<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
Baker, Fentress & Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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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 paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE>
Baker, Fentress & Company
Established 1891
SUITE 3510 . 200 WEST MADISON STREET . CHICAGO, ILLINOIS 60606 . (800) BKF-1891
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on April 22, 1999
To Our Shareholders:
The annual meeting of shareholders of Baker, Fentress & Company will be
held at The Chicago Hilton and Towers, 720 South Michigan Avenue, Chicago,
Illinois, on Thursday, April 22, 1999, at 10:30 a.m., local time, for the
following purposes:
1. To elect five directors;
2. To ratify or reject the selection of Ernst & Young LLP as independent
auditors for the Company; and
3. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 8, 1999, are
entitled to vote at the meeting.
By Order of the Board of Directors
James P. Koeneman
Secretary
Chicago, Illinois
March 10, 1999
Please indicate your voting instructions on the enclosed proxy card, date
and sign, and return it in the enclosed envelope. Please mail the proxy card
promptly to help save the cost of additional solicitations.
<PAGE>
PROXY STATEMENT
================================================================================
The board of directors of the Company is soliciting proxies from
shareholders for use at the annual meeting that will be held on April 22, 1999
and at any adjournment or adjournments of such meeting.
This proxy statement describes each of the matters on which the board of
directors is asking shareholders to vote. The board recommends that you vote in
favor of each of these proposals.
ITEM 1. ELECTION OF DIRECTORS
================================================================================
Five directors are to be elected at the meeting. The board of directors has
nominated the following persons to serve as directors for terms expiring at the
annual meeting of shareholders in 2002: Eugene V. Fife, J. Barton Goodwin, James
P. Gorter, John A. Levin and Burton G. Malkiel, all of whom are now directors.
If any nominee should be unable to serve, the proxies will be voted for such
other person as shall be determined by the persons named as proxies in
accordance with their judgment. Shareholders are entitled to one vote per share
in the election of directors, with no right of cumulation. A plurality vote of
the shares present at the meeting, in person or by proxy, is required to elect
directors, assuming a quorum is present.
Additional information concerning the nominees and the directors who are
continuing in office appears below.
Directors Nominated for Election
<TABLE>
<CAPTION>
Class and
Name, Age, and Principal Occupation Director Expiration
Since January 1, 1993 Since of Term Other Business Affiliation
- --------------------------------------------------------- -------- ---------- --------------------------------------------------
<S> <C> <C> <C>
Eugene V. Fife--age 58 (4) 1996 III 1999 Director of Eclipsys Corporation (hospital
President, chief executive officer, and co-chairman of information systems and solutions company)
the board of directors of Multimedia Medical Systems
(computer software company) since August 1996 and
limited partner of Goldman, Sachs & Co. (investment
bankers) since 1995; prior thereto, general partner and
member of the management committee of Goldman, Sachs &
Co.
J. Barton Goodwin--age 52 (1)(4) 1987 III 1999
Managing director of BCI Advisors, Inc. (private capital
investment group), general partner of Bridge Associates
II and Teaneck Associates and member of Glenpointe
Associates, LLC, Glenpointe V, LLC and BCI Investors,
LLC
James P. Gorter--age 69* (1) 1978 III 1999 Director of Consolidated-Tomoka Land Co., Levin
Chairman of the board of the Company; limited partner Management Co., Inc. and Caterpillar, Inc.
of Goldman, Sachs & Co. (investment bankers) (heavy equipment manufacturer)
John A. Levin--age 60* (1) 1996 III 1999 Director of Morgan Stanley group of investment
President and chief executive officer of the Company and funds (13 funds)
co-chairman and chief executive officer of John A.
Levin & Co., Inc., investment adviser to and subsidiary
of the Company, and Levin Management Co., Inc., a
wholly-owned subsidiary of the Company, since June
1996; prior thereto, president of and securities
analyst/portfolio manager at John A. Levin & Co., Inc.
