SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] 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 Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_][X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)(4) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
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________________________________________________________________________________
5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
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previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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4) Date Filed:
________________________________________________________________________________
-----------------------------------CHINA RESOURCES DEVELOPMENT, INC.
[COMPANY LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 28, 1999STOCKHOLDERS
TO BE HELD ON DECEMBER 12, 2001
To the Shareholders:
Notice is hereby givenStockholders of China Resources Development, Inc.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of ShareholdersStockholders (the
"Annual Meeting") of CHINA RESOURCES DEVELOPMENT, INC.China Resources Development, Inc., a Nevada corporation
(the "Company"), will be held at the offices of Hainan Zhongwei Agricultural Resources Company Limited,
Sixth Floor, International2:30 p.m., Hong Yun Hotel, 13 Haixiu Avenue, Haikou City, HainanKong time, on December 12, 2001
at 26/F, Securities Building, 5020 Binhe Road, Fu Tian District, Shenzhen
Province, People's Republic of China, on May 28, 1999, at 3:00 p.m., local time, for the following purposes:
1. To consider and vote upon a proposal byelect two Class II members to the Company's Board of Directors to
effect a one-for-ten reverse stock split ofhold office until the Company's common stock,
par value $0.001 per share,annual meeting of stockholders to be
held in 2004 and of the Company's Series B Preferred
stock, par value $0.001 per share;until their successors are duly elected and
qualified;
2. To elect directors in Class III;
3. To consider and vote upon the ratification ofratify the appointment of Ernst & Young as independent auditors
of the Company's independent accountantsCompany for the fiscal year ending December 31, 1999;2001; and
4.3. To transact such other business as may properly come before the
Annual Meeting and any adjournmentadjournments or postponementpostponements thereof.
ShareholdersAll stockholders are cordially invited to attend; however, only
stockholders of record at the close of business on April 30, 1999,October 31, 2001 are entitled
to notice of and to vote at the Annual Meeting or any adjournment or
postponementadjournments thereof.
The Company's annual report on Form 10-K for the year
ended December 31, 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.THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE BOARD'S
NOMINEES TO SERVE AS CLASS II DIRECTORS, AND FOR PROPOSAL TWO.
By Order of the Board of Directors
/s/ Wong Wah On
-----------------------------------
Wong Wah On
Corporate Secretary
May 14, 1999CORPORATE SECRETARY
Hong Kong
November 12, 2001
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. STOCKHOLDERS
WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY
AND VOTE THEIR SHARES IN PERSON.
CHINA RESOURCES DEVELOPMENT, INC.
Room 2005, 20/F., Universal Trade Centre
3-5A Arbuthnot Road, Central, Hong Kong
----------------------------------ROOM 2105
WEST TOWER, SHUN TAK CENTRE
200 CONNAUGHT ROAD C.
SHEUNG WAN, HONG KONG
------------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS
TO BE HELD ON
MAY 28, 1999
This proxy statement and theDECEMBER 12, 2001
------------------------------------
INTRODUCTION
The accompanying proxy card are being
furnished in connection with the solicitation of proxiesis solicited by the Board of Directors (the
"Board") of China Resources Development, Inc. (the "Company," "we", 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"),"us" and
from the holder of the
Company's outstanding shares of Series B preferred stock (the "Preferred
Stock"), forsimilar terms) to be voted at the Annual Meeting of ShareholdersStockholders to be held May 28, 1999, for the
purposes set forth in the accompanying noticeon
Wednesday, December 12, 2001 (the "Annual Meeting")., and any adjournments
thereof. When such proxy is properly executed and returned, the shares it
represents will be voted at the meeting as directed. If no specifications are
indicated, the shares will be voted in accordance with the recommendation of the
Board with respect to each matter submitted to the Company's stockholders for
approval. Abstentions and broker non-votes will not be voted, but will be
counted for determining the presence of a quorum.
The cost of preparing and mailing the enclosed proxy materials, which
is estimated to be approximately $28,000, will be borne by the Company. The
Company may use the services of its officers and employees (who will receive no
additional compensation) to solicit proxies. In addition to the use of the
mails, proxies may be solicited by telephone, Mailgram, facsimile, telegraph,
cable and personal interview. The Company intends to request banks and brokers
holding shares of the Company's Common Stock to forward copies of the proxy
materials to those persons for whom they hold shares and to request authority
for the execution of proxies. The Company will bearreimburse banks and brokers for
their out-of-pocket expenses. The Company may also retain the costsservices of soliciting proxies from its shareholders. In
additiona
solicitation firm to soliciting proxiesaid in the solicitation of proxies. If it does so, the
Company will pay the fees and expenses of such firm.
A list of stockholders entitled to vote at the Annual Meeting will be
available for examination by mail, directors, officers and employeesany stockholder for a proper purpose during normal
business hours at the offices 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 tofor a period of at least ten days
preceding 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 May 13, 1999.Annual Meeting.
VOTING AT THE ANNUAL MEETING
The shares entitled to vote at the Annual Meeting consist of shares of
the Company's Common Stock and Series B Preferred Stock, with each share
entitling the holder to one vote. At the close of business on April 30, 1999,October 31, 2001,
the record date for determining shareholders entitled to notice of and to vote at the Annual Meeting, (the "Record Date"), there were issued and outstanding
and entitled to vote approximately
5,929,004837,797 shares of the Company's Common Stock and 3,200,000320,000 shares of the Company's
Series B Preferred Stock. AllThis Proxy Statement and the accompanying form of
the outstanding shares of Common Stock and Preferred Stockproxy are entitledfirst being sent to votestockholders 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.about November 12, 2001.
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 shareholderstockholder 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 shareholdersstockholders is necessary to take action at the Annual
Meeting. A majority of the outstanding shares of the Company's 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 inspectorsinspector of election appointed for the Annual Meeting. The
inspectorsinspector of election will determine whether or not a quorum is present at the
Annual Meeting. The inspectorsinspector 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
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.
The two nominees for director who receive the greatest number of votes
cast in person or by proxy at the Annual Meeting shall be elected as Class II
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, counted together, present in person or represented by proxy at
the Annual Meeting; and, for purposes of determining shareholderstockholder approval of
such proposals, abstentions will be treated as shares of Common Stock or
Preferred Stock voted against adoption of such proposals.
2
CONVENTIONS
Unless otherwise specified, all references in this proxy statement to
"U.S. Dollars," "Dollars," "US$," or "$" are to United States dollars; all
references to "Hong Kong Dollars" or "HK$" are to Hong Kong dollars; and all
references to "Renminbi" or "RMB" or "Yuan" are to Renminbi Yuan, which is the
lawful currency 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 Subsidiariesits subsidiaries maintain their accounts in
Renminbi. The financial statements of the Company and its subsidiaries are
prepared in Renminbi. Translations of amounts from Renminbi to U.S. Dollars and
from Hong Kong Dollars to U.S. Dollars are for the convenience of the reader.
Unless otherwise indicated, any translations from Renminbi to U.S. Dollars 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 March
31, 1999,September 30, 2001,
which was approximately U.S.$1.00 = Rmb8.28. Translations from Hong Kong Dollars
to U.S. Dollars have been made at the single rate of exchange as quoted by the
Hongkong and Shanghai Banking Corporation Limited on March 31,
1999,September 30, 2001, which
was approximately US$1.00 = HK$7.75.7.80. 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, as the case may be, at the PBOC Rate or at all.
References to "Billion Luck" are to Billion Luck Company Ltd., a
British Virgin Islands company, which is a wholly-owned subsidiary of the
Company.
References to "Company" and "Registrant" are 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).
References to "Farming Bureau" are to the Hainan Agricultural
Reclamation General Company, a division of 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 controlled by the Farming Bureau.
2
References 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.its subsidiaries.
