<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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
JEFFERIES GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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
PRELIMINARY COPY
JEFFERIES GROUP, INC.
11100 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 12, 1998
------------------------
To the Shareholders of Jefferies Group, Inc.:
The Annual Meeting of Shareholders of Jefferies Group, Inc. will be held at
The Rihga Royal Hotel, 151 W. 54th Street, New York, New York 10019, on Tuesday,
May 12, 1998, at 1:30 p.m., local time, to consider and act upon:
1. Election of eight Directors to serve until the next Annual Meeting and
until their successors have been duly elected and qualified.
2. Approval of an amendment to the Certificate of Incorporation of the
Company to increase to 100,000,000 the number of shares of the Company's
common stock authorized for issuance.
3. Any other business which may properly come before the meeting or any
adjournment thereof.
Shareholders of record at the close of business on March 20, 1998, 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 650 Fifth Avenue, Fourth
Floor, New York, New York 10019.
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
March , 1998
<PAGE> 3
PRELIMINARY COPY
JEFFERIES GROUP, INC.
11100 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
March , 1998
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 Rihga Royal Hotel, 151 W. 54th Street,
New York, New York 10019, on Tuesday, May 12, 1998, at 1:30 p.m., local time,
and at any adjournment thereof. All shareholders of record at the close of
business on March 20, 1998, 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 March , 1998.
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 eight nominees for Director whose names are listed herein, (ii)
for approval of an amendment to the Certificate of Incorporation of the Company
to increase to 100,000,000 the number of shares of the Company's common stock,
par value of $.01 per share (the "Common Stock"), authorized for issuance, and
(iii) 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 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
[ ] shares of Common Stock, on March 20, 1998, 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 number of outstanding shares of Common Stock at the record date and all
other share information in this Proxy Statement have been restated to reflect
the effect of the two-for-one stock split of all the outstanding shares of the
Company's Common Stock, paid on December 15, 1997 (the "December 1997 Stock
Split").
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, while approval of the amendment to the Certificate of Incorporation
will require the affirmative vote of the holders of a majority of all
outstanding shares, 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
<PAGE> 4
item, and a broker "non-vote" on the amendment to the Certificate of
Incorporation (which results when a broker holding shares for a beneficial owner
has not received timely voting instructions on certain matters from such
beneficial owner), will operate to prevent approval of the item to the same
extent as a vote against approval of such item; and a broker "non-vote" 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 First
Chicago Trust Company of New York, 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 February 27, 1998, as adjusted for the December 1997 Stock
Split, 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>
PERCENTAGE OF
SHARES OF COMMON COMMON STOCK
STOCK BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OWNED
------------------------------------ ------------------ -------------
<S> <C> <C>
Jefferies Group, Inc. Employee Stock Ownership Plan..... 2,320,380(1) 11.2%
Frank E. Baxter......................................... 1,791,178(2) 8.6%
Tweedy, Browne Company L.P. and Affiliates.............. 1,689,744(3) 8.2%
52 Vanderbilt Ave., 8th Floor
New York, New York 10017
The Guardian Life Insurance Company
of America and Affiliates............................. 1,182,308(4) 5.7%
201 Park Avenue South
New York, New York 10003
Barry M. Taylor......................................... 610,231(5) 2.9%
Richard B. Handler...................................... 507,394(6) 2.5%
Raymond L. Killian, Jr.................................. 390,742(7) 1.9%
Clifford A. Siegel...................................... 316,884(8) 1.5%
Michael L. Klowden...................................... 303,726(9) 1.5%
Louis V. Bellucci, Sr................................... 212,148(10) 1.0%
Jonathan R. Cunningham.................................. 112,401(11) *
Richard G. Dooley....................................... 67,612(12) *
Mark A. Wolfson......................................... 55,234(13) *
Frank J. Macchiarola.................................... 53,112(14) *
Tracy G. Herrick........................................ 50,724(15) *
Sheldon B. Lubar........................................ 9,268(16) *
All Directors and Executive Officers.................... 5,174,134(17) 25.0%
</TABLE>
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* The percentage of shares beneficially owned does not exceed one percent of the
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, 1992, all shares were allocated
to the accounts of ESOP participants. Those shares allocated to the
accounts of Directors and Executive Officers are indicated 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, Alan D. Browning, an Executive Vice President of
Jefferies & Company, Inc.
3
<PAGE> 6
("Jefferies"), and Melvin W. Locke, Jr., Director of Human Resources of the
Company, presently serve on the committee. These individuals each disclaim
beneficial ownership of the shares held by the ESOP except those shares
allocated to his ESOP account.
(2) Includes 72,000 shares subject to immediately exercisable options; 24,000
shares Mr. Baxter holds as custodian for his children's accounts; 48,821
shares allocated to Mr. Baxter's account under the Jefferies Group, Inc.
Capital Accumulation Plan for Employees (the "CAP"); 27,641 shares held by
the Trustee of the Jefferies Group, Inc. Employee Stock Purchase Plan (the
"ESPP"); 34,892 shares held by the Trustee of the ESOP; and 297,347 shares
held by the Trustee of the Jefferies Group, Inc. Profit Sharing Plan (the
"PSP"). Participants in the CAP have no voting power and are subject to
certain restrictions on disposition with respect to shares in their CAP
accounts. Participants in the ESOP have sole voting power and no
dispositive power over shares allocated to their ESOP accounts.
Participants in the ESPP have sole voting and dispositive power over shares
allocated to their ESPP accounts. Participants in the PSP have sole voting
power and limited dispositive power over shares allocated to their PSP
accounts. Mr. Baxter also owns 5,000 shares (less than 1% of the
outstanding class) of the common stock of Investment Technology Group, Inc.
("ITGI"), a subsidiary which is 82% owned by the Company.
(3) Tweedy, Browne Company L.P., a Delaware limited partnership ("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 February 6, 1997, and as of the date
hereof, had not filed an amended Schedule 13D in 1998. The holdings for TBC
and related entities are therefore based on the 1997 Schedule 13D, as
adjusted for the December 1997 Stock Split. As adjusted, TBC reported
beneficial ownership of 1,405,860 shares (6.8% of the outstanding class),
with sole voting power over 1,211,000 shares and shared dispositive power
over all 1,405,860 shares. TBK reported having sole voting and dispositive
power over 226,040 shares. Vanderbilt reported having sole voting and
dispositive power over 57,844 shares. The aggregate number of shares with
respect to which TBC, TBK and Vanderbilt could be deemed to be the
beneficial owner is 1,689,744 shares (8.2% of the outstanding class). As of
February 6, 1997, the three general partners in Vanderbilt (Christopher H.
