Edgar Filing: SAUL CENTERS INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Saul Centers, 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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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[_] Fee paid previously with preliminary materials.
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)

[LOGO] Saul Centers
7501 Wisconsin Avenue, Suite 1500
Bethesda, Maryland 20814-6522
(301) 986-6200

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 25, 2003

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of SAUL
CENTERS, INC., a Maryland corporation, will be held at 11:00 a.m. local time, on
April 25, 2003, at the Hyatt Regency Bethesda, One Bethesda Metro Center,
Bethesda, MD (at the south west corner of the Wisconsin Avenue and Old
Georgetown Road intersection, adjacent to the Bethesda Metro Stop on the Metro
Red Line), for the following purposes:

1. To elect four directors to serve until the annual meeting of
stockholders in 2006, or until their successors are duly elected and qualified.

2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.

Stockholders of record at the close of business on February 21, 2003
will be entitled to notice of and to vote at the annual meeting or at any
adjournment thereof.

Stockholders are cordially invited to attend the meeting in person.
WHETHER OR NOT YOU NOW PLAN TO ATTEND THE MEETING, YOU ARE ASKED TO COMPLETE,
DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD FOR WHICH A POSTAGE PAID
RETURN ENVELOPE IS PROVIDED. If you decide to attend the meeting, you may revoke
your proxy and vote your shares in person. It is important that your shares be
voted.

By Order of the Board of Directors

/s/ Scott Schneider
Scott V. Schneider
Chief Financial Officer and Secretary

March 24, 2003
Bethesda, Maryland

[LOGO] Saul Centers
7501 Wisconsin Avenue, Suite 1500
Bethesda, Maryland 20814-5522
(301) 986-6200

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 2003

GENERAL

This Proxy Statement is furnished by the Board of Directors of Saul
Centers, Inc. (the "Company") in connection with the solicitation by the Board
of Directors of proxies to be voted at the annual meeting of stockholders to be
held on April 25, 2003, and at any adjournment or adjournments thereof, for the
purposes set forth in the accompanying notice of such meeting. All stockholders
of record at the close of business on February 21, 2003 will be entitled to
vote.

Any proxy, if received in time, properly signed and not revoked, will
be voted at such meeting in accordance with the directions of the stockholder.
If no directions are specified, the proxy will be voted for the Proposal set
forth in this Proxy Statement. Any stockholder giving a proxy has the power to
revoke it at any time before it is exercised. A proxy may be revoked (i) by
delivery of a written statement to the Secretary of the Company stating that the
proxy is revoked, (ii) by presentation at the annual meeting of a subsequent
proxy executed by the person executing the prior proxy, or (iii) by attendance
at the annual meeting and voting in person.

Votes cast in person or by proxy at the annual meeting will be
tabulated and a determination will be made as to whether or not a quorum is
present. The Company will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence or absence of a
quorum, but as unvoted for purposes of determining the approval of any matter
submitted to the stockholders. If a broker submits a proxy indicating that it
does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to such matter.

Solicitation of proxies will be primarily by mail. However, directors
and officers of the Company also may solicit proxies by telephone or telegram or
in person. All of the expenses of preparing, assembling, printing and mailing
the materials used in the solicitation of proxies will be paid by the Company.
Arrangements may be made with brokering houses and other custodians, nominees
and fiduciaries to forward soliciting materials, at the expense of the Company,
to the beneficial owners of shares held of record by such persons. It is
anticipated that this Proxy Statement and the enclosed proxy card first will be
mailed to stockholders on or about March 24, 2003.

As of the record date, February 21, 2003, 15,387,397 shares of Common
Stock of the Company, $0.01 par value per share ("Common Stock"), were
outstanding. Each share of Common Stock entitles the holder thereof to one vote
on each of the matters to be voted upon at the annual meeting. As of the record
date, officers and directors of the Company had the power to vote approximately
29.6% of the outstanding shares of Common Stock, excluding 7.7% of the
outstanding Common Stock held by the B. F. Saul Company Employees' Profit
Sharing Retirement Trust, two of four trustees of which are officers and/or
directors of the Company. The Company's officers and directors have advised the
Company that they intend to vote their shares of Common Stock in favor of the
Proposal set forth in this Proxy Statement.

ELECTION OF DIRECTORS

Nominees and Directors

The First Amended and Restated Articles of Incorporation and the
Amended and Restated Bylaws of the Company provide that there shall be no fewer
than three, nor more than 15 directors, as determined from time to time by the
directors in office. The Board of Directors of the Company currently consists of
12 directors. During 2002, Mark Sullivan III resigned from the Board of
Directors and was replaced by John E. Chapoton in October 2002. Also in October
2002, David B. Kay was appointed to the Board of Directors. Nine of the other
directors have served on the Board of Directors since June 1993, and B. Francis
Saul III was elected in 1997. The Board of Directors is divided into three
classes with staggered three-year terms. The term of each class expires at the
annual meeting of stockholders, which is expected to be held in April of each
year. The directors elected at the annual meeting of stockholders in 2003 will
serve until the annual meeting of stockholders in 2006. Under the Company's
Articles, a majority of the directors must be independent directors, who are
directors unaffiliated with B. F. Saul Company and certain affiliated entities
(collectively, "The Saul Organization"). Messrs. Chapoton, Jackson, Kay, Kelley,
Longsworth, Noonan, and Symington are independent directors under the Company's
Articles.

The Company's officers and directors have advised the Company that they
intend to vote their shares of Common Stock for the election of each of the
nominees. Proxies will be voted FOR the election of the nominees listed below
unless authority is withheld.

The following list sets forth the name, age, position with the Company,
present principal occupation or employment and material occupations, positions,
offices or employment during the past five years of each nominee and director of
the Company. Nominees Caraci, Grosvenor, Jackson and Kay are presently directors
of the Company. All shall, if elected, continue to serve as a director until his
successor has been duly elected and qualified.

Name Age Principal Occupation and Current Directorships
---- --- ----------------------------------------------

Class One Directors-Term Ends at 2006 Annual Meeting (if elected)

Philip D. Caraci 64 Vice Chairman of the Company. President
of the Company from 1993 to 2003. Senior
Vice President and Secretary of the B.F.
Saul Real Estate Investment Trust from
1987 to 2003. Executive Vice President
of the B.F. Saul Company from 1987 to
2003, with which he had been associated
since 1972. President of B.F. Saul
Property Company from 1986 to 2003.
Trustee of the B.F. Saul Real Estate
Investment Trust.

Gilbert M. Grosvenor 71 Director of the Company. President (1980
through 1996) and Chairman of the Board
of Trustees since 1987 of the National
Geographic Society, with which he has
been associated since 1954. Director of
Chevy Chase Bank, Marriott International
Corporation, Ethyl Corp., and a Trustee
of the B.F. Saul Real Estate Investment
Trust.

Philip C. Jackson, Jr. 74 Director of the Company. Adjunct
Professor Emeritus at Birmingham-
Southern College from 1989 to 1999.
Member of the Thrift Depositors'
Protection Oversight Board from 1990
until 1993. Vice Chairman and a Director
of Central Bancshares of the South
(Compass Bancshares, Inc.) from 1980 to
1989. Member of the Board of Governors
of the Federal Reserve System from 1975
to 1978.

