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CAPITAL INVESTMENT OF HAWAII INC - SC 13E3/A - Amended Going Private
Date Filed: December 21, 1999
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
CAPITAL INVESTMENT OF HAWAII, INC.
(Name of Issuer)
CAPITAL INVESTMENT OF HAWAII, INC.
Stuart T. K. Ho
Dean W. Ho
Donald M. Wong
(Name of Persons(s) Filing Statement)
COMMON STOCK WITHOUT PAR VALUE
(Title of Class of Securities)
140231101
(CUSIP Number of Class of Securities)
Stuart T. K. Ho Cuyler Shaw, Esq.
Chairman of the Board and President Ashford & Wriston
Capital Investment of Hawaii, Inc. 1099 Alakea Street
Suite 1700, Makai Tower 14th Floor
733 Bishop Street Honolulu, Hawaii 96813
Honolulu, Hawaii 96813 (808) 539-0400
(808) 537-3981
(Name, address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check appropriate box):
a. [X] The filing of solicitation materials or a Proxy Statement subject to
Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of
1933.
c. [ ] A tender offer.
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d. [ ] None of the above.
Check the following box if the soliciting materials or Proxy Statement referred
to in checking box (a) are preliminary copies: [X]
Calculation of Filing Fee:
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Transaction Valuation:* Amount of Filing Fee:
$23,250.00 $4.65 (1/50th of one percent)
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* approximately 93,000 shares of the Issuer's Common Stock, without par
value, redeemed for cash consideration of $.25 (25 cents) per share.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee
was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and the
date of its filing.
Amount Previously Paid: $ 0
Form or Registration No.: Schedule 13E-3
Filing Party: Capital Investment of Hawaii, Inc.
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INTRODUCTION
This Rule 13e-3 transaction involves a transaction subject to Regulation
14A of the Securities Exchange Act of 1934, as amended (the "Act"), and the
information contained in the Proxy Statement filed concurrently herewith by
Capital Investment of Hawaii, Inc. (the "Company") is incorporated by reference
into the Items in this Schedule.
The Rule 13e-3 transaction involves a going-private plan adopted by the
Board of Directors of the Company, under which the Company's Articles of
Association would be amended to provide that each 300 outstanding shares of
Company common stock ("Existing Shares") will be consolidated and converted into
one share of "New Common Stock" (the "Reverse Stock Split"). Upon completion of
the Reverse Stock Split, holders of less than 300 Existing Shares will cease to
be shareholders of the Company and the Company will acquire for cash all
resulting fractional shares of New Common Stock at a price equal to $.25 (25
cents) per Existing Share.
The Reverse Stock Split will be funded by the Company's existing cash
reserves.
Because Mr. Stuart T. K. Ho, a director of the Company, has been
involved in the initiation and structuring of the transactions and will continue
to beneficially own a significant equity interest in the Company after the
transactions are completed, and because two additional directors, Messrs. Dean
T. W. Ho and Donald M. Wong, will continue to beneficially own significant
equity interests in the Company after the transaction is completed, they may be
deemed to be engaged in the transaction and thus are also filing this Schedule
13E-3. Such persons are referred to herein as the "Management Directors."
The cross reference sheet below is provided pursuant to General
Instruction F of Schedule 13E-3 and shows the location in the Proxy Statement of
the information required to be included in response to the Items in this
Schedule 13E-3. If any Item is inapplicable or the answer thereto is in the
negative and omitted from the Proxy Statement, a statement to that effect has
been included on the cross reference sheet.
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CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
SCHEDULE 13E-3 PROXY STATEMENT
ITEM NUMBER AND HEADING HEADING
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<S> <C> <C>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO
TRANSACTION
(a) Name and Address of Issuer and Class Proxy Statement Cover Page
of Securities "ABOUT THE ANNUAL MEETING"
(b) Title and Amount of Securities; Number "MARKET AND DIVIDEND INFORMATION"
of Holders
(c) Principal Securities Market; Quarterly "MARKET AND DIVIDEND INFORMATION - Market
High and Low Bid Quotations Information"
(d) Frequency and Amount of Dividends (2 "MARKET AND DIVIDEND INFORMATION - Dividends"
years)
(e) Underwritten Public Offering for Cash Not applicable
Within 3 Years
(f) Purchases of Securities by Issuer or "TRANSACTIONS IN COMMON STOCK"
Affiliate; Amount and Average Price
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d) This Statement is filed by the "SUMMARY of the REVERSE STOCK SPLIT - What is
Company, which is the issuer of the Board's Recommendation?"; and "ELECTION
the class of equity securities OF DIRECTORS"
which is the subject of the
Rule 13e-3 transaction, and the
Management Directors as defined
in the Introduction to this
Statement
(e) Criminal Proceedings None
(f) Civil Proceedings None
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) Relating to Affiliates Not Applicable
</TABLE>
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<TABLE>
<CAPTION>
SCHEDULE 13E-3 PROXY STATEMENT
ITEM NUMBER AND HEADING HEADING
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<S> <C> <C>
(b) Contracts between Affiliates or Issuer Not Applicable
and Unaffiliated Persons
ITEM 4. TERMS OF TRANSACTION.
(a) Material Terms of Transaction "SUMMARY OF THE REVERSE STOCK SPLIT";
"SPECIAL FACTORS"; "THE REVERSE STOCK SPLIT"
(b) Different Treatment of Any Security Not Applicable
Holder
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) Merger, Reorganization or Liquidation Not Applicable
(b) Sale of Assets Not Applicable
(c) Change in the Present Board of Not Applicable
Directors or Management
(d) Change in Dividend Rate, Indebtedness Not Applicable
or Capitalization or Issuer
(e) Material Change in Issuer's Business Not Applicable
or Corporate Structure
(f) Securities Becoming Eligible for "THE REVERSE STOCK SPLIT - Termination of
Termination of Registration Exchange Act Registration"
(Section 12(g)(4))
</TABLE>
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<TABLE>
<CAPTION>
SCHEDULE 13E-3 PROXY STATEMENT
ITEM NUMBER AND HEADING HEADING
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<S> <C> <C>
(g) Suspension of Obligation to File "THE REVERSE STOCK SPLIT - Termination
Reports (Section 15(d)) of Exchange Act Registration"
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER
CONSIDERATION.
(a) Source and Amount of Funds "THE REVERSE STOCK SPLIT - Fees and
Expenses; Sources of Funds; Persons and
Assets Employed, Retained or Utilized"
(b) Statement of Expenses Incurred with Not Applicable
Transaction
(c) Borrowed Funds Not Applicable
(d) Funds Provided by Bank Not Applicable
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) Purpose "SPECIAL FACTORS - Purposes of the Reverse
Stock Split"
(b) Alternatives to Accomplish Such Purpose "SPECIAL FACTORS - Alternatives Considered"
(c) Reasons for Structure of Transaction "SPECIAL FACTORS - Alternatives Considered; -
Reasons for the Reverse Stock Split"
(d) Effects of Transaction; Federal Tax "THE REVERSE STOCK SPLIT - Effect on Market
Consequences for Shares; - Termination of Exchange Act
Registration"; "SPECIAL FACTORS - Certain
Federal Income Tax Considerations"
ITEM 8. FAIRNESS OF THE TRANSACTION
(a) Issuer's and Management Directors' "SPECIAL FACTORS - Fairness of the Reverse
Statement of Fairness Stock Split, Position of the Board of
Directors"; "THE REVERSE STOCK SPLIT -
Recommendation of the Board of Directors"
</TABLE>
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<TABLE>
<CAPTION>
SCHEDULE 13E-3 PROXY STATEMENT
ITEM NUMBER AND HEADING HEADING
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<S> <C> <C>
(b) Material Factors of Determination of "SPECIAL FACTORS - Fairness of the Reverse
Fairness Stock Split"; "THE REVERSE STOCK SPLIT -
Recommendation of the Board of Directors"
(c) Whether Transaction is Structured to "THE REVERSE STOCK SPLIT - Required Vote";
Require Approval of Majority of "SPECIAL FACTORS - Fairness of the Reverse
Unaffiliated Shareholders Stock Split"
(d) Whether Unaffiliated Representative "SPECIAL FACTORS - Fairness of the Reverse
Retained by Directors to Negotiate Stock Split, Position of the Board of
Transaction Directors"
(e) Transaction Approved by Majority of "SPECIAL FACTORS - Fairness of the Reverse
Non-employee Directors Stock Split, Position of the Management
Directors"
(f) Other Offers by Unaffiliated Persons Not Applicable
ITEM 9. REPORTS, OPINIONS, Not Applicable
APPRAISALS AND CERTAIN
NEGOTIATIONS.
ITEM 10. INTEREST IN SECURITIES OF ISSUER.
(a) Beneficial Ownership of Securities by "THE REVERSE STOCK SPLIT - Interests of
Plan, Officers, Directors, etc. Certain Persons in the Reverse Stock Split;
- Fees and Expenses; Sources of Funds;
Persons and Assets Employed, Retained or
Utilized"; "ELECTION OF DIRECTORS"; "SECURITY
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS";
and "SECURITY OWNERSHIP OF MANAGEMENT"
(b) Transactions in Common Stock by "TRANSACTIONS IN COMMON STOCK"
Beneficial Ownership with last 60 days
</TABLE>
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<TABLE>
<CAPTION>
SCHEDULE 13E-3 PROXY STATEMENT
ITEM NUMBER AND HEADING HEADING
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<S> <C> <C>
ITEM 11. CONTRACTS, ARRANGEMENTS, OR UNDERSTANDINGS "ABOUT THE ANNUAL MEETING - What are the
WITH RESPECT TO THE ISSUER'S SECURITIES. Company's Objectives?"; "THE REVERSE STOCK
SPLIT - Fees and Expenses; Sources of Funds;
Persons and Assets Employed, Retained or
Utilized"
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE TRANSACTION.
(a) Present Intent of Directors or "THE REVERSE STOCK SPLIT - Required Vote;
Officers to Sell or Vote Securities Indications of Voting Intent by Ho Family
Shareholders and Management Directors
(b) Recommendations or Opposition to "THE REVERSE STOCK SPLIT - Recommendation of
Transaction the Board of Directors"
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) Appraisal Rights "THE REVERSE STOCK SPLIT - Rights of
Dissenting Shareholders", Appendix B to the
Proxy Statement
(b) Provision for Access to Corporate Not Applicable
Files; Unaffiliated Shareholders'
Right to Counsel at Issuer's Expense
(c) Exchange of Debt Securities Not Applicable
ITEM 14. FINANCIAL INFORMATION
(a) (1) Financial Statements (2 yrs) Incorporated by reference to 1999 Annual
Report
(2) Unaudited Balance Sheets, etc. Not Applicable
(3) Ratio of Earnings to Fixed "FINANCIAL INFORMATION/RATIO OF EARNINGS TO
Changes (2 yrs) FIXED CHARGES"
(4) Book Value "MARKET AND DIVIDEND INFORMATION"
</TABLE>
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<TABLE>
<CAPTION>
SCHEDULE 13E-3 PROXY STATEMENT
ITEM NUMBER AND HEADING HEADING
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<S> <C> <C>
(b) Pro Forma Data Not Applicable
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR
UTILIZED.
(a) Purpose "THE REVERSE STOCK SPLIT - Fees and
Expenses; Sources of Funds; Persons and
Assets Employed, Retained or Utilized"
(b) Identity of Persons "THE REVERSE STOCK SPLIT - Fees and
Expenses; Sources of Funds; Persons
and Assets Employed, Retained or Utilized"
ITEM 16. ADDITIONAL INFORMATION Additional Information concerning the Reverse
Stock Split is set forth in the Proxy Statement
attached hereto as Exhibit 17(d) which
information is incorporated herein by reference
in its entirety.
ITEM 17. EXHIBITS
(a) Loan Agreement Not Applicable
(b) Opinion; Appraisal Not Applicable
(c) Contract (Item 11) Not Applicable
(d) Disclosure Materials Proxy Statement including Appendices
(e) Appraisal Rights (Included as Appendix B to the Proxy Statement)
(f) Written Instruction re Solicitations - Not Applicable
Recommendations
</TABLE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The name of the issuer is Capital Investment of Hawaii, Inc., a Hawaii
corporation, and the address of its principal executive office is PRI
Tower, Suite 1700, 733 Bishop Street, Honolulu, Hawaii 96813.
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(b) The exact title of the class of equity securities to which this
statement relates is voting common stock, without par value. The
information set forth under the caption "MARKET AND DIVIDEND
INFORMATION" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth under the caption "MARKET AND DIVIDEND
INFORMATION - Market Information" of the Proxy Statement is incorporated
herein by reference.
(d) The information set forth under the caption "MARKET AND DIVIDEND
INFORMATION - Dividends" of the Proxy Statement is incorporated herein
by reference.
(e) Not applicable.
(f) The information set forth under the caption "TRANSACTIONS IN COMMON
STOCK" of the Proxy Statement is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) This Statement is filed by the issuer of the securities to which this
Schedule 13E-3 relates and by the Management Directors as defined in the
introduction to this Statement; the information set forth under the
caption "Election of Directors," "THE REVERSE STOCK SPLIT - Fees and
Expenses; Sources of Funds; Persons and Assets Employed, Retained or
Utilized" and "SUMMARY OF THE REVERSE STOCK SPLIT - What is the Board's
Recommendation?" is incorporated herein by reference.
(e) None.
(f) None.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) Not applicable.
(b) Not applicable.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth under the captions "SPECIAL FACTORS" and
"SUMMARY OF THE REVERSE STOCK SPLIT" of the Proxy Statement is
incorporated herein by reference. "SPECIAL FACTORS" and "The Reverse
Stock Split".
(b) Not Applicable
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ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(e) Not Applicable.
(f)-(g) The information set forth under the captions "THE REVERSE STOCK SPLIT -
Termination of Exchange Act Registration" of the Proxy Statement is
incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth under the caption "THE REVERSE STOCK SPLIT -
Fees and Expenses; Sources of Funds; Persons and Assets Employed,
Retained or Utilized" is incorporated herein by reference.
(c)-(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The information set forth under the caption "SPECIAL FACTORS - Purposes
of the Reverse Stock Split; -- Reasons for the Reverse Stock Split; --
of the Proxy Statement is incorporated herein by reference.
(b) The information set forth under the captions "THE REVERSE STOCK SPLIT -
Background" and "SPECIAL FACTORS - Alternatives Considered" of the Proxy
Statement is incorporated herein by reference.
(c) The information set forth under the captions "THE REVERSE STOCK SPLIT -
Background" and "SPECIAL FACTORS - Alternatives Considered" and "-
Reasons for Undertaking the Reverse Stock Split at this Time" of the
Proxy Statement is incorporated herein by reference.
(d) The information set forth under the caption "THE REVERSE STOCK SPLIT -
Effect on Market for Shares," "- Termination of Exchange Act
Registration," "SPECIAL FACTORS - Certain Federal Income Tax
Considerations, -- Effects of the Reverse Stock Split of the Proxy
Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information set forth under the captions "SPECIAL FACTORS - Fairness
of the Reverse Stock Split" and "THE REVERSE STOCK SPLIT -
Recommendation of the Board of Directors" of the Proxy Statement is
incorporated herein by reference.
(c) The information set forth under the caption "SPECIAL FACTORS - Fairness
of the Reverse Stock Split" of the Proxy Statement is incorporated
herein by reference.
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(d)-(e) The information set forth under the caption "SPECIAL FACTORS - Fairness
of the Reverse Stock Split" of the Proxy Statement is incorporated
herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISAL AND CERTAIN NEGOTIATIONS
Not Applicable.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information concerning the ownership of and transactions in Common
Stock set forth under the captions "THE REVERSE STOCK SPLIT - Fees and
Expenses; Sources of Funds; Persons and Assets Employed, Retained or
Utilized," "THE REVERSE STOCK SPLIT - Reasons for the Reverse Stock
Split" "- Interests of Certain Persons in the Reverse Stock Split,"
"ELECTION OF DIRECTORS"; and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS/MANAGEMENT" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth under the caption "TRANSACTIONS IN COMMON
STOCK" of the Proxy Statement is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth under the caption "ABOUT THE ANNUAL MEETING -
What Are the Company's Objectives?" and "THE REVERSE STOCK SPLIT - Fees and
Expenses, Sources of Funds; Persons and Assets Employed, Retained or Utilized"
is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth under the captions "THE REVERSE STOCK SPLIT -
Required Vote" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth under the caption "THE REVERSE STOCK SPLIT -
Recommendation of the Board of Directors" of the Proxy Statement is
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth under the caption "THE REVERSE STOCK SPLIT -
Rights of Dissenting Shareholders" of the Proxy Statement is
incorporated herein by reference.
(b) Not applicable.
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(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) Audited financial statements of the Company as of July 31, 1999 and 1998
and for the years ended July 31, 1999, 1998 and 1997, and the report of
independent accountants thereon are set forth in the Financial
Statements and notes thereto in the portions of the Corporation's 1999
Annual Report to Shareholders (the "1999 Annual Report") which are
attached hereto as an exhibit. Management's Discussion and Analysis of
Financial Condition and Results of Operations for such periods is set
forth in the portions of the 1999 Annual Report attached hereto as an
exhibit.
