Edgar Filing: BKF CAPITAL GROUP INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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[ ] Definitive Additional Materials
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BKF CAPITAL GROUP, INC.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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BKF CAPITAL GROUP, INC.
ONE ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 332-8400

April 15, 2004

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
BKF Capital Group, Inc. (the "Company") at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York on
Thursday, May 13, 2004, at 8:30 a.m., local time.

At the meeting you will be asked to consider and vote on the election of
three (3) directors, the ratification of Grant Thornton LLP as the Company's
independent auditors and a stockholder proposal relating to the Company's
stockholder rights plan.

The board of directors has unanimously approved the election of the three
directors and the ratification of Grant Thornton LLP as the Company's
independent auditors and recommends that you vote FOR each of them. The board of
directors unanimously recommends that you vote AGAINST the stockholder proposal.

A copy of the Company's Annual Report for the fiscal year ended December
31, 2003 is also enclosed.

The formal notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted, regardless of the size of
your holdings. Accordingly, whether or not you plan to attend the meeting in
person, please complete, sign, date and return the enclosed proxy card promptly
so that your shares will be represented. The proxy card is revocable and will
not affect your right to vote in person if you attend the meeting.

Very truly yours,

/s/ JOHN A. LEVIN
John A. Levin
Chairman,
Chief Executive Officer and President

BKF CAPITAL GROUP, INC.

NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON MAY 13, 2004

To Our Stockholders:

The annual meeting of stockholders (the "Annual Meeting") of BKF Capital
Group, Inc., a Delaware corporation (the "Company"), will be held at the offices
of Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas,
New York, New York, on Thursday, May 13, 2004, at 8:30 a.m., local time, for the
following purposes:

1. to elect three (3) directors to hold office as specified in the
accompanying Proxy Statement;

2. to ratify the appointment of Grant Thornton LLP as independent
auditors for the Company;

3. to consider a stockholder proposal relating to the Company's
stockholder rights plan; and

4. to transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.

Stockholders of record at the close of business on April 2, 2004, the
record date, are entitled to vote at the Annual Meeting.

By Order of the Board of Directors

/s/ NORRIS NISSIM
Secretary

New York, NY
April 15, 2004

YOUR VOTE IS IMPORTANT! WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU
ATTEND THE ANNUAL MEETING.

PROXY STATEMENT

The board of directors of the Company (the "Board of Directors") is
soliciting proxies from stockholders for use at the Annual Meeting that will be
held on May 13, 2004 and at any adjournment or adjournments of that meeting. The
Company began mailing these proxy materials to stockholders on or about April
15, 2004.

THIS PROXY STATEMENT DESCRIBES EACH OF THE MATTERS ON WHICH THE BOARD OF
DIRECTORS IS ASKING STOCKHOLDERS TO VOTE. THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR THE PROPOSALS DESCRIBED IN ITEMS 1 AND 2 AND AGAINST THE PROPOSAL
DESCRIBED IN ITEM 3.

ITEM 1. ELECTION OF DIRECTORS

The Board of Directors is asking you to elect three (3) directors at the
meeting. The Board of Directors has nominated the following persons to serve as
directors for terms expiring at the annual meeting of stockholders in 2007:
Messrs. Anson M. Beard, Jr., Peter J. Solomon and Dean J. Takahashi. Each is
currently a director of the Company.

If any nominee should be unable to serve, the persons named as proxies
shall vote for such other person as shall be determined by such persons in
accordance with their judgment.

Information concerning the nominees and the directors who are continuing in
office appears below.

DIRECTORS NOMINATED FOR ELECTION

EXPIRATION EXPIRATION
NAME, AGE, AND PRINCIPAL OCCUPATION DIRECTOR OF CURRENT OF TERM IF
DURING THE LAST FIVE YEARS SINCE CLASS TERM ELECTED OTHER BUSINESS AFFILIATION(S)
----------------------------------- -------- ----- ---------- ---------- ------------------------------

Anson M. Beard, Jr. -- age 68 2000 II 2004 2007
Retired, former investment banker
Peter J. Solomon -- age 65 2000 II 2004 2007 Director of Monro Muffler Inc.
Chairman of Peter J. Solomon (automotive repair services),
Company, L.P. and Peter J. Office Depot, Inc. (supplier
Solomon Securities Co., Ltd. of office products) and
(investment banking) since 1989 Phillips-Van Heusen
Corporation (apparel and
footwear marketer/
manufacturer)
Dean J. Takahashi -- age 46 1997 II 2004 2007
Senior Director of Investments,
Yale University, since 1996

REQUIRED VOTE

Stockholders are entitled to one vote per share in the election of
directors (called straight voting), with no right of cumulation. The affirmative
vote of a plurality of the shares cast at the meeting is required to elect
directors, assuming a quorum is present.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE THREE (3) NOMINEES
NAMED ABOVE.

DIRECTORS CONTINUING IN OFFICE

EXPIRATION
NAME, AGE, AND PRINCIPAL OCCUPATION DURING DIRECTOR OF CURRENT
THE LAST FIVE YEARS SINCE CLASS TERM OTHER BUSINESS AFFILIATION(S)
------------------------------------------ -------- ----- ---------- ---------------------------------------

Barton M. Biggs -- age 71 2003 I 2006
Managing Partner, Traxis Partners since
June 2003; prior thereto, Managing
Director, Morgan Stanley since 1973;
Chairman, Morgan Stanley Asset
Management since 1975; Chairman, Morgan
Stanley Institutional Funds (1996-2003)
J. Barton Goodwin -- age 57 1987 III 2005
Managing Director of BCI Partners, 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 since 1986
David D. Grumhaus -- age 68 1988 I 2006 Director of Niche Software Systems,
Travel 100 Group (travel company) and Inc. (computer software company)
Casey Travel Corporation (travel agency)
since 1991
John A. Levin -- age 65 1996 III 2005
Chairman since February 2000; Chief
Executive Officer and President of the
Company and Chairman and Chief Executive
Officer of Levin Management Co., Inc.
and John A. Levin & Co., Inc. since June
1996; prior thereto, President and
Securities Analyst/ Portfolio Manager of
the predecessor to John A. Levin & Co.,
Inc.
Burton G. Malkiel -- age 71 1982 III 2005 Director of Vanguard Group of
Professor of Economics, Princeton Investment Funds (106 funds), The
University since 1964 Jeffrey Company (investment company)
and CareGain (healthcare asset
management company)

James S. Tisch -- age 51 President since 2000 I 2006 Director of CNA Financial Corp.
October 1994 and Chief Executive Officer (holding company whose subsidiaries
since January 1999 of Loews Corporation consist of insurance companies) and
(holding company whose subsidiaries are Vail Resorts, Inc. (resort operator)
engaged in the following lines of
business: insurance; production and sale
of cigarettes; operation of hotels;
natural gas transmission; operation of
offshore oil and gas drilling rigs; and
distribution and sale of watches and
clocks) and Chief Executive Officer of
Diamond Offshore Drilling, Inc.
(offshore oil and gas company) since
March 1998; prior thereto, Chief
Operating Officer of Loews Corporation

MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD OF
DIRECTORS

During 2003, the Board of Directors conducted four meetings, including
scheduled and special meetings. Each board member, other than Mr. Biggs,
attended at least 75% of the meetings of the Board of Directors and committees
on which he served during 2003. Mr. Biggs attended two of the three board
meetings held during the time he was a member of the Board of Directors.

The Company has standing audit, compensation and nominating committees,
whose current functions and members are described below. It is anticipated that
at its first meeting following the Annual Meeting, the Board of Directors will
designate the directors who currently serve on these committees to serve on each
of these committees until the next annual meeting of stockholders, except that
it is anticipated that Peter J. Solomon will be replaced by an independent
director as a member of the nominating and governance committee (the "Nominating
and Governance Committee").

AUDIT COMMITTEE

The primary purpose of the audit committee (the "Audit Committee") is to
assist the Board of Directors in fulfilling its oversight responsibilities with
respect to the accounting and financial reporting processes of the Company, the
Company's compliance with legal and regulatory requirements, and the selection
of independent auditors. The Audit Committee pre-approves all audit and
permissible non-audit services provided by the independent auditors. These
services may include audit services, audit-related services, tax services and
other services. The Audit Committee had six meetings during 2003.