David B. Kay 46 Director of the Company. Chief Financial
Officer of J.E. Robert Companies from
2002 to present. Partner at Arthur
Andersen LLP from 1990 to 2002. Director
of Chevy Chase Bank, F.S.B.

Name Age Principal Occupation and Current Directorships
---- --- ----------------------------------------------

Class Two Directors-Term Ends at 2004 Annual Meeting

General Paul X. Kelley 74 Director of the Company. Chairman of American
Battle Monuments Commission since 2001.
Partner of J.F. Lehman & Company since 1998.
Commandant of the Marine Corps and member of
the Joint Chiefs of Staff from 1983 to 1987.
Director of Park Place Entertainment
Corporation, Sturm Ruger & Company, Inc and
OAO Technology Solutions, Inc.

Charles R. Longsworth 73 Director of the Company. Chairman Emeritus of
Colonial Williamsburg Foundation. President
and Trustee of Colonial Williamsburg
Foundation from 1977 through 1994. President
Emeritus, Hampshire College. Chairman
Emeritus, Trustees of Amherst College.
Director of the Center for Public Resources
and Trustee of Historic Deerfield.

Patrick F. Noonan 60 Director of the Company. Chairman of The
Conservation Fund since 1985. Trustee of the
National Geographic Society. On the Board of
Advisors of Duke University School of the
Environment. Director of Ashland, Inc. and
International Paper. Member of the President's
Commission on White House Fellows.

B. Francis Saul III 41 President and a Director of the Company. Vice
Chairman of the Company from 1997 to 2003.
Senior Vice President of the B.F. Saul
Company. President of the B.F. Saul Property
Company. Senior Vice President and a Trustee
of the B.F. Saul Real Estate Investment Trust.
Vice Chairman of Chevy Chase Bank, F.S.B.
Chairman of the Boys & Girls Clubs of Greater
Washington. Director of Children's National
Medical Center and The Conservation Fund.

Class Three Directors-Term Ends at 2005 Annual Meeting

B. Francis Saul II 70 Chairman and Chief Executive Officer of the
Company. President and Chairman of the Board
of Directors of the B.F. Saul Company since
1969. Chairman of the Board of Trustees of the
B.F. Saul Real Estate Investment Trust since
1969 and a Trustee since 1964. Chairman of the
Board and Chief Executive Officer of Chevy
Chase Bank, F.S.B. since 1969. Member of
National Gallery of Art Trustees Council.
Trustee of the National Geographic Society,
Trustee of the Johns Hopkins Medicine Board
and an Honorary Trustee of the Brookings
Institution.

John E. Chapoton 66 Director of the Company. Advisor on tax and
legal matters to Brown Investment Advisory &
Trust Co. since 2001. Partner in the law firm
of Vinson & Elkins L.L.P. from 1994 to 2000.
Director of Stancorp Financial Group.

James W. Symington 75 Director of the Company. Of Counsel in the law
firm of O'Connor & Hannan since 1986. Member
of Congress from 1969 to 1977. U.S. Chief of
Protocol from 1966 to 1968. Chairman Emeritus
of National Rehabilitation Hospital.

Name Age Principal Occupation and Current Directorships
---- --- ----------------------------------------------

Class Three Directors-Term Ends at 2005 Annual Meeting (continued)

John R. Whitmore 69 Director of the Company. Senior Advisor to the
Bessemer Group, Inc. since 1998. Formerly
President and Chief Executive Officer of the
Bessemer Group and its Bessemer Trust Company
subsidiaries (a financial management and
banking group) and director of Bessemer
Securities Corporation from 1975 to 1998.
Director of the B.F. Saul Company and Chevy
Chase Property Company. Trustee of the B.F.
Saul Real Estate Investment Trust. Director of
Chevy Chase Bank, F.S.B., Chairman of the
Board of Directors of ASB Capital Management,
Inc. and Chevy Chase Trust Company.

In the event that any nominee(s) should be unable to accept the office
of director, which is not anticipated, it is intended that the persons named in
the proxy will vote for the election of such other person in the place of such
nominee(s) for the office of director as the Board of Directors may recommend.
The affirmative vote of a plurality of the shares of Common Stock present is
required for the election of directors.

The Board of Directors met five times during 2002. Each member of the
Board attended 100% of the aggregate meetings of the Board and of the Committees
of the Board on which he served.

Committees of the Board of Directors

The Board of Directors has three standing committees: the Audit
Committee, the Compensation Committee, and the Executive Committee.

The Audit Committee is composed of Messrs. Kelley, Longsworth, Noonan
and Symington, with Mr. Kelley serving as chairman. It approves the engagement
of independent public accountants, reviews with the independent public
accountants the plans and results of each audit engagement, approves
professional services provided by the independent public accountants, considers
and approves the range of audit and non-audit fees, reviews related party
transactions, reviews the Company's financial statements, evaluates the
performance of the independent public accountants and the Company's financial
and accounting personnel, oversees the internal audit function and reviews the
adequacy of the Company's internal accounting controls. All of these functions
are performed under the guidelines of the company's Audit Committee Charter
which was revised and adopted effective March 20, 2003 (a copy of which is
attached as an annex to this Proxy Statement). This Committee met five times
during 2002. Additionally, the Audit Committee chairman conducted three
telephonic meetings with management and the independent public accountants.

The Compensation Committee is composed of Messrs. Grosvenor and
Whitmore. It determines compensation for the Company's executive officers,
reviews and approves management's recommendations for the annual salaries of all
Company officers, and administers any stock, incentive or other compensation
plans adopted by the Company, including the Company's 1993 Stock Option Plan
(the "Stock Option Plan"). This Committee met once during 2002.

The Executive Committee is composed of Messrs. Caraci, Jackson and Saul
II. It has such authority as is delegated to it by the Board of Directors and
advises the Board of Directors from time to time with respect to such matters as
the Board of Directors directs. This Committee did not meet during 2002.

Compensation Committee Interlocks and Insider Participation

B. Francis Saul II, Chairman of the Board and Chief Executive Officer
of the Company, served on the Board of Trustees and the Compensation Committee
of the National Geographic Society during 2002. Gilbert M. Grosvenor, a director
of the Company and a member of the Company's Compensation Committee during 2002,
serves as Chairman of the Board of Trustees of the National Geographic Society.

Compensation of Directors

Directors of the Company are currently paid an annual retainer of
$18,000 and a fee of $1,000 for each Board or Committee meeting attended, and
are annually awarded 100 shares of the Company's Common Stock. The shares are
issued on the date of each Annual Meeting of Stockholders to each director
serving on the Board of Directors as of the record date of such meeting, and
their issuance may not be deferred and transfer of the shares is restricted for
a period of 12 months following the date of issue. Directors from outside the
Washington, D.C. area also are reimbursed for out-of-pocket expenses in
connection with their attendance at meetings. For the year ended December 31,
2002, the Company paid its directors total compensation of $310,591, of which
$66,750 was paid in cash, $218,750 was paid in deferred stock compensation (as
described below), and $25,091 was paid through annual common stock awards.

