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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential For Use of
the Commission Only (as
Permitted by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
PORTSMOUTH SQUARE, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
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Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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PORTSMOUTH SQUARE, INC.
820 MORAGA DRIVE
LOS ANGELES, CALIFORNIA 90049
(310) 889-2500
--------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON January 31, 2002
To the Shareholders of Portsmouth Square, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Portsmouth
Square, Inc. ("Portsmouth" or the "Company") will be held on January 31, 2002
at 3:30 P.M. at the Luxe Summit Hotel Bel-Air located at 11461 Sunset
Boulevard, Angeles, California 90049 for the purpose of considering and
acting on the following:
1. To elect five Directors to serve until the next Annual Meeting or
until their successors have been duly elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants for the Company for the fiscal year ending June 30, 2002;
and
3. To consider and act upon any other matters that may properly come
before the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on December 19, 2001
as the record date for determining the shareholders having the right to vote
at the meeting or any adjournment thereof.
Your proxy is important to us whether you own a few or many shares. Please
complete, sign, date and promptly return the enclosed proxy in the self
addressed, postage-paid envelope provided. Return the proxy even if you plan
to attend the meeting. You may always revoke your proxy and vote in person.
Dated: December 21, 2001
By Order of the Board of Directors,
/S/ Michael G. Zybala
Michael G. Zybala
Secretary
1
PORTSMOUTH SQUARE, INC.
820 MORAGA DRIVE
LOS ANGELES, CALIFORNIA 90049
(310) 889-2500
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PROXY STATEMENT
-------------------
ANNUAL MEETING OF SHAREHOLDERS
January 31, 2002
The Board of Directors of Portsmouth Square, Inc. (the "Company" or
"Portsmouth") is soliciting proxies in the form enclosed with this statement
in connection with the Annual Meeting of Shareholders to be held January 31,
2002 or at any adjournment or adjournments thereof.
This Proxy Statement and the accompanying Proxy are first being sent to
Shareholders on or about January 2, 2002. Only shareholders of record at the
close of business on December 19, 2001 are entitled to notice of, and to vote
at, the Annual Meeting.
If you give us a proxy, you can revoke it at any time before it is used. To
revoke it, you may file a written notice revoking it with the Secretary of
the Company, execute a proxy with a later date or attend the meeting and vote
in person.
You may vote at the Annual Meeting only shares that you owned of record on
December 19, 2001. There were 734,183 shares of stock outstanding on that
date. A majority, or 367,092 of those shares will constitute a quorum for
the transaction of business at this meeting. Each share is entitled to one
vote on each matter to be presented at the meeting. Unless cumulative
voting is elected as described under "Election of Directors" below, the
affirmative vote of the holders of the majority of the shares of the
Company's stock present or represented at the meeting and entitled to vote is
required to elect directors and ratify or approve the other item being voted
on at this time.
In addition to mailing this material to shareholders, the Company has asked
banks and brokers to forward copies to persons for whom they sold stock of
the Company and to request authority for execution of the proxies. The
Company will reimburse the banks and brokers for their reasonable out-of-
pocket expenses in doing so. Officers of the Company may, without being
additionally compensated, solicit proxies by mail, telephone, telegram or
personal contact. All proxy-soliciting expenses will be paid by the Company.
The Company does not expect to employ anyone else to assist in the
solicitation of proxies.
2
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of five directors. We
propose to elect five directors, each to hold office until we have the next
Annual Meeting and until his successor is elected and qualified. The Board
of Directors has nominated John V. Winfield, Jerold R. Babin, Josef A.
Grunwald, John C. Love and William J. Nance. The person named in the
enclosed form of proxy will vote it for the election of the nominees listed
below unless you instruct him otherwise, or a nominee is unwilling to serve.
The Board of Directors has no reason to believe that any nominee will be
unavailable. However, in that event, the proxy may vote for another
candidate or candidates nominated by the Board of Directors.
The California Corporations Code, as applicable to the Company, provides that
a shareholder may cumulate votes if a shareholder gives notice, prior to the
voting, of an intention to cumulate votes. If such a notice is given, every
shareholder may cumulate votes. Cumulating votes means that you can take the
total number of votes you have for all directors and distribute them among
one or more nominees as you see fit. For example, assume you have 100
shares. We have five directors so you have a total of 5 x 100 = 500 votes.