Burton G. Malkiel--age 66(3) 1982 III 1999 Director of Prudential Insurance Co. of America,
Professor of Economics, Princeton University Select Sector SPDR Trusts, Banco Bilbao Vizcaya
Gestinova (Spanish bank) and Vanguard group of
investment funds (12 funds)
</TABLE>
2
<PAGE>
Directors Continuing in Office
<TABLE>
<CAPTION>
Class and
Name, Age, and Principal Occupation Director Expiration
Since January 1, 1993 Since of Term Other Business Affiliation
- --------------------------------------------------------- -------- ---------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Frederick S. Addy--age 67 (2) 1988 I 2000 Director of J.P. Morgan Funds (22 funds) and EEX,
Retired; former executive vice president, chief Inc. (an international oil and gas exploration
financial officer and director of Amoco Corporation company)
Bob D. Allen--age 64* 1992 II 2001 Director of First Union - Florida (commercial bank)
Chairman, president, chief executive officer and
director of Consolidated-Tomoka Land Co. since 1990
Jessica M. Bibliowicz--age 39* 1997 I 2000 Trustee of Eaton Vance group of investment funds
President and chief operating officer of John A. Levin & (21 funds)
Co., Inc., investment adviser to and subsidiary of the
Company, and Levin Management Co., Inc., a wholly-owned
subsidiary of the Company, since July 1997; prior
thereto, chairman and chief executive officer of Smith
Barney Mutual Funds Management, Inc. and executive vice
president of Smith Barney Inc., 1994-1997; prior
thereto, senior vice president of Prudential Securities
David D. Grumhaus--age 63 (1)(3) 1988 I 2000 Director of Niche Software Systems, Inc. (computer
President of Casey Travel Corporation (travel agency) software company)
Jeffrey A. Kigner--age 38* 1996 I 2000
Co-chairman and chief investment officer of John A.
Levin & Co., Inc., investment adviser to and subsidiary
of the Company, and Levin Management Co., Inc., a
wholly-owned subsidiary of the Company, since July
1997; prior thereto, executive vice president of John
A. Levin & Co., Inc., June 1996-June 1997; prior
thereto, securities analyst/portfolio manager at John
A. Levin & Co., Inc.
David D. Peterson--age 68(2)(3) 1983 II 2001 Chairman of executive committee and director of
Retired, since June 1996; prior thereto, president and Consolidated-Tomoka Land Co.
chief executive officer of the Company
William H. Springer--age 69(2) 1992 II 2001 Director of Walgreen Co. and trustee of the
Retired; former vice chairman and director of Ameritech Northern Institutional Funds (4 funds) and the
Goldman Sachs group of investment funds
(3 funds)
Dean J. Takahashi--age 41 1997 II 2001
Senior director of investments, Yale University
</TABLE>
___________________
Notes to Tables
* These directors are "interested persons" of the Company (as defined in the
Investment Company Act), as follows: Mr. Allen, as president and chief
executive officer of Consolidated-Tomoka Land Co., a controlled affiliate
of the Company; Mr. Gorter, as an officer of the Company; Mr. Levin, as an
officer of the Company and of Levin Management Co., Inc. and its
subsidiaries, and as an affiliate of the Company because of his ownership
of more than 5% of the Company's common stock; Mr. Kigner and Ms.
Bibliowicz, as officers of Levin Management Co., Inc. and its subsidiaries.
(1) Member of the executive committee, which has the authority during intervals
between meetings of the board of directors to exercise the power of the
board, with certain exceptions. Mr. Grumhaus is the first alternate member
of the executive committee.
3
<PAGE>
(2) Member of the compensation committee, which had five meetings during 1998.
The committee makes recommendations to the board of directors concerning
the Company's compensation policies. The committee also administers the
Levin Management Co., Inc. and Subsidiaries Key Employee Incentive Bonus
Plan and the Baker, Fentress & Company 1998 Incentive Compensation Plan.
(3) Member of the audit committee, which had two meetings during 1998. The
committee makes recommendations regarding the selection of independent
auditors and meets with representatives of the Company's independent
auditors to determine the scope and review the results of each audit.
(4) Member of the nominating committee, which had no meetings during 1998. The
committee makes recommendations to the board of directors regarding the
selection of candidates to be nominated for election to the board. The
committee does not consider nominees recommended by shareholders.
The Company owns 5.0 million, or 79.9%, of the outstanding shares of
Consolidated-Tomoka Land Co.
During 1998, the board of directors conducted six meetings, including
regularly scheduled and special meetings. Each director attended at least 75% of
the meetings of the board of directors and committees on which he or she served
during 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
Each director and officer of the Company is required to report his or her
transactions in shares of Company common stock to the Securities and Exchange
Commission within a specified period following a transaction. During 1998 the
directors and officers filed all such reports within the specified time period
except Mr. Grumhaus, who filed one report covering one transaction for one
account late.
