<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Gemstar International Group Limited
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(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:
Notes:
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
August 31, 1999
Dear Member:
The Annual Meeting of Members (hereinafter, "shareholders") of Gemstar
International Group Limited, a British Virgin Islands corporation ("Gemstar"),
will be held at 7:00 a.m., California U.S.A. time, on September 17, 1999 at 2-
29-18 Nishi-Ikebukuro, Toshima-ku, Tokyo 171, Japan.
At this meeting, the holders of Gemstar Ordinary Shares will be asked to
elect Elsie Ma Leung, Douglas B. Macrae and Stephen A. Weisswasser
(collectively, the "Director Nominees") to a three-year term as Class I
directors. Ms. Leung is Gemstar's Chief Financial Officer and has served as a
director of Gemstar since April 1994. Mr. Macrae is currently the President
and Chief Executive Officer of VideoGuide Inc., a wholly-owned subsidiary of
Gemstar, and has served as a director of Gemstar since September 1997. Mr.
Weisswasser is Gemstar's Executive Vice President and General Counsel and has
served as a director of Gemstar since July 1999.
At the meeting, you will also be asked to ratify the appointment of KPMG LLP
as Gemstar's independent auditors for the fiscal year ending March 31, 2000.
In the material accompanying this letter, you will find a Notice of Annual
Meeting of Shareholders, a Proxy Statement, a proxy, and a copy of the
Gemstar's Annual Report on Form 10-K for the year ended March 31, 1999.
All shareholders are cordially invited to attend the meeting in person.
However, whether or not you plan to attend the meeting, please complete, sign,
date and return your proxy in the enclosed envelope. If you attend the
meeting, you may vote in person if you wish, even though you have previously
returned your proxy. It is important that your shares be represented and be
voted at the meeting.
Sincerely,
/s/ HENRY C. YUEN
HENRY C. YUEN
President and Chief Executive
Officer
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on September 17, 1999
The Annual Meeting of the members (hereinafter, "shareholders") of Gemstar
International Group Limited, a British Virgin Islands corporation (the
"Company" or "Gemstar"), will be held at 2-29-18 Nishi-Ikebukuro, Toshima-ku,
Tokyo 171 Japan on September 17, 1999 at 7:00 a.m. California, U.S.A. time.
At the meeting, shareholders will act on the following matters:
(1) To elect 3 directors for a three-year term to expire at the 2002
Annual Meeting;
(2) To ratify the appointment of KPMG LLP as independent auditors for
the fiscal year ending March 31, 2000; and
(3) To transact such other matters that may properly come before the
meeting or any postponements or adjournments thereof.
Your attention is directed to the accompanying Proxy Statement. Only
shareholders of record at the close of business on August 27, 1999 will be
entitled to notice of and to vote at the meeting and any adjournment thereof.
PLEASE PROMPTLY VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD. This
will ensure that your shares are voted in accordance with your wishes and that
a quorum will be present. You are invited to attend the meeting, and you may
vote in person even though you have returned your proxy card.
By Order of the Board of Directors,
/s/ Henry C. Yuen
President and Chief Executive
Officer
August 31, 1999
Pasadena, California
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWNED ON THE RECORD DATE, PLEASE INDICATE YOUR
VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD AND DATE, SIGN AND RETURN IT IN
THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO
POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO AVOID THE ADDITIONAL
EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN
PROMPTLY MAILING IN YOUR PROXY CARD.
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
PROXY STATEMENT
Annual Meeting of Shareholders
September 17, 1999
GENERAL
Persons Making the Solicitation
This proxy statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Gemstar International Group Limited (the
"Company" or "Gemstar") of proxies for use at an Annual Meeting of
Shareholders to be held at 2-29-18 Nishi-Ikebukuro, Toshima-ku, Tokyo 171
Japan on September 17, 1999 at 7:00 a.m. California, U.S.A. time and at any
adjournment thereof (the "Annual Meeting"). This proxy statement is first
being mailed to shareholders on or about August 31, 1999. You are requested to
sign, date and return the enclosed proxy card in order to ensure that your
shares are represented at the Annual Meeting.
A form of proxy is enclosed for your use. The shares represented by each
properly executed unrevoked proxy will be voted as directed by the shareholder
executing the proxy. If no direction is made, the shares represented by each
properly executed unrevoked proxy will be voted (i) "FOR" the proposal to
elect Elsie Ma Leung, Douglas B. Macrae and Stephen A. Weisswasser to a three-
year term as Class I directors of Gemstar, and (ii) "FOR" the proposal to
ratify the appointment of KPMG LLP as Gemstar's independent auditors for the
fiscal year ending March 31, 2000. With respect to any other matter that may
come before the Annual Meeting or any adjournment thereof, the proxy confers
upon the proxy holders discretionary authority to vote the proxy in accordance
with their best judgment.
The expense of soliciting proxies will be borne by the Company. Proxies will
be solicited principally through the use of the mail, but directors, officers
and regular employees of the Company may solicit proxies personally or by
telephone or special letter without any additional compensation. The Company
also will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for any reasonable expenses in forwarding proxy materials to
beneficial owners.
Revocability of Proxy
Any proxy given by a shareholder of the Company may be revoked by the
shareholder who executed it at any time before it is voted at the Annual
Meeting.
Record Date
Only holders of record of the Company's ordinary shares, par value $0.01 per
share (the "Ordinary Shares"), at the close of business on August 27, 1999
(the "Record Date") are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof. The outstanding voting securities of the
Company on that date consisted of [ ] Ordinary Shares.
<PAGE>
ELECTION OF GEMSTAR CLASS I DIRECTORS
Gemstar's Amended and Restated Articles of Association, as amended, provide
that the Gemstar Board shall consist of at least three but not more than ten
persons. The Board is divided into three classes, as nearly equal as possible,
and each class has a staggered three-year term. Currently, the terms of office
of directors in Class I, Class II and Class III end following the annual
meetings of shareholders in 1999, 2000 and 2001, respectively. Nine directors
are currently serving on the board of directors (three Class I, three Class
II, and three Class III). Although four Class I directors are authorized, the
Company has named only three nominees. As a result, the Company has one
vacancy in Class I. The reason for this procedure is that the Company is in
the process of determining whether to reduce the authorized number of
directors or to seek an additional qualified candidate for the current vacancy
on the Board. At the Gemstar Annual Meeting, shareholders will be asked to
elect three Class I directors to hold office until the 2002 Annual Meeting,
subject to the provisions of Gemstar's Amended and Restated Articles of
Association, as amended. Proxies cannot be voted for a greater number of
persons than number of nominees named in this Proxy Statement.
The Gemstar Board has recommended three nominees for election as directors
of Gemstar. The accompanying proxy solicited by the Gemstar Board will be
voted for the election of the three nominees named below, unless the proxy
card is marked to withhold authority to vote. Each nominee is presently a
member of the Gemstar Board.
The nominees for election are:
ELSIE MA LEUNG
DOUGLAS B. MACRAE
STEPHEN A. WEISSWASSER
If any of the nominees should become unavailable for election to the Gemstar
Board, the persons named in the proxy or their substitutes shall be entitled
to vote for a substitute to be designated by the Gemstar Board. The Gemstar
Board has no reason to believe that it will be necessary to designate a
substitute nominee.
