UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE 14A
Proxy Statement
Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No. )
Filed
by the Registrant
x
Filed
by a Party other than the Registrant
¨
Check the appropriate box:
¨
Preliminary Proxy Statement
¨
Confidential For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Materials Pursuant to §240.14a-12
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PORTSMOUTH
SQUARE, INC.
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(Name of Registrant
as Specified In Its Charter)
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(Name of Person(s)
Filing Proxy Statement, if Other Than the Registrant)
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Payment of Filing Fee (Check the
appropriate box):
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x
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No fee required.
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¨
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Fee computed on table below per Exchange
Act Rules 14a-6(i)(4) and 0-11.
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(1)
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Title of each class of securities to which transaction applies
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(2)
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Aggregate number of securities to which transaction applies
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total Fee Paid:
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Fee paid previously with preliminary materials.
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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.
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Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration No:
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(3)
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Filing Party:
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(4)
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Date filed:
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PORTSMOUTH
SQUARE, INC.
10940 WILSHIRE
BLVD., SUITE 2150
LOS
ANGELES, CALIFORNIA 90024
(310)
889-2500
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
ON FEBRUARY 23, 2012
To the Shareholders of Portsmouth
Square, Inc.:
NOTICE
IS HEREBY GIVEN that the Annual Meeting of Shareholders of Portsmouth Square, Inc. ("Portsmouth" or the "Company")
will be held on February 23, 2012 at 11:00 A.M. at the Hilton San Francisco Financial District, 750 Kearny Street, San Francisco,
CA 94108 for the purpose of considering and acting on the following:
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(1)
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To elect five Directors to serve until the next Annual Meeting or until their successors shall have been duly elected and qualified;
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(2)
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To ratify the retention of Burr Pilger Mayer, Inc. as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2012; and
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(3)
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To transact such other business as may properly come before the meeting, or any postponements or adjournments thereof.
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The
Board of Directors has fixed the close of business on January 6, 2012 as the record date for determining the shareholders having
the right to vote at the meeting or any adjournment thereof.
Your
proxy is important to us whether you own a few or many shares. Please complete, sign, date and promptly return the enclosed proxy
in the self-addressed, postage-paid envelope provided. Return the proxy even if you plan to attend the meeting. You may always
revoke your proxy and vote in person.
Dated:
January 20, 2012
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By Order of the Board of Directors,
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Michael G. Zybala
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Secretary
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Important Notice Regarding
the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on February 23, 2012. The Company’s
Proxy, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended June 30, 2011 are also available on the Portsmouth
page of its parent company’s website at:
www.intgla.com.
PORTSMOUTH
SQUARE, INC.
10940 WILSHIRE
BLVD., SUITE 2150
LOS ANGELES,
CALIFORNIA 90024
(310) 889-2500
PROXY STATEMENT
ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD
FEBRUARY 23, 2012
The Board of
Directors of Portsmouth Square, Inc. (the "Company" or Portsmouth") is soliciting proxies in the form enclosed
with this statement in connection with the Annual Meeting of Shareholders to be held February 23, 2012 or at any adjournment or
adjournments thereof.
This Proxy Statement
and the accompanying Proxy are first being sent to Shareholders on or about January 24, 2012. Only shareholders of record at the
close of business on January 6, 2012 are entitled to notice of, and to vote at, the Annual Meeting.
If you give
us a proxy, you can revoke it at any time before it is used. To revoke it, you may file a written notice revoking it with the
Secretary of the Company, execute a proxy with a later date or attend the meeting and vote in person.
You may vote
at the Annual Meeting only shares that you owned of record on January 6, 2012. There were 734,183 shares of stock outstanding
on that date. A majority, or 367,092 of those shares will constitute a quorum for the transaction of business at this meeting.
Each share is entitled to one vote on each matter to be presented at the meeting. Unless cumulative voting is elected as described
under "Election of Directors" below, the affirmative vote of the holders of the majority of the shares of the Company's
stock present or represented at the meeting and entitled to vote is required to elect directors and ratify or approve the other
proposals being voted on at this time.
In addition
to mailing this material to shareholders, the Company has asked banks and brokers to forward copies to persons for whom they hold
stock of the Company and to request authority for the execution of proxies. The Company will reimburse banks and brokers for their
reasonable out-of-pocket expenses in doing so. Officers of the Company may, without being additionally compensated, solicit proxies
by mail, telephone, telegram or personal contact. All proxy soliciting expenses will be paid by the Company. The Company does
not expect to employ anyone else to assist in the solicitation of proxies.
