<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
Man Sang Holdings, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(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> 2
MAN SANG HOLDINGS, INC.
21/F RAILWAY PLAZA
39 CHATHAM ROAD SOUTH
TSIMSHATSUI, KOWLOON, HONG KONG
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 2, 1999
To the Shareholders of Man Sang Holdings, Inc. :
An Annual Meeting of Shareholders of Man Sang Holdings, Inc. (the
"Company") will be held at 21/F, Railway Plaza, 39 Chatham Road South,
Tsimshatsui, Kowloon, Hong Kong, at 10:00 a.m., on Monday, August 2, 1999 for
the following purposes :
1. To elect six Directors of the Company to hold office until the
next annual meeting of shareholders or until their successors are
duly elected and qualified.
2. To ratify the appointment of Deloitte Touche Tohmatsu as the
Company's independent accountants.
3. To approve an amendment to the Company's 1996 Stock Option Plan to
reserve an additional 1,000,000 shares of Common Stock for
issuance thereunder.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on July 5, 1999 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you are
planning to attend the meeting, you are urged to complete, date and sign the
enclosed proxy card and return it promptly.
YOUR VOTE IS IMPORTANT! PLEASE PROMPTLY MARK, DATE, SIGN, AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE. IF YOU ARE ABLE TO ATTEND THE MEETING AND WISH
TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS
VOTED.
By Order of the Board of Directors
/s/ SOPHIA HO
Sophia Ho
Secretary
Hong Kong
July 5, 1999
<PAGE> 3
MAN SANG HOLDINGS, INC.
21/F RAILWAY PLAZA
39 CHATHAM ROAD SOUTH
TSIMSHATSUI, KOWLOON, HONG KONG
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 2, 1999
PURPOSE
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Man Sang Holdings, Inc., a Nevada
corporation (the "Company"), to be voted at the 1999 Annual Meeting of
Shareholders of the Company and at any adjournment thereof (the "Annual
Meeting"). The Annual Meeting is scheduled to be held at 21/F, Railway Plaza, 39
Chatham Road South, Tsimshatsui, Kowloon, Hong Kong, on Monday, August 2, 1999
at 10:00 a.m. local time. The accompanying enclosed notice of the Annual
Meeting, this Proxy Statement and the enclosed proxy are being mailed to
shareholders on or about July 9, 1999. All of the expenses in connection with
soliciting proxies from shareholders, including the reimbursement of brokerage
firms and others for their expenses in forwarding proxies and this Proxy
Statement to the beneficial owners of the Company's common stock, will be borne
by the Company.
PROXIES AND REVOCATION OF PROXIES
The shares represented by any proxy in the enclosed form, if such proxy
is properly executed and is received by the Company, and not properly revoked,
prior to or at the Annual Meeting prior to the closing of the polls, will be
voted in accordance with the specifications made thereon. Proxies on which no
specification has been made by the shareholder will be voted FOR the election to
the Board of Directors of the nominees of the Board of Directors named herein,
FOR the ratification of the appointment of the designated independent
accountants, and FOR the amendment to the Company's 1996 Stock Option Plan to
reserve an additional 1,000,000 shares of Common Stock (as defined below) for
issuance thereunder. Any proxy given pursuant to this solicitation may be
revoked by the person giving it anytime before it is voted. Proxies may be
revoked by (i) filing with the Secretary of the Company, at or before the taking
of the vote at the Annual Meeting, a written notice of revocation bearing a
later date than the date of the proxy; or (ii) attending the Annual Meeting and
voting in person.
VOTING SECURITIES
The Board of Directors has fixed July 5, 1999 as the record date (the
"Record Date") for the determination of holders of common stock, $.001 par
value, of the Company (the "Common Stock") entitled to notice of and to vote at
the Annual Meeting. At the close of business on that date, there were
outstanding and entitled to vote 4,305,960 shares of the Common Stock. The
holders of the Common Stock will be entitled to one vote per share of the Common
Stock registered in their names on the books of the Company at the close of
business on the Record Date. In addition to the Common Stock, there were 100,000
shares of Series A Preferred Stock (the "Series A Preferred Stock") outstanding
and entitled to vote as of the Record Date. The holders of Series A Preferred
Stock, as a class, are entitled to one-third voting control, or an aggregate of
2,152,980 votes at the Annual Meeting, in all matters voted on by the
shareholders of the Company.
-1-
<PAGE> 4
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK
The information furnished in the following table indicates beneficial
ownership of shares of the Company's Common Stock, as of July 5, 1999, by (i)
each shareholder of the Company who is known by the Company to be beneficial
owner of more than 5% of the Company's Common Stock, (ii) each director, nominee
for director and Named Officer (defined in "Information Regarding Executive
Officers" in Proposal 1 below) of the Company, individually, and (iii) all
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
- ------------------- ------------------------ ----------------
<S> <C> <C>
Cafoong Limited (2) (4) ......................................... 2,750,000 58%
Cheng Chung Hing, Ricky (2) (3) (4) ............................. 2,800,000 59%
Cheng Tai Po (2) (3) (4) ........................................ 2,800,000 59%
Yan Sau Man, Amy (3) (4) ........................................ 50,000 1%
Hung Kwok Wing, Sonny (3) (4) ................................... 50,000 1%
Lai Chau Ming, Matthew (4) ...................................... - 0 - *
Yuen Ka Lok, Ernest (4) ......................................... - 0 - *
Sun Kam Fai, Zacky (4) .......................................... - 0 - *
Ho Suk Han, Sophia (4) .......................................... - 0 - *
All executive officers and directors as a group (8 persons) ..... 2,950,000 62%
</TABLE>
- -------------
* Less than 1%
(1) This disclosure is made pursuant to certain rules and regulations
promulgated by the Securities and Exchange Commission and the number of
shares shown as beneficially owned by any person may not be deemed to be
beneficially owned for other purposes. Unless otherwise indicated in
these footnotes, each named individual has sole voting and investment
power with respect to such shares of Common Stock, subject to community
property laws, where applicable.
(2) Cafoong Limited owns directly 1,357,875 shares of Common Stock of the
Company. Cafoong Limited also owns indirectly 1,392,125 shares of Common
Stock of the Company by virtue of holding all issued and outstanding
shares of certain British Virgin Islands companies which own such shares
of Common Stock of the Company. Because Cheng Chung Hing, Ricky and Cheng
Tai Po own 60% and 40%, respectively, of all issued and outstanding
stock, and are directors, of Cafoong Limited, they may be deemed to be
the beneficial owners of the shares of Common Stock of the Company which
are owned, directly or indirectly, by Cafoong Limited.