Required Vote
For the purpose of electing directors, each shareholder is entitled to one
vote for each director to be elected for each Ordinary Share owned. Gemstar's
Amended and Restated Articles of Association, as amended, provide that
directors shall be elected by a plurality vote of all votes cast, in person or
by proxy. Thus, the nominees receiving the highest number of votes, up to the
number of directors to be elected, will be elected. Abstentions and broker
non-votes will have no effect on the results, although they will be counted
for purposes of determining the presence of a quorum for the conduct of
business at the Annual Meeting.
The Board of Directors recommends a vote "FOR" the election of each of the
nominees listed above.
2
<PAGE>
Director Nominees
The following table provides information regarding the nominees for election
as directors of the Company. The ages shown are as of June 1999.
<TABLE>
<CAPTION>
Business Experience and Director
Name and Age Directorships Since
------------ ----------------------- --------------
<C> <S> <C>
Elsie Ma Leung (51).......... Ms. Elsie Ma Leung has served April 1994
as the Company's Chief
Financial Officer since August
1994 and as a director of the
Company since April 1994. Ms.
Leung has been Chief Financial
Officer of Gemstar Development
Corporation ("GDC"), a wholly
owned subsidiary of the
Company, since January 1993.
Ms. Leung has been the Chief
Operating Officer of GDC since
1998. Ms. Leung founded a
public accounting firm, Leung,
Kaufman & Co., in 1983 and was
its managing partner until
joining the Company. Ms. Leung
also served as Chief Financial
Officer of American Plant
Growers, Inc. from 1988 to
1993. Prior to 1983, Ms. Leung
performed audit duties at
Kenneth Leventhal & Company.
Ms. Leung is a licensed
Certified Public Accountant.
Ms. Leung holds a B.A.
(Accounting) from California
State University, Los Angeles.
Douglas B. Macrae (40)....... Mr. Douglas B. Macrae has September 1997
served as a director of the
Company since September 1997.
Mr. Macrae founded VideoGuide
Inc., a wholly-owned subsidiary
of the Company, in September
1993 and has served as its
President and Chief Executive
officer since that time.
Mr. Macrae currently serves as
Chairman of the Board of GCC
Technologies, Inc., a privately
held company that designs,
licenses, manufactures and
sells consumer electronics and
computer products. From 1981 to
1993, Mr. Macrae served as Vice
President of Engineering of GCC
Technologies, Inc. From 1985 to
1991, Mr. Macrae served as a
director of Blyth Holdings, a
publicly held database company.
Since 1988, Mr. Macrae has
served on the Board of Trustees
of the Pingry School in
Martinsville, New Jersey.
Stephen A. Weisswasser (58).. Mr. Stephen A. Weisswasser has July 1999
served as a director, the
Executive Vice President and
General Counsel of the Company
since July 1999. Mr.
Weisswasser was previously a
partner at the law firm of
Covington & Burling from April
1998 to July 1999. From 1995 to
1998, Mr. Weisswasser served as
the Chief Executive Officer and
President of Americast. Prior
to his position with Americast,
Mr. Weisswasser served as a
Senior Vice President of
Capital Cities/ABC Inc. from
1986 to 1995. Mr. Weisswasser
holds a B.A. from Wayne State
University and a J.D. from
Harvard Law School where he
graduated magna cum laude. Mr.
Weisswasser is a member of the
Board of Directors Fanfare
Cable Channel and is a nominee
to serve on the Board of
Directors of Next Level
Communications, LLP.
</TABLE>
3
<PAGE>
Directors Whose Terms of Office Will Continue After the Annual Meeting
The following table provides information regarding the directors of the
Company whose terms of office will continue after the Annual Meeting. The ages
shown are as of June 1999.
<TABLE>
<CAPTION>
Director
Name and Age Business Experience and Directorships Since
------------ ------------------------------------- ----------
<C> <S> <C>
Henry C. Yuen (49)..... Dr. Henry C. Yuen is a co-founder of the April 1992
Company and has served as the Company's
Chief Executive Officer and President
since August 1994 and as a director since
April 1992, and as Chairman of the Board
of Directors of the Company since January
1999. Dr. Yuen has been the Chief
Executive Officer and President of GDC
since 1989. Dr. Yuen invented the
Company's VCR Plus+ system and co-founded
Gemstar in 1989. Prior to the founding of
Gemstar, Dr. Yuen was a research
scientist and Technical Fellow at TRW,
Inc., and held faculty positions at New
York University Courant Institute of
Mathematical Sciences and the California
Institute of Technology. Dr. Yuen was
elected the 1996 National Entrepreneur of
the Year and the 1996 Entrepreneur of the
Year--Los Angeles Region by the
Entrepreneur of the Year Institute,
jointly sponsored by USA Today, Ernst &
Young and Nasdaq. Dr. Yuen was also
selected the 1990 Business Week
Entrepreneur of the Year. He was the
recipient of the 1991 Best Product of the
Year Award from the Electronic Institute
Association, and the 1991 Silver Anvil
Award from the Public Relations Society
of America. Dr. Yuen holds a B.S.
(Mathematics) from the University of
Wisconsin, a Ph.D. (Applied Mathematics)
from the California Institute of
Technology, and a J.D. from Loyola
University School of Law. Dr. Yuen has
over 70 published scientific papers, 25
issued patents, and over 100 pending
patents. Dr. Yuen is a member of the
State Bar of California.
Thomas L. H. Lau (45).. Mr. Thomas L. H. Lau is a co-founder of April 1992
the Company and has served as a director
of the Company since April 1992. Mr. Lau
served as the Company's Chairman of the
Board from April 1992 to January 1999.
Since February 1998, Mr. Lau has served
as an Executive Director of The Kwong
Sang Hong Limited, a company engaged in
property investment and distribution and
trading of cosmetics. Since 1985, Mr. Lau
has been an Executive Director of Chinese
Estates Holdings Ltd., Hong Kong, a
holding company for various Hong Kong
business interests, including real estate
and securities. Since 1996, Mr. Lau has
also served as Deputy Chairman of Evergo
China Holdings Ltd., a company
principally engaged in property
investment and financing in the People's
Republic of China. Prior to that, Mr. Lau
was involved in a broad spectrum of
business activities, including
manufacturing, international trading,
real estate investment and development
and securities transactions. Mr. Lau
holds a B.A. (Business Administration)
from the University of Toronto and an
M.B.A. from the University of Windsor.
Perry A. Lerner (56)... Mr. Perry A. Lerner has been a director July 1998
of the Company since July 1998. Mr.
