1SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OFProxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (AMENDMENT NO. )(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ][_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for[x] 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
[ ] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
CHINA RESOURCES DEVELOPMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X][x] No fee required.
[ ][_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
(2)________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
(3)________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4)________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
(5)________________________________________________________________________________
5) Total fee paid:
[ ][_] Fee paid previously with preliminary materials:
[ ]________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Formform or Scheduleschedule and the date of its filing.
(1)1) Amount Previously Paid:
(2)previously paid:
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(4)4) Date Filed:
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CHINA RESOURCES DEVELOPMENT, INC.
23/Room 2005, 20/F. OFFICE TOWER, CONVENTION PLAZA
1 HARBOUR ROAD, WANCHAI, HONG KONG, Universal Trade Centre
3-5A Arbuthnot Road, Central, Hong Kong
-----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 30, 1997To Be Held May 28, 1999
To the Shareholders:
Notice is hereby given that an Annual Meeting of Shareholders (the
"Annual Meeting") of CHINA RESOURCES DEVELOPMENT, INC. (the "Company"), will be
held at the offices of Hainan Zhongwei Agricultural Resources Company Limited,
Sixth Floor, International Hong Yun Hotel, 13 Haixiu Avenue, Haikou City, Hainan
Province, People's Republic of China, on December 30, 1997,May 28, 1999, at 3:00 p.m., local time,
for the following purposes:
1. To consider and vote upon a proposal by the Board of Directors to
effect a one-for-ten reverse stock split of the Company's common stock,
par value $0.001 per share; and of the Company's Series B Preferred
Stock, par value $0.001 per share.
2. To elect directors in Class I;
2.III;
3. To consider and vote upon the ratification of the appointment of
Ernst & Young as the Company's independent accountants for the fiscal
year ending December 31, 1997;1999; and
3.4. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
Shareholders of record at the close of business on December 12, 1997,April 30, 1999, are
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof. The Company's annual report on Form 10- K/A10-K for the year
ended December 31, 1996,1998, is enclosed for your convenience.
Please sign and date the enclosed proxy card and return it promptly in
the accompanying envelope (no postage required if mailed in the United States)
to ensure that your shares will be represented at the Annual Meeting. If you
attend the Annual Meeting, you may vote your shares in person even if you have
previously submitted a proxy.
By Order of the Board of Directors,
/s/ Zhang Yibing
Zhang YibingWong Wah On
------------------------------------
Wong Wah On
Corporate Secretary
December 15, 1997May 13, 1999
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CHINA RESOURCES DEVELOPMENT, INC.
23/Room 2005, 20/F. OFFICE TOWER, CONVENTION PLAZA
1 HARBOUR ROAD, WANCHAI, HONG KONG, Universal Trade Centre
3-5A Arbuthnot Road, Central, Hong Kong
----------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON DECEMBER 30, 1997MAY 28, 1999
This proxy statement and the accompanying proxy card are being
furnished in connection with the solicitation of proxies by the Board of
Directors of China Resources Development, Inc., a Nevada corporation (the
"Company"), from holders of the Company's outstanding shares of Common Stock,
par value $0.001 per share (the "Common Stock"), and from the holder of the
Company's outstanding shares of Series B preferred stock (the "Preferred
Stock"), for the Annual Meeting of Shareholders to be held December 30, 1997,May 28, 1999, for the
purposes set forth in the accompanying notice (the "Annual Meeting"). The
Company will bear the costs of soliciting proxies from its shareholders. In
addition to soliciting proxies by mail, directors, officers and employees of the
Company, without receiving additional compensation therefor, may solicit proxies
by telephone, by telegram or in person. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of Common Stock held of record
by such persons, and the Company will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith. This proxy statement is first being
mailed to shareholders of the Company on or about December 15, 1997.May 13, 1999.
VOTING AT THE MEETING
At the close of business on December 12, 1997,April 30, 1999, the record date for
determining shareholders entitled to notice of and to vote at the Annual Meeting
(the "Record Date"), there were outstanding and entitled to vote approximately
6,029,0045,929,004 shares of Common Stock and 3,200,000 shares of Preferred Stock. All of
the outstanding shares of Common Stock and Preferred Stock are entitled to vote
on all matters which properly come before the annual meeting, and each
shareholder will be entitled to one vote for each share of Common Stock or
Preferred Stock held.
Each proxy that is properly signed and received prior to the Annual
Meeting will, unless revoked, be voted in accordance with the instructions on
such proxy. If no instruction is indicated, the shares will be voted FOR
approval of the reverse stock split, FOR the election of the nominees for
director listed in this proxy statement, FOR ratification of the appointment of
Ernst & Young, and FOR the approval of such other business that may properly
come before the Annual Meeting or any postponement or adjournment thereof. A
shareholder who has given a proxy may revoke such proxy at any time before it is
voted at the Annual Meeting by delivering a written notice of revocation or duly
executed proxy bearing a later date to the Secretary of the Company or by
attending the meeting and voting in person.
A quorum of shareholders is necessary to take action at the Annual
Meeting. A majority of the outstanding shares of Common Stock and Preferred
Stock, counted together, of the Company, represented in person or by proxy, will
constitute a quorum. Votes cast by proxy or in person at the Annual Meeting will
be tabulated by the inspectors of election appointed for the Annual Meeting. The
inspectors of election will determine whether or not a quorum is present at the
Annual Meeting. The inspectors of election will treat abstentions as shares of
Common Stock or Preferred Stock that are present and entitled to vote for
purposes of determining the presence of a quorum. Under certain circumstances, a
broker or other nominee may have discretionary authority to vote certain shares
of Common Stock if instructions have not been received from the beneficial owner
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or other person entitled to vote. If a broker or nominee indicates on the proxy
that it does not have instructions or discretionary authority to vote certain
shares of Common Stock on a particular matter, those shares will not be
considered as present for purposes of determining whether a quorum is present or
whether a matter has been approved.
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The nominees for director who receive the greatest number of votes cast
in person or by proxy at the Annual Meeting shall be elected directors of the
Company. The vote required for adoption of the other proposals herein is the
affirmative vote of a majority of the shares of Common Stock and Preferred Stock
present in person or represented by proxy at the Annual Meeting; and, for
purposes of determining shareholder approval of such proposals, abstentions will
be treated as shares of Common Stock or Preferred Stock voted against adoption
of such proposals.
CONVENTIONS
Unless otherwise specified, all references in this report to "U.S.