(3) Each of Cheng Chung Hung, Ricky, Cheng Tai Po, Yan Sau Man, Amy and Hung
Kwok Wing, Sonny has the right, within 60 days, to exercise non-qualified
options granted under the 1996 Stock Option Plan to purchase 50,000
shares of Common Stock of the Company .
(4) Address is 21st Floor, Railway Plaza, 39 Chatham Road South, Tsimshatsui,
Kowloon, Hong Kong.
PREFERRED STOCK
The following table is furnished as of July 5, 1999, to indicate
beneficial ownership of the Company's Series A Preferred Shares by each
shareholder of the Company who is known by the Company to be a beneficial owner
of more than 5% of the Company's Series A Preferred Shares.
-2-
<PAGE> 5
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
- ------------------- ------------------------ ----------------
<S> <C> <C>
Cafoong Limited (1) (2) ............................................. 100,000 100%
</TABLE>
- -----------
(1) Cheng Chung Hing, Ricky and Cheng Tai Po own 60% and 40%, respectively,
of all issued and outstanding stock, and are directors, of Cafoong
Limited and, accordingly, are deemed to be the beneficial owners of the
shares of Series A Preferred Stock of the Company owned by Cafoong
Limited.
(2) Address is 21st Floor, Railway Plaza, 39 Chatham Road South, Tsimshatsui,
Kowloon, Hong Kong.
CHANGES IN CONTROL
To the knowledge of management, there are no present arrangements or
pledges of securities of the Company which may result in a change in control of
the Company.
QUORUM AND VOTING PROCEDURES
The presence at the Annual Meeting, in person or by proxy, of the holders
representing a majority of voting powers of the outstanding shares of the Common
Stock and Series A Preferred Stock entitled to vote at the Annual Meeting is
required to constitute a quorum for the transaction of business at the Annual
Meeting. Abstentions and broker non-votes will be considered represented at the
meeting for the purpose of determining a quorum. Shares of Common Stock and
Series A Preferred Stock represented by a properly dated, signed and returned
proxy will be counted as present at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting a
vote or abstaining.
The shares represented by each proxy will be voted in accordance with the
instructions given therein. Where no instructions are indicated, the proxy will
be voted for the nominees to the Board of Directors named in this Proxy
Statement, for the ratification of the appointment of Deloitte Touche Tohmatsu
as the Company's independent accountants, for the amendment to the Company's
1996 Stock Option Plan to reserve an additional 1,000,000 shares of Common Stock
for issuance thereunder; and at the discretion of the persons named in the
accompanying proxy on any other business that may properly come before the
Annual Meeting.
Under applicable law and the Company's Articles of Incorporation and
Bylaws, if a quorum is present at the Annual Meeting, the six nominees for
election to the Board of Directors who receive a plurality of votes cast for the
election of directors present in person or represented by proxy shall be elected
directors. The appointment of Deloitte Touche Tohmatsu as the Company's
independent accountants will be ratified if a majority of votes cast in the
Annual Meeting in person or by proxy are in favor of Proposal 2 hereof. The
number of shares of Common Stock that is reserved for issuance under the
Company's 1996 Stock Option Plan will be increased by 1,000,000 if a majority of
votes cast in the Annual Meeting in person or by proxy are in favor of Proposal
3 hereof. Abstentions and broker non-votes will not affect the outcome of the
voting because they will not represent votes cast.
The Board of Directors is not aware of any matters that are expected to
come before the Annual Meeting other than those referred to in this Proxy
Statement. If any other matter should come before the Annual Meeting, the
persons named in accompanying proxy intend to vote such proxies in accordance
with their best judgment.
Under the laws of the State of Nevada, dissenters rights are not
available to shareholders of the Company with respect to any matter scheduled to
be brought before the Annual Meeting.
-3-
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
Six directors are to be elected to serve until the next annual meeting of
shareholders or until their successors are elected and shall have been
qualified. The Board of Directors has nominated Cheng Chung Hing, Ricky; Cheng
Tai Po; Yan Sau Man, Amy; Hung Kwok Wing, Sonny; Lai Chau Ming, Matthew and Yuen
Ka Lok, Ernest to serve as directors (the "Nominees"). Directors shall be
elected by shareholders holding a plurality of the votes represented by the
shares of Common Stock and Series A Preferred Stock present at the Annual
Meeting. In the event that any one of the Nominees is unable or declines to
serve as a director, the Board of Directors intends to substitute another person
of their choice as nominee, in his place and stead, or to present such lesser
number of directors in accordance with the Company's Bylaws. The Board of
Directors has no reason to believe that any Nominee will be unable to serve or
decline to serve as a director. Any vacancy occurring between shareholders'
meetings, including vacancies resulting from an increase in the number of
directors, may be filled by the Board of Directors. A director elected to fill a
vacancy shall hold office until the next annual shareholders' meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE TO THE BOARD OF DIRECTORS.
INFORMATION REGARDING NOMINEES
The following table sets forth, as of July 5, 1999, the name and age,
position held with the Company and term of office, of each director or executive
officer of the Company and the period or periods during which he or she has
served in his or her respective position(s).
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD TERM OF OFFICE
- ------------ --- ---------------- --------------
<S> <C> <C> <C>
Cheng Chung Hing, Ricky 38 President and Chairman of the Board 1/96 - present
Chief Executive Officer 1/98 - present
Chief Financial Officer 2/99 - present
Cheng Tai Po 47 Vice Chairman of the Board 1/96 - present
Yan Sau Man, Amy 36 Vice President and Director 1/96 - present
Hung Kwok Wing, Sonny 35 Vice President and Director 11/96 - present
Lai Chau Ming, Matthew 46 Director 11/96 - present
Yuen Ka Lok, Ernest 36 Director 11/96 - present
</TABLE>
TERM OF OFFICE
Each of the directors of the Company serves until his or her successor is
duly elected at the next annual meeting of shareholders or until his or her
earlier resignation or removal.