Lerner is a Managing Director of Crown
Capital Group, Inc., a New York City
private investment company. From 1982
through 1996, Mr. Lerner was a partner at
the law firm of O'Melveny & Myers LLP in
Los Angeles and New York City. He is a
graduate of Claremont McKenna College and
Harvard Law School. He also serves as a
director of Imperial Credit Industries,
Inc., Franchise Mortgage Acceptance
Corporation and Southern Pacific Bank.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Director
Name and Age Business Experience and Directorships Since
------------ ------------------------------------- -----------
<C> <S> <C>
George F. Carrier (81).. Dr. George F. Carrier has served as a August 1994
director of the Company since August
1994. He served on the faculty of
Harvard University from 1952 until he
retired in 1988. While at Harvard, he
served as the Gordon McKay Professor of
Mechanical Engineering and T. Jefferson
Coolidge Professor of Applied
Mathematics. Since 1995, Dr. Carrier
has served as a private consultant to
TRW Inc.'s Aerospace and Automotive
Divisions and since 1992 has served as
a private consultant to the National
Science Foundation. Dr. Carrier holds a
B.S. (Mechanical Engineering) from
Cornell University and a Ph.D. (Applied
Mechanics) from Cornell University.
Teruyuki Toyama (69).... Mr. Teruyuki Toyama has served as a August 1994
director of the Company since August
1994. From 1993 to 1997, Mr. Toyama was
the President and Chief Executive
Officer of Overseas Courier Services
Co., Ltd. In 1997, he was appointed
Executive Advisor of that company and
in 1998 he became an Honor Advisor to
that company. Mr. Toyama worked for
over 40 years in various capacities
with Asahi Shimbun Co., Ltd. ("Asahi
Shimbun"). From 1991 to 1993, he was
Senior Managing Director and Chief
Operating Officer of Asahi Shimbun.
From 1987 to 1991, he was Asahi
Shimbun's Managing Director in charge
of Advertising. Prior to 1987 he served
as Director of the Advertising Division
and as a member of the board of
directors. Mr. Toyama holds a degree
from Tokyo University of Foreign
Studies.
James E. Meyer (44)..... Mr. James E. Meyer has served as a May 1997
director of the Company since May 1997.
Mr. Meyer has served as Chief Operating
Officer for Thomson Consumer
Electronics, Inc. ("Thomson") since
1997. Mr. Meyer served as Senior Vice
President Product Management for
Thomson from 1992 to 1996. From
December 1996 to September 1997, Mr.
Meyer served as Executive Vice
President, Marketing & Sales-Americas
for Thomson. Since June 1995, Mr. Meyer
also serves as the Director of
Mikohngaming.
</TABLE>
Classified Board of Directors
The Board is divided into three classes: Class I, Class II, and Class III.
The Class I directors consist of Ms. Leung, and Messrs. Macrae and
Weisswasser; the Class II directors consist of Dr. Carrier and Messrs. Toyama
and Meyer; and the Class III directors consist of Dr. Yuen and Messrs. Lau and
Lerner. Each director serves for a term ending following the third annual
meeting following the annual meeting at which such director was elected. The
terms of office of directors in Class I, Class II, and Class III end following
the annual meetings in 1999, 2000 and 2001, respectively. The Company
currently has one vacancy on the Board of Directors. The appointment of all
officers is subject to the discretion of the Board.
Compensation of Directors
The Company pays each director who is not an employee of the Company $25,000
per year for services as a director of the Company and $1,000 per Board or
committee meeting attended. All directors are reimbursed for their out-of-
pocket expenses incurred in connection with attendance at meetings of, and
other activities relating to service on, the Board or any committee of the
Board. In addition, directors who are not full-time employees of the Company
are eligible to participate in, and each such director has received awards
pursuant to, the Gemstar International Group Limited 1994 Stock Incentive
Plan, as amended (the "Stock Incentive Plan").
5
<PAGE>
Committees and Meetings of the Board of Directors
The committees of the Board consist of an Executive Committee, an Audit
Committee and a Compensation Committee. During the fiscal year ended March 31,
1999, the Board of Directors held fifteen (15) meetings. All directors
attended 75% or more of the total meetings of the Board and committees of the
Board on which they served.
The Executive Committee of the Board consists of Dr. Yuen, Mr. Lau and Ms.
Leung. The Executive Committee has authority to take any action other than
appointment of auditors, election and removal of directors and appointment of
officers, which can be taken only by the Board. During the fiscal year ended
March 31, 1999, the Executive Committee did not hold any meetings.
The Audit Committee of the Board consists of Dr. Carrier and Mr. Toyoma. The
Audit Committee recommends to the Board the independent public auditors to be
selected to audit the Company's annual financial statements and approves any
special assignments given to such auditors. The Audit Committee also reviews
the planned scope of the annual audit and the independent auditors' letter of
comments and management's responses thereto, any major accounting changes made
or contemplated and the effectiveness and efficiency of the Company's internal
accounting staff. During the fiscal year ended March 31, 1999, the Audit
Committee did not hold any meetings.
The Compensation Committee of the Board consists of Dr. Carrier and Mr.
Toyama. The Compensation Committee establishes remuneration levels for
executive officers of the Company, reviews management organization and
development, reviews significant employee benefit programs and administers the
Company's Stock Incentive Plan. During the fiscal year ended March 31, 1999,
the Compensation Committee held nine meetings.
Executive Officers
The following table sets forth certain information regarding the executive
officers of the Company as of June 14, 1999:
<TABLE>
<CAPTION>
Name Age Position and Office Executive Officer Since
---- --- ------------------- -----------------------
<C> <S> <C> <C>
Henry C. Yuen........... 49 Chief Executive Officer, President and Director August 1994
Elsie Ma Leung.......... 51 Chief Financial Officer and Director August 1994
Larry Goldberg.......... 51 Secretary and Corporate Counsel August 1994
</TABLE>
For a description of Dr. Yuen and Ms. Leung, see "Directors Whose Terms of
Office Will Continue After the Annual Meeting" and "Director Nominees."
Mr. Larry Goldberg joined the Company in August 1994 as Secretary and
Corporate Counsel. Mr. Goldberg served as a director of the Company from April
1994 until May 1999. Mr. Goldberg resigned as Secretary of the Company in May
of 1999 and has resigned as Corporate Counsel of the Company effective August
1999. Mr. Goldberg will continue to be an employee of the Company pursuant to
the terms of his employment agreement. For eight years prior to joining the
Company, he was a partner in the law firm of Schneider, Goldberg and Yuen,
specializing in business law and business litigation where he continues to be
of counsel. Prior to practicing law, Mr. Goldberg performed audit duties with
Price Waterhouse and Kenneth Leventhal & Company. Mr. Goldberg is admitted to
practice law in California. Mr. Goldberg holds a B.A. (Economics) from UCLA
and a J.D. from Loyola University School of Law, Los Angeles.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the Ordinary Shares as of June 14, 1999, for (i) each
person who beneficially owns more than 5% of the Ordinary Shares, (ii) each of
the directors and Named Executive Officers (as defined in the "Summary of
Executive Compensation" section below) and (iii) all directors and executive
officers as a group. Except as otherwise indicated, beneficial ownership
includes voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
Number of
Shares Percentage of
Beneficially Shares
Name and Position Owned(1) Outstanding(1)
----------------- ------------ --------------
<S> <C> <C>
Thomas L. H. Lau(2)............................... 20,000,000 20.0%
Henry C. Yuen(3).................................. 14,849,229 13.7
THOMSON multimedia S.A.(4)........................ 6,453,732 6.5
Elsie Ma Leung(5)................................. 2,319,998 2.3
Larry Goldberg(6)................................. 305,000 *
Douglas Macrae(7)................................. 656,586 *
George F. Carrier(8).............................. 44,000 *
Teruyuki Toyama(9)................................ 44,000 *
James E. Meyer.................................... -- *
Perry A. Lerner(10)............................... 20,000 *
All current directors and executive officers as a
group (9 persons)(10)............................ 38,238,813 34.3
</TABLE>
- --------
* Less than 1%
(1) Applicable percentage of ownership is based on 99,938,000 Ordinary Shares
outstanding as of June 14, 1999 together with applicable options for such
shareholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission. In computing the number
of shares beneficially owned by a person and the percentage ownership of
that person, shares subject to options held by that person that are
currently exercisable or that become exercisable within 60 days following
May 31, 1999 are deemed outstanding. However, such shares are not deemed
outstanding for purposes of computing the percentage ownership of any
other person. Unless otherwise indicated, each of the shareholders named
in this table has sole voting and dispositive power with respect to the
Ordinary Shares shown as beneficially owned by such shareholder. The
address for all directors and officers of the Company is c/o Gemstar
International Group Limited, 135 North Los Robles Avenue, Suite 800,
Pasadena, California, 91101.
