SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
LEGG MASON, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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:
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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:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.
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3) Filing party:
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4) Date filed:
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<PAGE>
[LEGG MASON LOGO]
100 Light Street
Baltimore, Maryland 21202
June 12, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held at The Center Club, 100 Light Street, 16th Floor, Baltimore,
Maryland at 10:00 a.m. on Thursday, July 23, 1998. On the following pages you
will find the formal Notice of Annual Meeting and Proxy Statement.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted at the meeting. Accordingly, please
date, sign and return the enclosed proxy card promptly.
I hope that you will attend the meeting and look forward to seeing you
there.
Sincerely,
/s/ Raymond A. Mason
RAYMOND A. MASON
Chairman of the Board
and President
<PAGE>
LEGG MASON, INC.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, JULY 23, 1998
------------------
To the Stockholders of
LEGG MASON, INC.:
The Annual Meeting of Stockholders of Legg Mason, Inc., a Maryland
corporation, will be held at The Center Club, 100 Light Street, 16th Floor,
Baltimore, Maryland, on Thursday, July 23, 1998, at 10:00 a.m. to consider and
vote upon:
(1) The election of four directors for the three-year term ending in
2001.
(2) Amendment of the Legg Mason, Inc. 1988 Stock Option Plan For
Non-Employee Directors.
(3) Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the fiscal year ending March 31,
1999.
(4) Any other matter that may properly come before the meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on May 14, 1998 as
the date for determining stockholders of record entitled to notice of and to
vote at the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement and 1998
Annual Report to Stockholders.
By order of the Board of Directors
/s/ Charles A. Bacigalupo
CHARLES A. BACIGALUPO
Secretary
June 12, 1998
<PAGE>
LEGG MASON, INC.
100 LIGHT STREET
BALTIMORE, MARYLAND 21202
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, JULY 23, 1998
------------------
The enclosed proxy is solicited by the Board of Directors of Legg Mason,
Inc. (the "Company") and is revocable at any time prior to its exercise. The
cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited by officers, directors and
regular employees of the Company personally or by telephone or any other means
of communication, and the Company may reimburse brokers, banks, custodians,
nominees and other fiduciaries for their reasonable out-of-pocket expenses in
forwarding proxy materials to their principals. This proxy material is being
sent to stockholders on or about June 12, 1998.
Stockholders of record at the close of business on May 14, 1998 are
entitled to notice of and to vote at the meeting. As of the close of business on
that date, there were outstanding and entitled to vote 27,572,660 shares of
Common Stock, $.10 par value ("Common Stock"), each of which is entitled to one
vote. See "Security Ownership of Management and Principal Stockholders" for
information regarding ownership of the Common Stock.
Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock present in person or represented by proxy at the meeting,
with a quorum present. For purposes of the election of directors, abstentions do
not affect the plurality vote. The affirmative vote of a majority of the votes
cast on the proposal is required for approval of the amendment of the Legg
Mason, Inc. 1988 Stock Option Plan For Non-Employee Directors, provided that the
total votes cast on the proposal represent over 50% in interest of all
securities entitled to vote on the proposal. For purposes of the vote on this
amendment, an abstention will have the effect of a vote against the proposal
unless holders of more than 50% in interest of all securities entitled to vote
on the proposal cast votes, in which event an abstention will not have any
effect on the result of the vote.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Each year
one class is elected to serve for a term of three years. The stockholders will
vote at this Annual Meeting for the election of four directors for the
three-year term expiring at the Annual Meeting of Stockholders in 2001. All
nominees presently serve as directors.
The persons named in the enclosed proxy will vote for the election of the
nominees named below unless authority to vote is withheld. In the event any
nominee is unable to serve, the persons named in the proxy will vote for such
substitute nominee as they, in their discretion, shall determine. The Board of
Directors has no reason to believe that any nominee named herein will be unable
to serve.
The following material contains information concerning the nominees for
election and those directors whose terms continue beyond the date of the Annual
Meeting.
NOMINEES FOR DIRECTOR FOR THE TERM EXPIRING IN 2001
EDMUND J. CASHMAN, JR., age 61, has been a director of the Company since
its inception in 1981 and has served as a Senior Executive Vice President of the
Company since December 1983. He has been a Senior Executive Vice President of
Legg Mason Wood Walker, Incorporated ("LMWW"), the Compa-
<PAGE>
ny's principal subsidiary, since December 1983, and was an Executive Vice
President of LMWW from 1977 until December 1983. He is responsible for
supervising LMWW's syndicate, taxable fixed-income securities, private client
services, public finance and equity institutional sales activities. Mr. Cashman
is also President and a director of the Legg Mason Tax-Exempt Trust, Inc.; Vice
Chairman of the Board of Legg Mason Income Trust, Inc.; President and a trustee
of the Legg Mason Tax-Free Income Fund; a trustee of Legg Mason Cash Reserve
Trust; a trustee of Bartlett Capital Trust; a director of LM Institutional Fund
Advisors II, Inc.; and a director of EA Engineering, Science, and Technology,
Inc.
WILLIAM WIRTH, age 67, has been a director of the Company since July 1995.
He was employed by Credit Suisse from 1961 until his retirement in March 1994.