PROPOSAL 1
Election of
Directors
The Company's
Board of Directors presently consists of five directors. We propose to elect five directors, each to hold office until we have
the next Annual Meeting and until his successor is elected and qualified. The Board of Directors has nominated John V. Winfield,
Jerold R. Babin, Josef A. Grunwald, John C. Love and William J. Nance. The person named in the enclosed form of proxy will vote
it for the election of the nominees listed below unless you instruct him otherwise, or a nominee is unwilling to serve. The Board
of Directors has no reason to believe that any nominee will be unavailable. However, in that event, the proxy may vote for another
candidate or candidates nominated by the Board of Directors.
The California
Corporations Code, as applicable to the Company, provides that a shareholder may cumulate votes if a shareholder gives notice,
prior to the voting, of an intention to cumulate votes. If such a notice is given, every shareholder may cumulate votes. Cumulating
votes means that you can take the total number of votes you have for all directors and distribute them among one or more nominees
as you see fit. For example, assume you have 100 shares. We have five directors so you have a total of 5 x 100 = 500 votes. You
could give all 500 votes to one person or 250 votes to each of two nominees, or 100 votes to each of five nominees. You can use
this power only under the circumstances described herein. If cumulative voting is elected, the enclosed form of proxy gives the
proxy discretion to cumulate votes so that he can elect the maximum possible number of the nominees identified below.
Any shareholder
executing the enclosed form of proxy may withhold authority to vote for any one or more nominees by so indicating in the manner
described in the form of proxy. However, the number of votes authorized by the form of proxy will not be affected and the named
proxies could probably offset any such action by using cumulative voting if they thought it necessary. Under the California Corporations
Code any shareholder or any person who claims to have been denied the right to vote may apply to a state superior court for a
determination of the validity of any election or appointment of any director.
DIRECTORS
AND EXECUTIVE OFFICERS
The following
table sets forth certain information with respect to the Directors and Executive Officers of the Company. There is no relationship
by blood, marriage or adoption among the Directors and Officers. All Directors serve one-year terms with their terms expiring
at the Annual Meeting. All Officers of the Company are elected or appointed by the Board of Directors and hold office until the
Annual Meeting or until replaced at the discretion of the Board.
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Shares of
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Common Stock
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Position with
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Director
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Beneficially Owned
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Percent of
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Name
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Age
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The Company
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Since
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on January 6, 2012
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Class
(1)
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John V. Winfield
(2)
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65
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Chairman of the Board,
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1996
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0
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(4)
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0.0
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%
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President and Chief
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Executive Officer
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Jerold R. Babin
(3)
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77
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Director
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1996
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48,345
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6.6
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%
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Josef A. Grunwald
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63
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Director
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1996
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0
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(4)
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0.0
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%
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John C. Love
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71
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Director
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1998
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0
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(4)
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0.0
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%
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William J. Nance
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68
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Director
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1996
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0
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(4)
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0.0
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%
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Michael G. Zybala
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59
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Vice President, Secretary, and General Counsel
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N/A
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0
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0.0
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%
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David T. Nguyen
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38
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Treasurer and Controller
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N/A
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0
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0.0
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%
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Santa Fe Financial
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592,077
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(4)
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80.6
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Corporation and The InterGroup Corporation
(4)
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All of the above as a group
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640,422
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87.2
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%
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(1)
Based on 734,183 common shares issued and outstanding as of January 6, 2012.
(2)
John
V. Winfield is the sole beneficial owner of 49,400 shares of common stock of Portsmouth's majority owner Santa Fe Financial Corporation
("Santa Fe"). The InterGroup Corporation (“InterGroup”) is the beneficial owner of 992,248 shares of common
stock of Santa Fe. As the President and Chairman of the Board and a 60.1% beneficial shareholder of InterGroup, Mr. Winfield has
voting and dispositive power over a total of 1,041,648 shares of Santa Fe, which represents approximately 83.9% of the voting
power of Santa Fe.
(3)
Jerold R. Babin claims sole voting power over the 48,345 shares identified herein, of which he has sole dispositive power over
9,667 shares held in his retirement account. He claims shared dispositive power with his wife over 38,478 shares which they hold
as trustees of a family trust.
(4)
Santa Fe Financial Corporation is the record and beneficial owner of 505,437 common shares of Portsmouth and Santa Fe’s
parent company, InterGroup, is the record and beneficial owner of 86,640 shares of Portsmouth. As directors of Santa Fe and InterGroup,
Messrs. Winfield, Nance and Love share the power to direct the vote of the shares of Portsmouth owned by Santa Fe and InterGroup.
Mr. Grunwald is a director of InterGroup and also shares in that company’s power to vote the shares of Portsmouth.
Security
Ownership of Management in Parent Corporation.
