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 ss.240.14a-11(c) or ss.240.14a-12
Kinnard 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)(1)
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:
<PAGE>
KINNARD INVESTMENTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 21, 1998
TO THE SHAREHOLDERS OF KINNARD INVESTMENTS, INC.
The 1998 Annual Meeting of Shareholders of Kinnard Investments, Inc. will
be held at the Minneapolis Convention Center, Room 211 AB, 1301 Second Avenue
South, Minneapolis, Minnesota, at 3:30 p.m. (Minneapolis time) on Thursday, May
21, 1998, for the following purposes:
1. To set the number of members of the Board of Directors at seven (7).
2. To elect members of the Board of Directors.
3. To take action on any other business that may properly come before the
meeting or any adjournment thereof.
Accompanying this Notice of Annual Meeting is a Proxy Statement, form of
Proxy and the Company's Annual Report to Shareholders for the year ended
December 31, 1997.
Only Shareholders of record as shown on the books of the Company at the
close of business on April 1, 1998, will be entitled to vote at the Meeting or
any adjournment thereof. Each Shareholder is entitled to one vote per share on
all matters to be voted on at the Annual Meeting.
Please note that whether you own one or many shares, it is important that
your shares of Common Stock be represented at the Annual Meeting. Therefore,
please complete, date and sign the enclosed form of Proxy and mail it promptly
in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
Gerald M. Gifford
Secretary
Dated: April 17, 1998
Minneapolis, MN
<PAGE>
KINNARD INVESTMENTS, INC.
Annual Meeting of Shareholders
May 21, 1998
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of Directors of Kinnard
Investments, Inc. (the "Company") for use at the Annual Meeting of Shareholders
of the Company to be held Thursday, May 21, 1998, at the location and for the
purposes set forth in the Notice of Annual Meeting, and at any adjournment
thereof.
The cost of soliciting Proxies, including the preparation, assembly and
mailing of the Proxies and soliciting material, as well as the cost of
forwarding such material to the beneficial owners of stock, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular remuneration, solicit Proxies personally
or by telephone.
Any shareholder giving a Proxy may revoke it at any time prior to its use
at the Annual Meeting by giving written notice of such revocation to the
Secretary or other officer of the Company or by filing a new written Proxy with
an officer of the Company. Personal attendance at the meeting is not, by itself,
sufficient to revoke a Proxy unless written notice of the revocation or a
subsequent Proxy is delivered to an officer before the revoked or superseded
Proxy is used at the meeting.
Proxies not revoked will be voted in accordance with the choice specified
by shareholders by means of the ballot provided on the Proxy for that purpose.
Proxies which are signed but which lack any such specification will, subject to
the following, be voted in favor of the proposals set forth in the Notice of
Meeting and in favor of the number and slate of directors proposed by the Board
of Directors and listed herein. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at the
Meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instruction by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote shall be deemed
present at the Meeting for purposes of determining a quorum but shall not be
deemed to be represented at the Meeting for purposes of calculating the vote
required for approval of such matter.
The mailing address of the principal executive office of the Company is
Kinnard Financial Center, 920 Second Avenue South, Minneapolis, Minnesota 55402.
<PAGE>
The Company expects that this Proxy Statement, the related Proxy and Notice of
Meeting will first be mailed to Shareholders on April 17, 1998.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed April 1, 1998, as the
record date for determining shareholders entitled to vote at the Annual Meeting.
Persons who were not shareholders on such date will not be allowed to vote at
the Annual Meeting. At the close of business on April 1, 1998, 5,963,227 shares
of the Company's Common Stock, par value $.02, were issued and outstanding. The
Common Stock is the only outstanding class of capital stock of the Company
entitled to vote at the Annual Meeting. Each share of Common Stock is entitled
to one vote on each matter to be voted upon at the meeting. Holders of Common
Stock are not entitled to cumulative voting rights.