From 1977 to 1994, Dr. Wirth served as a member of the Credit Suisse Executive
Board with responsibility for various areas of asset management, institutional
investment counseling, mutual funds, economic research and financial analysis.
He continues to occupy positions in several entities within the CS Holding
Group, an international financial organization, including Chairman of the Board
of Bank Hofmann AG, Zurich. He is also a Vice Chairman of Deutsche Bank
(Switzerland) AG, Geneva.
HAROLD L. ADAMS, age 59, has been a director of the Company since January
1988. He has been the Chairman of RTKL Associates, Inc., an international
architecture, engineering and planning firm, since 1987 and the President of the
firm since 1969.
W. CURTIS LIVINGSTON, age 54, has been a director of the Company since 1989
and has served as the President and Chief Executive Officer of Western Asset
Management Company since August 1984 and as Chairman since October 1995, having
served as Senior Vice President of that firm since 1980. Western Asset
Management Company is an investment advisory firm acquired by the Company in
December 1986. Mr. Livingston is a director of Western Asset Trust, Inc.,
President and a director of LM Institutional Fund Advisors I, Inc. and a
director of LM Institutional Fund Advisors II, Inc.
DIRECTORS CONTINUING IN OFFICE
Directors whose terms will expire in 1999
RAYMOND A. MASON, age 61, has served as Chairman of the Board and
President of the Company since its inception in 1981. He has served as Chairman
and Chief Executive Officer of LMWW since 1975, and was its President from 1970
to November 1985. Prior to 1970, he was President of Mason & Company, Inc.,
which he founded in 1962. Mr. Mason is Chairman of the Board of the Legg Mason
Value Trust, Inc., the Legg Mason Total Return Trust, Inc. and the Legg Mason
Special Investment Trust, Inc. He is a director of Giant Food Inc.
JAMES W. BRINKLEY, age 61, has been a director of the Company since its
inception in 1981 and has served as a Senior Executive Vice President of the
Company since December 1983. In November 1985, he became President of LMWW,
having served as an Executive Vice President of LMWW since 1970. In February
1998, he also became the Chief Operating Officer of LMWW. Mr. Brinkley is
responsible for supervising LMWW's Private Client Group, Operations and
over-the-counter trading activities. He is a Trustee and Vice Chairman of the
Securities Industry Association.
NICHOLAS J. ST. GEORGE, age 59, has been a director of the Company since
July 1983. Since February 1979, he has been the President and Chief Executive
Officer of Oakwood Homes Corporation, a manufacturer and retailer of
manufactured homes. Mr. St. George was the Director of Corporate Development for
Ferguson Enterprises, Inc., a wholesale plumbing supplier, from 1976 to 1979 and
was Group Vice President of LMWW, where he was engaged in investment banking
activities, from 1973 to 1976. Mr. St. George is a director of Oakwood Homes
Corporation, American Bankers Insurance Group, Inc. and Carey International,
Inc.
RICHARD J. HIMELFARB, age 56, has served as a director of the Company and
as an Executive Vice President of the Company and LMWW since November 1983. He
has been a Senior Executive Vice President of the Company and LMWW since July
1995. He is responsible for supervising the corporate and real estate finance
activities of LMWW and other subsidiaries of the Company. From 1967 until
joining the Company in 1983, Mr. Himelfarb was engaged in the private practice
of law.
2
<PAGE>
ROGER W. SCHIPKE, age 61, has been a director of the Company since January
1991. He is engaged in private investment activities. From August 1993 through
May 1996, he was Chairman of the Board and Chief Executive Officer of Sunbeam
Corporation, a manufacturer of consumer products. From May 1990 to July 1993, he
was Chairman of the Board, President and Chief Executive Officer of The Ryland
Group, Inc. Prior to May 1990, Mr. Schipke served 29 years in various executive
capacities with the General Electric Company, most recently as Senior Vice
President of the Appliance Group. Mr. Schipke is a director of Brunswick
Corporation, Oakwood Homes Corporation and the Rouse Company.
EDWARD I. O'BRIEN, age 69, has been a director of the Company since
February 1993. He is engaged in private investment activities. He serves in an
advisory capacity to certain entities in the securities business, having served
as a consultant to the Securities Industry Association from December 1992 to
November 1993, and as its President from 1974 to December 1992. From 1955 to
1974, Mr. O'Brien served in various capacities with Bache & Co. (now Prudential
Securities Incorporated), including as a general partner, Chairman of the
Executive Committee and Director. Mr. O'Brien is a director of a number of
mutual funds in the Neuberger & Berman mutual fund complex.
Directors whose terms will expire in 2000
CHARLES A. BACIGALUPO, age 64, has been a director and the Secretary of
the Company since its inception in 1981 and has served as a Senior Vice
President of the Company since May 1982. He has served as a Senior Vice
President and Secretary of LMWW since 1970. He is the director of LMWW's legal
and compliance department. Mr. Bacigalupo is a director of Legg Mason Capital
Management, Inc.
HARRY M. FORD, JR., age 65, has been a director of the Company since its
inception in 1981 and has served as a Senior Vice President of the Company since
May 1982. He has been a Vice President of LMWW since 1976 and a Senior Vice
President since 1978. He joined Legg & Co. in 1964. Mr. Ford's principal
occupation is as a Financial Advisor with LMWW.