As of January
6, 2012, John V. Winfield is the beneficial owner of 49,400 shares of the common stock of Portsmouth’s parent corporation,
Santa Fe. The InterGroup Corporation is the beneficial owner of 992,248 shares of common stock of Santa Fe. Pursuant to a Voting
Trust Agreement dated June 30, 1998, InterGroup also has the power to vote the 49,400 shares of common stock owned by Mr. Winfield
giving it a total of 1,041,648 voting shares, which represents 83.9% of the voting power of Santa Fe. As President, Chairman of
the Board and a 60.1% beneficial shareholder of InterGroup, Mr. Winfield has voting and dispositive power over the shares owned
of record and beneficially by InterGroup. No other director or executive officer of Portsmouth has a beneficial interest in Santa
Fe’s shares.
Business
Experience:
The principal
occupation and business experience during the last five years for each of the Directors and Executive Officers of the Company
are as follows:
John V. Winfield
—
Mr. Winfield was first elected to the Board in May of 1996 and currently serves as the Company's Chairman of the Board,
President and Chief Executive Officer. Mr. Winfield is also Chairman of the Board, President and Chief Executive Officer of Portsmouth's
parent company Santa Fe Financial Corporation (“Santa Fe”), a public company, having held those positions since April
1996. Mr. Winfield is also Chairman of the Board, President and Chief Executive Officer of Santa Fe’s parent company, The
InterGroup Corporation (“InterGroup”), a public company, and has held those positions since 1987. Mr. Winfield also
serves as Chairman of the Board of Comstock Mining, Inc. (NYSE AMEX: LODE), a public company in which he was elected a Director
on June 23, 2011. Mr. Winfield’s extensive experience as an entrepreneur and investor, as well as his managerial and leadership
experience from serving as a chief executive officer and director of public companies, led to the Board’s conclusion that
he should serve as a director of the Company.
Jerold R.
Babin —
Mr. Babin was first appointed as a Director of the Company on February 1996. Mr. Babin is a retail securities
broker. From 1989 to June 30, 2010, he worked for Prudential Securities (later Wachovia Securities and now Wells Fargo Advisors)
where he held the title of First Vice-President. Mr. Babin retired from his position at Wells Fargo advisors in June 2010. For
the past 20 years, until present, Mr. Babin has also served as an arbitrator for FINRA (formerly NASD). Mr. Babin’s extensive
experience in the securities and financial markets as well has his experience in the securities and public company regulatory
industry led to the Board’s conclusion that he should serve as a director of the Company.
Josef A.
Grunwald
— Mr. Grunwald was elected as a Director of the Company in May 1996. Mr. Grunwald is an industrial, commercial
and residential real estate developer. He serves as Chairman of PDG N.V. (Belgium), a hotel management company, and President
of I.B.E. Services S.A. (Belgium), an international trading company. Mr. Grunwald is also a Director of InterGroup, having held
that position since 1987. Mr. Grunwald’s extensive experience in business and finance in the real estate industry, his experience
in hotel management, as well as his experience as an entrepreneur and manager of his own companies, led to the Board’s conclusion
that he should serve as a director of the Company.
John C. Love
— Mr. Love was appointed a Director of the Company on March 5, 1998. Mr. Love is an international hospitality and tourism
consultant. He is a retired partner in the national CPA and consulting firm of Pannell Kerr Forster and, for the last 30 years,
a lecturer in hospitality industry management control systems and competition & strategy at Golden Gate University and San
Francisco State University. He is Chairman Emeritus of the Board of Trustees of Golden Gate University and the Executive Secretary
of the Hotel and Restaurant Foundation. Mr. Love is also a Director of Santa Fe, having been appointed in March 2, 1999 and a
Director of InterGroup, having been appointed in January 1998. Mr. Love’s extensive experience as a CPA and in the hospitality
industry, including teaching at the university level for the last 30 years in management control systems, and his knowledge and
understanding of finance and financial reporting, led to the Board’s conclusion that he should serve as a director of the
Company.
William J.
Nance
— Mr. Nance was first elected to the Board in May 1996. Mr. Nance is also a Director of Santa Fe having held that
position since May 1996. He is the President and CEO of Century Plaza Printers, Inc., a company he founded in 1979. He has also
served as a consultant in the acquisition and disposition of multi-family and commercial real estate. Mr. Nance is a Certified
Public Accountant and, from 1970 to 1976, was employed by Kenneth Leventhal & Company where he was a Senior Accountant specializing
in the area of REITS and restructuring of real estate companies, mergers and acquisitions, and all phases of real estate development
and financing. Mr. Nance is a Director of InterGroup and has held such position since 1984. Mr. Nance also serves as a director
of Comstock Mining, Inc. Mr. Nance’s extensive experience as a CPA and in numerous phases of the real estate industry, his
business and management experience gained in running his own businesses, his service as a director and audit committee member
for other public companies and his knowledge and understanding of finance and financial reporting, led to the Board’s conclusion
that he should serve as a director of the Company.