You could give all 500 votes to one person or 250 votes to each of two
nominees, or 100 votes to each of five nominees. You can use this power only
under the circumstances described herein. If cumulative voting is elected,
the enclosed form of proxy gives the proxy discretion to cumulate votes so
that he can elect the maximum possible number of the nominees identified
below.
Any shareholder executing the enclosed form of proxy may withhold authority
to vote for any one or more nominees by so indicating in the manner described
in the form of proxy. However, the number of votes authorized by the form of
proxy will not be affected and the named proxies could probably offset any
such action by using cumulative voting if they thought it necessary. Under
the California Corporations Code any shareholder or any person who claims to
have been denied the right to vote may apply to a state superior court for a
determination of the validity of any election or appointment of any director.
2
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Directors and Executive Officers of the Company. There is no relationship by
blood, marriage or adoption among the Directors and Officers. All Directors
serve one-year terms with their terms expiring at the Annual Meeting. All
Officers of the Company are elected or appointed by the Board of Directors
and hold office until the Annual Meeting or until replaced at the discretion
of the Board.
Shares of
Common Stock
Beneficially
Present Owned on Percent
Position Director December 19, of
Name Age With the Company Since 2001 Class (1)
- -------------------------------------------------------------------------------------------------
John V. Winfield (2) 55 Chairman of the Board, 1996 0(4) 0.0%
President and Chief
Executive Officer
Jerold R. Babin (3) 69 Director 1996 48,345 6.6%
John C. Love 61 Director 1998 0(4) 0.0%
Josef A. Grunwald 53 Director 1996 0 0.0%
William J. Nance 57 Director, 1996 0(4) 0.0%
Michael G. Zybala 49 Vice President, N/A 0 0.0%
Secretary, Treasurer
and General Counsel
Santa Fe Financial 505,142 68.8%
Corporation (4)
All of the above as a group (5) 553,487 75.4%
- ------------------------------
(1) Based on 734,183 common shares issued and outstanding as of December 19,
2001.
(2) John V. Winfield is the sole beneficial owner of 49,400 shares
of Portsmouth's majority owner Santa Fe Financial Corporation ("Santa
Fe"). The InterGroup Corporation is the beneficial owner of 569,396
common shares and 63,600 convertible voting preferred shares of Santa Fe.
As the President and Chairman of the Board of InterGroup, Mr. Winfield
has voting and dispositive power over a total of 682,396 shares of Santa
Fe which represents 54.9% of the voting power of Santa Fe.
(3) Jerold R. Babin claims sole voting power over the 48,345 shares
identified herein, of which he has sole dispositive power over 9,667
shares held in his retirement account. He claims shared dispositive
power with his wife over 38,478 shares which they hold as trustees of a
family trust.
(4) Santa Fe Financial Corporation is the record and beneficial owner of
505,142 shares of the common shares of Portsmouth. As directors of Santa
Fe, Messrs. Winfield, Nance and Love have the power to direct the vote of
the shares of Portsmouth owned by Santa Fe.
(5) As a group, the directors of Portsmouth owned a total of 682,396 shares
of Santa Fe's common and preferred stock as of December 19, 2001, which
represents 54.9% of the voting power of Santa Fe.
3
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and each beneficial owner of more than ten percent of
the Common Stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and The Nasdaq Stock
Market. Officers, directors and greater than ten-percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting
persons that no Form 5's were required for those persons, the Company
believes that during fiscal 2000 all filing requirements applicable to its
officers, directors, and greater than ten-percent beneficial owners were
complied with.
BUSINESS EXPERIENCE:
The principal occupation and business experience during the last five years
for each of the Directors and Executive Officers of the Company are as
follows:
John V. Winfield - Mr. Winfield was first elected to the Board in May of 1996
and currently serves as the Company's Chairman of the Board, President and
Chief Executive Officer. Mr. Winfield is also Chairman of the Board,
President and Chief Executive Officer of Portsmouth's parent company Santa Fe
Financial Corporation, having held those positions since April 1996. Mr.