In addition, directors may elect to participate in the Deferred
Compensation and Stock Plan discussed below. For the year ended December 31,
2002, 17,907 shares were credited to the directors' deferred fee accounts.

Deferred Compensation Plan

A Deferred Compensation and Stock Plan for Directors was established by
the Company, effective January 1, 1994 and amended March 18, 1999, for the
benefit of its directors and their beneficiaries. Before the beginning of any
calendar year, a director may elect to defer all or part of his or her
director's fees to be earned in that year and the following years. A director
has the option to have deferred fees paid in cash, in shares of Common Stock or
in a combination of cash and Common Stock. If the director elects to have the
deferred fees paid in stock, the number of shares allocated to the director is
determined based on the market value of the Common Stock on the day the deferred
director's fees were earned.

In connection with the Company's initial public offering of its Common
Stock in 1993, 20,000 shares of Common Stock were authorized for a deferred
compensation plan and were reserved for listing with the New York Stock Exchange
upon issuance. Between 1996 and 2001, the Company authorized and reserved for
listing with the New York Stock Exchange an additional 150,000 shares of Common
Stock in connection with the Deferred Compensation and Stock Plan for Directors.
Through February 21, 2003, 130,000 of these 170,000 shares have been credited to
the directors' deferred fee accounts.

COMPENSATION COMMITTEE REPORT

The Compensation Committee is comprised of Messrs. Grosvenor and
Whitmore. Members of the Compensation Committee are selected each year by the
full Board of Directors. All members of the Compensation Committee must be
"outside directors," who are not (i) officers or former officers of the Company;
(ii) employees of the Company or any of its subsidiaries; (iii) relatives of the
Chief Executive Officer; (iv) holders of more than 5% of the Company's voting
stock; (v) members of an organization acting as an advisor, legal counsel or in
similar capacity with respect to the Company and receiving compensation
therefore on an ongoing basis from the Company, in addition to director's fees;
or (vi) with reference to a particular transaction, interested directors within
the meaning of Section 2-419 of the Maryland General Corporation Law.

The Compensation Committee determines compensation for the Company's
executive officers, reviews and approves management's recommendations for the
annual salaries of all Company officers, and administers any stock incentive or
other compensation plans adopted by the Company, including the Stock Option
Plan. The Compensation Committee believes that the Company's compensation
package must be structured in a manner that will help the Company attract and
retain qualified executives and will align compensation of such executives with
the interests of stockholders. The compensation package currently consists of
salary and bonus. Although the Company has adopted the Stock Option Plan, the
Company has not issued options under the plan since 1994.

Salary and Bonus

Salary and bonus are determined by the Compensation Committee using a
subjective evaluation process. In making determinations of salary and bonus for
particular officers, including the Chief Executive Officer, the Compensation
Committee considers the general performance of the Company, the officer's
position, level and scope of responsibility, the officer's anticipated
performance and contributions to the Company's achievement of its long-term
goals, and the salary and bonus for the officer recommended by management.

Gilbert M. Grosvenor
John R. Whitmore

Executive Officers Who Are Not Directors

The following list sets forth the name, age, position with the Company,
present principal occupation or employment and material occupations, positions,
offices or employment during the past ten years of each executive officer who is
not a director of the Company. With the exception of Bill D. Tzamaras, who
joined the Company in 2002, each listed individual has held an office with the
Company since its inception in June 1993.

Name Age Position and Background
---- --- -----------------------

Christopher H. Netter 48 Senior Vice President - Leasing. Vice
President of the B.F. Saul Company and B.F.
Saul Property Company and Assistant Vice
President of the B.F. Saul Real Estate
Investment Trust from 1987 to 1993.

Scott V. Schneider 45 Senior Vice President - Chief Financial
Officer, Treasurer and Secretary. Vice
President of the B.F. Saul Company and B.F.
Saul Property Company and Assistant Vice
President of the B.F. Saul Real Estate
Investment Trust from 1985 to 1993.

Charles W. Sherren, Jr. 49 Senior Vice President - Management. Vice
President of the B.F. Saul Company and B.F.
Saul Property Company and Assistant Vice
President of the B.F. Saul Real Estate
Investment Trust from 1981 to 1993.

Bill D. Tzamaras 41 Chief Accounting Officer. Vice President and
Treasurer of the B.F. Saul Real Estate
Investment Trust and B.F. Saul Property
Company since 2001. Vice President of B.F.
Saul Company since 2000. Principal with
Reznick, Fedder & Silverman, Certified
Public Accountants, from 1996 to 2000.

EXECUTIVE COMPENSATION
Annual Compensation

The Company pays compensation to its executive officers for their
services in such capacity. The following Summary Compensation Table sets forth
the annual and long-term compensation paid by the Company to the Company's Chief
Executive Officer and each of its four other most highly compensated executive
officers, who were serving as of December 31, 2002, ("named executive officers")
for, or with respect to, the fiscal periods ended December 31, 2002, 2001, and
2000.

SUMMARY COMPENSATION TABLE

Long-Term
Compensation
------------ All
Annual Compensation Stock Option Other
Name and Principal Position Year Salary Bonus Awards (Shs) Compensation (1)
--------------------------- ---- ------ ----- ------------ ----------------

B. Francis Saul II 2002 $125,000 $10,000 -- --
Chairman and 2001 125,000 10,000 -- --
Chief Executive Officer 2000 125,000 10,000 -- --

B. Francis Saul III 2002 260,000 18,200 -- --
President (2) 2001 226,667 16,450 -- --
2000 201,667 16,800 -- --

Philip D. Caraci 2002 365,000 29,200 -- --
Vice Chairman (3) 2001 331,667 27,200 -- --
2000 306,667 25,200 -- --

Christopher H. Netter 2002 243,500 17,045 -- $ 23,114
Senior Vice President 2001 226,667 16,100 -- 15,615
Leasing 2000 211,667 15,400 -- 14,798

Scott V. Schneider 2002 233,500 16,345 -- 19,767
Senior Vice President 2001 216,667 15,400 -- 15,415
Chief Financial Officer 2000 203,333 14,700 -- 14,561

(1) Amounts paid represent Company's contribution to Employees' Profit Sharing
Retirement Trust and Company's payment of life insurance premiums for the
benefit of the named executive officers.
(2) Served as Vice Chairman until March 20, 2003.
(3) Served as President until March 20, 2003.

Aggregated Options Exercised in Last Fiscal Year, and Fiscal Year-End Share
Option Values

The following table provides information regarding option exercises during
2002 by the named executive officers and the value of such officers' unexercised
options at December 31, 2002. No options were granted to the executive officers
in 2002.