Browne, William H. Browne, and John D. Spears) were the three general
partners of TBC 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 general
partner of TBC or Vanderbilt). The general partners in each of TBC, TBK,
and Vanderbilt, 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) The Guardian Life Insurance Company of America ("Guardian"), Guardian
Investor Services Corporation ("GISC"), The Guardian Park Ave. Fund
("GPAF"), The Guardian Stock Fund, Inc. ("GSF"), The Guardian Park Avenue
Small Cap Fund ("GPASCF"), The Guardian Small Cap Stock Fund ("GSCSF"), The
Guardian Life Insurance Company of America Master Pension Trust ("Guardian
MPT"), and The Guardian Employees' Incentive Savings Plan ("GEISP") filed a
group Schedule 13G dated February 11, 1998, reporting beneficial ownership
at December 31, 1997. The members of the group reported having voting and
dispositive power as follows: Guardian reported sole voting and dispositive
power over 497,736 shares and shared voting and dispositive power over
132,172 shares; GISC reported shared voting and dispositive power over
552,400 shares; GPAF reported shared voting and dispositive power over
200,000 shares; GSF reported shared voting and dispositive power over
338,000 shares; GPASCF reported shared voting and dispositive power over
338,000 shares; GSCSF reported shared voting and dispositive power over
8,300 shares; Guardian MPT reported shared voting and dispositive power
over 6,100 shares; and GEISP reported shared voting and dispositive power
over 52,172 shares.
(5) Includes 8,000 shares subject to immediately exercisable options; 20,000
shares held by Mr. Taylor's spouse in her individual capacity; 740 shares
held by Mr. Taylor's spouse as trustee; 33,819 shares allocated to Mr.
Taylor's CAP account; 378 shares held under the ESPP; 25,599 shares held
under the ESOP; and 843 shares held under the PSP.
4
<PAGE> 7
(6) Includes 55,463 shares allocated to Mr. Handler's CAP account, 10,535
shares held under the ESOP and 55,328 shares which Mr. Handler received in
lieu of part of his 1997 bonus.
(7) Includes 4,920 shares held by Mr. Killian's spouse; 34,409 shares allocated
to Mr. Killian's CAP account; 27,633 shares held under the ESPP; 34,892
shares held under the ESOP; and 30,148 shares held under the PSP. Mr.
Killian also owns 212,878 shares (1.09% of the outstanding class) of ITGI
common stock, including 182,933 shares subject to immediately exercisable
options.
(8) Includes 22,633 shares allocated to Mr. Siegel's CAP account; 53,587 shares
held under the ESPP; and 9,433 shares held under the ESOP.
(9) Includes 254,000 shares subject to immediately exercisable options; 12,888
shares allocated to Mr. Klowden's CAP account; 8,278 shares held under the
ESPP; and 79 shares held under the ESOP. Mr. Klowden also owns 1,000 shares
(less than 1% of the outstanding class) of ITGI common stock.
(10) Includes 45,440 shares allocated to Mr. Bellucci's CAP account; 4,705
shares held under the ESPP; 34,892 shares held under the ESOP; and 843
shares held under the PSP.
(11) Includes 40,000 shares subject to immediately exercisable options; 26,785
shares allocated to Mr. Cunningham's CAP account; 7,963 shares held under
the ESPP; 25,848 shares held under the ESOP; and 525 shares held under the
PSP.
(12) Includes 43,612 shares subject to immediately exercisable options. Mr.
Dooley also beneficially owns 19,500 shares (less than 1% of the
outstanding class) of ITGI common stock, 12,500 of which are subject to
immediately exercisable options.
(13) Includes 2,076 shares held under the Company's Non-Employee Directors'
Deferred Compensation Plan (the "DCP") and allocated to Mr. Wolfson's DCP
account; and 19,308 shares subject to immediately exercisable options. Mr.
Wolfson also owns 27,500 shares (less than 1% of the outstanding class) of
ITGI common stock, 17,500 of which are subject to immediately exercisable
options.
(14) Includes 21,612 shares subject to immediately exercisable options. Mr.
Macchiarola also beneficially owns 4,300 shares (less than 1% of the
outstanding class) of ITGI common stock.
(15) Includes 1,705 shares held under the DCP and allocated to Mr. Herrick's DCP
account; and 16,000 shares subject to immediately exercisable options.
(16) Includes 2,134 shares held by Mr. Lubar's spouse and 5,000 shares subject
to immediately exercisable options.
(17) Includes 881,533 shares subject to options exercisable within sixty days of
February 28, 1998 by all Directors and current Executive Officers as a
group. In addition, all Directors and current Executive Officers as a group
beneficially own shares of ITGI ( % of the outstanding class) of
which shares are subject to immediately exercisable options.
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
five nor more than twelve Directors. The number of authorized Directors to be
elected at the Annual Meeting has been fixed at eight. 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. Messrs. Baxter, Dooley, Herrick, Killian, Klowden,
Macchiarola and Wolfson were elected to their positions by a vote of
shareholders at the 1997 Annual Meeting. Mr. Lubar was elected to his position
by a vote of the Board of Directors on January 28, 1998.
5
<PAGE> 8
INFORMATION CONCERNING NOMINEES FOR DIRECTOR AND
EXECUTIVE OFFICERS
NOMINEES
The following information is submitted concerning the nominees for election
as Directors:
FRANK E. BAXTER, 61, 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 & Company, Inc. ("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.
RICHARD G. DOOLEY, 68, 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, ITGI
since 1996 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.
TRACY G. HERRICK, 64, a nominee, has been a Director of the Company since
1983 and of Jefferies since 1981. He is also President of Tracy G. Herrick,
Inc., an economic consulting firm, and a Director of Anderson Capital
Management, a registered investment adviser, and of The Committee for Monetary
Research and Education.
RAYMOND L. KILLIAN, JR., 60, a nominee, has been a Director of the Company
since January 1997. Mr. Killian has been the Chairman of the Board of ITGI and
of ITG since January 1997, has been a member of the Board of ITGI since March
1994, and served as the President and Chief Executive Officer of ITGI from March
1994 until January 1997. Mr. Killian directed the activities of ITG since 1987,
has been on ITG's Board since 1992, and was President and Chief Executive
Officer of ITG from 1992 until January 1997. Mr. Killian was a Director of the
Company from 1985 to 1992, an Executive Vice President of the Company from 1985
to 1995, a Director and an Executive Vice President of Jefferies from 1985 to
1991, and served as National Sales Manager of Jefferies from 1985 to 1990.
MICHAEL L. KLOWDEN, 52, a nominee, has been a Director of the Company since
May 1987 and the President and Chief Operating Officer of the Company and of
Jefferies since December 1996. 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. Mr. Klowden has been a Director of ITGI since
January 1997.
SHELDON B. LUBAR, 68, a nominee, has been Chairman of the Board of Lubar &
Co. Incorporated, an investment banking firm, since 1977. From 1986 to the
present, he has also been Chairman of the Board of Christiana Companies, Inc., a
New York Stock Exchange listed company that supplies refrigerated warehousing
and logistics. Mr. Lubar has also been a Director of EVI, Inc. since 1995,
Ameritech Corporation since 1993, MGIC Investment Corporation since 1991,
Firstar Corporation since 1986 and of Massachusetts Mutual Insurance Co. since
1977.
FRANK J. MACCHIAROLA, 57, 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 Newman, Tannenbaum, Halpern, Syracuse & Hirschtritt
LLP.
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<PAGE> 9
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 and 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, and a Director of Johns Manville
Corporation since 1996. Mr. Macchiarola is Chairman of the Company's Audit
Committee and a member of the Compensation Committee.
MARK A. WOLFSON, 45, a nominee, has been a Director of the Company since
July 1991. Mr. Wolfson has been a principal of Arbor Investors, LLC, a private
investment company, since 1995, President of MW General, Inc., since 1994, and a
Vice President of Keystone, Inc., the primary investment vehicle of Robert M.