Michael G.
Zybala
- Mr. Zybala was appointed as Vice President and Secretary of the Company on February 20, 1998. He is also Vice President,
Secretary and General Counsel of Santa Fe. Mr. Zybala is an attorney at law and has served as the Company’s General Counsel
since 1995 and has represented the Company as its corporate counsel since 1978. Mr. Zybala also serves as Assistant Secretary
and Counsel to InterGroup having held those positions since January 1999.
David T.
Nguyen
– Mr. Nguyen was appointed as Treasurer of the Company on February 27, 2003. Mr. Nguyen also serves as Treasurer
of InterGroup and Santa Fe, having been appointed to those positions on February 26, 2003 and February 27, 2003, respectively.
Mr. Nguyen is a Certified Public Accountant and, from 1995 to 1999, was employed by PricewaterhouseCoopers LLP where he was a
Senior Accountant specializing in real estate. Mr. Nguyen has also served as the Company's Controller from 1999 to December 2001
and from December 2002 to present.
Family Relationships:
There are no family relationships among directors, executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.
Involvement
in Certain Legal Proceedings:
No director or executive officer, or person nominated or chosen to become a director or executive
officer, was involved in any legal proceeding requiring disclosure.
BOARD AND
COMMITTEE INFORMATION
Board of Directors:
Portsmouth is
an unlisted company and a Smaller Reporting Company under the rules and regulations of the Securities and Exchange Commission
(“SEC”). The majority of its Board of Directors consists of “independent” directors as independence is
defined by the applicable rules of the SEC and NASDAQ. The Board of Directors held four meetings during the 2011 Fiscal Year (in
person, telephonically or by written consent). No Director attended (whether in person, telephonically, or by written consent)
less than 75% of all meetings held during the period of time he or she served as Director during the 2011 Fiscal Year.
Board Leadership
Structure
The Chairman
of the Board, Mr. Winfield, also serves as our Chief Executive Officer. The Board believes that combining the Chairman and Chief
Executive officer roles is the most appropriate structure for the Company at this time because (i) this structure has had a longstanding
history with the Company, which the Board believes has served our stockholders well through many economic cycles and business
challenges; (ii) the Board believes Mr. Winfield’s unique business experience and history with the Company makes it appropriate
for him to serve in both capacities; and (iii) the Board believes its corporate government processes and committee structures
preserve Board independence by insuring independent discussions among directors and independent evaluation of, and communications
with, members of senior management such that separation of the Chairman and Chief Executive Officer roles is unnecessary at this
time.
The Board of
Directors has not established a formal process for security holders to send communications to the Board of Directors and the Board
has not deemed it necessary to establish such a procedure at this time. Historically, almost all communications that the Company
receives from security holders are administrative in nature and are not directed to the Board of Directors. If the Company should
receive a security holder communication directed to the Board of Directors, or to an individual director, said communication will
be relayed to the Board of Directors or the individual director as the case may be.
The Company
does not have any formal policy with regard to board members attendance at annual meetings of shareholders but encourages each
director to attend said meetings. All of the Company’s directors attended the fiscal 2010 annual meeting of shareholders.
Committees:
Portsmouth has
established three committees, an Audit Committee, a Hotel Committee and a Securities Investment Committee. The Company does not
have any standing nominating or compensation committees of the Board of Directors. Executive compensation is determined by the
independent members of the Board. New director nominations, if any, will be considered and determined by the Board of Directors.
The Company has no policy with regard to consideration of any director candidates recommended by security holders. As a Smaller
Reporting Company that has approximately 87.2% of its voting securities controlled by management, the Company has not deemed it
appropriate to institute such a policy.
Audit Committee.
Portsmouth is an unlisted company and Smaller Reporting Company under SEC rules. The Company’s Audit Committee is currently
comprised of Messrs. Nance (Chairperson) and Love, each of whom are independent directors as independence is defined by the applicable
rules and regulations of the SEC and NASDAQ, and as may be modified or supplemented. Each of these directors also meets the audit
committee financial expert test based on their qualifications and business experience discussed above. The primary function of
the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing: the financial
reports provided by the Company to any governmental body or the public; the Company’s system of internal controls regarding
finance, accounting, legal compliance and ethics that management and the Board have established; and the Company’s auditing,
accounting and financial processes generally. The Audit Committee is responsible for the selection and retention of the Company’s
independent registered public accounting firm. The Audit Committee held six meetings during the 2011 fiscal year. The Company’s
Board of Directors has adopted a written charter for the Audit Committee, a copy of that written charter, as amended, is posted
on the Portsmouth page of its parent company’s website www.intgla.com.
Hotel Committee.