The Audit Committee is composed of David D. Grumhaus, J. Barton Goodwin and
Burton G. Malkiel. Each member is independent and financially literate, as
defined by The New York Stock Exchange's listing standards that will apply to
the Company after the Annual Meeting, and at least one member has accounting or
financial management expertise, as required by these listing standards. The
Board of Directors has determined that while no current member of the Audit
Committee possesses all of the attributes of an "audit committee financial
expert" (as defined by the Securities and Exchange Commission), the committee
members have the appropriate experience and ability to perform their duties as
Audit Committee members.

The charter of the Audit Committee was revised in 2004 and is attached as
Appendix A to this proxy statement.

COMPENSATION COMMITTEE

The compensation committee (the "Compensation Committee") is composed of
Anson M. Beard, Jr., David D. Grumhaus and Burton G. Malkiel. Each of the
Compensation Committee members is independent, as defined by The New York Stock
Exchange's listing standards that will apply to the Company after the Annual
Meeting. The Compensation Committee makes recommendations regarding compensation
policies and has direct responsibility for the compensation of the Company's
executive officers. The Compensation Committee also administers the Company's
1998 Incentive Compensation Plan. The Compensation Committee had two meetings
during 2003.

NOMINATING AND GOVERNANCE COMMITTEE

The Nominating and Governance Committee is composed of J. Barton Goodwin,
Peter J. Solomon and James S. Tisch. Except for Mr. Solomon, each of the
Nominating and Governance Committee members is independent, as defined by The
New York Stock Exchange's listing standards that will apply to the Company after
the Annual Meeting. The Nominating and Governance Committee makes
recommendations to the Board of Directors regarding the selection of candidates
to be nominated for election to the Board of Directors, monitors and reviews
corporate governance issues, and oversees the evaluation of the Board of
Directors and management. The Nominating and Governance Committee had one
meeting during 2003.

The Board of Directors has not adopted any formal policies or procedures
with regard to the consideration of any director candidates recommended by
stockholders. Stockholders should send their recommendations to the Secretary of
the Company at One Rockefeller Plaza, New York, NY 10020. In general, the Board
of Directors would require the consent of any proposed director candidate to be
considered and to be nominated, and such person's undertaking to serve if
elected, as well as the type of information that must be disclosed by and about
directors, nominees, and executive officers of the Company under the federal
securities laws and as may now or hereafter be required by the Company's charter
and bylaws as to stockholder nominees. Further, the Nominating and Governance
Committee could seek information about a candidate's specific attributes,
including a candidate's business experience, experience as a director, community
involvement and public credibility. The Board of Directors believes that these
informal standards are sufficient to serve the Company's needs. The New York
Stock Exchange's listing standards that will apply to the Company after the
Annual Meeting require all members of the Nominating and Governance Committee to
be independent. In order to meet these standards, it is anticipated that Peter
J. Solomon will be replaced by an independent director as a member of the
committee effective May 13, 2004.

NON-EMPLOYEE DIRECTOR MEETINGS

In 2004, pursuant to the Company's Corporate Governance Guidelines, the
Board of Directors will hold regularly scheduled meetings of non-employee
directors. Such meetings will be presided over by the chairman of the Audit,
Compensation or Nominating and Governance Committee, as determined by the
non-employee directors based on the anticipated agenda for the meetings.

DIRECTOR ATTENDANCE AT ANNUAL MEETINGS

The Company encourages directors to attend the annual meeting of
stockholders. All of the Company's directors attended last year's annual meeting
of stockholders.

ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

Prior to the Annual Meeting, the Audit Committee did not reappoint Ernst &
Young LLP and expects to engage Grant Thornton LLP, independent auditors, to
audit the financial statements of the Company for the year ending December 31,
2004. Grant Thornton LLP has no direct or indirect financial interest in the
Company except as independent auditors. The selection of Grant Thornton LLP
followed the review and consideration of a number of audit firms (including
Ernst & Young LLP, which has served as the Company's independent auditors since
1987). Ernst & Young LLP's reports on the financial statements of the Company

for the past two fiscal years have not contained an adverse opinion nor a
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. In addition, there have been no
disagreements over the past two fiscal years with Ernst & Young LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure which, if not resolved, would have caused Ernst &
Young LLP to make a reference to the subject matter of the disagreement in its
audit report. The Company is asking stockholders to ratify the selection of
Grant Thornton LLP as independent auditors of the Company. A representative of
each of Ernst & Young LLP and Grant Thornton LLP is expected to attend the
meeting and will be available to respond to questions raised at the Annual
Meeting. The representative from each of Ernst & Young LLP and Grant Thornton
LLP also will have the opportunity to make a statement if he or she desires to
do so.

AUDIT FEES

Ernst & Young LLP received $458,250 for the year ended December 31, 2003
and $203,500 for the year ended December 31, 2002 for professional services
rendered in connection with the audit of the Company's annual financial
statements, reviews of the financial statements included in quarterly reports on
Form 10-Q filed by the Company, and audits of consolidated subsidiaries.

AUDIT RELATED FEES

No audit-related services were rendered with respect to the fiscal years
ended December 31, 2003 and December 31, 2002.

TAX SERVICES

Ernst & Young LLP received from the Company a total of $15,000 for the year
ended December 31, 2003 and $23,500 for the year ended December 31, 2002 in
connection with its review of Company tax returns. The Audit Committee of the
Board of Directors believes these additional services were compatible with
maintaining the independence of Ernst & Young LLP.

ALL OTHER FEES

In 2003, Ernst & Young LLP received $19,000 for tax services rendered in
connection with a mutual fund for which the Company acts as an adviser. Ernst &
Young LLP did not render any other professional services or receive any other
fees in connection with work performed for the Company in 2002.

PRE-APPROVAL PROCEDURES

The Audit Committee has adopted the following guidelines regarding the
engagement of the Company's independent auditor to perform services for the
Company. Prior to the commencement of the audit services (including audits of
the Company's employee benefit plan), the Audit Committee shall approve the
terms of the engagement letter that outlines the scope of the audit services
proposed to be performed by the independent auditor during the fiscal year.
Non-audit services will also require pre-approval from the Audit Committee.

REQUIRED VOTE

The affirmative vote of the holders of a majority of the shares of common
stock present in person or by proxy and entitled to vote at the Annual Meeting
is necessary to ratify the appointment of Grant Thornton LLP as independent
auditors of the Company. Unless otherwise instructed, properly executed proxies
which are returned in a timely manner will be voted in favor of the ratification
of the appointment of Grant Thornton LLP.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT AUDITORS OF THE COMPANY.

ITEM 3. STOCKHOLDER PROPOSAL

GAMCO Investors, Inc., One Corporate Center, Rye, New York 10580-1434, the
owner of 411,300 shares of common stock (based on Amendment No. 7 to Schedule
13D filed by GAMCO Investors, Inc. on December 12, 2003), has given notice that
it intends to present the following proposal at the Annual Meeting. The proposed
resolution and supporting statement, for which the Board of Directors accepts no
responsibility, are set forth below.

PROPOSED RESOLUTION

That the stockholders of BKF Capital Group, Inc. (the "Company") hereby
request that the Board of Directors redeem the Common Share Purchase Rights
issued pursuant to the Rights Agreement, dated June 8, 2001, unless the holders
of a majority of the outstanding shares approve the issuance at a meeting of the
stockholders held as soon as practical.