Unaudited financial statements of the Company are set forth in the
Company's Quarterly Report on Form 10-Q for the period ended October 31,
1999 (the "Form 10-Q"), which is attached as Appendix E to the Proxy
Statement (which is filed as an exhibit hereto). Management's Discussion
and Analysis of Financial Condition and Results of Operations for such
periods is set forth in the Form 10-Q. The above noted sections of the
1999 Annual Report and Form 10-Q are hereby incorporated by reference.
(b) Not material.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a)-(b) The information set forth in the cover page of the Proxy Statement, and
under the caption "THE REVERSE STOCK SPLIT - Fees and Expenses; Sources
of Funds; Persons and Assets Employed, Retained or Utilized," of the
Proxy Statement is incorporated herein by reference. The time and
efforts of certain officers and other employees of the Corporation have
been utilized in connection with the preparation of the Schedule 13E-3
and the Proxy Statement and related materials to be sent to stockholders
and have been and will be utilized in connection with overseeing this
transaction. Neither the Management Directors nor the Ho Family
Shareholders have or will separately employ, retain or utilize any
person, or any assets of the Company, in connection with the Rule 13E-3
transaction. Except as otherwise disclosed in this Item 15, no person
has been or will be retained, employed or compensated to make
solicitations or recommendations in connection with the Rule 13E-3
transaction.
ITEM 16. ADDITIONAL INFORMATION.
All of the information set forth in the Proxy Statement is incorporated
herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
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(b) Not applicable.
(c) Not applicable.
(d) (1) Proxy Statement of Capital Investment of Hawaii, Inc., Letter to
Shareholders, and Notice of Annual Meeting of Shareholders, filed
with the SEC on December 21, 1999.
(2) Capital Investment of Hawaii, Inc. Form 10-K (Annual Report) for
the fiscal year ended July 31, 1999 filed with the SEC on
November 15, 1999, which Form 10-K as filed is incorporated
herein by reference.
(e) Hawaii Dissenters' Rights Statute (Appendix B to the Proxy Statement).
(f) Not applicable.
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: December 20, 1999 CAPITAL INVESTMENT OF HAWAII, INC.
By: /s/ STUART T. K. HO
------------------------------------------
Name: Stuart T. K. Ho
Title: Chairman of the Board and President
By: /s/ STUART T. K. HO
------------------------------------------
Name: Stuart T. K. Ho
Title: Chairman of the Board and President
By: /s/ DEAN T. W. HO
------------------------------------------
Name: Dean T. W. Ho
Title: Vice Chairman and Secretary
By: /s/ DONALD M. WONG
------------------------------------------
Name: Donald M. Wong
Title: Senior Vice President and Secretary
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EXHIBIT 17(d)(1)
CAPITAL INVESTMENT OF HAWAII, INC.
FILING TYPE: DEF 14A
DESCRIPTION: PRELIMINARY PROXY STATEMENT
FILING DATE:
PERIOD END:
PRIMARY EXCHANGE: NONE
TICKER: CHAW
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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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CAPITAL INVESTMENT OF HAWAII, 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):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(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):
$23,250 - amount to be expended to purchase fractional shares
resulting from going private reverse stock split
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
5) Total fee paid:
$4.65
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------
4) Date Filed:
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December ___, 1999
To the Shareholders of
Capital Investment of Hawaii, Inc.
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Annual Meeting") of Capital Investment of Hawaii, Inc. (the "Company"), at
the Grosvenor Center Conference Room (ground floor), 733 Bishop Street,
Honolulu, Hawaii, on Monday, January 31, 2000, at 9:30 a.m.
On December 21, 1999, the Company's Board of Directors adopted a
going-private plan (the "Plan") to restructure the share ownership of the
Company. The purpose of the Plan is to reduce the number of Company shareholders
below 300, thus allowing the Company to terminate its reporting obligations
under the Securities Exchange Act of 1934, as amended (the "1934 Act"). This
will allow the Company to eliminate the substantial time and expense associated
with 1934 Act compliance. The Board of Directors believes that the Company's
shareholders derive little benefit from the Company's status as a publicly-held
corporation.
The objectives of the Plan will be accomplished by a 1-for-300 reverse
stock split that will have the effect of eliminating the shares of all Company
shareholders who own less than 300 shares of the Company's currently outstanding
common stock by converting such shares into a right to receive cash in the
amount of $.25 (25 cents) per share.
You are urged to read the accompanying Proxy Statement, which provides
you with a description of the terms of the proposed transactions.
As described in the enclosed Proxy Statement, at the Annual Meeting, in
addition to the election of directors, you will be asked to consider and vote
upon a proposal to approve and adopt the reverse stock split. Your Board of
Directors has determined that the reverse stock split is in the best interest of
Capital Investment of Hawaii, Inc. and its shareholders and has unanimously
approved the reverse stock split. THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE APPROVAL AND ADOPTION OF THE REVERSE STOCK SPLIT AND THE ELECTION OF
DIRECTORS.
If the reverse stock split is consummated, shareholders who vote against
approval of the reverse stock split and who otherwise comply with the procedures
described in the Proxy Statement will be granted dissenters' appraisal rights.
See "THE REVERSE STOCK SPLIT - Rights of Dissenting Shareholders."
It is very important that your shares be represented at the Annual
Meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, you are requested
to complete, date, sign and return the enclosed Proxy in the postage-paid
envelope provided. Failure to return a properly executed Proxy or vote at the
Annual Meeting, will have the same effect as a vote against approval of the
reverse stock split. Executed proxies with no instructions indicated thereon
will be voted for approval and adoption of the reverse stock split.
Please do not send any of your stock certificates at this time. If the
reverse stock split is consummated, you will be sent a letter explaining the
procedures for exchanging your shares for cash or new shares.
We look forward to seeing you at the 2000 Annual Meeting of
Shareholders. If you have questions before the Annual Meeting regarding the
matters discussed in this letter, you may call Mr. Donald M. Wong, our Vice
President, at (808) 537-3981.
Very truly yours,
Stuart T. K. Ho
Chairman of the Board and President
Attachment
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CAPITAL INVESTMENT OF HAWAII, INC.
SUITE 1700, MAKAI TOWER
733 BISHOP STREET
HONOLULU, HAWAII 96813
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------
NOTICE IS HEREBY GIVEN that, pursuant to call of its Directors, the Annual
Meeting of Shareholders of Capital Investment of Hawaii, Inc. (the "Company")
will be held at the Grosvenor Center Conference Room (ground floor) 733 Bishop
Street, Honolulu, Hawaii 96813, on Monday, January 31, 2000, at 9:30 a.m., for
the purpose of considering and voting upon the following matters:
1. AMENDMENT OF ARTICLES OF ASSOCIATION. To consider and act upon a
proposal to amend the Company's Articles of Association, to (i) reduce the
number of shares of common stock which the Company is authorized to issue from 3
million shares, without par value ("Existing Shares"), to 10,000 shares, without
par value ("New Common Stock"), and (ii) consolidate and convert each 300
outstanding Existing Shares into one share of New Common Stock.
2. ELECTION OF DIRECTORS. To elect a Board of Directors to hold office
until the next Annual Meeting of Shareholders or until their successors have
been elected and qualified.
3. WHATEVER OTHER BUSINESS may properly be brought before the meeting or
any adjournment thereof.
Only those shareholders of record at the close of business on December 15, 1999,
shall be entitled to notice of the meeting and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Dean T. W. Ho
Secretary
Honolulu, Hawaii
December ___, 1999
YOUR VOTE IS IMPORTANT
We urge you to complete and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the meeting in person. If you do attend the
meeting, you may withdraw your proxy and vote in person.
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ABOUT THE ANNUAL MEETING....................................................................1
SUMMARY OF THE REVERSE STOCK SPLIT..........................................................2
SUMMARY OF OTHER MATTERS IN CONNECTION WITH THE MEETING.....................................4
SPECIAL FACTORS.............................................................................4
Purposes of the Reverse Stock Split.................................................5
Alternatives Considered.............................................................5
Reasons for the Reverse Stock Split.................................................5
Reasons for Undertaking the Reverse Stock Split at This Time........................8
Effects of the Reverse Stock Split..................................................9
Certain Federal Income Tax Considerations...........................................9
Fairness of the Reverse Stock Split................................................12
ANNUAL MEETING OF SHAREHOLDERS.............................................................16
Date, Time and Place...............................................................17
Purpose............................................................................17
Record Date; Shares Outstanding and Entitled to Vote...............................17
Vote Required......................................................................17
Voting, Solicitation and Revocation of Proxies.....................................18
THE REVERSE STOCK SPLIT....................................................................18
General............................................................................18
Background.........................................................................19
Basic Terms of the Reverse Stock Split.............................................19
Exchange of Stock Certificates.....................................................20
Cash for Fractional Shares.........................................................21
Conditions of the Reverse Stock Split; Regulatory Approvals........................21
Effect on Market for Shares........................................................21
Termination of Exchange Act Registration...........................................21
Fees and Expenses; Sources of Funds; Persons and Assets Employed, Retained or
Utilized.........................................................................22
</TABLE>
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(continued)
<TABLE>
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Interests of Certain Persons in the Reverse Stock Split............................22
Rights of Dissenting Shareholders..................................................22
Required Vote; Indications of Voting Intent by Ho Family Shareholders and
Management.......................................................................25
Recommendation of the Board of Directors...........................................26
MARKET AND DIVIDEND INFORMATION............................................................26
Market Information.................................................................26
Number of Equity Holders...........................................................26
Dividends..........................................................................26
FINANCIAL INFORMATION/RATIO OF EARNINGS TO FIXED CHARGES...................................27
PRINCIPAL HOLDERS OF VOTING SECURITIES.....................................................27
ELECTION OF DIRECTORS......................................................................28
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS.....................................29
Compensation of Directors..........................................................30
Information Regarding the Board of Directors and Committees........................30
Required Vote; Recommendation of the Board of Directors............................30
EXECUTIVE COMPENSATION.....................................................................31
Compensation of Named Executive Officers...........................................31
Summary Compensation Table.........................................................31
SECURITY OWNERSHIP OF MANAGEMENT...........................................................31
TRANSACTIONS IN COMMON STOCK...............................................................31
Public Offerings in Past Three Years...............................................31
Purchases by Company, Officers, Directors or Affiliates in Past Sixty Days.........31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................................32
COMPLIANCE WITH SECTION 16(a) REQUIREMENTS.................................................32
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS..................................................32
SHAREHOLDER PROPOSALS......................................................................33
WHERE YOU CAN FIND MORE INFORMATION........................................................33
</TABLE>
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TABLE OF CONTENTS
(continued)
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INFORMATION INCORPORATED BY REFERENCE......................................................33
OTHER BUSINESS.............................................................................34
</TABLE>
Appendix A - Capital Investment of Hawaii, Inc.; Calculation of Net
After-Tax Asset Value in Liquidation; Pro Forma Balance
Sheet as of December 1, 1999
Appendix B - Hawaii Business Corporation Act
Appendix C - Proposed Amendment to Capital Investment of Hawaii,
Inc./Articles of Association
Appendix D - Form of Proxy
iii
<PAGE> 9
PROXY STATEMENT
- --------------------------------------------------------------------------------
CAPITAL INVESTMENT OF HAWAII, INC.
Suite 1700, Makai Tower
733 Bishop Street
Honolulu, Hawaii 96813
(808) 537-3981
----------------------------
This Proxy Statement and the accompanying form of Proxy are being sent to
shareholders of Capital Investment of Hawaii, Inc. (the "Company") on or about
December ___, 1999 for use in connection with the Annual Meeting of Shareholders
of the Company ("Annual Meeting") to be held on January 31, 2000.
THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED ON THE FAIRNESS OR MERITS OF SUCH TRANSACTIONS NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
ABOUT THE ANNUAL MEETING
When and where is the Annual Meeting?
The Annual Meeting will be held at 9:30 a.m. on Monday, January 31,
2000, at the Grosvenor Center Conference Room (ground floor), 733 Bishop Street,
Honolulu, Hawaii 96813.
What is the purpose of the Annual Meeting?
At the Annual Meeting, shareholders will act upon the matters outlined
in the accompanying notice of meeting, including a proposal to amend the
Company's Articles of Association to provide for a one-for-300 reverse stock
split (the "Reverse Stock Split") and the election of directors.
What are the Company's objectives?
On December 21, 1999, the Company's Board of Directors adopted
resolutions providing for a going-private plan (the "Plan") to restructure the
share ownership of the Company. The purpose of the Plan is to reduce the number
of Company shareholders below 300, thus allowing the Company to terminate its
reporting obligations under the Securities Exchange Act of 1934, as amended (the
"1934 Act"). This will allow the Company to eliminate the very substantial time
and expense associated with 1934 Act compliance. The Company's Board of
Directors believes that the Company's shareholders derive little benefit from
the Company's status as a publicly-held corporation. Over the past several
years, the Company believes that third-party purchase or sale transactions have
been negligible.
How will these objectives be accomplished?
A ONE-FOR-300 REVERSE STOCK SPLIT ("REVERSE STOCK SPLIT") that will have
the effect of eliminating the shares of all Company shareholders who own less
than 300 shares of the Company's currently outstanding voting common stock
without par value ("Existing Shares") by converting such Existing Shares into a
right to receive cash in the amount of $.25 (25 cents) per Existing Share.
Company shareholders who own 300 or more Existing Shares will have each 300 of
such shares converted into one share of common stock (the "New Common Stock")
and will receive cash in lieu of fractional shares at $.25 (25 cents) per
Existing Share. The Reverse Stock Split is summarized below and is described in
detail under "THE REVERSE STOCK SPLIT."
IF YOU OWN LESS THAN 300 EXISTING SHARES, AND IF THE REVERSE STOCK SPLIT
IS APPROVED AND IMPLEMENTED, YOU WILL RECEIVE CASH FOR THE SHARES THAT YOU OWN.
SEE "THE REVERSE STOCK SPLIT."
1
<PAGE> 10
IF YOU OWN 300 OR MORE EXISTING SHARES, YOU WILL RECEIVE ONE SHARE OF
NEW COMMON STOCK FOR EACH 300 SHARES OF EXISTING COMMON STOCK THAT YOU OWN, AND
CASH IN LIEU OF ANY FRACTIONAL SHARE.
SUMMARY OF THE REVERSE STOCK SPLIT
WHAT EFFECT WILL THE REVERSE STOCK SPLIT HAVE ON ME?
- - If you own less than 300 Existing Shares on the effective date of the
Reverse Stock Split, you will receive cash in lieu of the fractional
share of New Common Stock to which you would otherwise be entitled, at a
price equal to $.25 (25 cents) per Existing Share. After the effective
date of the Reverse Stock Split, you will have no continuing interest as
a shareholder of the Company.
- - If you own 300 or more Existing Shares on the effective date of the
Reverse Stock Split, you will receive one (1) share of New Common Stock
for each 300 shares of Existing Common Stock that you own, and you will
receive cash (at a rate equal to $.25 (25 cents) per Existing Share) in
lieu of any fractional share that would otherwise be issuable.
See "THE REVERSE STOCK SPLIT - Basic Terms of the Reverse Stock Split."
AM I ENTITLED TO DISSENT FROM THE REVERSE STOCK SPLIT?
To be able to dissent from the Reverse Stock Split and demand the right
to receive a cash payment from the Company for the fair value of the Existing
Shares held by any such dissenter, a record shareholder must file a notice in
writing with the Company before the time of the vote to approve the Reverse
Stock Split at the Annual Meeting, advising that the shareholder intends to
demand to be paid fair compensation for his or her Existing Shares, and such
dissenting shareholder must refrain from voting for the Reverse Stock Split at
the Annual Meeting. Dissenting shareholders also must follow the procedures set
forth in the Hawaii Business Corporations Act, the applicable sections of which
are attached to this Proxy Statement as APPENDIX B. The failure of a shareholder
to follow the specific requirements set forth in the Hawaii Business
Corporations Act concerning such dissenters' rights will result in the loss of
such rights. See "THE REVERSE STOCK SPLIT - Rights of Dissenting Shareholders."
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT?
Shareholders who receive cash upon redemption of their fractional share
interests in the New Common Stock as a result of the Reverse Stock Split will
generally recognize gain or loss based on their adjusted basis in the fractional
share interests redeemed. The Company has not received an opinion of counsel in
connection with the tax consequences of the Reverse Stock Split. Each
shareholder is urged to consult his or her own tax advisor regarding the tax
consequences of the Reverse Stock Split. See "SPECIAL FACTORS Certain Federal
Income Tax Considerations."
WHAT IS THE BOARD'S RECOMMENDATION?
The Board of Directors recommends that you vote "FOR" the proposal to
amend the Company's Articles of Association, effecting the Reverse Stock Split.
At a meeting held on December 21, 1999, the Company's Board of Directors
unanimously approved the Plan, including the Reverse Stock Split. The Board of
Directors has unanimously concluded that the Plan, and the Reverse Stock Split
provided for in the Plan, is fair to, and in the best interests of, the Company
and its shareholders. See "SPECIAL FACTORS - Fairness of the Reverse Stock
Split."
Mr. Stuart T. K. Ho, a director of the Company, has been involved in the
initiation and structuring of the Reverse Stock Split and will continue to
beneficially own a significant equity interest in the Company after the
transaction is completed. Because two other directors (Messrs. Dean T. W. Ho and
Donald M. Wong) will continue to beneficially own significant equity interests
in the Company after the transactions are completed, they (together with Mr.
Stuart T. K. Ho) may be deemed to be "engaged" in the Reverse Stock Split under
applicable regulations of
2
<PAGE> 11
the Securities and Exchange Commission ("SEC.") Messrs. Stuart T. K. Ho, Dean T.
W. Ho and Donald M. Wong are sometimes collectively referred to in this document
as the "Management Directors," and certain additional information is provided
with respect to them in that capacity.