Dollars," "Dollars," "U.S.$," or "$" are to United States dollars; and all
references to "Renminbi" or "Rmb" or "yuan" are to Renminbi yuan, which is the
lawful currencyPROPOSAL 1 - BOARD OF DIRECTORS PROPOSAL TO EFFECT A
ONE-FOR-TEN REVERSE STOCK SPLIT OF THE COMPANY'S OUTSTANDING CAPITAL STOCK
The Board of the People's Republic of China ("China" or "PRC"). The
Company and Billion Luck maintain their accounts in U.S. Dollars and Hong Kong
Dollars, respectively. HARC and the Operating Subsidiaries maintain their
accounts in Renminbi yuan. The financial statementsDirectors of the Company and its
subsidiaries are prepared in Renminbi. Translations of amounts from Renminbihas approved a resolution to
U.S. Dollars are for the convenienceeffect a one-for-ten reverse split of the reader. Unless otherwise indicated,
any translations from RenminbiCompany's issued and outstanding
shares of Common Stock and Preferred Stock (the "Reverse Stock Split"). If the
Reverse Stock Split is approved by shareholders, the Board of Directors will
determine the date on which the Reverse Stock Split will become effective. Each
share of Common Stock and Preferred Stock issued and outstanding immediately
prior to U.S. Dollarsthat effective date will be reclassified as and changed into one-tenth
of one share of Common Stock or from U.S. Dollars to Renminbi
have been made at the single rate of exchange as quoted by the People's Bank of
China (the "PBOC Rate") on September 30, 1997, which was U.S.$1.00 = Rmb8.30.
The Renminbi is not freely convertible into foreign currencies and the quotation
of exchange rates does not imply convertibility of Renminbi into U.S. Dollars or
other currencies. All foreign exchange transactions take place either through
the Bank of China or other banks authorized to buy and sell foreign currencies
at the exchange rates quoted by the People's Bank of China. No representation is
made that the Renminbi or U.S. Dollar amounts referred to herein could have been
or could be converted into U.S. Dollars or Renminbi,Preferred Stock, as the case may be, at the
PBOC Rate or at all.
References to "Billion Luck" refer to Billion Luck Company Ltd., a
British Virgin Islands company, which is a wholly-owned subsidiarybe.
The principal effect of the Company.
ReferencesReverse Stock Split will be to "Company"decrease the
number of outstanding shares of Common Stock from 5,929,004 (as of May 13, 1999)
to approximately 592,900 shares (assuming that no post-Reverse Stock Split
shares of Common Stock are issued in lieu of fractional shares and "Registrant" areassuming that
no additional shares have been issued or retired subsequent to China Resources
Development, Inc., and include, unless the context requires otherwise, the
operations of Billion Luck, HARC, First Supply, and Second Supply (all as
hereinafter defined)May 13, 1999).
References to "Farming Bureau" areThe Common Stock issued pursuant to the Hainan Agricultural
Reclamation General Company, a division ofReverse Stock Split will be fully paid
and nonassessable. The respective relative voting rights and other rights that
accompany the Ministry of Agriculture, the PRC
government agency responsible for matters relating to agriculture.
References to "First Supply" are to First Goods And Materials Supply
And Sales Corporation, a company organized in the PRC and a wholly-owned
subsidiary of HARC.
References to "Guilinyang Farm" are to Hainan Province Guilinyang State
Farm, a PRC entity which is owned and controlledCommon Stock will not be altered by the Farming Bureau.
ReferencesReverse Stock Split, and
the Common Stock will continue to "Hainan" are to Hainan Province of the PRC.
References to "Hainan State Farms" are to the rubber farms in Hainan
controlled by the Farming Bureau.
References to "HARC" are to Hainan Zhongwei Agricultural Resources
Company Limited,have a company organized in the PRC, whose capital is owned 56% by
Billion Luck, 39% by the Farming Bureau and 5% by Guilinyang Farm.
References to "Operating Subsidiaries" are to the consolidated
operations, assets and/or activities, as the context indicates, of First Supply
and Second Supply.
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References to the "PRC" or "China" are to the People's Republic of
China and include all territory claimed by or under the control of the Central
Government, except Hong Kong, Macau, and Taiwan.
References to "Second Supply" are to Second Goods And Materials Supply
And Sales Corporation, a company organized in the PRC and a wholly-owned
subsidiary of HARC.
References to "Series B Preferred Stock" and "Preferred Stock" are to
the Company's Series B Preferred Stock, $0.001 par value of which 3,200,000
shares are outstanding.
References to "Tons" are to metric tons.
BENEFICIAL OWNERSHIP OF CERTAIN SHAREHOLDERS
BENEFICIAL OWNERS OF MORE THAN 5%
OF THE COMPANY'S COMMON STOCK
The following table sets forth, to$0.001 per share.
Consummation of the knowledgeReverse Stock Split will not alter the number of management, each
person or entity who is the beneficial owner of more than 5% of theauthorized
shares of the Company's Common Stock, or Series Bwhich will remain at 200,000,000, of which
approximately 199,407,100 shares of Common Stock would constitute authorized but
unissued and unreserved shares. In addition, the Board of Directors included the
3,200,000 shares of the Company's Preferred Stock outstanding asin the Reverse Stock Split
proposal in order to maintain the current relative voting rights of the holders
of the Common Stock and of the Preferred Stock.
Reasons for the Proposed Reverse Stock Split
The Reverse Stock Split is being proposed primarily because the Common
Stock does not currently meet the requirements for continued listing on the
Nasdaq Small-Cap Market. The Nasdaq Small-Cap Market continued listing standards
include a requirement that the closing bid price for a listed company be at
least $1.00 per share. Failure to meet this requirement for 30 consecutive
trading days may result in a company being delisted from the Nasdaq Small-Cap
Market. When the minimum bid price requirement is not met for 30 consecutive
trading days, a company is delisted unless its closing bid price equals or
exceeds $1.00 for at least ten consecutive trading days during a 90-day period
following the notice of non-compliance from The Nasdaq Stock Market, Inc.
("Nasdaq").
As of December 12, 1997,10, 1998, the closing bid price for the Common Stock had
been less than $1.00 for more than 30 consecutive trading days. The Company
received a notification of non-compliance from Nasdaq dated December 10, 1998.
The notification stated that, in order to avoid delisting of the Common Stock
from the Nasdaq Small-Cap Market, the bid price for the Common Stock must close
at or above $1.00 per share for at least ten consecutive trading days before
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March 10, 1999. The Common Stock failed to meet this minimum bid price
requirement during the 90-day period which ended March 10, 1999.
On March 9, 1999, the Company filed a request with the Nasdaq Listing
Qualifications Hearing Department for a hearing to contest the delisting of the
Common Stock. The delisting was stayed pending the hearing. Such hearing
took place on May 6, 1999. [Outcome of hearing to be inserted in final proxy
statement.]