Number of Securities
Underlying Unexercised Value of Unexercised
Shares/Units Options at In-the-Money Options at
Acquired on Value Fiscal Year-End (#) Fiscal Year-End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable (1)
---- ------------ ------------ ------------------------- -----------------------------

B. Francis Saul II
Chairman and Chief
Executive Officer -- -- --/-- --/--

B. Francis Saul III
President -- -- --/-- --/--

Philip D. Caraci 36,890 $124,887 63,110/-- $239,818/--
Vice Chairman

Christopher H. Netter 20,000 62,716 5,000/-- 19,000/--
Senior Vice President, Leasing

Scott V. Schneider 9,900 33,493 15,100/-- 57,380/--
Senior Vice President,
Chief Financial Officer

(1) All unexercised options are fully vested, have an exercise price of $20.00
per share and expire on September 23, 2003, with earlier expiration to
occur at employment termination. Value is based on a closing price of
$23.80 per share on December 31, 2002, minus the exercise price of $20.00
per share.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of February 21, 2003 regarding
equity compensation plans approved by the shareholders and equity compensation
plans that were not approved by the shareholders.

Number of securities to Number of securities
be issued upon exercise Weighted average exercise remaining available for future
of outstanding options, price of outstanding issuance (excluding securities
warrants and rights options, warrants and rights reflected in column (a))
Plan category (a) (b) (c)
------------- ----------------------- ---------------------------- ------------------------------

Equity compensation plans
approved by security holders (1) 62,711 $20.00 220,000

Equity compensation plans not
approved by security holders (2) 130,000 (3) 17.37 40,000

(1) Consists entirely of common shares authorized for issuance under the Stock
Option Plan.
(2) Consists entirely of common shares authorized for issuance under the
Deferred Compensation and Stock Plan for Directors.
(3) Shares are issued upon deferral of directors' compensation fees, at the
time directors' fee are earned. Shares may not be transferred or sold
until the director no longer serves on the Company's Board of Directors.

AUDIT COMMITTEE REPORT

The information contained in the report shall not be deemed to be
"soliciting material" or to "filed" with the SEC, nor shall such information be
incorporated by reference into any previous or future filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company incorporates it by specific
reference. The Audit Committee is comprised of Messrs. Kelley, Longsworth,
Noonan and Symington, all of whom are "independent" (as defined in Sections
303-01(B)(2)(a) and (3) of the NYSE Listing Manual). The Audit Committee has
adopted a written Audit Committee Charter, a copy of which is attached as an
annex hereto.

Review and Discussion with Management. The Committee has reviewed and
discussed the Company's financial statements for the year ended December 31,
2002 with management.

Review and Discussion with Independent Auditors. The Committee has
discussed with the independent auditors those items required by SAS 61, which
includes among other things, matters related to the conduct of the audit of the
Company's financial statements. The committee has received a written report
required by Independence Standards Board Standard No. 1 from the auditors
regarding their independence, and has discussed this report with the auditors.

Change in Auditor. On June 21, 2002, our Board of Directors, following the
recommendation of our Audit Committee, approved the dismissal of Arthur Andersen
LLP as our principal independent accountant. On the same date, our Board
approved, in accordance with our Audit Committee's recommendation, the
engagement of Ernst & Young LLP to serve as our principal independent accountant
to audit our financial statements for the year ending December 31, 2002.

Arthur Andersen LLP's reports on our consolidated financial statements for
each of the prior two most recent fiscal years ended December 31, 2001 and 2000
did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles.
During our prior two most recent fiscal years and through the date hereof, there
were no disagreements with Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to Arthur Andersen LLP's satisfaction, would
have caused them to make reference to the subject matter in connection with
their reports. During that period and through the date hereof, there were no
"reportable events," as defined in Item 304(a)(1)(v) of Regulation S-K.

During our prior two most recent fiscal years and prior to Ernst & Young
LLP's engagement on June 21, 2002, we did not consult Ernst & Young LLP with
respect to the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on our consolidated financial statements, or any other matters or
reportable events required to be disclosed under Items 304(a)(2)(i) and (ii) of
Regulation S-K.

AUDIT COMMITTEE REPORT (CONTINUED)

The Audit Committee currently believes that we should continue our
relationship with Ernst & Young LLP and have appointed Ernst & Young LLP to
continue as our independent accountants for the fiscal year ending December 31,
2003.

One or more representatives of Ernst & Young LLP will be available at the
Annual Meeting to answer your questions and make a statement if they desire.

Fiscal 2002 Audit Firm Fee Summary. During 2002, we retained Arthur
Andersen LLP and Ernst & Young LLP to provide services in the following
categories and amounts:

Arthur Andersen LLP Ernst & Young LLP
------------------- -----------------

Audit Fees $ -- $ 144,500
Financial Information Systems Design
and Implementation Fees -- --
All Other Fees (Tax Services, Contract Services,
Registration Statements and Debt Compliance Letter) 9,084 122,250
---------- -----------
Total Fees $ 9,084 $ 266,750
========== ===========

The Audit Committee has determined that the provision of non-audit
services by each of our principal accountants during 2002 is compatible with
maintaining our principal accountants' independence.

Conclusion. Based on the review and discussions referred to above, the
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 2002 for filing with the SEC.

Paul X. Kelley, Committee Chairman
Charles R. Longsworth
Patrick F. Noonan
James W. Symington

PERFORMANCE GRAPH

Rules promulgated under the Exchange Act require the Company to present a
graph comparing the cumulative total stockholder return on its Common Stock with
the cumulative total stockholder return of (i) a broad equity market index, and
(ii) a published industry index or peer group. The graph compares the cumulative
total stockholder return of the Company's Common Stock ("BFS"), based on the
market price of the Common Stock and assuming reinvestment of dividends, with
the National Association of Real Estate Investment Trust Equity Index ("NAREIT
Equity"), the S&P 500 Index ("S&P 500") and the Russell 2000 Index ("Russell
2000"). The graph assumes the investment of $100 on January 1, 1998.

Comparison of Cumulative Total Return

[GRAPH]

Dec. 1997 Dec. 1998 Dec. 1999 Dec. 2000 Dec. 2001 Dec. 2002
Saul Centers $100 $ 94 $ 95 $140 $174 $208
Russell 2000 $100 $ 97 $118 $115 $118 $ 94
NAREIT Equity $100 $ 83 $ 79 $ 99 $113 $118
S&P 500 $100 $129 $156 $141 $125 $ 97

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Officers, directors and greater than 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Forms 3, 4 and 5 which
they file.

To the best of the Company's knowledge, based upon copies of forms
furnished to it and written representations from officers, directors and 10%
beneficial holders, no person was late filing SEC Forms 3, 4 or 5 during the
period January 1, 2002 through December 31, 2002.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of February 21,
2003, concerning shares of Common Stock beneficially owned by all persons (if
any) known by the Company to own more than 5% of the Company's outstanding
Common Stock, by each director and nominee, by each executive officer named in
"Executive Compensation" above, and by all directors and executive officers as a
group, according to information provided to the Company by each such person.
Unless otherwise noted, each person named has sole voting and sole investment
power with respect to all shares beneficially owned by such person. For purposes
of this table, "beneficially owned" includes securities redeemable or
exercisable for Common Stock that are currently redeemable or exercisable or
that will become redeemable or exercisable within 60 days of February 21, 2003.
As a result, the number of shares set forth below includes the number of shares
of Common Stock the person holds and shares of common stock the person could
receive on exercise of options for shares held by the person that are
exercisable within 60 days of February 21, 2003.