PRINCIPAL SHAREHOLDERS
The following table provides information concerning persons known to the
Company to be the beneficial owners of more than 5% of the Company's outstanding
Common Stock as of April 1, 1998:
Shares Percent
Name and Address Beneficially of
of Beneficial Owner Owned (1) Class (2)
- ------------------- ------------ ---------
John G. Kinnard and 774,866 (3) 13.0%
Company, Incorporated
Employee Stock Owner-
ship Plan and Trust
920 Second Ave. S.
Minneapolis, MN 55402
William F. Farley 485,500 (4) 7.9%
920 Second Avenue S.
Minneapolis, MN 55402
Robert S. Spong
920 Second Avenue S.
Minneapolis, MN 55402 307,451 (5) 5.2%
<PAGE>
- ------------------------
(1) Unless otherwise indicated, each person or entity named or included in
the group has sole power to vote and sole power to direct the
disposition of all shares listed as beneficially owned by such person
or entity.
(2) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of April 1, 1998, or within 60
days of such date are treated as outstanding only when determining the
percent of the class owned by such individual and when determining the
percent owned by the group.
(3) Such shares are held in trust for the benefit of participants in the
John G. Kinnard and Company, Incorporated Employee Stock Ownership Plan
and Trust (the "ESOP"). The participants have voting power over shares
held by the ESOP which have been allocated to their accounts, and the
Trustees vote shares, if any, which have not been allocated to
participants' accounts.
(4) Includes 158,000 shares which may be purchased pursuant to options and
warrants which were exercisable as of April 1, 1998, or will become
exercisable within 60 days of such date.
(5) Includes 117,297 shares held by Mr. Spong's wife, 12,365 shares
allocated to his account under the ESOP and 72,536 shares held for Mr.
Spong in the Company's 401(k) profit sharing account (over which Mr.
Spong has dispositive power but not voting power).
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of Common Stock
beneficially owned as of April 1, 1998, by each director and nominee for
director of the Company, by each executive officer of the Company named in the
Summary Compensation table, and by all directors and executive officers
(including the named individuals) as a group:
Shares Percent
Name of Beneficially of
Beneficial Owner Owned (1) Class (2)
William F. Farley 485,500 (3) 7.9%
Robert S. Spong 307,451 (4) 5.2%
Gerald M. Gifford 146,213 (5) 2.4%
Andrew J. O'Connell 130,252 (6) 2.2%
Stephen H. Fischer 108,142 (7)(8) 1.8%
Hilding C. Nelson 86,015 (9) 1.4%
Daniel R. Sass 19,128 (10) *
John H. Grunewald 2,000 (8) *
John J. Fauth 0 (8) 0
Ronald A. Erickson 0 (8) 0
All Directors and Executive
Officers as a Group
(10 persons) 1,284,701 (11) 20.6%
*Less than one per cent
<PAGE>
(1) See footnote (1) to preceding table.
(2) See footnote (2) to preceding table.
(3) Includes 158,000 shares which may be purchased pursuant to options and
warrants which were exercisable as of April 1, 1998, or will become
exercisable within 60 days of such date.
(4) Includes 117,297 shares held by Mr. Spong's wife, 12,365 shares
allocated to his account under the ESOP and 72,536 shares held for Mr.
Spong in the Company's 401(k) profit sharing account (over which Mr.
Spong has dispositive power but not voting power).
(5) Includes 27,100 shares which may be purchased pursuant to options which
were exercisable as of April 1, 1998, or will become exercisable within
60 days of such date, 9,853 shares allocated to Mr. Gifford's account
under the ESOP and 21,760 shares held for Mr. Gifford in the Company's
401(k) profit sharing account (over which Mr. Gifford has dispositive
power but not voting power).
(6) Includes 33,000 shares which may be purchased pursuant to options which
were exercisable as of April 1, 1998, or will become exercisable within
60 days of such date, shares allocated to the ESOP accounts of Mr.
O'Connell (19,207 shares) and his wife (4,702 shares) and 45,943 shares
held for Mr. O'Connell in the Company's 401(k) profit sharing account
(over which Mr. O'Connell has dispositive power but not voting power).
Mr. O'Connell disclaims beneficial ownership of the shares allocated to
his wife's ESOP account.
(7) Includes 2,500 share options which may be purchased pursuant to options
which were exercisable as of April 1, 1998 or will become exercisable
within 60 days of such date.