-4-
<PAGE> 7
INFORMATION REGARDING EXECUTIVE OFFICERS
The following table sets forth the names, ages and offices of the present
executive officers of the Company. The periods during which such persons have
served in such capacities and information with respect to non-employee directors
are indicated in the description of business experience of such persons below.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ---- --- -------------
<S> <C> <C>
Cheng Chung Hing, Ricky ..................................................... 38 President, Chairman, Chief
Executive Officer, Chief
Financial Officer
Cheng Tai Po ................................................................ 47 Vice Chairman
Yan Sau Man, Amy ............................................................ 36 Vice President
Hung Kwok Wing, Sonny ....................................................... 35 Vice President
Sun Kam Fai, Zacky .......................................................... 37 Vice President
Ho Suk Han, Sophia .......................................................... 30 Secretary
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
CHENG Chung Hing, Ricky, co-founder of the Company with its subsidiaries
(the "Group"), has served as Chairman of the Board of Directors and President of
the Company since January 8, 1996, and of Man Sang International (B.V.I.)
Limited ("Man Sang BVI") since December 1995. He was appointed a member of the
Compensation Committee of the Board of Directors on September 8, 1997 but
resigned on September 18, 1998. He was appointed Chief Executive Officer and
Chief Financial Officer of the Company on January 2, 1998 and February 27, 1999
respectively. Mr. Cheng was appointed Chairman and a Director of Man Sang
International Limited ("MSIL"), an indirect subsidiary listed on The Stock
Exchange of Hong Kong Limited, on August 8, 1997 and August 4, 1997,
respectively. Prior to the reorganization of the Group in late 1995 which
culminated in the Company's issuance of Common Stock and Series A Preferred
Stock in exchange for all the outstanding securities of Man Sang BVI in January
1996 (the "Group Reorganization"), he had served as chairman and president of
various companies within the Group. Mr. Cheng has over 15 years' experience in
the pearl business and is responsible for overall planning, strategic
formulation and business development of the Company.
CHENG Tai Po, co-founder of the Group, has served as Vice Chairman of the
Company since January 8, 1996 and of Man Sang BVI since December 1995. He was
appointed Deputy Chairman and a Director of MSIL on August 8 and August 4, 1997,
respectively. Prior to the Group Reorganization, he had served as vice-chairman
of various companies within the Group. Mr. Cheng has over 15 years' experience
in the pearl business and is responsible for purchasing and processing of pearls
as well as overall planning, strategic formulation and business development of
the Company.
YAN Sau Man, Amy, has served as Vice President and a Director of the
Company since January 8, 1996 and of Man Sang BVI since December 1995. She was
appointed as a Director of MSIL on August 12, 1997. Ms. Yan joined the Group in
1984 and has been responsible for overall marketing and sales activities of the
Company.
HUNG Kwok Wing, Sonny, has served as Vice President and a Director of the
Company since November 1, 1996. He was appointed a Director of MSIL on August
12, 1997. Prior to joining the Company, Mr. Hung was employed as Deputy Manager
of Dah Sing Bank from February 1996 to October 1996 and as Branch Manager of The
Hongkong and Shanghai Banking Corporation Limited from 1991 to February 1996.
Mr. Hung is responsible for formulation and execution of corporate policies and
participates in the development and implementation of corporate planning
programs. Mr. Hung received his bachelor's degree in Finance and Banking from
San Francisco State University and master's degree in Business Administration
from the University of Strathclyde, U.K.
-5-
<PAGE> 8
LAI Chau Ming, Matthew, has served as a Director of the Company since
November 1996. He was appointed a member of the Compensation Committee and a
member of the Audit Committee of the Board of Directors on September 8, 1997 and
September 18, 1998 respectively. Mr. Lai is currently employed as Senior Manager
of Vickers Ballas Hong Kong Limited ("Vickers Ballas"). Prior to his joining
Vickers Ballas in July 1996, Mr. Lai served from 1972 to 1996 as a Senior
Manager of Sun Hung Kai Investment Company Limited, one of the biggest
investment companies in Hong Kong. Mr. Lai has over 26 years' experience in
investment. He is experienced in the areas of financial management and planning.
YUEN Ka Lok, Ernest, has served as a Director of the Company since
November 1996. He was appointed Chairman of the Compensation Committee and a
member of the Audit Committee of the Board of Directors on September 8, 1997 and
September 18, 1998 respectively. Mr. Yuen was also appointed a Director of MSIL
on August 12, 1997. Mr. Yuen is a solicitor and is currently a Partner in the
law firm of Messrs. Yuen & Partners. Mr. Yuen joined Messrs. Ivan Tang & Co.
("ITC") as a Consultant in August 1994 and became a Partner in January 1996. The
Hong Kong office of ITC changed its practice name to Yuen & Partners in August,
1997. Prior to his joining ITC, from March 1992 to August 1994, Mr. Yuen was
employed as Assistant Solicitor at Messrs. Van Langenbery & Lau ("VLL") and
Messrs. AB Nasir, respectively. Prior to his joining VLL, Mr. Yuen was an
Articled Clerk at Messrs. Robin Bridge & John Liu. From 1985 to 1987, Mr. Yuen
was an audit trainee at Price Waterhouse (now known as PriceWaterhouseCoopers),
an international accounting firm. Mr. Yuen is experienced in civil and criminal
litigations as well as the general commercial transactions.
SUN Kam Fai, Zacky, joined the Company in March 1999 and has served as
Vice President of the Company since May 3, 1999. He is responsible for financial
management and participates in formulation and execution of corporate policies.
Mr. Sun was the Financial Controller of CCT Communication Group Limited in Hong
Kong from December 1997 to February 1999 and of Synergy Power Corporation Pty
Ltd in Australia from May 1995 to June 1997. In June 1992, he established an
independent accounting firm in Hong Kong, which he managed until October 1994.
From April 1987 to June 1992, Mr. Sun served as Project Manager of Toplus
Development Limited to explore investment opportunities. From 1984 to 1987, Mr.
Sun was an audit trainee at Ernst & Whinney (now known as Ernst & Young), an
international accounting firm. He is a Certified Public Accountant, a fellow of
the Association of the Chartered Certified Accountants, an associate of the
Australian Society of Certified Public Accountants and an associate of the Hong
Kong Society of Accountants.
HO Suk Han, Sophia, has served as Secretary of the Company since January
1998. Miss Ho has over 8 years' experience in company secretarial work in an
international accounting firm and several listed companies in Hong Kong. She is
an associate of The Hong Kong Institute of Company Secretaries and The Institute
of Chartered Secretaries and Administrators in Hong Kong Limited.
FAMILY RELATIONSHIPS
Cheng Chung Hing, Ricky and Cheng Tai Po are brothers. Other than the
foregoing, there are no family relationships among the above-named directors and
executive officers of the Company.
