SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
CHINA RESOURCES DEVELOPMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
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):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the 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:
<PAGE>
-----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 28, 1999
To the Shareholders:
Notice is hereby given that an Annual Meeting of Shareholders (the
"Annual Meeting") of CHINA RESOURCES DEVELOPMENT, INC. (the "Company"), will be
held at the offices of Hainan Zhongwei Agricultural Resources Company Limited,
Sixth Floor, International Hong Yun Hotel, 13 Haixiu Avenue, Haikou City, Hainan
Province, People's Republic of China, on May 28, 1999, at 3:00 p.m., local time,
for the following purposes:
1. To consider and vote upon a proposal by the Board of Directors to
effect a one-for-ten reverse stock split of the Company's common stock,
par value $0.001 per share, and of the Company's Series B Preferred
stock, par value $0.001 per share;
2. To elect directors in Class III;
3. To consider and vote upon the ratification of the appointment of
Ernst & Young as the Company's independent accountants for the fiscal
year ending December 31, 1999; and
4. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
Shareholders of record at the close of business on April 30, 1999, are
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof. The Company's annual report on Form 10-K for the year
ended December 31, 1998, is enclosed for your convenience.
Please sign and date the enclosed proxy card and return it promptly in
the accompanying envelope (no postage required if mailed in the United States)
to ensure that your shares will be represented at the Annual Meeting. If you
attend the Annual Meeting, you may vote your shares in person even if you have
previously submitted a proxy.
By Order of the Board of Directors,
/s/ Wong Wah On
-----------------------------------
Wong Wah On
Corporate Secretary
May 14, 1999
<PAGE>
CHINA RESOURCES DEVELOPMENT, INC.
Room 2005, 20/F., Universal Trade Centre
3-5A Arbuthnot Road, Central, Hong Kong
----------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 28, 1999
This proxy statement and the accompanying proxy card are being
furnished in connection with the solicitation of proxies by the Board of
Directors of China Resources Development, Inc., a Nevada corporation (the
"Company"), from holders of the Company's outstanding shares of Common Stock,
par value $0.001 per share (the "Common Stock"), and from the holder of the
Company's outstanding shares of Series B preferred stock (the "Preferred
Stock"), for the Annual Meeting of Shareholders to be held May 28, 1999, for the
purposes set forth in the accompanying notice (the "Annual Meeting"). The
Company will bear the costs of soliciting proxies from its shareholders. In
addition to soliciting proxies by mail, directors, officers and employees of the
Company, without receiving additional compensation therefor, may solicit proxies
by telephone, by telegram or in person. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of Common Stock held of record
by such persons, and the Company will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith. This proxy statement is first being
mailed to shareholders of the Company on or about May 13, 1999.
VOTING AT THE MEETING
At the close of business on April 30, 1999, the record date for
determining shareholders entitled to notice of and to vote at the Annual Meeting
(the "Record Date"), there were outstanding and entitled to vote approximately
5,929,004 shares of Common Stock and 3,200,000 shares of Preferred Stock. All of
the outstanding shares of Common Stock and Preferred Stock are entitled to vote
on all matters which properly come before the annual meeting, and each
shareholder will be entitled to one vote for each share of Common Stock or
Preferred Stock held.
Each proxy that is properly signed and received prior to the Annual
Meeting will, unless revoked, be voted in accordance with the instructions on
such proxy. If no instruction is indicated, the shares will be voted FOR
approval of the reverse stock split, FOR the election of the nominees for
director listed in this proxy statement, FOR ratification of the appointment of
Ernst & Young, and FOR the approval of such other business that may properly
come before the Annual Meeting or any postponement or adjournment thereof. A
shareholder who has given a proxy may revoke such proxy at any time before it is
voted at the Annual Meeting by delivering a written notice of revocation or duly
executed proxy bearing a later date to the Secretary of the Company or by
attending the meeting and voting in person.
A quorum of shareholders is necessary to take action at the Annual
Meeting. A majority of the outstanding shares of Common Stock and Preferred
Stock, counted together, of the Company, represented in person or by proxy, will
constitute a quorum. Votes cast by proxy or in person at the Annual Meeting will
be tabulated by the inspectors of election appointed for the Annual Meeting. The
inspectors of election will determine whether or not a quorum is present at the
Annual Meeting. The inspectors of election will treat abstentions as shares of
Common Stock or Preferred Stock that are present and entitled to vote for
purposes of determining the presence of a quorum. Under certain circumstances, a
broker or other nominee may have discretionary authority to vote certain shares
of Common Stock if instructions have not been received from the beneficial owner
<PAGE>
or other person entitled to vote. If a broker or nominee indicates on the proxy
that it does not have instructions or discretionary authority to vote certain
shares of Common Stock on a particular matter, those shares will not be
considered as present for purposes of determining whether a quorum is present or
whether a matter has been approved.
The nominees for director who receive the greatest number of votes cast
in person or by proxy at the Annual Meeting shall be elected directors of the
Company. The vote required for adoption of the other proposals herein is the
affirmative vote of a majority of the shares of Common Stock and Preferred Stock
present in person or represented by proxy at the Annual Meeting; and, for
purposes of determining shareholder approval of such proposals, abstentions will
be treated as shares of Common Stock or Preferred Stock voted against adoption
of such proposals.
