings of the Company.
For 1999, Mr. Baxter's compensation consisted of a base salary of $400,000,
and an incentive award implemented under and subject to the terms of the
Pay-for-Performance Incentive Plan. Mr. Baxter's base
14
<PAGE> 17
salary remained at the prior year's level. By this means the Committee sought to
provide Mr. Baxter with a non-performance based element of compensation that was
certain as to payment. In making this subjective determination, the Committee
recognized that, by providing a non-performance based element to the CEO's
compensation, some trade-off exists between a desire to avoid exposing the CEO
to excessive amounts of risk and the desire to align the interests of the CEO as
closely as possible with those of the Company's shareholders.
During the first quarter of 1999, the Committee also established the terms
of Mr. Baxter's incentive award. The Committee specified this annual incentive
award as 6.8% of consolidated net earnings from continuing operations, excluding
the after-tax effect of all expenses associated with the Spin-Off and not
classified as part of discontinued operations.
Under Mr. Baxter's leadership, the Company experienced 35% year-over-year
growth in its net earnings from continuing operations in 1999. Mr. Baxter earned
a bonus of $3,378,000 as a result of this 1999 performance.
In April 1999, the Company granted to Mr. Baxter Make-Whole Options and the
1000-share option granted to persons who could no longer participate in the CAP.
The basis on which these options were granted is described above under the
caption "Compensation Matters Relating to the Spin-Off."
The foregoing report has been furnished by:
Richard G. Dooley, Chairman
Frank J. Macchiarola & Sheldon B. Lubar
15
<PAGE> 18
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly change in the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return of the Standard & Poor's 500 Index, and the Financial
Service Analytics Brokerage Composite Index ("FSA Composite") for the period of
five fiscal years, commencing January 1, 1995 (based on prices at December 31,
1994), and ending December 31, 1999.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
JEFFERIES GROUP, INC.'S COMMON, STANDARD & POOR'S 500 AND FSA COMPOSITE INDICES
<TABLE>
<CAPTION>
FSA BROKERAGE COMPOSITE
JEFFERIES GROUP, INC. S&P 500 INDEX
--------------------- ------- -----------------------
<S> <C> <C> <C>
1994 100 100 100
1995 160 138 142
1996 274 169 208
1997 558 225 382
1998 680 290 425
1999 839 351 628
</TABLE>
* Normalized so that the value of the Company's Common Stock and each index was
$100 on December 31, 1994, assuming all dividends were reinvested, and
assuming the Spin-Off resulted in a one time dividend on each share of JEF of
$40.31 (the opening price of the new ITG shares immediately after the
Spin-Off) in April of 1999.
PENSION PLAN
All employees of the Company prior to April 1, 1997, who are citizens or
residents of the United States, who are 21 years of age, and who have completed
one year of service with the Company are covered by the Jefferies Group, Inc.
Employees' Pension Plan (the "Pension Plan"), a defined benefit plan, which was
originally adopted in 1964 and amended in January 1987. The Pension Plan is
funded through contributions by the Company and earnings on existing assets in
conformance with annual actuarial evaluations. The Pension Plan provides for
annual benefits following normal retirement at age 65 equal to 1% of the
employee's covered remuneration from January 1, 1987, until termination of
employment plus 20% of the first $4,800 and 50% of amounts exceeding $4,800 of
annual average covered remuneration for 1985 and 1986, reduced proportionately
for service of less than fifteen years (as of December 31, 1986). Benefits
payable under the Pension Plan are not subject to deduction for Social Security
benefits or other offsets.
Covered remuneration for purposes of the Pension Plan includes the
employee's total annual compensation (salaries, bonuses and commissions) not to
exceed $100,000 for 1985 and 1986, and $200,000 for 1987. From 1988 through
1993, this latter dollar limitation was adjusted automatically for each plan
year to the
16
<PAGE> 19
amount prescribed by the Secretary of the Treasury, or his delegate, for such
plan year. From 1994 until 1996, the maximum covered remuneration was $150,000.
From 1997 through 1999, the maximum covered remuneration was $160,000. An
employee who retires upon normal retirement at age 65 with at least four years
of service will receive a full vested benefit. An employee who retires at age 55
with at least four years of service will receive the normal retirement benefit
reduced by 1/2% for each month benefit payments commence before age 65.
Employees who terminate employment with the Company for reasons other than death
or retirement will be entitled to the vested portion of their benefits at their
normal or early retirement age. Benefits vest at the rate of 0% for the first
year of service, 33% for each of the next two years of service, and 34% for the
fourth year of service. The retirement benefits payable at age 65 for those
employees with service prior to January 1, 1987, will be composed of two items:
(1) a benefit for service up to December 31, 1986, in accordance with the
original Pension Plan formula recognizing pay as the average of 1985 and 1986
remuneration up to $100,000, and (2) a benefit for service commencing on January
1, 1987, equal to 1% of covered remuneration through the date of termination.
Total years of credited service apply to both the original and amended Pension
Plans for purposes of determining vesting and eligibilities.
As of December 31, 1999, the estimated annual benefits payable upon
retirement at normal retirement age for each of the Named Executive Officers of
the Company are: Mr. Baxter: $52,694; Mr. Gluck: $52,039; Mr. Handler: $64,161;
Mr. Klowden: $26,500; and Mr. Schmitz: $7,800.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Jefferies has extended credit to certain of its Directors, Officers,
employees and shareholders in connection with their purchase of securities on
margin. Receivables from its Officers and Directors were $8,114,979 at December
31, 1999. Such extensions of credit were made in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility or
present other unfavorable features.
During 1999, in the ordinary course of business, Jefferies executed
securities transactions on behalf of Tweedy, Browne Company L.L.C., a
shareholder of the Company beneficially owning in excess of 5% of the Company's
Common Stock, and received commissions of approximately $62,000.