Additionally, the Board of Directors believes that the high number of
shares of Common Stock outstanding and its relatively low per-share market price
may adversely effect the trading market for the Common Stock and its
acceptability to certain institutional investors and other members of the
investing public. While the number of shares ownedoutstanding should not, by eachitself,
affect the marketability of a stock, the type of investor who acquires such
person andstock or the percentageCompany's reputation in the financial community, the Company
believes that, in practice, this is not necessarily the case, as certain
investors view low-priced as unattractive or, as a matter of policy, are
precluded from purchasing low-priced shares. In addition, certain brokerage
houses, as a matter of policy, will not extend margin credit on stocks trading
at low prices. On the other hand, certain other investors may be attracted to
low-priced stock because of the outstanding shares represented thereby.
Amount and
Name and Address Nature of Percent
of Beneficial Owner Beneficial Ownership (1) of Class
- ------------------- ---------------------------- --------
China Everbright Financial 334,800 Common Stock 5.55%
Holdings Limited (2)
23/F., Office Tower 3,200,000 Series B Preferred Stock 100%
Convention Plaza
1 Harbour Road
Wanchai, Hong Kong
Worlder International Company 486,000 Common Stock 8.06%
Limited (3)
21/F., Great Eagle Centre
No. 23 Harbour Road
Hong Kong
- -------------------
(1)greater trading volatility sometimes associated
with such securities.
The inclusion hereinBoard of any shares deemed beneficially owned does not
constitute an admissionDirectors believes that it is in the best interests of beneficial ownershipthe
Company and its shareholders to maintain the listing of these shares.
(2) China Everbright Financial Holdings Limited ("Everbright") was formerly
known as Everbright Finance & Investment Co. Limited. Of the 334,800 sharesCommon Stock on the
Nasdaq Small-Cap Market and that the consummation of the proposed Reverse Stock
Split will increase the price per share of Common Stock indicated, Everbright directly owns 199,800 shares,to in excess of $1.00.
It is anticipated that, if approved by the Company's shareholders, the Reverse
Stock Split will become effective at the close of business on June 11, 1999.
In the event that the Reverse Stock Split is not approved by the
Company's shareholders, it is likely that the Common Stock will be delisted by
Nasdaq. If this were to occur, the Common Stock would be traded on the OTC
Bulletin Board and would be subject to regulations relating to "Penny Stocks"
which would immediately affect the ability of shareholders to resell their stock
and the remaining 135,000 shares represent one-half ofmarket value for the 270,000 sharesCommon Stock.
There can be no assurance, even if the Reverse Stock Split is
consummated, that the bid price per share of Common Stock owned by Silverich Limited, which is one-half owned by Everbright and
one-half owned by Worlder International Company Limited.
(3) Ofwill increase to in
excess of $1.00, or that, if the 486,000 sharesbid price per share of Common Stock indicated, Worlder International
Company Limited ("Worlder") directly owns 351,000 shares, anddoes
increase to in excess of $1.00, that such bid price will remain at or above
$1.00. Accordingly, there can be no assurance that Nasdaq will not delist the remaining
135,000 shares represent one-half of the 270,000 shares of
Common Stock ownedeven if the Reverse Stock Split is consummated. Additionally, there
can be no assurance that the Reverse Stock Split will not adversely impact the
market price of, or the trading market for, the Common Stock.
Future Dilution; Anti-Takeover Effects
There may be certain disadvantages suffered by Silverich Limited, which is one-half owned by Worlder and one-half owned by
Everbright.
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SHARE OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of December 12, 1997, by (i) each
director of the Company, (ii) each executive officer of the Company named in the
summary compensation table, and (iii) all directors and executive officersshareholders of the
Company as a group. All information with respectresult of approval of the Reverse Stock Split. These disadvantages
include a significant increase in possible dilution to beneficial ownership has
been furnished by the respective director or executive officer (in the case of
shares beneficially owned by each of them). Unless otherwise indicated in a
footnote, each stockholder possesses sole voting and investment power with
respect to the shares indicated as beneficially owned.
Amount and
Name of Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Class
- ---------------- ------------------------ -----
Yang Jiangang -0- N/A
Li Shunxing -0- N/A
Wang Faren -0- N/A
Yiu Yat Hung 216,000 Common Stock (2) 3.58%
Han Jian Zhun -0- (3) N/A
Tam Cheuk Ho -0- (4) N/A
Zhang Yibing -0- N/A
Li Fei Lie -0- (5) N/A
Wong Wah On 43,200 Common Stock (6) 0.72%
All executive officers 259,200 Common Stock 4.30%
and directors as a group
- -------------------
(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficialpresent shareholders'
percentage ownership of these shares.
(2) Hong Wah Investment Holdings Limited owns 216,000the Common Stock because of the additional authorized
shares of Common Stock.
Hong Wah Investment Holdings Limited is a Hong Kong companyStock which would be available for future issuance by the
Company. Current shareholders, in the aggregate, own approximately 3% of which Yiu Yat
Hung, the Vice Chairman of the Board of Directors of the Company, is a director.
Additionally, Hong Wah Investment Holdings Limited is beneficially owned by Yiu
Yat On, a brother of Yiu Yat Hung. In addition, Mr. Yiu was granted options to
purchase 600current
authorized shares of Common Stock under the Company's Stock Option Plan as
described inpresent capital structure,
but would own only 0.3% of the Company's annual report on Form 10-K/A for the fiscal year
ended December 31, 1996, provided herewith.
(3) Han Jian Zhun was granted options to purchase 600authorized shares of Common Stock under the
Company's post-split capital structure, assuming that the proposed Reverse Stock
Option Plan as describedSplit is consummated.
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The proportionate increase in the Company's annual
report on Form 10-K/A for the fiscal year ended December 31, 1996, provided
herewith.
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(4) Tam Cheuk Ho was granted options to purchase 600number of shares of Common Stock
underavailable for future issuance may also have certain anti-takeover effects. For
example, the Company's Stock Option Plan as described in the Company's annual
report on Form 10-K/A for the fiscal year ended December 31, 1996, provided
herewith.
(5) Li Fei Lie was granted options to purchase 10,000availability of a large number of shares of Common Stock underfor future
issuance might allow the Company's Stock Option Plan as described inBoard of Directors to dilute the Company's annual
report on Form 10-K/A forpercentage
share ownership of persons who might attempt to obtain control over the fiscal year ended December 31, 1996, provided
herewith.
(6) Brender Services Limited owns 43,200 shares of Common Stock. Brender
Services Limited is beneficially owned by Wong Wah On, the Financial ControllerCompany.
Approval of the Company. In addition, Brender was granted optionsReverse Stock Split therefore, may allow the Board of Directors
to purchase 10,000frustrate a takeover attempt which might be favorable to shareholders as a
group, and may have the effect of limiting shareholder participation in these
types of transactions. While the Reverse Stock Split may have certain
anti-takeover effects, management is not aware of any attempts by third persons
to accumulate a large number of shares of Common Stock underand the Company'sBoard of
Directors is not recommending the Reverse Stock Option Plan,Split in response to any
existing attempts by third parties to obtain control of the Company.