MARGARET DEB. TUTWILER, age 47, has been a director of the Company since
July 1995. Since May 1997, she has served as Senior Vice President for
Communications and Public Affairs for the Cellular Telecommunications Industry
Association. From May 1993 until May 1997, she was engaged in the public
relations and strategic communications business through firms of which she was
the sole or a principal owner. Prior to May 1993, she held various positions in
government service, including from August 1992 to January 1993 Assistant to the
President for Communications, The White House; from March 1989 to August 1992
Assistant Secretary of State for Public Affairs and Department Spokesman, U.S.
Department of State; from January 1989 to March 1989 Consultant, U.S. Department
of State; from November 1988 to January 1989 Senior Advisor, Transition Team,
U.S. Department of State; from February 1985 to August 1988 Assistant Secretary
for Public Affairs and Public Liaison, U.S. Department of the Treasury; from
July 1984 to February 1985 Deputy Assistant to the President for Political
Affairs, The White House; and from January 1981 to July 1984 Special Assistant
to the President and Executive Assistant to the Chief of Staff, The White House.
JAMES E. UKROP, age 60, has been a director of the Company since January
1985. Since 1975, he has been the principal executive officer of Ukrop Super
Markets, Inc., which operates a chain of supermarkets in Virginia. Mr. Ukrop is
a director of Owens & Minor, Inc., Vice Chairman of Richfood Holdings, Inc. and
Chairman of First Market Bank.
JOHN E. KOERNER, III, age 55, has been a director of the Company since
October 1990. He has been the President of Koerner Capital Corporation, a
private investment corporation, since August 1995. From 1976 until August 1995
he was President of Barq's, Inc., a soft drink producer and distributor.
PETER F. O'MALLEY, age 59, has been a director of the Company since April
1992. He has been Of Counsel to the law firm of O'Malley, Miles, Nylen &
Gilmore, P.A. and its predecessor, O'Malley & Miles, since 1989. Prior to that
time he was Managing Partner of O'Malley & Miles. Mr. O'Malley currently serves
as the President of Aberdeen Creek Corp., a privately-held company engaged in
investment, business consulting and development activities, and is a director of
Potomac Electric Power Company, Giant Food Inc. and Forensic Technologies
International Corp.
3
<PAGE>
COMMITTEES OF THE BOARD - BOARD MEETINGS
The Board of Directors has an Audit Committee and a Compensation
Committee. It does not have a nominating committee.
The Audit Committee, which consists of Messrs. St. George (Chairman),
O'Brien and Schipke, is primarily concerned with the effectiveness of the audits
of the Company by the Company's independent auditors. Its duties include:
recommending the selection of independent auditors; reviewing the scope of the
audits conducted by them, as well as the results of their audits; meeting with
the Company's internal auditors; and reviewing the organization and scope of the
Company's internal system of accounting and financial controls.
The Compensation Committee, which consists of Messrs. Koerner (Chairman)
and Ukrop and Ms. Tutwiler, is responsible for recommending and approving the
compensation of the senior executive officers of the Company. The Compensation
Committee also serves as the administrative committee of certain of the
Company's employee benefit plans.
During the fiscal year ended March 31, 1998, the Board of Directors, the
Audit Committee and the Compensation Committee each met four times. Each
director attended 75% or more of the aggregate number of meetings of the Board
and all committees of the Board on which the director served.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer
of $15,000, a fee of $2,000 for each Board meeting attended, and reimbursement
of expenses for attendance at meetings. Committee members also receive an annual
retainer of $1,000 ($2,000 for the committee chair) for service in that
capacity.
Under the terms of the Legg Mason, Inc. 1988 Stock Option Plan For
Non-Employee Directors (the "Plan"), which covers an aggregate of 233,333 shares
of Common Stock, each non-employee director is granted, on the date he or she is
first elected as a director, an option to purchase 2,000 shares of Common Stock,
and, on the date of each subsequent Annual Meeting of Stockholders, an option to
purchase an additional 2,000 shares. All options have an exercise price equal to
the fair market value of the Common Stock on the date of grant. The options are
exercisable immediately upon the date of grant and have a ten-year term, subject
to earlier termination in the event the optionee ceases to be a director of the
Company. During the fiscal year ended March 31, 1998, each of Messrs. Adams,
Koerner, O'Brien, O'Malley, Schipke, St. George, Ukrop and Wirth and Ms.
Tutwiler received an option to purchase 2,000 shares of Common Stock (2,666
shares after giving effect to a four-for-three stock split effected in September
1997).
The Plan has been amended, subject to stockholder approval at this meeting,
to increase the amount of the annual option grants from 2,000 shares to 3,000
shares, commencing the date of this meeting, to increase the number of shares
covered by the Plan from 233,333 shares to 550,000 shares and to extend the term
of the Plan until July 31, 2008. See "Proposed Amendment of Non-Employee
Director Stock Option Plan."