Bass, since 1995. He is also a Professor at the Graduate School of Business,
Stanford University, where he has been a faculty member since 1977, including a
term as Associate Dean from 1990 through 1993, and has taught at the University
of Chicago and Harvard University. Mr. Wolfson has been a Director of ITGI since
June 1994, a Director of Oreck Corporation since 1996, a Director of Oreck
Manufacturing Corp. and Integrated Orthopedics, Inc. since 1997, a Director of
DaVinci I Corp. since 1998, and a member of the Board of Advisors of FEP Capital
Holdings, L.P., since 1995. Mr. Wolfson is a member of the Company's Audit and
Compensation Committees.
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
and Klowden, for whom information is provided above, the following sets forth
information as to the Executive Officers:
ROBERT T. COLGAN, 37, has been an Executive Vice President and Director of
Jefferies since May 1993 and the Director of Equity Division Capital Markets
since August 1997.
JONATHAN R. CUNNINGHAM, 35, has been an Executive Vice President of
Jefferies since 1994, a Director of Jefferies since 1993, and Manager of the
U.S. Convertible Securities Department of Jefferies since January 1997. Mr.
Cunningham was a Senior Vice President of Jefferies from 1991 to 1993 and was
the Assistant National Sales Manager of the Convertible Securities Department
from 1994 through 1996.
DAVID F. EISNER, 40, has been an Executive Vice President of the Company
and Executive Vice President and a Director of Jefferies since August 1992.
Between April 1992 and August 1992, Mr. Eisner was Chairman of Madison Capital
Advisors, Inc., a consulting and financial advisor firm, and from January 1991
to March 1992 was Senior Vice President of Providence Capital, Inc., a
securities broker-dealer. From March 1988 to December 1990, Mr. Eisner was a
Vice President of Jefferies, a Director of ITGI from March 1994 to January 1997,
and a Director of ITG from January 1994 to January 1997.
JERRY M. GLUCK, 50, has been Secretary and General Counsel of the Company
and Jefferies since May 1985 and a Director of Jefferies since November 1984.
From March 1994 until September 1995, Mr. Gluck was the Secretary of ITGI.
RICHARD B. HANDLER, 36, has been an Executive Vice President of Jefferies
since April 1990 and a Director of Jefferies since May 1993. Mr. Handler is the
Manager of the Taxable Fixed Income Division of Jefferies.
SCOTT P. MASON, 50, has been the President and Chief Executive Officer of
ITGI since January 1997, a Director of ITGI since March 1994 and a Director of
ITG since 1992. Mr. Mason was previously the Edmund Cogswell Converse Professor
of Finance and Banking and the Chairman of the Finance Area at the Harvard
University Graduate School of Business Administration, where he was a professor
from 1978 through 1996. Mr. Mason was a consultant to ITGI from 1987 through
1996.
CLARENCE T. SCHMITZ, 49, has been an Executive Vice President and the Chief
Financial Officer of the Company and an Executive Vice President and a Director
of Jefferies since February 1995. Prior to 1990,
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<PAGE> 10
Mr. Schmitz founded and chaired KPMG Peat Marwick's ("KPMG") International
Mergers and Acquisitions Group. From 1990 until May 1993, Mr. Schmitz was the
Managing Partner of KPMG's Los Angeles Business Unit and a member of KPMG's
Board of Directors. From June 1993 until January 1995, Mr. Schmitz was the
National Managing Partner for KPMG's Manufacturing, Retailing and Distribution
line of business, and was a member of KPMG's Management Committee. Mr. Schmitz
is also a Director of the Los Angeles Area Chamber of Commerce.
JOHN C. SHAW, JR., 51, has been a Director of Jefferies since 1983,
National Sales Manager of Jefferies since August 1997, and an Executive Vice
President of Jefferies since 1993. Previously, Mr. Shaw was the Assistant
National Sales Manager of Jefferies from May 1994 until August 1997, and
Regional Sales Manager of Jefferies from May 1993 until May 1994.
CLIFFORD A. SIEGEL, 40, has been an Executive Vice President of Jefferies
since May 1992, a Director of Jefferies since May 1991, and Managing Director of
Jefferies International Limited, the Company's wholly owned U.K. subsidiary,
since February 1995. From June 1990 until May 1992, Mr. Siegel was a Senior Vice
President of Jefferies.
MAXINE SYRJAMAKI, 53, 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.
BARRY M. TAYLOR, 57, has been an Executive Vice President of the Company
since 1983 and is currently a Director of Jefferies who is not a nominee. Mr.
Taylor was a Director of the Company from 1983 and will be until the Company's
Annual Meeting on May 12, 1998. Prior to becoming Executive Vice President, Mr.
Taylor was a sales executive of Jefferies since 1974 and was Los Angeles Branch
Manager from February 1983 through June 1984.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors of the Company held six meetings during 1997. 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, Sheldon B. Lubar and Mark A. Wolfson. 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 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 1997, there were five meetings of the Audit
Committee.
The current Compensation Committee members are Richard G. Dooley, Chairman,
Sheldon B. Lubar, Frank J. Macchiarola and Mark A. Wolfson. The Compensation
Committee develops and implements compensation policies, plans and programs for
the Company's Executive Officers. During 1997, there were seven meetings of the
Compensation Committee.
DIRECTOR COMPENSATION
Each non-employee Director (Messrs. Dooley, Herrick, Lubar, Macchiarola,
and Wolfson) receives an annual retainer of $20,000, paid quarterly, $1,000 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 paid an annual fee of $3,000, and
Directors receive $750 for each Committee meeting attended.
Under the Non-Employee Directors' Deferred Compensation Plan, each
non-employee Director may elect to receive annual retainer and Chairman's fees
in the form of stock options and/or to defer receipt of any
8
<PAGE> 11
Director fees in a deferred cash account or as deferred shares. If a Director
elects to be paid fees in the form of options, the number of options granted is
that number having an aggregate value, determined under the modified
"Black-Scholes" option valuation model, equal to the amount of such fees. Such
options have a term of ten years, and an exercise price per share equal to 100%
of the fair market value of a share at the date of grant. If fees are deferred
in cash, interest is credited at the prime rate. If fees are deferred in the
form of deferred shares, the Company credits the Director's deferral account
with a number of deferred shares equal to the number of shares having an
aggregate fair market value at the date the fees otherwise would be payable
equal to the amount of fees deferred. Dividend equivalents are credited on such
deferred shares, which amounts are deemed to be reinvested in additional
deferred shares. Deferrals are settled at such time as may have been elected by
the Director in a deferral election form.
In addition, under the Non-Employee Directors' Stock Option Plan, each
non-employee Director is automatically granted, each year, an option to purchase
2,000 shares of the Company's Common Stock after each annual shareholder's
meeting at which he is elected a Director. Such options have a term of five
years, and an exercise price per share equal to 100% of the fair market value of
a share at the date of grant. A newly elected Director is also automatically
granted an option to purchase 5,000 shares under the plan. Options under the
plan have an exercise price equal to 100% of the fair market value of a share at
the date of grant, become exercisable three months after the date of grant, and
expire at the earliest of five years after the date of grant, 12 months after
the optionee ceases to serve as a Director due to death, disability or
retirement or sixty days after the optionee ceases to serve as a Director for
any other reason.