(2) Includes shares held by Dynamic Core Holdings Limited, of which Mr. Lau
is the sole shareholder.
(3) Includes 8,759,249 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
June 14, 1999.
(4) Reflects ownership as reported on a Schedule 13D/A by THOMSON multimedia
S.A., dated as of April 22, 1998, filed with the Securities and Exchange
Commission.
(5) Includes 2,220,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
June 14, 1999.
(6) Includes 305,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
June 14, 1999.
(7) Includes 250,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
June 14, 1999.
(8) Includes 44,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
June 14, 1999.
(9) Includes 44,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
June 14, 1999.
(10) Includes 20,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
June 14, 1999.
(11) Includes 11,642,249 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
June 14, 1999.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Executive Compensation
The following table sets forth certain summary information concerning the
compensation paid by the Company for fiscal years 1999, 1998 and 1997 to the
Company's principal executive officer and the two other most highly
compensated executive officers during the 1999 fiscal year (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation(2)(3) Awards
-------------------------- -------------
Securities All Other
Name and Principal Fiscal Salary Underlying Compensation
Positions(1) Year ($) Bonus ($) Options(#)(4) ($)(5)
------------------ ------ --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Henry C. Yuen............ 1999 1,534,833 2,215,167 2,110,490 492,144
Chief Executive Officer
and President 1998 888,800 1,611,200 8,325,450 493,912
1997 648,000 518,400 -- 495,681
Elsie Ma Leung........... 1999 700,000 280,000 -- 1,333
Chief Operating Officer
and Chief 1998 570,000 228,000 3,000,000 2,427
Financial Officer 1997 475,000 190,000 -- 4,076
Larry Goldberg........... 1999 466,560 186,624 -- 1,333
Secretary and Corporate
Counsel 1998 388,800 155,520 600,000 2,248
1997 324,000 129,600 -- 4,427
</TABLE>
- --------
(1) All of the Named Executive Officers are or were employed in the indicated
positions with GDC. Dr. Yuen also serves as Chief Executive Officer and
President of the Company and Ms. Leung also serves as Chief Financial
Officer of the Company.
(2) No individual listed in the table received aggregate other compensation
exceeding $50,000 or 10% of the compensation reported in the table for
such individual.
(3) The salary paid to each of the Named Executive Officers represents each
such officer's adjusted base salary for each of the indicated fiscal
years, calculated pursuant to the applicable formula under such officer's
employment agreement with the Company or GDC, as the case may be. The
bonuses paid to Dr. Yuen represent the aggregate amounts of Dr. Yuen's
merit bonus and annual incentive bonus, calculated pursuant to the
applicable formulae set forth in the Employment Agreement between GDC and
Dr. Yuen, dated April 1, 1994, as amended, and the New Yuen Agreement (as
defined). The bonuses paid to each of Mr. Goldberg and Ms. Leung represent
the amount of the annual incentive bonus paid to each such officer for
each of the indicated fiscal years, calculated pursuant to the applicable
formula in such officer's employment agreement with GDC or the Company, as
the case may be.
(4) Number of securities has been adjusted to reflect the 2-for-1 stock split
effected in May 1999.
(5) The Company or GDC, as the case may be, provide the Named Executive
Officers with certain group life, health, medical and other non-cash
benefits generally available to all salaried employees and not included in
this column pursuant to the Securities and Exchange Commission's rules.
The amounts shown in this column include the following:
(a) Matching contributions by the Company or GDC, as the case may be, under
the Gemstar Employees 401(k) and Profit Sharing Plan, which permit
salaried employees to make tax-deferred contributions of a portion of
their base compensation pursuant to Section 401(k) of the Code. Under
such plan, prior to January 1, 1998, GDC or the Company will match 100%
of 3% of a participant's compensation up to $16,667 contributed as
elective deferrals and 50% of 3% of a participant's compensation in
excess of $16,667 contributed as elective deferrals up to applicable
limits under the Code. Effective January 1, 1998, GDC's matching
contribution will be an amount equal to 100% of up to 2% of a
participant's compensation contributed, up to applicable limits under
the Code.
(b) Represents premiums paid for split dollar life insurance policies.
8
<PAGE>
Summary of Option Grants
The following table provides certain summary information concerning grants
of options to the Named Executive Officers of the Company during the 1999
fiscal year.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Number of % of Total Stock Price
Securities Options Appreciation
Underlying Granted to Exercise for Option Term
Options Employees in Price Expiration -----------------------
Name Granted(1) Fiscal Year Per Share Date 5% 10%
- ---- ---------- ------------ --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Henry C. Yuen........... 445,400 17.1% $21.75 05/31/08 $ 6,092,385 $15,439,300
1,665,090 63.9 20.69 06/01/08 21,665,868 54,905,563
Elsie Ma Leung.......... -- -- -- -- -- --
Larry Goldberg.......... -- -- -- -- -- --
</TABLE>
- --------
(1) Number of securities and exercise price has been adjusted to reflect the
2-for-1 stock split effected in May 1999.
Summary of Options Exercised
The following sets forth certain summary information concerning the exercise
of stock options by the Named Executive Officers during the 1999 fiscal year
together with the fiscal year-end value of unexercised options.
Aggregated Option Exercises in the Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised in
Options at the Money Options at
Shares Fiscal Year End(1) Fiscal Year-End(2)
Acquired Value ------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Henry C. Yuen........... -- -- 6,927,558 8,622,382 $208,675,900 $210,244,179
Elsie Ma Leung.......... -- -- 2,030,700 1,789,300 56,367,804 41,866,695
Larry Goldberg.......... -- -- 556,350 294,650 16,360,077 7,358,348
</TABLE>
- --------
(1) Number of securities has been adjusted to reflect the 2-for-1 stock split
effected in May 1999.