Registration
The Board of Directors believes that the consummation of the Reverse
Stock Split and Mr. Wong was
granted optionsthe changes which would result therefrom will not cause the
Company to purchase 600 sharesterminate registration of the Common Stock under the Plan,Securities
Exchange Act of 1934, as describedamended, or to cease filing reports thereunder, and the
Company does not presently intend to seek, either before or after the Reverse
Stock Split, any change in the Company's annual report on Form 10-K/Astatus as a reporting company for
the fiscal year
ended December 31, 1996, provided herewith.
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FINANCIAL INFORMATIONfederal securities law purposes.
Federal Income Tax Consequences
The following financial information and management's discussion and
analysisreceipt of financial condition and results of operations are excerpted from the
Company's Form 10-Q quarterly report for the quarterly period ended September
30, 1997. This information supplements the information containedCommon Stock or Preferred Stock in the Company's annual report on Form 10-K/AReverse Stock
Split should not result in any taxable gain or loss to shareholders for U.S.
federal income tax purposes. If the fiscal year ended December 31,
1996, a copy of whichReverse Stock Split is provided herewith and incorporated herein by reference.
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Amounts in thousands, except share and per share data)
Note Three Months Ended Nine Months Ended
---- September 30, September 30,
----------------------------------- --------------------------------------
1997 1996 1997 1997 1996 1997
RMB RMB USD RMB RMB USD
(unaudited) (unaudited)
SALES 419,295 486,788 50,517 893,762 1,282,507 107,682
COST OF SALES (410,396) (445,430) (49,445) (860,071) (1,165,224) (103,623)
-------- -------- ------- -------- ---------- --------
GROSS PROFIT 8,899 41,358 1,072 33,691 117,283 4,059
DEPRECIATION OF
FIXED ASSETS (1,195) (484) (144) (2,039) (1,692) (246)
SELLING AND
ADMINISTRATIVE
EXPENSES (6,263) (14,132) (755) (21,979) (39,305) (2,648)
-------- -------- ------- -------- ---------- --------
OPERATING INCOME 1,441 26,742 173 9,673 76,286 1,165
FINANCIAL INCOME/
(EXPENSES), NET (859) (10,122) (103) 31 (31,798) 4
OTHER INCOME 19,981 11,127 2,407 38,726 15,370 4,666
-------- -------- ------- -------- ---------- --------
INCOME BEFORE
INCOME TAXES 20,563 27,747 2,477 48,430 59,858 5,835
INCOME TAXES (1,806) (2,335) (217) (7,959) (7,912) (959)
-------- -------- ------- -------- ---------- --------
NET INCOME BEFORE
MINORITY INTERESTS 18,757 25,412 2,260 40,471 51,946 4,876
MINORITY INTERESTS (9,979) (9,807) (1,202) (21,577) (23,208) (2,600)
-------- -------- ------- -------- ---------- --------
NET INCOME FOR THE
PERIOD 8,778 15,605 1,058 18,894 28,738 2,276
======== ======== ======= ======== ========== ========
EARNINGS PER SHARE 2 1.46 5.31 0.18 3.19 9.78 0.38
======== ======== ======= ======== ========== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(Amounts in thousands)
SEPTEMBER 30, 1997 December 31, 1996 September 30, 1997
------------------ ----------------- ------------------
RMB RMB USD
NOTES (UNAUDITED) (audited) (unaudited)
-----
ASSETS
CURRENT ASSETS
Cash and cash equivalents 127,852 131,006 15,404
Trade receivables 10,130 4,212 1,220
Other receivables, deposits and
prepayments 59,323 48,755 7,147
Inventories 3 69,874 55,452 8,419
Amounts due from related
companies 143,216 147,221 17,255
Amount due from Farming
Bureau 6,187 298,570 745
------- ------- ------
TOTAL CURRENT ASSETS 416,582 685,216 50,190
FIXED ASSETS 4 6,484 6,504 781
INVESTMENTS 11,128 12,344 1,341
GOODWILL 1,028 1,049 124
------- ------- ------
TOTAL ASSETS 435,222 705,113 52,436
======= ======= ======
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loans -- 292,560 --
Amounts due to related companies 8,929 -- 1,076
Amounts due to shareholders 299 4,976 36
Accounts payable 19,594 25,848 2,361
Income taxes payable 21,636 17,063 2,607
Other payables and accrued
liabilities 16,623 43,295 2,002
------- ------- ------
TOTAL CURRENT
LIABILITIES 67,081 383,742 8,082
MINORITY INTERESTS 130,157 108,580 15,681
------- ------- ------
TOTAL LIABILITIES 197,238 492,322 23,763
======= ======= ======
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SEPTEMBER 30, 1997 December 31, 1996 September 30, 1997
------------------ ----------------- ------------------
RMB RMB USD
NOTES (UNAUDITED) (audited) (unaudited)
-----
Common Stock, US$0.001 par
value: Authorized - 200,000,000
shares in 1997 and 1996
Issued and outstanding - 6,029,004
shares in 1997 and 5,779,004
shares in 1996 48 48 6
Preferred stock, authorized -
10,000,000 shares in 1997 and
1996: Series B preferred stock,
US$0.001 par value: Authorized
3,200,000 shares in 1997 and 1996
Issued and outstanding - 3,200,000
shares in 1997 and 1996 270 270 33
Additional paid-in capital 153,493 147,194 18,493
Reserves 17,748 17,748 2,138
Retained earnings 66,425 47,531 8,003
------- ------- ------
TOTAL SHAREHOLDERS'
EQUITY 237,984 212,791 28,673
------- ------- ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 435,222 705,113 52,436
======= ======= ======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-8-
11
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Amounts in thousands, except share and per share data)
Series B
Series A Convertible Series B Additional
Common Preferred Preferred referred Paid-In Retained
Stock Stock Stock Stock Capital Reserves Earnings Total
RMB RMB RMB RMB RMB RMB RMB RMB
Balance at December
31, 1996 48 -- -- 270 147,194 17,748 47,531 212,791
Issuance of 250,000
shares of common
stock as compensation
for consulting services
received -- -- -- -- 6,299 -- -- 6,299
Net income for the
period 18,894 18,894
====== ------ --- --- ------- ------ ------ -------
Balance at September
30, 1997 48 -- -- 270 153,493 17,748 66,425 237,984
====== ====== === === ======= ====== ====== =======
-9-
12
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Amounts in thousands)
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
1997 1996 1997
RMB RMB USD
(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income 18,894 28,738 2,276
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interests 21,577 23,208 2,600
Depreciation and amortization 2,060 1,713 248
Loss on disposal of fixed assets 799 5 96
Decrease/(increase) in assets:
Trade receivables (5,918) (103,484) (713)
Other receivables, deposits and prepayments (4,269) (82,800) (515)
Inventories (14,422) (81,574) (1,738)
Amount due from Farming Bureau (177) 31,879 (21)
Amounts due from related companies 4,005 34,632 483
Other current assets -- 19,448 --
Increase/(decrease) in liabilities:
Amounts due to related companies 8,929 13,055 1,076
Accounts payable (6,254) 109,291 (753)
Income taxes payable 4,573 3,608 551
Other payables and accrued liabilities (26,672) 57,215 (3,213)
------- -------- ------
Net cash provided by operating activities 3,125 54,934 377
------- -------- ------
CASH FLOWS PROVIDED BY/(USED IN)
INVESTING ACTIVITIES:
Purchases of fixed assets (2,821) (1,994) (340)
Purchases of investments -- (200) --
Reduction of minority interests -- (164) --
Proceeds from disposal of fixed assets 3 -- --
Proceeds from sale of investments 1,216 -- 147
------- -------- ------
Net cash used in investing activities (1,602) (2,358) (193)
------- -------- ------
-10-
13
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
1997 1996 1997
RMB RMB USD
(UNAUDITED)
CASH FLOWS PROVIDED BY/(USED IN)
FINANCING ACTIVITIES:
Issue of share capital less share offering costs -- 73,937 --
Repayment of loans to shareholders (4,677) (15,428) (564)
Repayments of bank borrowings -- (440) --
Short term advances -- (86,917) --
------- -------- ------
Net cash used in financing activities (4,677) (28,848) (564)
------- -------- ------
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS: (3,154) 23,728 (380)
Cash and cash equivalents, at beginning of period 131,006 56,942 15,784
------- -------- ------
Cash and cash equivalents, at end of period 127,852 80,670 15,404
======= ======== ======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-11-
14
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months period ended
September 30, 1997, are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997. The unaudited
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 1996.