Directors who are also employees of the Company are not paid Directors'
fees and are not granted options for serving as Directors.
During fiscal year 1997, Tracy G. Herrick, a Director of the Company,
provided the Company with certain financial and other consulting services. Mr.
Herrick was paid $126,000 for his services.
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.
9
<PAGE> 12
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, 1997, 1996, and 1995, of those persons who were, during 1997, the
Chief Executive Officer, the other four most highly compensated Executive
Officers of the Company specified by SEC rules, and the President and Chief
Operating Officer of the Company (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
-------------------------------- ------------------------ ---------
(B) (C) (D) (F) (G) (H) (I)
(A) (E) SECURITIES
OTHER UNDER-
ANNUAL RESTRICTED LYING ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION(2) AWARD(S) SARS PAYOUTS SATION(3)
------------------ ---- ------- ---------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank E. Baxter 1997 400,000 818,918 16,228 2,088,082(4) 72,000 2,628,322(5) 90,940
Chairman and Chief 1996 400,000 601,240 12,289 150,000(6) 1,465,857 77,504
Executive Officer 1995 400,000 403,380 14,043 1,200,926 51,985
Richard B. Handler 1997 500,000 [ ] 14,971 82,826
Executive Vice 1996 500,000 7,897,172 14,005 84,561
President and Manager 1995 500,000 5,644,482 14,078 55,347
of the Taxable Fixed
Income Division of
Jefferies
Louis V. Bellucci, Sr. 1997 300,000 2,442,000 15,693 82,557
Executive Vice President
and 1996 300,000 2,172,000 12,431 70,289
Chairman of the Equity 1995 300,000 1,612,000 14,017 46,870
Division of Jefferies
Jonathan R. Cunningham(7) 1997 -- 2,277,088 14,403 68,558
Executive Vice President
and Director of the U.S.
Convertible Securities
Department of Jefferies
Clifford A. Siegel 1997 -- 2,210,727 8,618 157,150(8) 47,132
Executive Vice 1996 -- 1,247,000 10,164 52,420
President of Jefferies 1995 -- 1,295,000 10,456 28,537
and Chief Executive and
Jefferies Intl. Ltd., the
Company's wholly owned
subsidiary
Michael L. Klowden 1997 300,000 1,050,750 13,405 650,250(9) 40,000 54,239
President and Chief 1996 275,000 825,000 11,394 275,000(10) 126,000 33,759
Operating Officer 1995 171,875 494,792 7,479 84,000 12,035
</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.
(2) Each Named Executive Officer participating in the CAP was credited with
units representing shares of the Company's Common Stock ("CSUs") at a price
equal to eighty-five percent (85%) of the Company's average cost per share
of the shares available for distribution in the CAP. The Company's average
cost per share is based upon the average cost of shares repurchased
specifically for purposes of the CAP and held as treasury shares pending
distribution upon settlement of CSUs. During each calendar quarter, each CAP
participant defers receipt of compensation, part of which is credited to
their cash account. At the end of the quarter, the cash account is debited
by an amount equal to the number of CSUs multiplied by 85% of the average
cost per share. During 1997, the amount of the 15% discount on the CSUs with
respect to each Named Executive Officer was as follows: Mr. Baxter: $16,228;
Mr. Handler: $14,971; Mr. Bellucci: $15,693; Mr. Cunningham: $14,403; Mr.
Siegel: $7,614; and
10
<PAGE> 13
Mr. Klowden: $13,405. In addition, Mr. Siegel received options under the
U.K. CAP to purchase the Company's Common Stock with an exercise price equal
to 17% of the average cost per share of shares repurchased specifically for
purposes of the U.K. CAP. During each calendar quarter, Mr. Siegel deferred
receipt of compensation, part of which was credited to a cash account. At
the end of the quarter, Mr. Siegel's cash deferral account was debited by an
amount equal to (a) the number of shares over which options are granted,
multiplied by (b) 85% of the average cost per share less the exercise price
of the option. The debit to the cash account and the exercise price of the
option together effectively result in a 15% discount to Mr. Siegel.
Consistent with the disclosure of the comparable discount under the CAP, the
aggregate amount of the discount is included in column (e), and the options
granted are not reflected in column (g). In 1997, Mr. Siegel was granted
options to purchase an aggregate of 2,107 shares under the U.K. CAP,
representing a discount of $1,004.
(3) The total amounts for 1997 shown in the "All Other Compensation" column
include the following:
(a) The Company's matching contributions under the Company's Section 401(k)
plan. During the plan year ended November 30, 1997, each Named
Executive Officer received $11,020 as the Company's matching
contributions.
(b) Forfeitures under the Company's Employee Stock Ownership Plan ("ESOP").
During the plan year ended November 30, 1997, each Named Executive
Officer's account was credited with 11.845 shares at an original cost
of $10.875 per share, for a total of $129 each, as a result of such
forfeitures.
(c) The Company's matching contributions to the Company's Employee Stock
Purchase Plan ("ESPP"). During the year ended December 31, 1997, the
Named Executive Officers received the following total matching
contributions: Mr. Baxter: $3,600; Mr. Cunningham: $3,367; Mr. Klowden:
$12,600. Messrs. Handler, Siegel and Bellucci did not receive matching
contributions in fiscal 1997.
(d) Contributions of $6,864 and forfeiture allocations of $828 for each of
the Named Executive Officers under the Company's Profit Sharing Plan.
(e) Dividend equivalents and interest payments to the cash accounts of the
Named Executive Officers under the Jefferies Group, Inc. Capital
Accumulation Plan for Key Employees (the "CAP"), paid at a rate equal
to the average percentage rate Jefferies paid on its margin accounts
carrying credit balances, as follows: Mr. Baxter: $7,135; Mr. Handler:
$7,692; Mr. Bellucci: $6,496; Mr. Cunningham: $4,401; Mr. Siegel:
$3,074; and Mr. Klowden: $1,908.
(f) An amount of "deemed interest" credited to each participant's CAP
account and to Mr. Siegel's account under the Company's United Kingdom
Capital Accumulation Plan for Key Employees (the "U.K. CAP") for 1997.
The CAP and U.K. CAP participants defer a portion of their cash
compensation to Profit-Based Deferred Compensation Accounts. The amount
of "deemed interest" is determined by multiplying (i) the daily
weighted average amount in the CAP and U.K. CAP participant's
Profit-Based Deferred Compensation Account by (ii) an interest rate
equal to 100% , in the case of the CAP, or 85%, in the case of the U.K.
CAP, of the fully-diluted earnings per share (if any) of Common Stock
for that fiscal year divided by the fair market value of a share at the
end of the preceding year. In 1997, the Named Executive Officers
received the following amounts of such "deemed interest" under the CAP:
Mr. Baxter: $61,364; Mr. Handler: $56,293; Mr. Bellucci: $57,220; Mr.
Cunningham: $41,948; Mr. Siegel: $25,217; and Mr. Klowden: $20,890. Mr.
Siegel also received an additional $20,154 of "deemed interest" under
the U.K. CAP.