(2) Market value of the securities underlying the options at exercise date or
year-end, as the case may be, minus the exercise or base price of "in-the-
money" options and transaction costs.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
To: The Board of Directors
As members of the Compensation Committee, it is our duty to administer the
Company's overall compensation program for its senior management. The
Compensation Committee also oversees the administration of the Gemstar
International Group Limited 1994 Stock Incentive Plan, as amended (the "Stock
Incentive Plan"). In addition, the Compensation Committee establishes the
compensation and evaluates the performance of the Chief Executive Officer. The
Compensation Committee is comprised entirely of non-employee directors.
The primary philosophy of the Company regarding compensation is to offer a
program which rewards each of the members of senior management commensurately
with the Company's overall financial performance and growth, including each
person's individual performance during the previous fiscal year. The Company's
compensation program for senior management is designed to attract and retain
individuals who are capable of leading the Company in achieving its business
objectives in an industry characterized by competitiveness, growth and change.
The Company believes a substantial portion of the annual compensation of
each member of senior management should relate to, and should be contingent
upon, the financial performance of the Company, as well as the individual
contribution of each particular person to the Company's financial performance.
As a result, a significant portion of the total compensation package consists
of variable, performance-based components, such as merit and annual incentive
bonuses and stock option awards, which can increase or decrease to reflect
changes in corporate and individual performance.
The Compensation Committee evaluates the total compensation for the
Company's Chief Executive Officer, Dr. Henry C. Yuen, and certain other
members of senior management in light of information collected by the
Compensation Committee regarding the financial performance of the Company. The
Compensation Committee considers various indicators of success on both a
corporate and individual level in determining the overall compensation package
for Dr. Yuen and other members of senior management. The Corporate indicators
of success include, among others, revenue, operating income and earnings per
share.
On January 7, 1998, the Compensation Committee approved, and recommended
that the Company's Board of Directors also approve, an Amended and Restated
Employment Agreement (the "New Yuen Agreement") with Dr. Yuen. The New Yuen
Agreement supersedes and replaces Dr. Yuen's former employment agreement with
GDC, and provides for Dr. Yuen's service to each of the Company and GDC as
Chief Executive Officer and President through October 31, 2002, subject to a
three-year renewal term and to earlier termination under certain
circumstances. On January 7, 1998, the Company's Board of Directors (with Dr.
Yuen abstaining from voting) also approved the New Yuen Agreement.
In approving the New Yuen Agreement, the Compensation Committee and the
Board of Directors took into account, among other things, (i) the Company's
substantial dependence upon Dr. Yuen's continued contributions and service to
the Company; (ii) Dr. Yuen's considerable business experience and
technological expertise; (iii) the increased challenge faced by the Company of
sustaining its growth into the coming decade; (iv) challenges associated with
rapidly evolving technology and increasing global competition in the
businesses in which the Company operates; and (v) the desirability of
obtaining Dr. Yuen's commitment to carry out the long-term future projects of
the Company beyond the term of Dr. Yuen's former employment agreement.
The New Yuen Agreement includes provisions (collectively, the "Performance-
Based Provisions") pursuant to which Dr. Yuen's annual base salary ("Base
Salary") is adjusted and his merit bonus, annual incentive bonus and annual
stock option grants are calculated. The Performance-Based Provisions of the
New
Yuen Agreement were subject to shareholder approval to satisfy one of the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), in order to permit the Company to deduct
10
<PAGE>
payments in excess of $1 million in any fiscal year. The Performance-Based
Provisions of the New Yuen Agreement were approved by the holders of the
Company's Ordinary Shares at a Special Meeting of Members of the Company held
on March 12, 1998 (the "1998 Special Meeting").
Under the New Yuen Agreement, Dr. Yuen's Base Salary initially is set at $1
million, effective as of October 1, 1997. The New Yuen Agreement provides for
annual adjustments to Dr. Yuen's Base Salary based on the growth of the
Company's consolidated revenues and consolidated net earnings. The New Yuen
Agreement also provides for the payment to Dr. Yuen of a merit bonus (the
"Merit Bonus"). The Merit Bonus is equal to a percentage of Dr. Yuen's then-
current Base Salary (reflecting any prior adjustments), equal to the
percentage increase, if any, in the Company's consolidated earnings before
interest, taxes, depreciation and amortization ("EBITDA") for its most
recently completed fiscal year from the Company's EBITDA for the comparable
period in the immediately preceding fiscal year. The New Yuen Agreement also
provides for the payment to Dr. Yuen of an additional bonus (the "Annual
Incentive Bonus"), the amount of which, if any, is tied to the annual rate of
growth of the Company's consolidated earnings per share. Under the New Yuen
Agreement, the aggregate dollar amount of Dr. Yuen's Base Salary (as
adjusted), Merit Bonus, and Annual Incentive Bonus for each compensation
period is subject to an annual limitation. The amount of the adjustment to Dr.
Yuen's Base Salary, and the amounts of the Merit Bonus and the Annual
Incentive Bonus payable to Dr. Yuen under the New Yuen Agreement for the
fiscal year ended on March 31, 1999, were dependent upon the Company's
financial performance for such year and on whether the Company's consolidated
revenues and consolidated earnings from operations for the fiscal quarter
ended March 31, 1999 exceeded the Company's consolidated revenues and
consolidated earnings from operations, respectively, for the fiscal quarter
ended March 31, 1998.
The Compensation Committee determines the cash compensation paid to the
other members of senior management in a similar manner as that of the Chief
Executive Officer. Each officer's overall cash compensation is based upon the
Company achieving certain financial objections, together with each officer
satisfying certain qualitative individual management objectives.
The Compensation Committee oversees the administration of the Stock
Incentive Plan, which provides the Company with the ability to periodically
reward key employees with options to purchase shares of the Company's Ordinary
Shares. These long-term incentives are designed to align the interests of key
employees with those of the shareholders of the Company. Stock option grants
provide an incentive that focuses the individual's attention on managing the
Company from the perspective of an owner, with an equity stake in the
business. The value of stock options is tied to the future performance of the
Company's Ordinary Shares and provides value to the recipient only when the
price of the Company's Ordinary Shares increases above the option exercise
price. Stock options reward management for long-term strategic planning
through the resulting enhancement of share price. The Company believes that a
compensation structure which includes the periodic granting of long-term
incentives such as stock options helps to attract and retain senior managers
with long-term management perspectives. During the 1999 fiscal year, the
Company granted stock options to Dr. Yuen. The New Yuen Agreement provides for
the annual grant of options to purchase 1,665,090 Ordinary Shares, as adjusted
to reflect the 2-for-1 stock split effected in May 1999. Holders of the
Company's Ordinary Shares approved the annual stock option grant to Dr. Yuen
at the 1998 Special Meeting. Additionally, Dr. Yuen elected to receive his
Merit Bonus and Annual Incentive Bonus in the form of options to purchase
Ordinary Shares. Accordingly, in June 1998, the Company granted Dr. Yuen
options to purchase 445,400 Ordinary Shares (as adjusted to reflect the 2-for-
1 stock split effected in May 1999) in lieu of paying a portion of Dr. Yuen's
Merit Bonus and Annual Incentive Bonus in cash. The number of options granted
to each employee of the Company was determined in accordance with the relative
position, seniority and contribution of each such individual.