References to "HARC" are to Hainan Cihui Industrial Company Limited
(formerly known as Hainan Zhongwei Agricultural Resources Company Limited,Limited), a
company organized in the PRC, whose capital iswas owned, 56% by
Billion Luck,as of December 31, 2000,
39% by the Farming Bureau and 5%61% by the Company. References to "Operating Subsidiaries" are toDuring fiscal year 2001, the
consolidated
operations, assets and/or activities, asCompany acquired the context indicates, of First Supply,
and Second Supply.39% interest in HARC previously owned by the Farming
Bureau.
References to the "PRC" or "China" 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 "Tons" are to metric tons.
BENEFICIAL3
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS
BENEFICIAL OWNERS OF MORE THAN 5%
OF THE COMPANY'S COMMON STOCKAND MANAGEMENT
The following table sets forth certain information known to the knowledgeCompany
regarding the beneficial ownership of management,shares of Common Stock and Series B Voting
Preferred Stock as of October 31, 2001 by (i) each person or entity who isknown by the beneficialCompany
to be the owner of more than 5% of the outstanding shares of Common Stock and
Preferred Stock combined, (ii) each of the Company's Common Stock or Series B Preferred Stock outstanding as
of May 13, 1999, the number of shares owned bydirectors, (iii) each such person and the
percentage of
the outstandingCompany's executive officers, and (iv) all executive officers and directors
as a group. Unless otherwise indicated, each person has sole investment and
voting power with respect to all shares represented thereby.shown as beneficially owned.
Unless otherwise indicated the address of each beneficial owner is Room
2105, West Tower, Shun Tak Centre, 200 Connaught Road C., Sheung Wan, Hong Kong.
Amount and Nature of
Beneficial Ownership
-------------------------------------------------------------
Common Stock Preferred Stock Percent
Name and Address Nature of Percent of---------------------------- ------------------------- of
Beneficial Owner Beneficial Ownership (1)# of Shares % of Class ------------------- ------------------------ -----
Winsland Capital Limited 334,800 Common Stock 5.65%
TrustNet Chambers 3,200,000 Series B Preferred 100%
P.O. Box 3444, Road Town
Tortola, British Virgin Islands
Worlder International Company 486,000 Common Stock 8.20%
Limited (2)
21/F., Great Eagle Centre
No. 23 Harbour Road
Hong Kong
- ---------------------------
(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of these shares.
3
(2) Of the 486,000 shares of Common Stock indicated, Worlder International
Company Limited ("Worlder") directly owns 351,000 shares, and the remaining
135,000 shares represent shares of Common Stock owned by Silverich Limited,
which is wholly-owned by Worlder.
SHARE OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of May 13, 1999, 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 officers of the
Company as a group. All information with respect 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 NatureShares % of Percent of
Beneficial Owner Beneficial Ownership (1) Class Vote
- ---------------- ------------------------ -----
Li Shunxing -0- N/A
Han Jian Zhun -0- (2) N/A
Tam Cheuk Ho -0- (3) N/A
Li Fei Lie -0- (4) N/A
Wong Wah On 43,200 Common Stock (5) 0.73%
Ching Lung Po 334,800 Common Stock (6) 5.65%
All executive officers 378,000 Common Stock 6.38%
and directors as a group
- ----------------------------
(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of these shares.
(2) Han Jian Zhun was granted options to purchase 600 shares of Common Stock
under the Company's Stock Option Plan.
(3) Tam Cheuk Ho was granted options to purchase 600 shares of Common Stock
under the Company's Stock Option Plan.
(4) Li Fei Lie was granted options to purchase 10,000 shares of Common Stock
under the Company's Stock Option Plan.
(5) Brender Services Limited owns 43,200 shares of Common Stock. Brender
Services Limited is beneficially owned by Wong Wah On, the Director, Secretary
and Financial Controller of the Company. In addition, Brender was granted
options to purchase 10,000 shares of Common Stock under the Company's Stock
Option Plan, and Mr. Wong was granted options to purchase 600 shares of Common
Stock under the Plan.
4
(6) Winsland Capital Limited owns 334,800 shares of Common Stock. Winsland
Capital Limited is beneficially owned by Ching Lung Po, the Chairman of the
Board of Directors of the Company.
FINANCIAL INFORMATION
The following financial information and management's discussion and
analysis of financial condition and results of operations are excerpted from the
Company's Form 10-Q quarterly report for the quarterly period ended March 31,
1999. This information supplements the information contained in the Company's
annual report on Form 10-K for the fiscal year ended December 31, 1998, a copy
of which is provided herewith and incorporated herein by reference.
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Amounts in thousands, except share and per share data)
Three Months Ended March 31,
----------------------------
1999 1998 1999----------- ---------- ----------- ---------- ---- ---- ----
RMB RMB US$
NET SALES 21,355 93,227 2,579
COST OF SALES (21,140) (90,324) (2,553)
----------- ----------- -----------
GROSS PROFIT 215 2,903 26
DEPRECIATION (485) (389) (58)
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (5,139) (8,006) (621)
FINANCIAL INCOME, NET 183 43 22
OTHER EXPENSES, NET (330) (1,342) (40)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (5,556) (6,791) (671)
INCOME TAXES - - -
----------- ----------- -----------
LOSS BEFORE MINORITY
INTERESTS (5,556) (6,791) (671)
MINORITY INTERESTS 1,207 1,316 146
----------- ----------- -----------
NET LOSS (4,349) (5,475) (525)
=========== =========== ===========
BASIC AND DILUTED
LOSS PER SHARE (0.73) (0.91) (0.09)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 5,929,004 6,029,004 5,929,004
=========== =========== ===========
See notes to condensed consolidated financial statements.
5
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
(Amounts in thousands)
March 31, December 31, March 31,
1999 1998 1999
---- ---- ----
RMB RMB US$
Notes (Unaudited) (Note) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 89,532 129,238 10,813
Trade receivables 5,757 8,463 695
Inventories 2 13,069 10,569 1,579
Other receivables, deposits and prepayments 82,452 30,449 9,958
Amount due from Farming Bureau 34,077 33,667 4,116
Amounts due from related companies 32,733 30,802 3,953
---------- ---------- ----------
TOTAL CURRENT ASSETS 257,620 243,188 31,114
PROPERTY AND EQUIPMENT 3 6,286 7,243 759
INVESTMENTS 119,301 119,301 14,408
GOODWILL 987 994 119
---------- ---------- ----------
TOTAL ASSETS 384,194 370,726 46,400
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 15,469 12,204 1,868
Other payables and accrued liabilities 32,982 15,476 3,983
Income taxes payable 16,366 16,366 1,977
Amounts due to related companies 29,544 31,291 3,568
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 94,361 75,337 11,396
MINORITY INTERESTS 106,738 107,945 12,891
---------- ---------- ----------
TOTAL LIABILITIES AND MINORITY
INTERESTS 201,099 183,282 24,287
---------- ---------- ----------
SHAREHOLDERS' EQUITY Common stock, US$0.001 par value:
Authorized - 200,000,000 shares in 1999
and 1998
Issued and outstanding - 5,929,004 shares
in 1999 and 1998 49 49 6
Preferred stock, authorized -
10,000,000 shares in 1999 and 1998
Series B preferred stock, US$0.001 par
value:
Authorized - 3,200,000 shares in 1999
and 1998
Issued and outstanding - 3,200,000
shares in
1999 and 1998 27 27 3
Additional paid-in capital 156,564 156,564 18,909
Reserves 26,274 26,274 3,174
Retained earnings 185 4,534 22
Accumulated other comprehensive income/(loss) (4) (4) (1)
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 183,095 187,444 22,113
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 384,194 370,726 46,400
========== ========== ==========
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
6
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(Amounts in thousands)
Accumulated
Series A Series B Additional other
Common preferred Preferred Paid-in Retained comprehensive
stock stock Stock Capital Reserves earnings income/(loss) Total
----- ----- ----- ------- -------- -------- ------------- -----
RMB RMB RMB RMB RMB RMB RMB
Balance at January 1,
1999 49 - 27 156,564 26,274 4,534 Ching Lung Po 73,480(1) 4.0% 320,000(1) 100% 30.5%
Worlder International
Company Limited 48,600(2) 5.8% -- --
4.2%
21/F Great Eagle Centre
23 Harbour Road
Hong Kong
Tam Cheuk Ho 284, 897(3) 29.2% -- --
21.2%
Wong Wah On 289,217(4) 29.8% -- --
21.5%
Wan Yin Ling -- -- -- -- --
Ng Kin Sing -- -- -- -- --
Lo Kin Cheung -- -- -- -- --
Executive Officers and
Directors as a group
(of 6 persons) ........ 402,697(1)(3)(4) 187,444
Net loss (4,349) (4,349)
------ ------ ------ ------- ------- ------- --------- ---------
Balance at March 31,
1999 49 - 27 156,564 26,274 185 (4) 183,095
====== ====== ====== ======= ======= ======= ========= =========33.7% 320,000 100% 52.1%
See notes- --------------
(1) Shares registered to condensed consolidated financial statements.