WHAT VOTE IS REQUIRED TO APPROVE THE REVERSE STOCK SPLIT?
The affirmative vote of at least 66 2/3% of all Existing Shares
outstanding on the record date is required to approve the amendment of the
Company's Articles of Association to effect the Reverse Stock Split.
As described under "ANNUAL MEETING OF SHAREHOLDERS - Vote Required,"
those members of the Ho Family who are Company directors, executive officers or
10% shareholders have indicated that they intend to vote in favor of the Reverse
Stock Split. Two of the five directors of the Company (Messrs. Pedro Ada and C.
B. Sung) are outside directors (i.e., neither a member of the Ho Family nor an
employee of the Company or the Company's subsidiaries). See "THE REVERSE STOCK
SPLIT - Interests of Certain Persons in the Reverse Stock Split."
HAS THE COMPANY OBTAINED AN INDEPENDENT OPINION REGARDING THE REVERSE STOCK
SPLIT?
No. The Company has not obtained any such opinion.
SUMMARY OF OTHER MATTERS IN CONNECTION WITH THE MEETING
WHAT DO I NEED TO DO NOW?
ALL COMPANY SHAREHOLDERS will vote on the Reverse Stock Split and on the
election of directors. Read this Proxy Statement and mail your signed proxy card
in the enclosed return envelope as soon as possible, so that your shares can be
represented at the Annual Meeting.
CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
Yes. See "ANNUAL MEETING OF SHAREHOLDERS - Voting, Solicitation and
Revocation of Proxies."
SHOULD I SEND MY STOCK CERTIFICATES IN NOW?
DO NOT SEND IN YOUR STOCK CERTIFICATES NOW. After the Reverse Stock
Split is approved and effected, the Company will send you instructions for
submitting your stock certificate(s) in exchange for a stock certificate
representing your shares of New Common Stock, if any, and cash in lieu of
fractional shares.
SPECIAL FACTORS
In considering whether to vote in favor of the Reverse Stock Split,
shareholders should carefully consider the Special Factors discussed below,
including discussion as to the fairness to the Company's shareholders of the
Reverse Stock Split.
PURPOSES OF THE REVERSE STOCK SPLIT
The purpose of the Reverse Stock Split is to reduce the number of
Company shareholders to below 300 by buying the Existing Shares of small
shareholders (i.e., shareholders owning fewer than 300 Existing Shares) of the
Company. Once the Company has fewer than 300 shareholders, it will be able to
deregister its common stock under the 1934 Act, and will no longer be subject to
the regulatory and reporting requirements of that Act. The Board of Directors
has determined that few, if any, shareholders receive significant benefit from
the Company's compliance with the 1934 Act, as described below under "Reasons
for the Reverse Stock Split."
No director, officer or affiliate of the Company has any purpose with
respect to the Reverse Stock Split that is separate from or different than the
Company's purposes for those transactions as described above.
3
<PAGE> 12
ALTERNATIVES CONSIDERED
The Board of Directors did not consider any alternatives to the Reverse
Stock Split.
REASONS FOR THE REVERSE STOCK SPLIT
In considering the Reverse Stock Split, the Board of Directors
determined that the Company cannot afford the costs associated with retaining
its status as a public company, for the reasons discussed below.
Considering the case for "selling the company."
A reverse stock split would not be necessary if the Company was sold, i.e. its
assets sold and the Company's affairs wound up. The factors favoring "selling
the company" are (i) the continuing stagnation of Hawaii's tourist-driven
economy and the economies of certain Asian nations whose citizens are
historically a major source of Hawaii tourism; (ii) the large secured and
unsecured indebtedness of the Company (see "Appendix A"), which now cost the
Company approximately $440,000 per annum to service; and (iii) the Company's
lack of capital.
Considering the case for "growing the company."
The factors the Board of Directors considered for growing the Company arise from
the profitability and experience acquired by the Company since 1991 by making
"acquisition and development" loans ("ADC loans") to home builders in Southern
Nevada and Utah. An ADC loan is a transaction in which a lender advances money
to a builder to enable the builder to purchase zoned land and build
infrastructure and finished lot pads. The opportunity for the Company to make
ADC loans exists because federal regulations and regulators regard ADC loans as
risky and require that federally-insured lenders apply stringent lending
standards when making such loans. The result is usually very low loan-to-value
ratios for ADC loans. Small builders find this onerous, causing some to seek
non-traditional sources of ADC financing, but at a high borrowing cost. Housing
activity in many urban areas in the Western U.S. is largely carried by small
builders.
COMPANY'S HISTORY OF ADC LENDING
<TABLE>
<CAPTION>
FISCAL INVESTMENT AT
YEAR INCOME END OF FISCAL YR.
<S> <C> <C>
1998-99 $ 279,709 $1,217,871
1997-98 828,824 1,435,210
1996-97 449,842 2,711,737
1995-96 1,143,229 1,902,009
1994-95 1,360,568 3,574,360
1993-94 861,594 5,169,856
1992-93 788,000 4,444,421
</TABLE>
The table above describes the profitability of the Company's experience with ADC
lending. The Company experienced a decline in ADC income in Fiscal Year 1999, as
the result of a $437,297 charge taken when a builder to whom several project
loans had been made defaulted. The default was the only one experienced by the
Company since it began making ADC loans in 1991. However, most of the decline in
ADC loan income (and investment) during the decade was not for lack of business
opportunity but rather the result of the Company diverting an increasing amount
of its capital to meet operating losses in Hawaii, to which the Company's failed
investment in "Bakery Europa," (acquired in 1990 and later sold) was the major
contributing factor. Despite this history, the Board of Directors believe that
ADC lending on the mainland is an enterprise that the Company has the requisite
skills to exploit. The business is profitable. And it is a "niche" business
which is protected from large investors because of the relatively modest
financing demands of builders and because of the burden of dividing large pools
of capital among so many small loans, all of which require management.
Analysis of the Board of Directors
4
<PAGE> 13
The Board of Directors believe that "growing the company" through ADC lending is
the best strategy to pursue, but can only come about if the Company can survive
Hawaii's poor economic climate. They believe the Company can survive only if it
liquidates all or most of its debt through the sale of assets not needed in its
ADC lending business. They further believe that the Company can liquidate its
debt, given the range of liquidity implicit in the character its assets and
local market conditions, only if the Company significantly reduces its
administrative overhead to provide it with time to carry out an orderly sale of
assets. Recognizing the range of liquidity of the Company's assets, the Board of
Directors reviewed general and administrative expenses with a view towards
structural reduction of such expenses. One of the major expenses reviewed was
the cost of continuing to comply with the 1934 Act, which the Board of Directors
weighed against the 1934 Act's intended benefit to stockholders and investors.
- The cost of compliance with the 1934 Act is extremely high, the
Board of Directors concluded, in proportion to the Company's
total costs and expenses, exclusive of interest expense, and,
therefore, a detriment to the Company and its shareholders. For
Fiscal Years 1998 and 1997, the Company's total costs and
expenses, exclusive of interest expense, were, respectively,
$1,721,599 and $1,845,446. The cost of compliance with SEC rules
and regulations - which including auditing, preparation of
quarterly and annual filings with the SEC and other bookkeeping
costs -- for FY1998 and FY1997 were, respectively, $131,975 and
$122,913, or 8 percent and 7 percent, respectively, of the
Company's total costs and expenses, exclusive of interest
expense, and 7 percent and 7 percent, respectively, of the
Company's revenues. Some of this high cost is the result of
steps to enhance profitability. For example, because ADC loans
often provide for what accountants call "contingent interest"
but what the Company calls a "profit-participation," the
transaction is deemed a "joint venture" for accounting purposes.
As such, each "joint venture" is required to be fully audited,
thus contributing to the high cost of compliance. To date, the
Company has received invoices from the Company's independent
auditor, KPMG LLP, totaling approximately $93,700 for
professional services related to filing the Company's FY1999
Form 10-K.
- The Existing Shares are not listed on any stock exchange and in
recent years there has been no active trading of the shares.
During the past four fiscal years, i.e., within the year ended
July 31, 1996, and through the year ended July 31, 1999, the
high and low bid for each quarter for the Company's stock was a
low bid of 3/16 and a high bid of 1/2, and lack of trading
activity has not changed since the end of fiscal year 1999 to
the date of this plan. On October 31, 1999, there were
approximately 565 stockholders of record of common stock,
excluding individuals and institutions for whom shares are held
in the name of nominees or brokerage firms. Approximately 365 of
the Company's current shareholders of record own less than 300
Existing Shares each. Further, ownership of approximately 49.22
percent of the Existing Shares is concentrated in the family of
the late founder of the Company, Chinn Ho, further reducing
potential liquidity in the trading of the Existing Shares if
family members elected not to engage in active trading of the
shares. Accordingly, given the lack of trading activity in the
Existing Shares, the number of shareholders owning Existing
Shares, and the current composition of stock ownership, the
Board of Directors concludes that the Company's shareholders
derive little benefit from the Company's status as a
publicly-held corporation. Moreover, the Board of Directors
believe that the risks and expenses of continuing as a
publicly-held company substantially outweigh the benefits to
current shareholders.
Accordingly, the Board of Directors proposed the Reverse Stock Split to
achieve the following purposes:
- To reduce the number of shareholders of record of the Company to
less than 300 in order to terminate the registration of the
Company's common stock under the 1934 Act; and
- To relieve the Company of the burdens, risks and costs
associated with the regulatory and reporting requirements of the
1934 Act and the rules and regulations of the SEC pursuant to
the 1934 Act (see "Termination of Exchange Act Registration"),
which have not, in view of the inactive trading market for
Existing Shares, provided corresponding benefits.
5
<PAGE> 14
REASONS FOR UNDERTAKING THE REVERSE STOCK SPLIT AT THIS TIME
The Board of Directors believe there is an urgent need for the Company
to substantially reduce its operating costs to conserve its cash and give it the
time to liquidate the Company's debt through asset sales. The need to eliminate
the cost of compliance with the 1934 Act at this time is pressing because there
is no assurance that the Hawaii economy, and the Asian economies that support
it, will recover sufficiently to restore asset values, especially real estate
asset values, that have significantly diminished during the decade of the
nineties. Declining asset values in Hawaii have reduced the ability of Hawaii
businesses, including the Company, to deleverage themselves through asset sales.
See notes to Appendix A for examples of declines in the values of certain
assets. As pointed out above (see "Reasons for the Stock Split") the cost of
compliance with the 1934 Act is, the Board of Directors believe, not only
disproportionately large with respect to the Company's non-interest expenses and
revenues but also works to the detriment of the Company and its shareholders
because, given the lack of trading in the Company's stock for several years, the
Company and its shareholders receive no benefit intended by the 1934 Act.
The Board of Directors previously discussed the feasibility of reducing
the number of Company shareholders, in order to permit deregistration under the
1934 Act. The Company announced, on November 15, 1989, that the Board of
Directors planned to submit a 1-for 500 reverse stock split to the Company's
shareholder for approval. Following an outside appraisal in 1990 to estimate the
fair value of the Company's stock, the Board of Directors took no action to
proceed with a going-private transaction because of uncertainty about the value
of a large investment owned by a subsidiary of the Company in Marin County,
California, and because of uncertainty in valuing the Company's sundry
investment interests managed by AEA Investors, Inc. ("AEA") See "SPECIAL
FACTORS-Fairness of the Reverse Stock Split, Appendix A, Note 3." AEA is a
private investment management company that acquires privately-owned companies
with a view towards improving their financial performance and then selling
shares of the acquired company in a public offering. Another outside appraisal
to estimate the fair value of the Company's stock was made in 1995. Again, the
Board of Directors took no action to proceed with a going-private transaction.
At that time, most of the Company's interest in AEA-led investments was
concentrated in the stock of Dal-Tile International, Inc., ("Dal-Tile").
Dal-Tile was then, as it is now, the largest manufacturer of ceramic tile in the
U.S. but at the time of the 1995 appraisal it was privately-owned. In
considering the plan, the Board of Directors in 1995 were undecided about
deciding the fairness of the value of a promising private company whose
prospects of going public seemed imminent.
The nature of the Company's interest in AEA has changed significantly.
Dal-Tile "went-public" in 1996, and its shares were listed on the New York Stock
Exchange (ticker symbol: DTL). While the Company's interest in Dal-Tile
continues to be illiquid because of a "lock-up" agreement among the AEA investor
group, including the Company, affecting approximately 55 percent of Dal-Tile's
stock, the listing on the New York Stock Exchange gives the value of the shares
a transparency that the Company's shareholders did not have in 1995. The
Company's other shareholding interests through AEA, i.e., outside of the
Company's interest in Dal-Tile, while not publicly-traded, have a relatively
small cost. The Peacock Gap investment is no longer an asset of the Company.
Hence, the factors that caused the Board of Directors to be undecided about the
fairness of the value of the Company's stock on earlier occasions no longer
exist.
EFFECTS OF THE REVERSE STOCK SPLIT
The effect of the Reverse Stock Split will be to convert the share
ownership interest who owns less than 300 Existing Shares into a right to
receive cash, in an amount equal to $0.25 per Existing Share. Such shareholders
will cease to be shareholders of the Company, and will not have any interest in
the equity or future prospects of the Company. Company shareholders who own 300
or more Existing Shares will receive one share of New Common Stock for each 300
Existing Shares that they own, and will receive cash for any resulting fraction
of a share of New Common Stock. See "THE REVERSE STOCK SPLIT-Basic Terms of the
Reverse Stock Split."
The effect of the Reverse Stock Split will be to reduce the number of
Company shareholders to below 300, thus allowing the Company to deregister its
common stock under the 1934 Act, as described at "Reasons for the Reverse Stock
Split." By eliminating the share ownership interests of Company shareholders
with less than 300 Existing Shares, the Reverse Stock Split will eliminate the
opportunity of such shareholders to participate in any potential future growth
of the Company; however, the Board of Directors has determined that this loss of
6
<PAGE> 15
opportunity is offset by consideration to be paid to such shareholders. See
"SPECIAL FACTORS-Fairness of the Reverse Stock Split" below.
The effect of the Reverse Stock Split will be that the shareholders who
receive shares of New Common Stock pursuant to the Reverse Stock Split will be
shareholders in the Company, which will be privately held following the
Company's deregistration under the 1934 Act. The Company's capitalization
following the consummation of the Reverse Stock Split will effectively be
unchanged. The holders of New Common Stock will share in a portion of any future
increase in the Company's value, but will have corresponding exposure and risk
depending on the Company's future performance.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The receipt by a holder of Existing Shares of cash in lieu of fractional
shares of New Common Stock pursuant to the Reverse Stock Split will be a taxable
transaction for federal income tax purposes under the United States Internal
Revenue Code of 1986, as amended (the "Code").
Under Section 302 of the Code, a shareholder will recognize gain or loss
upon receiving cash in lieu of fractional shares of New Common Stock pursuant to
the Reverse Stock Split if:
- The Reverse Stock Split results in a "complete redemption" of
all of the shareholder's Existing Shares;
- The receipt of cash is "substantially disproportionate" with
respect to the shareholder; or
- The receipt of cash is "not essentially equivalent to a
dividend" with respect to the shareholder.
These three tests are applied by taking into account not only shares
that a shareholder actually owns, but also shares that the shareholder
constructively owns pursuant to Section 318 of the Code, as described below.
If any one of the three tests is satisfied, the shareholder will
recognize gain or loss on the difference between the amount of cash received by
the shareholder pursuant to the Reverse Stock Split and the tax basis in the
Existing Shares held by such shareholder prior to the Reverse Stock Split.
Provided that the Existing Shares constitute a capital asset in the hands of the
shareholder, this gain or loss will be long-term capital gain or loss if the
eligible Existing Shares are held for more than one year and will be short term
capital gain or loss if such shares are held for one year or less.
Under the constructive ownership rules of Section 318 of the Code, a
shareholder is deemed to constructively own shares owned by certain related
individuals and entities in addition to shares directly owned by the
shareholder. For example, an individual shareholder is considered to own shares
owned by or for his or her spouse and his or her children, grandchildren and
parents ("family attribution"). In addition, a shareholder is considered to own
a proportionate number of shares owned by estates or certain trusts in which the
shareholder has a beneficial interest, by partnerships in which the shareholder
is a partner, and by corporations in which 50% or more in value of the stock is
owned directly or indirectly by or for such shareholder. Similarly, shares
directly or indirectly owned by beneficiaries of estates of certain trusts, by
partners of partnerships and, under certain circumstances, by shareholders of
corporations may be considered owned by these entities ("entity attribution"). A
shareholder is also deemed to own shares which the shareholder has the right to
acquire by exercise of an option.
The receipt of cash by a shareholder pursuant to the Reverse Stock Split
will result in a "complete redemption" of all of the shareholder's Existing
Shares as long as the shareholder does not constructively own any shares of New
Common Stock immediately after the Reverse Stock Split. However, a shareholder
may qualify for gain or loss treatment under the "complete redemption" test even
though such shareholder constructively owns shares of New Common Stock provided
that (i) the shareholder constructively owns shares of New Common Stock as a
result of the family attribution rules (or, in some cases, as a result of a
combination of the family and entity attribution rules), and (ii) the
shareholder qualifies for a waiver of the family attribution rules (such waiver
being subject to several conditions, one of which is that the shareholder has no
interest in the Company immediately after the Reverse Stock Split, including as
an officer, director or employee, other than an interest as a creditor.
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Shareholders who receive cash in lieu of fractional shares of New Common
Stock pursuant to the Reverse Stock Split will qualify for capital gain or loss
treatment as a result of satisfying the "complete redemption" requirements.