(4) Deferred compensation in prior years was considered Long-Term Compensation
and reported as "phantom shares" in a "Long-Term Incentive Plan Awards
Table" in the year awarded, and as "LTIP Payouts" in the year it became
payable. Amendments to Mr. Baxter's Incentive Compensation Plan under the
Company's Pay-for-Performance Plan eliminated the risk of forfeiture of
"phantom shares" with respect to compensation earned commencing January 1,
1996 which are therefore reported as Restricted Stock in this Proxy
Statement. However, compensation previously stated as long-term
compensation continues to be treated as such and is reported in the "LTIP
Payouts" column. Under Mr. Baxter's Incentive Compensation Plan, two-thirds
of Mr. Baxter's annual bonus is deferred, one-third of which will become
payable on each of December 31, 1998 and December 31, 1999 (the
11
<PAGE> 14
"deferred incentive compensation"). The amount of deferred incentive
compensation will be calculated by dividing that portion of the 1997
incentive compensation which has been deferred ($1,638,082) by the closing
price of the Company's Common Stock on December 31, 1997 ($40.9375), and
designating the result (40,014) as "phantom shares" of the Company's Common
Stock. The amount of the deferred payment actually made to Mr. Baxter will
be determined at the time it is to be paid, generally by multiplying (a)
the number of phantom shares by (b) the sum of (1) the closing price of the
Company's Common Stock on the first trading day coincident with or
following the close of the Company's fiscal year and (2) the amount of
dividends, if any, declared on shares of the Company's Common Stock during
the years of deferral. Includes 12,721 shares of restricted stock granted
to Mr. Baxter at a price of $35.375 as compensation for 1997 in the amount
of $450,000, all of which will vest on January 28, 1999.
(5) Pursuant to Mr. Baxter's Incentive Compensation Plan, Mr. Baxter deferred
$1,202,480 in 1996, which was converted into 59,566 "phantom shares" based
on the closing price of the Company's Common Stock on December 31, 1996
($20.1875) (the number of shares and closing price as adjusted to reflect
the December 1997 Stock Split). 29,783 phantom shares became payable on
December 31, 1997, at a closing price of $40.9375 for a long-term
compensation payout of $1,219,242. Mr. Baxter also deferred $806,759 in
1995, which was converted into 68,296 "phantom shares" based on the closing
price of the Company's Common Stock on December 31, 1995 ($11.8125) (the
number of shares and closing price as adjusted to reflect both the
Company's March 1996 and December 1997 stock splits). 34,148 of the 1995
phantom shares became payable on December 31, 1997, at a closing price of
$40.9375 for a long-term compensation payout of $1,397,934. Includes a
payment of $11,033 in dividend equivalents attributed to such phantom
shares.
(6) Includes a total of 9,160 shares of restricted stock granted to Mr. Baxter
in 1996 (adjusted to reflect the December 1997 Stock Split), 4,580 of which
became unrestricted on March 20, 1997, and 4,580 of which will become
unrestricted on March 27, 1998, and will vest on the second anniversary of
the date of grant.
(7) Mr. Cunningham became an executive officer of the Company in 1997 and was
not an executive officer in 1996 or 1995.
(8) A total of 4,000 shares of restricted stock were granted to Mr. Siegel on
January 28, 1998 in partial payment for the termination of a long-term
special bonus arrangement. Shares were purchased at a price of $27.50 per
share and were worth $39.25 on the date of grant.
(9) Under Mr. Klowden's Incentive Compensation Plan, adopted pursuant to the
Company's Pay-for-Performance Plan, one-fourth of Mr. Klowden's annual
bonus is deferred and will become payable on December 31, 1998 (the
"deferred incentive compensation"). The amount of deferred incentive
compensation will be calculated by dividing that portion of the 1997
incentive compensation which has been deferred ($350,250) by the closing
price of the Company's Common Stock on December 31, 1997 ($40.9375), and
designating the result (8,556) as "phantom shares" of the Company's Common
Stock. The amount of the deferred payment actually made to Mr. Klowden will
be determined at the time it is to be paid, generally by multiplying (a)
the number of phantom shares by (b) the sum of (1) the closing price of the
Company's Common Stock on the first trading day coincident with or
following the close of the Company's fiscal year and (2) the amount of
dividends, if any, declared on shares of the Company's Common Stock during
the years of deferral. Also includes 8,481 shares of restricted stock
granted to Mr. Klowden at a price of $35.375 per share for an aggregate of
$300,000 as compensation for 1997, which will vest on January 28, 1999.
(10) Pursuant to his Incentive Compensation Plan, Mr. Klowden deferred $275,000
in 1996, which was converted into 13,622 "phantom shares" based on the
closing price of the Company's Common Stock on December 31, 1996 ($20.1875)
(the number of shares and closing price as adjusted to reflect the December
1997 Stock Split). All 13,622 shares became payable on December 31, 1997.
12
<PAGE> 15
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------------------- -----------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
MARKET
NUMBER OF % OF TOTAL PRICE
SECURITIES OPTIONS/SARS EXERCISE ON
UNDERLYING GRANTED TO OR BASE DATE OF
OPTIONS/SARS EMPLOYEES IN PRICE GRANT EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) ($) DATE 0% 5% 10%
---- ------------ ------------ -------- -------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank E. Baxter.......... 72,000 20.97% $22.50 $22.50 3/17/2002 -- $447,576 $989,026
Richard B. Handler....... -- -- -- -- -- -- -- --
Louis V. Bellucci, Sr.... -- -- -- -- -- -- -- --
Jonathan R. Cunningham... -- -- -- -- -- -- -- --
Clifford A. Siegel(1).... 1,004 0.29% $ 3.36 $20.31 4/15/2001 $17,022 $ 21,417 $ 26,487
534 0.16% $ 4.50 $27.31 4/15/2001 $12,180 $ 15,109 $ 18,446
372 0.11% $ 5.22 $35.75 4/15/2001 $11,356 $ 13,832 $ 16,622
181 0.05% $ 5.93 $40.94 4/15/2001 $ 6,337 $ 7,610 $ 9,028
Michael L. Klowden....... 20,000 5.83% $20.19 $20.19 2/9/2007 -- $253,916 $643,474
40,000 11.65% $22.50 $22.50 3/17/2002 -- $248,653 $549,459
</TABLE>
- ---------------
(1) Represents options to purchase shares of Common Stock acquired under the
U.K. CAP. The operation of the U.K. CAP is briefly described in Footnote 2
to the Summary Compensation Table. Each stock option has an exercise price
equal to 17% of the average cost per share of shares repurchased for
purposes of granting options under the U.K. CAP. Each option was acquired at
Mr. Siegel's election in lieu of an amount of compensation deferred equal to
four times the exercise price. Generally, the options will become
exercisable on February 15, 2001, and expire on April 15, 2001, subject to
accelerated exercisability and expiration upon certain terminations of
employment or in certain other circumstances as determined by the
Compensation Committee. The exercise price of the options may be paid in
cash, by surrender of previously acquired shares, by application of other
cash balances, or in any other manner permitted by the Compensation
Committee.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS/SARS AT FY-END OPTIONS/SARS
ACQUIRED ON REALIZED (#)EXERCISABLE (E)/ AT FY-END ($) EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE (U) UNEXERCISABLE(1)
---- ----------- -------- ---------------------- --------------------------
<S> <C> <C> <C> <C>
Frank E. Baxter............. -- -- 72,000(E) $1,327,500
Richard B. Handler.......... -- -- -- --
Louis V. Bellucci, Sr....... -- -- 60,000(E) $2,201,250
Jonathan R. Cunningham...... -- -- 40,000(E) $1,244,980
Clifford A. Siegel.......... -- -- 60,000(E) $2,201,250
8,386(U) $ 310,140
Michael L. Klowden.......... -- -- 218,664(E) $4,756,264
35,336(U) $ 925,362
</TABLE>
- ---------------
(1) At December 31, 1997, the closing price of the Company's Common Stock was
$40.9375, which was the price used to determine the year-end value tables in
Column (e).