(8) Does not includes 2,500 shares which will become purchasable by such
individual on May 21, 1998 pursuant to an automatic grant under the
Company's 1997 Stock Option Plan if such individual is re-elected as a
director of the Company.
(9) Includes 32,500 shares which may be purchased pursuant to options which
were exercisable as of April 1, 1998 or will become exercisable within
60 days of such date.
<PAGE>
(10) Includes 9,000 shares which may be purchased pursuant to options which
were exercisable as of April 1, 1998, or will become exercisable within
60 days of such date, 2,428 shares allocated to Mr. Sass' account under
the ESOP and 2,000 shares held for Mr. Sass in the Company's 401(k)
profit sharing plan (over which Mr. Sass has dispositive power but not
voting power).
(11) Includes 262,100 shares which may be purchased pursuant to options and
warrants which were exercisable as of April 1, 1998, or will become
exercisable within 60 days of such date, 48,555 shares allocated to
accounts under the ESOP, and 142,239 shares held in the Company's
401(k) profit sharing plan (over which participants have dispositive
power but not voting power).
ELECTION OF DIRECTORS
(Proposals #1 and #2)
General Information
The Bylaws of the Company provide that the number of directors shall be not
less than the minimum required by law (which is one) and that in accordance with
such requirement the number of directors to be elected for the ensuing year
shall be determined by the shareholders at each annual meeting. The Board of
Directors recommends that the number of directors be set at seven and that seven
directors be elected. Unless otherwise instructed, the Proxies will be so voted.
Under applicable Minnesota law, approval of the proposal to set the number
of directors at seven, as well as the election of each nominee, requires the
affirmative vote of the holders of the greater of (1) a majority of the voting
power of the shares represented in person or by proxy at the Annual Meeting with
authority to vote on such matter, or (2) a majority of the voting power of the
minimum number of shares that would constitute a quorum for the transaction of
business at the Annual Meeting.
In the absence of other instructions, the Proxies will be voted for each of
the following individuals. If elected, such individuals will serve until the
next annual meeting of shareholders or until their successors shall be duly
elected and shall qualify. All of the nominees are members of the present Board
of Directors. Hilding C. Nelson, who has served as Chairman of the Board since
October 1995, has advised the Company he does not wish to stand for re-election.
If, prior to the Annual Meeting of Shareholders, it should become known that any
one of the following individuals will be unable to serve as a director after the
Annual Meeting by reason of death, incapacity or other unexpected occurrence,
the Proxies will be voted for such substitute nominee(s) as is selected by the
Board of Directors. Alternatively, the Proxies may, at the Board's discretion,
be voted for such fewer number of nominees as results from such death,
incapacity or other unexpected occurrence. The Board of Directors has no reason
to believe that any of the following nominees will be unable to serve.
<PAGE>
Current Position(s) Principal Occupation(s) Director
Nominee Age With Company During Past Five Years Since
William F. 54 Chief Operating Chief Operating Officer April 1997
Farley Officer and of the Company and President
Director and Chief Executive Officer
of the Company's subsidiary,
John G. Kinnard and Company,
Incorporated ("JGK") since
April 1997. From April 1996
to April 1997, private
investor. From March 1990
to April 1996, Vice Chairman
of First Bank System.
Robert S. 63 Director Senior Vice President of JGK. May 1981
Spong
Stephen H. 54 Director Independent investor since February
Fischer February 1998. Chief 1991
Executive Officer (from
March 1992 to February 1998)
and President and Chief
Financial Officer (from August
1986 to February 1998)
of PrimeVest Financial
Services, Inc.("PFS"), a
subsidiary of ReliaStar
Financial Corporation.
Treasurer of the Company
from February 1993 to
November 1996.
Andrew J. 43 Director Investment Executive with July 1994
O'Connell JGK since 1978. Senior Vice
President of JGK since
May 1992.
John J. 52 Director President and Chief July 1997
Fauth Executive Officer of The
Churchill Companies, a
private investment company,
since 1982.
<PAGE>
John H. 61 Director Independent investor since January 1998
Grunewald January 1997. From September
1993 to January 1997, Chief
Financial Officer of Polaris
Industries, a manufacturer of
recreational vehicles.