During fiscal 1999 prior to his resignation, Tracy G. Herrick, a former
Director of the Company, provided the Company with certain financial and other
consulting services. Mr. Herrick was paid $88,527.
The Company believes the foregoing transactions were on terms no less
favorable to the Company than could have been obtained from unaffiliated
parties. The Board of Directors has adopted a policy which provides that the
Company will not enter into any transactions with its Directors, Officers, or
affiliates (not including companies consolidated with it for financial reporting
purposes), other than those related to employee compensation or expense
reimbursement and other than those having terms no less favorable to the Company
than could have been obtained from unaffiliated parties, unless approved by the
Company's disinterested and independent Directors.
ANNUAL REPORT AND INDEPENDENT AUDITORS
The Company's Annual Report on Form 10-K for the Company's fiscal year
ended December 31, 1999, accompanies this Proxy Statement, but is not deemed a
part of the proxy soliciting material.
KPMG LLP were the Company's independent auditors for the year ended
December 31, 1999. The appointment of independent auditors is approved annually
by the Board of Directors, which approval is based, in part, on the
recommendations of the Audit Committee. In making its recommendations, the Audit
Committee reviews both the audit scope and estimated audit fees for the coming
year. Shareholder approval is not sought in connection with this selection.
17
<PAGE> 20
A representative of KPMG LLP, the independent auditors who examined the
consolidated financial statements of the Company for 1999, is expected to be
present at the meeting to respond to appropriate questions of shareholders and
will have the opportunity to make a statement if he so desires.
OTHER MATTERS
Management had received no notice, by the date 45 days before the mailing
date of this Proxy Statement, of any matter to come before the Annual Meeting
other than those described in this Proxy Statement, and does not know of any
other matters to come before the Annual Meeting. However, if any additional
matters are properly presented to the meeting, it is the intention of the
persons named in the accompanying proxy to vote such proxy in accordance with
their best judgment on such matters.
INCORPORATION BY REFERENCE
Certain financial and other information has been provided in the Annual
Report on Form 10-K delivered with this Proxy Statement. The following sections
of the Annual Report are hereby incorporated by reference: "Supplementary
Financial Information," "Financial Statements," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure," and
"Quantitative and Qualitative Disclosures About Market Risk."
SHAREHOLDER PROPOSALS
Shareholder proposals relating to the 2001 Annual Meeting of Shareholders
must be received by the Company at its principal executive offices in Los
Angeles, California at the address set forth on the first page hereof, no later
than December 2, 2000 to be included in the Company's proxy statement and proxy
card, and no later than February 17, 2001, if to be presented at the meeting but
not included in the proxy statement or proxy card in order to be considered
timely under federal securities laws. Nothing in this paragraph shall be deemed
to require the Company to include in its proxy materials relating to the 2001
Annual Meeting of Shareholders, any shareholder proposal which does not meet all
of the requirements for inclusion established by the Securities and Exchange
Commission and the Company's By-Laws at that time in effect.
For the Board of Directors,
Jerry M. Gluck, Secretary
April 3, 2000
18
<PAGE> 21
[X] PLEASE MARK YOUR
VOTES AS INDICATED
IN THIS EXAMPLE.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR
election of Directors.
FOR WITHHELD
1. Election of Directors. [ ] [ ] 2. In their discretion, upon such
(see reverse) other business as may properly
come before the meeting, or at
any adjournment thereof.
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
SIGNATURE(S)________________________________________________ DATE _____________
Shareholders should date this proxy and sign here exactly as name appears at
left. If stock is held jointly, both owners should sign this proxy. Executors,
administrators, trustees, guardians and others signing in a representative
capacity should indicate the capacity in which they sign. Receipt is
acknowledged of Notice of the above meeting, the Proxy Statement relating
thereto, and the Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
- -------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
[LOGO] JEFFERIES
GROUP, INC.
Dear Shareholders,
We are embracing the e-economy throughout the firm. We are very excited
with the new communications tools as a means of enhancing our dialogue with
clients and improving our internal processes. They increase our ability to
compete. Our people, however, remain our most important asset. We are
optimistic that combining our human and technological capital will propel
earnings growth.
Frank E. Baxter
Chairman and CEO
<PAGE> 22
JEFFERIES GROUP, INC.
P PROXY FOR ANNUAL MEETING OF SHAREHOLDERS MAY 26, 2000
Solicited on Behalf of the Board of Directors of the Company
R
The undersigned holder(s) of common shares of JEFFERIES GROUP, INC., a
O Delaware corporation (the "Company") hereby appoints Frank E. Baxter,
Richard B. Handler and John C. Shaw, Jr., and each of them, attorneys
X of the undersigned, with power of substitution, to vote all shares of the
common shares that the undersigned is entitled to vote at the Annual
Y Meeting of Shareholders of the Company to be held on Friday, May 26, 2000,
at 10 a.m. and at any adjournment thereof, as follows:
1. Election of Directors. (change of address/comments)
Nominees for directors are: Frank E. Baxter,
W. Patrick Campbell, Richard G. Dooley, ---------------------------
Richard B. Handler, Sheldon B. Lubar,
Frank J. Macchiarola, John C. Shaw, Jr. ---------------------------
2. In their discretion, upon such other ---------------------------
business as may properly come before
the meeting, or at any adjournment ---------------------------
thereof.
(PLEASE SIGN ON REVERSE SIDE)
(See Reverse Side)
- --------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
[LOGO] JEFFERIES
GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
DATE: MAY 26, 2000
TIME: 10:00 A.M.
PLACE: JEFFERIES & COMPANY, INC.
11100 SANTA MONICA BLVD. 11th FL.
LOS ANGELES, CA 90025