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Amounts in thousands)
Three months ended March 31,
----------------------------
1999 1998 1998
---- ---- ----
RMB RMB US$
OPERATING ACTIVITIES
Net loss (4,349) (5,475) (525)
Adjustments to reconcile net loss to
net cash provided by/(used by) operating
activities:
Depreciation and amortization 492 395 59
Minority interests (1,207) (1,316) (146)
Loss on disposal of property and equipment 454 - 55
Changes in operating assets and liabilities:
Trade receivables 2,706 (47,555) 327
Inventories (2,500) 38,883 (302)
Other receivables, deposits and prepayments (52,003) (53,907) (6,281)
Amount due from Farming Bureau (410) 11,691 (49)
Amounts due from related companies (1,931) (13,003) (233)
Accounts payable 3,265 (3,072) 395
Other payables and accrued liabilities 17,506 (2,212) 2,114
Income taxes payable - (3,075) -
Amounts due to related companies (1,747) - (211)
---------- ---------- ----------
Net cash used in operating activities (39,724) (78,646) (4,797)
---------- ---------- ----------
INVESTING ACTIVITIES
Purchases of property and equipment (42) (341) (5)
Proceeds from disposal of property and equipment 60 - 7
---------- ---------- ----------
Net cash provided by/(used in) investing activities 18 (341) 2
---------- ---------- ----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (39,706) (78,987) (4,795)
Cash and cash equivalent, at beginning of period 129,238 124,547 15,608
---------- ---------- ----------
Cash and cash equivalent, at end of period 89,532 45,560 10,813
========== ========== ==========
See notesWinsland Capital Limited, a company beneficially owned
by Mr. Ching. Also includes an option granted to condensed consolidated financial statements.
7
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(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 instructionsMr. Ching to Form 10-Q and Article 10purchase
40,000 shares of Regulation S-X. Accordingly, they do not
include allCommon Stock.
(2) Includes13,500 shares registered to Silverich Limited, a wholly-owned
subsidiary of Worlder International Company Limited.
(3) Includes 244,897 shares registered to Anka Capital Limited, a company owned
50% by Mr. Tam. Mr. Tam disclaims beneficial ownership of the information and footnotes requiredshares owned
by generally
accepted accounting principles for complete financial statements. InAnka Capital Limited, except to the opinionextent of management, all adjustments (consistinghis pecuniary interest in
the shares. Also includes an option granted to Mr. Tam to purchase 40,000
shares of normal
recurring accruals) considered necessary forCommon Stock.
(4) Includes 244,897 shares registered to Anka Capital Limited, a fair presentation have
been included. Operating results for the three months period ended
March 31, 1999, are not necessarily indicativecompany owned
50% by Mr. Wong. Mr. Wong disclaims beneficial ownership of the results that may
be expected forshares
owned by Anka Capital Limited, except to the year ending December 31, 1999.
2. INVENTORIES
March 31, December 31,
--------- ------------
1999 1998
---- ----
RMB RMB
Finished goods 13,069 10,569
====== ======
3. PROPERTY AND EQUIPMENT, NET
March 31, December 31,
--------- ------------
1999 1998
---- ----
RMB RMB
At cost:
Buildings and leasehold improvements 5,509 6,052
Machinery, equipment and motor vehicles 6,768 6,904
---------- ----------
12,277 12,956
Accumulated depreciation: (5,991) (5,713)
---------- ----------
Net book value 6,286 7,243
========== ==========
4. SEGMENT FINANCIAL INFORMATION
Three months ended March 31,
----------------------------
1999 1998
---- ----
RMB RMB
Net sales to external customers:
Natural rubber
Net sales to unaffiliated customers 16,567 53,140
Net sales to affiliates - 3,296
--------- ---------
16,567 56,436
--------- ---------
8
Materials, supplies and other Agricultural products:
Net sales to unaffiliated customers 83 30,484
Net sales to affiliates 4,705 6,307
--------- ---------
4,788 36,791
--------- ---------
Total consolidated net sales 21,355 93,227
========= =========
Segment loss:
Natural rubber (3,098) (2,353)
Material, supplies and other
Agricultural products (101) (1,035)
--------- ---------
Total segment loss (3,199) (3,388)
Reconciling items:
Corporate expenses (2,540) (3,559)
Interest income 209 242
Interest expense (26) (86)
--------- ---------
Total consolidated loss before income taxes (5,556) (6,791)
========= =========
Segment assets:
Natural rubber 259,905 244,418
Material, supplies and other
agricultural products 15,620 32,397
--------- ----------
Total segment asset 275,525 276,815
Reconciling items:
Corporate assets 19,354 48,934
Investments 119,301 147,671
Intersegment receivables (29,986) (50,690)
---------- ----------
Total consolidated assets 384,194 422,730
========== ==========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table shows the selected unaudited condensed consolidated
income statements dataextent of the Company and its subsidiaries for the three months
ended March 31, 1999 and 1998. The data should be read in conjunction with the
unaudited Condensed Consolidated Financial Statements of the Company and related
notes thereto.
9
The discussions below are presentedhis pecuniary
interest 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 atshares. Also includes 4,320 shares registered to Brender
Services Limited, a company beneficially owned by Mr. Wong and an exchange rateoption
granted to Mr. Wong to purchase 40,000 shares of $1.00 =
RMB8.28, which represents the approximate single rate of exchange as quoted by
the People's Bank of China on March 31, 1999. 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 ended March 31,
----------------------------
1999 1998
---- ----
RMB RMB
Net sales:
Natural rubber 16,567 56,436
Materials, supplies and other agricultural products 4,788 36,791
---------- ----------
21,355 93,227
---------- ----------
Gross profit 215 2,903
Gross profit margin (%) 1.01 3.11
Loss before income taxes (5,556) (6,791)
Income taxes - -
---------- ----------
Loss before minority interests (5,556) (6,791)
Minority interests 1,207 1,316
---------- ----------
Net loss (4,349) (5,475)
========== ==========
NET SALES AND GROSS PROFIT
Total net sales for the first quarter of fiscal 1999 decreased by
approximately RMB72 million (US$8.7 million) or 77% to approximately RMB21
million (US$2.6 million), compared to approximately RMB93 million (US$11.2
million) for the corresponding period in 1998. Net sales of natural rubber
declined by approximately RMB40 million (US$4.8 million) or 71% to approximately
RMB17 million (US$2.0 million), compared to approximately RMB56 million (US$6.8
million) for the corresponding period in 1998. Net sales revenue from the
procurement of materials and supplies decreased by approximately RMB32 million
(US$3.9 million) or 87% to approximately RMB5 million (US$600,000), compared to
approximately RMB37 million (US$4.5 million) for the corresponding period in
1998.