Aggregate Number
Name of of Shares Beneficially Percent of
Beneficial Owner (1) Owned (2) Class (2)
-------------------- ---------------------- ----------

B. Francis Saul II 4,255,856 (3) 27.7%
Philip D. Caraci 113,767 (4) *
John E. Chapoton 435 *
Gilbert Grosvenor 21,341 *
Philip C. Jackson, Jr 60,170 (5) *
David B. Kay 190 *
Paul X. Kelley 17,397 *
Charles R. Longsworth 24,450 *
Patrick F. Noonan 28,571 (6) *
B. Francis Saul III 22,189 *
James W. Symington 7,768 *
John R. Whitmore 22,830 *
Scott V. Schneider 16,341 (7) *
Christopher H. Netter 5,268 (8) *
Charles W. Sherren, Jr 10,500 (9) *
All directors and officers as a group (18 persons) 4,610,888 29.8%

* Less than 1 percent
(1) The address of each beneficial owner listed is c/o Saul Centers, Inc.,
7501 Wisconsin Avenue, Suite 1500, Bethesda, MD 20814-6522.
(2) Beneficial ownership and percent of class are calculated pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended. Includes
134,097 shares earned by directors in the Deferred Compensation Plan.
(3) Includes 3,315,984 shares owned by the B. F. Saul Real Estate Investment
Trust, 267,769 shares owned by Dearborn LLC, 208,454 shares owned by B. F.
Saul Property Co., 374,030 shares owned by Westminster Investing
Corporation, 99 shares owned by Van Ness Square Corporation, 22,602 shares
owned by various family trusts for which Mr. Saul II is either the sole
trustee or sole custodian for a child, and 57,066 shares owned by Mr. Saul
II's spouse. Mr. Saul II disclaims beneficial ownership of 57,066 shares
owned by his spouse. Pursuant to Rule 13d-3, the Common Stock described
above is considered to be beneficially owned by Mr. Saul II because he has
or may be deemed to have sole or shared voting and/or investment power in
respect thereof. Excludes 1,190,938 shares owned by the B. F. Saul Company
Employees' Profit Sharing Retirement Trust, (the "Employee Trust"). Mr.
Saul II is one of four Trustees for the Employee Trust and has an interest
in the Employee Trust as one of the participating employees. Excludes
2,437,859 units in the Partnership owned by B. F. Saul Real Estate
Investment Trust, 1,735,475 units in the Partnership owned by Dearborn
LLC, 191,415 units in the Partnership owned by the B. F. Saul Property
Company, 574,111 units in the Partnership owned by Van Ness Square
Corporation, 229,420 units in the Partnership owned by Westminister
Investing Corporation, 10,483 units in the Partnership owned by Avenel
Executive Park Phase II, LLC. In general, these units are convertible into
shares of Common Stock on a one-for-one basis. However, under the terms of
the limited partnership agreement of the Partnership, at the current time,
these units may not be converted into shares of Common Stock because the
conversion would cause Mr. Saul II and his affiliates to beneficially own
collectively greater than 24.9% of the outstanding shares of Common Stock.
(4) Includes 51,714 shares owned in trust by Mr. Caraci's spouse for which Mr.
Caraci is a co-trustee with his spouse, and 32,611 shares subject to
currently exercisable options held by Mr. Caraci. Mr. Caraci disclaims
beneficial ownership of 51,714 shares owned by his spouse. Excludes
1,190,938 shares owned by the Employee Trust. Mr. Caraci is one of four
Trustees for the Employee Trust and has an interest in the Employee Trust
as one of the participating employees.
(5) Mr. Jackson disclaims beneficial ownership of 2,800 shares owned by his
spouse.
(6) Mr. Noonan disclaims beneficial ownership of 6,016 shares owned by his
spouse.
(7) Includes 15,100 shares subject to currently exercisable options held by
Mr. Schneider and 1,241 shares owned by Mr. Schneider's children.
(8) Includes 5,000 shares subject to currently exercisable options held by Mr.
Netter, and 129 shares owned by his spouse. Mr. Netter disclaims
beneficial ownership of the 129 shares owned by his spouse.
(9) Includes 500 shares owned jointly by Mr. Sherren and his spouse and 10,000
shares subject to currently exercisable options held by Mr. Sherren.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

Certain relationships exist among the Company and its subsidiaries, the
members of The Saul Organization and the Partnerships and are discussed below.

Management of the Current Portfolio Properties. The Company and its
subsidiaries share with The Saul Organization certain ancillary functions, such
as computer and payroll services, benefits administration and in-house legal
services. The Saul Organization also subleases office space to the Company (see
below for description of terms of corporate headquarters lease). The terms of
all sharing arrangements, including payments related thereto, are reviewed
periodically by the Audit Committee of the Company, which consists entirely of
independent directors under the Company's Articles and NYSE rules. Included in
general and administrative expenses for the year ended December 31, 2002 are
charges totaling $2,574,000 related to such shared services, of which $2,542,000
was paid prior to December 31, 2002. The Company believes that the amounts
allocated to it for such shared services represent a fair allocation between The
Saul Organization and the Company and its subsidiaries. The Company believes
that sharing these expenses with The Saul Organization results in a savings from
the expenses that would be incurred if such services were obtained from
independent third parties.

Related Party Rents. Chevy Chase Bank leases space in several of the
shopping centers owned by the Company and its subsidiaries. The total rental
income from Chevy Chase Bank from January 1, 2002 through December 31, 2002 was
$1,368,000. The Company believes that all of the leases with Chevy Chase Bank
have comparable terms to leases that would have been obtained from unrelated
third parties.

An entity controlled by the son of Philip D. Caraci, the Company's
President and director until March 2003 and current Vice Chairman, leased space
in four of the Company's Shopping Centers during 2002. The total rental income
was $143,000 during the year ended December 31, 2002. The leases were assigned
to unaffiliated third parties during the year and no further rental income will
be received under these leases from the affiliated party during 2003.
Additionally, a $37,000 leasing commission payment was made to this affiliated
party for procurement of a third party tenant lease at one of the Company's
Shopping Centers. The Company believes that all of these leases have comparable
terms to leases that would have been obtained from unrelated third parties.

The Company's corporate headquarters lease commenced in March 2002. The
Company leases space from a member of The Saul Organization. The 10-year lease
provides for an initial annual rental payment of $513,000, escalated at 3% per
year, with payment of a pro-rata share of operating expenses over a base year
amount. The total rental expense reflected in the Company's financial statements
for the year ended December 31, 2002 was $549,000. The Company believes that
this lease has comparable terms to what would have been obtained from a third
party landlord.

Management Personnel. The Chairman and Chief Executive Officer as well as
the Vice Chairman, the President of the Company and the Chief Accounting Officer
are also affiliated with The Saul Organization, but devote a substantial amount
of time to the management of the Company. The annual compensation for these
officers is fixed by the Compensation Committee of the Board of Directors each
year.