Winfield is Chairman of the Board, President and Chief Executive Officer of
The InterGroup Corporation ("InterGroup"), a public company, and has held
those positions since 1987. Mr. Winfield is also Chairman of the Board of
Healthy Planet Products, Inc., a public company ("HPP"), having first been
appointed as a Director in September 1997 and elected Chairman on August 5,
1998. Mr. Winfield also serves as Chairman of the Board of Etz Lavud, a
public company.
Jerold R. Babin - Mr. Babin was appointed as a Director of the Company on
February 1996. Mr. Babin has been a retail securities broker for the past 37
years. From 1989 to present, he has worked for Prudential Securities, where
he currently holds the title of First Vice-President.
John C. Love - Mr. Love was appointed a Director of the Company on March 5,
1998. Mr. Love is an international hospitality and tourism consultant based
in Orinda, California. He was formerly a partner in the national CPA and
consulting firm of Pannel Kerr and Forster. Mr. Love has extensive
experience in hotel development, acquisition and development. He is Chairman
Emeritus of Golden Gate University in San Francisco. Mr. Love is also a
Director of Santa Fe, having first been appointed on March 2, 1999 and a
Director of InterGroup, having first been appointed in January 1998.
Josef A. Grunwald - Mr. Grunwald was elected as a Director of the Company in
May 1996. Mr. Grunwald is an industrial, commercial and residential real
estate developer. He serves as Chairman of PDG N.V. (Belgium), a hotel
management company, and President of I.B.E. Services S.A. (Belgium), an
international trading company. Mr. Grunwald is also a Director of
InterGroup, having held that position since 1987 and also serves as a
director of Etz Lavud, Ltd.
William J. Nance - Mr. Nance was first elected to the Board in May 1996. Mr.
Nance is also a Director of Santa Fe. He is the President and CEO of Century
Plaza Printers, Inc., a company he founded in 1979. He has also served as a
consultant in the acquisition and disposition of multi-family and commercial
real estate. Mr. Nance is a Certified Public Accountant and, from 1970 to
1976, was employed by Kenneth Leventhol & Company where he was a Senior
Accountant specializing in the area of REITS and restructuring of real estate
companies, mergers and acquisitions, and all phases of real estate
development and financing. Mr. Nance is a Director and the Treasurer of
InterGroup and has held such positions since 1984. Mr. Nance also serves as
a Director of HPP, having first been elected on August 5, 1998.
Michael G. Zybala - Mr. Zybala was appointed as Vice President and Secretary
of the Company on February 20, 1998 and was appointed Treasurer on May 16,
2000. He is also Vice President, Secretary, Treasurer and General Counsel of
Santa Fe. Mr. Zybala has served as the Company's General Counsel since 1995
4
and has represented the Company as its corporate counsel since 1978. Mr.
Zybala is a Director of HPP and serves as the company's Secretary. He was
appointed as a Director of HPP on June 17, 1998 and elected as Secretary on
August 5, 1998. Mr. Zybala also serves as Vice President Operations and
Assistant Secretary of InterGroup, having been appointed to those positions
in January 1999.
Board Meetings
For the fiscal year ended June 30, 2001, the Board of Directors held five
meetings, with no incumbent director attending (whether in person,
telephonically or by written consent) fewer than 75 percent of the meetings
held during the period for which he has been a director.
Committees
The Company has established two standing committees, a Securities Investment
Committee and an Audit Committee. The Company does not have any standing
nominating or compensation committees of the Board of Directors.
On March 17, 1998, the Company established a Securities Investment Committee
to establish guidelines and to review the Company's investment policies. The
members of that committee are Directors John V. Winfield (Chair), John C.
Love and William J. Nance. During fiscal 2001, the Securities Investment
Committee held two meetings, in person, telephonically or by written consent
with, all members attending each meeting.