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the ownership of
Common Stock of the Company as of May 14, 1998 by each director and nominee for
director, each executive officer named in the Summary Compensation Table, all
executive officers, directors and nominees as a group, and each person who, to
the best of the Company's knowledge, beneficially owned more than five percent
of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
COMMON
STOCK PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OF OWNER(1) OWNED(1)(2)(3) COMMON STOCK(1)(3)
- ------------------------------------------------- ---------------- -------------------
<S> <C> <C>
Raymond A. Mason .......................... 688,971(4) 2.49
James W. Brinkley ......................... 361,668(5) 1.31
Edmund J. Cashman, Jr. .................... 244,695 *
Richard J. Himelfarb ...................... 160,774 *
Charles A. Bacigalupo ..................... 133,167(6) *
John B. Levert, Jr. ....................... 130,516 *
Harry M. Ford, Jr. ........................ 88,624 *
W. Curtis Livingston ...................... 67,747(7) *
James E. Ukrop ............................ 55,458 *
Edward A. Taber III ....................... 45,067 *
John E. Koerner, III ...................... 28,695(8) *
Harold L. Adams ........................... 26,982 *
Peter F. O'Malley ......................... 25,662 *
Roger W. Schipke .......................... 22,330 *
Robert A. Frank ........................... 20,124(9) *
Edward I. O'Brien ......................... 18,130 *
Nicholas J. St. George .................... 17,332 *
Margaret DeB. Tutwiler .................... 7,998 *
William Wirth ............................. 7,998 *
All executive officers, directors and
nominees as a group (25 persons) ......... 2,269,182 8.08
</TABLE>
- ----------
* Less than 1%.
(1) The table does not include 2,620,490 shares, of which 1,415,459 shares are
held for investment purposes on behalf of advisory clients of Alliance
Capital Management L.P., an investment advisory subsidiary of The Equitable
Companies Incorporated, and 1,205,031 shares are held for investment
purposes by The Equitable Life Assurance Society of the United States, 1290
Avenue of the Americas, New York, New York 10104. All of the shares (9.5% of
the shares outstanding) are held with sole dispositive power, 1,987,040
shares are held with sole voting power and 344,255 shares are held with
shared voting power. In addition, the table does not include 2,371,718
shares (8.6% of the shares outstanding) held by investment advisory clients
of Wellington Management Company, LLP ("WMC"), 75 State Street, Boston,
Massachusetts 02109, as to all of which shares WMC has shared dispositive
power and as to 1,672,520 of which shares WMC has shared voting power, and
1,558,297 shares (5.7% of the shares outstanding) held by investment
advisory clients of GeoCapital LLC, 767 Fifth Avenue, New York, New York
10153, as to which shares GeoCapital LLC has sole dispositive power. The
number of shares in the preceding information is based upon Schedule 13G
reports filed by The Equitable Companies Incorporated, WMC and GeoCapital
LLC, respectively, reporting ownership as of December 31, 1997. The
percentages are based on the Company's outstanding shares as of May 14,
1998.
(2) Except as otherwise indicated and except for shares held by members of an
individual's family or in trust, all shares are held with sole dispositive
and voting power.
(3) Includes the following number of shares subject to options exercisable
within 60 days from May 14, 1998: Mr. Mason -- 78,915; Mr. Brinkley --
47,076; Mr. Cashman -- 23,661; Mr. Himelfarb -- 33,485; Mr. Bacigalupo --
22,196; Mr. Ford -- 20,695; Mr. Livingston -- 12,469; Mr. Ukrop -- 22,327;
Mr. Taber -- 44,234; Mr. Koerner -- 20,662; Mr. Adams -- 22,327; Mr.
O'Malley -- 18,996; Mr. Schipke -- 11,331; Mr. Frank -- 8,333; Mr. O'Brien
-- 17,330; Mr. St. George -- 2,666; Ms. Tutwiler -- 7,998; Mr. Wirth --
7,998; and all executive officers, directors and nominees as a group --
510,636. For purposes of determining the percent of outstanding stock, such
stock options are assumed to have been exercised. Does not include shares
represented by vested beneficial interests in the Legg Mason Profit Sharing
Plan and Trust.
(4) Does not include 6,433 shares owned by Mr. Mason's wife, as to which Mr.
Mason disclaims beneficial ownership.
(5) Includes 2,666 shares owned by a charitable foundation of which Mr. Brinkley
is a co-trustee.
(6) Does not include 26,666 shares owned by Mr. Bacigalupo's wife, as to which
Mr. Bacigalupo disclaims beneficial ownership.
(7) Includes 868 shares held by Mr. Livingston as a trustee of trusts for the
benefit of his children.
(8) Includes 1,200 shares owned by Mr. Koerner's children.