Exclusivity Agreement and Right of First Refusal. The Company has entered
into an Exclusivity Agreement (the "Exclusivity Agreement") with, and has been
granted a right of first refusal (the "Right of First Refusal") by, certain
members of The Saul Organization. The purpose of these agreements is to minimize
potential conflicts of interest between The Saul Organization and the Company
and it subsidiaries. The Exclusivity Agreement and Right of First Refusal
generally require The Saul Organization to conduct its shopping center business
exclusively through the Company and its subsidiaries and to grant the Company a
right of first refusal to purchase commercial properties and development sites
that become available to The Saul Organization in the District of Columbia or
adjacent suburban Maryland.

Reimbursement Agreement. Pursuant to a reimbursement agreement among the
partners in the Partnerships, The Saul Organization and those of its
subsidiaries that are partners in the Partnerships have agreed to reimburse the
Company and the other partners in the event the Partnerships fail to make
payments with respect to certain portions of the Partnerships' debt obligations
and the Company or any such other partners personally make payments with respect
to such debt obligations. As of December 31, 2002, the maximum potential
obligation of The Saul Organization and its subsidiaries under the agreement was
$266,392,000. The Company believes that the Partnerships will be able to make
all payments due with respect to their debt obligations.

OTHER MATTERS

The Board of Directors does not know of any matters to be presented at the
annual meeting other than those stated above. If any other business should come
before the annual meeting, the persons named in the enclosed proxy will vote
thereon as they determine to be in the best interests of the Company.

PROPOSALS FOR NEXT ANNUAL MEETING

It is presently contemplated that the 2004 annual meeting of stockholders
will be held in mid-April 2004. Any stockholder proposal to be considered for
inclusion in the Company's proxy statement and form of proxy for the annual
meeting of stockholders to be held in 2004 must be received at the Company's
office at 7501 Wisconsin Avenue, Suite 1500, Bethesda, Maryland 20814-6522, no
later than November 20, 2003.

Under the Amended and Restated Bylaws of the Company, a stockholder must
comply with certain procedures to submit stockholder proposals to be considered
at an annual meeting of stockholders. These procedures provide that stockholders
must do so by notice timely delivered to the Secretary of the Company. The
Secretary of the Company generally must receive notice of any such proposal not
less than sixty days nor more than ninety days prior to the anniversary of the
preceding year's annual meeting of stockholders. In the case of proposals for
the 2004 annual meeting of stockholders, the Secretary of the Company must
receive notice of any such proposal no earlier than January 26, 2004 and no
later than February 25, 2004 (other than proposals intended to be included in
the proxy statement and form of proxy, which, as noted above, the Company must
receive by November 20, 2003). The stockholder notice must meet the applicable
requirements that are imposed by the Amended and Restated Bylaws. The chairman
of the annual meeting shall have the power to declare that any proposal not
meeting these and any other applicable requirements that the Amended and
Restated Bylaws impose shall be disregarded. A copy of the Bylaws are on file
with the Securities and Exchange Commission.

In addition, the form of proxy that the Board of Directors will solicit in
connection with the Company's 2004 annual meeting of stockholders will confer
discretionary authority to vote on any proposal, unless the Secretary of the
Company receives notice of that proposal no earlier than January 26, 2004 and no
later than February 25, 2004, and the notice complies with the other
requirements described in the preceding paragraph.

ANNUAL REPORT

A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 2002 accompanies this Proxy Statement.

By order of the Board of Directors

/s/ Scott Schneider
Scott V. Schneider
Chief Financial Officer and Secretary

March 24, 2003
Bethesda, Maryland

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

CHARTER

I. PURPOSE

The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors in fulfilling its oversight responsibilities
relating to: (a) the integrity of the financial reports and other financial
information provided by Saul Centers, Inc. (the "Company") to the public;
(b) the Company's compliance with legal and regulatory requirements, (c)
the systems of internal controls which management has established; (d) the
performance of the Company's internal audit function; (e) the independence,
qualifications and performance of the Company's independent auditor; (f)
the Company's auditing, accounting and financial reporting processes
generally; and (g) the duties set forth below and such other
responsibilities as may be delegated to the Committee by the Board from
time to time. The Committee is responsible for appointment, compensation
and oversight of the Company's independent auditors and internal auditors
who shall report directly to the Committee and are ultimately accountable
to the Board and the Committee. Consistent with this function, the
Committee should encourage continuous improvement of, and should foster
adherence to, the Company' s policies, procedures and practices at all
levels.

II. COMPOSITION

The Committee shall be composed of three or more directors as determined by
the Board, each of whom shall be "independent," as such term is defined
from time to time in the Securities Exchange Act of 1934 (the "Exchange
Act"), the New York Stock Exchange's Listed Company Manual (the "NYSE
Manual") and other laws and regulations applicable to the Company and the
Committee. All members of the Committee shall have a working familiarity
with basic finance and accounting practices. Committee members may enhance
their familiarity with finance and accounting by participating in
educational programs conducted by the Company or an outside consultant.

Prior to approving a director's appointment to the Committee, the Board
shall have determined, (a) that such director satisfies the foregoing
independence requirements; and (b) in the exercise of its business
judgment, that such director has the requisite financial and accounting
knowledge to serve on the Committee.

No member of the Committee shall simultaneously serve on the audit
committee of more than three public companies, including the Company,
unless the Board has made a determination that such simultaneous service
would not impair the ability of such member to effectively serve on the
Committee.

The Chairman of the Board shall recommend to the full Board for its
approval which directors should serve on the Committee and shall recommend
who shall serve as chairman of the Committee. In addition, from time to
time as he sees fit, the Chairman of the Board shall recommend to the full
Board for its approval the removal of directors from the Committee or the
appointment of additional directors to the Committee. If a chairman is not
elected by the Board, the members of the Committee may designate a chairman
by majority vote of the full Committee.

III. COMPENSATION

The chairman of the Committee and each member of the Committee shall be
entitled to compensation for being the chairman or member of the Committee,
as applicable, and for meeting attendance as such fees are established from
time to time by the Board. Each member of the Committee shall be entitled
to be reimbursed for reasonable out-of-pocket expenses incurred by such
member in attending meetings of the Committee and in performing his/her
duties as a member of the Committee. No member of the Committee shall
receive from the Company any compensation other than his or her fees for
serving as a director and a member of the Committee or any other committee
of the Board.

IV. MEETINGS

The Committee shall meet at least quarterly, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
accountants in separate sessions to discuss any matters that the Committee
or either of these groups believe should be discussed privately.

Meetings of the Committee shall be called by the chairman of the Committee
upon his request or upon the request of the Chairman of the Board or a
majority of the members of the Committee. Except for the regular quarterly
meetings of the Committee, notice of any meeting of the Committee shall be
given in the manner provided for in the Bylaws of the Company for meetings
of the Board and its committees.

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

CHARTER

IV. MEETINGS (continued)

The provisions set forth in the Company's Bylaws for meetings of the Board
and its committees shall govern the quorum and voting requirements for all
meetings of the Committee.

The Committee shall be required to keep a record of its actions and
proceedings and shall report to the Board at the next meeting of the Board
following the Committee meeting with such report to include recommendations
for Board actions when appropriate.