On February 26, 2004, the Board of Directors established a Hotel Committee to actively oversee the Company’s interests
in Justice Investors and the repositioning and operations of the Hotel asset. The members of the Special Committee are Directors
John C. Love (Chair), William J. Nance and the Company’s Vice President, Secretary and General Counsel, Michael G. Zybala.
The Hotel Committee meets on a regular basis, at least once per month.
Securities
Investment Committee.
On March 17, 1998, the Company established a Securities Investment Committee to establish guidelines
and to review the Company’s investment policies. The Committee consists of all of the Directors of the Company, John V.
Winfield (Chair), John C. Love and William J. Nance. During fiscal 2011, the Securities Investment Committee held three meetings,
in person, telephonically or by written consent with, all members attending each meeting.
Code of Ethics.
The Company
has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. A copy of the Code of Ethics is posted on the Portsmouth page
of its parent company’s website at www.intgla.com. The Company will provide to any person without charge, upon request,
a copy of its Code of Ethics by sending such request to: Portsmouth Square, Inc., Attn: Treasurer, 10940 Wilshire Blvd., Suite
2150, Los Angeles, CA 90024. The Company will promptly disclose any amendments or waivers to its Code of Ethics on Form 8-K and
will post such information on its website.
COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a)
of the Securities Exchange Act of 1934 requires the Company’s officers and directors, and each beneficial owner of more
than ten percent of the Common Stock of the Company, to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Officers, directors and greater than ten-percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received
by the Company, or written representations from certain reporting persons that no Forms 5 were required for those persons, the
Company believes that during fiscal 2011 all filing requirements applicable to its officers, directors, and greater than ten-percent
beneficial owners were complied with.
EXECUTIVE
COMPENSATION
As a Smaller
Reporting Company, Portsmouth has no compensation committee. Executive Officer compensation is set by independent members of the
Board of Directors. The Board seeks to design and set compensation to attract and retain highly qualified executive officers and
to align their interests with those of long-term owners of the Company. The Board has not engaged any compensation consultants
in determining the amount or form of executive or director compensation, but does review and monitor published compensation surveys
and studies. The Board may delegate to the Company’s Chief Executive Officer the authority determine the compensation of
certain executive officers.
The following
table provides certain summary information concerning compensation awarded to, earned by, or paid to the Company’s principal
executive officer and other named executive officers of the Company whose total compensation exceeded $100,000 for all services
rendered to the Company for each of the Company’s last two completed fiscal years ended June 30, 2011 and 2010. No stock
awards, long-term compensation, options or stock appreciation rights were granted to any of the named executive officers during
the last two fiscal years.
SUMMARY COMPENSATION
TABLE
|
Annual Compensation
|
|
|
|
|
|
Name and
|
|
Fiscal
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John V. Winfield
|
|
|
2011
|
|
|
$
|
133,500
|
(1)
|
|
|
-
|
|
|
$
|
17,000
|
(2)
|
|
$
|
150,500
|
|
|
Chairman; President
|
|
|
2010
|
|
|
$
|
133,500
|
(1)
|
|
|
-
|
|
|
$
|
17,000
|
(2)
|
|
$
|
150,500
|
|
|
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael G. Zybala
|
|
|
2011
|
|
|
$
|
97,500
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
97,500
|
|
|
Vice President, Secretary
|
|
|
2010
|
|
|
$
|
105,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
105,000
|
|
|
and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Amounts shown include $6,000 per year in regular Directors fees.
(2)
During
fiscal years 2011 and 2010, the Company also paid annual premiums of $17,000 for a split dollar whole life insurance policy, owned
by, and the beneficiary of which is, a trust for the benefit of Mr. Winfield’s family. This policy was obtained in December
1998 and provides for a death benefit of $1,000,000. The Company has a secured right to receive, from any proceeds of the policy,
reimbursement of all premiums paid prior to any payments to the beneficiary.
Portsmouth has
no stock option plan or stock appreciation rights for its executive officers. The Company has no pension or long-term incentive
plans. There are no employment contracts between Portsmouth and any executive officer, and there are no termination-of-employment
or change-in-control arrangements.
On July 18,
2003, the disinterested members of the Board of Directors established a performance based compensation program for the Company’s
CEO, John V. Winfield, to keep and retain his services as a direct and active manager of the Company’s securities portfolio.