COMPLIANCE WITH SECTION 16(a) OF EXCHANGE ACT
Based solely on a review of copies of the forms provided to the Company,
or written representations that no other filing of forms was required, the
Company has found that: (i) Cafoong Limited became the beneficial owner of more
than 10% of the Common Stock on January 8, 1996 and such company filed Form 3 in
respect thereof in February 1997; (ii) Cheng Chung Hing, Ricky and Cheng Tai Po
became the indirect beneficial owners of more than 10% of the Company's Common
Stock on January 8, 1996 by virtue of their respective holding of 60% and 40% of
all the issued and outstanding stock of Cafoong Limited and such individuals
filed Forms 3 in respect thereof on February 20, 1997; and (iii) Cheng Chung
Hing, Ricky; Cheng Tai Po; Yan Sau Man, Amy; Ng Hak Yee, Patrick (resigned in
February
-6-
<PAGE> 9
1999); and Hung Kwok Wing, Sonny were granted non-qualified stock options to
purchase Common Stock on September 16, 1997 and such individuals filed Forms 4
in respect thereof on April 9, 1998.
COMMITTEES AND ATTENDANCE OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE
The Board of Directors established an Audit Committee on September 18,
1998 with Alexander Reid Hamilton as Chairman, and Yuen Ka Lok, Ernest and Lai
Chau Ming, Matthew as Committee members. Mr. Hamilton is a Director and Chairman
of the Audit Committee of MSIL. He was a partner in an international accounting
firm for 16 years and has over 21 years of audit and accounting experience. Mr.
Hamilton serves as audit committee member of several companies which are listed
on The Stock Exchange of Hong Kong Limited. With his rich experience, the
Company invited him to act as Chairman of the Audit Committee.
The Committee is to make such examinations as are necessary to monitor
the corporate financial reporting and the internal and external audits of the
Company. Besides the monitoring function, the Committee also makes
recommendations on improvements and conduct any other duties as the Board of
Directors may delegate. During the year ended March 31, 1999, the Audit
Committee held two meetings to review the financial results of the Company
before presentation to the Board of Directors for approval and release.
COMPENSATION COMMITTEE
The Board of Directors established a Compensation Committee on September
8, 1997 with Yuen Ka Lok, Ernest as Chairman, and Cheng Chung Hing, Ricky and
Lai Chau Ming, Matthew as Committee members. To promote the Committee's
independence, Cheng Chung Hing, Ricky resigned as Compensation Committee member
on September 18, 1998.
The Compensation Committee is to deliberate and stipulate the
compensation policy for the Company and to administer the 1996 Stock Option
Plan. During the year ended March 31, 1999, the Compensation Committee met seven
times (six of which were either via full board meetings or by unanimous written
consents of action of all directors) to discuss and review the compensation
policies of the Company, including but not limited to the grant and
administration of stock options to consultants of the Company. The Company
engaged consultants during the year ended March 31, 1999 with the aim of
enhancing shareholder value. To closely link the consultants' compensation with
the Company's stock price, the Compensation Committee granted stock options as a
principal part of the consultants' compensation.
Besides the Audit and Compensation Committee, the Board of Directors
presently maintains no other committees.
ATTENDANCE OF THE BOARD OF DIRECTORS
During the year ended March 31, 1999, the Board of Directors held eleven
meetings and adopted seven unanimous written consents of action. Each director
(during the period in which each such director served) attended at least 75% of
the meetings of the Board of Directors and the meetings of the committees of the
Board of Directors on which such director served.
-7-
<PAGE> 10
EXECUTIVE COMPENSATION
Overview and the Compensation Committee of the Board of Directors
While for convenience of reference this Proxy Statement and the annual
report on Form 10-K has used "the Company" when referring to the overall
business of the Group, the Company itself actually has no employees. The
employee directors of the Company have entered into Services Agreement with MSIL
(see "Employment Agreements"). Other executive officers in the management team
were employed by a subsidiary of MSIL.
In the 1998 Annual General Meeting of MSIL held in August 1998, the
shareholders of MSIL passed a resolution to authorize its Board of Directors to
fix remuneration of all directors (which for MSIL would include all its
executives) for the year. The MSIL Board determined that the compensation
packages of its directors were generally competitive. Hence, the compensation
packages remained unchanged for fiscal 1999, save for Cheng Tai Po's (as
described in the next paragraph).
The Board of Directors of both the Company and MSIL recognized that
purchasing and processing techniques are critical to the success of the
Company's business and, in recognition of Cheng Tai Po's foresight and endeavor
to minimize the respective costs, provided him a leasehold property at no cost
as his personal residence, commencing October 1998.
As at July 5, 1999, the Company via its subsidiary, Man Sang BVI, holds
355,000,000 shares, or 73.28% of the issued capital, of MSIL. Since the overall
compensation of the executive officers of the Company was determined by the
Board of Directors of MSIL, the Company's Compensation Committee takes up a
monitoring function. The Committee reviews the decisions of the MSIL Board in
relation to this issue. Should the Committee disagree with the decisions of the
MSIL Board, the Committee may advise the Company's Board of Directors to vote in
any general meeting of MSIL against authorizing the MSIL Board to fix
compensation for MSIL's directors and executives.
For fiscal 1999, all executive officers received their salaries and part
of their bonus (if applicable) from MSIL.
With respect to the Chairman and the Vice Chairman, the Compensation
Committee members acknowledged that they have brought to the Company not only
their expertise and personal relationships in the pearl industry, but also their
vision, foresight and efforts to limit the adverse effects of the weakness in
Asian economies over the past year and to steer the Company towards more
profitable business. The Committee members also took into account the need to
retain such highly qualified officers by providing competitive compensation
packages, and granted a bonus to each of Cheng Chung Hing, Ricky, Chairman of
the Board and Cheng Tai Po, Vice Chairman.