CONVENTIONS
Unless otherwise specified, all references in this proxy statement to
"U.S. Dollars," "Dollars," "US$," or "$" are to United States dollars; all
references to "Hong Kong Dollars" or "HK$" are to Hong Kong dollars; and all
references to "Renminbi" or "RMB" or "Yuan" are to Renminbi Yuan, which is the
lawful currency of the People's Republic of China ("China" or "PRC"). The
Company and Billion Luck maintain their accounts in U.S. Dollars and Hong Kong
Dollars, respectively. HARC and the Operating Subsidiaries maintain their
accounts in Renminbi. The financial statements of the Company and its
subsidiaries are prepared in Renminbi. Translations of amounts from Renminbi to
U.S. Dollars and from Hong Kong Dollars to U.S. Dollars are for the convenience
of the reader. Unless otherwise indicated, any translations from Renminbi to
U.S. Dollars or from U.S. Dollars to Renminbi have been made at the single rate
of exchange as quoted by the People's Bank of China (the "PBOC Rate") on March
31, 1999, which was approximately U.S.$1.00 = Rmb8.28. Translations from Hong
Kong Dollars to U.S. Dollars have been made at the single rate of exchange as
quoted by the Hongkong and Shanghai Banking Corporation Limited on March 31,
1999, which was approximately US$1.00 = HK$7.75. The Renminbi is not freely
convertible into foreign currencies and the quotation of exchange rates does not
imply convertibility of Renminbi into U.S. Dollars or other currencies. All
foreign exchange transactions take place either through the Bank of China or
other banks authorized to buy and sell foreign currencies at the exchange rates
quoted by the People's Bank of China. No representation is made that the
Renminbi or U.S. Dollar amounts referred to herein could have been or could be
converted into U.S. Dollars or Renminbi, as the case may be, at the PBOC Rate or
at all.
References to "Billion Luck" are to Billion Luck Company Ltd., a
British Virgin Islands company, which is a wholly-owned subsidiary of the
Company.
References to "Company" and "Registrant" are to China Resources
Development, Inc., and include, unless the context requires otherwise, the
operations of Billion Luck, HARC, First Supply, and Second Supply (all as
hereinafter defined).
References to "Farming Bureau" are to the Hainan Agricultural
Reclamation General Company, a division of the Ministry of Agriculture, the PRC
government agency responsible for matters relating to agriculture.
References to "First Supply" are to First Goods And Materials Supply
And Sales Corporation, a company organized in the PRC and a wholly-owned
subsidiary of HARC.
References to "Guilinyang Farm" are to Hainan Province Guilinyang State
Farm, a PRC entity which is owned and controlled by the Farming Bureau.
2
<PAGE>
References to "Hainan" are to Hainan Province of the PRC.
References to "Hainan State Farms" are to the rubber farms in Hainan
controlled by the Farming Bureau.
References to "HARC" are to Hainan Zhongwei Agricultural Resources
Company Limited, a company organized in the PRC, whose capital is owned 56% by
Billion Luck, 39% by the Farming Bureau and 5% by the Company.
References to "Operating Subsidiaries" are to the consolidated
operations, assets and/or activities, as the context indicates, of First Supply,
and Second Supply.
References to the "PRC" or "China" include all territory claimed by or
under the control of the Central Government, except Hong Kong, Macau, and
Taiwan.
References to "Second Supply" are to Second Goods And Materials Supply
And Sales Corporation, a company organized in the PRC and a wholly-owned
subsidiary of HARC.
References to "Tons" are to metric tons.
BENEFICIAL OWNERSHIP OF CERTAIN SHAREHOLDERS
BENEFICIAL OWNERS OF MORE THAN 5%
OF THE COMPANY'S COMMON STOCK
The following table sets forth, to the knowledge of management, each
person or entity who is the beneficial owner of more than 5% of the outstanding
shares of the Company's Common Stock or Series B Preferred Stock outstanding as
of May 13, 1999, the number of shares owned by each such person and the
percentage of the outstanding shares represented thereby.
<TABLE>
<CAPTION>
Amount and
Name and Address Nature of Percent of
of Beneficial Owner Beneficial Ownership (1) Class
------------------- ------------------------ -----
<S> <C> <C>
Winsland Capital Limited 334,800 Common Stock 5.65%
TrustNet Chambers 3,200,000 Series B Preferred 100%
P.O. Box 3444, Road Town
Tortola, British Virgin Islands
Worlder International Company 486,000 Common Stock 8.20%
Limited (2)
21/F., Great Eagle Centre
No. 23 Harbour Road
Hong Kong
</TABLE>
- ---------------------------
(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of these shares.
3
<PAGE>
(2) Of the 486,000 shares of Common Stock indicated, Worlder International
Company Limited ("Worlder") directly owns 351,000 shares, and the remaining
135,000 shares represent shares of Common Stock owned by Silverich Limited,
which is wholly-owned by Worlder.
SHARE OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of May 13, 1999, by (i) each director of
the Company, (ii) each executive officer of the Company named in the summary
compensation table, and (iii) all directors and executive officers of the
Company as a group. All information with respect to beneficial ownership has
been furnished by the respective director or executive officer (in the case of
shares beneficially owned by each of them). Unless otherwise indicated in a
footnote, each stockholder possesses sole voting and investment power with
respect to the shares indicated as beneficially owned.
<TABLE>
<CAPTION>
Amount and
Name of Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Class
---------------- ------------------------ -----
<S> <C> <C>
Li Shunxing -0- N/A
Han Jian Zhun -0- (2) N/A
Tam Cheuk Ho -0- (3) N/A
Li Fei Lie -0- (4) N/A
Wong Wah On 43,200 Common Stock (5) 0.73%
Ching Lung Po 334,800 Common Stock (6) 5.65%
All executive officers 378,000 Common Stock 6.38%
and directors as a group
</TABLE>
- ----------------------------
(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of these shares.
(2) Han Jian Zhun was granted options to purchase 600 shares of Common Stock
under the Company's Stock Option Plan.
(3) Tam Cheuk Ho was granted options to purchase 600 shares of Common Stock
under the Company's Stock Option Plan.
(4) Li Fei Lie was granted options to purchase 10,000 shares of Common Stock
under the Company's Stock Option Plan.
(5) Brender Services Limited owns 43,200 shares of Common Stock. Brender
Services Limited is beneficially owned by Wong Wah On, the Director, Secretary
and Financial Controller of the Company. In addition, Brender was granted
options to purchase 10,000 shares of Common Stock under the Company's Stock
Option Plan, and Mr. Wong was granted options to purchase 600 shares of Common
Stock under the Plan.