2. EARNINGS PER SHARE:
The computation of primary earnings per share for the three months and
nine months ended September 30, 1997, are based on the weighted average
number of common stock outstanding after giving effect to dilutive
stock options, which are included as common share equivalents using the
treasury stock method and assumed to be converted to common stock. The
number of shares used in computing the primary earnings per share for
the three months and nine months ended September 30, 1997, were
6,029,004 and 5,917,893 respectively. Fully diluted earnings per share
is not materially different from primary earnings per share.
The computation of primary earnings per share for the three months and
nine months ended September 30, 1996, is based on the weighted average
number of common stock outstanding after giving effect to dilutive
stock options and Series B convertible preferred stock, which are
included as common share equivalents using the treasury stock method
and assumed to be converted to common stock, respectively. The number
of shares used in computing the primary earnings per share was
2,939,589 as if the one-for-ten reverse stock split had been completed
at the beginning of the period. Fully diluted earnings per share is not
materially different from primary earnings per share.
3. INVENTORIES:
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ -----------
RMB RMB
(unaudited) (audited)
Finished goods 69,874 55,452
========= =========
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
-12-
15
4. FIXED ASSETS:
SEPTEMBER 30, DECEMBER 31,
1997 1996
------- -------
RMB RMB
(unaudited) (audited)
Cost:
Buildings 3,876 3,806
Plant, machinery and equipment 1,883 1,645
Transportation vehicles and equipment 5,560 4,264
------- -------
11,319 9,715
------- -------
Accumulated depreciation:
Buildings 2,374 1,711
Plant, machinery and equipment 451 238
Transportation vehicles and equipment 2,010 1,262
------- --------
4,835 3,211
------- --------
Net book value 6,484 6,504
======= ========
5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
RMB RMB
(UNAUDITED) (UNAUDITED)
Cash paid during the period for interest expenses 3,561 19,959
====== ======
-13-
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
The following table shows the selected unaudited condensed consolidated
income statements data of the Company and its subsidiaries for the three months
and nine months ended September 30, 1996 and 1997. The data should be read in
conjunction with the unaudited Condensed Consolidated Financial Statements of
the Company and related Notes thereto:
The discussions below are presented in the Company's primary operating
currency which is the Renminbi Yuan ("Rmb"). For information purposes the
amounts have been translated into U.S. dollars at an exchange rate of $1.00 =
Rmb8.30 which represents the approximate single rate of exchange as quoted by
the People's Bank of China on September 30, 1997. No representation is made that
Rmb amounts could have been, or could be, converted into U.S. dollars at that
rate or any other rate.
(Amounts in thousands)
Three months Nine months
ended ended
September 30, September 30,
----------------------- ---------------------------
1997 1996 1997 1996
RMB RMB RMB RMB
Sales:
Distribution of natural rubber 408,073 390,544 857,222 977,964
Procurement of materials and
supplies 11,222 96,244 36,540 304,543
-------- -------- ---------- ----------
419,295 486,788 893,762 1,282,507
-------- -------- ---------- ----------
Gross profit 8,899 41,358 33,691 117,283
Gross profit margin (%) 2.12 8.50 3.77 9.14
Income before income taxes 20,563 27,747 48,430 59,858
Income taxes (1,806) (2,335) (7,959) (7,912)
-------- -------- ---------- ----------
Net income 18,757 25,412 40,471 51,946
Minority interests (9,979) (9,807) (21,577) (23,208)
-------- -------- ---------- ----------
Net income after minority
interests 8,778 15,605 18,894 28,738
======== ======== ========== ==========
-14-
17
SALES AND GROSS PROFIT
Total net sales for the third quarter of fiscal 1997 decreased by
approximately Rmb68 million (US$8 million) or 13.9% to approximately Rmb419
million (US$50 million), compared to approximately Rmb487 million (US$59
million) for the corresponding period in 1996. It was mainly due to the decrease
in net sales from procurement of materials and supplies by approximately Rmb85
million (US$10 million) or 88.3% to approximately Rmb11 million (US$1.3 million)
compared to approximately Rmb96 million (US$12 million) for the corresponding
period in 1996.
For the nine months ended September 30, 1997, the Company's total net
sales decreased by Rmb389 million (US$47 million) or 30.3%. The net sales of
natural rubber and materials and supplies decreased by Rmb121 million (US$15
million) or 12.3% and Rmb268 million (US$32 million) or 88%, respectively, as
compared to the corresponding period in 1996.