Despite of the fact that the average natural rubber price for the first
quarter of 1999 increased to approximately Rmb8,000 per ton, compared to
approximately Rmb7,500 per ton for the corresponding period in 1998, net sales
of natural rubber decreased by approximately 71%, which was attributable to the
weak consumption market and the competition from imported rubber.
The decrease in net sales of procurement of materials, supplies and
other agricultural products in 1999 was mainly due to the sales of barley of
Rmb29 million (US$3.5 million) in 1998. There were no sales of barley in 1999,
as this product was not profitable and the management decided to suspend the
trading of this product.
Overall gross profit decreased by approximately RMB2.7 million
(US$325,000) or 93% to RMB215,000 (US$26,000) for the first three months of 1999
from approximately RMB2.9 million (US$350,000) for the corresponding period in
1998. Gross profit margin decreased to 1.01% for the three months of 1999 from
3.11% for the corresponding period in 1998. The decrease in gross profit margin
was primarily due to the gross loss on the procurement business.
10
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months of
1999 were RMB5.1 million (US$616,000), compared to RMB8.0 million (US$966,000)
for the corresponding period in 1998. The decrease was mainly due to the
Company's measures to control cost, including salary cuts and reduction of
entertainment expenses.
FINANCIAL INCOME, NET
Net financial income increased by RMB138,000 (US$17,000) to RMB183,000
(US$22,000) for the three months of 1999 compared to RMB43,000 (US$5,000) for
the corresponding period in 1998. The increase was due to the fact that the
Company had more cash deposits with financial institutions during the first
quarter of 1999 in comparison with the corresponding period in 1998.
OTHER EXPENSES, NET
Other expenses, net, decreased by approximately RMB1 million
(US$122,000) or 75% from RMB1.3 million (US$157,000) for the three months of
1998 to RMB330,000 (US$40,000) for the corresponding period in 1999. The net
expenses for the three months of 1998 mainly represented net loss from the
trading of rubber futures contracts. The net expenses for the three months of
1999 mainly represented the loss on disposal of fixed assets.
MINORITY INTERESTS
Pursuant to an Agreement for the Sale and Purchase of Share in HARC
dated April 30, 1998 between Guilinyang Farm and the Company, the Company
purchased 5,000,000 shares, representing 5% of the total issued and outstanding
share capital of HARC, from Guilinyang Farm for a total consideration of RMB7
million (US$846,000). After the said purchase, the Company's effective interest
in HARC increased from 56% to 61%. Minority interests after the said purchase
represent a 39% interest in HARC held by the Farming Bureau compared with 44%
before the said purchase.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund inventories and trade
receivables and, to a lesser extent, to expand business operations. The Company
has financed its working capital requirements primarily through internally
generated cash.
The Company has a working capital surplus of approximately RMB163
million (US$19.7 million) as of March 31, 1999, compared to that of
approximately RMB168 million (US$20.0 million) as of December 31, 1998. Net cash
used in operating activities for the three months ended March 31, 1999 was
approximately RMB40 million (US$4.8 million) as compared to approximately RMB79
million (US$9.5 million) for the corresponding period in 1998. Net cash flows
from the Company's operating activities are attributable to the Company's income
and changes in operating assets and liabilities.
There has been no other significant change in financial condition and
liquidity since the fiscal year ended December 31, 1998. The Company believes
that internally generated funds will be sufficient to satisfy its anticipated
working capital needs for at least the next twelve months.
11
MARKET RISK AND RISK MANAGEMENT POLICIES
The Company's interest income is most sensitive to changes in the
general level of interest rates. As at March 31, 1999, approximately 85% of the
Company's cash equivalents are mainly Renminbi and Hong Kong Dollar deposits
with financial institutions, bearing market interest rates without fixed term.
The remaining balance of cash equivalents are Hong Kong Dollar short term fixed
deposits.
Since 1996, the Company's board of directors has adopted a risk
management resolution authorizing the management to enter into natural rubber
commodities futures contracts for hedging the price risk associated with certain
firm commitments for the purchase of natural rubber. The Company also trades
natural rubber commodity futures contracts which are not specific hedges. As at
March 31, 1999, the Company had neither a position in natural rubber commodity
futures contracts, nor firm commitments for the purchase of natural rubber.
YEAR 2000 ISSUE
As is more fully described in the Company's annual report on Form 10-K
for the fiscal year ended December 31, 1998, the Company is modifying or
replacing its software as well as hardware to ensure Year 2000 compliance. The
Company believes that the costs directly associated with the year 2000 issue
will be less than US$20,000 and that all required upgrades and replacements will
be completed prior to the end of the third quarter of 1999.
Although the Company believes that its internal exposure to the year
2000 issue is limited and that its remediation efforts will be successful in
addressing its year 2000 issues, there can be no assurance that such remediation
efforts will be successful or that its upgraded software or any newly installed
systems will be fully year 2000 compatible. At this time, the Company is unable
to accurately predict the consequences of failed remediation efforts or a
failure of the Company's upgraded software or new systems to effectively address
the year 2000 issue, although management does not believe that any such failures
will result in a material adverse effect on the Company or its subsidiaries, or
the operation of their business.
Any failure of the software or systems of the suppliers, customers,
financial institutions or other third parties with which the Company or its
subsidiaries conduct business to address their year 2000 issues could impair the
Company's ability to perform normal operational functions. Because the Company
is still evaluating the status of the systems of the third parties with which
the Company and its subsidiaries conduct business, management has not yet
developed a comprehensive contingency plan and is unable to identify "the most
reasonably likely worst case scenario" at this time. As management identifies
significant risks related to these issues, management will develop appropriate
contingency plans.
12Common Stock.
4
PROPOSAL 1
- BOARD OF DIRECTORS PROPOSAL TO EFFECT A
ONE-FOR-TEN REVERSE STOCK SPLIT OF THE COMPANY'S OUTSTANDING CAPITAL STOCK
The Board of Directors of the Company has approved a resolution to
effect a one-for-ten reverse split of the Company'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 that effective date will be reclassified as and changed into one-tenth
of one share of Common Stock or Preferred Stock, as the case may be.
The principal effect of the Reverse Stock Split will be to 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 assuming that
no additional shares have been issued or retired subsequent to May 13, 1999).
The Common Stock issued pursuant to the Reverse Stock Split will be fully paid
and nonassessable. The respective relative voting rights and other rights that
accompany the Common Stock will not be altered by the Reverse Stock Split, and
the Common Stock will continue to have a par value of $0.001 per share.
Consummation of the Reverse Stock Split will not alter the number of authorized
shares of the Company's Common Stock, which 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 in 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 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
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, and the hearing panel's determination is pending.
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 outstanding should not, by itself,
13
affect the marketability of a stock, the type of investor who acquires such
stock or the Company'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 greater trading volatility sometimes associated
with such securities.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to maintain the listing of the Common 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 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 market value for the Common Stock.
There can be no assurance, even if the Reverse Stock Split is
consummated, that the bid price per share of Common Stock will increase to in
excess of $1.00, or that, if the bid price per share of Common Stock does
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
Common Stock even 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 shareholders of the
Company as a result of approval of the Reverse Stock Split. These disadvantages
include a significant increase in possible dilution to present shareholders'
percentage ownership of the Common Stock because of the additional authorized
shares of Common Stock which would be available for future issuance by the
Company. Current shareholders, in the aggregate, own approximately 3% of current
authorized shares of Common Stock under the Company's present capital structure,
but would own only 0.3% of the authorized shares of Common Stock under the
Company's post-split capital structure, assuming that the proposed Reverse Stock
Split is consummated.
The proportionate increase in the number of shares of Common Stock
available for future issuance may also have certain anti-takeover effects. For
example, the availability of a large number of shares of Common Stock for future
issuance might allow the Company's Board of Directors to dilute the percentage
share ownership of persons who might attempt to obtain control over the Company.