4
<PAGE>
(6) Winsland Capital Limited owns 334,800 shares of Common Stock. Winsland
Capital Limited is beneficially owned by Ching Lung Po, the Chairman of the
Board of Directors of the Company.
FINANCIAL INFORMATION
The following financial information and management's discussion and
analysis of financial condition and results of operations are excerpted from the
Company's Form 10-Q quarterly report for the quarterly period ended March 31,
1999. This information supplements the information contained in the Company's
annual report on Form 10-K for the fiscal year ended December 31, 1998, a copy
of which is provided herewith and incorporated herein by reference.
<TABLE>
<CAPTION>
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Amounts in thousands, except share and per share data)
Three Months Ended March 31,
----------------------------
1999 1998 1999
---- ---- ----
RMB RMB US$
<S> <C> <C> <C>
NET SALES 21,355 93,227 2,579
COST OF SALES (21,140) (90,324) (2,553)
----------- ----------- -----------
GROSS PROFIT 215 2,903 26
DEPRECIATION (485) (389) (58)
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (5,139) (8,006) (621)
FINANCIAL INCOME, NET 183 43 22
OTHER EXPENSES, NET (330) (1,342) (40)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (5,556) (6,791) (671)
INCOME TAXES - - -
----------- ----------- -----------
LOSS BEFORE MINORITY
INTERESTS (5,556) (6,791) (671)
MINORITY INTERESTS 1,207 1,316 146
----------- ----------- -----------
NET LOSS (4,349) (5,475) (525)
=========== =========== ===========
BASIC AND DILUTED
LOSS PER SHARE (0.73) (0.91) (0.09)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 5,929,004 6,029,004 5,929,004
=========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1999
---- ---- ----
RMB RMB US$
Notes (Unaudited) (Note) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 89,532 129,238 10,813
Trade receivables 5,757 8,463 695
Inventories 2 13,069 10,569 1,579
Other receivables, deposits and prepayments 82,452 30,449 9,958
Amount due from Farming Bureau 34,077 33,667 4,116
Amounts due from related companies 32,733 30,802 3,953
---------- ---------- ----------
TOTAL CURRENT ASSETS 257,620 243,188 31,114
PROPERTY AND EQUIPMENT 3 6,286 7,243 759
INVESTMENTS 119,301 119,301 14,408
GOODWILL 987 994 119
---------- ---------- ----------
TOTAL ASSETS 384,194 370,726 46,400
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 15,469 12,204 1,868
Other payables and accrued liabilities 32,982 15,476 3,983
Income taxes payable 16,366 16,366 1,977
Amounts due to related companies 29,544 31,291 3,568
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 94,361 75,337 11,396
MINORITY INTERESTS 106,738 107,945 12,891
---------- ---------- ----------
TOTAL LIABILITIES AND MINORITY
INTERESTS 201,099 183,282 24,287
---------- ---------- ----------
SHAREHOLDERS' EQUITY Common stock, US$0.001 par value:
Authorized - 200,000,000 shares in 1999
and 1998
Issued and outstanding - 5,929,004 shares
in 1999 and 1998 49 49 6
Preferred stock, authorized -
10,000,000 shares in 1999 and 1998
Series B preferred stock, US$0.001 par
value:
Authorized - 3,200,000 shares in 1999
and 1998
Issued and outstanding - 3,200,000
shares in
1999 and 1998 27 27 3
Additional paid-in capital 156,564 156,564 18,909
Reserves 26,274 26,274 3,174
Retained earnings 185 4,534 22
Accumulated other comprehensive income/(loss) (4) (4) (1)
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 183,095 187,444 22,113
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 384,194 370,726 46,400
========== ========== ==========
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
6
<PAGE>
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(Amounts in thousands)
<TABLE>
<CAPTION>
Accumulated
Series A Series B Additional other
Common preferred Preferred Paid-in Retained comprehensive
stock stock Stock Capital Reserves earnings income/(loss) Total
----- ----- ----- ------- -------- -------- ------------- -----
RMB RMB RMB RMB RMB RMB RMB
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1999 49 - 27 156,564 26,274 4,534 (4) 187,444
Net loss (4,349) (4,349)
------ ------ ------ ------- ------- ------- --------- ---------
Balance at March 31,
1999 49 - 27 156,564 26,274 185 (4) 183,095
====== ====== ====== ======= ======= ======= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1999 1998 1998
---- ---- ----
RMB RMB US$
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss (4,349) (5,475) (525)
Adjustments to reconcile net loss to
net cash provided by/(used by) operating
activities:
Depreciation and amortization 492 395 59
Minority interests (1,207) (1,316) (146)
Loss on disposal of property and equipment 454 - 55
Changes in operating assets and liabilities:
Trade receivables 2,706 (47,555) 327
Inventories (2,500) 38,883 (302)
Other receivables, deposits and prepayments (52,003) (53,907) (6,281)
Amount due from Farming Bureau (410) 11,691 (49)
Amounts due from related companies (1,931) (13,003) (233)
Accounts payable 3,265 (3,072) 395
Other payables and accrued liabilities 17,506 (2,212) 2,114
Income taxes payable - (3,075) -
Amounts due to related companies (1,747) - (211)
---------- ---------- ----------
Net cash used in operating activities (39,724) (78,646) (4,797)
---------- ---------- ----------
INVESTING ACTIVITIES
Purchases of property and equipment (42) (341) (5)
Proceeds from disposal of property and equipment 60 - 7
---------- ---------- ----------
Net cash provided by/(used in) investing activities 18 (341) 2
---------- ---------- ----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (39,706) (78,987) (4,795)
Cash and cash equivalent, at beginning of period 129,238 124,547 15,608
---------- ---------- ----------
Cash and cash equivalent, at end of period 89,532 45,560 10,813
========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE>
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Amounts in thousands)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months period ended
March 31, 1999, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999.