-8-
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth information concerning cash and non-cash
compensation paid or accrued for services in all capacities to the Company and
its subsidiaries during the three years ended March 31, 1999 of the Company's
Chief Executive Officer and each of its other most highly compensated executive
officers whose compensation exceeded $100,000 (the "Named Officers") during
fiscal 1999.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(3) OPTIONS GRANTED(6) COMPENSATION
- --------------------------- ---- ------ ----- --------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
($) ($) ($) (#) ($)
Cheng Chung Hing, Ricky 1999 388,100 291,074(1) 92,135 (4) 0
Chairman of the Board, 1998 388,100 323,400(2) 92,135 (4) 100,000 &
President, CEO and CFO 11,800,000
1997 388,100 323,400 45,650 (4) 0
Cheng Tai Po 1999 388,100 291,074(1) 93,710 (5) 0
Vice Chairman 1998 388,100 323,400(2) - 100,000 &
11,800,000
1997 388,100 323,400 - 0
Yan Sau Man, Amy 1999 129,366 - - 0
Vice President and Director 1998 129,366 - - 100,000 &
5,000,000
1997 124,191 - - 0
Hung Kwok Wing, Sonny 1999 129,366 - - 0
Vice President and Director(7) 1998 129,366 - - 100,000 &
4,000,000
Ng Hak Yee, Patrick(7 & 8) 1999 118,586 - - 0 102,231(9)
(resigned on February 27, 1999) 1998 129,366 - - 100,000 &
4,000,000
</TABLE>
(1) Cheng Chung Hing, Ricky and Cheng Tai Po received bonus of $161,708 and
$129,366 from each of the Company and MSIL respectively for fiscal 1999.
(2) Half of the bonus of each of Cheng Chung Hing, Ricky and Cheng Tai Po for
fiscal 1998 was paid by the Company, and half of which was paid by MSIL.
(3) Although the officers receive certain perquisites such as Company
provided life insurance and medical insurance, the value of such
perquisites did not exceed the lesser of $50,000 or 10% of the officer's
salary and bonus.
(4) In addition to the amounts referred to in note (1) and (2) above, Cheng
Chung Hing, Ricky is provided the right to use a leasehold property of
the Company at no cost as his personal residence. The estimated fair
rental value of such leasehold property was $92,135. The estimated fair
rental value is based on the "rateable value" assessed by the Rating and
Valuation Department of The Government of Hong Kong Special
Administrative Region. According to the Hong Kong Rating Ordinance (Cap.
116), rateable value is an estimate of the annual rental of the relevant
premises at a designated valuation reference date. When assessing a
rateable value, all factors which would affect rental value, such as age
and size of the premises, quality of finishes, location, transport
facilities, amenities and open market rents, are considered.
-9-
<PAGE> 12
(5) In addition to the amounts referred to in note (1) above, Cheng Tai Po is
provided the right to use a leasehold property of the Company at no cost
as his personal residence commencing on October 11, 1998. The estimated
fair rental value of such leasehold property was $93,710. The estimated
fair rental value is based on the "rateable value" assessed by the Rating
and Valuation Department of The Government of Hong Kong Special
Administrative Region. According to the Hong Kong Rating Ordinance (Cap.
116), rateable value is an estimate of the annual rental of the relevant
premises at a designated valuation reference date. When assessing a
rateable value, all factors which would affect rental value, such as age
and size of the premises, quality of finishes, location, transport
facilities, amenities and open market rents, are considered.
(6) Each Named Executive received options from both the Company and MSIL in
fiscal 1998.
(7) In fiscal 1998, each of Hung Kwok Wing, Sonny and Ng Hak Yee, Patrick
became, for the first time, a person whose compensation is to be reported
in this table. Therefore, their compensation in prior years is not
reported.
(8) Subsequent to the resignation of Ng Hak Yee, Patrick, the options granted
to him by the Company and MSIL expired on May 27, 1999 and March 27, 1999
respectively.
(9) A termination pay of $102,231 was made to Ng Hak Yee, Patrick.
OPTION GRANTS IN FISCAL 1999
In fiscal 1999, neither the Company nor MSIL granted any option to any of
its directors or executive officers.
PERFORMANCE GRAPH
The following graph summarizes cumulative total shareholder return
(assuming reinvestment of dividends) on the Common Stock of the Company and IWI
Holding Limited ("IWI"), a peer issuer selected by the Company. The Company's
Common Stock was first registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended, on June 17, 1996. As there was no trading of the
Company's Common Stock on June 17 and June 18, 1996, the trading price of the
Common Stock of the Company was not available. Therefore, the measurement period
hereto commenced on June 19, 1996 and ended on March 31, 1999, the Company's
1999 fiscal year end date. The graph assumes that $100 was invested on June 19,
1996.
The comparisons in this graph are required by the Securities and Exchange
Commission and are not intended to forecast or be indicative of future stock
price performance or the financial performance of the Company. Shareholders are
encouraged to review the Financial Statements of the Company contained in the
accompanying annual report on Form 10-K for the fiscal year ended March 31,
1999.
-10-
<PAGE> 13
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
6/19/96 3/31/97 3/31/98 3/31//99
------- ------- ------- --------
<S> <C> <C> <C> <C>
The Company's Common Stock $100 $15.57 $8.93 $12.50
IWI's Common Stock $100 $46.67 $8.32 $3.73
</TABLE>
As there is no broad equity market index for the OTC Bulletin Board where
the Company's Common Stock is traded and there is no published industry or
line-of-business index for the pearl or jewelry business in which the Company is
engaged, the Company has selected IWI as a peer issuer for comparison. IWI is
engaged primarily in the design, assembly, merchandising and wholesale
distribution of jewelry and whose shares are traded on NASDAQ.
EMPLOYMENT AGREEMENTS
The Company itself has no employment agreement with any of its officers
or employees. However, MSIL entered into Service Agreements with each of Cheng
Chung Hing, Ricky; Cheng Tai Po; Yan Sau Man, Amy; and Hung Kwok Wing, Sonny on
September 8, 1997. The major terms of these agreements are as follows:-
- - each service agreement is for an initial term of 3 years commencing on
September 1, 1997, and may be terminated by either party by giving the
other written notice of not less than 3 months;
- - the annual basic salary payable to each of Cheng Chung Hing, Ricky, Cheng
Tai Po, Yan Sau Man Amy, and Hung Kwok Wing, Sonny shall be HK$3 million,
HK$3 million, HK$1 million and HK$1 million respectively, subject to
annual review by the Board of MSIL every year; and
- - each of Cheng Chung Hing, Ricky, Cheng Tai Po, Yan Sau Man, Amy, and Hung
Kwok Wing, Sonny is also entitled to a discretionary bonus in respect of
each financial year. The amount of such discretionary bonuses shall be
determined by the MSIL Board each year, provided that the aggregate of
all discretionary bonuses payable by MSIL to its executive directors in
any financial year shall not exceed 10% of the net profits (after tax and
after extraordinary items) of MSIL for such year as shown in its audited
accounts.