However, if the constructive ownership rules prevent compliance with these
requirements, such shareholder may nonetheless qualify for capital gain or loss
treatment by satisfying either the "substantially disproportionate" or the "not
essentially equivalent to a dividend" requirements. In general, the receipt of
cash pursuant to the Reverse Stock Split will be "substantially
disproportionate" with respect to the shareholder if the percentage of shares of
New Common Stock owned by the shareholder immediately after the Reverse Stock
Split is less than 80% of the percentage of Existing Shares directly and
constructively owned by the shareholder immediately before the Reverse Stock
Split (giving effect to the difference in number of shares due to the Reverse
Stock Split). Alternatively, the receipt of cash pursuant to the Reverse Stock
Split will, in general, be "not essentially equivalent to a dividend" if the
Reverse Stock Split or the receipt of payment pursuant to the Tender Offer
results in a "meaningful reduction" in the shareholder's proportionate interest
in the Company.
If none of the three tests described above is satisfied, the shareholder
will be treated as having received a taxable dividend in an amount equal to the
entire amount of cash received by the shareholder pursuant to the Reverse Stock
Split.
The receipt of shares of New Common Stock pursuant to the Reverse Stock
Split by owners of more than 300 Existing Shares will be a non-taxable
transaction for federal income tax purposes. Accordingly, a holder of more than
300 Existing Shares who receives shares of New Common Stock will not recognize
gain or loss, or dividend income, as a result of the Reverse Stock Split with
respect to the shares of New Common Stock received (but, as described above,
cash received in lieu of a fractional share of New Common Stock will be a
taxable transaction to the extent of such cash received). In addition, the basis
and holding period of such shareholder's shares of New Common Stock will carry
over as the basis and holding period of such shareholder's shares of New Common
Stock.
The backup withholding rules require a payor to deduct and withhold a
tax if (i) the payee fails to furnish a taxpayer identification number ("TIN")
to the payor; (ii) the IRS notifies the payor that the TIN furnished by the
payee is incorrect; (iii) the payee has failed to properly report the receipt of
"reportable payment" on several occasions and the IRS has notified the payor
that withholding is required; or (iv) there has been a failure of the payee to
certify under the penalty of perjury that the payee is not subject to
withholding under Section 3406 of the Code. As a result, if any one of the
events discussed above occurs, the Company will be required to withhold a tax
equal to 31% of any "reportable payment" made in connection with the Reverse
Stock Split. A "reportable payment" includes, among other things, dividends and
amounts paid through brokers in retirement of securities. Any amounts withheld
from a payment to a shareholder under the backup withholding rules will be
allowed as a refund or credit against such shareholder's federal income tax,
provided that the required information is furnished to the IRS. Certain
shareholders (including corporations and tax exempt organizations) are not
subject to the backup withholding requirements.
The foregoing is only a general description of certain of the United
States federal income tax consequences of the Reverse Stock Split, without
reference to the particular facts and circumstances of any particular
shareholder. Each shareholder is urged to consult his or her own tax advisor to
determine the particular tax consequences to such shareholder of the Reverse
Stock Split (including the application and effect of state and local income and
other tax laws).
FAIRNESS OF THE REVERSE STOCK SPLIT
On December 21, 1999, the Board of Directors, by unanimous vote,
approved and adopted the Plan. In approving and adopting the Plan, the Board of
Directors determined that the Plan is fair to, and in the best interests of, the
shareholders of the Company, including unaffiliated shareholders.
In reaching its determination that the Reverse Stock Split is fair to
the unaffiliated shareholders of the Company, the Board of Directors considered,
among other matters, the following factors:
1. Current market prices;
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2. Historical market prices;
3. Net book value;
4. Going concern value;
5. Liquidation value;
6. The price paid in purchases by the Company or its affiliates since
August 1, 1997, the commencement of the second full fiscal year preceding the
date of this schedule;
7. Any report, opinion, or appraisal received by the Company or its
affiliates relating to the transaction's fairness; and
8. Other firm offers of which the Company or its affiliates are aware
for merger, consolidation, or sale of the assets of the Company, or for
securities of the Company in order to exercise control.
The Board of Directors know it is often the practice in transactions of
this kind to engage an appraiser to render an opinion on the fairness of the
consideration to be offered to the shareholders. In this case, however, the
Board of Directors believe that most of the Company's assets are sufficiently
uncomplicated in kind and character and the methods used to ascertain their
current value sufficiently well understood that an outside appraisal to
establish the fairness of the consideration offered is unnecessary (and,
therefore, unnecessarily expensive). Moreover, the Board of Directors believe
that the fairness of the price, in this case, turns much less on net asset
values (because the net asset value of the Company's shares is so low) and much
more on the benefit to be received by the Company's shareholders by the Company
paying the price recommended as "fair" for fractional shares. Nonetheless, the
Board of Directors believe that all valuation factors should be considered,
whether relevant or not. The management of the Company has prepared and provided
its own estimation of the value of the Company's assets and liabilities (see
Appendix A).
Neither the Company nor its affiliates are aware of any firm offers for
merger, consolidation or sale of the assets of the Company, or for securities of
the Company in order to exercise control, nor have the Company or its affiliates
purchased any of the common stock of the Company since August 1, 1997, the
commencement of the second full fiscal year preceding the date of this schedule.
"Current market price" and "historical market price" methods of
valuation result in the best indications of value because they result directly
from the actions of informed and willing buyers and seller of shares. However,
as earlier indicated (see "SPECIAL FACTORS-Reasons for the Reverse Stock
Split"), there has been no active trading in the Company's stock for several
years. According to the office of Abel-Behnke, a Honolulu investment firm that
makes a market in the Company's stock, the quotations for the Company's stock on
October 30, 1999, ranged between $0.187 bid and $0.250 asked. Richard Behnke, a
principal of Abel-Behnke, informed the Company on November 24, 1999, that to his
knowledge there had been no trading in the Company's stock "for a long time."
The "net book value" method is not a useful indicator of value because
the Company has had a negative book value since Fiscal Year 1996. Yet the
Company owns certain assets with market values that may well exceed their
historical cost. Nor is the "going concern value" method a valid valuation
method to apply. The going concern value method is more appropriate in a
manufacturing, service or rental income producing firm where the net income
flows are steady or reveal a reasonably predictable pattern. The Company's long
financial history adheres to a pattern of periodic losses punctuated by periodic
profits resulting from the sale of developed and undeveloped real estate or
appreciated financial assets. A valuation method like the going concern method,
resting of the capitalization of pre-tax or after-tax earnings would not, when
applied to the Company's history, lead to a creditable result.
The "liquidation" method is, in the opinion of the Board of Directors, a
more appropriate valuation method than the methods discussed thus far
considering the Company's history of financial and real estate assets being
bought and sold at irregular intervals and where reported earnings are not
steady or predictable. The liquidation
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<PAGE> 18
value method cures the problem in the net book value method in that it restates
assets at their market value or net realizable value after allowance for
marketing and the cost of the liquidation effort. The applicability of this
method should take into account that value determined by the liquidation method
is not synonymous with market liquidity. For example, a warehouse valued at
"market" does not mean that the value of the warehouse can be immediately sold
and its value converted to cash.
Appendix A summarizes the Company's assets, liabilities and
stockholder's equity applying a modified form of the liquidation method. The
primary techniques applied in valuing the individual assets are: (1) current and
historical market prices for listed or traded securities; (2) capitalization of
income or application of industry-recognized multipliers or adjusted purchase
prices for non-traded investments; and (3) estimated market values for real
estate parcels. Since the liquidation of the Company is not planned, no
provision is made for an estimated cost of liquidation or for a discount for
"book to market," an adjustment sometimes made by appraisers in the case of
investment companies because the market price of their shares are frequently
below the aggregate of the net asset values held by such firms. Appendix A
suggests an indicated value per share by liquidation (net current asset)
approach, as hereinabove qualified, of $0.03 per share.
Position of the Board of Directors.
On December 21, 1999, the Board of Directors, by unanimous vote,
approved and adopted the Plan. In approving and adopting the Plan, the Board of
Directors determined that the Plan, which includes the Reverse Stock Split, is
fair to, and in the best interests of, the shareholders, including the
unaffiliated shareholders, of the Company.
In reaching its determination that the Reverse Stock Split is fair to
the shareholders, including the unaffiliated shareholders of the Company, the
Board of Directors considered the following factors:
- The indicated value per share of the Company's stock determined
by a modified liquidation (net current asset) approach is $0.03.
- The Company estimates that the approximate number of fractional
shares that will need to be purchased as a result of the Reverse
Stock Split is 93,000 Existing Shares, after which the total
number of shareholders of the Company will be reduced to
approximately 250.
- The cost to purchase the 93,000 Existing (fractional) Shares, at
$.25 (25 cents) per share, is $23,250. Compared with the
$131,975 and $122,913 cost of complying with the 1934 Act in
Fiscal years 1998 and 1997, respectively, the payment of the
excess of the $0.25 per share redemption price over the $0.03
indicated value of the Company's shares is a fair price for the
Company to pay to secure the cooperation of the holders of
fractional shares, and the Board of Directors accordingly
believe that it is in the best interest of the shareholders,
including the unaffiliated shareholders, that the price be paid.
- The lack of trading activity in the Company's shares and the low
bid and asking prices for the shares, the Company's poor
financial performance, the Board's knowledge of the state of the
Hawaii economy, which has been and is expected to continue to be
relatively stagnant throughout 2000, and the need to reduce the
Company's operating costs in order to allow the Company
sufficient time to sell certain of its assets and reduce its
debt, were all factors that helped the Board to conclude that
now is an appropriate time to undertake the Reverse Stock Split.
In light of the number and variety of factors that the Board of
Directors considered in evaluating the fairness of the price to be paid for
Existing Shares pursuant to the Reverse Stock Split, they did not find it
practicable to assign relative weights to such factors, and accordingly, did not
do so.
In addition to the factors listed above, which bear primarily on the
fairness of the price to be paid for Existing Shares from a financial point of
view, the Board considered factors applicable to the fairness generally of the
Reverse Stock Split, to all Company shareholders, including unaffiliated
shareholders. The Board has informally discussed the feasibility of reducing the
number of Company shareholders in order to permit deregistration under the
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<PAGE> 19
1934 Act for a number of years, as described above (see "Reasons for Undertaking
the Reverse Stock Split at This Time") but did not believe that it was
appropriate to proceed with a going-private transaction under such
circumstances. This fact, together with certain of the financial and economic
factors described above, led the Board to conclude that the timing of the
going-private transaction was fair to the Company's shareholders.
The Board did consider that the Reverse Stock Split would eliminate the
opportunity of shareholders owning less than 300 Existing Shares to participate
in any potential future growth of the Company, but determined that the loss of
opportunity was offset by the consideration to be paid a premium for their
shares, particularly in view of the lack of trading for the Existing Shares and
considering the Company's recent financial history.
The Board of Directors believe that the risks and expenses of continuing
as a publicly-held company substantially outweigh any benefits to current
shareholders. Additionally, in view of the large number of Company shareholders
with very small holdings of Existing Shares, the Board believes that it is not
in the best interests of the Company to continue to allocate corporate
resources, including management time, to compliance with public company
regulatory and reporting requirements.
The Board of Directors determined not to require that the Reverse Stock
Split be approved by a majority of Company shareholders who are not Ho Family
members, in view of the large number of Company shareholders with small holdings
of Existing Shares, because of the likelihood of a low voter response. It has
not been the practice in past years to solicit the votes of the great majority
of unaffiliated shareholders for annual meeting purposes, and the Board is
concerned about a low response from unaffiliated shareholders who may not
believe their vote is important.
The Board of Directors determined that it was not feasible to establish
an independent committee of unaffiliated directors. The Company's outside
directors (Messrs. C.B. Sung and P.P. Ada) have not retained unaffiliated
representatives to act on behalf of Company shareholders who are not Ho Family
members, for the purpose of negotiating the terms of the Reverse Stock Split.
The Board believes that the Reverse Stock Split is fair to unaffiliated
shareholders despite the absence of such "procedural safeguards," based on its
analysis of the factors described above. With respect to the Reverse Stock
Split, the Board believes that the interests of the unaffiliated shareholders
owning less than 300 Existing Shares are adequately protected by their ability
to dissent from the Reverse Stock Split and obtain payment for their shares
under Hawaii law (see "Rights of Dissenting Shareholders"). Hawaii law does not
require dissenters' rights in connection with a reverse stock split, and this
right is being provided voluntarily by the Company as a procedural safeguard.
Position of the Management Directors
Additionally, the terms of the Reverse Stock Split have been approved by the two
outside Company directors, which serves as an additional procedural safeguard.
The two outside directors did not vote separately as a group in voting to
approve the Reverse Stock Split, but rather approved the transaction in
connection with the Board's unanimous approval.
Position of the Ho Family Shareholders
The Ho Family Shareholders also believe that the Reverse Stock Split are
fair to all Company shareholders, including unaffiliated shareholders. Such
belief is based on (i) the conclusions of, and the approval of, the Board of
Directors, as well as the basis therefore, which conclusions and bases, as set
forth above, are adopted by the Ho Family Shareholders and incorporated by
reference. The Ho Family Shareholders did not find it practical to, and did not,
quantify or otherwise attach relative weights to the specific factors that they
considered.
ANNUAL MEETING OF SHAREHOLDERS
DATE, TIME AND PLACE
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The Annual Meeting will be held on Monday, January 31, 2000, at 9:30
a.m. Honolulu time, at the Grosvenor Center Conference Room (ground floor), 733
Bishop Street, Honolulu, Hawaii 96813.
PURPOSE
The purpose of the Annual Meeting is to consider and vote upon:
- The amendment of the Company's Articles of Association, which
will effect the Reverse Stock Split;
- The election of directors for the ensuing year; and
- Other matters, if any, that may properly come before the Annual
Meeting.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
The Company has fixed 5:00 p.m. Honolulu time on December 15, 1999 as
the record date for determining the holders of Company common stock entitled to
notice of, and to vote at, the Annual Meeting. At the close of business on the
record date, there were 1,032,692 Existing Shares issued and outstanding, held
by approximately 566 holders of record. Holders of record of Existing Shares are
entitled to one vote per share.
VOTE REQUIRED
Amendment of Articles of Association. The affirmative vote of at least
66 2/3% of all Existing Shares outstanding on the record date is required to
approve the amendment of the Company's Articles of Association, which will
effect the Reverse Stock Split. See "THE REVERSE STOCK SPLIT - Required Vote;
Indications of Voting Intent by Ho Family Shareholders and Management."
Election of Directors. Each shareholder will have one vote for each
Existing Share held, except that cumulative voting may be required in the
election of directors. If cumulative voting applies, the necessary vote for the
election of directors is described below. If cumulative voting does not apply,
directors must be elected by a majority of the Existing Shares represented in
person or by proxy at the Annual Meeting, assuming that a quorum (a majority of
all Existing Shares entitled to vote) is present at such meeting.
Hawaii law requires use of cumulative voting in the election of
directors if, not less than 48 hours prior to the time fixed for the Annual
Meeting, any shareholder delivers a request therefor to an office of the
Company. Cumulative voting means that each shareholder present in person or by
proxy may cast a number of votes equal to the number of his or her shares
multiplied by the number of directors to be elected. The shareholder may cast
all of such votes for a single director or may distribute them among the number
to be voted for, or any two or more as the shareholder see fit. The nominees
receiving the highest number of votes on the foregoing basis, up to the total
number to be elected, will be the successful nominees. If cumulative voting is
requested, the holders of management proxies will vote the proxies received by
them cumulatively in such manner as is determined by them at that time.
VOTING, SOLICITATION AND REVOCATION OF PROXIES
If the enclosed proxy is duly executed and received in time for the
Annual Meeting, it will be voted in accordance with the instructions given. If
no instruction is given, it is the intention of the persons named in the proxy
to vote the shares represented by the proxy FOR (i) the approval of the
amendment of the Company's Articles of Association and (ii) the election of the
nominated directors. Any proxy given by a shareholder may be revoked before its
exercise by written notice to the Secretary of the Company, or by a subsequently
dated proxy, or in open meeting before the shareholder vote is taken. The shares
represented by properly executed unrevoked proxies will be voted in accordance
with the instructions on the proxy. With regard to any other matters that may
properly come before the Annual Meeting, it is the intention of the persons
named in the proxy to vote the proxy in accordance with the recommendations of
management on such matters.
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The proxy for the Annual meeting is being solicited on behalf of the
Company's Board of Directors. The Company will bear the cost of solicitation of
proxies from its shareholders. In addition to using the mails, proxies may be
solicited by personal interview, telephone and wire. Banks, brokerage houses,
other institutions, nominees and fiduciaries will be requested to forward their
proxy soliciting material to their principals and obtain authorization for the
execution of the proxies. Officers and other employees of the Company may
solicit proxies personally. The Company does not expect to pay any compensation
for the solicitation of proxies, but will, upon request, pay the standard
charges and expenses of banks, brokerage houses, other institutions, nominees,
and fiduciaries for forwarding proxy material to and obtaining proxies from
their principals.
THE REVERSE STOCK SPLIT
GENERAL
The purpose of the Reverse Stock Split is to reduce the number of
Company shareholders below 300 by buying the Existing Shares of small
shareholders (under 300 Existing Shares) in the Company. As described below
under "Basic Terms of the Reverse Stock Split," the Reverse Stock Split consists
of an amendment to the Company's Articles of Association, pursuant to which each
300 Existing Shares will be converted into one share of New Common Stock. The
text of the proposed amendment to the Company's Articles of Association is
attached as APPENDIX B. Because the Company will not issue fractional shares of
New Common Stock, any shareholder who owns less than 300 Existing Shares (which
would convert into less than a whole share of New Common Stock) will instead
receive cash in lieu of such fractional interest, at a price equal to $.25 (25
cents) per Existing Share.