<TABLE>
<CAPTION>
2. INVENTORIES
March 31, December 31,
--------- ------------
1999 1998
---- ----
RMB RMB
<S> <C> <C>
Finished goods 13,069 10,569
====== ======
3. PROPERTY AND EQUIPMENT, NET
March 31, December 31,
--------- ------------
1999 1998
---- ----
RMB RMB
At cost:
Buildings and leasehold improvements 5,509 6,052
Machinery, equipment and motor vehicles 6,768 6,904
---------- ----------
12,277 12,956
Accumulated depreciation: (5,991) (5,713)
---------- ----------
Net book value 6,286 7,243
========== ==========
4. SEGMENT FINANCIAL INFORMATION
Three months ended March 31,
----------------------------
1999 1998
---- ----
RMB RMB
Net sales to external customers:
Natural rubber
Net sales to unaffiliated customers 16,567 53,140
Net sales to affiliates - 3,296
--------- ---------
16,567 56,436
--------- ---------
8
<PAGE>
Materials, supplies and other Agricultural products:
Net sales to unaffiliated customers 83 30,484
Net sales to affiliates 4,705 6,307
--------- ---------
4,788 36,791
--------- ---------
Total consolidated net sales 21,355 93,227
========= =========
Segment loss:
Natural rubber (3,098) (2,353)
Material, supplies and other
Agricultural products (101) (1,035)
--------- ---------
Total segment loss (3,199) (3,388)
Reconciling items:
Corporate expenses (2,540) (3,559)
Interest income 209 242
Interest expense (26) (86)
--------- ---------
Total consolidated loss before income taxes (5,556) (6,791)
========= =========
Segment assets:
Natural rubber 259,905 244,418
Material, supplies and other
agricultural products 15,620 32,397
--------- ----------
Total segment asset 275,525 276,815
Reconciling items:
Corporate assets 19,354 48,934
Investments 119,301 147,671
Intersegment receivables (29,986) (50,690)
---------- ----------
Total consolidated assets 384,194 422,730
========== ==========
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table shows the selected unaudited condensed consolidated
income statements data of the Company and its subsidiaries for the three months
ended March 31, 1999 and 1998. The data should be read in conjunction with the
unaudited Condensed Consolidated Financial Statements of the Company and related
notes thereto.
9
<PAGE>
The discussions below are presented in the Company's primary operating
currency, which is the Renminbi Yuan ("RMB"). For information purposes, the
amounts have been translated into U.S. dollars at an exchange rate of $1.00 =
RMB8.28, which represents the approximate single rate of exchange as quoted by
the People's Bank of China on March 31, 1999. No representation is made that RMB
amounts could have been, or could be, converted into U.S. dollars at that rate
or any other rate.
<TABLE>
<CAPTION>
(Amounts in thousands) Three months ended March 31,
----------------------------
1999 1998
---- ----
RMB RMB
<S> <C> <C>
Net sales:
Natural rubber 16,567 56,436
Materials, supplies and other agricultural products 4,788 36,791
---------- ----------
21,355 93,227
---------- ----------
Gross profit 215 2,903
Gross profit margin (%) 1.01 3.11
Loss before income taxes (5,556) (6,791)
Income taxes - -
---------- ----------
Loss before minority interests (5,556) (6,791)
Minority interests 1,207 1,316
---------- ----------
Net loss (4,349) (5,475)
========== ==========
</TABLE>
NET SALES AND GROSS PROFIT
Total net sales for the first quarter of fiscal 1999 decreased by
approximately RMB72 million (US$8.7 million) or 77% to approximately RMB21
million (US$2.6 million), compared to approximately RMB93 million (US$11.2
million) for the corresponding period in 1998. Net sales of natural rubber
declined by approximately RMB40 million (US$4.8 million) or 71% to approximately
RMB17 million (US$2.0 million), compared to approximately RMB56 million (US$6.8
million) for the corresponding period in 1998. Net sales revenue from the
procurement of materials and supplies decreased by approximately RMB32 million
(US$3.9 million) or 87% to approximately RMB5 million (US$600,000), compared to
approximately RMB37 million (US$4.5 million) for the corresponding period in
1998.
Despite of the fact that the average natural rubber price for the first
quarter of 1999 increased to approximately Rmb8,000 per ton, compared to
approximately Rmb7,500 per ton for the corresponding period in 1998, net sales
of natural rubber decreased by approximately 71%, which was attributable to the
weak consumption market and the competition from imported rubber.
The decrease in net sales of procurement of materials, supplies and
other agricultural products in 1999 was mainly due to the sales of barley of
Rmb29 million (US$3.5 million) in 1998. There were no sales of barley in 1999,
as this product was not profitable and the management decided to suspend the
trading of this product.
Overall gross profit decreased by approximately RMB2.7 million
(US$325,000) or 93% to RMB215,000 (US$26,000) for the first three months of 1999
from approximately RMB2.9 million (US$350,000) for the corresponding period in
1998. Gross profit margin decreased to 1.01% for the three months of 1999 from
3.11% for the corresponding period in 1998. The decrease in gross profit margin
was primarily due to the gross loss on the procurement business.
10
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months of
1999 were RMB5.1 million (US$616,000), compared to RMB8.0 million (US$966,000)
for the corresponding period in 1998. The decrease was mainly due to the
Company's measures to control cost, including salary cuts and reduction of
entertainment expenses.
FINANCIAL INCOME, NET
Net financial income increased by RMB138,000 (US$17,000) to RMB183,000
(US$22,000) for the three months of 1999 compared to RMB43,000 (US$5,000) for
the corresponding period in 1998. The increase was due to the fact that the
Company had more cash deposits with financial institutions during the first
quarter of 1999 in comparison with the corresponding period in 1998.