From July 1976 to June 1993,
Chief Financial Officer of
Pentair, Inc., a diversified
industrial manufacturer.
Also, a director of the following
public companies: Nash Finch
Company and Advantage Learning
Systems, Inc.
Ronald A. 61 Director President since 1970 of January 1998
Erickson Holiday Companies, a private
business entity owning and
operating gasoline/convenience
stores, supermarkets, sporting
goods stores and wholesale
food distribution businesses.
Also a director of Carriage
Services, Inc.
Board and Committee Meetings
The Board of Directors has the following Committees: Compensation,
Nominations and Audit. The Compensation Committee reviews and recommends
compensation for officers and directors of the Company and administers the
Company's employee stock plans. During fiscal 1997 such Committee, which
consisted of Messrs. Hilding C. Nelson, and Stephen H. Fischer, met six times.
The Audit Committee reviews with the Company's independent accountants the
annual financial statements and the results of the annual audit. During fiscal
1997 such Committee also consisted of Messrs. Fischer and Nelson and met four
times. The Nominations Committee, which reviews and recommends nominations of
candidates for director, consisted of Messrs. Farley and Nelson during fiscal
1997. The Committee did not hold any formal meetings during 1997, although
Committee members met informally several times. The Nominations Committee is
engaged in a search for additional outside directors. The Nominations Committee
will consider qualified nominees recommended by Company shareholders. Such
recommendations should be submitted in writing to the Secretary of the Company
and should include a biography of the nominee.
During fiscal 1997, the Board of Directors held seven meetings. Each
incumbent director attended 75% or more of the total number of meetings (held
<PAGE>
during the period(s) for which he has been a director or served on committee(s))
of the Board and of committee(s) of which he was a member.
Directors Fees
Under current compensation plans, the Company pays the directors who are
not employees of the Company or a subsidiary, for their services as directors of
the Company, the sum of $750 per month plus $500 per regular board meeting and
$250 per special board and each committee meeting attended.
Under the Company's 1997 Stock Option Plan, each nonemployee director
receives, upon election or re-election to the Board by the shareholders, an
option to purchase 2,500 shares of the Company's Common Stock at a price equal
to the fair market value of the Company's Common Stock as defined in the Plan.
On May 20, 1997 the Company granted options to purchase 2,500 shares, at an
option price of $5.98 per share, to Messrs. Nelson and Fischer, who were
re-elected as directors at the 1997 annual meeting of shareholders.
Since October 1995, Hilding C. Nelson has served as Chairman of the Board,
for which he has been paid the regular outside director fees described above and
additional compensation based on time expended on Company business. In 1997 Mr.
Nelson's aggregate cash compensation as a director was $151,043.
Certain Relationships and Related Transactions
(a) Andrew J. O'Connell and Robert S. Spong, directors of the Company, are
employees of JGK. They earned in 1997 commissions, bonuses and other
compensation and benefits from JGK, on the same bases and under the same
policies as other employees, in the aggregate amounts of $691,177 and $155,967,
respectively.
(b) Certain directors and officers of the Company (and members of the
immediate families of such persons) maintain margin accounts with JGK and have
margin account indebtedness outstanding from time to time. All such indebtedness
is incurred in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and do not involve more than
normal risk of collectibility or present other unfavorable features.
(c) On April 7, 1997 the Company entered into a Subscription and Purchase
Agreement with William F. Farley whereby Mr. Farley purchased 325,000 Units of
securities of the Company for $1,706,250 or $5.25 per Unit, each Unit consisting
of one share of Common Stock of the Company and a warrant to purchase an
additional share at a price of $6.00 per share. The fair market value of a share
of the Company's Common Stock on such date was $5.00 per share. The warrants
issued become exercisable as to 125,000 on December 31, 1997 and as to 200,000
on December 31, 1998 and expire on April 6, 2002. The Agreement provides Mr.
Farley certain participatory and demand registration rights exercisable on or
after April 7, 2000.