SUPPORTING STATEMENT OF STOCKHOLDER

On May 29, 2001, the Board of Directors declared a dividend of one Common
Share Purchase Right pursuant to a Rights Agreement dated as of June 8, 2001.
Generally, the stockholders may exercise their rights under this agreement (the
"Rights") only when a person or group acquires, or through an exchange or tender
offer attempts to acquire, a beneficial interest in 10% or more of the common
stock of a Company. Stockholders -- other than the person or group attempting to
acquire 10% -- may then exercise the Rights and receive stock at a fraction of
its fair market value. The Agreement permitted certain stockholders, including
GAMCO and affiliates, to retain existing stockholdings that exceeded 10%. The
Company may redeem the Rights for $.01 per Right. These Rights represent a
corporate anti-takeover device, commonly known as a "poison pill." Issuing the
Rights allows the Company to increase vastly the cost to a potential bidder of
effecting any merger or tender offer unless the Board of Directors favors the
bid. Potential bidders cannot take their offer directly to the stockholders even
if an overwhelming majority would have accepted the offer. The potential bidder
must negotiate with management, and a Board or management may sometimes have
interests that conflict with the interests of stockholders. We believe the Board
should allow its stockholders to decide for themselves what represents a fair
price for their holdings. Also, as we noted in previous years, a holding company
for an investment manager subject to the federal securities laws has change of
control protections arising under the securities laws.

The power of stockholders to accept an offer by a potential bidder provides
an important check and balance on management and the Board in their stewardship
of the stockholders' interests. Should this proposal prevail, the Board, in an
effort to improve stockholder value, should itself redeem the Rights or put the
decision whether to continue using a poison pill to a vote of the stockholders
at a special meeting to be held as soon as practical.

An identical proposal last year received support from over 90% of the votes
cast, yet the Company refused to act. When over 90% of the shares voting and
almost 100% of the shares excluding those owned by management disagree, we
believe the Board should weigh more carefully exactly whose interests retaining
the poison pill protects and why the stockholders so plainly disagree.

WE URGE STOCKHOLDERS TO VOTE FOR THIS RESOLUTION.

COMPANY'S STATEMENT IN OPPOSITION TO THE PROPOSAL

The Board of Directors of the Company recommends that you vote AGAINST the
stockholder's proposal for the following reasons:

On May 29, 2001, the Company's Board of Directors adopted a Share Purchase
Rights Plan (the "Plan"). The Plan was adopted, and has been maintained by the
Board of Directors, for two primary reasons: (1) to maintain a stable employee
and client base and (2) to assure that all of BKF Capital Group's stockholders
receive fair and equal treatment in any proposed takeover of the Company.

The decision of the directors regarding the Plan has been driven in part by
the recognition that our Company is not an industrial concern with tangible
assets, but is a relatively small personal services business. In such a
business, perception can matter as much as reality, and the perception by
clients or employees that one or two stockholders (who may be competitors of the
Company) could acquire great influence over the direction and operation of the
business would be highly destabilizing. In our experience, clients and employees
properly use a long term horizon in selecting an investment manager or employer,
as applicable. The market for both is extremely competitive in the investment
management business. Instability or perceived instability, whether created by
concentrated stockholdings or stockholder activism, can negatively impact the
Company's efforts to attract and retain clients and employees. For this reason,
the Board of Directors believes that the rescission of the Plan would hamper the
Company's efforts to create stockholder value.

The Plan was not adopted to prevent a takeover. Rather, the Plan is meant
to encourage anyone seeking to acquire the Company to negotiate with the Board
of Directors prior to attempting a takeover by guarding against abusive tactics
such as "creeping acquisitions" through open market purchases and "partial or
two-tier tender offers" that fail to treat all stockholders equally. The Plan is
intended to give the Board of Directors a greater period of time to evaluate the
adequacy of an acquisition proposal and to negotiate the best result for BKF
stockholders.

Many companies have adopted similar rights plans. As of the end of 2003,
over 2,050 U.S. companies, including approximately 57.6% of the S & P 500
companies, have issued rights to protect their stockholders against abusive
acquisition tactics. Contrary to the contention that rights plans inhibit the
realization of stockholder value, research indicates that having a rights plan
accomplishes the goal of maximizing stockholder value. A 1997 study published by
Georgeson & Company determined that companies with stockholder rights plans
received an additional $13 billion in takeover premiums from 1992 to 1996. The
Georgeson study also found that (1) premiums paid for target companies with
rights plans were on average 8% higher than premiums paid for target companies
without rights plans, (2) the presence of a rights plan increased neither the
likelihood of withdrawal of a friendly takeover bid nor the defeat of a hostile
one, and (3) rights plans did not reduce the likelihood that a company would
become a takeover target.

As we noted in past years, federal law governing investment advisers does
not necessarily discourage abusive takeover tactics or encourage negotiations
with the Board of Directors. Such laws explicitly offer protection to clients,
not stockholders. These laws give clients the right to terminate their
relationship with the Company in the event of a change in control. The Board of
Directors does not believe this limited termination right serves as an adequate
substitute for the stockholder protections provided by the Plan.

In summary, we believe that the proposal seeks to take away from the Board
of Directors a valuable mechanism for promoting stability for employees and
clients, protecting the stockholders against abusive takeover tactics, and
maximizing stockholder value. The same proponent has made a similar proposal at
the last two annual meetings, and each time the Board of Directors has carefully
reviewed the issues raised in the proposal in the exercise of its powers as the
board of the Company. For the reasons described above, the Board of Directors
continues to believe that the Plan is in the best interests of the Company and
its stockholders. The overriding objectives of the Board of Directors remain the
preservation and maximization of the Company's value for all stockholders. The
Board of Directors believes that the Plan supports those objectives.

REQUIRED VOTE

The affirmative vote of the holders of a majority of the shares of common
stock present in person or by proxy and entitled to vote at the Annual Meeting
is necessary for the approval of this proposal. Approval would not, however,
require that the requested action be taken, since the proposal is precatory.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE
STOCKHOLDER PROPOSAL.

OTHER MATTERS

As of the date of this proxy statement, the Board of Directors does not
intend to bring any other matters before the Annual Meeting and is not aware of
any proposals to be presented to the Annual Meeting by others. If any other
matter comes before the Annual Meeting, however, the persons named in the proxy
solicited by the Board of Directors will vote thereon in accordance with their
judgment.

STOCKHOLDER COMMUNICATIONS

Stockholders who wish to communicate with the Board of Directors or a
particular director may send a letter to the Secretary of the Company at One
Rockefeller Plaza, New York, NY 10020. The envelope should indicate that a
stockholder communication to a director or the Board of Directors is enclosed.
The Secretary shall forward the correspondence to the director or directors to
whom it is addressed.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The table below sets forth the beneficial ownership as of March 31, 2004 of
(1) each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of the Company's common stock, (2) each director and
nominee for director of the Company, (3) each executive officer of the Company
whose name appears on the summary compensation table below (the "Named Executive
Officers") and (4) all directors and executive officers of the Company as a
group. Each person had sole or shared voting or dispositive powers with respect
to such shares.

NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES CLASS
------------------------ ---------- ----------

Mario J. Gabelli............................................ 664,400(1) 9.6%
One Corporate Center
Rye, NY 10580
John A. Levin............................................... 631,981(2) 9.1%
c/o BKF Capital Group, Inc.
One Rockefeller Plaza
New York, NY 10020
Abrams Capital LLC.......................................... 488,800(3) 7.1%
David C. Abrams
222 Berkeley Street, 22nd Floor
Boston, MA 02116
Newberg Family Trust........................................ 412,850(4) 6.0%
1601 Wilshire Boulevard
Los Angeles, CA 90025
Anson M. Beard, Jr. ........................................ 0(5) *
Barton M. Biggs............................................. 0(5) *
J. Barton Goodwin........................................... 56,076(5)(6) *
David Grumhaus.............................................. 11,991(5)(7) *
Burton G. Malkiel........................................... 0(5) *
Peter J. Solomon............................................ 1,000(5) *
Dean J. Takahashi........................................... 182(5) *
James S. Tisch.............................................. 2,000(5) *
Gregory T. Rogers........................................... 65,049(8) *
Glenn A. Aigen.............................................. 20,939(9) *
Norris Nissim............................................... 3,297 *
Directors and executive officers as a group (12 persons).... 792,515 11.3%

---------------

* Less than 1%

(1) The information set forth is based solely on Amendment No. 7 to Schedule 13D
filed with the Securities and Exchange Commission (the "SEC") on December
12, 2003 and includes 200,300 shares held by Gabelli Funds, LLC, 411,300
shares held by GAMCO Investors Inc., 3,900 shares held by Gabelli

Foundation, Inc., 16,000 shares held by Gabelli & Company, Inc. Profit
Sharing Plan, 15,900 shares held by Gabelli Advisors, Inc. and 17,000 shares
held by MJG Associates, Inc.