Approval of the Reverse Stock Split therefore, may allow the Board of Directors
to frustrate 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 and the Board of
Directors is not recommending the Reverse Stock Split in response to any
existing attempts by third parties to obtain control of the Company.
14
Registration
The Board of Directors believes that the consummation of the Reverse
Stock Split and the changes which would result therefrom will not cause the
Company to terminate registration of the Common Stock under the Securities
Exchange Act of 1934, as amended, 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 status as a reporting company for
federal securities law purposes.
Federal Income Tax Consequences
The receipt of Common Stock or Preferred Stock in the Reverse Stock
Split should not result in any taxable gain or loss to shareholders for U.S.
federal income tax purposes. If the Reverse Stock Split is approved, the U.S.
tax basis of Common Stock or Preferred Stock received as a result of the Reverse
Stock Split will be equal, in the aggregate, to the basis of the shares
exchanged for the 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 included 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 surrender 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.
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 sole 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 approval of the Reverse
Stock Split.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE PROPOSAL TO EFFECT THE REVERSE STOCK SPLIT.
15
PROPOSAL 2 - ELECTION OF DIRECTORS
During 1998, the Company's Board of Directors was comprised of seven
directors, and, according toNOMINEES AND DIRECTORS
- ----------------------
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 ofpermits the
Board of Directors.Directors to fix the number of directors at not less than three nor
more than 25. At the 1996 annual meeting the shareholders approvedof stockholders held in 1996, an amendment
to the Articles of Incorporation to dividewas approved, dividing the directors into three
classes. OnePursuant to the amendment, one class of directors is to be elected each year,
forto serve a three-year term.
However, as
three classes ofTwo Class II directors were newly established, the Class I directors werewill be 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. Tam Cheuk
Ho and Wong Wah On were elected to serve in Class I until the annual meeting to
be held in 2000 and until their successors have been duly elected and qualified.
At the annual meeting held in 1998, Messrs. Ching Lung Po and Lin Yu Quan were
elected to serve in Class II until the annual meeting to be held in 2001 and
until their successors have been duly elected and qualified. Messrs. 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 Wan 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 III is to be conducted at the 1999 Annual Meeting. The
nominees for Class III,II directors, if elected, will serve a three-year term
until the annual meeting
of stockholders to be held in 20022004 and until their successors havehis successor is duly elected and
qualified. Messrs. WanChing Lung Po and Ng areKin Sing both currently servingserve as directors. Mr.
Ng currently serves as a Class III director, but effective upon his election at
the Annual Meeting, will resign as such and continue as a Class II director. Mr.
Ng's resignation and election as a Class II director will result in there being
two directors from each of the Company.Class I, II and III.
Both nominees have consented to being named herein and have indicated
their intention to serve as Class II 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 named 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 nomineesfollowing persons have been nominated for election to the Board of
Directors:
Name Age Position
---- --- ---------
Ching Lung Po 54 Chairman, President and certain information about them are set forth below:
Class III Directors:Chief
Executive Officer
Ng Kin Sing 39 Director
Business Experience.
- -------------------
Mr. Wan Ying LinChing Lung Po has been a director of the Company since February 4,
1998. Since SeptemberHe was appointed Chairman of 1996,the Board of Directors on January 25, 1999,
Chief Executive Officer and President of the Company on February 1, 1999 and
June 1, 1999, respectively. Mr. WanChing has also been the DirectorChairman of the Board of
Directors and Deputy General
ManagerPresident of OVM International Holding Corp. (OTCBB:(OTC Bulletin Board:
OVMI), which is included inon the OTC Bulletin Board operated by the National AssociationNasdaq, since
September 1996, and the Chariman of Securities
Dealers, Inc.Asia Fiber Holdings Limited (OTC Bulletin
Board: AFBR), which is included on the OTC Bulletin Board operated by the
Nasdaq, since January 2000. Mr. WanChing has been involved for more than 20 years
in the management of production and technology for industrial enterprises in
PRC. He worked in Heilongjiang Suihua
5
Electronic Factory as an engineer from 1969 to 1976 and was the Head of the
Heilongjiang Suihua Industrial Science & Technology Research Institute from 1975
to 1976. Mr. Ching joined the Heilongjiang Qingan Factory in 1976 and has been
the General Manager since 1976. In 1988, Mr. Ching started his own business and
established the Shenzhen Hongda Science & Technology Company Limited in
Shenzhen, which manufactures electronic products. Mr. Ching graduated from the
Guangxi LiuzhouHarbin Military and Engineering Institute and holds the title of Medical
Specialty, specializing in administration and management. From January 1986
through December 1987, he was the manager of Lam Ko Mould Company, in charge of
the China marketing and development division in Hong Kong. From January 1988
through February 1993, Mr. Wan worked as the marketing manager of Wai Tong
Trading Company in Hong Kong. In 1993, he joined the Hong Kong Prestressing
Concrete Engineering Company Limited, where he serves as manager.Senior
Engineer.
Mr. Ng Kin Sing has been a director of the Company since February 1,
1999, and also serves as a member of the Board's audit committee.Audit Committee. From April 1998 to the
present, Mr. Ng ishas been the managing director of Action Plan Limited, a
securities investment company. From November 1995 until March 1998, Mr. Ng was
sales and dealing director for 16
NatWest Markets (Asia) Limited; and from May 19951985
until October 1996,1995, 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.
Information RegardingConcerning the Board of Directors and Committees
TheDirectors.
- ---------------------------------------------
During the year ended December 31, 2000 the Company's Board of
Directors held eight (8) meetings during 1998,
and all other actionsmeetings. Each member of the Board were taken pursuantparticipated in each
action of the Board.
Committees of the Board of Directors.
- ------------------------------------
The Audit Committee, which currently consists of Ng Kin Sing, Wan Ying
Lin and Lo Kin Cheung, reviews the professional services provided by our
independent auditors, the independence of our auditors from our management, our
annual financial statements and our system of internal accounting controls. The
Audit Committee also reviews other matters with respect to unanimousour accounting,
auditing and financial reporting practices and procedures as it may find
appropriate or may be brought to its attention. The Company's Board of Directors
has adopted a written consents.Charter of the Audit Committee, a copy of which is
attached to this Proxy Statement as Appendix A. The members of the Audit
Committee are all independent, as defined in the National Association of
Securities Dealers' listing standards. The Audit Committee met on four occasions
during the year ended December 31, 2000.
The Company does not have a formal compensation committee. The Board of
Directors, acting as a compensation committee, periodically meets to discuss and
deliberate on issues surrounding the terms and conditions of executive officer
compensation, including base salaries, bonuses, awards of stock options and
reimbursement of certain business related costs and expenses.
The Company does not have a compensation orformal nominating committee. The Board has established an audit committee consisting of two
"independent" directors, 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, recommends candidates who will be
nominated as management's slate of directors at each annual meeting of
stockholders. The Board of Directors will also consider candidates for directordirectors
nominated by shareholders.stockholders. A shareholderstockholder who wishes to submit a candidate for
consideration at the 2000 annual meeting of stockholders to be held in 2002, must
notify the Secretary of the Company, in writing, no later than March 1, 2000.July 15, 2002.
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 to be included in proxy solicitations. The
nomination notice must also include the nominating shareholder'sstockholder's name and
address, the number of shares beneficially owned and a statement that such
stockholder intends to nominate his candidate. A statement from the
6
candidate must also be furnished, indicating the candidate's desire and ability
to serve as a director. Adherence to these procedures is a prerequisite to a
stockholder's right to nominate a candidate for director at the annual meeting.
Audit Committee Report.
- ----------------------
The following statement made by the Audit Committee, shall not be
deemed incorporated by reference into any filing under the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and shall not otherwise be deemed filed under
either of such Acts.