OTHER EXPENSES, NET
Other expenses, net, decreased by approximately RMB1 million
(US$122,000) or 75% from RMB1.3 million (US$157,000) for the three months of
1998 to RMB330,000 (US$40,000) for the corresponding period in 1999. The net
expenses for the three months of 1998 mainly represented net loss from the
trading of rubber futures contracts. The net expenses for the three months of
1999 mainly represented the loss on disposal of fixed assets.
MINORITY INTERESTS
Pursuant to an Agreement for the Sale and Purchase of Share in HARC
dated April 30, 1998 between Guilinyang Farm and the Company, the Company
purchased 5,000,000 shares, representing 5% of the total issued and outstanding
share capital of HARC, from Guilinyang Farm for a total consideration of RMB7
million (US$846,000). After the said purchase, the Company's effective interest
in HARC increased from 56% to 61%. Minority interests after the said purchase
represent a 39% interest in HARC held by the Farming Bureau compared with 44%
before the said purchase.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund inventories and trade
receivables and, to a lesser extent, to expand business operations. The Company
has financed its working capital requirements primarily through internally
generated cash.
The Company has a working capital surplus of approximately RMB163
million (US$19.7 million) as of March 31, 1999, compared to that of
approximately RMB168 million (US$20.0 million) as of December 31, 1998. Net cash
used in operating activities for the three months ended March 31, 1999 was
approximately RMB40 million (US$4.8 million) as compared to approximately RMB79
million (US$9.5 million) for the corresponding period in 1998. Net cash flows
from the Company's operating activities are attributable to the Company's income
and changes in operating assets and liabilities.
There has been no other significant change in financial condition and
liquidity since the fiscal year ended December 31, 1998. The Company believes
that internally generated funds will be sufficient to satisfy its anticipated
working capital needs for at least the next twelve months.
11
<PAGE>
MARKET RISK AND RISK MANAGEMENT POLICIES
The Company's interest income is most sensitive to changes in the
general level of interest rates. As at March 31, 1999, approximately 85% of the
Company's cash equivalents are mainly Renminbi and Hong Kong Dollar deposits
with financial institutions, bearing market interest rates without fixed term.
The remaining balance of cash equivalents are Hong Kong Dollar short term fixed
deposits.
Since 1996, the Company's board of directors has adopted a risk
management resolution authorizing the management to enter into natural rubber
commodities futures contracts for hedging the price risk associated with certain
firm commitments for the purchase of natural rubber. The Company also trades
natural rubber commodity futures contracts which are not specific hedges. As at
March 31, 1999, the Company had neither a position in natural rubber commodity
futures contracts, nor firm commitments for the purchase of natural rubber.
YEAR 2000 ISSUE
As is more fully described in the Company's annual report on Form 10-K
for the fiscal year ended December 31, 1998, the Company is modifying or
replacing its software as well as hardware to ensure Year 2000 compliance. The
Company believes that the costs directly associated with the year 2000 issue
will be less than US$20,000 and that all required upgrades and replacements will
be completed prior to the end of the third quarter of 1999.
Although the Company believes that its internal exposure to the year
2000 issue is limited and that its remediation efforts will be successful in
addressing its year 2000 issues, there can be no assurance that such remediation
efforts will be successful or that its upgraded software or any newly installed
systems will be fully year 2000 compatible. At this time, the Company is unable
to accurately predict the consequences of failed remediation efforts or a
failure of the Company's upgraded software or new systems to effectively address
the year 2000 issue, although management does not believe that any such failures
will result in a material adverse effect on the Company or its subsidiaries, or
the operation of their business.
Any failure of the software or systems of the suppliers, customers,
financial institutions or other third parties with which the Company or its
subsidiaries conduct business to address their year 2000 issues could impair the
Company's ability to perform normal operational functions. Because the Company
is still evaluating the status of the systems of the third parties with which
the Company and its subsidiaries conduct business, management has not yet
developed a comprehensive contingency plan and is unable to identify "the most
reasonably likely worst case scenario" at this time. As management identifies
significant risks related to these issues, management will develop appropriate
contingency plans.
12
<PAGE>
PROPOSAL 1 - BOARD OF DIRECTORS PROPOSAL TO EFFECT A
ONE-FOR-TEN REVERSE STOCK SPLIT OF THE COMPANY'S OUTSTANDING CAPITAL STOCK
The Board of Directors of the Company has approved a resolution to
effect a one-for-ten reverse split of the Company's issued and outstanding
shares of Common Stock and Preferred Stock (the "Reverse Stock Split"). If the
Reverse Stock Split is approved by shareholders, the Board of Directors will
determine the date on which the Reverse Stock Split will become effective. Each
share of Common Stock and Preferred Stock issued and outstanding immediately
prior to that effective date will be reclassified as and changed into one-tenth
of one share of Common Stock or Preferred Stock, as the case may be.
The principal effect of the Reverse Stock Split will be to decrease the
number of outstanding shares of Common Stock from 5,929,004 (as of May 13, 1999)
to approximately 592,900 shares (assuming that no post-Reverse Stock Split
shares of Common Stock are issued in lieu of fractional shares and assuming that
no additional shares have been issued or retired subsequent to May 13, 1999).
The Common Stock issued pursuant to the Reverse Stock Split will be fully paid
and nonassessable. The respective relative voting rights and other rights that
accompany the Common Stock will not be altered by the Reverse Stock Split, and
the Common Stock will continue to have a par value of $0.001 per share.
Consummation of the Reverse Stock Split will not alter the number of authorized
shares of the Company's Common Stock, which will remain at 200,000,000, of which
approximately 199,407,100 shares of Common Stock would constitute authorized but
unissued and unreserved shares. In addition, the Board of Directors included the
3,200,000 shares of the Company's Preferred Stock in the Reverse Stock Split
proposal in order to maintain the current relative voting rights of the holders
of the Common Stock and of the Preferred Stock.