The Company is a Small Business Filer under SEC rules. The Company's Audit
Committee is comprised of Messrs. Nance (Chairperson) and Love, each of who
are independent directors (as independence is defined in Rule 4200(a)(15) of
the National Association of Securities Dealers' ("NASD") listing standards,
as applicable and as may be modified or supplemented. Each of these
directors also meets the financial management expertise test. The primary
function of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities by reviewing: the financial reports
provided by the Company to any governmental body or the public; the Company's
system of internal controls regarding finance, accounting, legal compliance
and ethics that management and the Board have established; and the Company's
auditing, accounting and financial processes generally. The Audit Committee
held five meetings during the 2001 Fiscal Year. On June 8, 2000, the
Company's Board of Directors adopted a written charter for the Audit
Committee. A copy of that written charter is attached as Appendix A to this
proxy statement.
AUDIT COMMITTEE REPORT
The Audit Committee's responsibilities are described in a written charter
adopted by the Board of Directors, which is attached as Appendix A to this
Proxy Statement. The Audit Committee primary duties and responsibilities are
to: serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system; recommend to the
Board of Directors the appointment of the Company's independent accountants;
review and appraise the audit efforts of the Company's independent
accountants; and provide an open avenue of communications among the
independent accountants, financial and senior management, and the Board of
Directors. During fiscal year ended June 30, 2001, the Company retained its
independent accountants, PricewaterhouseCoopers LLP, to provide services in
the following categories and amounts:
Audit Fees: $ 23,005
Financial Information Systems
Design and Implementation Fees: $ -
All Other Fees $ -
The Audit Committee has determined that the provision of the above services
by the Company's independent accountants is compatible with maintaining the
independence of PricewaterhouseCoopers LLP.
The Audit Committee reviewed and discussed the audited financial statements
with management and PricewaterhouseCoopers LLP and management represented to
the Audit Committee that the financial statements were prepared in accordance
with generally accepted accounting principals. The discussions with
5
PricewaterhouseCoopers LLP also included the matters required by Statement on
Auditing Standards No. 61 (Communication with Audit Committees), as may be
modified or supplemented. The Audit Committee has also received the written
disclosures and the letter from PricewaterhouseCoopers LLP regarding its
independence as required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), which was discussed with
PricewaterhouseCoopers LLP.
Based on the Audit Committee's review of the audited financial statements,
and the review and discussions with management and PricewaterhouseCoopers LLP
referred to above, the Audit Committee recommended to the Company's Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2001 for
filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE:
WILLIAM J. NANCE, CHAIRPERSON
JOHN C. LOVE
EXECUTIVE COMPENSATION
As a small business issuer, Portsmouth has no compensation committee.
Executive officer compensation is set by disinterested members of the Board
of Directors. Set forth below is a summary compensation table concerning
compensation of the Chief Executive Officer ("CEO"), and any qualifying
Executive Officer or employee, for the last three completed fiscal years.
SUMMARY COMPENSATION TABLE
Other Annual
Name and Principal Position Year Salary Bonus Compensation
- --------------------------- ---- ------ ----- ----------------
John V. Winfield 2001 $90,000 $ 0 $6,000(1)
Chairman, President and 2000 $90,000 $ 0 $6,000
Chief Executive Officer 1999 $63,907 $ 0 $6,000
- -----------------------
(1) Amounts shown reflect regular Directors fees. During fiscal 2001, 2000
and 1999, the Company also paid annual premiums of $17,000 for a split dollar
whole life insurance policy, owned by, and the beneficiary of which is, a
trust for the benefit of Mr. Winfield's family. The Company has a secured
right to receive, from any proceeds of the policy, reimbursement of all
premiums paid prior to any payments to the beneficiary.
Portsmouth has no stock option plan or stock appreciation rights for its
executive officers. The Company has no pension or long-term incentive plans.
There are no employment contracts between Portsmouth and any executive
officer, nor are there any termination-of-employment or change-in-control
arrangements.
DIRECTOR COMPENSATION
The bylaws of Portsmouth permit directors to be paid a fixed sum for
attendance at each meeting of the Board or a stated salary as director. Each
director is paid a fee of $1,500 per quarter for a total annual compensation
of $6,000. This policy has been in effect since July 1, 1985.