The Audit Committee reviews our financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the system of internal
controls.
Management represented to the committee that the Company's consolidated
financial statements were prepared in accordance with generally accepted
accounting principles, and the committee has reviewed and discussed the
consolidated financial statements with management and the independent auditors.
The committee discussed with the independent auditors matters required to be
discussed by auditing standards generally accepted in the United States.
In addition, the committee has discussed with the independent auditors
the auditor's independence from the Company and its management, including the
matters in the written disclosures required by the Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees).
The committee also discussed with our independent auditors the overall
scope and plans for their respective audit. The committee meets with the
independent auditors with and without management present, to discuss the results
of their examinations, the evaluations of the Company's internal controls, and
the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, the
committee recommended to the Board of Directors, and the board has approved,
that the audited consolidated financial statements be included in the Company's
Form 10-K for the year ended December 31, 2000, for filing with the Securities
and Exchange Commission.
Submitted by the
Audit Committee of
the Board of
Directors:
/s/ Ng Kin Sing
/s/ Wan Ying Lin
/s/ Lo Kin Cheung
7
Report of the Board of Directors on Executive Compensation.
- ----------------------------------------------------------
The following statement made by the Board of Directors, sitting as a
Compensation Committee, shall not be deemed incorporated by reference into any
filing under the Securities Act or the Exchange Act, and shall not otherwise be
deemed filed under either of such Acts.
The Company does not have a formal compensation committee. The Board of
Directors, acting as a compensation committee, periodically meets to discuss and
deliberate on issues surrounding the terms and conditions of executive officer
compensation, including base salaries, bonuses, awards of stock options and
reimbursement of certain business related costs and expenses.
In determining the compensation of the Company's executive officers,
the Board of Directors takes into account all factors which it considers
relevant, including business conditions, in general, and in the Company's line
of business during the year in light of such conditions, the market compensation
for executives of similar background and experience, the performance of the
Company, in general, and the performance of the specific executive officer under
consideration, including the business area of the Company for which such
executive officer is responsible. In light of these factors, the Board of
Directors determined that the payment of discretionary bonuses to executive
officers was not appropriate for the fiscal year ended December 31, 2000.
The Board of Directors also believes that granting stock options
provides an additional incentive to executive officers to continue in the
service of the Company and gives them an interest similar to stockholders in the
success of the Company. In the future, the Board of Directors intends to make
use of stock options, along with other traditional salary and bonus components
of executive compensation packages, to provide incentives to attract and
maintain qualified executive officers.
Submitted by the Board of Directors,
Sitting as a Compensation Committee:
/s/ Ching Lung Po
/s/ Tam Cheuk Ho
/s/ Wong Wah On
/s/ Wan Ying Lin
/s/ Ng Kin Sing
/s/ Lo Kin Cheung
Compensation Committee Interlocks and Insider Participation.
- -----------------------------------------------------------
The current Board of Directors includes Ching Lung Po, Tam Cheuk Ho and
Wong Wah On, each of whom also serves as an executive officer of the Company. As
a result, these directors discuss and participate in deliberations of the Board
of Directors on matters relating to the terms of executive compensation. In this
regard, a director whose executive compensation is voted upon by the Board of
Directors must abstain from such vote.
8
Performance Graph.
- -----------------
The following graph compares the cumulative total returns on the
Company's common stock during the preceding five fiscal years, with the returns
on companies in the Nasdaq Market Index and an Industry Index Group selected by
the Company (Standard Industrial Classification Code No. 5411 - Grocery Stores).
The graph assumes that $100 was invested in the Company's common stock and each
of the indices presented on December 31,1995, and that dividends, if any, were
reinvested.
This information is presented in accordance with requirements of the
Securities and Exchange Commission, should not necessarily be viewed as
indicative of future performance, and shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing made by the Company under the Securities Act of 1933
or the Securities Exchange Act of 1934 (except to the extent that the Company
specifically incorporates this information by reference).
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CHINA RESOURCES DEVELOPMENT, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
STOCK PRICE PERFORMANCE COMPARISON OF
5-YEAR CUMULATIVE RETURNS
Fiscal Years Ended December 31
1995 1996 1997 1998 1999 2000
-----------------------------------------------------------
China Resources Development 100.00 4.50 2.80 1.05 1.34 .48
Grocery Stores 100.00 129.12 159.29 225.55 160.77 189.09
NASDAQ Market Index 100.00 124.27 152.00 214.39 378.12 237.66
9
Section 16(a) Beneficial Ownership Reporting Compliance.
- -------------------------------------------------------
Based solely upon a review of Forms 3, 4, and 5, and amendments
thereto, furnished to the Company for the fiscal year ended December 31, 2000,
Mr. Lo Kin Cheung failed to timely file Form 3 to report his appointment as a
director.
EXECUTIVE COMPENSATION
- ----------------------
Summary Compensation Table.
- --------------------------
The following table shows, for each of the three years ended December
31, 2000, the cash and other compensation paid by the Company to its President
and Chief Executive Officer and each other executive officer whose annual
compensation was $100,000 or more.
|----------------|
Annual Compensation | Long Term |
| Compensation |
------------------------------------- |----------------|
| |
Other | Securities |
Annual | Underlying | All Other
Salary Bonus Compensation | Options | Compensation
Name and Principal Position Year (US$) (US$) (US$) | (1) | (US$)
- -------------------------------- -------- --------- ---------- ---------------- |----------------|-----------------
Ching Lung Po, President and 2000 276,923 -0- -0- | -0- | -0-
Chief Executive Officer | |
| |
1999 253,846 -0- -0- | -0- | -0-
| |
1998 -0- -0- -0- | -0- | -0-
| |
| |
Tam Cheuk Ho, Director and 2000 230,769 -0- -0- | 60 | -0-
Chief Financial Officer | |
| |
1999 212,538 -0- -0- | 60 | -0-
| |
1998 -0- -0- -0- | 60 | -0-
| |
| |
Wong Wah On, Director, 2000 153,846 -0- -0- | 60 | -0-
Secretary and Financial | |
Controller | |
| |
1999 141,026 -0- -0- | 60 | -0-
| |
1998 -0- -0- -0- | 60 | -0-
| |
| |
Li Fei Lie, Vice President(2) 2000 69,231 -0- -0- | 1,000 | -0-
| |
1999 69,231 -0- -0- | 1,000 | -0-
| |
1998 46,795 -0- 22,436 | 1,000 | -0-
===================================================================================================================
(1) As of December 31, 2000, none of the stock options held by Mr. Li, Mr. Tam
and Mr. Wong were exercisable. None of such options was "in-the-money" at
such date, as the fair market value (as defined in the Company stock option
plan and adjusted as a result of the one-for-ten reverse stock split) of
the Common Stock on December 31, 2000, was US$2.94 per share.
(2) Mr. Li resigned in October 2001.
10
Option/SAR Grants Table.
- -----------------------
The following table sets forth information with respect to the grant of
options to purchase shares of Common Stock during the fiscal year ended December
31, 2000 to each person named in the Summary Compensation Table.
Potential Realiz-
able Value At
Assumed Rates
Number % Of Of Stock Price
Of Shares Total Options Appreciation For
Underlying Granted To Exercise Or Option Term
Options Employees In Base Price Expiration
Name Granted Fiscal Year $/Share Date 5%($) 10%($)
- -------------------------------------------------------------------------------------------------------------------
Ching Lung Po -- -- -- -- -- --
Tam Cheuk Ho -- -- -- -- -- --
Wong Wah On -- -- -- -- -- --
Li Fei Lie(1) -- -- -- -- -- --
- --------------------
(1) Mr. Li resigned in October 2001.
Aggregated Option Exercises and Fiscal Year-End Option Value Table.