(9) Includes 11,791 shares subject to a debenture convertible within 60 days
from May 14, 1998.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain information concerning compensation of
the Company's Chief Executive Officer and each of the five other most highly
compensated executive officers for the past three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- -------------
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION GRANTED(#) COMPENSATION(2)
--------------------------- ---- ------ -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Raymond A. Mason ................ 1998 $249,163 $3,670,000 $1,679 133,333 $ 48,172
Chairman of the Board, President 1997 240,000 2,680,000 1,700 26,666 43,740
and Chief Executive Officer 1996 222,000 1,835,000 1,638 26,666 41,007
James W. Brinkley ............... 1998 $223,750 $1,650,000 $1,709 9,000 $ 59,607
Senior Executive Vice President 1997 210,000 1,100,000 1,716 9,333 38,868
1996 196,170 800,000 1,007 8,000 26,462
Richard J. Himelfarb ............ 1998 $219,163 $1,450,000 $1,733 10,000 $ 14,425
Senior Executive Vice President 1997 210,000 1,100,000 1,733 8,000 11,413
1996 195,830 750,000 1,646 8,000 9,006
Robert A. Frank(3) .............. 1998 $200,000 $1,350,004 -- 33,325 $215,900
Executive Vice President 1997 116,667 759,233 -- 33,333 --
1996 -- -- -- -- --
Edward A. Taber III ............. 1998 $219,163 $1,300,000 -- 2,000 $ 7,250
Senior Executive Vice President 1997 210,000 1,000,000 -- 4,000 6,750
1996 201,660 750,000 -- 26,666 4,500
Edmund J. Cashman, Jr. .......... 1998 $218,330 $1,098,000 -- 2,000 $ 32,920
Senior Executive Vice President 1997 200,000 1,000,000 -- 2,666 27,802
1996 181,665 700,000 -- 5,333 19,501
</TABLE>
- ----------
(1) The Company pays discretionary incentive cash bonuses to certain executive
officers whose duties are administrative and managerial or whose
compensation is not solely based on commissions. The Company also sets aside
in each fiscal year an executive bonus pool in an amount up to 10% of the
Company's pre-tax income for the fiscal year (before deducting such
bonuses). The selection of the participants in the pool, the total amount
reserved for bonuses, and the allocation of incentive bonuses among the
executive officers identified in this table, is determined by the
Compensation Committee as described in the Compensation Committee Report on
Executive Compensation.
(2) Includes for fiscal 1998 for each individual $7,250 contributed by the
Company under the Company's Profit Sharing Plan. In addition, includes for
fiscal 1998 for Messrs. Mason, Brinkley, Himelfarb and Cashman,
respectively, $40,922, $52,357, $7,175 and $25,670 of commissions earned
from securities brokerage activities; and for Mr. Frank $171,200
representing additional compensation pursuant to his employment contract and
$37,450 of interest paid to him on an Executive Convertible Subordinated
Debenture purchased from the Company.
(3) Mr. Frank joined the Company in August 1996. Accordingly, compensation
information for fiscal 1997 commences from the date of his employment.
6
<PAGE>
STOCK OPTIONS
The following table summarizes option grants made during the fiscal year
ended March 31, 1998 to the executive officers named in the Summary Compensation
Table.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE PRESENT VALUE(2)
---- ------- -------------- --------- ---- ----------------
<S> <C> <C> <C> <C> <C>
Raymond A. Mason ............... 133,333 19.49% $ 35.43 5/7/04 $1,547,089
James W. Brinkley .............. 9,000 1.32 43.56 7/23/04 122,014
Richard J. Himelfarb ........... 10,000 1.46 43.56 7/23/04 135,571
Robert A. Frank ................ 33,325 4.87 43.56 7/23/04 451,790
Edward A. Taber III ............ 2,000 0.29 43.56 7/23/04 27,114
Edmund J. Cashman, Jr. ......... 2,000 0.29 43.56 7/23/04 27,114
</TABLE>
- ----------
(1) Option grants made pursuant to the Legg Mason, Inc. 1996 Equity Incentive
Plan. The exercise price of each option granted under the Plan is not less
than the fair market value of the Common Stock on the grant date. Options
generally are not exercisable during the first year after the date of grant,
and thereafter generally vest in cumulative installments of 20% on each
anniversary of the date of grant, such that the options are fully
exercisable on and after 5 years from the date of grant until the seventh
year following that date, subject in all cases to accelerated vesting if
there is an unapproved change of control. The vesting schedules for certain
of the executive officers are as follows: Mr. Mason 44,000 shares at 5/8/00;
44,000 shares at 5/8/01 and 45,333 shares at 5/8/02; Mr. Brinkley 1,800
shares at 7/24/98; 1,800 shares at 7/24/99; 1,800 shares at 7/24/00; 1,305
shares at 7/24/01 and 2,295 shares at 7/24/02; Mr. Himelfarb 2,000 shares at
7/24/98; 2,000 shares at 7/24/99; 2,000 shares at 7/24/00; 1,705 shares at
7/24/01 and 2,295 shares at 7/24/02; Mr. Taber 400 shares at 7/24/98; 400
shares at 7/24/99; 404 shares at 7/24/00; 796 shares at 7/24/02. Option
holders may use previously owned shares to pay all or part of the exercise
price.
(2) The stock options were valued using the Black-Scholes Option Pricing Model.
The following assumptions were made for purposes of calculating the Grant
Date Present Value: an expected option term of 6.26 years to exercise; a
dividend yield of 1.55%; stock price volatility of .2297 and .2256 for the
option grants expiring on 5/7/04 and 7/23/04, respectively, based upon the
daily Common Stock closing price for the 6.26 years prior to the grant date;
and risk-free interest rates of 6.68% and 6.15% for the option grants
expiring on 5/7/04 and 7/23/04, respectively. The actual value realized, if
any, on stock option exercises will be dependent on overall market
conditions and the future performance of the Company and its Common Stock.
There is no assurance the actual value realized will approximate the amount
calculated under the valuation model.
The following table summarizes option exercises during the fiscal year
ended March 31, 1998 by the executive officers named in the Summary Compensation
Table and the value of their unexercised options at March 31, 1998.