The Compensation Committee has considered the anticipated tax treatment to
the Company regarding the compensation and benefits paid to the executive
officers of the Company in light of the enactment of Section 162(m) of the
Code. Section 162(m) of the Code renders non-deductible to a publicly-held
corporation certain compensation in excess of $1 million paid in any year to
certain of its executive officers, unless the excess compensation is
"performance-based" (as defined) or is otherwise exempt from Section 162(m).
The basic philosophy of the Compensation Committee is to strive to provide the
executive officers of the Company with a
11
<PAGE>
compensation package which will preserve the deductibility of such payments
for the Company to the extent reasonably practicable and to the extent
consistent with its other compensation objectives. However, certain types of
compensation payments and their deductibility (e.g., the spread and exercise
of non-qualified options) depend upon the timing of an executive officer's
vesting or other factors beyond the Compensation Committee's control, and may
affect the deductibility of certain compensation payments. While we believe
that the options granted and to be granted to Dr. Yuen will qualify for the
"performance-based" exception to Section 162(m), no assurance can be given as
to the deductibility of any compensation paid under the New Yuen Agreement to
the extent that such compensation would, together with any other nonexempt
compensation paid to Dr. Yuen, exceed $1 million in any year.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Dr. George F. Carrier (Chairman)
Mr. Teruyuki Toyama
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Dr. Carrier and Mr. Toyama,
neither of whom is an officer or employee of the Company or was previously an
officer or employee of the Company.
12
<PAGE>
PERFORMANCE GRAPH
The following graph shows the Company's total return to shareholders
compared to the Nasdaq Composite Index and the Morgan Stanley High Technology
Index over the period from October 11, 1995 (the date the Company's Ordinary
Shares began trading on the Nasdaq National Market) to March 31, 1999.
Comparison of Cumulative Total Return from October 11, 1995 to March 31,
1999(1)
[Gemstar Performance Graph]
<TABLE>
<CAPTION>
IPO 3/29/96 3/31/97 3/31/98 3/31/99
--- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Gemstar..................................... 100 181.8 89.1 218.2 547.3
Nasdaq...................................... 100 110.0 122.0 183.3 245.8
Morgan Stanley High Tech.................... 100 102.0 114.2 174.7 328.7
</TABLE>
EMPLOYMENT AGREEMENTS
Amended and Restated Employment Agreement with Dr. Yuen
In January 1998, the Company's Compensation Committee and Board approved the
New Yuen Agreement. The New Yuen Agreement supersedes and replaces Dr. Yuen's
former Employment Agreement with GDC, and provides for Dr. Yuen's service to
each of the Company and GDC as Chief Executive Officer and President through
October 31, 2002, subject to a three-year renewal term and to earlier
termination under certain circumstances. The New Yuen Agreement also provides
that Dr. Yuen will serve as a director of each of the Company, GDC and
StarSight.
The New Yuen Agreement includes provisions (collectively, the "Performance-
Based Provisions") pursuant to which Dr. Yuen's annual base salary ("Base
Salary") is adjusted and his merit bonus, annual incentive bonus and annual
stock option grants are calculated. The Performance-Based Provisions of the
New Yuen Agreement were subject to shareholder approval to satisfy one of the
requirements of Section 162(m) of
13
<PAGE>
the Internal Revenue Code of 1986, as amended (the "Code"), in order to permit
the Company to deduct payments in excess of $1 million in any fiscal year. The
Performance-Based Provisions of the New Yuen Agreement were approved by the
shareholders at a Special Meeting of Members of the Company held on March 12,
1998 (the "1998 Special meeting").
Under the New Yuen Agreement, Dr. Yuen's Base Salary initially is set at $1
million. The New Yuen Agreement provides for annual adjustments to Dr. Yuen's
Base Salary based on the growth of the Company's consolidated revenues and
consolidated net earnings, as similar to his former employment agreement. The
New Yuen Agreement also provides for the payment to Dr. Yuen of a merit bonus
(the "Merit Bonus") which is equal to a percentage of Dr. Yuen's then-current
Base Salary (reflecting any prior adjustments), equal to the percentage
increase, if any, in the Company's consolidated earnings before interest,
taxes, depreciation and amortization ("EBITDA") for its most recently
completed fiscal year from the Company's EBITDA for the comparable period in
the immediately preceding fiscal year, as similar to his former employment
agreement. The New Yuen Agreement also provides for the payment to Dr. Yuen of
an additional bonus (the "Annual Incentive Bonus"), the amount of which, if
any, is tied to the annual rate of growth of the Company's consolidated
earnings per share, as similar to his former employment agreement. The New
Yuen Agreement allows Dr. Yuen to elect to receive the Merit Bonus and the
Annual Incentive Bonus in the form of options to acquire Ordinary Shares, in
lieu of receiving the Merit Bonus and the Annual Incentive Bonus in cash. The
Company granted Dr. Yuen options to purchase 445, 400 Ordinary Shares (as
adjusted to reflect the 2-for-1 stock split effected in May 1999) in lieu of
paying Dr. Yuen's Merit Bonus and Annual Incentive Bonus in cash. Under the
New Yuen Agreement, the aggregate dollar amount of Dr. Yuen's Base Salary (as
adjusted), Merit Bonus, and Annual Incentive Bonus for each compensation
period is subject to an annual limitation. The amount of the adjustment to Dr.
Yuen's Base Salary, and the amount of the Merit Bonus and the Annual Incentive
Bonus payable to Dr. Yuen under the New Yuen Agreement for the fiscal year
ended on March 31, 1999, were dependent upon the Company's financial
performance for such year and on whether the Company's consolidated revenues
and consolidated earnings from operations for the fiscal quarter ended March
31, 1999 exceeded the Company's consolidated revenues and consolidated
earnings from operations, respectively, for the fiscal quarter ended March 31,
1998, as similar to his former employment agreement. The New Yuen Agreement
provided for the immediate grant to Dr. Yuen of options to purchase 4,162,725
Ordinary Shares and annual grants of options to purchase 832,545 Ordinary
Shares (not adjusted to reflect 2-for-1 stock split). The Company's
shareholders approved these stock option grants to Dr. Yuen at the 1998
Special Meeting. Dr. Yuen is also entitled to $1,000 a month automobile
allowance and other benefits, including, health insurance and participation in
bonus and incentive and stock option compensation plans.