13
<PAGE> 16
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
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 18 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, the members of which
in 1997 were Messrs. Dooley, Macchiarola, and Wolfson, 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.
The Committee also administers the Company's stock-based incentive plan,
the 1993 Stock Ownership and Long-Term Incentive Plan (the "1993 Plan"). The
Committee believes that stock ownership by Executive Officers and stock-based
performance compensation arrangements can be beneficial in aligning the
interests of Executive Officers with the interests of shareholders, and
therefore the Committee has used stock option grants and other stock-related
awards and arrangements to provide incentive compensation.
In implementing compensation policies, plans, and programs for 1997, 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 the chief executive officer and the 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 greatest extent
possible without substantially impairing the operation and effectiveness of the
Company's compensation policies, plans, and programs. To this end, the Committee
established and the Board of Directors adopted the Jefferies Group, Inc.
Pay-For-Performance Incentive Plan in order that compensation thereunder will
qualify as "performance-based compensation," which plan was approved by the
shareholders at the 1994 Annual Meeting. The Committee also intends to grant
options under the 1993 Plan with an exercise price at least equal to 100% of
fair market value of the underlying stock at the date of grant (except for
options granted under the United Kingdom Capital Accumulation Plan for Key
Employees (the "U.K. CAP"), discussed below), and the Committee has been advised
that such options should qualify as "performance-based compensation." The
Committee believes that no compensation otherwise deductible for 1997 was
subject to the Section 162(m) deductibility limit.
14
<PAGE> 17
COMPENSATION PAID TO EXECUTIVE OFFICERS IN 1997 (OTHER THAN THE CHIEF EXECUTIVE
OFFICER)
Annual compensation paid to Executive Officers in 1997, including the Named
Executive Officers of the Company reflected in the foregoing tables, generally
consisted of a base salary and/or draw and an annual bonus which was determined
(i) in part by reference to net earnings of the Company, excluding earnings
attributable to Investment Technology Group, Inc. ("ITGI"), (ii), in the case of
certain Executive Officers with Company-wide responsibilities, in part by
reference to earnings attributable to ITGI, and (iii), in the case of Executive
Officers with responsibility for revenue-producing departments or divisions, in
part by reference to departmental or divisional profitability, and, in some
cases, revenues. In addition, in the case of certain Executive Officers with
predominantly administrative functions, in determining the amount of annual
bonus payable, the Committee considered individual initiative and performance.
The weighting assigned to earnings attributable to ITGI, where applicable in
determining any bonus, was substantially lower than the weighting assigned to
Company earnings from other sources, in light of the fact that the Executive
Officers' commitment of time is generally lower with respect to ITGI as compared
to other Company business activities.
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 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 general policies with respect to linking annual bonuses for Executive
Officers to Company-wide, subsidiary, departmental and divisional operating
results are governed by the Pay-For-Performance Incentive Plan. In accordance
with that Plan, the Committee determined formulas for payment of an annual bonus
to each such Executive Officer in early 1997 with a view to providing overall
compensation which would provide him with a competitive compensation package and
align the interests of the Executive Officers 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. 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. In addition, the Committee granted an award of
restricted stock of the Company to Mr. Klowden in January 1998, under the 1993
Plan, as a discretionary bonus in recognition of the Company's unusually strong
1997 performance and his contributions to such performance.
The Committee granted equity-based awards, primarily in the form of option
grants, to certain Executive Officers as a form of long-term compensation. In so
doing, the Committee sought to provide an additional element of long-term
compensation based on the Committee's review of general trends regarding
compensation of executives in the securities industry and its subjective
judgment as to the appropriate level of total compensation for each Executive
Officer granted such an award. 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. In addition, the Committee from
time to time may grant options in lieu of bonus otherwise payable in cash with
the concurrence of the Executive Officer.
Finally, the Company's Capital Accumulation Plan for Key Employees (the
"CAP"), which was adopted by the Board of Directors and approved by shareholders
during 1993, is designed to allow Executive Officers to defer receipt of (and
thus defer taxation on) a portion of their income. Under the CAP, part of such
deferred amounts are deemed invested in Common Stock of the Company at a 15%
discount from the average cost of shares repurchased by the Company for purposes
of the CAP, and part of such deferred amounts are deemed invested in a
hypothetical instrument that pays interest based on the rate represented by the
fully diluted earnings per share (if any) of Common Stock for a given year
divided by the fair market value of a share at the end of the Company's
preceding fiscal year. However, during the first three years of deferral, if the
Company's earnings per share are negative, the CAP participant will not receive
interest, but will instead be charged by an amount equal to the fully diluted
loss per share for the given year divided by the fair market
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<PAGE> 18
value of a share at the end of the preceding fiscal year. In the Committee's
view, the CAP's method of valuing deferred compensation adds an additional
incentive for participants therein to maximize the value of the Company's Common
Stock and the Company's profitability. The UK CAP has been established to
provide benefits similar to the CAP to Executive Officers who receive
compensation in the United Kingdom through the grant of options which are
designed to duplicate benefits under the CAP while conforming to certain United
Kingdom tax and other laws.
COMPENSATION PAID TO THE CHIEF EXECUTIVE OFFICER IN 1997
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.
During calendar year 1997, the Committee retained the services of KPMG Peat
Marwick LLP to assist it in connection with the compensation of the Chief
Executive Officer of the Company.
Mr. Baxter's compensation package for 1997 was intended to motivate and
reward Mr. Baxter for achieving profit levels that were in the best interests of
the Company's shareholders and to encourage him to remain with the Company to
continue to serve those interests. In setting Mr. Baxter's compensation for
1997, 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 profitability of the
Company.
For the year 1997, Mr. Baxter's compensation consisted of a base salary of
$400,000 (which was approximately 20% of Mr. Baxter's total target annual
compensation for 1997), and an incentive award determined pursuant to an
Incentive Compensation Plan (the "ICP") which is implemented under and subject
to the terms of the Pay-for-Performance Incentive Plan and sets forth the
general terms of Mr. Baxter's annual incentive award. Mr. Baxter's base salary
was set at a level deemed most appropriate by the Committee when taking into
consideration the Committee's desire to provide Mr. Baxter some certainty in the
level of his compensation through this non-performance based element of
compensation. 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 shareholders.
During the first quarter of 1997, the Committee also established the terms
of Mr. Baxter's incentive award under the ICP. The ICP authorizes the Committee
to set a rate, stated as a percentage of after-tax profits, at which Mr.