AGGREGATE OPTION EXERCISES DURING FISCAL 1998
AND VALUE OF OPTIONS HELD AT MARCH 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT MARCH 31, 1998 OPTIONS AT MARCH 31, 1998(1)
ACQUIRED ON VALUE ----------------------------- ----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond A. Mason ............... 33,333 $1,419,099 78,915 187,079 $3,619,445 $5,377,767
James W. Brinkley .............. -- -- 59,576 27,587 2,886,257 871,611
Richard J. Himelfarb ........... 11,666 449,232 41,818 26,179 1,968,179 792,521
Robert A. Frank ................ -- -- 8,333 58,325 306,821 1,451,701
Edward A. Taber III. ........... -- -- 44,234 42,930 1,883,608 1,714,098
Edmund J. Cashman, Jr. ......... 10,915 494,024 23,661 9,335 1,104,588 327,123
</TABLE>
- ----------
(1) Value realized and value of unexercised options are calculated by
determining the difference between the fair market value of the shares
underlying the options and the exercise price of the options at exercise or
March 31, 1998, respectively.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Legg Mason's executive compensation program is designed to attract,
motivate and retain the management talent needed to strengthen the Company's
position in the financial services industry and to achieve its business
objectives.
Salaries of executive officers are set at levels which the Compensation
Committee of the Board of Directors (which committee consists entirely of
non-employee directors) believes are competitive with salaries of executives in
similar positions at comparable financial services companies. In addition,
substantial emphasis is placed on incentive compensation directly related to
short- and long-term corporate performance through annual cash bonuses and stock
option grants.
As is common in the financial services industry, a significant portion of
total compensation of the Company's executive officers is paid in the form of
annual bonuses. For example, in fiscal 1998, approximately 94% of the annual
cash compensation of Raymond A. Mason, the Company's Chief Executive Officer
("CEO"), was paid as an annual bonus. This is intended to maximize the portion
of an individual's compensation that is subject to fluctuation each year based
upon corporate and individual performance, as discussed below.
The compensation program is structured to recognize each executive's level
of responsibility and to reward exceptional individual and corporate
performance. The program takes into account both annual operating results and
the desirability of providing incentives for future improvement. This includes
the ability to implement the Company's business plans as well as to react to
unanticipated external factors which can have a significant impact on corporate
performance. Compensation decisions for all executives, including the CEO, are
based on the same criteria.
In carrying out its responsibilities, the Compensation Committee has from
time to time availed itself of independent consulting advice in connection with
its consideration of executive compensation plans. The Committee also has
available to it surveys of financial services industry compensation, which
include the companies comprising the peer group referenced in the Stock
Performance Graph following this report.
There are three major components of the Company's executive compensation
program: base salary, short-term awards, and long-term incentive awards.
BASE SALARY
A competitive base salary is important in fostering a career orientation
among executives consistent with the long-term nature of the Company's business
objectives. The Compensation Committee determines the salary of the CEO and the
Company's other senior executive officers based on its consideration of the
CEO's recommendations.
Salaries and salary adjustments are based on the responsibilities,
performance and experience of each executive, regular reviews of competitive
positioning (comparing the Company's salary structure with that of similar
companies) and business performance. While there is no specific weighting of
these factors, the responsibilities, performance and experience of each
executive and reviews of competitive positioning are the most important
considerations.
Raymond A. Mason, the Company's CEO, has more than 35 years of service with
the Company. The Compensation Committee established his fiscal 1998 salary based
upon competitive positioning and the Company's overall compensation approach, as
noted above, of limiting base salary levels and emphasizing incentive
compensation.
8
<PAGE>
SHORT-TERM AWARDS
Short-term cash awards to executives are directly based on the Company's
fiscal year operating results and recognize contributions to the business during
the fiscal year.
The Company's Executive Incentive Compensation Plan provides for an
executive bonus pool in an amount up to 10% of the Company's pre-tax income
(calculated before deduction of the bonuses) for annual cash awards to the CEO
and other key executive officers selected by the Committee. For fiscal 1998, the
Committee selected the CEO, three of the five other executives named in the
Summary Compensation Table and one executive who subsequently retired from the
Company in February 1998 to be eligible for bonus awards pursuant to the Plan,
and during the first quarter of the fiscal year established maximum percentage
allocations of the pool for each of these individuals. Mr. Mason's maximum
percentage allocation was established at 40%. The pre-established maximum
percentage allocation and the specific bonus the CEO and each of the other
selected executives receives within the amount determined pursuant to the
pre-established percentage allocation is dependent on the executive's level of
responsibility and individual performance. Levels of responsibility are
evaluated annually by the Compensation Committee without regard to any specific
formula. Assessments of individual performance are made annually by the
Compensation Committee after receiving the evaluations and recommendations of
the CEO. Such assessments are based on a number of factors, including individual
and corporate performance, initiative, business judgment and management skills.
Total bonuses to the CEO and the four selected executive officers under the
Company's Executive Incentive Compensation Plan together with bonuses paid to
two other executive officers whose bonuses were determined by the Compensation
Committee with respect to fiscal 1998 aggregated approximately 8.2% of pre-tax
income (before deduction of the cash bonuses), with 32% of such total bonuses
being awarded to Mr. Mason. The portion of the total bonus pool awarded to Mr.