V. RESPONSIBILITIES AND DUTIES

The Committee's specific powers and responsibilities in carrying out its
oversight role are delineated in the Audit Committee Powers and
Responsibilities Checklist. The checklist will be updated annually to
reflect changes in regulatory requirements, authoritative guidance, and
evolving oversight practices. As the compendium of Committee powers and
responsibilities, the most recently updated checklist will be considered to
be an addendum to this charter.

This charter, including the most recently updated Audit Committee Powers
and Responsibilities Checklist, shall be made available on the Company's
website at www.saulcenters.com.

AUDIT COMMITTEE POWERS AND RESPONSIBILITIES CHECKLIST

---------------------------------------
MEETINGS AT WHICH ITEMS
ARE ANTICIPATED TO BE
PERFORMED
---------------------------------------
A/N - As necessary
P - In person
T - By telephone
---------------------------------------
1Q 2Q 3Q 4Q A/N
---------------------------------------
P T P T P T P T
------------------------------------------------------------------------------------------------------------------------------

A. Independent Auditors
------------------------------------------------------------------------------------------------------------------------------
1. In the sole discretion of the Committee, retain or terminate the
Company's independent auditor and the approval of all fees and terms of
the audit engagement X X
------------------------------------------------------------------------------------------------------------------------------
2. Approve in advance all tax and non-audit services which may legally be
provided to the Company by its independent auditor, including the fees
and terms for such services. X X
------------------------------------------------------------------------------------------------------------------------------
3. Meet with the independent auditor to review the scope of the annual
audit and the audit procedures to be utilized. X
------------------------------------------------------------------------------------------------------------------------------
4. At the conclusion of the audit, review the audit, including any
comments or recommendations of the independent auditor. The review
will cover any audit problems or difficulties encountered by the
independent auditors and management's response to those items.

Items to be reviewed would include: any restrictions on the scope of
the independent auditor's activities or on access to requested
information, any significant disagreements between the independent
auditor and management, any accounting adjustments that were noted
or proposed by the independent auditor, but were passed (as
immaterial or otherwise); any communications between the audit team
and the independent auditor's national office respecting auditing or
accounting issues presented by the engagement; and any "management"
or "internal control" letter issued, or proposed to be issued, by the
independent auditor to the Company X
------------------------------------------------------------------------------------------------------------------------------
5. Review with the independent auditor and the Company's financial
management the adequacy and effectiveness of the Company's internal
accounting and financial controls, and management's report on any
significant deficiencies in internal controls which could adversely affect
the Company's ability to record, process, summarize and report financial
data and report on any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Company's internal controls X X X X X
------------------------------------------------------------------------------------------------------------------------------
6. Review the annual management recommendation letter prepared by the
independent auditor and management's responses to such letter X
------------------------------------------------------------------------------------------------------------------------------
7. Review the independent auditor's ability to attest to and report on
management's assessment of the Company's internal control structure
and its financial reporting procedures in its Annual Report on Form 10-K X
------------------------------------------------------------------------------------------------------------------------------

AUDIT COMMITTEE POWERS AND RESPONSIBILITIES CHECKLIST

A. Independent Auditors (continued)
------------------------------------------------------------------------------------------------------------------------------
8. Obtain and review, at least annually, a report by the independent
auditor describing the auditor's internal quality-control procedures,
and any material issues raised by the most recent internal
quality-control review or peer review of the auditor, 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 auditor and any steps taken to deal with any such
issues X
------------------------------------------------------------------------------------------------------------------------------
9. Review with the Company's financial management and the independent
auditor at least annually the Company's critical accounting policies. X X
------------------------------------------------------------------------------------------------------------------------------
10. Confirm quarterly that the Company's independent auditor has no
conflict of interest with the Company under Section 206 of the
Sarbanes-Oxley Act of 2002 or any rules promulgated thereunder X X X X
------------------------------------------------------------------------------------------------------------------------------
11. Review the annual written statement from the independent auditor
delineating all relationships between the independent auditor and the
Company, and discussing any relationships which may impact the
continued objectivity and independence of the independent auditors X
------------------------------------------------------------------------------------------------------------------------------
12. Evaluating the independent auditor and the lead audit partner on an
annual basis, taking into account the opinions of the Company's
management and internal auditors or others performing similar functions X
------------------------------------------------------------------------------------------------------------------------------
13. Consider whether, in order to assure continuing auditor independence,
there should be regular rotation of the lead audit partner or the
independent auditor X
------------------------------------------------------------------------------------------------------------------------------
14. Report the Committee's conclusions to the full Board with respect to
the independent auditor's qualifications, performance and independence X X
------------------------------------------------------------------------------------------------------------------------------

AUDIT COMMITTEE POWERS AND RESPONSIBILITIES CHECKLIST

B. Annual and Quarterly Financial Results and Statements and Public
Announcements of Financial Information
--------------------------------------------------------------------------------------------------------------------------------

1. Review the annual and quarterly financial results and statements,
including the disclosure in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" with management and the
independent auditors prior to any filing with the SEC. The review will
include the following items:

. any material accounting issues identified by management or the
independent auditor and their impact on the financial statements
. any audit problems or difficulties encountered by the independent auditor
and management's response to those items
. the independent auditor's evaluation of the quality of the disclosure and
the content of the financial statements
. any changes in accounting principles
. the effect of any regulatory and accounting initiatives, such as off-balanceee
sheet activities, on the financial statements
. any related party transactions
. any pending litigation and other contingent liabilities
. the report of the independent auditor required by Section 10A of the
Securities Exchange Act of 1934, including the critical
accounting policies and practices used, all alternative
methods of financial accounting within GAAP that have been
discussed with management, the treatment preferred by the
independent auditor, and other material written communications
with management
. other matters required to be communicated by the independent auditor
to the Committee under generally accepted auditing standards X X X X
--------------------------------------------------------------------------------------------------------------------------------
2. Review, prior to announcement or distribution to analysts or rating agencies,
Company earnings releases and earnings guidance for the purpose of ensuring
that such press releases and guidance properly disclose financial information
presented in accordance with GAAP and, to the extent non-GAAP information
is included, adequately disclose how such non-GAAP information differs from
the comparable GAAP information and that such pro forma information is
not given undue prominence, and to ensure that such press releases and
guidance for not otherwise provide misleading presentations of the Company's
results of operations or financial condition X X X X
--------------------------------------------------------------------------------------------------------------------------------

AUDIT COMMITTEE POWERS AND RESPONSIBILITIES CHECKLIST (CONTINUED)