ITEM 2. SELECTION OF INDEPENDENT AUDITORS
================================================================================
The Company's board of directors, including a majority of the directors who
are not interested persons of the Company, has selected Ernst & Young LLP,
independent auditors, to audit the financial statements of the Company for the
year ending December 31, 1999. Ernst & Young LLP has served the Company in this
capacity since 1987 and has no direct or indirect financial interest in the
Company except as independent auditors. The Company is asking shareholders to
ratify the selection of Ernst & Young LLP as independent auditors of the
Company. A representative of Ernst & Young LLP is expected to attend the meeting
and will be available to respond to questions raised at the meeting. The
representative from Ernst & Young LLP also will have the opportunity to make a
statement if he or she desires to do so.
OTHER MATTERS
================================================================================
The management of the Company does not intend to bring any other matters
before the meeting, and it does not know of any proposals to be presented to the
meeting by others. If any other matter comes before the meeting, however, the
persons named in the proxy solicited by the board of directors will vote thereon
in accordance with their judgment.
INTERESTS IN STOCK
================================================================================
The table below contains information as of December 31, 1998 on the number
of shares of common stock of the Company and of its controlled affiliate,
Consolidated-Tomoka Land Co., as to which each named officer of the Company and
all directors and officers of the Company as a group, had outright ownership,
or, alone or with others, any power to vote or dispose of the shares, or to
direct the voting or disposition of the shares by others, and the percentage of
the aggregate of such shares to all of the outstanding shares of the respective
companies.
4
<PAGE>
<TABLE>
<CAPTION>
Shares of Baker, Fentress & Company
------------------------------------------------------------
Power Over Voting
or Disposition of
Outright Other Shares (a) Aggregate
Ownership -------------------- --------------------
of Shares Alone Shared Shares Percent
--------- ------ --------- --------- -------
<S> <C> <C> <C> <C> <C>
Frederick S. Addy................... 4,272 -- -- 4,272 0.01%
Bob D. Allen........................ 37,507 -- 46,685 84,192 0.22
Jessica M. Bibliowicz............... 1,097 -- -- 1,097 0.00
Eugene V. Fife...................... 6,145 -- -- 6,145 0.02
J. Barton Goodwin................... -- -- 750,418 750,418 1.92
James P. Gorter..................... 129,332 21,805 416,590 567,727 1.45
David D. Grumhaus................... 7,992 5,315 509,865 523,172 1.34
Jeffrey A. Kigner................... 333,892 -- -- 333,892 0.86
John A. Levin....................... 3,612,485 -- 43,874 3,656,359 9.37
Burton G. Malkiel................... -- -- 20,000 20,000 0.05
David D. Peterson................... 26,926 -- -- 26,926 0.07
William H. Springer................. 5,000 -- -- 5,000 0.01
Dean J. Takahashi................... 1,097 -- -- 1,097 0.00
James P. Koeneman................... 1,326 1,230 454 3,010 0.01
Julie A. Heironimus................. -- -- 20 20 0.00
Scott E. Smith...................... 1,848 -- 4,075 5,923 0.02
--------- ------ --------- --------- -------
Directors and officers as a group
(16 persons)...................... 4,168,919 28,350 1,791,981 5,989,250 15.35%(b)
</TABLE>
<TABLE>
<CAPTION>
Shares of Consolidated-Tomoke Land Co.
------------------------------------------------------------
Power Over Voting
or Disposition of
Outright Other Shares (a) Aggregate
Ownership -------------------- --------------------
of Shares Alone Shared Shares Percent
--------- ------ --------- --------- -------
<S> <C> <C> <C> <C> <C>
Bob D. Allen........................ 161,140(c) -- -- 161,140(c) 2.49%
J. Barton Goodwin................... -- -- 800 800 .01
James P. Gorter..................... 2,400 -- 4,000 6,400 .10
John A. Levin....................... -- -- 36,844 36,844 .58
David D. Peterson................... 4,000 -- -- 4,000 .06
--------- ------ --------- ---------
Directors and officers as a group
(16 persons)...................... 167,540(c) 41,644 209,184(c) 3.24%
</TABLE>
- ----------
Notes to Tables:
(a) Each person disclaims beneficial ownership of such shares.
(b) Number has been rounded.
(c) Includes 92,000 shares subject to options held by Mr. Allen that were
exercisable within 60 days of December 31, 1998.