The Company’s previous experience and results with outside money managers was not acceptable. Pursuant to the criteria established
by the Board, Mr. Winfield was be entitled to performance compensation for his management of the Company’s securities portfolio
equal to 20% of all net investment gains generated in excess of the performance of the S&P 500 Index. Compensation amounts
will be calculated and paid quarterly based on the results of the Company’s investment portfolio for that quarter. Should
the Company have a net investment loss during any quarter, Mr. Winfield would not be entitled to any further performance-based
compensation until any such investment losses are recouped by the Company. On February 26, 2004, the Board of Directors amended
the performance threshold to require an annualized return equal to the Prime Rate of Interest (as published in the Wall Street
Journal) plus 2% instead of the S&P 500 Index, effective with the quarterly period commencing January 1, 2004. This performance
based compensation program may be further modified or terminated at the discretion of the Board. No performance based compensation
was earned or paid for fiscal years ended June 30, 2011 or 2010.
Outstanding Equity Awards at Fiscal
Year End.
The Company did not have any outstanding
equity awards at the end of its fiscal year ended June 30, 2011 and has no equity compensation plans in effect.
SHAREHOLDER
ADVISORY VOTES ON EXECUTIVE COMPENSATION
At its Fiscal
2010 Annual Meeting of Shareholders held on February 24, 2011, the Company submitted to its shareholders two proposals regarding
executive compensation. The first proposal to approve, in a non-binding vote, the compensation of the Company’s named executive
officers was approved by the shareholders, having received more than 98% of the shares voted at the meeting in favor of the proposal.
The second proposal was to determine, in a non-binding vote, whether a shareholder advisory vote to approve the compensation of
the Company’s executive officers should occur every one, two or three years. The shareholders overwhelmingly voted in favor
of three years as the frequency in which the Company should have an advisory vote on executive compensation with more than 88%
percent of the shares voted at the meeting being in favor of three years. The Compensation Committee and the Board of Directors
have considered the guidance provided by these advisory votes and have set three years as the frequency in which it will have
a non-binding vote on executive compensation.
DIRECTOR COMPENSATION
Each director
of the Company is paid a Board retainer fee of $1,500 per quarter for a total annual compensation of $6,000. This policy has been
in effect since July 1, 1985. Members of the Company’s Audit Committee also receive a fee of $500 per quarter. Directors
and Committee members are also reimbursed for their out-of-pocket travel costs to attend meetings.
On February
26, 2004, the Board of Directors established a Special Hotel Committee to actively oversee the Company’s interests in Justice
Investors and the repositioning and operations of the Hotel asset. The members of the Special Committee are Directors John C.
Love (Chair), William J. Nance and the Company’s Vice President, Secretary and General Counsel, Michael G. Zybala. For fiscal
year ended June 30, 2010 each of the Committee members, who are directors, received monthly fees of $2,500.
The following
table provides information concerning compensation awarded to, earned by, or paid to the Company’s directors for the fiscal
year ended June 30, 2011.
DIRECTOR COMPENSATION
TABLE
|
Name
|
|
Fees Earned
or Paid in Cash
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerold R. Babin
|
|
$
|
6,000
|
|
|
|
-
|
|
|
$
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Josef A. Grunwald
|
|
$
|
6,000
|
|
|
|
-
|
|
|
$
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Love
|
|
$
|
38,000
|
(1)
|
|
|
-
|
|
|
$
|
38,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William J. Nance
|
|
$
|
38,000
|
(1)
|
|
|
-
|
|
|
$
|
38,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John V. Winfield
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(1)
Amounts
shown include regular Board fees, Audit Committee fees and Hotel Committee fees.
(2)
As
an executive officer, Mr. Winfield’s directors fees are reported in the Summary Compensation Table.
Change in
Control or Other Arrangements
Except for the
foregoing, there are no other arrangements for compensation of directors and there are no employment contracts between the Company
and its directors or any change in control arrangements.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
As of January
16, 2012, Santa Fe and InterGroup owned 80.6% of the common stock of Portsmouth, and InterGroup and John V. Winfield, in the aggregate,
owned approximately 83.9% of the voting stock of Santa Fe. Certain costs and expenses, primarily rent, insurance and general administrative
expenses, are allocated between the Company, Santa Fe, and InterGroup based on management’s estimate of the utilization
of resources. Effective June 30, 1998, certain accounting and administrative functions of the Company were transferred to the
Los Angeles, California offices of InterGroup. During the fiscal years ended June 30, 2011 and 2010, the Company made payments
to InterGroup in the total amount of approximately $72,000 for each of those years, for administrative costs and reimbursement
of direct and indirect costs associated with the management of the Company and its investments, including the Partnership asset.
As Chairman
of the Securities Investment Committee, the Company’s President and Chief Executive officer, John V. Winfield, oversees
the investment activity of the Company in public and private markets pursuant to authority granted by the Board of Directors.
Mr. Winfield also serves as Chief Executive Officer of Santa Fe and InterGroup and oversees the investment activity of those companies.