The New Yuen Agreement entitles Dr. Yuen to terminate the New Yuen Agreement
within 90 days following a change of control (as defined below), in which
event (1) he would be entitled to receive (a) a lump-sum payment equal to five
times his then-current Base Salary, (b) for a period of 60 months following
such termination, all other elements of his compensation provided under the
New Yuen Agreement, (2) all unvested options granted to him pursuant to the
New Yuen Agreement would immediately vest in full and would be exercisable for
their full term and all previously granted vested options to acquire Ordinary
Shares will remain fully exercisable for their full term. A "change of
control" is defined as the occurrence of any of the following: (i) the
acquisition (other than from the Company directly or from any Company
shareholder who was, as of the effective date of the New Yuen Agreement, a 25%
shareholder of the Company) by any person or entity of beneficial ownership of
25% or more of the Company's outstanding shares; (ii) the acquisition (other
than from GDC directly or from any GDC shareholder who was, as of the
effective date of the New Yuen Agreement, a 25% shareholder of GDC) by any
person or entity of beneficial ownership of 25% or more of GDC's outstanding
shares; (iii) during any period of two consecutive years, individuals who, at
the beginning of such period, constituted the board of directors of the
Company or GDC (together with any new directors whose election or appointment
to such board of directors or whose nomination for election by the
shareholders of the Company or GDC was approved by Dr. Yuen or by a vote of a
majority of the directors then still in office who are either directors at the
beginning of such period or whose election, appointment or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors of the Company
14
<PAGE>
or GDC then in office; (iv) approval by the board of directors or a majority
of the shareholders of either the Company or GDC of a merger, reorganization,
combination or consolidation whereby the shareholders of either the Company or
GDC immediately prior to such approval will not, immediately after
consummation of such reorganization, merger, combination or consolidation own
more than 50% of the voting stock of the surviving entity; or (v) a
liquidation or dissolution of either the Company or GDC or the sale of all or
substantially all of the assets of either the Company or GDC, unless the
successor to the assets in any such liquidation, dissolution or sale, is the
Company or any of its subsidiaries.
Under the New Yuen Agreement, as similar to Dr. Yuen's former employment
agreement, all inventions, designs, improvements, patents, copyrights,
discoveries and other intellectual property which (i) are developed by Dr.
Yuen while performing his duties for GDC or using GDC's equipment or trade
secret information, (ii) are related at the time of conception to GDC's
business or actual or demonstrably anticipated research, or (iii) result from
any work performed by Dr. Yuen for GDC, are the property of GDC, if and only
to the extent GDC can show by clear and convincing evidence that such property
is GDC's property.
Employment Agreement with Ms. Leung
The Company and GDC entered into an Amended and Restated Employment
Agreement with Ms. Leung, dated as of March 31, 1998 (the "New Leung
Agreement"), which supersedes and replaces Ms. Leung's former employment
agreement. The New Leung Agreement provides for an initial term effective from
January 1, 1998 through December 31, 2003 and will be automatically renewed
for a three-year period unless either party gives written notice of
termination.
Under the New Leung Agreement, Ms. Leung will serve as Chief Financial
Officer of the Company and Chief Operating Officer and Chief Financial Officer
of GDC. Ms. Leung will also serve as a director of the Company, GDC and
StarSight. Ms. Leung receives a base salary of $700,000 per year, with annual
adjustments based upon the Company's consolidated revenues, as similar to her
former employment agreement. The New Leung Agreement also provides that Ms.
Leung may receive an annual incentive bonus based upon the Company's
consolidated earnings per share, as similar to her former employment
agreement. Under the New Leung Agreement, Ms. Leung received options to
purchase 1,200,000 Ordinary Shares (not adjusted to reflect the 2-for-1 stock
split effected in May 1999), scheduled to vest ratably over the six-year term
of the New Leung Agreement over the term of the Agreement. Ms. Leung is also
entitled to a $750 per month automobile allowance and other benefits,
including health insurance and participation in bonus and incentive and stock
option compensation plans.
The New Leung Agreement provides Ms. Leung the right to terminate the New
Leung Agreement within 90 days following a change of control (defined
substantially as defined above with respect to the New Yuen Agreement), in
which event (1) she would be entitled to receive (a) a lump-sum payment equal
to five times her then-current base salary, (b) for a period of 60 months
following such termination, all other elements of her compensation provided
under the New Leung Agreement, (2) all unvested options granted to her under
the New Leung Agreement would immediately vest in full and would be
exercisable for their full term and all previously granted vested options to
acquire Ordinary Shares will remain fully exercisable for their full term.
All inventions, designs, improvements, patents, copyrights and discoveries
conceived by Ms. Leung during the term of the New Leung Agreement which are
competitive with or related to existing products or services of GDC shall be
assigned to GDC.
Employment Agreement with Mr. Goldberg
GDC has entered into an employment agreement with Mr. Goldberg (the
"Goldberg Agreement"). The term of the employment agreement is from April 1,
1994 to March 31, 2001, and will be automatically renewed for a one-year
period unless either party gives written notice of termination. Mr. Goldberg
resigned as Secretary of the Company in May 1999 and has resigned as Corporate
Counsel of the Company effective August 1999. Mr. Goldberg will continue to be
an employee of the Company pursuant to the terms of his employment agreement.
15
<PAGE>
The Goldberg Agreement provides for a base salary subject to an annual
adjustment based upon the Consumer Price Index and the Company's revenues and
net earnings, and an annual incentive bonus based upon the growth of the
Company.
In the event that GDC is involved in a merger or a sale of all or
substantially all of its assets to another entity, GDC will (or will cause a
successor to) provide for such adjustment to Mr. Goldberg's compensation as
may be necessary to preserve, as nearly as practicable, the payment of his
base salary and certain other benefits under such agreements, including,
without limitation, health insurance.
The Goldberg Agreement provides that termination of Mr. Goldberg (or
termination of any compensation or benefits payable to Mr. Goldberg under the
Goldberg Agreement) may be effected upon the occurrence of certain specified
events. In addition, the Goldberg Agreement provides that all inventions,
patents, copyrights and other intellectual property developed or conceived by
Mr. Goldberg during the term of the Goldberg Agreement which are competitive
with any existing products or services of the Company or its affiliates, are
the property of GDC. All other intellectual property belongs to Mr. Goldberg.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company continues to maintain a license agreement a Holdings subsidiary,
that allows for the incorporation of the VCR Plus+ technology in the
manufacture and distribution of handsets. Pursuant to the license agreement,
the Holdings subsidiary pays the Company a per unit royalty fee based on unit
shipments. Royalty fees totaled $1,446,000 for the year ended March 31, 1997.
There were no royalty fees for the years ended March 31, 1998 and 1999.
The Company continues to maintain service relationships with certain
subsidiaries. Pursuant to the services agreements, the Holdings subsidiaries
provide marketing and promotion services for the Company in their respective
territories in connection with the Company's systems, maintain relationships
with licensees and promote and monitor the publication of the Company's
PlusCode Numbers (a proprietary one to eight digit number that is entered into
a VCR or television equipped with the Company's VCR Plus+ system, enabling
consumers to record a television program). Service fees paid to these
companies totaled $8,300,000, and $8,178,000 and $6,527,000 for each of the
years in the three-year period ended March 31, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the United States Securities Exchange Act of 1934, as
amended, requires that the Company's directors and officers, and persons who
own more than 10% of a registered class of the Company's equity securities,
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "Commission") and the National Association of
Securities Dealers, Inc. ("NASD"). Directors, officers, and beneficial owners
of more than 10% of the Company's Ordinary Shares are required by the
Commission to furnish the Company with copies of the reports they file.