Reasons for the Proposed Reverse Stock Split
The Reverse Stock Split is being proposed primarily because the Common
Stock does not currently meet the requirements for continued listing on the
Nasdaq Small-Cap Market. The Nasdaq Small-Cap Market continued listing standards
include a requirement that the closing bid price for a listed company be at
least $1.00 per share. Failure to meet this requirement for 30 consecutive
trading days may result in a company being delisted from the Nasdaq Small-Cap
Market. When the minimum bid price requirement is not met for 30 consecutive
trading days, a company is delisted unless its closing bid price equals or
exceeds $1.00 for at least ten consecutive trading days during a 90-day period
following the notice of non-compliance from The Nasdaq Stock Market, Inc.
("Nasdaq").
As of December 10, 1998, the closing bid price for the Common Stock had
been less than $1.00 for more than 30 consecutive trading days. The Company
received a notification of non-compliance from Nasdaq dated December 10, 1998.
The notification stated that, in order to avoid delisting of the Common Stock
from the Nasdaq Small-Cap Market, the bid price for the Common Stock must close
at or above $1.00 per share for at least ten consecutive trading days before
March 10, 1999. The Common Stock failed to meet this minimum bid price
requirement during the 90-day period which ended March 10, 1999.
On March 9, 1999, the Company filed a request with the Nasdaq Listing
Qualifications Hearing Department for a hearing to contest the delisting of the
Common Stock. The delisting was stayed pending the hearing. Such hearing took
place on May 6, 1999, and the hearing panel's determination is pending.
Additionally, the Board of Directors believes that the high number of
shares of Common Stock outstanding and its relatively low per-share market price
may adversely effect the trading market for the Common Stock and its
acceptability to certain institutional investors and other members of the
investing public. While the number of shares outstanding should not, by itself,
13
<PAGE>
affect the marketability of a stock, the type of investor who acquires such
stock or the Company's reputation in the financial community, the Company
believes that, in practice, this is not necessarily the case, as certain
investors view low-priced as unattractive or, as a matter of policy, are
precluded from purchasing low-priced shares. In addition, certain brokerage
houses, as a matter of policy, will not extend margin credit on stocks trading
at low prices. On the other hand, certain other investors may be attracted to
low-priced stock because of the greater trading volatility sometimes associated
with such securities.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to maintain the listing of the Common Stock on the
Nasdaq Small-Cap Market and that the consummation of the proposed Reverse Stock
Split will increase the price per share of Common Stock to in excess of $1.00.
It is anticipated that, if approved by the Company's shareholders, the Reverse
Stock Split will become effective at the close of business on June 11, 1999.
In the event that the Reverse Stock Split is not approved by the
Company's shareholders, it is likely that the Common Stock will be delisted by
Nasdaq. If this were to occur, the Common Stock would be traded on the OTC
Bulletin Board and would be subject to regulations relating to "Penny Stocks"
which would immediately affect the ability of shareholders to resell their stock
and the market value for the Common Stock.
There can be no assurance, even if the Reverse Stock Split is
consummated, that the bid price per share of Common Stock will increase to in
excess of $1.00, or that, if the bid price per share of Common Stock does
increase to in excess of $1.00, that such bid price will remain at or above
$1.00. Accordingly, there can be no assurance that Nasdaq will not delist the
Common Stock even if the Reverse Stock Split is consummated. Additionally, there
can be no assurance that the Reverse Stock Split will not adversely impact the
market price of, or the trading market for, the Common Stock.
Future Dilution; Anti-Takeover Effects
There may be certain disadvantages suffered by shareholders of the
Company as a result of approval of the Reverse Stock Split. These disadvantages
include a significant increase in possible dilution to present shareholders'
percentage ownership of the Common Stock because of the additional authorized
shares of Common Stock which would be available for future issuance by the
Company. Current shareholders, in the aggregate, own approximately 3% of current
authorized shares of Common Stock under the Company's present capital structure,
but would own only 0.3% of the authorized shares of Common Stock under the
Company's post-split capital structure, assuming that the proposed Reverse Stock
Split is consummated.
The proportionate increase in the number of shares of Common Stock
available for future issuance may also have certain anti-takeover effects. For
example, the availability of a large number of shares of Common Stock for future
issuance might allow the Company's Board of Directors to dilute the percentage
share ownership of persons who might attempt to obtain control over the Company.
Approval of the Reverse Stock Split therefore, may allow the Board of Directors
to frustrate a takeover attempt which might be favorable to shareholders as a
group, and may have the effect of limiting shareholder participation in these
types of transactions. While the Reverse Stock Split may have certain
anti-takeover effects, management is not aware of any attempts by third persons
to accumulate a large number of shares of Common Stock and the Board of
Directors is not recommending the Reverse Stock Split in response to any
existing attempts by third parties to obtain control of the Company.
14
<PAGE>
Registration
The Board of Directors believes that the consummation of the Reverse
Stock Split and the changes which would result therefrom will not cause the
Company to terminate registration of the Common Stock under the Securities
Exchange Act of 1934, as amended, or to cease filing reports thereunder, and the
Company does not presently intend to seek, either before or after the Reverse
Stock Split, any change in the Company's status as a reporting company for
federal securities law purposes.
Federal Income Tax Consequences
The receipt of Common Stock or Preferred Stock in the Reverse Stock
Split should not result in any taxable gain or loss to shareholders for U.S.
federal income tax purposes. If the Reverse Stock Split is approved, the U.S.
tax basis of Common Stock or Preferred Stock received as a result of the Reverse
Stock Split will be equal, in the aggregate, to the basis of the shares
exchanged for the Common Stock or Preferred Stock. For U.S. federal income tax
purposes, the holding period of the shares immediately prior to the effective
date of the Reverse Stock Split will be included in the holding period of the
Common Stock or Preferred Stock received as a result of the Reverse Stock Split.
SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS FOR MORE DETAILED
INFORMATION REGARDING THE EFFECTS OF THE PROPOSED REVERSE SPLIT ON THEIR
INDIVIDUAL TAX STATUS.
Exchange of Certificates
As soon as is practicable following the effective date of the Reverse
Stock Split, shareholders will be notified and requested to surrender their
current certificates to the Company's stock transfer agent in exchange for the
issuance of new certificates reflecting the Reverse Stock Split. Commencing on
the effective date of the Reverse Stock Split, each certificate representing
pre-Reverse Stock Split shares of Common Stock or Preferred Stock will be deemed
for all purposes to evidence ownership of post-Reverse Stock Split shares of
Common Stock or Preferred Stock, as the case may be. No fractional shares of
Common Stock or Preferred Stock will be issued, and, in lieu thereof, assuming
approval by the shareholders of the Reverse Stock Split, a whole share will be
issued to any shareholders entitled to a fraction of a share of Common Stock or
Preferred Stock.
Determination by Board to Abandon Reverse Stock Split
In accordance with Nevada law and notwithstanding approval of the
proposal by shareholders, at any time prior to the effective date of the Reverse
Stock Split, the Board of Directors may, in its sole discretion, abandon the
proposal without any further action by shareholders.
Requisite Vote
Assuming the presence of a quorum, the affirmative vote of the holders
of a majority of the voting power of the outstanding shares of Common Stock and
Preferred Stock, counted together, is necessary for approval of the Reverse
Stock Split.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE PROPOSAL TO EFFECT THE REVERSE STOCK SPLIT.
15
<PAGE>
PROPOSAL 2 - ELECTION OF DIRECTORS
During 1998, the Company's Board of Directors was comprised of seven
directors, and, according to Article VIII of the Company's Articles of
Incorporation, the membership of the Board may be increased to no more than 25
directors or decreased to no fewer than three directors by action of the Board
of Directors. At the 1996 annual meeting, the shareholders approved an amendment
to the Articles of Incorporation to divide the directors into three classes. One
class of directors is to be elected each year for a three-year term. However, as
three classes of directors were newly established, the Class I directors were
elected at the 1996 annual meeting for one-year terms, the Class II directors
were elected for two-year terms and the Class III directors were elected for
normal three-year terms. At the annual meeting held in 1997, Messrs. Tam Cheuk
Ho and Wong Wah On were elected to serve in Class I until the annual meeting to
be held in 2000 and until their successors have been duly elected and qualified.
At the annual meeting held in 1998, Messrs. Ching Lung Po and Lin Yu Quan were
elected to serve in Class II until the annual meeting to be held in 2001 and
until their successors have been duly elected and qualified. Messrs. Li
Shunxing, Ng Kin Sing (who was selected by the Board of Directors to fill the
vacancy created by the resignation of Mr. Zhang Yibing) and Wan Ying Lin (who
was selected by the Board of Directors to fill the vacancy created by the
resignation of Mr. Yang Jiangang) continue to serve in Class III until the
annual meeting to be held in 1999 and until their successors have been duly
elected and qualified. Therefore, in accordance with the Articles of
Incorporation and the actions taken at the 1996 annual meeting, the election of
directors in Class III is to be conducted at the 1999 Annual Meeting.
The nominees for Class III, if elected, will serve a three-year term
until the annual meeting to be held in 2002 and until their successors have duly
elected and qualified. Messrs. Wan and Ng are currently serving as directors of
the Company. Both nominees have consented to being named herein and have
indicated their intention to serve as directors of the Company, if elected.
Unless authority to do so is withheld, the persons named as proxies will vote
the shares represented by such proxies for the election of the nominees. In case
any of the nominees shall become unavailable for election to the Board of
Directors, which is not anticipated, the persons named as proxies shall have
full discretion and authority to vote or refrain from voting for any other
nominees in accordance with their judgment. Vacancies on the Board of Directors
may be filled by the remaining director or directors, even though less than a
quorum, for the unexpired term of such vacant position.
The nominees and certain information about them are set forth below:
Class III Directors:
Mr. Wan Ying Lin has been a director of the Company since February 4,
1998. Since September of 1996, Mr. Wan has been the Director and Deputy General
Manager of OVM International Holding Corp. (OTCBB: OVMI), which is included in
the OTC Bulletin Board operated by the National Association of Securities
Dealers, Inc. Mr. Wan graduated from the Guangxi Liuzhou Institute of Medical
Specialty, specializing in administration and management. From January 1986
through December 1987, he was the manager of Lam Ko Mould Company, in charge of
the China marketing and development division in Hong Kong. From January 1988
through February 1993, Mr. Wan worked as the marketing manager of Wai Tong
Trading Company in Hong Kong. In 1993, he joined the Hong Kong Prestressing
Concrete Engineering Company Limited, where he serves as manager.
Mr. Ng Kin Sing has been a director of the Company since February 1,
1999, and also serves as a member of the Board's audit committee. Mr. Ng is the
managing director of Action Plan Limited, a securities investment company. From
November 1995 until March 1998, Mr. Ng was sales and dealing director for
16
<PAGE>
NatWest Markets (Asia) Limited; and from May 1995 until October 1996, he was the
dealing director of BZW Asia Limited, an international securities brokerage
house. Mr. Ng holds a bachelor's degree in business administration from the
Chinese University of Hong Kong.
Information Regarding Board of Directors and Committees
The Company's Board of Directors held eight (8) meetings during 1998,
and all other actions of the Board were taken pursuant to unanimous written
consents. The Board of Directors does not have a compensation or nominating
committee. The Board has established an audit committee consisting of two
"independent" directors, Ng Kin Sing and Wan Ying Lin. The Board as a whole
operates as a committee to nominate directors and to administer the Company's
1995 Stock Option Plan (except that a committee of three disinterested persons
was formed to act with respect to stock options issued to directors). Each
director attended all of the meetings of the Board of Directors during the
period for which he was a director.