-11-
<PAGE> 14
COMPENSATION OF DIRECTORS
No employee of the Company receives any compensation for his or her
service as a Director. The non-employee directors of the Company were
compensated for their services as directors in fiscal 1999 as follows:-
<TABLE>
<CAPTION>
Non-employee Directors Directors' Fee
---------------------- --------------
<S> <C>
$
Lai Chau Ming, Matthew ............................ 12,937
Yuen Ka Lok, Ernest ............................... 25,873
</TABLE>
MSIL paid $25,873 to Alexander Reid Hamilton (who is not a director of
the Company) for his services as a director of MSIL. No additional compensation
of any nature was paid to any non-employee director of the Company for their
services as directors.
An amount of $500 is to be paid to each of the non-employee director and
Alexander Reid Hamilton for their participation in Audit Committee meetings. In
fiscal 1999, the Audit Committee members were compensated as follows:-
<TABLE>
<CAPTION>
Amount Received
---------------
Audit Committee Members The Company MSIL
----------------------- ----------- ----
<S> <C> <C>
($) ($)
Lai Chau Ming, Matthew 1,000 N/A
Yuen Ka Lok, Ernest 1,000 500
Alexander Reid Hamilton 1,000 500
Audit Committee of MSIL met only once in fiscal 1999.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Cheng Chung Hing, Ricky, Chairman of the Board, Chief Executive Officer,
Chief Financial Officer and President of the Company, was a member of the
Compensation Committee. To promote the Committee's independence, he resigned as
Compensation Committee member on September 18, 1998. The other two members of
the Committee are not executives of the Company or any of its subsidiaries, but
Yuen Ka Lok, Ernest, is a partner of Messrs. Yuen & Partners, one of the legal
advisors to the Company and its subsidiaries. Messrs. Yuen & Partners receives
its standard professional fees in the provision of legal services to the Company
and its subsidiaries.
Except as described in this and the immediately preceding paragraph, no
executive officer of the Company, (i) served as a member of the compensation
committee (or other board committee performing similar functions or, in the
absence of any such committee, the board of directors) of another entity, one of
whose executive officers served on the Company's Compensation Committee, (ii)
served as a director of another entity, one of whose executive officers served
on the Company's Compensation Committee, or (iii) served as a member of the
compensation committee (or other board committee performing similar functions
or, in the absence of any such committee, the board of directors) of another
entity, one of whose executive officers served as a director of the Company.
Both Cheng Tai Po and Yan Sau Man, Amy, serve as directors in several companies
of which Cheng Chung Hing, Ricky is also a director; however, neither of them is
a member of the Compensation Committee of the Company's Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past three years, the Company has loaned funds and received
advances from Cheng Chung Hing, Ricky and Cheng Tai Po, the founders and
principal shareholders of the Company. The maximum amount advanced
-12-
<PAGE> 15
to Cheng Chung Hing, Ricky and Cheng Tai Po during the past three years was
$230,110 and $106,360 respectively. During fiscal 1999, the Company advanced
$33,839 to Cheng Chung Hing, Ricky and $106,360 to Cheng Tai Po respectively.
Both of them repaid the amount before March 31, 1999. All such advances were
made on an interest free basis and without definitive repayment terms.
During the same period, Cheng Chung Hing, Ricky and Cheng Tai Po advanced
funds to the Company on an interest free basis and repayable on demand. Advances
from Cheng Chung Hing, Ricky totaled $-0- and advances from Cheng Tai Po totaled
$-0- as at March 31, 1999. The maximum amount owed to Cheng Chung Hing, Ricky
and to Cheng Tai Po during the past three years was $94,306 and $-0-
respectively.
Finally, during the past three years, Cheng Chung Hing, Ricky has
utilized a leasehold property of the Company as his personal residence at no
cost to him. Since October 11, 1998, Cheng Tai Po has utilized a leasehold
property of the Company as his personal residence at no cost to him. See
"Executive Compensation".
Yuen Ka Lok, Ernest, a director of both the Company and MSIL, the
Chairman of the Compensation Committee and a member of the Audit Committee of
the Board of Directors of the Company, is a partner of Messrs. Yuen & Partners,
one of the legal advisors to the Company. Messrs. Yuen & Partners receives its
standard professional fees in the provision of legal services to the Company.
Alexander Reid Hamilton, Chairman of the Audit Committee of the Board of
Directors of the Company is a director of MSIL.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF
DELOITTE TOUCHE TOHMATSU AS INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Deloitte Touche Tohmatsu as
independent accountants for the fiscal year ended March 31, 1999 and has further
directed that the selection of such independent accountants be submitted for
ratification by the shareholders at the Annual meeting. Deloitte Touche Tohmatsu
will have one or more representatives at the Annual Meeting. Such
representatives will have an opportunity to make a statement, if he or she so
desires, and will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF DELOITTE TOUCHE TOHMATSU AS
INDEPENDENT ACCOUNTANTS FOR THE COMPANY.
PROPOSAL 3
AMENDMENT TO THE COMPANY'S 1996 STOCK OPTION PLAN
TO RESERVE ADDITIONAL SHARES
OF COMMON STOCK FOR ISSUANCE THEREUNDER
In November, 1996, the shareholders approved the Company's 1996 Stock
Option Plan (the "Option Plan"). The Company is presently authorized to issue
1,000,000 shares of Common Stock upon the exercise of options granted under the
Option Plan.
The shareholders will be requested at the Annual Meeting to approve an
amendment to the Option Plan which increases by 1,000,000 the number of shares
of Common Stock that may be issued under the Option Plan. The purpose of the
Option Plan is to encourage ownership of the Company's Common Stock by eligible
key employees, consultants and directors of the Company and its affiliates, and
to provide increased incentive for such employees, consultants and directors to
render services and to exert maximum effort for the business success of the
Company. The Compensation Committee of the Board of Directors believes that the
Option Plan promotes the Company's success by aligning
-13-
<PAGE> 16
financial interests of key employees, consultants and directors with long-term
shareholder value, and that the number of shares remaining available for
issuance will be insufficient to achieve the purpose of the Option Plan over the
term of the plan unless the additional shares are authorized. A copy of the
Option Plan as proposed to be amended may be obtained upon written request to
the Company's Secretary at its principal office.