The following table contains information with respect to the "beneficial
ownership" (as defined by the Securities and Exchange Commission) of shares of
the Company's common stock, as of December 31, 1998, by each person (other than
Mr. Levin whose share ownership information is shown above) who is known by
management of the Company to be the beneficial owner of more than five percent
of such stock. Except as otherwise indicated by footnote, the persons below have
sole voting and investment power over their shares.
5
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Name and Address Owned Percent
---------------- ----- -------
<S> <C> <C>
Yale University, Investments Office 2,049,214* 5.25%
230 Prospect Street
New Haven, CT 06511-2107
Attn: Dean J. Takahashi, Senior Director
</TABLE>
*Does not include 1,097 shares owned by Mr. Takahashi, a Yale university
employee who is a member of the Board of Directors of the Company.
EXECUTIVE OFFICERS
===============================================================================
The current executive officers of the Company are:
<TABLE>
<CAPTION>
Name, Age, and Principal Occupation Year First
Since January 1, 1993 Office(a) Elected
--------------------- --------- -------
<S> <C> <C>
James P. Gorter--age 68 Chairman of the 1987
Chairman of the Board of the Company; limited Board
partner of Goldman Sachs & Co.
John A. Levin--age 60 President and 1996
President and Chief Executive Officer of the Chief Executive
Company and Chairman and Chief Executive Officer Officer
of Levin Management Co., Inc. ("Levco") and the
Adviser since June 1996; prior thereto, President
and Securities Analyst/Portfolio Manager at
John A. Levin & Co., Inc.
James P. Koeneman--age 50 Executive Vice 1983
Executive Vice President and Secretary of the President
Company (administrative and financial officer) and Secretary
Scott E. Smith--age 44 Executive Vice 1989
Executive Vice President of the Company President
(portfolio manager--private placement portfolio)
Julie Heironimus--age 39 Treasurer and 1998
Treasurer and Assistant Secretary of the Company Assistant
since April 1998; prior thereto, senior accountant Secretary
of the Company
</TABLE>
- ------------
(a) Each officer of the Company generally holds office until the first meeting
of the Board after the annual meeting of shareholders and until his or her
successor is elected and qualified.
COMPENSATION
==============================================================================
DIRECTORS' COMPENSATION
Company employees who serve as directors of the Company receive no
compensation for such services. The Company pays non-employee directors,
including Levco employees or officers, an annual retainer of $20,000 (the
Chairman receives $32,000), payable in quarterly installments. Non-employee
directors receive $1,500 for each Board meeting and $500 for each meeting of a
committee of the Board that they attend in person or by telephone. The Company
also reimburses directors for their out-of-pocket expenses incurred in
connection with such meetings.
The following table sets forth compensation paid by the Company during 1998
to each of the directors of the Company for serving as directors of the Company.
6
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Accrued Total
Compensation as Part of the Compensation
from the Company's from the
Name of Person, Position Company Expenses Company
- ------------------------ ------- -------- -------
<S> <C> <C> <C>
Frederick S. Addy........................................ $ 29,000 none $ 29,000
Director
Bob D. Allen............................................. 26,000(a) none(a) 26,000(a)
Director
Jessica Bibliowicz....................................... 27,000(c) none(c) 27,000(c)
Director
Eugene V. Fife........................................... 28,500 none 28,500
Director
J. Barton Goodwin........................................ 27,000 none 27,000
Director
James P. Gorter.......................................... 46,000(b) none 46,000(b)
Chairman of the board and director
David D. Grumhaus........................................ 28,000 none 28,000
Director
Jeffrey A. Kigner........................................ 26,000(c) none(c) 26,000(c)
Director
John A. Levin............................................ 0(c) none(c) 0(c)
President, Chief Executive Officer and Director
Burton G. Malkiel........................................ 28,500 none 28,500
Director
David D. Peterson........................................ 29,500(b) none 29,500(b)
Director
William H. Springer...................................... 28,500 none 28,500
Director
Dean J. Takahashi........................................ 26,000 none 26,000
Director
</TABLE>
- ------------
Notes to Directors' Compensation Table:
(a) In addition to the amounts shown, Mr. Allen receives compensation from CTO,
of which he is president. Mr. Allen participates in the CTO defined benefit
pension plan funded by CTO. Pension benefits payable under the CTO plan are
based primarily on years of service and the average compensation for the
highest five years during the final 10 years of employment. The benefit
formula generally provides for a life annuity benefit. The estimated annual
benefit payable under the Consolidated-Tomoka Land Co. plan upon retirement
at age 65 to a person with final average earnings of $160,000 or more and 10
years of service would be approximately $27,042 annually. At December 31,
1998, Mr. Allen was expected to be credited with eight years of service.