<PAGE>
On April 7, 1997 the Company also entered into an employment agreement with
William F. Farley pursuant to which he was elected President, Chief Executive
Officer and Chairman of the Board of Directors of JGK and Chief Operating
Officer and a director of the Company. The Agreement will expire December 31,
1999 subject to annual one-year extensions if notice of termination is not given
by either party six months prior to an expiration date. Mr. Farley is to be paid
base salary at a rate of $250,000 per annum in 1997 and 1998. For 1997, Mr.
Farley was guaranteed a minimum bonus of $280,000 and is guaranteed a minimum
bonus for 1998 of $250,000. For 1999 and any extension years, his base salary
and bonus is to be subject to a plan to be adopted by the Board of Directors. In
addition, Mr. Farley will participate in all Company and JGK employee benefit
plans and be reimbursed for certain expenses. In addition, the Company has
loaned Mr. Farley $95,000 in exchange for a non-interest bearing promissory note
which is due at the termination of his employment.
Mr. Farley's agreement contains provision for payments to him in the event
of his termination of employment with the Company and JGK for certain reasons.
If he is terminated by the Company without "cause" or resigns for "good reason,"
as such terms are defined in the agreement, he will be paid his base salary,
bonus and benefits for the balance of the term of the agreement. In addition, he
will be paid his base salary and a bonus equal to two times his base salary, for
an additional 12 months. Further, Mr. Farley will become vested in all stock
options, benefits and perquisites to which he would have been entitled to
receive had he remained through the term of the agreement.
In connection with his employment, Mr. Farley was granted an incentive
stock option and a non-qualified stock option, each a ten year option for 82,500
shares, vesting at the rate of 20% on December 31 of each year 1997 through 2001
and exercisable at a price of $6.00 per share. In the event of the termination
of his employment other than for cause or good reason, and in the event of a
change of control of the Company, all of Mr. Farley's options will become fully
vested.
In the event of a "change of control" in the Company, as defined in the
employment agreement, vesting of Mr. Farley's stock options will accelerate and
he will be entitled to payment to cover all base salary, bonuses, benefits and
perquisites that he would receive if he were to remain employed for an
additional 36 months at his then current base salary, with his annual bonus
calculated at two times his current base salary. The payment will not be made
during any month following the change of control in which he continues in the
employment of the Company. If the change of control is not initiated by the
Company, payments to Mr. Farley will be grossed up to adjust for the impact of
any excise tax imposed on amounts exceeding limits under the Internal Revenue
Code.
Mr. Farley is subject to confidentiality restrictions under the terms of
his employment agreement and may not compete with the Company or its
subsidiaries for the longer of the period one year after his termination of
employment or until December 3, 1999.
<PAGE>
(d) In October 1996, the Company entered into a Deferred Compensation
Agreement with Stephen H. Fischer in connection with the Company's sale of
PrimeVest Financial Services, Inc., which provides for the payment to Mr.
Fischer of the sum of $100,000 plus interest at a rate equal to Prime plus one
point on the earlier of (i) January 4, 1999, (ii) within 60 days after a "change
of control" as defined in such Agreement or (iii) Mr. Fischer's death.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee of the Board of Directors during fiscal 1997 was composed
of an outside director, Stephen H. Fischer, and a second director, Hilding C.
Nelson, who also served as Chairman of the Board during 1997. The Committee is
responsible for developing and making recommendations to the Board with respect
to the compensation to be paid to the Chief Executive Officer of the Company and
to the other principal executive officers of the Company and its operating
subsidiary, JGK.
Overview and Philosophy. The Company's executive compensation program is
comprised of base salaries, annual cash bonuses, long-term incentive
compensation in the form of stock options, and various benefits, including
participation in the Company's pension plan and employee stock ownership plan
("ESOP"), both of which are generally available to all employees of the Company
and have contribution formulas which are related to the Company's performance
and vesting schedules which reward long-term service to the Company.
The Company has followed a policy of paying annual base salaries which are
less than the industry's average as reported by the Securities Industry
Association and relying on annual cash bonuses and long-term incentive
compensation to retain executive officers. The Compensation Committee believes
long-term incentives enhance the concept of ownership which emphasize profits
and directly ties executive compensation to shareholder value. Annual cash
bonuses and long-term stock option incentives are tied to the profitability of
the Company and are not awarded if the Company fails to achieve a profitable
year or if goals are not met.