DESCRIPTION OF THE PLAN
The Option Plan was initially approved by the Company's shareholders on
November 15, 1996. As initially approved, the Option Plan reserved 1,000,000
shares of the Company's Common Stock for issuance pursuant to stock options to
be granted under the Option Plan. The Compensation Committee of the Board of
Directors (comprised entirely of non-employee directors) has been delegated the
authority to administer the Option Plan and grant options to key employees,
consultants, and directors of the Company under the Option Plan. Members of the
Committee are eligible to receive stock options under the Option Plan if such
stock options are granted in accordance with Rule 16b-3 promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
During the term of the Option Plan, which expires on October 17, 2006,
incentive stock options ("ISOs") and/or nonqualified stock options ("NSOs") may
be granted to key employees, and NSOs may be granted to consultants and
directors, of the Company and its affiliates. The aggregate fair market value
(determined at the time the option is granted) of the Common Stock with respect
to which ISOs may be exercisable for the first time by any optionee during any
calendar year under all stock option plans of the Company and its affiliates may
not exceed US$100,000.
Because the key employees, consultants and directors of the Company who
may participate and the amount of their options are determined by the
Compensation Committee in its discretion, it is not possible to state the names
or positions of, or the number of options that may be granted to, the Company's
key employees, consultants and directors.
The Compensation Committee will establish the time or times at which
options may be exercised and whether all of the options may be exercisable at
one time or in increments over time. The option price or procedure for setting
the option price shall be established by the Compensation Committee at the time
of the granting of an option. For ISOs, the option price may not be less than
the fair market value of the Company's stock on the date of grant; provided that
in the case of ISOs granted to an individual who, at the time of grant, owns
stock possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or its affiliate ("Ten Percent Stockholder"),
the exercise price shall not be less than one hundred and ten percent of the
fair market value of a share of Common Stock on the date the option is granted.
For NSOs, the option price may be less than, equal to, or greater than the fair
market value of the Company's stock on the date of grant; provided, that the
exercise price may not be less than eighty-five percent of the fair market value
of the Company's stock on the date of grant. The Committee has the authority,
with the consent of an optionee, to amend an option, including reducing the
exercise price of any option to not less than the fair market value of the
Common Stock at the time of the amendment and extension of the term thereof. In
the event of stock dividends, splits and similar capital changes, the Option
Plan provides for appropriate adjustments in the exercise prices and in the
number of shares available for options so as to maintain the proportionate
number of shares without changing the aggregate exercise price.
The term of each option shall be no more than ten years from the date of
grant; provided that an ISO granted to a Ten Percent Stockholder may not have a
term in excess of five years from the date of grant. Options expire three months
following termination of employment (but in no event later than the date of
expiration of the term of the option as set forth in the option agreement),
except in the case of disability or death. In the event an optionee dies or is
determined under the Option Plan to be disabled while the optionee is employed
by the Company or its affiliates, acts as consultant or while serves on the
Board of Directors of the Company, the options previously granted to the
optionee may be exercised (to the extent the optionee would have been entitled
to do so at the date of death or the determination of disability) at any time
and from time to time, within a three-month period after such death or
determination of disability, by the optionee, the guardian, executor or
administrator of the optionee's estate, or by the person or persons
-14-
<PAGE> 17
to whom the optionee's rights under the option shall pass by will or the laws of
descent and distribution (but in no event later than the date of expiration of
the term of the option as set forth in the option agreement).
Under the Option Plan, the Compensation Committee has the authority to
provide in each stock option agreement whether the exercise price shall be paid
in cash, cashier's check, bank draft, or postal or express money order payable
to the order of the Company, or shares of Common Stock of the Company, or a
combination thereof. The Compensation Committee may also allow cashless
exercises as permitted under the Federal Reserve Board's Regulation T, subject
to applicable securities law restrictions. Each optionee must pay all taxes
required to be withheld by the Company or paid by the optionee in connection
with the exercise of an NSO.
If the Company recapitalizes or otherwise changes its capital structure,
or merges, consolidates, sells all of its assets or dissolves (each a
"Fundamental Change"), then upon any exercise of an option, the optionee will be
entitled to purchase under such option, in lieu of the number of shares of
Common Stock as to which option shall then be exercisable, the number and class
of shares of stock and securities to which the optionee would have been entitled
pursuant to the terms of the Fundamental Change if, immediately prior to such
Fundamental Change, the optionee had been the holder of record of the number of
shares of Common Stock as to which such option is then exercisable. If, after a
Fundamental Change, the Company will not be the surviving entity, or the Company
sells all or substantially all of its assets, or more than fifty percent of the
Company's outstanding shares of Common Stock will be acquired or owned or
controlled by another person or entity (other than a wholly owned subsidiary of
the Company), or the Company dissolves and liquidates, or as a result of or in
connection with a contested election of directors, the Company's directors
before such election will cease to constitute a majority of the Company's Board
of Directors, then the Compensation Committee may at its sole discretion
accelerate the time at which all or a portion of an optionee's options may be
exercised for a limited period of time before or after a specified date.
The Compensation Committee may, in its sole discretion and has no
obligation to, accelerate the time at which any option may be exercised,
including without limitation in the following circumstances if it deems such
acceleration necessary to provide equitable treatment to the optionee: (i) the
issuance by the Company of shares of stock of any class of securities
convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, (ii) the payment of a dividend in property
other than Common Stock, or (iii) the occurrence of any similar transaction.
The Option Plan may be amended, altered or discontinued by the Board of
Directors; provided that the approval of the shareholders of the Company is
required to (i) increase the total number of shares reserved for the purposes of
the Option Plan (except an increase pursuant to a change of capital structure of
the Company), (ii) change the class of persons eligible to participate in the
Option Plan, (iii) extend the applicable maximum option period of an option,
(iv) extend the expiration date of the Option Plan to a date after October 17,
2006, (v) decrease the exercise price of an option granted under the Option Plan
(except a decrease pursuant to a change of capital structure of the Company),
and (vi) withdraw the administration of the Option Plan from the Compensation
Committee.
The closing price of the Company's Common Stock as reported on OTC
Bulletin Board on June 25, 1999 was $1.75.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE OPTION PLAN
The federal income tax consequences of an optionee's participation in the
Option Plan are complex and subject to change. The following discussion is only
a summary of the general rules applicable to the Option Plan. Optionees should
consult their own tax advisors since a taxpayer's particular situation may be
such that some variation of the rules described below will apply.
-15-
<PAGE> 18
INCENTIVE STOCK OPTIONS
If an option granted under the Option Plan is treated as an incentive
stock option, the optionee will not recognize any income upon either the grant
or the exercise of the option, and the Company will not be allowed a deduction
for federal tax purposes. Upon a sale of the shares, the tax treatment to the
optionee and the Company will depend primarily upon whether the optionee has met
certain holding period requirements at the time he or she sells the shares. In
addition, as described below, the exercise of an incentive stock option may
subject the optionee to alternative minimum tax liability.