The domestic natural rubber consumption market remained sluggish for
the first half of fiscal 1997 and was worse in the third quarter due to the
currency crisis in Southeast Asia. Asian currencies have in recent months
weakened againstapproved, the U.S.
dollar, while the yuan remains relatively stable. The
currency deflationtax basis of most of the largest natural rubber producing countries
like Thailand, Indonesia and Malaysia caused a significant drop in the
international natural rubber price from approximately Rmb10,400 per ton in the
first half of fiscal 1997 to approximately Rmb9,000 per ton in the third quarter
of 1997. The average domestic natural rubber price for the nine months ended
September 30, 1997, was approximately Rmb10,000 per ton compared to
approximately Rmb12,000 per ton for the comparable period in 1996. Management
expects that the international rubber price will continue to drop in the next
quarter and will only become stable in early 1998.
Net sales from procurement of materials and supplies remained low in
the first half of fiscal 1997 because of the weak consumption market. The
Company also reduced the scope of those procurement segments with unsatisfactory
net margin contribution. There was a high margin contribution from trading of
agricultural products in 1996. However, this market was not favorable in 1997 as
compared to 1996. This accounted for the drop in net sales and gross profit
margin.
For the nine months ended September 30, 1997, gross profit decreased by
Rmb84 million (US$10 million)Common Stock or 71% to Rmb34 million (US$4 million), compared
to Rmb117 million (US$14 million) for the corresponding period in 1996. The
overall gross profit margin also decreased from 9.14% to 3.77% due to the
unsatisfactory profit margin contribution from the procurement business and the
significant drop in natural rubber price during the period.
SELLING AND ADMINISTRATIVE EXPENSES
For the nine months ended September 30, 1997, selling and
administrative expenses decreased by Rmb17,326,000 (US$2,087,000) or 44.1% to
Rmb21,979,000 (US$2,648,000) compared to the corresponding period in fiscal
1996. The reduction was primarily a result of the restructuring of operations
implemented effective the last quarter of fiscal 1996. The restructuring has
resulted in reduced administrative overheads, staff costs and the related
welfare expenses. Also, management exercised tighter control on the selling and
administrative expenses in view of the continued worsening of market conditions.
The reduction in operating expenses achieved through the restructuring of
operations was partially offset by the increase in legal and professional fees
associated with regulatory compliance and public relations costs incurredPreferred Stock received as a result of the NASDAQ listing status of the Company.
-15-
18
NET FINANCIAL INCOME/(EXPENSES)
The Company recorded net financial income of Rmb31,000 (US$4,000) for
the nine months ended September 30, 1997, compared to net financial expenses of
Rmb31,798,000 (US$3,831,000) for the corresponding period in fiscal 1996. This
was primarily attributable to the reduction in bank interest expenses following
the execution of the Restructuring Agreement effective on October 1, 1996.
Pursuant to the Restructuring Agreement, all outstanding bank loans of the
Company were deemed assigned to the Farming Bureau. As a result, all bank
interest incurred by the Company commencing October 1, 1996 was recovered from
the Farming Bureau. The net financial income for the nine months ended September
30, 1997, represented mainly the bank interest income and foreign exchange gain.
OTHER INCOME/NET
Other income increased by Rmb23,356,000 (US$2,814,000) or 152% to
Rmb38,726,000 (US$4,666,000) for the nine months ended September 30, 1997,
compared with Rmb15,370,000 (US$1,852,000) for the corresponding period in 1996.
The increase was mainly due to more income earned from trading of rubber futures
contracts during the nine months ended September 30, 1997, as compared to that
of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund accounts receivable,
inventories and to expand business operations. The Company has financed its
working capital requirements through a combination of internally generated cash
and proceeds from the offshore private placements completed in the year 1996.
Net cash provided by the operating activities was Rmb3.1 million (US$377,000)
for the nine months ended September 30, 1997, compared to that of Rmb54.9
million (US$6.6 million) for the corresponding period in 1996. The Company had a
working capital surplus of approximately Rmb350 million (US$42.1 million) as of
September 30, 1997, compared to that of Rmb301 million (US$36.3 million) as of
December 31, 1996.
On March 28, 1997 and March 31, 1997, the Company completed formal
assignments,Reverse
Stock Split will be equal, in the aggregate, of approximately Rmb293 million (US$35.3 million),
of bank loans to the Farming Bureau.
There has been no other significant change in financial condition and
liquidity sincebasis of the fiscal year ended December 31, 1996. The Company believes
thatshares
exchanged for the net proceeds retained from its capital raising efforts, together with
internally generated funds,Common Stock or Preferred Stock. For U.S. federal income tax
purposes, the holding period of the shares immediately prior to the effective
date of the Reverse Stock Split will be sufficientincluded in the holding period of the
Common Stock or Preferred Stock received as a result of the Reverse Stock Split.
SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS FOR MORE DETAILED
INFORMATION REGARDING THE EFFECTS OF THE PROPOSED REVERSE SPLIT ON THEIR
INDIVIDUAL TAX STATUS.
Exchange of Certificates
As soon as is practicable following the effective date of the Reverse
Stock Split, shareholders will be notified and requested to satisfysurrender their
current certificates to the Company's stock transfer agent in exchange for the
issuance of new certificates reflecting the Reverse Stock Split. Commencing on
the effective date of the Reverse Stock Split, each certificate representing
pre-Reverse Stock Split shares of Common Stock or Preferred Stock will be deemed
for all purposes to evidence ownership of post-Reverse Stock Split shares of
Common Stock or Preferred Stock, as the case may be. No fractional shares of
Common Stock or Preferred Stock will be issued, and, in lieu thereof, assuming
approval by the shareholders of the Reverse Stock Split, a whole share will be
issued to any shareholders entitled to a fraction of a share of Common Stock or
Preferred Stock.
-4-
Determination by Board to Abandon Reverse Stock Split
In accordance with Nevada law and notwithstanding approval of the
proposal by shareholders, at any time prior to the effective date of the Reverse
Stock Split, the Board of Directors may, in its anticipated
working capital needssole discretion, abandon the
proposal without any further action by shareholders.
Requisite Vote
Assuming the presence of a quorum, the affirmative vote of the holders
of a majority of the voting power of the outstanding shares of Common Stock and
Preferred Stock, counted together, is necessary for at leastapproval of the next twelve months.
-16-
19Reverse
Stock Split.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE PROPOSAL 1TO EFFECT THE REVERSE STOCK SPLIT.
PROPOSAL 2 - ELECTION OF DIRECTORS
During 1997,1998, the Company's Board of Directors was comprised of seven
directors, and, according to Article VIII of the Company's Articles of
Incorporation, the membership of the Board may be increased to no more than 25
directors or decreased to no fewer than three directors by action of the Board
of Directors. At the 1996 annual meeting, the shareholders approved an amendment
to the Articles of Incorporation to divide the directors into three classes. One
class of directors is to be elected each year for a three-year term. However, as
three classes of directors were newly established, the Class I directors were
elected at the 1996 annual meeting for one-year terms, the Class II directors
were elected for two-year terms and the Class III directors were elected for
normal three-year terms. At the annual meeting held in 1997, Messrs. Yiu Yat Hung and Tam Cheuk
Ho and Wong Wah On were elected to serve in Class I until the annual meeting to
be held in 19972000 and until their successors have been duly elected and qualified.