(b) Mr. Gorter and Mr. Peterson receive compensation from CTO as directors of
that company which is in addition to the amounts shown.
(c) As described below in the Officers' Compensation -- Summary Table, Mr. Levin
receives compensation from the Company for his services as an officer of the
Company, and Ms. Bibliowicz, Mr. Kigner and Mr. Levin receive compensation
from Levin Management Co., Inc. for their services as officers and employees
of that company and its subsidiaries, all which is in addition to the
amounts shown in the Directors' Compensation Table.
7
<PAGE>
OFFICERS' COMPENSATION - SUMMARY TABLE
The following table sets forth compensation for the fiscal years ended
December 31, 1998, December 31, 1997 and December 31, 1996 received by the
Company's Chief Executive Officer, the Company's four other most highly
compensated executive officers serving at the end of fiscal year 1998 (each of
whom was paid in excess of $60,000 in aggregate compensation by the Company and
Levco) and Janet Sandona Jones and Todd H. Steele for whom disclosure would have
been required but for the fact that each resigned from the Company in 1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Annual Compensation
---------------------------------------------------
Name and All Other
Principal Position Year Salary Bonus Compensation
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John A. Levin 1998 $990,748(a) $1,614,706(b) $30,000(c)
Chief Executive 1997 783,912(a) 1,711,658(b) 30,000(c)
and President 1996 375,177(a) 1,400,000(b) 30,000(c)
- --------------------------------------------------------------------------------
James A. Gorter 1998 0 0 64,000(d)
Chairman of the Board 1997 0 0 55,450(d)
1996 0 0 46,150(d)
- --------------------------------------------------------------------------------
James P. Koeneman 1998 160,000 85,000 36,126(e)
Executive Vice 1997 155,000 72,000 36,126(e)
President and Secretary 1996 149,000 74,450 36,068(e)
- --------------------------------------------------------------------------------
Scott E. Smith 1998 155,000 300,000 35,168(f)
Executive Vice 1997 150,000 125,000 35,168(f)
President 1996 145,400 82,270 35,168(f)
- --------------------------------------------------------------------------------
Janet Sandona Jones 1998 28,007 0 10,522(g)
Former Vice President 1997 81,000 32,000 31,940(g)
and Treasurer 1996 77,700 38,885 32,730(g)
- --------------------------------------------------------------------------------
Todd H. Steele 1998 26,042 0 6,868(h)
Former Vice President 1997 125,000 75,000 26,051(h)
1996 12,500 25,000 148(h)
- --------------------------------------------------------------------------------
</TABLE>
(a) In 1998, Mr. Levin received $50,000 from the Company for serving as an
officer of the Company and $940,748 from Levco for serving as an officer
and director of that company; in 1997, Mr. Levin received $50,000 from the
Company for serving as an officer of the Company and $733,912 from Levco
for serving as an officer and director of that company; in 1996, Mr.
Levin received $25,000 from the Company for serving as an officer of
the Company and $350,177 from Levco for serving as officer and director of
that company.
(b) Amounts reported as bonuses for Mr. Levin are bonuses Levco paid to Mr.
Levin for serving as an officer and director of that company and its
subsidiaries.
(c) Amounts reported reflect contributions Levco paid to the Levin Management
Co., Inc. retirement plan, a money purchase pension plan funded by employer
contributions in which Mr. Levin, Mr. Kigner and Ms. Bibliowitz
participate. The amount of the contribution made for each employee is
determined by a formula that takes into account, among other things, the
age of the employee for whom the contribution is made. The benefit received
under the Levin Management Co., Inc. retirement plan upon retirement
depends on the aggregate contributions to the plan for the participant and
the investment performance of those assets.
(d) The amount reported reflects the compensation Mr. Gorter received from the
Company for serving as a director of the Company ($46,000 in 1998, $39,450
and $30,150 in 1996) and compensation received for serving as a director of
Consolidated-Tomoka Land Co ($18,000). See Directors' Compensation Table,
above.
(e) The amounts reported reflects the sum Mr. Koeneman received from Company
contributions to the money purchase pension plan ($30,000 in each year),
Company contributions to the defined
8
<PAGE>
benefit pension plan ($4,478 in 1998, $4,478 in 1997 and $4,478 in 1996)
and Company contributions to the life and disability plans ($1,648 in 1998,
$1,648 in 1997 and $1,590 in 1996).