6
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 19, 2001, Santa Fe owned 68.8% of the common stock of
Portsmouth, and InterGroup and John V. Winfield, in the aggregate, owned
approximately 54.9% of the voting stock of Santa Fe. Four of the Directors
of Portsmouth serve as Directors of InterGroup and three Directors of
Portsmouth serve as Director of Santa Fe.
Certain costs and expenses, primarily salaries, rent and insurance, are
allocated between the Company, Santa Fe, and InterGroup based on management's
estimate of the utilization of resources. Effective June 30, 1998, certain
accounting and administrative functions of the Company and its subsidiaries,
were transferred to the Los Angeles, California offices of InterGroup. During
the fiscal years ended June 30, 2001 and 2000, the Company made payments to
InterGroup in the total amount of approximately $107,000 and $99,000,
respectively, for administrative costs and reimbursement of direct and
indirect costs associated with the management of the Company and its
investments, including the partnership asset. During fiscal 2001 and 2000,
the Company also paid annual consulting fees to an officer of InterGroup in
the amount of $88,200.
John V. Winfield serves as Chief Executive Officer and Chairman of the
Company, Santa Fe and InterGroup. Depending on certain market conditions and
various risk factors, the Chief Executive Officer, his family, Santa Fe and
InterGroup may, at times, invest in the same companies in which the Company
invests. The Company encourages such investments because it places personal
resources of the Chief Executive Officer and his family members, and the
resources of Santa Fe and InterGroup, at risk in connection with investment
decisions made on behalf of the Company. Under the direction the Securities
Investment Committee, the Company has instituted certain modifications to its
procedures, which management believes will decrease the potential for
conflicts of interest. On June 28, 2001, the Company, Santa Fe and
InterGroup entered into an agreement with an investment advisory company,
which assumed responsibility for the performance of the investment portfolios
of the Company, Santa Fe and InterGroup as of March 5, 2001. That agreement
was terminated on November 7, 2001.
In December 1998, the Board of Directors authorized the Company to obtain a
whole life split dollar insurance policy covering the Company's President and
Chief Executive Officer, Mr. Winfield. During fiscal 2001 and 2000, the
Company paid annual premiums of $17,000 for the split dollar whole life
insurance policy, owned by, and the beneficiary of which is, a trust for the
benefit of Mr. Winfield's family. The Company has a secured right to
receive, from any proceeds of the policy, reimbursement of all premiums paid
prior to any payments to the beneficiary.
There are no other relationships or related transactions between the Company
and any of its officers, directors, five-percent security holders or their
families that require disclosure.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF JOHN V.
WINFIELD, JEROLD R. BABIN, JOSEF A. GRUNWALD, JOHN C. LOVE AND WILLIAM J.
NANCE AS DIRECTORS OF THE COMPANY.
7
PRINCIPAL HOLDERS OF EQUITY SECURITIES
The following table shows, as of December 19, 2001, the Common Stock owned by
every person owning of record (other than securities depositories), or known
by the Company to own beneficially, more than 5% of the outstanding shares.
Any voting securities beneficially owned by directors and director nominees
are also disclosed under Proposal 1 - Election of Directors herein.
Name Shares of Common Stock Percent of Class (1)
---- ---------------------- --------------------
Santa Fe Financial Corporation 505,142(2) 68.8%
820 Moraga Drive
Los Angeles, CA 90049
Jerold R. Babin 48,345(3) 6.6%
4 Embarcadero Center
Suite 2400
San Francisco, CA 94111-4131
- -------------------------------
(1) Based on 734,183 shares issued and outstanding.
(2) Santa Fe is the record and beneficial owner of 505,142 shares.
The President and Chairman of the Board of Santa Fe votes these shares.
(3) Jerold R. Babin claims sole voting power over the 48,345 shares
identified herein, of which he has sole dispositive power over 9,667 held
in his retirement account. He claims shared dispositive power with his
wife over the 38,478 shares which they hold as trustees of a family
trust.
As of December 19, 2001, there were 734,183 shares of the Company's Common
Stock issued and outstanding, which were held by approximately 284
shareholders of record and approximately 402 beneficial holders.