Based solely on its review of the copies of such reports and written
representations from certain reporting persons that certain reports were not
required to be filed by such persons, the Company believes that all of its
directors, officers and greater than 10% beneficial owners complied with all
filing requirements applicable to them with respect to transactions during the
1999 fiscal year, except that a Form 3 for Mr. Lerner was inadvertently not
filed on a timely basis following his appointment to the Company's Board in
July 1998. Mr. Lerner's Form 3 was subsequently filed with the Commission and
the NASD.
16
<PAGE>
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K (the "Form 10-K") for the
year ended March 31, 1999 (without exhibits), which the Company has filed with
the Securities and Exchange Commission, accompanies this Proxy Statement.
Copies of exhibits to the Form 10-K are available, but a reasonable fee per
page will be charged to the requesting shareholder. Shareholders may make
requests in writing to the Company's Shareholders' Communications Department,
c/o Gemstar International Group Limited, 135 North Los Robles Avenue, Suite
800, Pasadena, California 91101.
PROPOSALS OF SHAREHOLDERS
A shareholder proposal submitted pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended, for inclusion in the Company's proxy
statement and form of proxy for the 2000 Annual Meeting of Shareholders must
be received by the Company by May 4, 2000. Such a proposal must also comply
with the requirements as to form and substance established by the Securities
and Exchange Commission for such proposals. A shareholder otherwise desiring
to bring matters before an annual meeting of shareholders must, pursuant to
the Company's Amended and Restated Articles of Association, as amended (the
"Articles"), submit a proposal in writing that is received by the Secretary of
the Company at the principal executive offices of the Company not less than
sixty (60) nor more than ninety (90) days prior to such annual meeting. In the
event that less than seventy (70) days notice or prior public disclosure of
the date of the annual meeting is given or made to the shareholders, the
Articles provide that notice by a shareholder of a shareholder proposal must
be received in writing by the Secretary of the Company on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made.
If any shareholder proposals are presented for action at the Annual Meeting,
but are not submitted within the time periods described above, it is the
intention of the persons named in the accompanying proxy to vote the shares to
which the proxy relates in accordance with their best judgment as determined
in their sole discretion.
APPROVAL OF INDEPENDENT PUBLIC AUDITORS
KPMG LLP were the independent auditors for the Company for the fiscal year
ended March 31, 1999 and have reported on the Company's financial statements
included in the Annual Report of the Company on Form 10-K which accompanies
this Proxy Statement. The Company's independent auditors are appointed by the
Board. The Board has reappointed KPMG LLP as the Company's independent
auditors for the fiscal year ending March 31, 2000. In the event that the
shareholders do not approve KPMG LLP as independent auditors, the selection of
independent auditors will be reconsidered by the Board. A representative of
KPMG LLP will be (i) available to participate by conference call at the Annual
Meeting, (ii) able to make a statement by conference call if he or she so
desires, and (iii) available to respond by conference call to appropriate
questions.
Required Vote
Approval of this proposal requires the affirmative vote of a majority of all
votes cast, in present or by proxy. Abstentions and broker non-votes will have
no effect on the results, although they will be counted for purposes of
determining the presence of a quorum for the conduct of business at the Annual
Meeting.
The Board of Directors recommends a vote "FOR" approval of KPMG LLP as the
Company's independent auditors for the fiscal year ending March 31, 2000.
17
<PAGE>
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board knows of
no other matters which will be acted upon at the Annual Meeting. If any other
matters are presented for action at the Annual Meeting or at any adjournment
thereof, it is the intention of the persons named in the accompanying proxy to
vote the shares to which the proxy relates in accordance with their best
judgment as determined in their sole discretion.
By Order of the Board of Directors
/s/ Henry C. Yuen
Henry C. Yuen
President and Chief Executive
Officer
Pasadena, California
August 31, 1999
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE.
18
<PAGE>
IMPORTANT NOTICE TO SHAREHOLDERS
--------------------------------
of Gemstar International Group Limited
The Annual Meeting of Shareholders will be held on
September 17, 1999 at 7:00 a.m. California, U.S.A. time
at 2-29-18 Nishi-Ikebukuro,
Toshima-ku,
Tokyo 171 Japan
- ----------------------------------------------------------------------------
GEMSTAR INTERNATIONAL GROUP LIMITED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR ANNUAL MEETING, SEPTEMBER 17, 1999
The undersigned, a member (hereinafter, "shareholder") of GEMSTAR
INTERNATIONAL GROUP LIMITED, a British Virgin Islands corporation (the
"Company"), acknowledges receipt of a copy of the Notice of Annual Meeting of
Shareholders, the accompanying Proxy Statement, a copy of the Company's Annual
Report on Form 10-K for the year ended March 31, 1999; and revoking any proxy
previously given, hereby constitutes and appoints Dale Araki, Kazuo Nagasaka and
Stephen Weisswasser and each of them, his or her true and lawful agents and
proxies with full power of substitution in each, to vote the shares of Ordinary
Shares of the Company standing in the name of the undersigned at the Annual
Meeting of Shareholders of the Company to be held at 2-29-18 Nishi-Ikebukuro,
Toshima-ku, Tokyo 171 Japan on September 17, 1999 at 7:00 a.m. California,
U.S.A. time.
(continued and to be signed on the other side)
<PAGE>
Dear Shareholder:
The Annual Meeting of the shareholders of Gemstar International Group
Limited (the "Company") will be held on Friday, September 17, 1999 at 7:00 a.m.
California, U.S.A. time at 2-29-18 Nishi-Ikebukuro, Toshima-ku, Tokyo 171 Japan.
The enclosed notice of the meeting and accompanying proxy statement
cover the formal business of the meeting.
Your continued interest in the Company is appreciated and we hope that
you will find it convenient to attend the meeting. However, whether or not you
plan to attend in person, please assure representation of your shares by
marking, signing and mailing in the accompanying proxy card.
Sincerely,
/s/ Henry Yuen
- ---------------
Henry Yuen
President and Chief Executive Officer
Please Detach and Mail in the Envelope Provided
- ------------------------------------------------------------------------------
[X] Please mark your [_]
votes as in this
example
The Board of Directors recommends a vote FOR Items 1 and 2.
Withhold
authority to
For all vote for
nominees all nominees
1. For a three-year term Nominees: Elsie Ma Leung
as a Class 1 member of [_] [_] Douglas B. Macrae and
the Company's Board of Stephen A. Weisswasser
Directors
(Authority to vote for any nominee named may be
withheld by lining through that nominee's name.)
2. Approval of KPMG LLP as the Company's independent auditors for the fiscal
year ending March 31, 2000.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, upon any other matters as may properly come before the
meeting or at any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREBY BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2. IF ANY NOMINEE BECOMES UNAVAILABLE FOR ANY REASON, THE
PERSONS NAMED AS PROXIES SHALL VOTE FOR THE ELECTION OF SUCH OTHER PERSON AS THE
BOARD OF DIRECTORS MAY PROPOSE TO REPLACE SUCH NOMINEE.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
Signature of Shareholder ____________________________ Dated _______________ 1999
Signature of Shareholder ____________________________ Dated _______________ 1999
This Proxy must be signed exactly as your name appears hereon. Executors,
administrators, trustees, etc., should give full title, as such. If the
shareholder is a corporation, a duly authorized officer should sign on behalf of
the corporation and should indicate his or her title.