Depending on certain market conditions and various risk factors, the Chief Executive Officer, his family, Santa Fe and InterGroup
may, at times, invest in the same companies in which the Company invests. The Company encourages such investments because it places
personal resources of the Chief Executive Officer and his family members, and the resources of Santa Fe and InterGroup, at risk
in connection with investment decisions made on behalf of the Company.
In December
1998, the Board of Directors authorized the Company to obtain whole life insurance and split dollar insurance policies covering
the Company’s President and Chief Executive Officer, Mr. Winfield. During fiscal 2011 and 2010, the Company paid annual
premiums of $17,000 for the split dollar whole life insurance policy, owned by, and the beneficiary of which is, a trust for the
benefit of Mr. Winfield’s family. The Company has a secured right to receive, from any proceeds of the policy, reimbursement
of all premiums paid prior to any payments to the beneficiary.
There are no
other relationships or related transactions between the Company and any of its officers, directors, five-percent security holders
or their families that require disclosure.
Director Independence
Portsmouth is
an unlisted company and a Smaller Reporting Company under the rules and regulations of the SEC. With the exception of the Company’s
President and CEO, John V. Winfield, all of Portsmouth’s Board of Directors consists of “independent” directors
as independence is defined by the applicable rules of the SEC and NASDAQ.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF
JOHN V. WINFIELD,
JEROLD R. BABIN, JOSEF A. GRUNWALD, JOHN C. LOVE
AND WILLIAM
J. NANCE AS DIRECTORS OF THE COMPANY
PRINCIPAL
HOLDERS OF EQUITY SECURITIES
The following
table shows, as of January 6, 2012, the Common Stock owned by every person owning of record (other than securities depositories),
or known by the Company to own beneficially, more than 5% of the outstanding shares. Any voting securities beneficially owned
by directors and director nominees are also disclosed under Proposal 1 - Election of Directors herein.
|
Name
|
|
Shares of Common Stock
|
|
|
Percent of Class
(1)
|
|
|
|
|
|
|
|
|
|
|
Santa Fe Financial Corporation
|
|
|
592,077
|
(2)
|
|
|
80.6
|
%
|
|
and The InterGroup Corporation
|
|
|
|
|
|
|
|
|
|
10940 Wilshire Blvd., Suite 2150
|
|
|
|
|
|
|
|
|
|
Los Angeles, CA 90024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerold R. Babin
|
|
|
48,345
|
(3)
|
|
|
6.6
|
%
|
|
555 California Street
|
|
|
|
|
|
|
|
|
|
Suite 2300
|
|
|
|
|
|
|
|
|
|
San Francisco, CA 94104
|
|
|
|
|
|
|
|
|
_______________________________
(1)
Based on 734,183 shares issued and outstanding.
(2)
Santa
Fe Financial Corporation is the record and beneficial owner of 505,437 common shares of Portsmouth and Santa Fe’s parent
company, InterGroup, is the record and beneficial owner of 86,640 shares of Portsmouth. The President and Chairman of the Boards
of Santa Fe and InterGroup votes these shares.
(3)
Jerold R. Babin claims sole voting power over the 48,345 shares identified herein, of which he has sole dispositive power over
9,667 shares held in his retirement account. He claims shared dispositive power with his wife over the 38,478 shares which they
hold as trustees of a family trust.
As of January
6, 2012, there were 734,183 shares of the Company's Common Stock issued and outstanding, which were held by approximately 190
shareholders of record, with a total of approximately 370 shareholders, including beneficial holders.
PROPOSAL 2
Ratification
of the Appointment of
Independent
Registered Public Accounting Firm
The Audit Committee
of the Board of Directors has appointed the firm of Burr Pilger Mayer, Inc. (“BPM” formerly, Burr, Pilger & Mayer
LLP) as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2012. BPM has served
as the Company’s independent registered public accounting firm since October 23, 2007. Although the action of shareholders
in this matter is not required, the Audit Committee believes it is appropriate to seek shareholder ratification of this appointment.
Ratification requires the affirmative vote of a majority of the shares represented and voted at the Annual Meeting.
We expect that
a representative of BPM will be present at the Annual Meeting to respond to appropriate questions from Shareholders, and we will
provide this representative with an opportunity to make a statement if he or she desires to do so.
THE FOLLOWING REPORT OF THE
AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SEC UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
AUDIT COMMITTEE
REPORT
The Audit Committee’s
responsibilities are described in a written charter adopted by the Board of Directors. The Audit Committee primary duties and
responsibilities are to: serve as an independent and objective party to monitor the Company’s financial reporting process
and internal control system; appoint and approve the compensation of the Company’s independent registered public accounting
firm; review and appraise the audit efforts of the Company’s independent registered public accounting firm; and provide
an open avenue of communications among the independent registered public accounting firm, financial and senior management, and
the Board of Directors. During fiscal year ended June 30, 2011, the Company retained Burr Pilger Mayer, Inc. (“BPM”)
as its independent registered public accounting firm to provide audit and audit related services. All fees and expenses paid to
BPM were approved by the Audit Committee.