(f) The amount reported reflects the sum Mr. Smith received from Company
contributions to the money purchase pension plan ($30,000 in each year),
Company contributions to the defined benefit pension plan ($3,664 in 1998,
$3,664 in 1997 and $3,664 in 1996) and Company contributions to the life
and disability plans ($1,504 in 1998, $1,504 in 1997 and $1,504 in 1996).
(g) The amount reported reflects the sum Ms. Jones received from Company
contributions to the money purchase pension plan ($7,002 in 1998, $28,250
in 1997 and $29,146 in 1996), Company contributions to the defined benefit
pension plan ($2,804 in 1998, $2,804 in 1997 and $2,804 in 1996) and
Company contributions to the life and disability plans ($716 in 1998, $886
in 1997 and $780 in 1996).
(h) The amount reported reflects the sum Mr. Steele received from Company
contributions to the money purchase pension plan ($6,510 in 1998, $25,000
in 1997 and $0 in 1996) and Company contributions to the life and
disability plans ($358 in 1998, $1,501 in 1997 and $148 in 1996).
Employment Contracts
Mr. Levin, Mr. Kigner and Ms. Bibliowicz have employment contracts with the
Company or Levco, or both. Messrs. Levin and Kigner entered into their
employment contracts at the time that the Company acquired Levco. Mr. Levin's
and Mr. Kigner's contracts began on June 27, 1996 and continue for five years.
Ms. Bibliowicz's contract is dated May 30, 1997 and continues until December 31,
2002. Each of the employment contracts contains confidentiality and
noncompetition provisions. Each contract also contains provisions that require
the Company or Levco to pay the executive officer if the Company or Levco
terminates his or her employment without cause (as defined in the contract). The
Company, Levco and Messrs. Levin and Kigner and Ms. Bibliowicz must seek
arbitration for any disputes brought under the contracts.
Pension Plan
The Company's officers and employees participate in the Company's
retirement plan, contributions to which are included in the cash compensation
table. The Company's retirement plan is a trusteed money purchase pension plan
funded by Company contributions equal to 25% of the compensation paid or accrued
to participating employees, subject to a $30,000 annual contribution limitation
per participant. The benefit received under the retirement plan upon retirement
depends on the aggregate contributions to the plan for the participant and the
investment performance of those assets.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Accrued
- --------------------------------------------------------------------------------
<S> <C>
James P. Gorter none
- --------------------------------------------------------------------------------
John A. Levin none (a)
- --------------------------------------------------------------------------------
James P. Koeneman $30,000
- --------------------------------------------------------------------------------
Scott E. Smith 30,000
- --------------------------------------------------------------------------------
Janet Sandona Jones 7,002
- --------------------------------------------------------------------------------
Todd H. Steele 6,510
- --------------------------------------------------------------------------------
</TABLE>
(a) Does not include Mr. Levin's participation in the Levin Management Co.,
Inc. Retirement Plan. See Note (c) under Officers' Compensation--Summary
Table.
9
<PAGE>
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board makes decisions on compensation of
the Company's executives. Each member of the Compensation Committee is a
non-employee director. The Committee establishes the compensation of John A.
Levin, Chief Executive Officer, based on its evaluation of Mr. Levin's
performance. It establishes the compensation of the other officers of the
Company in consultation with Mr. Levin. The full Board reviews all decisions by
the Compensation Committee relating to the compensation of all the Company's
officers.
The Company's executive compensation program reflects the philosophy that
compensation should reward executives for outstanding individual performance
and, at the same time, align the interests of executives closely with those of
shareholders. To implement that philosophy, the Company offers each of its
executives a combination of base salary and annual cash bonuses. Each executive
officer, with the exception of Mr. Levin, also participates in the Company's
Money Purchase Plan. Through this compensation structure, the Company aims to
reward above-average corporate performance and recognize individual initiative
and achievements.
Base salaries reflect individual positions, responsibilities, experience,
and potential contribution to the success of the Company. Actual salaries vary
according to the Compensation Committee's subjective assessment of a number of
factors in its review of base salaries of Company executives. The Committee
conducts annual reviews to ensure that base salaries are competitive, that they
reflect the specific responsibilities of individual executives and that they
appropriately reward individual executives for their contributions to the
Company's performance.
At the Committee's sole discretion, the Committee may pay each executive
officer a cash bonus based on the Compensation Committee's assessment of the
executive officer's individual performance and the performance of the Company.