Baxter's target compensation would be (a) increased, if the Company's net
profits exceeded the target profit level or (b) reduced (but not below the
amount of his base salary) if the Company's net profits did not equal or exceed
the target profit level. For 1997, the Committee determined that Mr. Baxter's
compensation would be based, in part, upon a weighted allocation of the earnings
of ITGI and of the remainder of the Company. The Committee established the
following rates, stated as a percentage of after-tax profits at which Mr.
Baxter's bonus would be reduced or increased from the target bonus level if
after-tax profits were lower or higher than the target level of each company's
profits: Jefferies Group, Inc. (other than the Company's equity interest in
ITGI's earnings) -- 5%; the Company's equity interest in ITGI's
earnings -- 1.75%.
The Committee determined that Mr. Baxter's 1997 target base salary and
bonus should be $1,956,000. In setting this target, the Committee considered
1996 compensation for chief executive officers at securities industry companies,
as well as subjective factors, including the fact that Mr. Baxter's leadership
had enabled the Company to greatly improve its financial performance and enhance
shareholder value in preceding years.
The 1997 target level for Company profits was set at $33,000,000. This was
arrived at by multiplying a target after-tax rate of return on equity for
shareholders of 15% by the estimated average stockholders' equity of the Company
for fiscal 1997 (as adjusted to reflect possible dilution resulting from the
exercise of stock options), which average was estimated to be approximately $220
million.
The Company exceeded the target level of after-tax profits set by the
Committee for 1997. No adjustments were made with respect to the actual
compensation payable to Mr. Baxter for 1997 performance
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<PAGE> 19
under the ICP (two-thirds of which is deferred under the ICP). In addition, the
Committee awarded Mr. Baxter 12,721 shares of restricted stock of the Company in
January 1998 under the 1993 Plan, with a market value of $450,000 on the date of
grant, as a discretionary bonus for 1997, in recognition of the Company's
unusually strong performance in 1997 and his contributions to such performance.
Mr. Baxter has not yet been paid the entire amount of his 1997 incentive
award. In addition to Mr. Baxter's base salary of $400,000, Mr. Baxter was paid
one-third of his annual incentive compensation for 1997, which was determined in
accordance with the factors discussed above. Half of the remaining two-thirds of
Mr. Baxter's annual incentive compensation for 1997 is potentially payable at
the end of each of fiscal years 1998 and 1999. The amounts of such deferred
compensation are deemed to be invested in "phantom shares" of the Company's
Common Stock at the closing price of such stock on the last day of 1997, with
amounts equal to dividends thereafter credited to Mr. Baxter as well. Such
"phantom shares," which are forfeitable in the event of termination of Mr.
Baxter's employment for cause but not in other circumstances, are reflected in
the Summary Compensation Table above under the column "Restricted Stock."
In March 1997, the Committee determined to grant to Mr. Baxter an option to
purchase 72,000 shares of the Company's Common Stock (adjusted for the December
1997 Stock Split) under the Company's 1993 Plan. The Committee sought to provide
an additional element of long-term compensation based on the Committee's review
of general trends regarding compensation of executives in the securities
industry and its subjective judgment that Mr. Baxter's targeted total
compensation for 1997, and the portion composed of long-term incentives tied to
the value of the Company's common stock, was low in relation to the practices of
high-performing companies in the industry.
Mr. Baxter also participates in the CAP, the terms of which are described
above. Amounts deferred by Mr. Baxter during and with respect to 1997 under the
CAP include both salary and incentive compensation.
The foregoing report has been furnished by:
Richard G. Dooley, Chairman
Frank J. Macchiarola & Mark A. Wolfson
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<PAGE> 20
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 Russell 2000, the Standard & Poor's 500, the
Lipper Analytical Brokerage Composite, and the Financial Service Analytics
Brokerage Composite ("FSA Composite") Indices for the period of five fiscal
years, commencing January 1, 1993 (based on prices at December 31, 1992), and
ending December 31, 1997. Included in the graph this year are the FSA Composite
and Standard & Poor's 500 Indices. The Company intends to discontinue use of the
Russell 2000 and Lipper Analytical Brokerage Composite Indices in future years
and to use the Standard & Poor's and FSA Composite Indices in lieu thereof
because, in the Company's opinion, those indices will provide the Company's
shareholders with a better benchmark of the Company's performance versus its
peers in the brokerage industry.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
JEFFERIES GROUP, INC.'S COMMON, RUSSELL 2000, STANDARD & POOR'S 500, LIPPER
ANALYTICAL
BROKERAGE AND FSA COMPOSITE INDICES
<TABLE>
<CAPTION>
LIPPER
FSA ANALYTICAL
BROKERAGE BROKERAGE
MEASUREMENT PERIOD 'JEFFERIES RUSSELL 2000 COMPOSITE COMPOSITE
(FISCAL YEAR COVERED) GROUP, INC.' INDEX S&P 500 INDEX INDEX
<S> <C> <C> <C> <C> <C>
1992 100 100 100 100 100
1993 166 119 110 130 134
1994 152 117 112 111 113
1995 243 150 153 152 154
1996 418 175 189 221 231
1997 851 214 251 420 457
</TABLE>
* Normalized so that the value of the Company's Common Stock and each index was
$100 on December 31, 1992, and assuming all dividends were reinvested.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Baxter does not have an employment contract with the Company. However,
his Incentive Compensation Plan provides that if Mr. Baxter's employment is
terminated for cause, he will forfeit any deferred amounts not yet payable as of
the date of termination. In the event of Mr. Baxter's approved retirement,
termination for other than cause, death or permanent disability, any deferred
amounts not yet payable as of the date of such event shall be paid on their
regularly scheduled payment date, or earlier at the discretion of the
Compensation Committee.
ITGI, a publicly held company which is a majority-owned subsidiary of the
Company, has entered into an employment agreement with Scott P. Mason in 1997,
in order to secure his services as President and Chief
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<PAGE> 21
Executive Officer of ITGI. The term of employment under the agreement extends
through 2001, with annual renewals thereafter. The agreement provides for annual
salary of $300,000 (subject to periodic review and raises), and an additional
payment of $450,000 in each of 1997 and 1998. The agreement also provides for an
annual incentive payment, the target amount of which is currently $450,000 in
each of 1997 and 1998 and $900,000 per year thereafter, which is payable based
upon achievement of growth in ITGI's earnings before income taxes. The agreement
also provides for the grant to Mr. Mason of a five-year option to purchase one
million shares of ITGI's Common Stock, exercisable at $22.175 per share
(approximately $4.00 above the market price of ITGI's Common Stock at the time
the terms of the option were agreed to and at the time the option was granted).
The agreement also provides for payment of severance benefits to Mr. Mason.
Benefits payable if employment is terminated by ITGI without cause or by Mr.
Mason for good reason (as defined in his employment agreement) include (i) a
lump sum payment equal to the amount of the fixed payment and target annual
incentive for the year of termination (to the extent not previously paid),
prorated for the period of service in that year, (ii) a lump sum payment of two
times the sum of salary plus fixed payment plus target annual incentive and
(iii) participation in welfare benefit and pension or retirement plans for two
years following termination. Benefits payable if, in connection with a change in
control or during the two years following such event, employment is terminated
by ITGI without cause or by Mr. Mason for good reason (as defined in his
employment agreement) are the same as in the preceding sentence except the
multiplier referred to in clause (ii) will be three times rather than two times
and the post-termination period referred to in clause (iii) will be three years
rather than two years. In the event of death or disability, a benefit would be
payable as a lump sum equal to the amount of the fixed payment and target annual
incentive for the year of termination (to the extent not previously paid),
prorated for the period of service in that year plus, in the case of disability,
periodic payments equal to 60% of base salary through age 65. The agreement
provides for payment of a tax "gross-up" payment to Mr. Mason to offset any
effects of golden parachute and certain other taxes on payments following a
change in control. The agreement also restricts Mr. Mason from competing with
ITGI for a period of six months or 18 months following termination of
employment, the period depending on the nature of the termination.