The Audit Committee
reviewed and discussed the audited financial statements with management and BPM, and management represented to the Audit Committee
that the consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United
States. The discussions with BPM also included the matters required by Statement on Auditing Standards No. 114 (AICPA,
Professional
Standards,
Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board (United States) in Rule 3200T
regarding “
Communication with Audit Committees.
”
The Audit Committee
has also received the written disclosures and the letter from BPM required by applicable requirements of the Public Company Accounting
Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence,
which was also discussed with BPM.
Based on the
Audit Committee’s review of the audited financial statements, and the review and discussions with management and BPM referred
to above, the Audit Committee recommended to the Company’s Board of Directors that the audited financial statements be included
in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011 for filing with the Securities and Exchange
Commission.
THE AUDIT
COMMITTEE:
WILLIAM
J. NANCE, CHAIRPERSON
JOHN C. LOVE
Audit
Fees
The aggregate
fees billed for each of the last two fiscal years ended June 30, 2011 and 2010 for professional services rendered by Burr Pilger
Mayer, Inc., the independent registered public accounting firm for the audit of the Company’s annual financial statements
and review of financial statements included in the Company’s Form 10-Q reports or services normally provided by the independent
registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years, were
as follows:
|
|
|
Fiscal Year
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Audit Fees
|
|
$
|
133,000
|
|
|
$
|
104,000
|
|
|
Audit Related Fees
|
|
|
-
|
|
|
|
-
|
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
|
All Other Fees
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
133,000
|
|
|
$
|
104,000
|
|
Audit Committee
Pre-Approval Policies
The Audit Committee
shall pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed
for the Company by its independent registered public accounting firm, subject to any de minimus exceptions that may be set for
non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Committee prior to the completion
of the audit. The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate,
including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee
to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting. All of the services described herein
were approved by the Audit Committee pursuant to its pre-approval policies.
None of the
hours expended on the independent registered public accounting firms’ engagement to audit the Company’s financial
statements for the most recent fiscal year were attributed to work performed by persons other than the independent registered
public accounting firm’s full-time permanent employees.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
RATIFICATION
OF THE APPOINTMENT OF BURR PILGER MAYER, INC.
AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
OTHER BUSINESS
As of the date
of this statement, management knows of no business to be presented at the meeting that is not referred to in the accompanying
notice. As to other business that may properly come before the meeting, it is intended that the proxies properly executed and
returned will be voted in respect thereof at the discretion of the person voting the proxies in accordance with the best judgment
of the person voting the proxies.
SHAREHOLDER
PROPOSALS
It is presently
anticipated that the fiscal 2012 Annual Meeting of Shareholders will be held on February 21, 2013. Any shareholder proposals intended
to be considered for inclusion in the proxy statement for presentation at the fiscal 2012 Annual Meeting must be received by the
Company no later than September 26, 2012. The proposal must be in accordance with the provisions of Rule 14a-8 and any other rules,
or amendments thereto, promulgated by the Securities and Exchange Commission under the Securities Act of 1934. Any proposals must
be submitted in writing to the following address: Michael G. Zybala, Secretary, Portsmouth Square, Inc., 10940 Wilshire Blvd.,
Suite 2150, Los Angeles, CA 90024. It is suggested that the proposal be submitted by certified mail – return receipt requested.
ANNUAL REPORT
ON FORM 10-K
The Annual Report
on Form 10-K for the fiscal year ended June 30, 2011 accompanies this proxy statement, but is not deemed a part of the proxy solicitation
material. A copy of the Company’s Form 10-K for the fiscal year ended June 30, 2011, as required to be filed with the Securities
and Exchange Commission, excluding exhibits, will be mailed to shareholders without charge upon written request to: Michael G.
Zybala, Secretary, Portsmouth Square, Inc., 10940 Wilshire Blvd., Suite 2150, Los Angeles, CA 90024. Such request must set forth
a good-faith representation that the requesting party was either a holder of record or a beneficial owner of the common stock
of the Company on January 6, 2012. The Company’s Form 10-K and other reports are also available on the Portsmouth page of
its parent company’s website at www.intgla.com
and through the Securities and Exchange
Commission’s website
www.sec.gov.
|
|
By Order of the Board of Directors
|
|
|
|
|
|
PORTSMOUTH SQUARE, INC.
|
|
|
|
|
|
Michael G. Zybala
|
|
|
Secretary
|
Dated: Los Angeles, California
January 20, 2012
Portsmouth Square (PK) (USOTC:PRSI)
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