PROPOSAL II
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP,
certified public accountants, as the Company's independent accountants for
the fiscal year ending June 30, 2002 and recommends to shareholders that they
vote for the ratification of this selection. PricewaterhouseCoopers LLP has
served as the Company's independent accountants commencing with the audit for
the year ended December 31, 1997. Ratification requires the affirmative vote
of a majority of the shares represented and voted at the Annual Meeting. A
representative of PricewaterhouseCoopers LLP is expected to be present at the
Annual Meeting to make a statement, if desired, and to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT ACCOUNTANTS FOR THE COMPANY.
8
OTHER BUSINESS
As of the date of this statement, management knows of no business to be
presented at the meeting that is not referred to in the accompanying notice,
other than the approval of the minutes of the last shareholders' meeting,
which action will not amount to ratification of the actions taken at that
meeting. As to other business that may properly come before the meeting, it
is intended that the proxies properly executed and returned will be voted in
respect thereof at the discretion of the person voting the proxies in
accordance with the best judgment of the person voting the proxies.
SHAREHOLDER PROPOSALS
It is presently anticipated that the 2002 Annual Meeting of Shareholders will
be held on or around January 30, 2003. Any shareholder proposals intended to
be considered for inclusion in the proxy statement for presentation at the
2002 Annual Meeting must be received by the Company no later than August 30,
2002. The proposal must be in accordance with the provisions of Rule 4a-8
promulgated by the Securities and Exchange Commission under the Securities
Act of 1934. It is suggested that the proposal be submitted by certified
mail - return receipt requested.
FORM 10-KSB and ANNUAL REPORT
The Annual Report to Shareholders for the 2001 fiscal year accompanies this
proxy statement, but is not deemed a part of the proxy solicitation material.
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 2001, as required to be filed with the Securities and Exchange
Commission, excluding exhibits, will be mailed to shareholders without charge
upon written request to: Michael G. Zybala, Secretary, Portsmouth Square,
Inc., 820 Moraga Drive, Los Angeles, CA 90049. Such request must set forth a
good-faith representation that the requesting party was either a holder of
record or a beneficial owner of the common stock of the company on December
19, 2001. The Company's Form 10-KSB and other reports are also available
through the Securities and Exchange Commission's world wide web site
(http://www.sec.gov).
By Order of the Board of Directors
PORTSMOUTH SQUARE, INC.
Michael G. Zybala
Secretary
Dated: Los Angeles, California
December 21, 2001
9
APPENDIX-A
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AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
PORTSMOUTH SQUARE, INC.
CHARTER
--------------------
(Adopted June 8, 2000)
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by the Corporation
to any governmental body or the public; the Corporation's systems of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and the Corporation's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the corporation's policies, procedures and
practices at all levels. The Audit Committee's primary duties and
responsibilities are to:
* Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
* Review and appraise the audit efforts of the Corporation's
independent accountants and internal accounting department.
* Provide an open avenue of communication among the independent
accountants, financial and senior management, and the Board of
Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV. of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of two or more directors as determined
by the Board, the majority of which shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Committee.
A director will not be considered "independent" if, among other things, he or
she has:
* been employed by the corporation or its affiliates in the current or past
three years;
* accepted any compensation from the corporation or its affiliates in excess
of $60,000 during the previous fiscal year (except for board service,
retirement plan benefits, or non-discretionary compensation;
* an immediate family member who is, or has been in the last three years,
employed by the corporation or its affiliates as an executive officer;
* been a partner, controlling shareholder or an executive officer of any
for-profit business to which the corporation made, or from which it
received, payments (other than those which arise solely from investments
in the corporation's securities) that exceed five percent of the
organization's consolidated gross revenues for that year, or $200,000,
whichever is more, in any of the past three years; or
* been employed as an executive of another entity where any of the company's
executives serve on that entity's compensation committee.
10
All members of the Committee shall have a working familiarity with basic
finance and accounting practices, and at least one member of the Committee
shall have accounting or related financial management expertise. Committee
members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by the Corporation or an
outside consultant.
The members of the Committee shall be elected by the Board at the annual
meeting of the Board of Directors or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the full
Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, the director of the
internal auditing department and the independent accountants in separate
executive sessions to discuss any matters that the Committee or each of these
groups believe should be discussed privately. In addition, the Committee or
at least its Chair should meet with the independent accountants and
management quarterly to review the Corporations financials consistent with
IV.4. below).