BACKGROUND
The Company's Board of Directors has informally discussed the
feasibility of reducing the number of Company shareholders in order to permit
deregistration of the Company's common stock under the 1934 Act for several
years. Based on discussions with its legal counsel in mid-1999, the Board
authorized the exploration of strategies for accomplishing this objective. After
review of the legal, economic and procedural issues involved, management, in
consultation with its legal counsel, determined that the Reverse Stock Split was
appropriate and decided to recommend it to the Board.
The Board concurred with management's recommendation that the Reverse
Stock Split is the most efficient way to reduce the number of Company
shareholders below 300. On December 21, 1999, the Board approved and adopted the
Reverse Stock Split, and determined to submit it (specifically the amendment of
the Company's Articles of Association to effect the Reverse Stock Split) to the
Company's shareholders at the Annual Meeting.
BASIC TERMS OF THE REVERSE STOCK SPLIT
Upon shareholder approval and the filing of the amendment of the
Company's Articles of Association, the outstanding shares of Company common
stock will be consolidated and converted from 3 million to 10,000. Accordingly,
each 300 Existing Shares that are outstanding on the date of the filing of the
amendment will be converted into one share of New Common Stock. After giving
effect to the Reverse Stock Split, the Company expects that the number of
shareholders of record will be reduced such that the Company's regulatory and
reporting requirements under the 1934 Act could be terminated. Based on the
Company's shareholder records, the Company believes that the Reverse Stock Split
will reduce the number of Company shareholders to approximately 250. Following
the Company's termination of its registration under the 1934 Act, the Company
will no longer incur the expense of compliance with 1934 Act regulatory and
reporting requirements. Corporate resources currently devoted to such compliance
(estimated to be approximately $100,000 inclusive of management time, per year)
can be allocated to other areas where they can be used more efficiently.
Holders of Less Than 300 Existing Shares. Upon the effectiveness of the
Reverse Stock Split, shareholders who are not entitled to receive a whole share
of New Common Stock (all shareholders who own less than 300 Existing Shares on
the effective date of the Reverse Stock Split) will cease to be shareholders or
have any interest in the equity or future prospects of the Company. Such
shareholders will receive cash in lieu of the fractional share of New Common
Stock which they would otherwise receive, in an amount equal to $.25 (25 cents)
per Existing Share.
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Such shareholders will not participate in any increase or decrease in the value
of the Company or the New Common Stock.
Holders of 300 or More Existing Shares. Shareholders who own 300 or more
Existing Shares will be entitled to receive one (1) share of New Common Stock
for each 300 Existing Shares that they own on the effective date of the Reverse
Stock Split. Except for the difference in the number of shares authorized and
the number of shares owned by shareholders, the New Common Stock be identical,
with respect to voting, dividend and other rights, to the former Existing
Shares. However, because the Company intends to terminate its registration under
the 1934 Act following the Reverse Stock Split, and thereafter will not file
reports pursuant to the 1934 Act, and because of the number and composition of
the Company's shareholders following the Reverse Stock Split, it is anticipated
that there will not be a market for the New Common Stock.
EXCHANGE OF STOCK CERTIFICATES
If the amendment to the Company's Articles of Association is approved by
the Company's shareholders, the Board of Directors will cause Amended and
Restated Articles of Association to be immediately filed with the Hawaii
Department of Commerce and Consumer Affairs, and a notice of such filing
("Notice"), along with a Transmittal Letter, to be sent to all holders of
Existing Shares.
On the effective date of the Reverse Stock Split, each certificate
representing an Existing Share will be deemed for all corporate purposes, and
without any further action by any person, to evidence ownership of the reduced
number of shares of New Common Stock and/or the right to receive cash for any
fractional share interest. Each shareholder who holds fewer than 300 Existing
Shares on the effective date of the Reverse Stock Split will cease to have any
rights with respect to New Common Stock, and will have only the right to receive
cash in lieu of the fractional share to which such holder would otherwise be
entitled, as described in "Cash for Fractional Shares" below.
If certificates for Existing Shares have been lost or destroyed, the
Company may, in its sole discretion, accept in connection with the Reverse Stock
Split a duly executed affidavit and indemnity agreement of loss or destruction,
in a form satisfactory to the Company, in lieu of the lost or destroyed
certificate. Additional instructions regarding lost or destroyed stock
certificates will be included in the Notice and Transmittal Letter sent to
Company shareholders after the effectiveness of the Reverse Stock Split.
THE NOTICE AND TRANSMITTAL LETTER WILL BE SENT BY THE COMPANY TO
SHAREHOLDERS PROMPTLY AFTER THE EFFECTIVE DATE OF THE REVERSE STOCK SPLIT. DO
NOT SEND IN YOUR STOCK CERTIFICATES UNTIL YOU RECEIVE THE NOTICE AND TRANSMITTAL
LETTER.
There will be no service charges or costs payable by Company
shareholders in connection with the exchange of their certificates or in
connection with the payment of cash in lieu of fractional shares.
These costs will be borne by the Company.
CASH FOR FRACTIONAL SHARES
The Company will not issue fractional shares of New Common Stock.
Accordingly, if you own less than 300 Existing Shares, you will not receive a
fractional share of New Common Stock, but will instead receive cash in lieu of
such fractional interest. The amount of cash that you will receive will be equal
to $.25 (25 cents) for each Existing Share that you own on the effective date of
the Reverse Stock Split.
If you own 300 or more Existing Shares, you will receive one share of
New Common Stock for each 300 Existing Shares that you own on the effective date
of the Reverse Stock Split, and you will receive cash in lieu of any resulting
fractional share of New Common Stock, also at a price equal to $.25 (25 cents)
per Existing Share represented.
CONDITIONS OF THE REVERSE STOCK SPLIT; REGULATORY APPROVALS
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Aside from shareholder approval of the amendment of the Company's
Articles of Association (see "Required Vote; Indications of Voting Intentions of
Ho Family Shareholders and Management") the Reverse Stock Split is not subject
to any conditions or regulatory approvals. The Company is required to make
certain filings with the SEC under the 1934 Act in connection with the Reverse
Stock Split and this Proxy Statement. Such filings have been made.
EFFECT ON MARKET FOR SHARES
Following the Reverse Stock Split, the Company intends to deregister its
common stock under the 1934 Act. See "Termination of Exchange Act Registration"
below. This and other factors will likely mean that the market for New Common
Stock will be significantly more limited than the market for Existing Shares has
historically been.
TERMINATION OF EXCHANGE ACT REGISTRATION
The Existing Shares are currently registered under the 1934 Act. Such
registration may be terminated upon application of the Company to the SEC if
there are fewer than 300 record holders of the Company's outstanding shares.
Upon the consummation of the Reverse Stock Split, the Company will have
approximately 250 shareholders. The Company intends to make application for
termination of registration of the shares of New Common Stock as promptly as
possible after the effective date of the Reverse Stock Split.
Termination of registration under the 1934 Act will substantially reduce
the information required to be furnished by the Company to its shareholders and
to the SEC and would make certain provisions of the 1934 Act, such as the
short-swing profit provisions of Section 16(b), the requirement of furnishing a
proxy or information statement in connection with shareholder meetings pursuant
to Section 14(a), and the requirements of Rule 13E-3 under the 1934 Act
regarding "going private" transactions, no longer applicable to the Company.
The Company estimates that termination of registration of the New Common
Stock under the 1934 Act will save the Company as much as approximately $100,000
per year in legal, accounting, printing, management time, and other expenses per
year.
FEES AND EXPENSES; SOURCES OF FUNDS; PERSONS AND ASSETS EMPLOYED, RETAINED OR
UTILIZED
Fees and Expenses; Sources of Funds. The total amount of funds that will
be required by the Company to fund the cash payments in lieu of fractional
shares of New Common Stock pursuant to the Reverse Stock Split (the "Purchase
Funds") is estimated to be approximately $23,250. This estimated total is based
on the stock records of the Company as of June 30, 1999. Additionally the
Company anticipates legal, financial advisory, accounting, printing, and other
fees and expenses in relation to the transactions contemplated by the Reverse
Stock Split (the "Transaction Expenses") of approximately $30,000. The Company
has sufficient cash on hand to pay the Purchase Funds and Transaction Expenses.
Persons and Assets Employed, Retained or Utilized. As described above,
the Company will fund the Transaction Expenses with cash on hand. No other
significant assets of the Company will be employed or utilized in connection
with the Reverse Stock Split. As described in "THE ANNUAL MEETING - Voting,
Solicitation and Revocation of Proxies," certain officers and employees of the
Company may personally solicit proxies in connection with the Annual Meeting.
Additionally, certain employees of the Company will be involved in coordinating
the procedural aspects of the Reverse Stock Split, as the Company serves as the
transfer agent for the Company. No officer or employee of the Company will be
separately compensated for the solicitation of proxies or any other activity
undertaken in connection with the solicitation of proxies or the consummation of
the Reverse Stock Split generally. The Management Directors will not separately
employ, retain or utilize any person, or any assets of the Company, in
connection with the Reverse Stock Split.
INTERESTS OF CERTAIN PERSONS IN THE REVERSE STOCK SPLIT
Company directors Messrs. Stuart T. K. Ho and Dean T. W. Ho are members
of the Ho Family. As described above under "Reasons for the Reverse Stock
Split," the purpose of the Reverse Stock Split is to reduce the number of
Company shareholders in order to allow the Company to "go private" by
deregistering under the 1934
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Act. The elimination of small holdings of Existing Shares will further
concentrate the equity ownership of the Company in the Ho Family. Members of the
Ho Family, including directors named above, have a substantial interest, by
virtue of being members of the Ho Family, in the implementation of the Reverse
Stock Split.
RIGHTS OF DISSENTING SHAREHOLDERS
Although Hawaii law does not require dissenters' rights in connection
with a reverse stock split, the Company has voluntarily elected to provide
shareholders the right to dissent from the Reverse Stock Split and obtain
payment for their Existing Shares pursuant to Sections 415-80 and 415-81 of the
Hawaii Business Corporation Act (the "Act"). A shareholder who wishes to dissent
must file with the Company, prior to the vote on the Reverse Stock Split at the
Annual Meeting, a written notice that the shareholder intends to demand to be
paid fair compensation for his Existing Shares, and he or she must refrain from
voting such shares in approval of the Reverse Stock Split. A shareholder who
fails in either respect will have no right to payment for the Existing Shares
under either Section 415-80 or Section 415-81 of the Act. Such notice should be
sent to Capital Investment of Hawaii, Inc., Suite 1700, Makai Tower, 733 Bishop
Street, Honolulu, Hawaii 96813; Attention: President
A PROXY CARD DIRECTING A VOTE AGAINST THE AMENDMENT OF THE COMPANY'S
ARTICLES OF ASSOCIATION TO EFFECT THE REVERSE STOCK SPLIT, OR AN ABSTENTION FROM
VOTING, IS INSUFFICIENT TO SATISFY THE REQUIREMENTS FOR THE WRITTEN NOTICE THAT
IS REQUIRED UNDER SECTION 415-81 OF THE ACT.
Sections 415-80 and 415-81 of the Act are reprinted in their entirety as
APPENDIX B to this Proxy Statement. All references in Sections 415-80 and 415-81
of the Act and in this section to a "shareholder" are references to the record
holder of Existing Shares. A person or persons having a beneficial interest in
Existing Shares held of record in the name of another person or persons, such as
a broker or nominee, and wishing to exercise dissenters' rights should act
promptly to cause the shareholder of record to properly follow the steps
summarized below and in a timely manner to perfect dissenters' rights concerning
such Existing Shares.
A SUMMARY OF IMPORTANT DETAILS CONCERNING THESE REQUIREMENTS IS SET
FORTH BELOW; THE REQUIRED PROCEDURES SET FORTH IN SECTIONS 415-80 AND 415-81 OF
THE ACT MUST BE FOLLOWED EXACTLY OR DISSENTERS' RIGHTS MAY BE LOST.
The following discussion is not a complete statement of the law relating
to dissenters' rights; it is qualified in its entirety by APPENDIX B. This
discussion and APPENDIX B should be reviewed carefully by any shareholder who
wishes to exercise dissenters' rights, or who wishes to preserve the right to do
so; failure to comply with the procedures set forth in Sections 415-80 and
415-81 of the Act will result in the loss of dissenters' rights. Shareholders
should consult their own legal advisors.
If the Reverse Stock Split is effectuated, those shareholders of the
Company who elect to exercise their dissenters' rights and who properly and
timely perfect such rights will be entitled to receive the fair value in cash of
their Existing Shares. Such cash payment would be in lieu of the shares of New
Common Stock and/or amount of the cash they would otherwise receive upon the
effectiveness of the Reverse Stock Split. Pursuant to Section 415-81 of the Act,
"fair value" means the value of the Existing Shares immediately before the
effectuation of the Reverse Stock Split, excluding any appreciation or
depreciation in anticipation of the Reverse Stock Split, unless such exclusion
would be inequitable.
If the Company's shareholders approve the Reverse Stock Split by the
required vote, then the Company must mail to those shareholders who submitted a
written notice of intention to demand dissenters' rights and who refrained from
voting their Existing Shares to approve of the Reverse Stock Split, a notice
that the required shareholder approval of the Reverse Stock Split was obtained
(the "Notice of Approval"). The Notice of Approval must: (i) state where and
when a demand for payment must be sent and certificates of certificated shares
must be deposited to obtain payment; (ii) inform holders of uncertificated
shares to what extent transfer of shares will be restricted from the time that
demand for payment is received; (iii) supply a form for demanding payment that
includes a request for certification of the date on which the shareholder, or
the person on whose behalf the shareholder dissents, acquired beneficial
ownership of the shares; and (iv) be accompanied by a copy of Sections 415-80
and 415-81 of the Act. The time set for the demand and deposit must not be less
than 30 days from the Company's mailing of the Notice of Approval.
16
<PAGE> 25
A shareholder who fails to demand payment and deposit his or her shares
in the time and in the manner set forth in the Notice of Approval, will have no
right as a dissenter to receive the fair value of his or her Existing Shares.
The dissenter will retain all other rights of a shareholder until those rights
are modified by effectuation of the Reverse Stock Split.
Immediately upon effectuating the Reverse Stock Split, or upon receipt
of timely demand for payment if the Reverse Stock Split already has been
effectuated, the Company must remit to dissenters who have properly made their
demand and deposited their stock certificates, the amount that the Company
estimates to be the fair value of the Existing Shares, with interest if any has
accrued. The Company's Board has determined that the fair value of the Existing
Shares to be $.25 (25 cents) per share, which is the same price to be paid for
fractional shares after the Reverse Stock Split. See "Basic Terms of the Reverse
Stock Split".
The payment from the Company must be accompanied by: (i) the Company's
balance sheet and statement of income for the fiscal year ending as of July 31,
1999, together with the Company's latest interim financial statements; (ii) a
statement of the Company's estimate of the fair value of the Existing Shares;
and (iii) a statement of the dissenter's right to demand supplemental payment
for Existing Shares, with a copy of Sections 415-80 and 415-80 of the Act.
If, within 60 days after the date set for demanding payment and
depositing certificates as set forth in the Notice of Approval, the Company has
not effectuated the Reverse Stock Split and remitted payment to dissenting
shareholders, then the Company must return any stock certificates that have been
deposited.
If the Company fails to remit payment as set forth above or if the
dissenter believes that the amount remitted is less than the fair value, or that
the interest is incorrectly determined, then the dissenter may send to the
Company his or her own estimate of the value of the Existing Shares or of the
interest, and demand payment of the deficiency (the "Deficiency Notice"). If the
dissenter does not file the Deficiency Notice with the Company within 30 days
after the Company's mailing of the remittance to the dissenter, then the
dissenter will be entitled to no more than the amount already remitted.
Within 60 days of receiving a Deficiency Notice from a dissenter in
accordance with the terms of Sections 415-80 and 415-81 of the Act, if any such
demands for payment remain unsettled, the Company must file an action in an
appropriate court of competent jurisdiction in the County of Honolulu, Hawaii,
requesting that the court determine the fair value of the Existing Shares and
interest. All dissenters who have complied fully with Sections 415-80 and 415-81
of the Act, wherever residing, whose demands have not been settled must be made
parties to that proceeding. The court may appoint one or more persons as
appraisers, to receive evidence and recommend a decision on the question of fair
value. All dissenters made parties will be entitled to judgment for the amount
by which the fair value of their shares is found to exceed the amount the
Company previously remitted, with interest. If the Company fails to file suit in
the time frame specified above, then the Company must pay each dissenter the
amount he or she demanded in his or her Deficiency Notice.
The costs and expenses of any proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, will be
determined by the court and assessed against the Company; however, the court may
apportion and assess any part of the costs and expenses as it deems equitable,
against all or some of the dissenters who are parties and whose action in
demanding supplemental payment the court finds to be arbitrary, vexatious, or
not in good faith. Fees and expenses of counsel and of experts for the
respective parties may be assessed as the court deems equitable against the
Company and for any or all dissenters, if the Company failed to comply
substantially with the requirements of Section 415-81 of the Act. The court may
assess fees and costs against either the Company or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
concerning the rights provided by Sections 415-80 and 415-81 of the Act.