In its evaluation of the performance of the officer and the determination of
incentive bonuses, the Committee does not assign quantitative relative weights
to different factors or follow mathematical formulas. Rather, the Committee
makes its determination in each case after considering the factors it deems
relevant at the time.
The executive compensation committee establishes the annual base salary of
the Chief Executive Officer. For 1998, the Company paid Mr. Levin $50,000 to
serve as the Company's Chief Executive Officer. Unlike the other executive
officers, Mr. Levin does not receive a cash bonus from the Company based on his
individual or the Company's performance.
For corporate income tax purposes, the Company may not deduct executive
compensation in excess of $1 million, unless it is performance-based
compensation and is paid pursuant to a plan meeting certain requirements of the
Code. The Committee currently anticipates that, to the extent practicable and in
the Company's best interest, the Company will pay executive compensation in a
manner that satisfies the requirements of the Code to permit the Company to
deduct the compensation.
Compensation Committee Members
William H. Springer (Chairman)
Frederick S. Addy
David D. Peterson
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
- --------------------------------------------------------------------------------
In 1998, stockholder total return, which is based on the per share market
price of the Company, was 3.5%. Stockholder total return is the actual return if
all distributions had been reinvested during the year. It is based on market
price and calculated on a per share basis. Expenses are deducted in the
calculation of stockholder return. The chart below sets forth a comparison of
the Company's annual stockholder return with (i) the annual stockholder return
of closed-end investment companies ("Closed-End Funds") reported by Morningstar,
Inc.; and (ii) the annual stockholder return of the S&P 500 Index. The chart is
based on an investment of $100 on December 31, 1993, and assumes that all
dividends and capital gain distributions were reinvested. The chart is not an
indicator of the future performance of the Company. Thus, it should not be used
to predict the future performance of the Company's stock.
10
<PAGE>
Comparison of Cumulative Five Year Total Return
[GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
12/31/93 12/31/94 12/30/95 12/29/96 12/31/97 12/31/98
- --------------------------------------------------------------------------------
Baker, Fentress & Company $100 $ 93 $123 $142 $178 $184
- --------------------------------------------------------------------------------
Closed-End Funds $100 $ 94 $123 $146 $196 $220
- --------------------------------------------------------------------------------
S&P 500 Index $100 $101 $139 $171 $229 $294
- --------------------------------------------------------------------------------
Total returns assume that dividends and capital gain distributions are
reinvested.
PROXY SOLICITATION; VOTING; ADJOURNMENT
===============================================================================
If you properly sign your proxy and return it on time, your shares will be
voted at the Annual Meeting in accordance with the directions you mark on your
proxy card. If you properly sign and return your proxy, but don't mark any
directions on it, your shares will be voted for the election of each of the
nominated directors and for the ratification of the election of Ernst & Young
LLP as independent auditors of the Company.
You may revoke your proxy at any time before it is voted, either in person
at the meeting, by written notice to the Company, or by delivery of a later
dated proxy. No appraisal rights exist for any action proposed to be taken at
the Annual Meeting.
Shareholders of record at the close of business on March 8, 1999 are
entitled to participate in the meeting and to cast one vote for each held. The
Company had 39,029,101 shares of common stock outstanding on the record date.
There is no other class of stock outstanding. Proxy material is first being
mailed to shareholders on or about March 10, 1999.
Proxies will be solicited by mail. Directors, officers, and a small number
of regular employees may solicit proxies, personally or by telephone, telegraph
or mail, but such persons will not be specially compensated for such services.
In addition, the Company may engage Corporate Investor Communications, Inc. to
render proxy solicitation services at a cost estimated at $6,000. The Company
will inquire of any shareholder of record known to be a broker, dealer, bank, or
other nominee as to whether other persons were the beneficial owners of shares
held of record by such persons. If so, the Company will supply additional copies
of solicitation materials for forwarding to beneficial owners and will make
reimbursement for reasonable out-of-pocket costs. The Company will bear all
costs of solicitation and related actions.
Harris Trust and Savings Bank, the Company's transfer agent, tabulates the
proxies. Under Delaware law (under which the Company is organized) and the
Company's bylaws, a majority of the shares outstanding on the Record Date,
excluding shares held in the Company's treasury, must be pre-
11
<PAGE>
sent at the meeting in person or by proxy to constitute a quorum for the
transaction of business. Shares abstaining from voting or present but not
voting, including broker non-votes, are counted as "present" for purposes of
determining the existence of a quorum. Broker non-votes are shares held by a
broker or nominee for which an executed proxy is received by the Company, but
which are not voted as to one or more proposals because instructions have not
been received from beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power.