C. Financial Reporting Process
--------------------------------------------------------------------------------------------------------------------------------
1. In consultation with the independent auditor, review the integrity of
the Company's financial reporting process and controls, both internal
and external X
--------------------------------------------------------------------------------------------------------------------------------
2. Consider the independent auditor's judgments about the quality and
appropriateness (not just acceptability) of the Company's accounting
principles and the clarity of financial disclosure practices as applied
in its financial reporting X
--------------------------------------------------------------------------------------------------------------------------------
3. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
independent auditors or the Company's financial management X
--------------------------------------------------------------------------------------------------------------------------------
4. Discuss, at least annually, with the independent auditors and the
Company's financial management any significant judgments or estimates
made in management's preparation of the financial statements and the
view of each as to appropriateness of such judgments or estimates X X
--------------------------------------------------------------------------------------------------------------------------------
5. Review with the independent auditors and the Company's financial
management the extent to which changes or improvements in financial or
accounting practices, as approved by the Committee, have been
implemented X
--------------------------------------------------------------------------------------------------------------------------------
D. Internal Audit Function
--------------------------------------------------------------------------------------------------------------------------------
1. Oversee the internal audit function, including the retention,
evaluation and termination of the internal auditor and the approval of
all fees and terms of engagement X
--------------------------------------------------------------------------------------------------------------------------------
2. Meet with the internal auditor to develop the annual internal audit
plan X
--------------------------------------------------------------------------------------------------------------------------------
3. Meet, at least annually, with the internal auditor to review the results of the
work performed, the adequacy and effectiveness of the controls tested, and
any recommendations or problems encountered and management's response
to those items X X
--------------------------------------------------------------------------------------------------------------------------------
4. Report the Committee's conclusions to the full Board with respect to
the performance of the independent audit function X X
--------------------------------------------------------------------------------------------------------------------------------

AUDIT COMMITTEE POWERS AND RESPONSIBILITIES CHECKLIST (CONTINUED)

E. Other Reports and Certifications
--------------------------------------------------------------------------------------------------------------------------------
1. Report to the entire Board, annually, or more often as deemed
necessary, on the activities and findings of the Committee, including
its recommendation on inclusion of the Company's audited financial
statements into the Company's Annual Report on Form 10-K X X
--------------------------------------------------------------------------------------------------------------------------------
2. Prepare the annual report of the Committee's oversight responsibilities
for inclusion in the Company's annual proxy statement X
--------------------------------------------------------------------------------------------------------------------------------
3. Review the Company's proxy statement disclosure concerning the
independence of the members and the charter of the Committee X
--------------------------------------------------------------------------------------------------------------------------------
4. Review and approve the Company's certification to the New York Stock
Exchange (the "NYSE") concerning the meetings, membership requirements
and charter of the Committee X
--------------------------------------------------------------------------------------------------------------------------------
5. Review the annual certification of the CEO to the NYSE that he is not
aware of any violation of the NYSE's listing standards, which
certification is to be included in the Company's Annual Report
delivered to shareholders X
--------------------------------------------------------------------------------------------------------------------------------
6. Include a copy of the Committee charter and most recent checklist as an
appendix to the proxy statement at least once every three years X
--------------------------------------------------------------------------------------------------------------------------------
F. Other Powers and Responsibilities
--------------------------------------------------------------------------------------------------------------------------------
1. Review with management, the independent auditor and the internal
auditors significant risks or exposures, discussing guidelines and
policies to govern this process and assessing steps management has
taken to minimize such risks to the Company X
--------------------------------------------------------------------------------------------------------------------------------
2. Review management's monitoring of the Company's compliance with
applicable laws and regulations and ensure that the Company's disclosure
controls and procedures ensure that the Company's financial statements,
reports and other financial information disseminated to the SEC and the
public satisfy legal requirements. X X X X
--------------------------------------------------------------------------------------------------------------------------------
3. Review the Company's REIT regulatory compliance X X X X
--------------------------------------------------------------------------------------------------------------------------------
4. Review and/or reassess the Committee charter and checklist periodically,
at least annually, and amend the charter and checklist as conditions dictate. X X
--------------------------------------------------------------------------------------------------------------------------------
5. Obtain advice and assistance from outside legal, accounting or other advisors,
as appropriate. The Committee has full power and authority to retain, at the
Company's expense, such outside legal, accounting and other advisors as the
Committee deems necessary or appropriate X
--------------------------------------------------------------------------------------------------------------------------------
6. Meet separately with management, with those responsible for internal
audit function and with the independent auditors to identify issues
warranting Committee attention X
--------------------------------------------------------------------------------------------------------------------------------

AUDIT COMMITTEE POWERS AND RESPONSIBILITIES CHECKLIST (CONTINUED)

F. Other Powers and Responsibilities (continued)
--------------------------------------------------------------------------------------------------------------------------------
7. Set, and review on a periodic basis, clear policies for hiring
employees or former employees of the Company's independent auditors X
--------------------------------------------------------------------------------------------------------------------------------
8. Establish, and review on a periodic basis, procedures for the receipt,
retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters and the
confidential, anonymous submission by employees of concerns regarding
questionable accounting and auditing matters X
--------------------------------------------------------------------------------------------------------------------------------
9. Investigate any matter relating to the Company's accounting, auditing,
internal control, or financial reporting practices brought to its
attention, with full access to all of the Company's books, records,
facilities and personnel X
--------------------------------------------------------------------------------------------------------------------------------
10. Review and approve any transactions between (i) the Company and its
officers or directors or their affiliates, and (ii) the Company and its
affiliates X
--------------------------------------------------------------------------------------------------------------------------------
11. Meet quarterly with the Company's chief financial officer (the "CFO") to
ascertain the ability of the CFO and the Company's chief executive officer
(the "CEO") to sign the certifications required by Sections 302 and 906 of
the Sarbanes-Oxley Act of 2002, including the reports of the effectiveness of
disclosure controls and procedures and any changes in internal controls X X X X
--------------------------------------------------------------------------------------------------------------------------------
12. Conduct an evaluation of the Committee's performance on an annual basis X
--------------------------------------------------------------------------------------------------------------------------------

SAUL CENTERS, INC.
A Proxy for Annual Meeting of Stockholders
April 25, 2003
This Proxy is solicited by the Board of Directors

The undersigned hereby appoints B. Francis Saul II and B. Francis Saul III, and
each of them, as proxies, with full power of substitution in each, to vote all
shares of the common stock of Saul Centers, Inc. (the "Company") which the
undersigned is entitled to vote, at the Annual Meeting of Stockholders of the
Company to be held on April 25, 2003, at 11:00 a.m. local time, and at any
adjournment thereof, on all matters set forth in the Notice of Meeting and Proxy
Statement, dated March 24, 2003, a copy of which has been received by the
undersigned as follows:

This Proxy will be voted as directed or, if no directions given, will
be voted "for" the matters stated.

Please complete, sign, date and return this proxy card promptly

Saul Centers, Inc. 2003 Annual Meeting

1. TO ELECT FOUR DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS
IN 2006.

1- Philip D. Caraci
2- Gilbert M. Grosvenor
3- Philip C. Jackson, Jr.
4- David B. Kay

__ FOR all nominees listed to the left (except as specified below)
__ WITHHOLD AUTHORITY to vote for all nominees listed to the left.

(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominees(s) in the box provided to the right.

2. OTHER MATTERS: GRANT AUTHORITY upon such other matters as may come before
the meeting as they determine to be in the best interest of the Company.

FOR AGAINST ABSTAIN

Date______________, 2003 NO. OF SHARES

Check appropriate box:
Indicate changes below:
Address Change? Name Change?

Signature(s) in Box:___

NOTE: Please sign exactly as your name(s) appear(s). When shares are held
by joint tenants, both should sign. Trustees and other signing in a
representative or fiduciary capacity should indicate their full titles in such
capacity.