If the shareholder votes for the Reverse Stock Split (either in person
or by proxy), or if the Company does not timely receive such shareholder's
written demand and deposit of shares or if the shareholder otherwise fails to
comply in a timely manner with the procedures of Sections 415-80 and 415-81 of
the Act, then such shareholder will be bound by the terms of the Reverse Stock
Split, and he or she will lose the right as a dissenter to receive the fair
17
<PAGE> 26
value of his or her Existing Shares in cash. Any shares that lose their status
as dissenting Existing Shares will be, or be deemed to have been, converted into
the right to receive pursuant to the Reverse Stock Split: (i) one share of New
Common Stock for every 300 Existing Stock Shares, and (ii) cash in lieu of
fractional shares. See "Basic Terms of the Reverse Stock Split" and "Cash for
Fractional Shares."
REQUIRED VOTE; INDICATIONS OF VOTING INTENT BY HO FAMILY SHAREHOLDERS AND
MANAGEMENT
The affirmative vote of at least 66 2/3% of all Existing Shares
outstanding on the record date is required to approve the amendment of the
Company's Articles of Association to effect the Reverse Stock Split. To the
extent known to the Company after reasonable inquiry, the officers, directors
and affiliates of the Company (including all members of the Ho Family) intend to
vote in favor of the amendment of the Company's Articles of Association. Such
shareholders beneficially own approximately 49.22% of the outstanding Existing
Shares. Approval of the amendment of the Company's Articles of Association has
not been structured so that approval by at least of a majority of unaffiliated
shareholders is required.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has unanimously concluded that the Reverse Stock
Split is fair to, and in the best interests of, the shareholders of the Company.
See "SPECIAL FACTORS Fairness of the Reverse Stock Split" for a description of
the factors considered by the Board of Directors in reaching this conclusion.
The Board of Directors recommends that you vote "FOR" the proposal to amend the
Company's Articles of Association, effecting the Reverse Stock Split.
MARKET AND DIVIDEND INFORMATION
MARKET INFORMATION
The Company's Existing Shares consist of common stock without par value.
COMPLETION OF THE REVERSE STOCK SPLIT IS EXPECTED TO RESULT IN THE
DEREGISTRATION OF THE NEW COMMON STOCK UNDER THE 1934 ACT.
The Company's Existing Shares are not actively traded and are not listed
on any exchange. However, based upon quotations obtained from Abel-Behnke
Corporation, the high and low bids for the Company's common stock during the
fiscal year ending July 31, 1999 ranged between $.1875 and $.50, and during the
fiscal year ending July 31, 1998, from $.50 to $.50. The Company's book value
per share at July 31, 1999 and July 31, 1998 was $<2.43> and $<1.38>,
respectively. Neither the book value nor its trading price may be indicative of
the value of the Company's common stock. During the first quarter of the 2000
fiscal year, the bid price of the Company's common stock ranged from $.1875 and
$.25.
NUMBER OF EQUITY HOLDERS
As of October 31, 1999, there were approximately 566 common shareholders
of record, not including shares held in "street name". The Company serves as its
own transfer agent.
DIVIDENDS
The Company has never paid dividends.
FINANCIAL INFORMATION/RATIO OF EARNINGS TO FIXED CHARGES
Capital Investment of Hawaii, Inc.
Computation of Ratio of Earnings to Fixed Charges
Years ended July 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
FIXED CHARGES:
Total interest charges $ 536,522 $ 907,203
</TABLE>
18
<PAGE> 27
<TABLE>
<S> <C> <C>
Interest component of rentals 37,262 52,953
----------- -----------
TOTAL FIXED CHARGES $ 573,784 $ 960,156
=========== ===========
EARNINGS:
Pretax income (loss) from continuing operations $(1,325,158) $ (907,203)
Fixed charges, as shown 573,784 960,156
----------- -----------
EARNINGS (LOSS) AVAILABLE FOR FIXED CHARGES $ (751,374) $ 52,953
=========== ===========
RATIOS OF EARNINGS TO FIXED CHARGES $ (1.31) 0.06
=========== ===========
</TABLE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The stockholders known to be the beneficial owners of more than 5% of
the outstanding voting stock (common stock, no par value) of Capital Investment
of Hawaii, Inc., are as follows:
<TABLE>
<CAPTION>
Amount and
nature of
beneficial Percent
Name and address of beneficial owner ownership of class
------------------------------------ --------- --------
<S> <C> <C>
Stuart T. K. Ho, Dean T.W. Ho and
Karen Ho Hong, Trustees of the
Chinn Ho Trust 168,650 16.3%
733 Bishop Street, Suite 1700
Honolulu, Hawaii 96813
Stuart T. K. Ho 252,536 (1) 24.5%
733 Bishop Street, Suite 1700
Honolulu, Hawaii 96813
Dean T. W. Ho 225,850 (2) 21.9%
733 Bishop Street, Suite 1700
Honolulu, Hawaii 96813
Karen Ho Hong 212,425 (3) 20.6%
4976 Poola Street
Honolulu, Hawaii 96821
Robin Ho Lee 77,250 7.5%
977 Longridge Road
Oakland, California 94610
</TABLE>
(1) Includes: (a) sole voting and investment power, 22,813 shares.
(b) shared voting and investment power for 168,650 shares
owned by the Chinn Ho Trust, of which Stuart Ho is one
of three trustees, and 29,500 shares owned by the
Chinn Ho Foundation, of which Stuart Ho is one of four
trustees.
(c) 10,850 shares owned by Mary L. Ho, spouse, who has
sole voting and investment power.
(d) 20,723 shares held in IRA account.
(2) Includes: (a) sole voting and investment power, 27,700 shares.
19
<PAGE> 28
(b) shared voting and investment power for 168,650 shares
owned by the Chinn Ho Trust, of which Dean Ho is one
of three trustees, and 29,500 shares owned by the
Chinn Ho Foundation, of which Dean Ho is one of four
trustees.
(3) Includes: (a) sole voting and investment power, 38,775 shares.
(b) shared voting and investment power for 168,650 shares
owned by the Chinn Ho Trust, of which Karen Ho Hong is
one of three trustees.
(c) shared voting and investment power for 5,000 shares
owned by Karen Ho Hong and Stanley Hong, as Trustees
for David Hong.
ELECTION OF DIRECTORS
At the Annual Meeting, five directors of the Company (the entire Board
of Directors) are to be elected to serve until the next Annual Meeting of
Stockholders or until their respective successors shall be duly elected and
qualified. Each of the nominees for director, identified below, is currently a
director of the Company. If any of the nominees should be unavailable to serve,
other persons shall be designated by the present Board of Directors to serve. In
the election of directors, each stockholder shall have the right to vote the
number of shares owned by him or her for as many as persons as there are
directors to be elected. The five nominees receiving the highest number of votes
at the Annual Meeting will be elected.
Certain information with respect to each nominee is set forth below:
STUART T. K. HO, 64, has been a director of the Company since 1971, Chairman of
the Board since 1982, President from 1975 to 1982, Vice President and
Secretary from 1966 to 1975. He is also director of Pacific Century
Financial Corporation, College Retirement Equities Fund, Gannett Co.,
Inc. and Aloha Airgroup, Inc.
DEAN T. W. HO, 61, has been a director since 1981, Vice Chairman since 1988 and
Secretary since 1991, President from 1982 to 1987, Executive Vice
President from 1975 to 1982, and Vice President from 1965 to 1975.
DONALD M. WONG, 81, has been a director since 1974, Senior Vice President since
1990, Financial Vice President from 1965 to 1990 and Treasurer since
1965.
PEDRO ADA, 69, has been a director since 1971. Mr. Ada is President of Ada's
Incorporated, a real estate, insurance agency and investment company in
Guam and a director of Bank of Guam.
C. B. SUNG, 74, has been a director since 1985. Mr. Sung is Chairman of Unison
International and President and Chief Executive Officer of Unison
Pacific Corp., a private investment company.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of common stock of
the Company reported to the Company as of July 31, 1999, to be beneficially
owned by each nominee for director, each continuing director, the chief
executive officer, and other executive officers, and all of such persons as a
group.
<TABLE>
<CAPTION>
Beneficial Ownership
--------------------
Percentage of
No. of Shares Class
------------- -------------
<S> <C> <C>
Stuart T. K. Ho 252,536(1) 24.5%
733 Bishop Street, Suite 1700
Honolulu, Hawaii 96813
Dean T. W. Ho 225,850(1) 21.9%
733 Bishop Street, Suite 1700
</TABLE>
20
<PAGE> 29
<TABLE>
<S> <C> <C>
Honolulu, Hawaii 96813
Donald M. Wong 39,750 3.8%
4440 Malia Street
Honolulu, Hawaii 96821
Pedro Ada 5,444 .5%
P. O. Box AP
Agana, Guam 96932
C. B. Sung 5,000 .5%
651 Gateway Boulevard, Suite 880
South San Francisco, California 94080
All Directors and Officers of the Company
(9 Persons) 336,132 32.5%
</TABLE>
(1) Includes (a) 168,650 shares owned by the Chinn Ho Trust as to which two
executive officers of the Registrant are Trustees. The trust agreement
is effective until two years after the death of Mrs. Chinn Ho or at such
time as the personal representative of Mrs. Ho's estate is discharged
and appropriately released, whichever occurs later, not to exceed 21
years after the death of the last survivor of Chinn Ho, Mrs. Ho and the
children of Chinn Ho; and (b) 29,500 shares owned by the Chinn Ho
Foundation qualified under Section 501(c)(3) of the Internal Revenue
Service Code, as to which four executive officers of the Registrant are
Trustees.
(2) Includes (a) Shared voting and investment power for 10,250 owned by
Donald M. Wong and Eugenia C. Wong; and (b) 29,500 shares owned by the
Chinn Ho Foundation, of which Donald Wong is one of four trustees.
COMPENSATION OF DIRECTORS
The Company's directors are paid a fee of $400 for each director's
meeting attended for the fiscal year ended July 31, 1999. Directors who are not
employees of the Company also receive $500 quarterly and are reimbursed expenses
incurred in attending meetings of the board.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES
There are no standing audit, nominating, compensation or other similar
committees of the Company's Board of Directors.
The Company's Board of Directors held four meetings during the fiscal
year ended July 31, 1999, which were attended by all of the directors.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
With respect to the election of directors, each shareholder will have
one vote for each Existing Share held, except that cumulative voting may be
required in the election of directors. Hawaii law requires use of cumulative
voting in the election of directors if, not less than 48 hours prior to the time
fixed for the Annual Meeting, any shareholder delivers a request therefor to an
office of the Company. Under cumulative voting, each shareholder present in
person or by proxy may cast a number of votes equal to the number of his or her
shares multiplied by the number of directors to be elected. The shareholder may
cast all of such votes for a single director or may distribute them among the
number to be voted for, or any two or more as the shareholder see fit. The
nominees receiving the highest number of votes on the foregoing basis, up to the
total number to be elected, will be the successful nominees. If cumulative
voting is requested, the holders of management proxies will vote the proxies
received by them cumulatively in such manner as is determined by them at that
time.
21
<PAGE> 30
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES FOR
ELECTION AS DIRECTORS.
EXECUTIVE COMPENSATION
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following information regarding executive compensation is provided
consistent with the SEC's disclosure requirements. These requirements are
intended to provide shareholders with a clear and concise view of the
compensation paid to executive officers and directors, and an understanding of
the directors' reasoning in making compensation decisions.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Annual Restricted Security Other
Compen- Stock Underlying LTIP Compen-
Name and Salary Bonus sation Award(s) Options/ Payouts sation
Principal position Year ($) ($) ($) ($) SARs(#) ($) ($)
------------------ ------- ------- ------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STUART T.K. HO 1999 121,016 -- -- -- -- -- --
Chairman of the 1998 127,008 -- -- -- -- -- --
Board and 1997 127,424 -- -- -- -- -- --
President
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The Company has no executive officers who are not also directors and
nominees for directors.
TRANSACTIONS IN COMMON STOCK
PUBLIC OFFERINGS IN PAST THREE YEARS
The Company has not made an underwritten public offering of its common
stock during the past three years that was registered under the Securities Act
of 1933, or exempt from such registration under Regulation A promulgated under
such Act.
PURCHASES BY COMPANY, OFFICERS, DIRECTORS OR AFFILIATES IN PAST SIXTY DAYS
No Company executive officer, director or affiliate has purchased
Company Common Stock in the past two years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into loan participation agreements during 1999 and
1998, which provided that the Company sell, without recourse, to participants,
an undivided participating interest in the loans to Touchstone Development of
Utah, LLC, Hearthstone Homes, Inc., Martin Development, Inc., and Hearthstone
Homebuilders, Inc. There were no outstanding amounts due to participants on the
loan agreements with Touchstone Development of Utah, LLC and Hearthstone Homes,
Inc., at July 31, 1999. Included in the total participants' share of the loan
commitment to Martin Development, Inc., amounting to $351,824 at July 31, 1999,
was $58,608 from a director of the Company and $234,608 from an officer of the
Company. Included in the total participants' share of loan commitment to
Hearthstone Homebuilders, Inc., amounting to $449,049 at July 31, 1999, was
$149,684 from a director of the Company. Included in the total participants'
share of the loan commitment to Touchstone
22
<PAGE> 31
Development of Utah, LLC, amounting to $391,538 at July 31, 1998, was $78,307
borrowed from a director of the Company and $39,154 borrowed from an officer of
the Company. The participants' share of the loan commitment to Hearthstone
Homes, Inc., amounting to $119,804 at July 31, 1998 was from an officer of a
subsidiary of the Company.
COMPLIANCE WITH SECTION 16(a) REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
("Section 16(a)") requires that all executive officers and directors of the
Company and all persons who beneficially own more than 10% of the Company's
common stock file reports with the Securities and Exchange Commission with
respect to beneficial ownership of the Company's securities. The Company has
adopted procedures to assist its directors and executive officers in complying
with the Section 16(a) filings.
Based solely upon the Company's review of the copies of the filings
which it received with respect to the fiscal year ended July 31, 1999, or
written representations from certain reporting persons, the Company believes
that all reporting persons made all filings required by Section 16(a) on a
timely basis.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of KPMG LLP performed the audit of the consolidated financial
statements for the Company for the year ended July 31, 1999. The Board of
Directors has recommended that the shareholders qualify the appointment of KPMG
LLP as independent auditors of the Company for the current year. Representatives
of KPMG LLP will be present at the Annual Meeting. They will be given the
opportunity to present a statement, if they so desire, and will be available to
respond to appropriate questions.
There were no changes in accountants nor disagreements on accounting or
financial disclosure matters for the years ended July 31, 1999 and 1998.
SHAREHOLDER PROPOSALS
The 2001 Annual Meeting of Shareholders will be held on or about January
15, 2001. Therefore, in the event the Company solicits proxies and remains
subject to the SEC's proxy rules, proposals of shareholders intended to be
presented at the 2001 Annual Meeting must be received by the Secretary of the
Board of Directors before August 1, 2000 for inclusion in the 2001 Proxy
Statement and form of Proxy. All notices of proposals should be directed to the
Secretary of the Board of Directors, Capital Investment of Hawaii, Inc., Suite
1700, Makai Tower, 733 Bishop Street, Honolulu, Hawaii 96813.
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that the Company files at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. The Company's SEC filings are also
available to the public on the SEC Internet site (http://www.sec.gov).
The Company has filed a Schedule 13E-3 with the SEC in connection with
the proposed going-private transaction. This Proxy Statement does not contain
all of the information set forth in the Schedule 13E-3. The Schedule 13E-3,
including exhibits, and other filings made with the SEC as described above, may
be inspected or obtained by contacting the SEC as described above.
INFORMATION INCORPORATED BY REFERENCE
The consolidated financial statements of the Company and the report of
its independent accountants thereon, together with supplementary financial data,
management's discussion and analysis and analysis of financial condition and
results of operations, and quantitative and qualitative disclosures about market
risk, are included in the
23
<PAGE> 32
Company's Annual Report to Shareholders for the fiscal year ended July 31, 1999
and are incorporated by reference in this Proxy Statement. A copy of such Annual
Report to Shareholders is enclosed.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE MADE AVAILABLE WITHOUT
CHARGE TO EACH SHAREHOLDER UPON REQUEST TO:
Donald M. Wong, Vice President
Capital Investment of Hawaii, Inc.
Suite 1700, Makai Tower
733 Bishop Street
Honolulu, Hawaii 96813
Phone: (808) 537-3981
OTHER BUSINESS
The Board of Directors knows of no other matters to be brought before
the Annual Meeting. However, if other matters should properly come before the
meeting, it is the intention of the persons named in the Proxy to vote the Proxy
in accordance with the recommendations of management on such matters.
By Order of the Board of Directors
Dean T. W. Ho
Secretary
Honolulu, Hawaii
_______________, 1999
Appendix A - Capital Investment of Hawaii, Inc.; Calculation of Net
After-Tax Asset Value in Liquidation; Pro Forma Balance Sheet as
of December 1, 1999.