The Board of Directors, acting as a nominating committee, will consider
candidates for director nominated by shareholders. A shareholder who wishes to
submit a candidate for consideration at the 2000 annual meeting must notify the
Secretary of the Company in writing no later than March 1, 2000. The
shareholder's written notice must include information about each proposed
nominee, including name, age, business address, principal occupation, shares
beneficially owned and other information required in proxy solicitations. The
nomination notice must also include the nominating shareholder's name and
address and the number of shares of stock beneficially owned by the shareholder.
The shareholder must also furnish a statement from the candidate indicating that
the candidate wishes and is able to serve as a director. These procedures, and a
statement that the shareholder intends to make the nomination, are prerequisites
to a stockholder nominating a candidate at the annual meeting.
Compensation of Directors
During 1998, directors of the Company did not receive compensation for
their service as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES DESCRIBED ABOVE.
PROPOSAL 3 - APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the shareholders, the Board of Directors has
reappointed Ernst & Young, Certified Public Accountants, as independent
accountants to audit the consolidated financial statements of the Company for
the year 1999. Ernst & Young has served as the Company's Independent Accountants
since March of 1995.
If the shareholders should fail to ratify the appointment of Ernst &
Young as its independent accountants, the Board of Directors would reconsider
the appointment. It is expected that representatives of Ernst & Young will be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire to do so and will be available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
17
<PAGE>
OTHER INFORMATION
For other information regarding the Company, including Executive
Compensation, Financial and Other Information, Management's Discussion and
Analysis of Financial Condition and Results of Operations, Certain Relationships
and Related Transactions and Compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended, please see the appropriate Items of the
Company's Form 10-K annual report for the fiscal year ended December 31, 1998, a
copy of which is provided herewith and incorporated herein by this reference.
This proxy statement and the Form 10-K provided herewith may contain
forward-looking statements. Shareholders are cautioned that any such
forward-looking statement is not a guarantee of future performance and involves
risks and uncertainties, and that actual results may differ materially from
those in this proxy statement and the Form 10-K as a result of various factors.
The information contained in this proxy statement and the Form 10-K, including
without limitation the information under the heading, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," identifies
important factors that could cause such differences. With respect to any such
forward-looking statement that includes a statement of its underlying
assumptions or bases, the Company cautions that, while it believes such
assumptions or bases to be reasonable and has formed them in good faith, assumed
facts or bases almost always vary from actual results, and the differences
between assumed facts or bases and actual results can be material depending on
the circumstances. When, in any forward-looking statement, the Company, or its
management, expresses an expectation or belief as to future results, that
expectation or belief is expressed in good faith and is believed to have a
reasonable basis, but there can be no assurance that the stated expectation or
belief will result or be achieved or accomplished.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
To be considered for inclusion in next year's proxy materials,
shareholder proposals to be presented at the Company's 2000 annual meeting must
be in writing and be received by the Company no later than March 1, 2000.
OTHER BUSINESS
The Board of Directors does not know of any business to be brought
before the Annual Meeting other than the matters described in the Notice of
Annual Meeting. However, if any other matter are properly presented for action,
it is the intention of each person named in the accompanying proxy to vote said
proxy in accordance with his judgment on such matters.
18
<PAGE>
PROXY FOR ANNUAL MEETING
OF SHAREHOLDERS
May 28, 1999
This Proxy is Solicited on
Behalf of the Board of Directors
The undersigned hereby appoints Ching Lung Po and Tam Cheuk
Ho, or either of them acting singly in the absence of the other, as attorneys
and as proxies, with full power of substitution, to vote all shares of Common
Stock and Preferred Stock of China Resources Development, Inc. (the "Company"),
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
of the Company to be held on May 28, 1999, at 3:00 p.m., local time, at the
offices of Hainan Zhongwei Agricultural Resources Company Limited, located at
Sixth Floor, International Hong Yun Hotel, 13 Haixiu Avenue, Haikou City, Hainan
Province, People's Republic of China, and at any adjournments or postponements
thereof, upon the matters described in the accompanying Proxy Statement and upon
other business that may properly come before the meeting. Said proxy is directed
to vote as instructed on the matters set forth below and otherwise at his
discretion. Receipt of a copy of the Notice of said meeting and Proxy Statement
is hereby acknowledged.
1. PROPOSAL TO EFFECT A ONE-FOR-TEN REVERSE STOCK SPLIT of the
Company's common stock, par value $0.001 per share, and the Company's Series B
Preferred Stock, par value $0.001 per share. (The Board of Directors recommends
a vote FOR)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF NOMINEES FOR DIRECTORS in Class III.
SHAREHOLDERS MAY WITHHOLD THEIR VOTE FOR ANY NOMINEES BY STRIKING OUT THE NAME
OF SUCH NOMINEE OR NOMINEES:
Ng Kin Sing, Wan Ying Lin
[ ] FOR [ ] WITHHOLD AUTHORITY
all nominees listed to vote for all nominees listed
3. PROPOSAL TO RATIFY THE SELECTION of Ernst & Young,
Certified Public Accountants, as the Company's independent accountants for the
fiscal year ending December 31, 1999. (The Board of Directors recommends a vote
FOR)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before
the meeting and any adjournment or postponement thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
Number of Shares:__________________ Name of Owner:________________________
of Common Stock (Please type or print)
Signature:____________________________
Title or Capacity:____________________
(if applicable) (Please type or print)
Date:_________________________________
Name of Owner:________________________
(Please type or print)
Signature:____________________________
Title or Capacity:____________________
(if applicable) (Please type or print)
Date:_________________________________
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR proposals 1 through 4. If signing as attorney, executor, trustee or
guardian, please give your full title as such. If stock is held jointly, each
owner should sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