(2) Includes 31,720 shares of common stock held by family members or family
related entities, 20,321 shares of restricted stock which vest on March 10,
2007, and 34,570 shares relating to options which have vested or will vest
within 60 days of March 31, 2004.

(3) The information set forth with respect to David C. Abrams is based solely on
Schedule 13G filed with the SEC on January 17, 2003.

(4) The information set forth with respect to Newberg Family Trust is based
solely on Amendment No. 3 to Schedule 13G filed with the SEC on January 28,
2004.

(5) The number of shares does not include any shares underlying the restricted
stock units granted to Messrs. Beard, Biggs, Goodwin, Grumhaus, Malkiel,
Solomon, Takahashi and Tisch. Each of these directors, with the exception of
Mr. Biggs has received 3,500 restricted stock units (Mr. Biggs has received
1,125), but the shares underlying these restricted stock units are not
deliverable, either by the terms of the awards regarding vesting and
delivery or because of a deferral election by the directors, within 60 days
of March 31, 2004. See "Compensation -- Directors' Compensation" for a
description of these grants.

The number of shares listed also does not include any shares underlying
262,642 restricted stock units granted to Mr. Levin. The shares underlying
these restricted stock units are not deliverable, either by the terms of
the awards regarding vesting and delivery or because of a deferral election
by Mr. Levin, within 60 days of March 31, 2004. See "Compensation --
Executive Officer Compensation" for a description of these grants.

(6) Includes 56,076 shares of common stock owned by immediate family members or
family trusts.

(7) Includes 10,759 shares of common stock held by family members or family
related entities.

(8) Includes 65,049 shares of common stock relating to options which have vested
or will vest within 60 days of March 31, 2004.

(9) Includes 19,555 shares of common stock relating to options which have vested
or will vest within 60 days of March 31, 2004 and 1,384 shares of restricted
stock which vest on March 10, 2007.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Each director and executive officer of the Company and each beneficial
owner of 10% or more of the Company's common stock is required to report his or
her transactions in shares of Company common stock to the SEC within a specified
period following a transaction. Based on our review of filings with the SEC and
written representations furnished to us during 2003, the directors, executive
officers and 10% beneficial owners filed all such reports within the specified
time period.

EXECUTIVE OFFICERS

The current executive officers of the Company are:

NAME, AGE, AND PRINCIPAL OCCUPATION
DURING LAST FIVE YEARS OFFICE(1) YEAR FIRST ELECTED
----------------------------------- ------------------------- ------------------

John A. Levin -- age 65 Chairman, Chief Executive 2000 (as Chairman)
Chairman since February 2000, Chief Executive Officer and President 1996 (as CEO and
Officer and President of the Company and President)
Chairman and Chief Executive Officer of Levin
Management Co., Inc. and John A. Levin & Co.,
Inc. since June 1996; prior thereto, President
and Securities Analyst/ Portfolio Manager of
the predecessor to John A. Levin & Co., Inc.
Gregory T. Rogers -- age 38 Executive Vice President 2000
Executive Vice President and Chief Operating and Chief Operating
Officer of the Company, Levin Management Co., Officer
Inc. and John A. Levin & Co., Inc. since
February 2000; prior thereto, Managing
Director of BARRA Strategic Consulting since
1994
Glenn A. Aigen -- age 41 Senior Vice President, 2000
Senior Vice President, Chief Financial Officer Chief Financial Officer
and Treasurer of the Company, Levin Management and Treasurer
Co., Inc. and John A. Levin & Co., Inc. since
February 2000; Vice President, Chief Financial
Officer and Director of Operations of Levin
Management Co., Inc. and John A. Levin & Co.,
Inc. from June 1996 to February 2000; prior
thereto, Director of Operations of the
predecessor to John A. Levin & Co., Inc. since
1993
Norris Nissim -- age 37 Vice President, General 2000
Vice President, General Counsel and Secretary Counsel and Secretary
of the Company and Vice President and General
Counsel of Levin Management Co., Inc. and John
A. Levin & Co., Inc. since February 2000;
Director of Legal Affairs of Levin Management
Co., Inc. and John A. Levin & Co., Inc. from
August 1996 to February 2000

---------------

(1) Each executive officer of the Company generally holds office until the first
meeting of the Board of Directors after the Annual Meeting of stockholders
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. Non-employee directors currently receive
approximately $30,000 per year in the form of stock awards (as valued at the
date of grant) which vest over the course of the year. In 2003, an annual grant
of 1,500 restricted stock units was made. In addition to the stock awards,
non-employee directors receive $500 for each meeting of a committee of the board
that they attend in person or by telephone and $5,000 per year for serving as
the chairman of any committee of the Board. The Company also reimburses
directors for their out-of-pocket expenses incurred in connection with such
meetings.

EXECUTIVE OFFICER COMPENSATION

The following table sets forth compensation for the years ended December
31, 2003, December 31, 2002 and December 31, 2001 received by the Company's
Chief Executive Officer, and the Company's three other executive officers
serving at the end of fiscal year 2003. These four officers are referred to as
the "Named Executive Officers."

SUMMARY COMPENSATION TABLE

LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------------------
--------------------------------------- RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) AWARD($) OPTIONS(2)(#) COMPENSATION($)
------------------ ---- --------- --------- --------------- ------------ ------------- ---------------

John A. Levin........ 2003 894,293 501,269 -- 514,934(3) -- 7,000(9)
Chairman, Chief 2002 886,819 2,218,737 -- 2,644,204(4) -- 12,000(9)
Executive Officer 2001 864,472 3,987,621 -- -- 45,000 10,500(9)
and President
Gregory T. Rogers.... 2003 421,038 598,766 -- -- -- 6,000(9)
Executive Vice 2002 417,519 910,094 -- 679,719(5) -- 11,000(9)
President and 2001 406,991 1,303,900 -- -- 20,000 10,500(9)
Chief Operating
Officer
Glenn A. Aigen....... 2003 242,097 673,347 -- 35,071(6) -- 6,000(9)
Senior Vice 2002 240,074 942,210 -- 426,899(7) -- 11,000(9)
President And Chief 2001 234,025 1,259,580 -- -- 15,000 10,500(9)
Financial Officer
Norris Nissim........ 2003 232,232 167,768 -- -- -- --
Vice President 2002 230,290 169,000 -- 79,575(8) -- 11,000(9)
And General Counsel 2001 224,489 214,500 -- -- 7,300 10,500(9)

---------------

(1) With respect to each of the Named Executive Officers, perquisites and other
benefits did not exceed the lesser of $50,000 or 10% of the total of annual
salary and bonus.

(2) All option grants were made under the Company's 1998 Incentive Compensation
Plan. These options were tendered for Restricted Stock Units ("RSU") in
2003.

(3) Represents grant value of 20,321 shares of restricted stock granted on March
10, 2004 with respect to 2003 bonus compensation. The shares of restricted
stock vest on March 9, 2007.

(4) Represents grant date value of 161,725 RSUs granted on March 12, 2003 with
respect to 2002 bonus compensation. With respect to 71,320 of these RSUs,
one third vested on December 31, 2003 and one third will vest on each of
December 31, 2004 and December 31, 2005, but the delivery of the shares of
common stock underlying the RSUs will not occur until December 31, 2005, and
delivery can be deferred by the Named Executive Officer. With respect to the
other 90,405 RSUs, such RSUs will vest on December 3, 2005, but the delivery
of shares of common stock underlying the RSUs may be deferred by the Named
Executive Officer.

As of December 31, 2003, Mr. Levin held an additional 85,917 RSUs with an
aggregate value of $2,120,432.

(5) Represents grant date value of 41,573 RSUs granted on March 12, 2003 with
respect to 2002 bonus compensation. With respect to 13,240 of these RSUs,
one third vested on December 31, 2003 and one third will vest on each of
December 31, 2004 and December 31, 2005, but the delivery of the shares of
common stock underlying the RSUs will not occur until December 31, 2005, and
delivery can be deferred by the Named Executive Officer. With respect to the
other 28,333 RSUs, such RSUs will vest on December 3, 2005, but the delivery
of shares of common stock underlying the RSUs may be deferred by the Named
Executive Officer.