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
- ------------------------
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the organization's annual financial statements and any reports
or other financial information submitted to any governmental body, or
the public, including any certification, report, opinion, or review
rendered by the independent accountants.
3. Review the regular internal reports to management prepared by the
internal accounting department and management's response.
4. Review with financial management and the independent accountants the
10-QSB prior to its filing or prior to the release of earnings. The
Chair of the Committee may represent the entire Committee for purposes
of this review.
Independent Accountants
- -----------------------
5. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants.
On an annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Corporation to determine the accountants' independence.
6. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
7. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of the organization's financial statements.
11
Financial Reporting Processes
- -----------------------------
8. In consultation with the independent accountants and the internal
accountants, review the integrity of the organization's financial
reporting processes, both internal and external.
9. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied
in its financial reporting.
10. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants, management, or the internal
accounting department.
Process Improvement
- -------------------
11. Establish regular and separate systems of reporting to the Audit
Committee by each of management, the independent accountants and the
internal accountants regarding any significant judgments made in
management's preparation of the financial statements and the view of
each as to appropriateness of such judgments.
12. Following completion of the annual audit, review separately with
management, the independent accountants and the internal accounting
department any significant difficulties encountered during the course
of the audit, including any restrictions on the scope of work or access
to required information.
13. Review any significant disagreement among management and the
independent accountants or the internal accounting department in
connection with the preparation of the financial statements.
14. Review with the independent accountants, the internal accounting
department and management the extent to which changes or improvements
in financial or accounting practices, as approved by the Audit
Committee, have been implemented. (This review should be conducted at
an appropriate of time subsequent to implementation of changes or
improvements, as decided by the Committee.)
Ethical and Legal Compliance
- ----------------------------
15. Review management's monitoring of the corporation's compliance
requirements and ensure that management has the proper review system in
place to ensure that corporation's financial statements, reports and
other financial information disseminated to governmental organizations,
and the public satisfy legal requirements.
16. Review activities, organizational structure, and qualifications of the
internal audit department.
17. Review, with the organization's counsel, legal compliance matters any
legal matter that could have a significant impact on the organization's
financial statements.
18. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
12
PROXY PROXY
PORTSMOUTH SQUARE, INC.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JANUARY 31, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John V. Winfield and Michael G. Zybala, or
either of them, as proxies, with power of substitution to each proxy and
substitute, to vote the Common Stock of the undersigned at the 2001 Annual
Meeting of Shareholders of Portsmouth Square, Inc. and at any adjournments
thereof, as indicated on the reverse hereof on the proposals for Election of
Directors, Ratification of Appointment of Independent Accountants and as said
proxies may determine in the exercise of their best judgment on any other
matters which may properly come before the meeting.
IF PROPERLY EXECUTED AND RETURNED, THIS PROXY WILL BE VOTED AS SPECIFIED OR,
IF NOT SPECIFIED, WILL BE VOTED FOR ELECTING ALL NOMINEES AND FOR THE
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS.
PLEASE SIGN ON THE REVERSE SIDE AND MAIL PROMPTLY IN THE ENCLOSED
ENVELOPE
-----------
SEE REVERSE
-----------
1. Election of Directors: NOMINEES: John V. Winfield, Jerold R. Babin, Josef
A. Grunwald, John C. Love and William J. Nance.
CHECK ONE: [ ] FOR ALL NOMINEES [ ] WITHHELD FROM ALL NOMINEES
[ ] ---------------------------------------------------
FOR, EXCEPT VOTE WITHHELD FROM THE ABOVE NOMINEE(S)
2. To ratify the appointment of PricewaterhouseCoopers LLP as the independent
accountants for the Company for the fiscal year ending June 30, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. IF ACTING IN A REPRESENTATIVE
CAPACITY, SIGN NAME AND TITLE. IF JOINT TENANTS, BOTH SHAREHOLDERS SHOULD
SIGN.
Dated: _______________, 2002
____________________________
Signature
____________________________
Signature if held jointly
7