Appendix B - Hawaii Dissenters' Rights Statute
Appendix C - Proposed Amendment to Company's Articles of Association
Appendix D - Form of Proxy
24
<PAGE> 33
APPENDIX A
CAPITAL INVESTMENT OF HAWAII, INC; CALCULATION OF NET
AFTER-TAX ASSET VALUE IN LIQUIDATION; PRO FORM
BALANCE SHEET AS OF DECEMBER 1, 1999
<TABLE>
<CAPTION>
ASSETS AT
CURRENT
VALUE NOTE
--------- ----
<S> <C> <C> <C>
ASSETS
Cash $ 597,000 (1)
Accounts and notes receivable
GO Pacific (sale of Bakery Europa) $ 66,000
Other receivables 67,000
133,000
Net realizable value of developed real estate
3 apartments, Ilikai Apartment Bldg $ 825,000
2 apartments, Ilikai Marina Apt. Bldg 390,000
5 apartments, Makaha Valley Towers 410,000
Land and warehouses, Puuhale Rd., 808,000
-----------
$ 2,433,000
Less 10% sales expense 243,000
-----------
2,190,000 (2)
Undeveloped land
8 lots, Ivins, UT, net of deed of trust 92,000
Parcels at Waianae and Makaha, HI 400,000
-----------
492,000 (3)
Investments
AEA: Dal-Tile International 755,000 (4)
AEA: Other investments 27,000
Investment in general insurance agency 336,000 (5)
Loans to Nevada home builders 487,000 (6)
Office premises 32,000
Deferred charges 11,000
-----------
Total Assets $ 5,060,000
LIABILITIES
Debentures and term notes $ 2,428,000
Secured note to a bank 627,000
Other secured notes 1,715,000
Accounts payable 161,000
-----------
Total Liabilities $ 4,931,000
STOCKHOLDERS' EQUITY/NET ASSET VALUE $ 129,000
For 1,032,692 shares issued and outstanding, per share $ 0.03
INDICATED VALUE PER SHARE BY LIQUIDATION
(NET CURRENT ASSET) APPROACH (MODIFIED) $ 0.03
</TABLE>
1
<PAGE> 34
NOTES TO APPENDIX A
All values set forth on Appendix A are after-tax estimated values. The Company
has sufficient net operating loss carry-forward to apply to all gains from sales
assumed by Appendix A.
1. Cash balance after the closing of the sale by the Company on November 30,
1999, of the Company's apartment management business located at the Ilikai
Apartment Building, Waikiki, Honolulu, Hawaii.
2. The calculation of the value of developed real estate is as follows:
<TABLE>
<CAPTION>
Market
Property: Ilikai and Ilikai Marina, Waikiki Value
<S> <C>
Ilikai Unit 309 (2-BR, city view) $ 275,000
Ilikai Unit 409 (2-BR, city view) 275,000
Ilikai Unit 325 (2-BR, city view) 275,000
Ilikai Marina Unit 480 (1-BR, ocean view) 230,000
Ilikai Marina Unit 1599 (1-BR, city view) 160,000
----------
Subtotal $1,215,000
</TABLE>
The five apartments described above, all located on Ala Moana Blvd. in
Waikiki, were appraised in August 1995 at $1,940,000 by Hastings Conboy
Braig & Associates, Ltd., real estate appraisers.
Currently, other Ilikai units with the same floor plans and views (Units
525, 509 and 1509) are currently respectively offered at $330,000,
$338,000 and $349,000. Ilikai unit 726, same floor plan but facing the
Hilton Hawaiian Village Hotel and its lagoon, sold in August 1999 for
$338,000.
At the Ilikai Marina, four units with floor plans and views identical
with Unit 480 are currently listed at between $220,000 and $325,000.
Sales at the Ilikai Marina have been slow, but recently increased,
mirroring the widely-reported improvement in condominium unit sales on
Oahu. Recent sales have been of units with different (smaller) floor
plans.
<TABLE>
<CAPTION>
Market
Property: Makaha Valley Towers, Makaha Value
<S> <C>
Unit 202, 2-BR $125,000
Unit 203, 2-BR 125,000
Unit 325, 1-BR 60,000
Unit 719, 1-BR 60,000
Unit 717, Studio 40,000
--------
Subtotal $410,000
</TABLE>
The five apartments described above, all located within the Makaha
Valley Towers, a 586-unit condominium project at Makaha, Oahu, Hawaii,
were appraised in August 1995 at $776,000, by Hastings Conboy Braig
& Associates, real estate appraisers.
Sales at this project have been slow. Asking prices for 2-bedroom units
range between $128,900 and $140,000, at the $65,000 level for 1-bedroom
units and at $45,000 for studios. The Company declined an offer to buy
Unit 719 for $58,000.
Land and warehouses at 251 Puuhale Street (TMK 1-2-08:94 & 95) are
comprised of 9,737 square feet of land and 8,889 square feet of floor
area within two buildings. The buildings were built in 1986. Annual rent
from two tenants, net of taxes, is $64,680 suggesting a value,
capitalized at 8%, of $808,500. The Company purchased this property in
1992 for $1,376,000.
3. Undeveloped land at Ivins, UT, is comprised of 8 lots in the "Red Rock
Canyon" tract with a net value of $17,000 per lot, or an aggregate value of
$136,000. These lots were conveyed to the Company by a deed in lieu of
foreclosure, subject to a prior deed of trust in favor of U.S. Bank in the
amount of $44,000. Hence, the net value to the Company is $92,000.
2
<PAGE> 35
Undeveloped land at Waianae and Makaha, Hawaii, includes streets,
segments of abandoned railroad right of way, abandoned pump sites and a
few unsold remnants from the piecemeal sale of Makaha and Waianae
Valley. Parcel TMK 8-4-2-59, or Lot 1249-A (shown on Map 218, filed with
Land Court Application 1052), area 2.823 acres, abuts Farrington Highway
and a public park where both government-owned parcels join the Makaha
surfing beach. Lot 1249-A also abuts the entire length of a 2 acre
parcel owned by AT&T which serves as the site for a strategically
important telecommunications junction facility. The facility is the
juncture for a number of undersea telecommunications cables inter-
connecting North America with Hawaii, Guam and Asia and as such it is
therefore a key installation in AT&T's worldwide network. AT&T owns an
easement to lay and maintain the cables over and beneath Lot 1249-A, and
is currently enlarging the facility to accommodate more cables. Lot
1249-A was appraised by Hastings Conboy Braig & Associates in July 1995
to have a value of $430,000, with this comment: "If there were an active
market environment, this property could sell at a price of $3.50 per
square foot, or a total of $430,000." The "market environment" has not
improved since July 1995, but the growing importance of the abutting lot
owned by AT&T and the interest of the City & County of Honolulu and
State of Hawaii in realigning Farrington Highway to control the erosion
of Makaha Beach, an important and politically-sensitive public asset,
indicates that Lot 1249-A has a current value of $3.25 per square foot,
or a total value of $399,652.
No value is assigned to the following real property at Makaha, Hawaii:
The Company's reversionary interest in Lot 1585, area 368,285
square feet (8.45 acres), as shown on Map 187, filed with Land
Court Application 1052 (amended) of Waianae Company. This
reservoir lot is owned by the Board of Water Supply and is
entirely within the Maunaolu residential subdivision. Title to
the lot reverts to the Company in the event the Board ceases to
use the property for water reservoir purposes. The Board collects
non-potable surface water in this reservoir and uses it solely
for the purpose of irrigating two golf courses in Makaha Valley.
The lot is zoned for "Country" residential use.
4. The Company owns shares in a limited liability company called DTI Investors
LLC organized by AEA to hold approximately 55 percent of the outstanding
common stock of Dal-Tile International, Inc. Dal-Tile is publicly traded and
is the largest manufacturer and marketer of ceramic tile in the U.S.
According to Dal-Tile's annual report issued in March 1999, the company "has
roughly three times the sales of its nearest rival." The Company's shares of
DTI stock entitle the Company to own 79,498 shares of Dal-Tile which, at a
recent price of 9-1/2, has a market value of approximately $755,000.
However, the Company is a party to an agreement among other AEA investors
and AEA agreeing to "lock-up" the stock until December 31, 2001, unless the
"lock-up" is sooner terminated. AEA has long been in the business of
acquiring private companies, improving their financial performance, and then
selling their shares to the public through initial public offerings.
Dal-Tile's stock is listed on the New York Stock Exchange (ticker symbol:
DTL) and went-public in late 1996 at $14 per share. The stock's price rose
in trading to as high as $20 per share. However, Dal-Tile's inability to
successfully integrate a large, new acquisition caused its financial
performance and stock price to sharply decline. As a result, a new chief
executive officer was appointed to head Dal-Tile in July 1997. This is an
abstract of the Dal-Tile's financial performance since Dal-Tile's new CEO,
Jacques Sardas, was appointed:
<TABLE>
<CAPTION>
Adjusted
Earnings Earnings Net Sales
Period Per Share Per Share ($ Million)
<S> <C> <C> <C>
3Q, FYE Jan. 1, 2000 0.43 0.28 $219
3Q, FYE Jan. 1, 1999 0.18 0.13 $194
3Q, FYE Jan. 2, 1998 -1.51 $178
</TABLE>
Since current earnings of Dal-Tile are beneficially affected by net loss
carry forward, earnings are adjusted to show the pro forma effect of net
income taxes at an effective rate of 38.5%. At a price of 9-1/2,
Dal-Tile has a value equal to a multiple of 8 times the last four
quarters of earnings and 8 times the annualized third quarter adjusted
earnings per share.
3
<PAGE> 36
5. The value of the 1,668 shares, or 9.77 percent of the 17,056 shares of
common stock of the general insurance agency outstanding, was calculated by
multiplying the revenues of the agency for the fiscal year ended May 31,
1999, by a (industry standard) multiple of 1.3 times revenues. Revenues of
this privately-owned company for the fiscal year ended May 31, 1999 were
$2,641,910, compared with $2,894,368 for the same year-earlier period.
Revenues for the first quarter of the fiscal year to end May 31, 2000 were
$949,506, compared with revenues of $825,330 for the same year-earlier
quarter. Applying the 1.3 multiple to $2,641,910 suggests a value of
$3,434,000 for the insurance agency, and therefore, indicates a value of
$336,000 for the Company's stock. An officer of the Company is a director of
the insurance agency.
6. The Company owns, as of October 31, 1999, the following interests in loans
made to home builders in Nevada and Utah, all of which are performing loans
in good standing:
<TABLE>
<CAPTION>
Principal
Builder Project Balance
<S> <C> <C>
Hearthstone Homebuilders Craig Estates II, Las Vegas, NV $ 76,538
Hearthstone Construction Sweet Dreams, Las Vegas, NV 39,830
Martin Development Co. Copper Bluffs, Mesquite, NV 371,128
--------
$487,496
</TABLE>
4
<PAGE> 37
APPENDIX B
HAWAII BUSINESS CORPORATION ACT
HAWAII REVISED STATUTES CH. 415
SECTION 415-80. RIGHT OF SHAREHOLDERS TO DISSENT.
(a) Any shareholder of a corporation shall have the right to dissent
from, and to obtain payment for the shareholder's shares in the event of, any of
the following corporate actions:
(1) Any plan of merger or consolidation to which the corporation
is a party, except as provided in subsection (c);
(2) Any sale or exchange of all or substantially all of the
property and assets of the corporation not made in the usual and regular course
of its business, including a sale in dissolution, but not including a sale
pursuant to an order of a court having jurisdiction in the premises or a sale
for cash on terms requiring that all or substantially all of the net proceeds of
sale be distributed to the shareholders in accordance with their respective
interests within one year after the date of sale;
(3) Any plan of exchange to which the corporation is a party as
the corporation the shares of which are to be acquired;
(4) Any amendment of the Articles of Association which materially
and adversely affects the rights appurtenant to the shares of the dissenting
shareholder in that it:
(A) Alters or abolishes a preferential right of the
shares;
(B) Creates, alters, or abolishes a right in respect of
the redemption of the shares, including a provision respecting a sinking fund
for the redemption or repurchase of the shares;
(C) Alters or abolishes a preemptive right of the holder
of the shares to acquire shares or other securities; or
(D) Excludes or limits the right of the holder of the
shares to vote on any matter, or to cumulate the holder's votes, except as the
right may be limited by dilution through the issuance of shares or other
securities with similar voting rights; or
(5) Any other corporate action taken pursuant to a shareholder
vote with respect to which the Articles of Association, the bylaws, or a
resolution of the board of directors directs that dissenting shareholders shall
have a right to obtain payment for their shares.
(b) (1) A record holder of shares may assert dissenters' rights as to
less than all of the shares registered in the record holder's name only if the
record holder dissents with respect to all the shares beneficially owned by any
one person, and discloses the name and address of the person or persons on whose
behalf the record holder dissents. In that event, the record holder's rights
shall be determined as if the shares as to which the record holder has dissented
and the record holder's other shares were registered in the names of different
shareholders.
(2) A beneficial owner of shares who is not the record holder may
assert dissenters' rights with respect to shares held on the beneficial owner's
behalf, and shall be treated as a dissenting shareholder under the terms of this
section and section 415-31 if the beneficial owner submits to the corporation at
the time of or before the assertion of these rights a written consent of the
record holder.
1
<PAGE> 38
(c) The right to obtain payment under this section shall not apply to
the shareholders of the surviving corporation in a merger if a vote of the
shareholders of the corporation is not necessary to authorize the merger.
(d) A shareholder of a corporation who has a right under this section to
obtain payment for the shareholder's shares shall have no right at law or in
equity to attack the validity of the corporate action that gives rise to the
shareholder's right to obtain payment, nor to have the action set aside or
rescinded, except when the corporate action is unlawful or fraudulent with
regard to the complaining shareholder or to the corporation.
SECTION 415-81. RIGHTS OF DISSENTING SHAREHOLDERS.
(a) As used in this section:
"Dissenter" means a shareholder or beneficial owner who is entitled to and does
assert dissenters' rights under section 415-80, and who has performed every act
required up to the time involved for the assertion of such rights.
"Corporation" means the issuer of the shares held by the dissenter before the
corporate action, or the successor by merger or consolidation of that issuer.
"Fair value" of shares means their value immediately before the effectuation of
the corporate action to which the dissenter objects, excluding any appreciation
or depreciation in anticipation of the corporate action unless the exclusion
would be inequitable.
"Interest" means interest from the effective date of the corporate action until
the date of payment, at the average rate currently paid by the corporation on
its principal bank loans, or, if none, at such rate as is fair and equitable
under all of the circumstances.
(b) If a proposed corporate action which would give rise to dissenters'
rights under section 415-80(a) is submitted to a vote at a meeting of
shareholders, the notice of meeting shall notify all shareholders that they have
or may have a right to dissent and obtain payment for their shares by complying
with the terms of this section, and shall be accompanied by a copy of sections
415-80 and 415-81 of this chapter.
(c) If the proposed corporate action is submitted to a vote at a meeting
of shareholders, any shareholder who wishes to dissent and obtain payment for
the shareholder's shares must file with the corporation, prior to the vote, a
written notice of intention to demand that the shareholder be paid fair
compensation for the shareholder's shares if the proposed action is effectuated
and shall refrain from voting the shareholder's shares in approval of the
action. A shareholder who fails in either respect shall acquire no right to
payment for the shareholder's shares under this section or section 415-80.
(d) If the proposed corporate action is approved by the required vote at
a meeting of shareholders, the corporation shall mail a further notice to all
shareholders who gave due notice of intention to demand payment and who
refrained from voting in favor of the proposed action. If the proposed corporate
action is to be taken without a vote of shareholders, the corporation shall send
to all shareholders who are entitled to dissent and demand payment for their
shares a notice of the adoption of the plan of corporate action. The notice
shall: (1) state where and when a demand for payment must be sent and
certificates of certificated shares must be deposited in order to obtain
payment; (2) inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is received; (3)
supply a form for demanding payment which includes a request for certification
of the date on which the shareholder, or the person on whose behalf the
shareholder dissents, acquired beneficial ownership of the shares; and (4) be
accompanied by a copy of sections 415-80 and 415-81 of this chapter. The time
set for the demand and deposit shall not be less than thirty days from the
mailing of the notice.
(e) A shareholder who fails to demand payment, or fails (in the case of
certified shares) to deposit certificates, as required by a notice pursuant to
subsection (d) shall have no right under this section or section 415-80 to
receive payment for the shareholder's shares. If the shares are not represented
by certificates, the corporation may restrict their transfer from the time of
receipt of demand for payment until effectuation of the proposed corporate
2
<PAGE> 39
action, or the release of restrictions under the terms of subsection (f). The
dissenter shall retain all other rights of a shareholder until these rights are
modified by effectuation of the proposed corporate action.
(f) (1) Within sixty days after the date set for demanding payment
and depositing certificates, if the corporation has not effectuated the proposed
corporate action and remitted payment for shares pursuant to paragraph (3), it
shall return any certificates that have been deposited, and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment.
(2) When uncertificated shares have been released from transfer
restrictions, and deposited certificates have been returned, the corporation may
at any later time send a new notice conforming to the requirements of subsection
(d), with like effect.
(3) Immediately upon effectuation of the proposed corporate
action, or upon receipt of demand for payment if the corporate action has
already been effectuated, the corporation shall remit to dissenters who have
made demand and (if their shares are certificated) have deposited their
certificates the amount which the corporation estimates to be the fair value of
the shares, with interest if any has accrued. The remittance shall be
accompanied by:
(A) The corporation's closing balance sheet and statement
of income for a fiscal year ending not more than sixteen months before the date
of remittance, together with the latest available interim financial statements;
(B) A statement of the corporation's estimate of fair
value of the shares; and
(C) A notice of the dissenter's right to demand
supplemental payment, accompanied by a copy of sections 415-80 and 415-81 of
this chapter.
(g) (1) If the corporation fails to remit as required by subsection
(f), or if the dissenter believes that the amount remitted is less than the fair
value of the dissenter's shares, or that the interest is not correctly
determined, the dissenter may send the corporation the dissenter's own estimate
of the value of the shares or of the interest, and demand payment of the
deficiency.