- -------------------------------------------------------------------
The following table sets forth information with respect to the exercise
of options to purchase shares of Common Stock during the fiscal year ended
December 31, 2000 by each person named in the Summary Compensation Table.
Number of Shares Values of Unexercised
Shares ($) Underlying Unexercised In the Money Options
Acquired on Value Options At Year End at Year End (1)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------------------------------------------------------------------------------------------------
Ching Lung Po -- -- -- / -- -- / --
Tam Cheuk Ho -- -- 60 / 60 -- / --
Wong Wah On -- -- 60 / 60 -- / --
Li Fei Lie(2) -- -- 1,000 / 1,000 -- --/
- --------------------------
(1) Value based on the difference between the closing price of the Company's
Common Stock on the NASDAQ SmallCap Market of $3.00 per share on December
31, 2000, and the exercise price of the options.
(2) Mr. Li resigned in October 2001.
11
Stock Option Plan.
- -----------------
The Company adopted a Stock Option Plan (the "Plan") as of March 31,
1995. The Plan allows the Board of Directors, or a committee thereof at the
Board's discretion, to grant stock options to officers, directors, key
employees, consultants and affiliates of the Company. Initially, 24,000 shares
of common stock could be issued and sold pursuant to options granted under the
Plan. "Incentive Stock Options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), may be granted to
employees, including officers, whether or not they are members of the Board of
Directors, and nonqualified stock options may be granted to any such employee or
officer and to directors, consultants, and affiliates who perform substantial
services for or on behalf of the Company or its subsidiaries.
The Board of Directors, or a committee appointed by the Board (the
"Committee"), is vested with authority to (i) select persons to participate in
the Plan; (ii) determine the form and substance of grants made under the Plan to
each participant, and the conditions and restrictions, if any, subject to which
grants will be made; (iii) interpret the Plan; and (iv) adopt, amend, or rescind
such rules and regulations for carrying out the Plan as it may deem appropriate.
The Board of Directors has the power to modify or terminate the Plan and from
time to time may suspend, and if suspended may reinstate, any or all of the
provisions of the Plan except that (i) no modification, suspension, or
termination of the Plan may, without the consent of the grantee affected, alter
or impair any grant previously made under the Plan; and (ii) no modification
shall become effective without prior consent of the stockholders of the Company
that would (a) increase the maximum number of shares reserved for issuance under
the Plan, except for certain adjustments allowed by the Plan; (b) change the
classes of employees eligible to participate in the Plan; or (c) materially
increase the benefits accruing to participants in the Plan. On October 12, 2000,
by virtue of an amendment adopted by the stockholders of the Company, the
requirement of stockholder approval of any modification of the Plan that would
materially increase the benefits accruing to participants in the Plan was
eliminated.
The Plan provides that the price per share deliverable upon the
exercise of each Incentive Stock Option shall not be less than 100% of the fair
market value of the shares on the date the option is granted, as the Committee
determines. In the case of the grant of any Incentive Stock Option to an
employee who, at the time of the grant, owns more than 10% of the total combined
voting power of all classes of stock of the Company or any of its subsidiaries,
such price per share, if required by the Code at the time of grant, shall not be
less than 110% of the fair market value of the shares on the date the option is
granted. The price per share deliverable upon the exercise of each nonqualified
stock option shall not be less than the higher of (i) the net tangible assets
per share of the Company as of the end of the fiscal year immediately preceding
the date of such granting; or (ii) 80% of the fair market value of the shares on
the date the option is granted, as the Committee determines. On October 12,
2000, by virtue of an amendment adopted by the stockholders of the Company to
modify the pricing procedure for the exercise of nonqualified stock options, the
price per share deliverable upon the exercise of each nonqualified stock option
shall not be less than 80% of the fair market value of the shares of the date
the option is granted, as the Committee determines.
Options may be exercised in whole or in part upon payment of the
exercise price of the shares to be acquired. Payment shall be made in cash or,
in the discretion of the Committee, in shares previously acquired by the
participant or in a combination of cash and shares of Common Stock. The fair
market value of shares of Common Stock tendered on exercise of options shall be
determined on the date of exercise.
12
On December 30, 1996, the stockholders of the Company adopted an
amendment to the Plan (a) to change the number of shares of Common Stock subject
to the Plan to that number of shares which would, in the aggregate and if deemed
outstanding, constitute 20% of the Company's then-outstanding shares of Common
Stock, as determined at the time of granting stock options, and (b) to allow
Nonqualified Stock Options, as defined in the Plan, to be exercisable in less
than one year (no currently outstanding options were changed by such amendment).
As of December 31, 2000, options to purchase 13,820 shares of Common
Stock had been granted and remain outstanding, and 10,180 were available for
future grant. Of the options outstanding as of such date, options to purchase
2,120 shares were beneficially owned by officers and directors of the shareholder.
The shareholder must also furnish a statement fromCompany.
Report on Repricing of Options.
- ------------------------------
No options were repriced during the candidate indicating thatyear ended December 31, 2000.
Director Compensation.
- ---------------------
During the candidate wishesfiscal years ended December 31, 2000 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 Directors
During 1998,1999, directors of
the Company did not receive compensation for their serviceservices as such.
Employment and Consulting Agreements.
- ------------------------------------
On February 1, 1999, the Company entered into an Employment Agreement
with Tam Cheuk Ho. In accordance with the terms of the Employment Agreement, Mr.
Tam is employed by the Company as its Chief Financial Officer, to perform such
duties as the Board of Directors from time to time determines. Mr. Tam receives
a base salary of HK$1,800,000 (US$230,769) annually, which base salary is to be
adjusted on each anniversary of the Employment Agreement to reflect a change in
the applicable consumer price index, or such greater amount as the Company's
Board of Directors may determine. The Employment Agreement has a term of two
years and will be automatically renewed, subject to earlier termination in
accordance with the terms thereof.
On February 1, 1999, the Company entered into an Employment Agreement
with Wong Wah On. In accordance with the terms of the Employment Agreement, Mr.
Wong is employed by the Company as its Financial Controller and Corporate
Secretary, to perform such duties as the Board of Directors from time to time
determines. Mr. Wong receives a base salary of HK$1,200,000 (US$153,846)
annually, which base salary is to be adjusted on each anniversary of the
Employment Agreement to reflect a change in the applicable consumer price index,
or such greater amount as the
13
Company's Board of Directors may determine. The Employment Agreement has a term
of two years and will be automatically renewed, subject to earlier termination
in accordance with the terms thereof.
On February 1, 1999, the Company entered into a Service Agreement with
Ching Lung Po. In accordance with the terms of the Service Agreement, Mr. Ching
is employed by the Company as its Chief Executive Officer, to perform such
duties as the Board of Directors from time to time determines. Mr. Ching
receives a base salary of HK$2,160,000 (US$276,923) annually, which base salary
is to be adjusted on each anniversary of the Employment Agreement to reflect a
change in the applicable consumer price index, or such greater amount as the
Company's Board of Directors may determine. The Employment Agreement has a term
of two years and will be automatically renewed, subject to earlier termination
in accordance with the terms thereof.
Except for the foregoing, the Company has no employment contracts with
any of its officers or directors and maintains no retirement, fringe benefit or
similar plans for the benefit of its officers or directors. The Company may,
however, enter into employment contracts with its officers and key employees,
adopt various benefit plans and begin paying compensation to its officers and
directors as it deems appropriate to attract and retain the services of such
persons.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As disclosed above under "Stock Options", the Company has adopted a
Stock Option Plan to grant stock option to officers, directors, key employees,
consultants and affiliates of the Company.
As disclosed above under "Executive Compensation", Ching Lung Po, Tam
Cheuk Ho and Wong Wah On are parties to employment agreements with the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERSA VOTE "FOR" THEFOR ELECTION OF THE
NOMINEES DESCRIBED ABOVE.DIRECTOR NOMINEES.