Compensation. The Company has continued the compensation policies and
practices which have included moderate increases during profitable periods and
reductions during unprofitable periods. Base salaries of some officers were
increased in 1997 to reflect individual performance and responsibilities.
Contributions to the Company's pension plan and ESOP are determined for
executive officers on the same basis as for all other employees. Annual
contributions to the pension plan are made at the rate of 5% of total
compensation paid during the year subject to IRS limitations. Contributions to
the ESOP are made at the discretion of the Company's Board of Directors. No
contribution was made to the ESOP for calendar year 1997.
<PAGE>
The Company provides medical and insurance benefits to its executive
officers which are generally available to all Company employees. Some executive
officers of the Company participate in the Company's employee stock purchase
plan which is also generally available to all employees and to which the Company
does not contribute. The amount of perquisites allowed to executive officers, as
determined in accordance with the rules of the Securities and Exchange
Commission, did not exceed 10% of salary for 1997.
Chief Executive Officer Compensation. In April 1997 William F. Farley was
employed as President, Chief Executive Officer and Chairman of the Board of JGK
and Chief Operating Officer of the Company. Mr. Farley was paid during 1997
pursuant to the terms of his employment contract.
Stephen H. Fischer
Hilding C. Nelson
Members of the Compensation Committee
Summary Compensation Table
The following table sets forth certain information regarding compensation
earned during each of the Company's last three fiscal years by each of the
Company's executive officers whose salary and bonus compensation exceeded
$100,000 for fiscal 1997.
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation Awards
------------------------ ------------
Securities
Underlying All Other
Name and Principal Fiscal Options Compensation
Position Year Salary($)(1) Bonus ($) /SARs (#) ($)
- ------------------ ------ ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
William F. Farley, Chief 1997 185,577 280,000 165,000 0
Operating Officer of KII
and President and Chief
Executive Officer of JGK
Gerald M. Gifford, 1997 160,399 7,500 -0- 8,662(2)
Secretary of KII and 1996 137,685 221,913 15,000 15,928
Executive Vice 1995 93,220 166,501 10,000 12,638
President of JGK
Daniel R. Sass, 1997 85,002 18,750 -0- 5,708(3)
Treasurer of KII and of 1996 75,012 95,000 5,000 15,928
JGK 1995 56,448 84,590 2,500 10,977
- ------------------------
1 Includes commission income.
2 Amount reflects Company contributions to the Pension Plan and ESOP of $8,000 and $662, respectively.
3 Amount reflects Company contributions to the Pension Plan and ESOP of $5,188 and $520, respectively.
</TABLE>
<PAGE>
Option/SAR Grants During 1997 Fiscal Year
The following options were granted to the named executive officers during
fiscal 1997 based on the achievement of performance objectives for fiscal 1996.
The Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
- --------------------------------------------------------------------------------- -------------------
Number of
Securities Percent of Total
Underlying Options/SARs
Options/SARs Granted to Exercise or
Granted Employees Base Price Expiration
Name (#) in Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- ------- -------------- --------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gerald M. Gifford 15,000(1) 3.1% 5.98 2/5/02 24,782 54,763
Daniel R. Sass 5,000(1) 1.0% 5.98 2/5/02 8,261 18,254
William F. Farley 165,000(2) 33.8% 6.00 4/6/07 622,606 1,577,805
1 Option was granted on February 5, 1997, and was immediately exercisable on the date of grant.
2 Options were granted on April 7, 1997, and vest at a rate of 20% per year beginning December 31, 1997.
</TABLE>
Option/SAR Exercises During 1997 Fiscal
Year and Fiscal Year End Option/SAR Values
The following table provides information related to options exercised by
the named executive officers during the 1997 fiscal year and the number and
value of options held at fiscal year end.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable(1)
- ---- --------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Gerald M. Gifford 0 N/A 27,100/0 51,121/0
Daniel R. Sass 0 N/A 9,000/0 16,944/0
William F. Farley 0 N/A 33,000/132,000 33,000/132,000
1 Based on the difference between the closing price of the Company's Common Stock as reported by Nasdaq at fiscal
year end and the option exercise price.