At the annual meeting held in 1998, Messrs. Wang FarenChing Lung Po and Han Jian
ZhunLin Yu Quan were
elected to serve in Class II until the annual meeting to be held in 19982001 and
until their successors have been duly elected and qualified. Messrs. Yang Jiangang, Li
Shunxing, Ng Kin Sing (who was selected by the Board of Directors to fill the
vacancy created by the resignation of Mr. Zhang Yibing) and Zhang Yibing were electedWan Ying Lin (who
was selected by the Board of Directors to fill the vacancy created by the
resignation of Mr. Yang Jiangang) continue to serve in Class III until the
annual meeting to be held in 1999 and until their successors have been duly
elected and qualified. Therefore, in accordance with the Articles of
Incorporation and the actions taken at the 1996 annual meeting, the election of
directors in Class IIII is to be conducted at the 19971999 Annual Meeting.
The nominees for Class I,III, if elected, will serve a three-year term
until the annual meeting to be held in 20002002 and until their successors have duly
elected and qualified. Mr. Tam isMessrs. Wan and Ng are currently serving as a director and as Chief
Financial Officerdirectors of
the Company, and Mr. Wong is the Company's Financial
Controller.Company. Both nominees have consented to being named herein and have
indicated their intention to serve as directors of the Company, if elected.
Unless authority to do so is withheld, the persons named as proxies will vote
the shares represented by such proxies for the election of the nominees. In case
any of the nominees shall become unavailable for election to the Board of
Directors, which is not anticipated, the persons named as proxies shall have
full discretion and authority to vote or refrain from voting for any other
nominees in accordance with their judgment. Vacancies on the Board of Directors
may be filled by the remaining director or directors, even though less than a
quorum, for the unexpired term of such vacant position.
The nominees and certain information about them are set forth below:
CLASS I DIRECTORS:-5-
Class III Directors:
Mr. Tam Cheuk Ho, 35,Wan Ying Lin has been a Director and the Chief Financial
Officerdirector of the Company since February 4,
1998. Since September of 1996, Mr. Wan has been the Director and Deputy General
Manager of OVM International Holding Corp. (OTCBB: OVMI), which is included in
the OTC Bulletin Board operated by the National Association of Securities
Dealers, Inc. Mr. Wan graduated from the Guangxi Liuzhou Institute of Medical
Specialty, specializing in administration and management. From January 1986
through December 1994. Prior to joining1987, he was the manager of Lam Ko Mould Company, from
July, 1984in charge of
the China marketing and development division in Hong Kong. From January 1988
through January, 1992, heFebruary 1993, Mr. Wan worked as Audit Manager at Ernst & Young,
Hong Kong, and from February, 1992 through September, 1992, as Financial
Controller at Tack Hsin Holdings Limited, a listed companythe marketing manager of Wai Tong
Trading Company in Hong Kong, whereKong. In 1993, he was responsible for accounting and financial functions. From October, 1992,
through December, 1994, Mr. Tam was Finance Director of Hong Wah Investment
Holdings Limited. He is an associate ofjoined the Hong Kong Society of Accountants andPrestressing
Concrete Engineering Company Limited, where he serves as manager.
Mr. Ng Kin Sing has been a fellowdirector of the Chartered AssociationCompany since February 1,
1999, and also serves as a member of Certified Accountants. Hethe Board's audit committee. Mr. Ng is alsothe
managing director of Action Plan Limited, a certified public accountant in Hong Kong. Hesecurities investment company. From
November 1995 until March 1998, Mr. Ng was sales and dealing director for
NatWest Markets (Asia) Limited; and from May 1995 until October 1996, he was the
dealing director of BZW Asia Limited, an international securities brokerage
house. Mr. Ng holds a Bachelor'sbachelor's degree in Business Administrationbusiness administration from the
Chinese University of Hong Kong.
Mr. Wong Wah On, 34, is the Financial ControllerInformation Regarding Board of the CompanyDirectors and a
member of the supervisory committee of HARC. He is responsible for assisting the
Chief Finance Officer of the Company's treasury, accounting and secretarial
functions. From October, 1992, through December, 1994, Mr. Wong was the Deputy
Finance Director of Hong Wah (Holdings) Limited. From July, 1988, through
October, 1992, he was the audit supervisor at Ernst & Young, Hong Kong. He
received a professional diploma in Company Secretaryship and Administration from
the Hong Kong Polytechnic University and is a fellow of the Chartered
Association of Certified Accountants, the Hong Kong Society of Accountants, and
the Institute of Chartered Secretaries and Administrators.
He is also a certified public accountant in Hong Kong.
-17-
20
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEESCommittees
The Company's Board of Directors held threeeight (8) meetings during 1997,1998,
and all other actions of the Board were taken pursuant to unanimous written
consents. The Board of Directors does not have a compensation or nominating
committee. Upon the expansion of theThe Board and the electionhas established an audit committee consisting of two
"independent" directors, the Board intends to establish an audit committee.Ng Kin Sing and Wan Ying Lin. The Board as a whole
operates as a committee to nominate directors and to administer the Company's
1995 Stock Option Plan (except that a committee of three disinterested persons
was formed to act with respect to stock options issued to directors). Each
director attended all of the meetings of the Board of Directors during the
period for which he was a director.
The Board of Directors, acting as a nominating committee, will consider
candidates for director nominated by shareholders. A shareholder who wishes to
submit a candidate for consideration at the 19982000 annual meeting must notify the
Secretary of the Company in writing no later than March 2, 1998.1, 2000. The
shareholder's written notice must include information about each proposed
nominee, including name, age, business address, principal occupation, shares
beneficially owned and other information required in proxy solicitations. The
nomination notice must also include the nominating shareholder's name and
address and the number of shares of stock beneficially owned by the shareholder.
The shareholder must also furnish a statement from the candidate indicating that
the candidate wishes and is able to serve as a director. These procedures, and a
statement that the shareholder intends to make the nomination, are prerequisites
to a stockholder nominating a candidate at the annual meeting.
COMPENSATION OF DIRECTORSCompensation of Directors
During 1997,1998, directors of the Company did not receive compensation for
their service as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES DESCRIBED ABOVE.
-6-
PROPOSAL 23 - APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the shareholders, the Board of Directors has
reappointed Ernst & Young, Certified Public Accountants, as independent
accountants to audit the consolidated financial statements of the Company for
the year 1997.1999. Ernst & Young has served as the Company's Independent Accountants
since March of 1995.