In addition, as of December 31, 2003, Mr. Rogers held 65,048 RSUs with an
aggregate value of $1,605,385.

(6) Represents the grant value of 1,384 shares of restricted stock granted on
March 10, 2004 with respect to 2003 bonus compensation. The shares of
restricted stock vest on March 9, 2007.

(7) Represents grant date value of 26,110 RSUs granted on March 12, 2003 with
respect to 2002 bonus compensation. With respect to 6,110 of these RSUs, one
third vested on December 31, 2003 and one third will vest on each of
December 31, 2004 and December 31, 2005, but the delivery of the shares of
common stock underlying the RSUs will not occur until December 31, 2005, and
delivery can be deferred by the Named Executive Officer. With respect to the
other 20,000 RSUs, such RSUs will vest on December 3, 2005, but the delivery
of shares of common stock underlying the RSUs may be deferred by the Named
Executive Officer.

As of December 31, 2003, Mr. Aigen held an additional 66,430 RSUs with an
aggregate value of $1,639,492.

(8) Represents grant date value of 4,867 RSUs granted on March 12, 2003 with
respect to 2002 bonus compensation. The RSUs will vest on December 3, 2005,
but the delivery of shares of common stock underlying the RSUs may be
deferred by the Named Executive Officer.

As of December 31, 2003, Mr. Nissim held an additional 5,000 RSUs with an
aggregate value of $123,400.

(9) Represents amounts contributed by the Company to the Company's 401(k) plan.

OPTION GRANTS IN 2003

The Company did not grant any options in 2003 to any Named Executive
Officers.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth certain information concerning the exercise
of options to purchase the Company's common stock during 2003 by the Named
Executive Officers and the value of unexercised in-the-money options to purchase
shares of the Company's common stock granted to the Named Executive Officers
outstanding as of December 31, 2003.

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL FISCAL YEAR-END
ACQUIRED VALUE YEAR-END 2003(#) 2003($)(1)
NAME ON EXERCISE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------

John A. Levin........ 0 0 34,570/0 402,697/0
Gregory T. Rogers.... 0 0 65,049/0 757,740/0
Glenn A. Aigen....... 0 0 19,555/0 181,546/0
Norris Nissim........ 0 0 0/0 0/0

---------------

(1) On December 31, 2003, the closing price of the Company's common stock on the
New York Stock Exchange was $24.68 per share.

TEN-YEAR OPTION/SAR REPRICINGS

On December 11, 2002, the Company issued a tender offer to exchange 333,308
outstanding options for restricted stock units on a 3 for 1 exchange basis. The
participation of the Named Executive Officers in this tender offer is reflected
in the following table:

(A) (B) (C) (D) (F) (G)
NUMBER OF MARKET PRICE (E)
SECURITIES OF STOCK AT EXERCISE PRICE
UNDERLYING TIME OF AT TIME OF NEW LENGTH OF ORIGINAL
OPTIONS/SAR'S REPRICING OR REPRICING OR EXERCISE OPTION TERM
REPRICED AND AMENDMENT AMENDMENT PRICE REMAINING AT DATE OF
NAME DATE AMENDED ($) ($) ($) REPRICING AMENDMENT
---- --------- ------------- ------------ -------------- -------- --------------------

John A. Levin.......... 1/10/2003 45,000 17.99 28.27 (1) 8 years 11 months
Chairman, Chief
Executive Officer and
President
Gregory T. Rogers...... 1/10/2003 20,000 17.99 28.27 (2) 8 years 11 months
Executive Vice
President and Chief
Operating Officer
Glenn A. Aigen......... 1/10/2003 15,000 17.99 28.27 (3) 8 years 11 months
Senior Vice President
and Chief Financial
Officer
Norris Nissim.......... 1/10/2003 7,300 17.99 28.27 (4) 8 years 11 months
Vice President and
General Counsel

---------------

(1) In exchange for 45,000 options tendered, 15,000 restricted stock units were
granted on January 10, 2003, with 7,500 vesting on December 31, 2003 and
7,500 vesting on December 31, 2004. All shares underlying the restricted
stock units are deliverable on December 31, 2004. On the grant date, the
price of the Company's common stock was $17.99.

(2) In exchange for 20,000 options tendered, 6,667 restricted stock units were
granted on January 10, 2003, with 3,333 vesting on December 31, 2003 and
3,334 vesting on December 31, 2004. All shares underlying the restricted
stock units are deliverable on December 31, 2004. On the grant date, the
price of the Company's common stock was $17.99.

(3) In exchange for 15,000 options tendered, 5,000 restricted stock units were
granted on January 10, 2003, with 2,500 vesting on December 31, 2003 and
2,500 vesting on December 31, 2004. All shares underlying the restricted
stock units are deliverable on December 31, 2004. On the grant date, the
price of the Company's common stock was $17.99.

(4) In exchange for 7,300 options tendered, 2,433 restricted stock units were
granted on January 10, 2003, with 1,216 vesting on December 31, 2003 and
1,217 vesting on December 31, 2004. All shares underlying the restricted
stock units are deliverable on December 31, 2004. On the grant date, the
price of the Company's common stock was $17.99.

EMPLOYMENT CONTRACTS

None of the Named Executive Officers is subject to an employment contract.

TARGET BENEFIT PENSION PLANS

The Company maintained a target benefit pension plan. Prior to January 1,
2000, contributions were made by the Company on behalf of all employees who had
reached the age of 20.5 and had completed nine months of service to the Company.
The amount of the contribution made by the Company was based on the employee's
age and compensation, and the amount of the retirement benefit depended on the
amount

contributed on behalf of the employee and the performance of those assets. In
December 2002, the Company received the letter of determination from the
Internal Revenue Service to liquidate the plan. The assets of the plan were
distributed in February 2003.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Anson M. Beard, Jr., David D. Grumhaus and Burton G. Malkiel served as
members of the Compensation Committee during 2003. None of these persons was
ever an officer or employee of the Company. During 2003, none of the Company's
executive officers served on the Board of Directors or the Compensation
Committee of any entity which had an executive officer who served on the
Company's Board of Directors or Compensation Committee.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors makes decisions on
compensation of the Company's executives. Each member of the Compensation
Committee is a non-employee director. The Compensation 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 of
Directors 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
stockholders. To implement that philosophy, the Company offers each of its
executives a combination of base salary and annual cash bonuses. Through this
compensation structure, the Company aims to reward above-average corporate
performance and recognize individual initiative and achievements.

The Compensation Committee administers the Company's 1998 Incentive
Compensation Plan, as amended, pursuant to which the Company may pay its
employees, based on performance, in cash or in Company stock (including stock
options and restricted stock units).

BASE SALARY

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 Company
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.

BONUSES

At the Compensation Committee's sole discretion, the Company 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 or business unit. In its evaluation of the performance of the officer
and the determination of incentive bonuses, the Compensation Committee does not
assign quantitative relative weights to different factors or follow mathematical
formulas. Rather, the Compensation Committee makes its determination in each
case after considering the factors it deems relevant at the time.

COMPENSATION OF CHIEF EXECUTIVE OFFICER

In 2003, Mr. Levin received a base salary of $894,293. His annual bonus was
determined by the Compensation Committee of the Board of Directors in accordance
with the guidelines established by it for the executive officers of the firm.
These guidelines took into consideration the overall profitability of the firm,
and

in the case of Mr. Levin, the profitability of pooled investment vehicles which
earned performance-based fees and with respect to which he acted as the
portfolio manager.

LIMITS ON DEDUCTIBILITY OF COMPENSATION

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
Anson M. Beard, Jr. (Chairman)
David D. Grumhaus
Burton G. Malkiel

AUDIT COMMITTEE REPORT

The Board of Directors has adopted a charter for the Audit Committee.
Pursuant to this charter, the Audit 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.

In March 2004, the Audit Committee met with members of the Ernst & Young
LLP engagement team to review the results of the 2003 audit. The Audit Committee
also discussed the audited financial statements and the results of the audit
with the Company's management.

The Audit Committee discussed the matters required to be discussed by
Statements on Auditing Standards No. 61, as amended, with Ernst & Young LLP.
Further, the Committee has received the written statements required by
Independence Standards Board Standard No. 1. Standard No. 1 requires auditors to
communicate, in writing, at least annually all relationships between the auditor
and the Company that, in the auditor's professional judgment, may reasonably be
thought to affect the auditor's independence. The Audit Committee has received
this written disclosure and has discussed with Ernst & Young LLP its
independence and considered the compatibility of non-audit services with the
auditor's independence.

Based on the above-mentioned review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board of Directors
that the Company's audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2003 for
filing with the SEC.

AUDIT COMMITTEE MEMBERS
David D. Grumhaus (Chairman)
Burton G. Malkiel
J. Barton Goodwin

EQUITY PARTICIPATION PLAN INFORMATION

The following table gives information about the Company's 1998 Incentive
Compensation Plan as of December 31, 2003.

EQUITY COMPENSATION PLAN INFORMATION

(C)
(A) (B) NUMBER OF SECURITIES
NUMBER OF SECURITIES WEIGHTED AVERAGE AVAILABLE FOR FUTURE
TO BE ISSUED UPON EXERCISE PRICE OF ISSUANCE UNDER EQUITY
EXERCISE OF OUTSTANDING COMPENSATION PLANS
OUTSTANDING OPTIONS, OPTIONS, WARRANTS (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS REFLECTED IN COLUMN (A))
------------- -------------------- ----------------- ------------------------

Equity compensation plans approved by
security holders...................... 218,279 $13.88 340,971
Equity compensation plans not approved
by security holders................... 0 N/A 0
------- -------
Total................................... 218,279 $13.88 340,971
======= =======

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

John A. Levin, the Chairman and Chief Executive Officer of the Company,
received tax preparation services from the Company in 2003. Based on the cost to
the Company of providing such services, Mr. Levin was billed $29,000 for such
services in 2003.

Henry L. Levin, a son of John Levin, received $260,000 as salary and
$4,534,134 as bonus compensation as one of two Senior Portfolio Managers for the
event driven investment team. In addition, Henry Levin is a managing member of
Purchase Management, LLC, which serves as a general partner of Purchase
Associates, L.P. and Purchase Associates II, L.P., and of Debt Management, LLC,
which serves as a general partner of Debt Opportunity Partners, L.P. These
general partners participate in the performance-based incentive allocations made
by the limited partners to the general partners. Levco GP, Inc., a wholly owned
subsidiary of the Company, serves as the managing general partner of each of the
partnerships. Purchase Management, LLC received incentive allocations totaling
$5,692,419, of which $2,846,210 was allocated to Henry Levin, and Debt
Opportunity Management received an incentive allocation of $123,136, of which
$30,784 was allocated to Henry Levin. Such allocations to Henry Levin are
included as compensation in the financial statements of the Company. In 2003,
investment vehicles and other accounts managed by the event driven investment
team generated $50.9 million in revenues, and the event driven team had
approximately $2.4 billion in assets under management as of December 31, 2003.

Jennifer Levin Carter, a daughter of John Levin, received $149,700 (and
reimbursed expenses of $7,377) from the company for consulting services rendered
to various alternative investment strategies of the Company.

In 2003, the Company paid Peter J. Solomon Company, of which Mr. Solomon, a
director of the Company, is the Chairman, $100,000 for its services as a
financial advisor.

Barton M. Biggs, a director of the Company, is a Managing Partner of Traxis
Partners. In 2003, Traxis Partners paid the Company $136,000 in rent for space
in the Company's offices at One Rockefeller Plaza, New York, NY.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS

The following chart shows the Company's annual total returns from December
31, 1998 through December 31, 2003. On August 19, 1999, the Company's
stockholders approved the Plan for Distribution of Assets of the Company,
pursuant to which the Company distributed or liquidated substantially all of its
assets, with the exception of Levin Management Co., Inc. and its subsidiaries,
and changed the nature of the Company's business so that it no longer operated
as a registered investment company. Currently, the Company's chief operating
business is as an investment adviser. Because the chart that follows contains
the Company's returns from 1999 through 2003, the chart includes information
about the Company during that period in which the Company was operating as a
registered investment company and during the period after the August 19, 1999
stockholder meeting in which the Company distributed or liquidated substantially
all of its assets except Levco. The chart sets forth a comparison of the
Company's total return with the annual return of (i) the S&P Financial Index;
and (ii) the S&P 500 Index. The chart is based on an investment of $100 on
December 31, 1998, 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.

COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN

[PERFORMANCE GRAPH]

--------------------------------------------------------------------------------------
12/31/98 12/31/99 12/31/00 12/29/01 12/31/02 12/31/03
--------------------------------------------------------------------------------------

BKF CAPITAL GROUP,
INC. $100 $134.17 $174.90 $275.05 $169.15 $236.52
S&P FINANCIAL INDEX 100 102.32 129.23 114.98 101.12 132.52
S&P 500 INDEX 100 121.04 110.02 96.96 75.54 97.19

PROXY SOLICITATION; QUORUM; VOTING; ADJOURNMENT

PROXY SOLICITATION

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 do not mark any
directions on it, your shares will be voted FOR the election of each of the
nominated directors, FOR the ratification of the appointment of Grant Thornton
LLP as independent auditors of the Company, and AGAINST the stockholder
proposal.

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.

Stockholders of record at the close of business on April 2, 2004 are
entitled to participate in the meeting and to cast one vote for each share held.
The Company had 6,898,903 shares of common stock outstanding on the record date
(including 56,105 shares of restricted stock). There is no other class of stock
outstanding. Stockholders are entitled to one vote per share for each matter
eligible to be voted upon.

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 Mellon Investor Services LLC to render proxy
solicitation services at a cost estimated at $7,000. The Company will inquire of
any stockholder 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.

QUORUM

Mellon Investor Services, LLC, 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 present at the meeting
in person or by proxy to constitute a quorum for the transaction of business.
Shares abstaining from voting and shares 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 the
beneficial owners or persons entitled to vote and the broker or nominee does not
have discretionary voting power to vote such shares.

VOTING

In the election of directors, you may vote FOR all of the nominees or your
vote may be WITHHELD with respect to one or more of the nominees. For the other
proposals, you may vote FOR, AGAINST or ABSTAIN. If you sign your proxy card or
broker voting instruction card with no further instructions, your shares will be
voted in accordance with the recommendations of the Board of Directors.

ELECTION OF DIRECTORS

The affirmative vote of a plurality of the shares cast at the meeting is
required for the election of directors. A properly executed proxy marked
WITHHOLD AUTHORITY with respect to the election of one or more directors will
not be voted with respect to the director or directors indicated, although it
will be counted for purposes of determining whether there is a quorum.

RATIFICATION OF APPOINTMENT OF AUDITORS

The affirmative vote of the holders of a majority of the shares represented
in person or by proxy and entitled to vote on the proposal will be required to
ratify the appointment of Grant Thornton LLP as independent auditors.
Abstentions will not be voted and will have the effect of a vote against this
proposal. Broker non-votes will not be counted in determining the number of
shares necessary for approval and will have no effect on the outcome of this
proposal.

STOCKHOLDER PROPOSAL

The affirmative vote of the holders of a majority of the shares represented
in person or by proxy and entitled to vote on the proposal will be required to
approve the stockholder proposal. Abstentions will not be voted and will have
the effect of a vote against this proposal. Broker non-votes will not be counted
in determining the number of shares necessary for approval and will have no
effect on the outcome of this proposal. Approval of this proposal will not
require that the requested action be taken, since the proposal is precatory.

ADJOURNMENT

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 stockholders, 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
stockholders about the reasons for additional solicitation.

PROPOSALS OF STOCKHOLDERS

Under the Company's bylaws, no business may be brought before an annual
meeting of stockholders unless it is specified in the notice of the meeting or
is otherwise brought before the meeting by or at the direction of the Board of
Directors or by a stockholder entitled to vote who has delivered notice to the
Company (containing certain information specified in the bylaws) not less than
60 days prior to the date on which the Company first mailed its proxy materials
for the prior year's annual meeting; provided, however, that if the date of the
annual meeting has been advanced by more than 30 days from the date of the prior
years annual meeting, then such notice must be received by the Secretary of the
Company not later than the close of business on the tenth day following the date
on which the Company first makes public disclosure of the date of the meeting.
These regulations are separate from and in addition to the SEC's requirements
that a stockholder must meet in order to have stockholder proposal included in
the Company's proxy statement.

Stockholders interested in submitting a proposal for inclusion in the proxy
material for the Annual Meeting of stockholders in 2004 may do so by following
the procedures prescribed in Rule 14a-8 of the Exchange Act. To be eligible for
inclusion, stockholder proposals must be received by the Company's Secretary no
later than December 16, 2004.

AVAILABLE INFORMATION

STOCKHOLDERS OF THE COMPANY WILL RECEIVE WITH THIS PROXY STATEMENT A COPY
OF THE COMPANY ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003.
STOCKHOLDERS OF THE COMPANY MAY OBTAIN, WITHOUT CHARGE, ADDITIONAL COPIES OF THE
COMPANY'S ANNUAL REPORT BY WRITING TO THE COMPANY AT ONE ROCKEFELLER PLAZA, 19TH
FLOOR, NEW YORK, NEW YORK 10020 OR BY CALLING (800) BKF-1891. STOCKHOLDERS MAY
ALSO OBTAIN COPIES OF THE ANNUAL AND QUARTERLY REPORTS ON THE COMPANY'S WEBSITE
AT WWW.BKFCAPITAL.COM.

THE BOARD OF DIRECTORS HAS ADOPTED CORPORATE GOVERNANCE GUIDELINES, A CODE
OF ETHICS FOR THE CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER AND CERTAIN
OTHER PERSONNEL, AN AUDIT COMMITTEE CHARTER, A NOMINATING AND GOVERNANCE
COMMITTEE CHARTER, AND A COMPENSATION COMMITTEE CHARTER. THESE DOCUMENTS MAY BE
OBTAINED, WITHOUT CHARGE, BY WRITING TO OR CALLING THE COMPANY AND ARE POSTED ON
THE COMPANY'S WEBSITE.

By Order of the Board of Directors

/s/ NORRIS NISSIM
--------------------------------------
Norris Nissim
Secretary

New York, New York
April 15, 2004

APPENDIX A

AUDIT COMMITTEE CHARTER

BKF CAPITAL GROUP, INC.

I. PURPOSE

The primary purpose of the Audit Committee is to assist the Board in
fulfilling its oversight responsibilities with respect to (a) the accounting and
financial reporting processes of the Company, including the integrity of the
financial statements and other financial information provided by the Company to
its stockholders, the public, any stock exchange and others, (b) the Company's
compliance with legal and regulatory requirements, (c) the independent auditors'
qualifications and independence, (d) the audit of the Company's financial
statements and (e) the performance of the Company's internal audit function and
independent auditors.

Although the Audit Committee has the powers and responsibilities set forth
in this Charter, the role of the Audit Committee is oversight. The members of
the Audit Committee are not full-time employees of the Company and may or may
not be accountants or auditors by profession or experts in the fields of
accounting or auditing and, in any event, do not serve in such capacity.
Consequently, it is not the duty of the Audit Committee to conduct audits or to
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. These are the responsibilities of
management and the independent auditors.

II. ORGANIZATION

The Audit Committee shall consist of three or more directors, each of whom
shall satisfy the independence, financial literacy and experience requirements
of Section 10A of the Securities Exchange Act, the New York Stock Exchange and
any other regulatory requirements, subject to the cure periods permitted by the
New York Stock Exchange. At least one member of the Audit Committee shall have
accounting or related financial management expertise, as the Company's board
determines in its business judgment.

The members of the Audit Committee shall be appointed by the Board on the
recommendation of the Nominating & Governance Committee. Members of the Audit
Committee may be removed at any time by action of the Board. The Audit
Committee's chairperson shall be designated by the Board or, if it does not do
so, the members of the Audit Committee shall elect a chairperson by a vote of
the majority of the full Audit Committee. No Audit Committee member shall serve
on the audit committees of more than three public companies without the
determination by the Board that such simultaneous service does not impair the
ability of such member to effectively serve on the Company's Audit Committee.

III. MEETINGS

The Audit Committee shall meet at least four times per year on a quarterly
basis, or more frequently as circumstances require. As part of its job to foster
open communication, the Audit Committee shall meet at least quarterly with
management, the chief internal auditor and the independent auditors in separate
executive sessions to discuss any matters that the Audit Committee or each of
these groups believe should be discussed privately.

IV. AUTHORITY AND RESPONSIBILITIES

In recognition of the fact that the independent auditors are ultimately
accountable to the Audit Committee, the Audit Committee shall (a) have the sole
authority and responsibility to select, evaluate and, where appropriate, replace
the independent auditors (or to nominate the independent auditors for
stockholder approval), (b) approve all audit engagement fees and terms and all
non-audit engagements with the independent auditors and (c) perform such other
duties and responsibilities set forth under the Securities

A-1

Exchange Act. The Audit Committee may consult with management and the internal
audit group but shall not delegate these responsibilities.

To fulfill its responsibilities, the Audit Committee shall:

WITH RESPECT TO THE INDEPENDENT AUDITORS:

1. Be directly responsible for the appointment, compensation, retention and
oversight of the work of the independent auditors (including resolution of
disagreements between management and the independent auditors regarding
financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attestation services for the Company.

2. Have the sole authority to review in advance, and grant any appropriate
pre-approvals, of (a) all auditing services to be provided by the independent
auditors and (b) all non-audit services to be provided by the independent
auditors as permitted by Section 10A of the Securities Exchange Act, and, in
connection therewith, to approve all fees and other terms of engagement. The
Audit Committee shall also review and approve disclosures required to be
included in Securities and Exchange Commission periodic reports filed under
Section 13(a) of the Securities Exchange Act with respect to audit and non-audit
services.

3. Evaluate on an annual basis the performance of the independent auditors,
including the lead audit partner, and present the conclusions of such evaluation
to the Board. In making its evaluation, the Audit Committee should take into
account the opinions of management and the Company's internal auditors.

4. Ensure that the independent auditors submit to the Audit Committee on an
annual basis a written statement consistent with Independent Standards Board
Standard No. 1, discuss with the independent auditors any disclosed
relationships or services that may impact the objectivity and independence of
the independent auditors and satisfy itself as to the independent auditors'
independence.

5. At least annually, obtain and review an annual report from the
independent auditors describing (a) the independent auditors' internal quality
control procedures and (b) any material issues raised by the most recent
internal quality control review, or peer review, of the independent auditors, or
by any inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent audits
carried out by the independent auditors, and any steps taken to deal with any
such issues.

6. Confirm that the "lead partner," the "concurring partner" and the other
"audit partner" rotation requirements of Regulation S-X have been complied with.
Consider whether, in order to assure continuing auditor independence, it is
appropriate to adopt a policy of rotating the independent auditors on a regular
basis.

7. Review all reports required to be submitted by the independent auditors
to the Audit Committee under Section 10A of the Securities Exchange Act.

8. Review, based upon the recommendation of the independent auditors and
the chief internal auditor, the scope and plan of the work to be done by the
independent auditors.

WITH RESPECT TO THE ANNUAL FINANCIAL STATEMENTS:

9. Review and discuss with management, the internal audit group and the
independent auditors the Company's annual audited financial statements,
including disclosures made in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

10. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended, relating to the
conduct of the audit.

11. Recommend to the Board, if appropriate, that the Company's annual
audited financial statements be included in the Company's annual report on Form
10-K for filing with the Securities and Exchange Commission.

12. Prepare the report required by the Securities and Exchange Commission
to be included in the Company's periodic reports, annual proxy statement and any
other reports of the Audit Committee required by applicable securities laws or
stock exchange listing requirements or rules.

A-2

WITH RESPECT TO QUARTERLY FINANCIAL STATEMENTS:

13. Review and discuss with management, the internal audit group and the
independent auditors the Company's quarterly financial statements, including
disclosures made in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the independent auditors' review of the quarterly
financial statements, prior to submission to stockholders, any governmental
body, any stock exchange or the public.