Mason for fiscal 1998 reflects his significant personal contributions to the
business and his leadership in building the Company's revenues, earnings and
capital position. The award was based on the Compensation Committee's general
evaluation of Mr. Mason's overall contribution as CEO to the Company's
performance levels. The Compensation Committee believes that Mr. Mason's cash
compensation (salary and cash bonus) was appropriate in relation to compensation
of CEOs of comparable companies, including the companies comprising the peer
group reflected in the Stock Performance Graph, taking into account the size and
business results of Legg Mason and those companies.
Section 162(m) of the Internal Revenue Code, enacted in 1993, limits
deductions for certain annual compensation in excess of $1,000,000 paid to
individuals required to be named in the summary compensation table in proxy
statements of public companies. The Compensation Committee believes that this
limitation did not result in the loss of any significant portion of the
potential tax deduction to the Company for its fiscal year ended March 31, 1998.
LONG-TERM INCENTIVE AWARDS
Long-term incentive awards, made during fiscal 1998 pursuant to the
shareholder-approved Legg Mason, Inc. 1996 Equity Incentive Plan, are designed
to reinforce the importance of building long-term value for the Company's
stockholders.
Stock options were the only long-term incentives granted to executive
officers in fiscal 1998. The Compensation Committee believes that the regular
annual grant of stock options focuses management attention on long-term growth
in stockholder value and stock price appreciation. Under the plan, options have
a term of up to 10 years and are granted at the fair market value of Legg Mason
Common Stock on the date of grant. Generally, an initial portion of the options
becomes exercisable one year from date of grant, with the balance becoming
exercisable in increments over the ensuing four years. Recipients must remain in
the Company's employ to exercise their options.
The number of options that the Compensation Committee grants to executive
officers is based on individual performance (determined as described under
"Short-Term Awards") and level of responsibility, and is determined by the
Compensation Committee after considering the recommendations of the CEO. Award
levels must be sufficient in size so that executives develop strong incentives
to achieve
9
<PAGE>
long-term corporate goals. In fiscal 1998, the Compensation Committee granted a
133,333 share stock option to Mr. Mason in order to recognize his significant
contribution to the Company's strategic growth and to increase his equity in the
Company.
COMPENSATION COMMITTEE
John E. Koerner, III, Chairman
Margaret DeB. Tutwiler
James E. Ukrop
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on Legg
Mason's Common Stock for the last five fiscal years with the cumulative total
return of the S&P 500 Stock Index and the Regional Sub-Index of the Financial
Service Analytics Brokerage Stock Price Index ("FSA Regional") over the same
period (assuming the investment of $100 in each on March 31, 1993, and the
reinvestment of all dividends). The FSA Regional is comprised of 13 publicly
held regional securities firms.
[STOCK PERFORMANCE GRAPHIC OMITTED]
Fiscal Year Ended March 31,
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------
Legg Mason $100 $ 93 $109 $137 $202 $381
- ----------------------------------------------------------------------
S&P 500 Stock Index $100 $101 $117 $155 $186 $274
- ----------------------------------------------------------------------
FSA Regional $100 $108 $113 $151 $223 $441
- ----------------------------------------------------------------------
</TABLE>
10
<PAGE>
CERTAIN TRANSACTIONS
During fiscal 1998, the Company paid approximately $187,000 to the law firm
of Ballard Spahr Andrews & Ingersoll for professional services and related
expenses. The daughter of Charles A. Bacigalupo, a Senior Vice President, the
Secretary and a director of the Company, is a partner of that law firm.
During fiscal 1997, the Company engaged RTKL Associates, Inc. ("RTKL")
through a competitive bid process to perform architectural and engineering
services for the building to which the Company's headquarters was relocated.
Approximately $980,000 was paid by the Company for such services during the
fiscal year ended March 31, 1998. Harold L. Adams, a director of the Company, is
the President and Chairman of RTKL.
In the ordinary course of its business, the Company has extended credit to
certain of its directors and executive officers in connection with their
purchase of securities in margin accounts. Such extension of credit has not
resulted in any losses to the Company and has been made on the same terms as
loans to unaffiliated customers.
PROPOSED AMENDMENT OF NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
In 1988, the Board of Directors and the stockholders of the Company adopted
the Legg Mason, Inc. 1988 Stock Option Plan For Non-Employee Directors (the
"Plan"), covering an aggregate of 66,667 shares of Common Stock. In 1993, the
Plan was amended to increase the amount of annual option grants from 1,000
shares to 2,000 shares and to increase the number of shares covered by the Plan
by 166,666 shares. Under the terms of the Plan, each non-employee director
(defined as persons who are not employees of the Company at the time of election
and who were not employees of the Company or a subsidiary for a period of at
least 2 years prior to such election) is granted, on the date he or she is first
elected as a director, an option to purchase 2,000 shares of Common Stock. After
such initial election, each non-employee director is thereafter granted an
option to purchase an additional 2,000 shares on the date of each Annual Meeting
of Stockholders. All options have an exercise price equal to the fair market
value of the Common Stock on the date of grant.
Options granted under the Plan are non-statutory stock options which do not
qualify for tax treatment under Section 422A of the Internal Revenue Code. The
options become exercisable immediately upon the date of grant, provided the
optionee continues to serve as a director of the Company. No option may be
exercised after the expiration of 10 years from the date of grant. All options
are non-transferable other than by will or the laws of descent and distribution.