14
PROPOSAL 3 -2
PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT
ACCOUNTANTS
SubjectAUDITORS OF THE COMPANY
At the Annual Meeting, stockholders will be requested to ratification by the shareholders,ratify the
Board of Directors has
reappointedDirectors' engagement of Ernst & Young Certified Public Accountants, as independent
accountantsfor the fiscal year ending
December 31, 2001.
Fees to Auditors.
- ----------------
Audit Fees: The aggregate fees, including expenses, billed by Ernst &
Young in connection with the audit of the Company's consolidated financial
statements for the most recent fiscal year and for the review of the Company's
financial information included in its Annual Report on Form 10-K and its
quarterly reports on Form 10-Q during the year 2000 was HK$630,000 (US$80,769).
All Other Fees: The aggregate fees, including expenses, billed for all
other services rendered to the Company by Ernst & Young during year 2000 was
HK$65,000 (US$8,333). These non-audit fees relate to corporate compliance, tax
services, SEC consulting services and registration filing services performed for
the Company.
General.
- -------
A representative of Ernst & Young is expected to be present at the
Annual Meeting, and if so, will be provided with an opportunity to make a
statement if such representative desires to do so, and is expected to be
available to respond to appropriate questions from stockholders.
The approval of Proposal 2 by the stockholders requires that the votes
cast favoring Proposal 2 exceed the votes cast opposing Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ERNST &
YOUNG AS INDEPENDENT AUDITORS OF THE COMPANY.
15
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the annual meeting of stockholders to be held
in 2002 must be received by the Company no later than July 15, 2002, in order to
have them included in the proxy statement and form of proxy relating to that
meeting.
OTHER MATTERS
Management is not aware of any other matters to be presented for action
at the Meeting. However, if any other matter is properly presented, it is the
intention of the persons named in the enclosed form of proxy to vote in
accordance with their best judgment on such matters.
ACCOMPANYING REPORTS
The Company's Annual Report on Form 10-K (without exhibits), including
audited consolidated financial statements as at and for the year 1999. Ernst & Young has served asyears ended December
31, 2000, 1999 and 1998, and the Company's Independent Accountants
since MarchQuarterly Report on Form 10-Q,
including unaudited consolidated financial statements as at and for the three
and six months ended June 30, 2001, accompany this proxy statement.
16
APPENDIX A
AUDIT COMMITTEE CHARTER
CHINA RESOURCES DEVELOPMENT, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
- ------------
This charter governs the operations of 1995.
If the shareholdersaudit committee. The committee shall
review and reassess the charter at least annually and obtain the approval of the
board of directors. The committee shall be appointed by the board of directors
and shall comprise at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if they have no relationship that may interfere with the exercise of
their independence from management and the Company. All committee members shall
be financially literate, and at least one member shall have accounting or
related financial management expertise.
STATEMENT OF POLICY
- -------------------
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the stockholders, potential
stockholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the board. In so
doing, it is the responsibility of the committee to maintain free and open
communication between the committee, independent auditors, the internal auditors
and management of the Company. In discharging its oversight role, the committee
is empowered to investigate any matter brought to its attention with full access
to all books, records, facilities, and personnel of the Company and the power to
retain outside counsel, or other experts for this purpose.
RESPONSIBILITIES AND PROCESSES
- ------------------------------
The primary responsibility of the audit committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. The committee in carrying out its
responsibilities believes its policies and procedures should failremain flexible, in
order to best react to changing conditions and circumstances. The committee
should take the appropriate actions to set the overall corporate "tone" for
quality financial reporting, sound business risk practices, and ethical
behavior.
The following shall be the principal recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate.
o The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the audit committee, as representatives of
the Company's stockholders. The committee shall have the ultimate
authority and responsibility to evaluate and, where appropriate,
recommend the replacement of the independent auditors. The committee
shall discuss with the auditors their independence from management and
the Company and the
A-1
included in the written disclosures required by the Independence
Standards Board. Annually, the committee shall review and recommend to
the board the selection of the Company's independent auditors, subject to
stockholders' approval.
o The committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation. Also, the
committee shall discuss with management, the internal auditors, and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and manage
business risk, and legal and ethical compliance programs. Further, the
committee shall meet separately with the internal auditors and the
independent auditors, with and without management present, to discuss the
results of their examinations.
o The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the committee by the independent auditors
under generally accepted auditing standards. The chair of the committee
may represent the entire committee for the purposes of this review.
o The committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on
Form 10-K (or the annual report to stockholders if distributed prior to
the filing of Form 10-K), including their judgment about the quality, not
just acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the
financial statements. Also, the committee shall discuss the results of
the annual audit and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards.
A-2
CHINA RESOURCES DEVELOPMENT, INC.
ANNUAL MEETING OF STOCKHOLDERS
December 12, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CHINA RESOURCES DEVELOPMENT, INC.
The undersigned hereby appoints Ching Lung Po proxy with power of
substitution and hereby authorizes him to represent and to vote, as designated
below, all of the shares of common stock of China Resources Development, Inc.
held of record by the undersigned on October 31, 2001 at the Annual Meeting of
Stockholders to be held at 26/F, Securities Building, 5020 Binhe Road, Fu Tian
District, Shenzhen Province, People's Republic of China, on Wednesday, December
12, 2001 at 2:30 p.m., Hong Kong time, and at all adjournments thereof, with all
powers the undersigned would possess if personally present. In his or her
discretion, the Proxy is authorized to vote upon such other business as may
properly come before the meeting.
1. Election of Directors
Nominees: Ching Lung Po and Ng Kin Sing.
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY [ ] FOR all nominees,
except as noted below:
-----------------------
Nominee exception(s)
2. Proposal to ratify the appointment of Ernst & Young as its independent
accountants, the Boardauditors 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.
17
OTHER INFORMATION
For other information regarding the Company including 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 annual report for the fiscal year endedending December 31, 1998, a
copy of which is provided herewith and incorporated herein by this reference.
This proxy statement and the Form 10-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 as a result of various factors.
The information contained in this proxy statement and the Form 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 respect2001 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 2000 ANNUAL MEETING
To be considered for inclusion in next year's proxy materials,
shareholder proposals to be presentedserve at the Company's 2000 annual meeting must
be in writing and be received by the Company no later than March 1, 2000.
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.
18
PROXY FOR ANNUAL MEETING
OF SHAREHOLDERS
May 28, 1999
This Proxy is Solicited on
Behalfpleasure of the Board of Directors
The undersigned hereby appoints Ching Lung Po and Tam 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 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)Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNEDSTOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1 AND 2.
ELECTIONTHE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF NOMINEES FOR DIRECTORS in Class III.
SHAREHOLDERS MAY WITHHOLD THEIR VOTE FOR ANY NOMINEES BY STRIKING OUT THE NAMENOTICE OF SUCH NOMINEE OR NOMINEES:
Ng Kin Sing, Wan Ying Lin
[ ] FOR [ ] WITHHOLD AUTHORITY
all nominees listed to vote2001 ANNUAL
MEETING AND PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.
DATED:
--------------------- ---------------------------------------------
(Signature)
---------------------------------------------
(Signature if jointly held)
---------------------------------------------
(Printed name(s))
Please sign exactly as name appears herein. When shares are held by Joint
Tenants, both should sign, and for all nominees listed
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, 1999. (The Board of Directors recommends a vote
FOR)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before
the meeting and any adjournment or postponement thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Number of Shares:__________________ Name of Owner:________________________
of Common 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 4. If signing as attorney, as executor, as
administrator, trustee or guardian, please give your full title as such. If stock is held jointly, each
owner should sign.by a
corporation, please sign in the full corporate name by the president or other
authorized officer. If held by a partnership, please sign in the partnership
name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THETHIS PROXY
CARD PROMPTLY
USINGIN THE ENCLOSED ENVELOPEENVELOPE. THANK YOU.