(2) If the dissenter does not file such an estimate within thirty
days after the corporation's mailing of its remittance, the dissenter shall be
entitled to no more than the amount remitted.
(h) (1) Not more than sixty days after receiving a demand for payment
pursuant to subsection (g), if any such demands for payment remain unsettled,
the corporation shall file in an appropriate court a petition requesting that
the fair value of the shares and interest thereon be determined by the court.
(2) An appropriate court shall be a court of competent
jurisdiction in the county of this State where the principal office of the
corporation is located. If, in the case of a merger or consolidation or share
exchange, the corporation is a foreign corporation without a registered office
in this State, the petition shall be filed in the county where the principal
office of the domestic corporation was last located.
(3) All dissenters, wherever residing, whose demands have not
been settled shall be made parties to the proceeding as in an action against
their shares. A copy of the petition shall be served on each dissenter; if a
dissenter is a nonresident, the copy may be served on the dissenter by
registered or certified mail or by publication as provided by law.
(4) The jurisdiction of the court shall be plenary and exclusive.
The court may appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers shall have
such power and authority as shall be specified in the order of their appointment
or in any amendment thereof. The dissenters shall be entitled to discovery in
the same manner as parties in other civil suits.
3
<PAGE> 40
(5) All dissenters who are made parties shall be entitled to
judgment for the amount by which the fair value of their shares is found to
exceed the amount previously remitted, with interest.
(6) If the corporation fails to file a petition as provided in
paragraph (1) of this subsection, each dissenter who made a demand and who has
not already settled the dissenter's claim against the corporation shall be paid
by the corporation the amount demanded by the dissenter, with interest, and may
sue therefor in an appropriate court.
(i) (1) The costs and expenses of any proceeding under subsection
(h), including the reasonable compensation and expenses of appraisers appointed
by the court, shall be determined by the court and assessed against the
corporation, except that any part of the costs and expenses may be apportioned
and assessed as the court may deem equitable against all or some of the
dissenters who are parties and whose action in demanding supplemental payment
the court finds to be arbitrary, vexatious, or not in good faith.
(2) Fees and expenses of counsel and of experts for the
respective parties may be assessed as the court may deem equitable against the
corporation and in favor of any or all dissenters if the corporation failed to
comply substantially with the requirements of this section, and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted arbitrarily, vexatiously, or not in good faith in respect to the rights
provided by this section and section 415-80.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and should not be assessed against the corporation, it may award to these
counsel reasonable fees to be paid out of the amounts awarded to the dissenters
who were benefited.
(j) (1) Notwithstanding the foregoing provisions of this section, the
corporation may elect to withhold the remittance required by subsection (f) from
any dissenter with respect to shares of which the dissenter (or the person on
whose behalf the dissenter acts) was not the beneficial owner on the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action. With respect to such shares, the corporation shall, upon
effectuating the corporate action, state to each dissenter its estimate of the
fair value of the shares, state the rate of interest to be used (explaining the
basis thereof), and offer to pay the resulting amounts on receiving the
dissenter's agreement to accept them in full satisfaction.
(2) If the dissenter believes that the amount offered is less
than the fair value of the shares and interest determined according to this
section, the dissenter may within thirty days after the date of mailing of the
corporation's offer, mail to the corporation the dissenter's own estimate of
fair value and interest, and demand their payment. If the dissenter fails to do
so, the dissenter shall be entitled to no more than the corporation's offer.
(3) If the dissenter makes a demand as provided in paragraph (2),
the provisions of subsections (h) and (i) shall apply to further proceedings on
the dissenter's demand.
4
<PAGE> 41
APPENDIX C
PROPOSED AMENDMENT
TO
CAPITAL INVESTMENT OF HAWAII, INC.
ARTICLES OF ASSOCIATION
ARTICLE V of the Articles of Association is amended by deleting Section
(1) thereto and substituting the following provision in lieu thereof:
(1) (a) The authorized capital stock of the corporation shall consist
of 10,000 shares of common stock, without part value.
(b) No fractional shares of common stock of the corporation shall
be issued.
(c) No shareholder of the corporation shall transfer any
fractional shares of common stock of the corporation, and the corporation shall
not recognize on its stock record books any purported transfer of any fractional
share of common stock of the corporation.
(d) Upon the filing of this amendment with the director of the
Department of Commerce and Consumer Affairs of the State of Hawaii, each share
of common stock, without par value, of the corporation issued and outstanding or
held by the corporation as treasury shares at such time shall, by virtue of this
amendment to the corporation's articles of association, be changed into one
three-hundredth (1/300th) of one share of fully paid and nonassessable common
stock of the corporation.
(e) In lieu of the issuance of any fractional shares that would
otherwise result from the reverse stock split effected by paragraph (d) of this
Section (1), the corporation shall pay to any shareholder that would otherwise
received fractional shares, other than the corporation with respect to treasury
shares, an amount in cash equal to $0.25 (25 cents) for each one three-hundredth
(1/300th) of a share of common stock constituting such fractional shares.
(f) Following the effectiveness of this amendment, certificates
for the shares of common stock to be outstanding after the reverse stock split
and cash payments pursuant to paragraph (e) hereof shall be issued and made, as
the case may be, pursuant to procedures adopted by the corporation's board of
directors and communicated to those who are to receive new certificates or cash.
(g) Following issuance of certificates and payment of cash
pursuant to paragraph (f) hereof, the board of directors of the corporation may
amend or restate the corporation's articles of association to eliminated
paragraphs (d), (e), and (g) hereof without approval of the shareholders of the
corporation.
ARTICLE V OF THE Articles of Association is further amended by deleting
Sections (2), (3) and (4) thereof in their entirety and by renumbering Sections
(5) and (6) thereof as Sections (2) and (3) respectively.
1
<PAGE> 42
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number 0-4179
CAPITAL INVESTMENT OF HAWAII, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Hawaii 99-0065664
- ------------------------------ ------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 1700, Makai Tower, 733 Bishop Street
Honolulu, Hawaii 96813
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (808) 537-3981
No Change
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
There were 1,032,692 shares outstanding of common stock, no par value,
as of October 31, 1999.
<PAGE> 43
PART I - FINANCIAL INFORMATION
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
October 31, 1999 and July 31, 1999
ASSETS
<TABLE>
<CAPTION>
October 31, July 31,
1999 1999
(Unaudited)
----------- -----------
<S> <C> <C>
Cash $ 113,190 360,769
----------- -----------
Receivables:
Trade accounts and notes, less allowance
for doubtful receivables of $1,000 at
October 31, 1999 and July 31, 1999 60,790 67,421
Accrued interest 89,248 55,417
Other 66,483 66,483
----------- -----------
Total receivables 216,521 189,321
----------- -----------
Developed real estate, less accumulated depre-
ciation of $280,188 at October 31, 1999
and $274,759 at July 31, 1999 1,378,415 1,383,745
Undeveloped land held for sale 232,006 226,797
Other investments:
Real estate 1,208,017 1,246,608
Securities 618,102 681,006
----------- -----------
1,826,119 1,927,614
----------- -----------
Property and equipment, at cost:
Leasehold improvements 63,740 63,740
Furniture and equipment 330,538 329,394
----------- -----------
394,278 393,134
Less accumulated depreciation and amortization (363,502) (360,944)
----------- -----------
Net property and equipment 30,776 32,190
----------- -----------
Deferred charges and other assets 26,673 11,627
----------- -----------
$ 3,823,700 4,132,063
=========== ===========
</TABLE>
<PAGE> 44
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, cont'd.
October 31, 1999 and July 31, 1999
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
October 31, July 31,
1999 1999
(Unaudited)
----------- -----------
<S> <C> <C>
Indebtedness (current installments of $3,970,745
at October 31, 1999 and $3,971,798 at
July 31, 1999):
Debentures $ 1,897,505 1,897,505
Mortgage notes 1,822,694 1,826,566
Other notes, secured 383,403 515,031
Other notes, unsecured 534,373 530,748
----------- -----------
Total indebtedness 4,637,975 4,769,850
----------- -----------
Accounts payable, trade 158,951 105,048
Accrued expenses 601,805 776,932
Other payables:
Loans under participation agreement:
Related parties 474,101 442,900
Other 420,365 357,973
Other 202,376 193,660
----------- -----------
1,096,842 994,533
----------- -----------
Stockholders' deficiency:
Common stock, no par value, stated value
$1 per share:
Authorized 2,531,765 shares; issued
1,723,774 shares. (No shares
reserved for conversion, warrants,
options or other rights) 1,723,774 1,723,774
Additional paid-in capital 469,312 469,312
Accumulated deficit (807,472) (649,899)
----------- -----------
1,385,614 1,543,187
Deduct cost of 691,082 common shares in
treasury (4,057,487) (4,057,487)
----------- -----------
Stockholders' deficiency (2,671,873) (2,514,300)
----------- -----------
$ 3,823,700 4,132,063
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 45
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three months ended October 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Revenues:
Income from investments $ 166,070 195,416
Other 5,585 5,187
----------- ----------
171,655 200,603
----------- ----------
Cost and expenses:
Direct operating expenses and general
and administrative expenses 246,859 374,917
Interest 120,666 151,370
----------- ----------
367,525 526,287
----------- ----------
Loss from continuing operations (195,870) (325,684)
Earnings from discontinued operations 38,297 45,653
----------- ----------
Net loss (157,573) (280,031)
Retained earnings (accumulated deficit)
at beginning of period (649,899) 436,668
----------- ----------
Retained earnings at end of period $ (807,472) 156,637
=========== ==========
Loss per common share:
Loss from continuing operations (.19) (.31)
Gain from discontinued operations .04 .04
----------- ----------
Net loss per common share $ (.15) (.27)
=========== ==========
Dividends per common share NONE NONE
----------- ----------
Weighted average number of common shares
outstanding during the period 1,032,692 1,032,692
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 46
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three months ended October 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net cash used in operating activities $(289,780) (745,988)
---------- ----------
Cash flows from investing activities:
Capital expenditures (1,144) (1,483)
Proceeds from sales of securities 81,627 28,714
---------- ----------
Net cash provided by investing
activities 80,483 27,231
---------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 9,936 9,568
Principal payments on indebtedness (141,811) (250,049)
Proceeds received under loan participa-
tion agreements 115,873 521,874
Payments made under loan participation
agreements (22,280) (258,450)
---------- ----------
Net cash provided by (used in)
financing activities (38,282) 22,943
---------- ----------
Net decrease in cash (247,579) (695,814)
Cash at beginning of period 360,769 752,493
---------- ----------
Cash at end of period $ 113,190 56,679
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 47
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Information
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial information have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The accompanying unaudited
consolidated financial statements should be read in conjunction with the
report on SEC Form 10-K for the fiscal year ended July 31, 1999 and the
consolidated financial statements and the notes thereto in the Company's
Quarterly Report on SEC Form 10-Q for the quarter ended October 31, 1998.
In the opinion of the Company's management, the accompanying unaudited
financial information contains all material adjustments required by
generally accepted accounting principles to present fairly the Company's
financial position as of October 31, 1999 and July 31, 1999, the results of
its operations for the three months ended October 31, 1999 and 1998, and its
cash flows for the three months ended October 31, 1999 and 1998. All such
adjustments are of a normal recurring nature, unless otherwise disclosed in
this Form 10-Q or other referenced material. Results of operations for
interim periods are not necessarily indicative of results for the full year.
<PAGE> 48
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company and its subsidiaries are engaged principally in the
business of acquiring, developing, leasing and dealing in real
estate, investing in securities which are subject to various factors
which cause fluctuations between periods. Accordingly, the results of
operations for the three months ended October 31, 1999 are not
necessarily indicative of results to be expected for the year and are
not necessarily comparable to the results of operations for the three
months ended October 31, 1998.
ADC Lending Activities
As of October 31, 1999, the Company had approximately $1,208,000 in
real estate investments. Those investments consist primarily of three
acquisition, development and construction (ADC) loans to developers
in Nevada and Utah.
The Company has engaged in making ADC loans for more than nine years.
As Nevada, particularly Las Vegas has seen strong economic growth,
the Company will continue to focus on ADC lending activities for the
remainder of fiscal 2000. Capital requirements to finance such
activities will continue to be satisfied from institutional
borrowings and participating loans to small groups of investors.
Direct Operating and General and Administrative Expenses
The decrease of direct operating and general and administrative
expenses for the three months ended October 31, 1999 as compared to
the same period in 1998 of $128,058 is primarily due to the reduction
of the corporate office space and administrative personnel. The
Company will continue its efforts to reduce general and
administrative expenses in order to meet its obligations and improve
operating results.
DISCONTINUED PROPERTY MANAGEMENT DIVISION
In October 1999, the Company entered into an agreement to sell
certain assets of its property management division. The sale
transaction has been finalized in December 1999 and the Company will
receive approximately $480,000 in cash in second quarter of fiscal
2000.
The Company has recorded earnings from discontinued operations of
$38,297 and $45, 653 for the three months ended October 31, 1999 and
1998, respectively which represent the net operating income of the
property management division. The Company expects a decline of
approximately $160,000 in net cash flows from the absence of the
property management division in fiscal 2000.
<PAGE> 49
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1999, the Company held cash of $113,190. The decrease
in cash of $247,579 for the three months ended October 31, 1999 is
primarily due to cash used in operating activities.
Included in cash used in operating activities for the three months
ended October 31, 1999 was approximately $134,500 of advances for the
construction of residential developments in Nevada and Utah. The
Company's net loss $157,573 is also included in cash used in
operating activities.
The Company met its operating cash requirements for the three months
ended October 31, 1999 by using cash on hand at July 31, 1999 and
proceeds from loan participation agreements. Cash inflows and
outflows from ADC loans in Hearthstone Homes, Inc., Hearthstone
Homebuilders, Inc. and Martin Development, Inc. will continue
throughout fiscal year 2000.
The Company has several notes payable to individuals, a corporation
and a financial institution. Approximately $1,900,000 of these notes
are payable on or before July 1, 2001. The Company has had long
standing good relationships with these individuals and companies and
has been successful in the past in obtaining extensions on these
notes as they become due. Management will continue to work with these
lenders in order to achieve future extensions beyond fiscal 2000.
The Company is contemplating a plan for going private (the Plan). The
Plan is to restructure the share ownership of the Company to reduce
the number of shareholders below 300, thus allowing the Company to
terminate its reporting obligations under the Securities Exchange Act
of 1934 (the Act). This will allow the Company to eliminate the
substantial time and expense of compliance with the Act.
Cash requirements for the remainder of fiscal 2000 are expected to be
satisfied by the cash proceeds from the sale of the Company's
property management division, institutional borrowings, loan
participation agreements and net collections on ADC loans. The
Company anticipates that it will sell certain of its security and
real estate holdings to meet cash requirements, if deemed necessary.
Currently, the Company has certain condominium apartments in Makaha,
Hawaii being actively listed for sale.
YEAR 2000
The Company has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the Year
2000 issue and has developed an implementation plan to resolve the
issue. The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable
year. Any of the Company's programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather then the year
2000. This could result in a major system failure or miscalculations.
<PAGE> 50
The Company presently believes that the Year 2000 problem will not
pose significant operational problems for the Company's computer
systems.
<PAGE> 51
Appendix D
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS OF
CAPITAL INVESTMENT OF HAWAII, INC.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(PLEASE SIGN AND RETURN IMMEDIATELY)
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned Shareholder of
Capital Investment of Hawaii, Inc., Honolulu, Hawaii (the "Company") do hereby
nominate, constitute and appoint Stuart T. K. Ho and Donald M. Wong and each of
them (with full power to act alone) my true and lawful attorney with full power
of substitution, for me and in my name, place and stead to vote all the common
stock of the Company standing in my name and on its books on _____________,
1999, at the Annual Meeting of Shareholders to be held in the Grosvenor Center
Conference Room (ground floor), 733 Bishop Street, Honolulu, Hawaii 96813, on
________, January ___, 2000 at 9:30 a.m., or at any adjournments thereof, with
all the powers the undersigned would possess if personally present, as follows:
1. AMENDMENT OF THE COMPANY'S ARTICLES OF ASSOCIATION. The amendment of the
Company's Articles of Association to reduce the number of the Company's
authorized shares from 3 million shares of common stock without par
value, to 10,000 shares of common stock without par value, and the
consolidation and conversion of each 300 shares of issued and
outstanding common stock into one share of common stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. ELECTION OF DIRECTORS. The election of the persons listed below to serve
as directors for the ensuing year.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed
below) below
Stuart T. K. Ho, Dean T. W. Ho, Donald M. Wong, Pedro Ada and C. B. Sung
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.
3. In their discretion, upon such other matters as may properly come before
the meeting.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" AND WILL BE VOTED "FOR" THE
PROPOSITIONS LISTED UNLESS AUTHORITY IS WITHHELD, IN WHICH CASE THIS
PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATION SO MADE.
Management knows of no other matters that may properly be, or which are
likely to be brought before the meeting. However, if any other matters are
properly presented at said meeting, this proxy shall be voted in accordance with
the recommendations of management.
The Board of Directors recommends a vote "FOR" the listed propositions.
Dated: ________________________________, 1999
_____________________________________________
(Signature of Shareholder)
_____________________________________________
(Signature of Shareholder)
When Signing as Attorney, Executor,
Administrator, Trustee or Guardian, Please
Give Full Title. If More Than One Trustee,
All Should Sign. ALL JOINT OWNERS MUST SIGN.
1