Assuming no amendment of the Plan, the number of shares presently available
for additional option grants under the Plan is approximately 69,000 shares. The
Board of Directors believes that the grants of stock options to non-employee
directors at 100% of fair market value continues to be a desirable and useful
means of linking the non-employee directors' interests with the interests of the
Company's stockholders and is otherwise an important part of the Company's
compensation of its non-employee directors. Accordingly, in June 1998, the Board
of Directors adopted, subject to stockholder approval at this annual meeting, an
amendment of the Plan to increase the amount of annual option grants from 2,000
shares to 3,000 shares, commencing the date of this meeting, to increase the
number of shares covered by the Plan from 233,333 shares to 550,000 shares and
to extend the term of the Plan until July 31, 2008. In addition, the amendment
changes the name of the Plan to the "Legg Mason, Inc. Stock Option Plan For
Non-Employee Directors". Assuming adoption of the proposed amendment, the number
of shares available for option grants under the Plan prior to the annual grants
on the date of this meeting will be approximately 386,000 shares, and options
covering 27,000 shares will be granted on the date of this meeting.
11
<PAGE>
The table below shows the number of shares of Common Stock underlying
options to be granted on July 23, 1998 to all of the Company's non-employee
directors as a group. The table assumes that nine non-employee directors will
each receive a grant of an option to purchase 3,000 shares of Common Stock.
NEW PLAN BENEFITS
Legg Mason, Inc. Stock Option Plan
For Non-Employee Directors
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES
GROUP UNDERLYING STOCK OPTIONS
----- ------------------------
<S> <C>
Non-Employee Director Group 27,000
</TABLE>
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. to be the
independent auditors of the Company for the fiscal year ending March 31, 1999.
This selection will be submitted for ratification at the Annual Meeting.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting. They will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder proposal intended for inclusion in the proxy material for
the 1999 Annual Meeting must be received in writing by the Company on or before
February 12, 1999. The inclusion of any proposal will be subject to applicable
rules of the Securities and Exchange Commission.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules thereunder, the Company's executive officers and directors are required to
file with the Securities and Exchange Commission and the New York Stock Exchange
reports of their ownership of Common Stock. Based solely on a review of copies
of such reports furnished to the Company, or written representations that no
reports were required, the Company believes that during the fiscal year ended
March 31, 1998 its executive officers and directors complied with the Section
16(a) requirements except that reports covering a gift of 1,000 shares by James
W. Brinkley, two gifts of an aggregate of 2,310 shares by Edmund J. Cashman, Jr.
and a stock option exercise for 1,333 shares by Theodore S. Kaplan were filed
late.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters to
come before the meeting. If any other matters should come before the meeting,
the persons named in the enclosed proxy will act thereon according to their best
judgment.
By order of the Board of Directors
/s/ Charles A. Bacigalupo
CHARLES A. BACIGALUPO
Secretary
12
<PAGE>
- --------------------------------------------------------------------------------
LEGG MASON, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, JULY 23, 1998
The undersigned hereby appoints Raymond A. Mason, Charles A. Bacigalupo and
Timothy C. Scheve, and each of them, as proxy, with full power of substitution,
to vote all shares which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of Legg Mason, Inc., on July 23, 1998, at 10:00 a.m.,
and at any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE ITEMS BELOW.
1. FOR [ ] WITHHOLD [ ] The election of all Nominees listed (except as marked
to the contrary):
Nominees for the term expiring at the 2001 annual meeting
Harold L. Adams Edmund J. Cashman, Jr.
W. Curtis Livingston William Wirth
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A LINE THROUGH
THE NOMINEE'S NAME)
2. FOR [ ] AGAINST [ ] ABSTAIN [ ] Amendment of the Legg Mason, Inc. 1988
Stock Option Plan For Non-Employee Directors.
3. FOR [ ] AGAINST [ ] ABSTAIN [ ] Ratification of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the fiscal year ending March 31,
1999.
4. To act upon any other matter which may properly come before the meeting or
any adjournment thereof.
THIS PROXY WILL BE VOTED ON EACH OF THE FOREGOING ITEMS AS SPECIFIED BY THE
PERSON SIGNING IT, BUT IF NO SPECIFICATION IS MADE THE PROXY WILL BE VOTED FOR
THE ELECTION OF DIRECTORS AND FOR THE OTHER PROPOSALS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
IT MAY BE REVOKED PRIOR TO ITS EXERCISE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Receipt of notice of the meeting and proxy statement is hereby
acknowledged, and the terms of the notice and statement are hereby incorporated
by reference into this proxy. The undersigned hereby revokes all proxies
heretofore given for said meeting or any adjournment or adjournments thereof.
Dated:...................., 1998 ..............................
(SEAL)
..............................
(SEAL)
PLEASE DATE AND THEN SIGN
EXACTLY AS NAME APPEARS TO THE
LEFT. IF SIGNING FOR A TRUST,
ESTATE, CORPORATION OR OTHER
LEGAL ENTITY, CAPACITY OR
TITLE SHOULD BE STATED. IF
SHARES ARE JOINTLY OWNED, BOTH
OWNERS SHOULD SIGN.
PLEASE DATE AND SIGN THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