ANNUAL REVIEWS:

14. Discuss with management and the independent auditors major issues
regarding accounting principles used in the preparation of the Company's
financial statements, including any significant changes in the Company's
selection or application of accounting principles. Review and discuss analyses
prepared by management and/or the independent auditors setting forth significant
financial reporting issues and judgments made in connection with the preparation
of the financial statements, including analyses of the effects of alternative
approaches under GAAP.

15. Prior to the filing of any audited financial statements with the
Securities and Exchange Commission, review with the independent auditors (i) all
critical accounting policies and practices used by the Company, (ii) all
alternative accounting treatments of financial information within GAAP related
to material items that have been discussed with management, including the
ramifications of the use of such alternative treatments and disclosures and the
treatment preferred by the independent auditors and (iii) other material written
communications between the independent auditors and management.

PERIODIC REVIEWS:

16. Periodically meet separately with each of management, the independent
auditors and the internal audit group. At such meetings review (a) any
significant disagreement between management and the independent auditors or the
internal audit group in connection with the preparation of the financial
statements, (b) any difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to required
information and (c) management's response to each.

17. Periodically review with the independent auditor any other audit
problems or difficulties (including accounting adjustments that were noted or
proposed by the independent auditor but passed by management (due to
immateriality or otherwise)), communications between the audit engagement team
and the independent auditor's national office regarding auditing or accounting
issues and management or internal control letters issued, or proposed to be
issued, by the auditor to the Company) and management's response to such
letters.

18. Periodically discuss with the independent auditors, without management
being present, (a) their judgments about the quality and appropriateness of the
Company's accounting principles and financial disclosure practices as applied in
its financial reporting and (b) the completeness and accuracy of the Company's
financial statements.

19. Consider and approve, if appropriate, significant changes to the
Company's accounting principles and financial disclosure practices as suggested
by the independent auditors, management or the internal audit group. Review with
the independent auditors, management and the internal audit group, at
appropriate intervals, the extent to which any changes or improvements in
accounting or financial practices, as approved by the Audit Committee, have been
implemented.

20. Review and discuss with management, the internal audit group, the
independent auditors and the Company's in-house and independent counsel, as
appropriate, any legal, regulatory or compliance matters that could have a
significant impact on the Company's financial statements, including applicable
changes in regulatory and accounting initiatives, standards or rules.

DISCUSSIONS WITH MANAGEMENT:

21. Review and discuss with management the Company's earnings press
releases, including the use of non-GAAP financial measures (as defined in
Regulation G), as well as financial information and earnings
A-3

guidance provided to analysts and rating agencies. Such discussions may be done
generally (i.e., discussion of the types of information to be disclosed and the
types of presentations to be made).

22. Review and discuss with management all material off-balance sheet
transactions, arrangements, obligations (including contingent obligations) and
other relationships of the Company with unconsolidated entities or other
persons, that may have a material current or future effect on financial
condition, changes in financial condition, results of operations, liquidity,
capital resources, capital reserves or significant components of revenues or
expenses.

23. Review and discuss with management the Company's major risk exposures
and the steps management has taken to monitor, control and manage such
exposures, including the Company's risk assessment and risk management
guidelines and policies.

WITH RESPECT TO THE INTERNAL AUDIT FUNCTION AND INTERNAL CONTROLS:

24. Review, based upon the recommendation of the independent auditors and
the chief internal auditor, the scope and plan of the work to be done by the
internal audit group and the responsibilities, budget and staffing needs of the
internal audit group.

25. Review and approve the appointment and replacement of the Company's
chief internal auditor.

26. Review on an annual basis the performance of the internal audit group.

27. In consultation with the independent auditors and the internal audit
group, review the adequacy of the Company's internal control structure and
procedures designed to insure compliance with laws and regulations, and any
special audit steps adopted in light of material control deficiencies.

28. Establish procedures for (a) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters and (b) the confidential, anonymous submission by
employees of the Company of concerns regarding the questionable accounting or
auditing matters.

29. Review (i) the internal control report prepared by management,
including management's assessment of the effectiveness of the Company's internal
control over financial reporting and (ii) the independent auditors' attestation,
and report, on the assessment made by management.

30. Review with management and the independent auditors any reports or
disclosure submitted by management to the Audit Committee as contemplated by the
Certifications required under Section 302 of the Sarbanes-Oxley Act of 2002.

OTHER:

31. Review and ratify or approve related-party transactions not covered by
ordinary Company policies and procedures pertaining to employees and that have a
value in excess of $10,000.

32. Review and approve (a) any amendment to or waiver from the Company's
code of ethics for the chief executive officer and senior financial officers and
(b) any public disclosure made regarding such change or waiver.

33. Review and reassess the adequacy of this Charter annually and recommend
to the Board any changes deemed appropriate by the Audit Committee.

34. Review its own performance annually.

35. Report regularly to the Board. Review with the full Board any issues
that have arisen with respect to the quality or integrity of the Company's
financial statements, the Company's compliance with legal or regulatory
requirements, the performance and independence of the Company's independent
auditors or the performance of the internal audit group.

36. Perform any other activities consistent with this Charter, the
Company's by-laws and governing law, as the Audit Committee or the Board deems
necessary or appropriate.

A-4

V. FORMER EMPLOYEES OF THE INDEPENDENT AUDITOR

The Audit Committee shall be required to preapprove the hiring of any
employee or former employee of the independent auditor who was a member of the
Company's audit engagement team within the preceding two fiscal years. The Audit
Committee shall not approve the hiring of any individual for a financial
reporting oversight role if such person is or was an employee of the independent
auditor and was a member of the Company's audit engagement team within the
preceding two fiscal years unless (A) (i) such individual is to be employed due
to an emergency or unusual situation and (ii) the Audit Committee determines
that the hiring of such individual is in the best interests of the Company's
stockholders or (B) such individual becomes employed by the Company as a result
of a business combination and the Audit Committee was made aware of such
individual's prior relationship with the Company as a member of its audit
engagement team.

VI. RESOURCES

The Audit Committee shall have the authority to retain independent legal,
accounting and other consultants to advise the Audit Committee. The Audit
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditors to attend a meeting of the Audit
Committee or to meet with any members of, or consultants to, the Audit
Committee.

The Audit Committee shall determine the extent of funding necessary for
payment of (a) compensation to the independent auditors engaged for the purpose
of preparing or issuing an audit report or performing other audit, review or
attest services for the Company, (b) compensation to any independent legal,
accounting and other consultants retained to advise the Audit Committee and (c)
ordinary administrative expenses of the Audit Committee that are necessary or
appropriate in carrying out its duties.

March 2004

A-5

PROXY PROXY

BKF CAPITAL GROUP, INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS

FOR THE ANNUAL MEETING OF STOCKHOLDERS -- MAY 13, 2004

J. Barton Goodwin, John A. Levin and Burton G. Malkiel, 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 stockholders of BKF Capital Group, Inc. to be held at the offices of
Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New
York, New York on Thursday, May 13th at 8:30 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.

Please indicate change of address here and mark the box on the other side.

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All capitalized terms used in this proxy shall have the same meanings assigned
to them in the Proxy Statement.

(Continued and to be signed on reverse side.)
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FOLD AND DETACH HERE

YOUR VOTE IS IMPORTANT.

PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY
USING THE ENCLOSED POSTMARKED ENVELOPE.

Please mark your votes as indicated in this example [X]

The Board of Directors recommends that you vote FOR proposals 1 and 2 and
AGAINST proposal 3.

1. To elect three directors;

FOR all nominees WITHHOLD
listed below AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed below
[ ] [ ]

Nominees: 01 Anson M. Beard, Jr. 02 Peter J. Solomon 03 Dean J. Takahashi

(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)

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FOR AGAINST ABSTAIN
2. To ratify the selection of Grant Thornton LLP as [ ] [ ] [ ]
independent auditors for the Company;
FOR AGAINST ABSTAIN
3. To approve a stockholder proposal relating to the [ ] [ ] [ ]
Company's stockholder rights plan; and
4. To transact such other business as may properly come
before the meeting.

Check here if you plan to attend the meeting. [ ]

Check here for address change. [ ]

Dated , 2004

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Signature(s)

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FOLD AND DETACH HERE