</TABLE>
<PAGE>
Stock Performance Chart
The following chart compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock during the five fiscal
years ended December 31, 1997 with the cumulative total return on the Nasdaq
Composite Index and the Nasdaq Financial Index. The comparison assumes $100 was
invested on December 31, 1992 in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
Dec Dec Dec Dec Dec
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Kinnard Investments 102.49 40.53 79.14 125.54 152.83
Nasdaq Composite 114.80 112.21 158.70 195.19 239.53
Nasdaq Financial 116.23 116.50 169.67 217.50 333.81
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANT
On June 30, 1997, the Company dismissed Deloitte & Touche, LLP ("Deloitte")
as its independent auditor. Deloitte's reports on the Company's financial
statements for the prior two years had not contained any adverse opinion or
disclaimer of opinion, or been qualified or modified as to uncertainty, audit
scope or accounting principles. The dismissal of Deloitte was recommended by the
Audit Committee and approved by the Board of Directors of the Company.
During the Company's two most recent fiscal years and the subsequent
interim period preceding Deloitte's dismissal, there were no disagreements
between the Company and Deloitte regarding any matter of the Company's
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
Deloitte, would have caused Deloitte to make reference to the subject matter of
the disagreement in connection with its report on the Company's financial
statements.
The Company dismissed Deloitte as its auditor because, in the Company's
view, the filing of a class action lawsuit against the Company involving a
company whose financial statements were audited by Deloitte may impair, or may
be perceived by others as impairing, Deloitte's independence with respect to
future services to the Company.
KPMG Peat Marwick LLP has been selected by the Board of Directors as the
Company's independent auditor for the current fiscal year. Representatives of
KPMG Peat Marwick LLP are expected to be present at the Annual Meeting, will be
given an opportunity to make a statement regarding financial and accounting
matters of the Company if they so desire, and will be available at such meeting
to respond to appropriate questions from the Company's shareholders.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten percent shareholders ("Insiders") are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based on a review of the copies of such reports
furnished to the Company, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to Insiders were complied with.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the annual meeting in calendar year 1999 must be
received by the Company by December 18, 1998, to be includable in the Company's
proxy statement and related proxy for the 1999 annual meeting.
OTHER BUSINESS
Management knows of no other matters to be presented at the meeting. If any
other matter properly comes before the meeting, the appointees named in the
Proxies will vote the Proxies in accordance with their best judgment.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1997, including its Report on Form 10-K filed with the
Securities and Exchange Commission, accompanies this Notice of Annual Meeting
and Proxy Statement. No part of such Annual Report is incorporated herein and no
part thereof is to be considered proxy soliciting material.
Dated: April 17, 1998
Minneapolis, MN
<PAGE>
KINNARD INVESTMENTS, INC.
PROXY FOR ANNUAL MEETING
May 21, 1998
The undersigned hereby appoints WILLIAM F. FARLEY and GERALD M. GIFFORD,
and each of them, with full power of substitution, his or her Proxies to
represent and vote, as designated below, all shares of the Common Stock of
Kinnard Investments, Inc. registered in the name of the undersigned at the 1998
Annual Meeting of Shareholders of the Company to be held at the Minneapolis
Convention Center, Room 211 AB, 1301 Second Avenue South, Minneapolis,
Minnesota, at 3:30 p.m., Minneapolis time, on May 21, 1998, and at any
adjournment thereof. The undersigned hereby revokes all proxies previously
granted with respect to such Meeting.
The Board of Directors recommends that you vote FOR each proposal.
1. Set the number of directors at seven (7).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Elect directors. (Nominees: W. Farley, R. Spong, S. Fischer,
A. O'Connell, J. Grunewald, J. Fauth, R. Erickson)
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
above (except those whose vote for all nominees
names have been written listed above
on the line below)
------------------------------------------------------
3. Other Matters. In their discretion, the Proxies are
authorized to vote upon such other business as may properly
come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Date_____________________, 1998
-------------------------------------
-------------------------------------
PLEASE DATE AND SIGN ABOVE exactly as
name appears at the left, indicating,
where proper, official position or
representative capacity. For stock
held in joint tenancy, each joint
owner should sign.