Any decision to adjourn the meeting would be made by vote of the shares
present at the meeting, in person or by proxy. Proxies would be voted in favor
of adjournment if there were not enough shares present at the meeting to
constitute a quorum. if sufficient shares were present to constitute a quorum,
but insufficient votes had been cast in favor of an item to approve it, proxies
would be voted in favor of adjournment only if the Board determined that
adjournment and additional solicitation was reasonable and in the best interest
of shareholders, taking into account the nature of the proposal, the percentage
of votes actually cast, the percentage of negative votes, the nature of any
further solicitation that might be made and the information provided to
shareholders about the reasons for additional solicitation .
PROPOSALS OF SHAREHOLDERS
================================================================================
The Company must receive any shareholder proposal to be considered for
inclusion in proxy materials for the Company's annual meeting of shareholders in
April 2000 at the principal executive office of the Company (Suite 3510, 200
West Madison Street, Chicago, Illinois 60606) no later than January 1, 2000.
Submission of a proposal does not guarantee inclusion of the proposal in the
proxy statement or its presentation at the meting since certain rules under the
federal securities laws must be satisfied.
OTHER
================================================================================
John A. Levin & Co., Inc., a wholly-owned second-tier subsidiary of the
Company, is the Company's investment adviser and manages the Company's portfolio
of publicly-traded securities. The address of John A. Levin & Co., Inc. is One
Rockefeller Plaza, 19th Floor, New York, New York 10020.
AVAILABLE INFORMATION
================================================================================
The Company is subject to the informational requirements of the Exchange
Act and files reports, proxy statements and other information with the
Commission. Those reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Chicago Regional Office, 500 West
Madison Street, Chicago, Illinois 60661; and New York Regional Office, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549.
Shareholders of the Company may obtain, without charge, copies of the
Company's most recent annual report and semi-annual report by writing to the
Company at 200 West Madison street, Suite 3510, Chicago, IL 60606, or by calling
(800) BKF-1891.
March 10, 1999
12
<PAGE>
PROXY BAKER, FENTRESS & COMPANY PROXY
Proxy Solicited By The Board Of Directors
For The Annual Meeting of Shareholders -- April 22, 1999
Frederick S. Addy, David D. Grumhaus, Jeffrey A. Kigner, or any of them, each
with the power of substitution and revocation, are hereby authorized to
represent the undersigned, with all powers which the undersigned would possess
if personally present, to vote the Common Stock of the undersigned at the annual
meeting of shareholders of BAKER, FENTRESS & COMPANY to be held at Chicago
Hilton & Towers, 720 South Michigan Avenue, Chicago, IL 60605, on Thursday,
April 22, 1999, at 10:30 a.m., local time, and at any postponements or
adjournments of that meeting, as set forth below, and in their discretion upon
any other business that may properly come before the meeting.
All capitalized terms used in this proxy shall have (Continued and to be
the same meanings assigned to them in the Proxy signed on reverse side.)
Statement.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED POSTMARKED ENVELOPE.
4475 - Baker, Fentress & Company
<PAGE>
BAKER, FENTRESS & COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
The Board of Directors recommends that you vote FOR all nominees and FOR the
selection of Ernst & Young LLP.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Election of directors-Nominees: FOR WITHHOLD FOR ALL Check here if you plan to attend the
Eugene V. Fife, J. Barton Goodwin, ALL ALL EXCEPT meeting. _____
James P. Gorter, John A. Levin, and _____ ______ _____
Burton G. Malkiel
___________________________________ Check here for address change. _____
(Except Nominee(s) written above)
New address: ________________________
_____________________________________
_____________________________________
2. To ratify the selection of Ernst & Young FOR AGAINST ABSTAIN
LLP as the Company's independent auditors. _____ _____ _____
This proxy will be voted as specified or, if no choice is specified, will be
voted FOR the election of the nominees named and FOR the selection of Ernst &
Young LLP.
Please sign exactly as your name appears. If acting as attorney, executor,
trustee, or in representative capacity, sign name and indicate title.
Dated: _________________, 1999
Signature(s) ______________________________________________________________
___________________________________________________________________________
Please vote, sign, date and return this proxy card promptly using the
enclosed envelope.
- -----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
4475 -Baker, Fentress & Company