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 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. The maximum covered remuneration for 1997 is $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
19
<PAGE> 22
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, 1997, the estimated annual benefits payable upon
retirement at normal retirement age for each of the Named Executive Officers of
the Company are: Mr. Baxter: $52,494; Mr. Bellucci: $40,412; Mr. Cunningham:
$67,757; Mr. Handler: $61,461; Mr. Klowden: $25,400; and Mr. Siegel: $54,708.
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 $2,184,586 at December
31, 1997. 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 1997, Mr. Herrick, a Director of the Company, provided financial and
other consulting services to the Company, for which he was paid $126,000.
During 1997, in the ordinary course of business, Jefferies executed
securities transactions on behalf of Tweedy, Browne Company L.P., a shareholder
of the Company beneficially owning in excess of 5% of the Company's Common
Stock, and received commissions of approximately $62,595.
During 1997, in the ordinary course of business, the Company's subsidiaries
executed securities transactions on behalf of Guardian Life Insurance Company
and its affiliates, shareholders of the Company beneficially owning in excess of
5% of the Company's Common Stock, and received commissions of approximately
$947,805.
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, 1997, accompanies this Proxy Statement, but is not deemed a
part of the proxy soliciting material.
KPMG Peat Marwick LLP were the Company's independent auditors for the year
ended December 31, 1997. 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.
A representative of KPMG Peat Marwick LLP, the independent auditors who
examined the consolidated financial statements of the Company for 1997, 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.
20
<PAGE> 23
PROPOSAL TO APPROVE THE AMENDMENT OF THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED COMMON STOCK
On January 28, 1998, the Board of Directors approved an amendment to the
Amended and Restated Certificate of Incorporation of the Company to increase to
100,000,000 the number of shares of the Company's Common Stock authorized for
issuance, and directed that the amendment (the "Amendment") be submitted to a
vote of shareholders at the Annual Meeting.
Section 4 of the Company's Amended and Restated Certificate of
Incorporation as currently in effect authorizes the issuance of 1,000,000 shares
of Preferred Stock, par value of $.01 (none of which is outstanding), and
25,000,000 shares of Common Stock, par value of $.01. As of March 20, 1998,
shares of the Company's Common Stock were issued, of which
were held as treasury shares of the Company. Approximately
shares of the Company's Common Stock have been reserved for issuance pursuant to
various employee compensation and benefit plans of the Company and of the
Company's subsidiaries. The Board of Directors believes the number of authorized
shares of Common Stock should be increased to make available additional shares
for possible stock dividends, stock splits, employee benefit plan issuances,
acquisitions, financings and for such other corporate purposes as may arise.
Therefore, the Board of Directors has approved and recommends to shareholders an
increase in the number of shares of authorized Common Stock of the Company to an
aggregate of 100,000,000 in accordance with the Amendment.
Other than as set forth above, the Company has no specific plans currently
calling for issuance of any of the additional shares of the Company's Common
Stock. The rules of the New York Stock Exchange currently require shareholder
approval of issuances of Common Stock under certain circumstances, including
those in which the number of shares to be issued is equal to or exceeds 20% of
the voting power outstanding. All newly authorized shares would have the same
rights as the presently authorized shares, including the right to cast one vote
per share and to participate in dividends when and to the extent declared and
paid. Under the Company's Amended and Restated Certificate of Incorporation,
shareholders do not have preemptive rights. Accordingly, the rights of existing
shareholders may, depending on how additional shares of Common Stock are issued,
be diluted by their issuance. While the issuance of shares in certain instances
may have the effect of forestalling a hostile takeover, the Board of Directors
does not intend or view the increase in authorized Common Stock as an
anti-takeover measure, nor is the Company aware of any proposed or contemplated
transaction of this type.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE AMENDMENT TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK TO
100,000,000.
OTHER MATTERS
Management 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 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."
21
<PAGE> 24
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the proxy material relating to the
1999 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, 1998. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
materials relating to the 1999 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
March , 1998
22
<PAGE> 25
PRELIMINARY COPY
JEFFERIES GROUP, INC.
PROXY/VOTING DIRECTION CARD FOR
ANNUAL MEETING OF SHAREHOLDERS ON MAY 12, 1998
THIS PROXY/VOTING DIRECTION IS SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Frank E. Baxter, Tracy G. Herrick and Michael
L. Klowden, and each of them, as proxies, with full power of substitution, to
represent the undersigned and to vote all shares of Common Stock of Jefferies
Group, Inc., held of record by the undersigned on March 20, 1998 or which the
undersigned would be otherwise entitled to vote at the Annual Meeting of
Shareholders to be held on May 12, 1998 and any adjournment thereof, upon
all matters that may properly come before the meeting. ALL SHARES VOTABLE BY
THE UNDERSIGNED, INCLUDING SHARES HELD OF RECORD BY AGENTS OR TRUSTEES FOR THE
UNDERSIGNED AS PARTICIPANTS IN THE JEFFERIES GROUP, INC. EMPLOYEE STOCK
OWNERSHIP PLAN, EMPLOYEE PROFIT SHARING PLAN AND EMPLOYEE STOCK PURCHASE PLAN,
WILL BE VOTED BY THE PROXIES NAMED ABOVE IN THE MANNER SPECIFIED ON THE REVERSE
SIDE OF THIS CARD, AND SUCH PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION
ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Management recommends a vote FOR the election of Directors and FOR amendment
of the Company's Certificate of Incorporation.
1. ELECTION OF DIRECTORS:
Frank E. Baxter, Richard G. Dooley, Tracy G. Herrick, Raymond L. Killian,
Jr., Michael L. Klowden, Sheldon B. Lubar, Frank J. Macchiarola,
Mark A. Wolfson
2. APPROVAL OF THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED SHARES.
(continued and to be signed on the reverse side)
- -------------------------------------------------------------------------------
<PAGE> 26
[X] PLEASE MARK YOUR
VOTES AS 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 and FOR the approval of the amendment of the
Certificate of Incorporation to increase the authorized shares.
FOR WITHHELD
1. Election of Directors. [ ] [ ]
(See reverse)
FOR AGAINST ABSTAIN
2. Approval of the amendment of the [ ] [ ] [ ]
Certificate of Incorporation to
increase the authorized shares.
For, except withheld from the following nominees:
- ---------------------------------------------------------------------
The undersigned acknowledges receipt of the Annual Report
on Form 10-K, the Notice of Annual Meeting of Shareholders
and the Proxy Statement, and hereby revokes all previously
granted proxies.
(Please sign exactly as name appears. Joint owners should
each sign personally. Trustees and others signing in a
representative capacity should indicate the capacity in
which they sign.)
_________________________________________________________
_________________________________________________________
Signature(s) Date