If an optionee exercises an incentive stock option and does not dispose
of the shares received within two years after the date of such option or within
one year after the transfer of the shares to him or her, any gain realized upon
the disposition will be characterized as long-term capital gain and, in such
case, the Company will not be entitled to a federal tax deduction.
If the optionee disposes of the shares either within two years after the
date the option is granted or within one year after the transfer of the shares
to him or her, such disposition will be treated as a disqualifying disposition
and an amount equal to the lesser of (i) the fair market value of the shares on
the date of exercise minus the purchase price, or (ii) the amount realized on
the disposition minus the purchase price, will be taxed as ordinary income to
the optionee in the taxable year in which the disposition occurs. (However, in
the case of gifts, sales to related parties, and certain other transactions, the
full difference between the fair market value of the stock and the purchase
price will be treated as compensation income.) The excess, if any, of the amount
realized upon disposition over the fair market value at the time of the exercise
of the option will be treated as long-term capital gain if the shares have been
held for more than one year following the exercise of the option. In the event
of a disqualifying disposition, the Company may withhold income taxes from the
optionee's compensation with respect to the ordinary income realized by the
optionee as a result of the disqualifying disposition.
The exercise of an incentive stock option may subject an optionee to
alternative minimum tax liability because the excess of the fair market value of
the shares at the time an incentive stock option is exercised over the purchase
price of the shares is included in income for purposes of the alternative
minimum tax even though it is not included in taxable income for purposes of
determining the regular tax liability of an employee. Consequently, an optionee
may be obligated to pay alternative minimum tax in the year he or she exercises
an incentive stock option.
In general, there will be no federal income tax deductions allowed to the
Company upon the grant, exercise, or termination of an incentive stock option.
However, in the event an optionee sells or disposes of stock received on the
exercise of an incentive stock option in a disqualifying disposition, the
Company will be entitled to a deduction for federal income tax purposes in an
amount equal to the ordinary income, if any, recognized by the optionee upon
disposition of the shares, provided that the deduction is not otherwise
disallowed by the Internal Revenue Code of 1986, as amended (the "Code").
NONQUALIFIED STOCK OPTIONS
Nonqualified stock options granted under the Option Plan do not qualify
as "incentive stock options" and will not qualify for any special tax benefits
to the optionee. An optionee generally will not recognize any taxable income at
the time he or she is granted a nonqualified option. However, upon its exercise,
the optionee will recognize ordinary income for federal income tax purposes
measured by the excess of the then fair market value of the shares over the
exercise price. The income realized by the optionee will be subject to income
and other employee withholding taxes.
The optionee's basis for determination of gain or loss upon the
subsequent disposition of shares acquired upon the exercise of a nonqualified
stock option will be the amount paid for such shares plus any ordinary income
recognized as a result of the exercise of such option. Upon disposition of any
shares acquired pursuant to the exercise of a
-16-
<PAGE> 19
nonqualified stock option, the difference between the sale price and the
optionee's basis in the shares will be treated as a capital gain or loss and
generally will be characterized as long-term capital gain or loss if the shares
have been held for more than one year at their disposition.
In general, there will be no federal income tax deduction allowed to the
Company upon the grant or termination of a nonqualified stock option or a sale
or disposition of the shares acquired upon the exercise of a nonqualified stock
option. However, upon the exercise of a nonqualified stock option, the Company
will be entitled to a deduction for federal income tax purposes equal to the
amount of ordinary income that an optionee is required to recognize as a result
of the exercise, provided that the deduction is not otherwise disallowed under
the Code.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE AMENDMENT OF THE COMPANY'S 1996 STOCK OPTION PLAN TO RESERVE AN
ADDITIONAL 1,000,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.
SHAREHOLDERS PROPOSALS FOR 2000 ANNUAL MEETING
Any shareholder proposal intended for inclusion in proxy materials for
the 2000 annual meeting of the shareholders must be received in proper form by
the Company at its principal office no later than March 25, 2000.
OTHER MATTERS
The Board of Directors is not aware of any business other than the
aforementioned matters that will be presented for consideration at the Annual
Meeting. If other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote thereon in
accordance with their best judgment.
ANNUAL REPORTS
A copy of the Company's 1999 Annual Report to shareholders, which is the
Company's annual report on Form 10-K for the fiscal year ended March 31, 1999
accompanies this Proxy Statement. The Annual Report is not to be treated as part
of the proxy solicitation material or as having been incorporated by reference
therein.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE URGED TO EXECUTE AND RETURN
THE ENCLOSED PROXY IN THE REPLY ENVELOPE PROVIDED.
By Order of the Board of Directors
/S/ SOPHIA HO
Sophia Ho
Secretary
Hong Kong
July 5, 1999
-17-
<PAGE> 20
MAN SANG HOLDINGS, INC.
21/F RAILWAY PLAZA
39 CHATHAM ROAD SOUTH
TSIMSHATSUI, KOWLOON, HONG KONG
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 2, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
undersigned hereby appoints Cheng Chung Hing, Ricky and Cheng Tai Po, and each
of them, as Proxies, with full power of substitution in each of them, in the
name, place and stead of the undersigned, to vote at an Annual Meeting of
Shareholders (the "Meeting") of Man Sang Holdings, Inc., a Nevada corporation
(the "Company"), on August 2, 1999, at 10:00 a.m., or at any postponements or
adjournments thereof, in the manner designated below, all of the shares of the
Company's common stock that the undersigned would be entitled to vote as if
personally present.
1. GRANTING ____________ WITHOLDING ____________ authority to vote for the
election as directors of the Company the following nominees:
(INSTRUCTIONS : TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME.)
Cheng Chung Hing, Ricky; Cheng Tai Po; Yan Sau Man, Amy; Hung Kwok Wing,
Sonny; Lai Chau Ming, Matthew and Yuen Ka Lok, Ernest.
2. Proposal to ratify the appointment of Deloitte Touche Tohmatsu as the
Company's independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to amend the Company's 1996 Stock Option Plan to reserve an
additional 1,000,000 shares of Common Stock for issuance thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments thereof.
(continued, and to be signed, on other side)
<PAGE> 21
(continued from other side)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF
NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 2 AND 3 AND
FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS. IF ANY OTHER MATTER SHOULD COME
BEFORE THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST
JUDGMENT OF PROXIES.
Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as an attorney, executor,
administrator, trustee, guardian, or corporate officer, please indicate the
capacity in which signing.
Dated: , 1999
--------------------------------
Signature
--------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