On March 16, 1995, the Company executed an engagement letter with the
certified public accounting firm of Ernst & Young, which detailed the scope of
work to be performed by Ernst & Young during the next year. After executing the
letter agreement with Ernst & Young to serve as independent auditors for the
Company, the Company terminated its relationship with the certified public
accounting firm of H. J. Swart & Company, P.A. (the "Former Accountants"), by
letter from the Company's counsel dated March 21, 1995. The Company's decision
to change accountants was approved by the Company's Board of Directors.
The Former Accountants' reports on the Company's financial status for
the years ended December 31, 1992, and December 31, 1993, did not contain an
adverse opinion or a disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope, or accounting principles. Since the engagement of
the Former Accountants in 1993 and until the dismissal of the Former
Accountants, there were no disagreements with the Former Accountants on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of the Former Accountants, would have caused it to make reference
to the subject matter of the disagreements in connection with its reports.
The Company filed a Form 8-K current report dated March 16, 1995,
setting forth the above information. The Company, through its counsel, delivered
a copy of the Form 8-K to the Former Accountants on March 21, 1995, and
requested that the Former Accountants review the disclosures contained therein
and provide a response as promptly as possible so the Company could file the
response within ten business days after the filing of the Form 8-K. The Company
received a response from the Former Accountants by letter dated March 22, 1995,
in which the
-18-
21
Former Accountants indicated that they agreed with the disclosures and
statements made by the Company in the Form 8-K. The Company then amended the
previously filed Form 8-K by filing a Form 8-K/A to include the response of the
Former Accountants, which was attached thereto as an exhibit.
If the shareholders should fail to ratify the appointment of Ernst &
Young as its independent accountants, the Board of Directors would reconsider
the appointment. It is expected that representatives of Ernst & Young will be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire to do so and will be available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
OTHER INFORMATION
For other information regarding the Company, including Beneficial
Ownership of Certain Shareholders, Executive Compensation, Financial and Other
Information, Management's Discussion and Analysis of Financial Condition and
Results of Operations, Certain Relationships and Related Transactions and
Compliance with Section 16(a) of the Securities Exchange Act of 1934, as
amended, please see the appropriate Items of the Company's Form 10-K/A10-K annual
report for the fiscal year ended December 31, 1996,1998, a copy of which is provided
herewith and incorporated herein by this reference.
This proxy statement and the Form 10-K/A10-K provided herewith may contain
forward-looking statements. Shareholders are cautioned that any such
forward-looking statement is not a guarantee of future performance and involves
risks and uncertainties, and that actual results may differ materially from
those in this proxy statement and the Form 10-K/A10-K as a result of various factors.
The information contained herein and in the Form 10-K/A,10-K, including without limitation the
information under the heading, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," identifies important factors
that could cause such differences. With respect to any such forward-looking
statement that includes a statement of its underlying assumptions or bases, the
Company cautions that, while it believes such assumptions or bases to be
reasonable and has formed them in good faith, assumed facts or bases almost
always vary from actual results, and the differences between assumed facts or
bases and actual results can be material depending on the circumstances. When,
in any forward-looking statement, the Company, or its management, expresses an
expectation or belief as to future results, that expectation or belief is
expressed in good faith and is believed to have a reasonable basis, but there
can be no assurance that the stated expectation or belief will result or be
achieved or accomplished.
SHAREHOLDER PROPOSALS FOR 19982000 ANNUAL MEETING
To be considered for inclusion in next year's proxy materials,
shareholder proposals to be presented at the Company's 19982000 annual meeting must
be in writing and be received by the Company no later than March 2, 1998.1, 2000.
-7-
OTHER BUSINESS
The Board of Directors does not know of any business to be brought
before the Annual Meeting other than the matters described in the Notice of
Annual Meeting. However, if any other matter are properly presented for action,
it is the intention of each person named in the accompanying proxy to vote said
proxy in accordance with his judgment on such matters.
-19--8-
22
APPENDIX
PROXY FOR ANNUAL MEETING
OF SHAREHOLDERS
DECEMBER 30, 1997
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORSMay 28, 1999
This Proxy is Solicited on
Behalf of the Board of Directors
The undersigned hereby appoints Li ShunxingChing Lung Po and Yang JiangangTam Cheuk
Ho, or either of them acting singly in the absence of the other, as attorneys
and as proxies, with full power of substitution, to vote all shares of Common
Stock and Preferred Stock of China Resources Development, Inc. (the "Company"),
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
of the Company to be held on December 30, 1997,May 28, 1999, at 3:00 p.m., local time, at the
offices of Hainan Zhongwei Agricultural Resources Company Limited, located at
Sixth Floor, International Hong Yun Hotel, 13 Haixiu Avenue, Haikou City, Hainan
Province, People's Republic of China, and at any adjournments or postponements
thereof, upon the matters described in the accompanying Proxy Statement and upon
other business that may properly come before the meeting. Said proxy is directed
to vote as instructed on the matters set forth below and otherwise at his
discretion. Receipt of a copy of the Notice of said meeting and Proxy Statement
is hereby acknowledged.
1. PROPOSAL TO EFFECT A ONE-FOR-TEN REVERSE STOCK SPLIT of the
Company's common stock, par value $0.001 per share, and the Company's Series B
Preferred Stock, par value $0.001 per share. (The Board of Directors recommends
a vote FOR)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF NOMINEES FOR DIRECTORS in the following classes.Class III.
SHAREHOLDERS MAY WITHHOLD THEIR VOTE FOR ANY NOMINEES BY STRIKING OUT THE NAME
OF SUCH NOMINEE OR NOMINEES:
CLASS I: Tam Cheuk Ho, Wong Wah OnNg Kin Sing, Wan Ying Lin
[ ] FOR [ ] WITHHOLD AUTHORITY
all nominees listed to vote for all nominees listed
2.3. PROPOSAL TO RATIFY THE SELECTION of Ernst & Young,
Certified Public Accountants, as the Company's independent accountants for the
fiscal year ending December 31, 1997.1999. (The Board of Directors recommends a vote
FOR)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3.4. To transact such other business as may properly come before
the meeting and any adjournment or postponement thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
23
Number of SharesShares:__________________ Name of Owner:________________________
of Common Stock: ----------------------
-----------------------Stock (Please type or print)
Signature:
------------------------------------____________________________
Title or Capacity:____________________
(if applicable) ----------------------------- (Please type or print)
Date:
-----------------------------------------_________________________________
Name of Owner:
--------------------------------________________________
(Please type or print)
Signature:
------------------------------------____________________________
Title or Capacity:____________________
(if applicable) ---------------------------- (Please type or print)
Date:
-----------------------------------------_________________________________
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR proposals 1 through 3.4. If signing as attorney, executor, trustee or
guardian, please give your full title as such. If stock is held jointly, each
owner should sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE