harvey norman holdings limited - asx · 2010-10-21 · harvey norman holdings limited a.c.n 003 237...

HARVEY NORMAN

HOLDINGS LIMITED A.C.N 003 237 545

A1 RICHMOND ROAD HOMEBUSH WEST, N.S.W 2140

LOCKED BAG 2 SILVERWATER DC, NSW 1811

AUSTRALIA

Telephone: (02) 9201 6111 Facsimile: (02) 9201 6250

21 October 2010

The Manager

Announcements

Australian Stock Exchange Limited

Exchange Centre

20 Bridge Street

SYDNEY NSW 2000

Dear Sir

We enclose a copy of the 2010 Notice of Meeting and Proxy form for Harvey Norman

Holdings Limited which will accompany the Annual Report to shareholders.

We expect to have the printed Annual Report, Notice of Meeting and Proxy form

forwarded to shareholders during the last week of October 2010.

If you have any queries, please do not hesitate to contact the writer.

Yours faithfully

Chris Mentis

Chief Financial Officer / Company Secretary

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Notice of Meeting

Notice is hereby given that the Annual General Meeting of members of Harvey Norman

Holdings Limited A.C.N. 003 237 545 will be held at The Tattersalls Club, 181 Elizabeth Street,

Sydney on 23 November, 2010 at 11.00 a.m.

A G E N D A

1. To receive the Company's Financial Statements, the Directors' Declaration and the

Directors' Report and Independent Audit Report for the year ended 30 June 2010.

2. To adopt the Remuneration Report as included in the Directors' Report for the year ended

30 June 2010. (Note the vote on this resolution is advisory only and does not bind the

directors or the Company).

3. To declare a dividend as recommended by the Board.

4. To consider, and if thought fit, pass the following resolution as an ordinary resolution:

"That Michael John Harvey, a Director who retires by rotation at the close of the

meeting in accordance with Article 63A of the Constitution of the Company and

being eligible, be re-elected as a Director of the Company".


"That Ian John Norman, a Director who retires by rotation at the close of the




"That Kay Lesley Page, a Director who retires by rotation at the close of the




"That John Evyn Slack-Smith, a Director who retires by rotation at the close of

the meeting in accordance with Article 63A of the Constitution of the Company

and being eligible, be re-elected as a Director of the Company".

8. To consider, and if thought fit, pass the following resolution as a special resolution:

"That the constitution of the Company be amended as follows:

(a) by inserting the following words at the end of Article 1(1):

References to Act or Code include reference to the Corporations Act 2001

(Cth).

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(b) by amending Article 87 to read as follows:

Subject to Article 88, the directors may authorise the payment by the

company to the members of such interim dividends as appear to the

directors to be justified by the profits of the company and not in

contravention of the Act.

(c) by amending Article 88 to read as follows:

No dividend shall be payable by the company if payment is prohibited by

Section 254T of the Act. Interest is not payable by the company in respect

of any dividend."

9. To consider, and if thought fit, pass the following resolution as an ordinary resolution in

accordance with ASX Listing Rule 10.14:

"That the Company approve the issue of 3,000,000 options to subscribe for

3,000,000 fully paid ordinary shares in the Company to David Matthew

Ackery, subject to the conditions set out in the Explanatory Notes."

No amount is payable in respect of the grant of an option.




3,000,000 fully paid ordinary shares in the Company to Chris Mentis,

subject to the conditions set out in the Explanatory Notes."





3,000,000 fully paid ordinary shares in the Company to John Evyn Slack-

Smith, subject to the conditions set out in the Explanatory Notes."


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A member has a right to appoint a proxy.

The proxy need not be a member of the Company.

A member who is entitled to cast two or more votes may appoint two proxies and may specify

the proportion or number of votes each proxy is appointed to exercise.

ATTACHMENTS

A. Voting Exclusion Statements.

B. Explanatory Statement.

C. Form of Proxy.

Dated this 21st day of October 2010

………………………………

Chris Mentis

Company Secretary

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http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#member

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ATTACHMENT A

VOTING EXCLUSION STATEMENTS

ASX LISTING RULES

RULE 14.11

HARVEY NORMAN HOLDINGS LIMITED A.C.N 003 237 545 (the "Company")

On 23 November, 2010, at the Annual General Meeting of its members, the Company will

disregard any votes cast on the following proposed resolutions:

1. Proposed Resolution 9:


3,000,000 fully paid ordinary shares in the Company to David Matthew Ackery,


by the following persons excluded from voting:

David Matthew Ackery;

Each associate of David Matthew Ackery;

Chris Mentis;

Each associate of Chris Mentis;

John Evyn Slack-Smith;

Each associate of John Evyn Slack-Smith.

However, the Company need not disregard a vote if:

it is cast by a person or proxy for a person who is entitled to vote, in accordance

with the directions on the proxy form; or

it is cast by the person chairing the meeting as proxy for a person who is entitled to

vote, in accordance with a direction on the proxy form to vote as the proxy

decides.



3,000,000 fully paid ordinary shares in the Company to Chris Mentis, subject to

the conditions set out in the Explanatory Notes."




Chris Mentis;







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decides.



3,000,000 fully paid ordinary shares in the Company to John Evyn Slack-Smith,





Chris Mentis;









decides.

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ATTACHMENT B

EXPLANATORY NOTES

Resolution 1 - To receive the Company's Financial Statements, the Directors' Declaration

and the Directors' Report and Independent Audit Report for the year

ended 30 June 2010.

1.1 The Harvey Norman Holdings Limited A.C.N. 003 237 545 (the "Company") Annual

Report has been made available to shareholders and is published on the Company's

website (www.harveynormanholdings.com.au/annualreports.htm).

1.2 The Chairman will allow a reasonable opportunity for the members as a whole at the

meeting to ask questions about or make comments on the management of the Company.

Resolution 2 - Adoption of Remuneration Report

2.1 Section 250R(2) of the Corporations Act 2001 (Cth) (the "Corporations Act") requires

that at the annual general meeting of the Company a resolution that the remuneration

report be adopted must be put to the vote at the Annual General Meeting of the

Company.

2.2 The Chairman will allow a reasonable opportunity for the members as a whole to ask

questions about, or make comments on, the remuneration report.

Resolution 3 - Declaration of Dividend

3.1 Article 86(1) of the constitution of the Company provides that the Company in a general

meeting may declare a dividend if, and only if, the directors of the Company have

recommended a dividend. Article 86(2) provides that a dividend shall not exceed the

amount recommended by the directors of the Company.

3.2 The recommended final dividend is 7.0 cents per share, fully franked, to be paid on 6

December 2010 to shareholders registered at 5:00pm on 5 November 2010. The total

dividend for the year will be 14.0 cents per share fully franked.

Resolution 4 - 7 - Election of Directors

4.1 Article 63A of the constitution of the Company provides that at every annual general

meeting, one third of the directors of the Company must retire from office and that no

director shall retain office for a period exceeding three years, without submitting himself

or herself for re-election.

The following directors retire and submit themselves for re-election.

4.2 Michael John Harvey - Director

Mr. M. Harvey, aged 45, joined Harvey Norman in 1987, having completed a Bachelor

of Commerce degree. Mr. M. Harvey gained extensive experience as a Harvey Norman

franchisee from 1989 to 1994. Mr M. Harvey became a director of the Company in 1993

and was appointed Managing Director in July 1994. Mr. M. Harvey ceased to be an

Executive Director and Managing Director on 30 June 1998.

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4.3 Ian John Norman - Director

Mr. Norman, aged 72, was co-founder of Harvey Norman with Mr. G. Harvey in 1982.

4.4 Kay Lesley Page - Director and Chief Executive Officer

Ms. Page, aged 53, joined Harvey Norman in 1983 and was appointed a director of the

Company in 1987. Ms. Page became a Director and Chief Executive Officer of the

Company in February 1999 and has overall executive responsibility for the consolidated

entity.

4.5 John Evyn Slack-Smith – Director

Mr. Slack-Smith, aged 41, was a Harvey Norman computer franchisee between 1993 and

1999. Mr. Slack-Smith became a director of the Company on 5 February 2001. Mr.

Slack-Smith has served as a director of the public company, Sydney Cancer Centre

Foundation.

Resolution 8 - Amendment to Constitution of the Company

5.1 The Corporations Amendment (Corporate Reporting Reform) Act 2010 ("Corporations

Amendment Act") received royal assent on 28 June 2010. The Corporations Amendment

Act varies certain provisions of the Corporations Act, including but not limited to the

requirements which must be met before a company may pay a dividend. The new section

254T of the Corporations Act provides that a company must not pay a dividend unless:

(a) the company's assets exceed its liabilities immediately before the dividend is

declared and the excess is sufficient for the payment of the dividend;

(b) the payment of the dividend is fair and reasonable to the company's shareholders

as a whole; and

(c) the payment of the dividend does not materially prejudice the company's ability to

pay its creditors.

5.2 In light of the changes to the Corporations Act, the proposed amendments to Articles 87

and 88 permit the directors to authorise payments of interim dividends and, subject to the

approval of shareholders, the payment of final dividends where such payments would not

breach the new section 254T of the Corporations Act.

5.3 The original Article 1(1):

(a) did not provide a definition of "Code", despite reference to the Code throughout

the constitution of the Company; and

(b) defined "Act" to mean the Companies (New South Wales) Code, which has been

superseded by the Corporations Act.

Proposed Resolution 8 includes an amendment to Article 1(1) in order that references to

Act or Code include references to the Corporations Act.

5.4 Section 136(2) of the Corporations Act provides that a company may modify or repeal its

constitution, or a provision of its constitution, by special resolution.

Resolution 9 – 11 - Proposed Grant of Options

6.1 The options will have a gross estimated aggregate value of $10,440,000.00, based upon

the assumptions applied in the Black-Scholes Model valuation methodology set out in

paragraph 6.20. So far as each of the directors and the Company are aware, there are no

other benefits foregone by any party.

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Background

6.2 The remuneration philosophy of the Company is set out at page 17 of the 2010 Annual

Report.

Remuneration Philosophy

6.3 The performance of the Company depends upon the quality of its directors and

executives. To prosper, the Company must attract, motivate and retain highly skilled

directors and executives. The Company intends to ensure that the level and composition

of remuneration is sufficient and reasonable and that its relationship to corporate and

individual performance is defined.

The Company's philosophy is that executive rewards must be "fair and responsible" in

the context of both external and internal relativities. All executive remuneration has been

benchmarked against comparable executive rewards in comparable companies.

Executive rewards must have a balance between fixed components (base salary and

benefits) and variable components (short-term and long-term incentives). Any variable

components, particularly when offered in the form of shares or options, must be subject

to performance conditions and service conditions.

The Board strives to ensure that operations of the Company are linked to the strategic

objectives of the Company, to create long term value for shareholders. The Board has

determined that in the future, variable "at risk" remuneration in the form of equity awards

to executive directors will require members of the executive director team to achieve and

execute measures, targets and initiatives, critical to the execution of the strategic

objectives of the Company.

The Board has always had the view that equity based plans must not enable executives to

reap substantial rewards for poor performance. The Board believes that:

(i) rises (or falls) in share prices can often be attributable to general market trends,

unrelated to the performance of executives or contribution by executives to the

creation of long term shareholder value;

(ii) long term value for shareholders is best created by requiring that the executive

director team should focus on, and achieve and execute measures, targets and

initiatives critical to the execution of the strategic objectives of the Company;

(iii) relevant measures, targets and initiatives will involve both financial and

non-financial criteria, and flexibility, to adjust to changing circumstances, to

avoid short-term decision making; and

(iv) "at risk" equity awards to the executive director team should be subject to

performance conditions and service conditions, informed by the above principles.

Responsibilities of the Remuneration Committee

6.4 The Board confirmed the role and responsibilities of the Remuneration Committee in a

written charter, which was formally adopted at a meeting of directors of the Company,

held 18 August 2003.

Since 30 June 2005, the Remuneration Committee has consisted of three members, all

being non-executive directors, two of whom are independent.

The responsibilities of the Remuneration Committee include the review and making of

recommendations to the Board on:

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(i) executive remuneration and incentive policies;

(ii) remuneration packages of senior management;

(iii) the recruitment, retention and termination policies of the Company and

procedures for senior management;

(iv) incentive schemes;

(v) superannuation arrangements; and

(vi) the remuneration framework for directors.

The remuneration policy has been designed so that the policy:

(i) motivates directors and management to pursue long-term growth and success of

the Company within an appropriate control framework; and

(ii) demonstrates a clear relationship between key executive performance and

remuneration.

The Board believes that the members of the Remuneration Committee can make, and do

make, quality and independent judgements in the best interests of the Company on

remuneration issues, notwithstanding that not all of the members of the Remuneration

Committee are independent directors.

Components of Executive Remuneration

6.5 The Remuneration Committee reviews and makes recommendations to the Board about

the performance, and remuneration of all executive directors. The Remuneration

Committee may review recommendations of the chief executive officer, chief financial

officer and the chief operating officer in relation to key senior executives of the

Company. No individual is directly involved in deciding his or her remuneration. The

Remuneration Committee intends that remuneration packages of executives of the

Company should involve a balance between fixed and incentive remuneration, reflecting

short and long-term performance objectives, appropriate to the circumstances and

strategic objectives of the Company. A proportion of the remuneration of executive

directors is structured in a manner designed to link rewards to corporate and individual

performance.

As part of the process of making recommendations to the Board about the reasonableness

of the remuneration of executive directors, the Remuneration Committee has undertaken

its own research in relation to remuneration packages disclosed in public reports of other

listed companies for executives undertaking similar functions to the executive directors

of the Company.

Terms of Issue

6.6 The exercise price for each option will be the volume weighted average market price of

the Company's shares sold on the ASX during the five consecutive trading days

immediately before the relevant option is granted ("Market Price"). If exercised, each

option will be converted into one ordinary share.

Each executive named in the resolution will be granted options to acquire shares in the

Company at the Market Price. Subject to meeting the relevant performance conditions

and service conditions and payment of the exercise price:

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(a) up to one third of the options will be granted within seven (7) days of the meeting

and will be exercisable between 1 January 2014 and 30 June 2016 (the "First

Tranche");

(b) up to one third of the options will be granted within seven (7) days of the first

anniversary of the meeting and will be exercisable between 1 January 2015 and

30 June 2017 (the "Second Tranche");

(c) up to one third of the options will be granted within seven (7) days of the second

anniversary of the meeting and will be exercisable between 1 January 2016 and

30 June 2018 (the "Third Tranche").


Options will not be listed on the ASX.

Application will be made to list the shares issued on the exercise of the options on the

ASX and such shares will rank equally with other ordinary shares of the Company and

will not carry restrictions on trading.

Unexercised options will lapse, irrespective of whether they have become exercisable,

when one of the following events occur:

as to the First Tranche, on 1 July 2016 or such earlier date specified by the Board;

as to the Second Tranche, on 1 July 2017 or such earlier date specified by the Board;

as to the Third Tranche, on 1 July 2018 or such earlier date specified by the Board;

the Board determines the options granted to a grantee should lapse, as a result of any

fraud, gross misconduct or conduct by that grantee which brings the Company into

disrepute;

the Board determines the relevant requirements in relation to options granted to a

grantee, including performance conditions and service conditions, have not and are

incapable of being met.

Separate performance conditions will apply to each tranche of options. There will be a 3

year period from date of grant of options, to satisfy all performance conditions. Each

tranche remains subject to service conditions.

The Remuneration Committee may at any time reduce the number of exercisable options

if there is only partial achievement of the performance conditions.

The Board reserves the right to make adjustments to the number of options or the amount

payable upon exercise of the options, or both, in accordance with the ASX Listing Rules,

if there is a bonus or rights issue or other reconstruction of capital before the options are

exercised.

Options are transferable only after satisfaction of all performance conditions.

Options will carry no right to receive dividends or to vote.

Subject to the ASX Listing Rules, options may be exercised before their specified

exercise date, but only if.

(a) a change of control of the company happens; or

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(b) in special circumstances.

For example, if a takeover offer is made to acquire the whole of the Company's shares

then the options may be exercised. Special circumstances, which will allow for the early

exercise of options, include retirement, redundancy, death or permanent disability of the

grantee.

An option will not entitle the holder to participate in new issues without exercising the

option.

The rights attaching to an option may be changed in order to comply with the listing rules

applying to a reorganisation of capital at the time of the reorganisation.

If there is a pro rata issue (except a bonus issue) to the holders of the underlying

securities, the exercise price of an option may be reduced according to the following

formula:

)1(

)]([

N

DSPEOEPNEP

where

NEP is the new exercise price of the option;

OEP is the old exercise price or the option;

E is the number of underlying securities into which one option is exercisable;

P is the average market price per security (weighted by reference to volume) of the

underlying securities during the 5 trading days ending on the day before the ex

rights date or ex entitlements date;

S is the subscription price for a security under the pro rata issue;

D is the dividend due but not yet paid on the existing underlying securities (except

those to be issued under the pro rata issue);

N is the number of securities with rights or entitlements that must be held to receive a

right to one new security.

6.7 Shareholder approval is required under ASX Listing Rule 10.14 and under Chapter 2E of

the Corporations Act for all issues of options to directors of the Company.

The Board has reviewed the overall remuneration arrangements of each executive

director named in Proposed Resolutions 9-11 ("Grantee") and believes the option

allocations proposed are reasonable having regard to the circumstances of the Company,

the duties and responsibilities of each Grantee and market levels of remuneration of

executives of similar sized organisations.

The Remuneration Committee considered a method of compensating each Grantee for the

lack of inclusion of "at risk" variable remuneration in the form of options in their

respective remuneration packages for the year ended 30 June 2010. The Remuneration

Committee considers the number of options proposed to be granted to each Grantee is

appropriate.

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In order for shareholders to consider the reasonableness of the issue of options to each

Grantee, as proposed in Proposed Resolutions 9 – 11, the following table sets out the total

remuneration arrangements proposed for each Grantee, assuming Proposed Resolutions 9

– 11 are approved, and compares these proposed arrangements with the total

remuneration arrangements that applied to each Grantee in the previous year (2010).

[Note this table only includes amounts relating to the options contained in the First

Tranche].

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Grantee Remuneration Comparison ($) (3)

[This table compares year end 30 June 2010 and year end 30 June 2011]

Name

(Position) Details

Short Term Benefits

(including Salary &

Fees, Performance

Cash Incentive, Other

Short Term Benefits

and Non Monetary

Benefits)

Super-

annuation

Reversal of

2007 EOP

(4)

Long Term

Incentive Total Remuneration

C Mentis

(Chief

Financial

Officer)

2010

(Actual)

2011 (Proposed)

1,285,539

1,285,539

14,461

14,461

(160,194)

-

-

1,160,000 (2)

1,139,806 (1)

2,460,000

D Ackery

(Executive

Director)

2010

(Actual)

2011 (Proposed)

1,735,539

1,735,539

14,461

14,461

(366,158)

-

-

1,160,000 (2)

1,383,842 (1)

2,910,000

J Slack-Smith

(Chief

Operating

Officer)

2010

(Actual)

2011 (Proposed)

1,735,539

1,735,539

14,461

14,461

(366,158)

-

-

1,160,000 (2)

1,383,842 (1)

2,910,000

Total

2010

(Actual)

2011 (Proposed)

4,756,617

4,756,617

43,383

43,383

(892,510)

-

-

3,480,000 (2)

3,907,490 (1)

8,280,000

Footnotes

(1) These are the amounts disclosed and explained in the 2010 Annual Report.

(2) The value of the long term incentive component for 2011 is the estimated value of the

proposed options based on the assumptions set out in paragraph 6.20 below multiplied

by the number of options proposed to be granted during the year ending 30 June 2011

for each Grantee. Because the accounting for share-based payments is complex and

the variables applied will change at the grant date, the values included in this table are

indicative and meant as a guide only for shareholders.

(3) The figures in the table only include amounts relating to the options contained in the

First Tranche.

(4) The options issued on 26 November 2007 to the respective trustees of trusts for the

benefit of certain executive directors of the Company ("2007 EOP Allocation") were

subject to testing during each of the financial years in the qualifying period to

determine whether performance conditions were satisfied. As the performance

conditions applicable to the 2007 EOP Allocation were not satisfied, the lapsing of the

2007 EOP Allocation required the reversal of the cumulative share based payments

expense previously recognised in the Income Statement of the Company and a reversal

of the share based payments remuneration previously disclosed in the Remuneration

Report for executive directors of the Company.

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Performance Conditions

6.8 Performance Conditions are deemed to be an essential component of all variable reward

elements. The proposed allocation of options will be subject to Service Conditions and:

(a) as to 30% - to a Financial Performance Condition;

(b) as to 70% - to Non-Financial Performance Conditions.

Financial Performance Condition

6.9 The Financial Performance Condition will be:

(a) partly satisfied if the earnings per share growth is 10% per annum or more on a

cumulative basis;

(b) wholly satisfied if the earnings per share growth is 15% per annum or more on a

cumulative basis.

Earnings per share measures the earnings that are attributed to each equivalent ordinary

share over a twelve month period. It is calculated by dividing the Company's earnings by

the number of shares on issue in accordance with Accounting Standard AASB 133 and is

described on page 3 and page 90 of the Company 2010 Annual Report as basic earnings

per share.

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Financial Performance Condition

– Earnings per share growth must be at least 10% per annum, cumulative

Financial Year of

Allocation Ending

30 June 2011 30 June 2012 30 June 2013

Share price Market Price at date of

issue. Must be issued

before 30 November

2010

Market Price at date of


after 23 November

2011 but before 30

November 2011

Market Price at date of


after 23 November

2012 but before 30

November 2012

Financial Years

(ending 30 June)

Base Year: 2010

Base Year: 2010

Base Year: 2010

Testing

Points -

2011 2011 Not Applicable Not Applicable

Measured

Years 2012 2011 - 2012 2012 Not Applicable

(Qualifying

Period) 2013 2011 - 2013 2012 - 2013 2013

Date before which

Options cannot be

exercised

1 January 2014 1 January 2015 1 January 2016

% of Financial

Performance

Condition options

that will become

exercisable

2011

EPS

2012

EPS

2013

EPS

2012

EPS

2013

EPS

2013

EPS

0% 23.95 26.34 28.98 26.34 28.98 28.98

50% 23.96 26.35 28.99 26.35 28.99 28.99

60% 24.18 26.84 29.79 26.84 29.79 29.79

70% 24.39 27.32 30.60 27.32 30.60 30.60

80% 24.61 27.81 31.43 27.81 31.43 31.43

90% 24.83 28.31 32.27 28.31 32.27 32.27

100% 25.05 28.80 33.12 28.80 33.12 33.12

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The following table sets out a comparison of earnings per share for recent financial years.

Financial Year Ending 30 June 2006 2007 2008 2009 2010

Earnings per share

(cents)

20.59 30.63 33.76 20.18 21.78

Growth from prior year

(%)

27.1% 48.8% 10.2% -40.2% 7.9%

6.10 The Board can, in its discretion, remove an amount from the calculation of earnings per

share for the purposes of this scheme if in the opinion of the Board, not removing such

amount would lead to the earnings per share growth exceeding the earnings per share

growth directly attributable to the performance of the executive director team.

6.11 If in any financial year the Financial Performance Condition is not satisfied, the Financial

Performance Condition can be satisfied by overachievement in a subsequent financial

year. However the overachievement of a Financial Performance Condition in a financial

year will not be carried forward to subsequent financial years.

6.12 For example, if in the year ending 30 June 2011 the earnings per share of the Company is

23.74 cents (being an increase of 9%) then the Financial Performance Condition will not

have been satisfied at the first testing point.

However, if in the year ending 30 June 2012 the earnings per share of the Company is 30

cents, then the 2010 tranche Financial Performance Condition will have been satisfied in

full [15% per annum cumulative growth target being 28.80 cents] and the 2011 Tranche

Financial Performance Condition will also have been satisfied.

Non-Financial Performance Conditions

6.13 The Board intends to use a modified balance scorecard methodology in order to

determine appropriate executive director team measures targets and initiatives necessary

to achieve the strategic objectives of the Company. These Non-Financial Performance

Conditions will be set annually by the Board consistent with the strategic direction of the

Company. The question as to whether the Non-Financial Performance Conditions have

been satisfied will be determined by the Remuneration Committee of the Board.

6.14 The Non-Financial Performance Conditions will be staged so that they apply to the

performance of the whole team of executive directors of the Company and will be tested

collectively:

(a) in respect of the 2011 year, for measures targets and initiatives of the 2011 year;

(b) in respect of the 2012 year, for measures targets and initiatives of the 2012 year;

and

(c) in respect of the 2013 year, for measures targets and initiatives of the 2013 year.

6.15 The Board will set several Non-Financial Performance Conditions in respect of each

year. The Board will also weight Non-Financial Performance Conditions in respect of

each year so that if only some of the Non-Financial Performance Conditions are

achieved, then only that proportion of the options equivalent to the allocated weighting

will be able to be exercised. These will be weighted:

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(a) as to 20% relating to the achievement of key operating priorities including

implementation of IT systems within budget and time frame constraints,

operational consistency, and the maintenance, improvement and implementation

of risk management programmes;

(b) as to 20% relating to the level of operating cashflow and operating budget

constraints by reference to cost control;

(c) as to 20% relating to the successful achievement of the integration of any

specified developed or acquired discrete business unit;

(d) as to 20% relating to improvements in retailing operations;

(e) as to 20% relating to the maintenance and growth of the retail property portfolio,

by reference to return on equity, and completion of any key designated

developments within the cost estimates and construction time lines.

6.16 The Remuneration Committee will have regard to certificates and reports from other

officers and sub committees of the Board in determining whether particular weighted

Non-Financial Performance Conditions have been satisfied.

6.17 The particular initiatives which may form the basis for annual Non-Financial

Performance Conditions are likely to be inherently commercially sensitive in nature.

Those initiatives must be consistent with the published information about the integrated

retail franchise and property strategy of the Company and applicable international

operations.

6.18 The Company believes that further disclosure of specific targets, measures and initiatives

upon which Non-Financial Performance Conditions will be based will provide an unfair

advantage to competitors to the detriment of the Company.

Service Conditions

6.19 The service conditions in respect of a grantee will be deemed to be satisfied if at the time

of exercise of the options:

(a) the Grantee has not resigned or provided notice of resignation of employment

from the Company, except in order to retire from the workforce;

(b) the Company has not terminated the employment of the Grantee for cause; or

(c) the Board has not determined that the options should lapse as a result of any

fraud, gross misconduct or conduct of the Grantee which brings the Company into

disrepute.

If the Grantee has died before the options are exercised, but the Performance Conditions

have been satisfied and the conditions in paragraphs 6.19(a), (b) and (c) do not apply, the

estate of the Grantee may exercise the options.

Option Value Calculations

6.20 The value of the options was calculated by Mercer (Australia) Pty Limited using the

Black-Scholes Model valuation methodology.

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Summary of Share-Based Payment valued for EGM disclosure purposes

Tranche 1 Tranche 2 Tranche 3

Assumptions

Valuation Date 20 September 2010 20 September 2010 20 September 2010

HVN Share Price $3.88 $3.88 $3.88

Exercise Price $3.88 $3.88 $3.88

Risk Free Rate 4.99% 4.99% 4.99%

Dividend Yield 3.5% 3.5% 3.5%

Volatility 37% 37% 37%

Post-vesting Withdrawal 0% 0% 0%

Option Terms

Vesting Term 3. 08 years 3. 08 years 3. 08 years

Contractual Term 5. 58 years 5. 58 years 5. 58 years

Results

Fair Value – Contractual Term

(assumes exercise at Expiry Date

only)

$1.16 $1.16 $1.16

These options, if approved and granted, will be valued independently based on the actual variables applicable at the grant date of the options and in accordance with AASB 2.

Mercer (Australia) Pty Limited has consented to be named in this Explanatory Statement in the form and context in which it is named. To the maximum extent permitted by law, Mercer (Australia) Pty Limited expressly disclaims and takes no responsibility for any statements in or omissions from this Explanatory Statement.

Other Information

6.21 ASX Listing Rule 10.15A requires disclosure of additional information in relation to

offers of shares and options to directors or associates, including:-

o each grantee is a director of the Company;

o the maximum number of securities that may be acquired by:

- David Matthew Ackery is 3,000,000;

- Chris Mentis is 3,000,000;

- John Evyn Slack-Smith is 3,000,000;

o the price for each security will be the market price (as defined in paragraph 6.6);

o the proposed grant of options is a new scheme, and as such no other persons have

received securities under the scheme;

o the names of all persons entitled to participate in the scheme are David Matthew

Ackery, Chris Mentis and John Evyn Slack-Smith;

o a voting exclusion statement is set out in Attachment A;

o no loan is proposed in relation to the acquisition;

o details of any securities issued under this scheme will be published in each annual

report of the Company relating to a period in which securities have been issued,

and that approval for the issue of securities was obtained under ASX Listing Rule

10.14;

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o any additional persons who become entitled to participate in the scheme after the

resolution was approved and who were not named in the notice of meeting will

not participate until approval is obtained under ASX Listing Rule 10.14;

o it is intended the securities will be issued before 30 November 2012, but in any

event must be issued before that date which is no later than 3 years after the

meeting.

6.22 Gerald Harvey and Kay Lesley Page, executive directors of the Company, are not entitled

to participate in the proposed grant of options or in any other employee incentive

scheme.

6.23 The non-executive directors are not entitled to participate in the proposed grant of

options. The non-executive directors are:

(a) Christopher Herbert Brown;

(b) Ian John Norman;

(c) Kenneth William Gunderson-Briggs;

(d) Graham Charles Paton; and

(e) Michael John Harvey.

Related parties to whom the proposed resolutions will permit financial benefit to be given

6.24 The related parties to whom the proposed resolution would permit financial benefits to be

given are:

(a) David Matthew Ackery;

(b) Chris Mentis;

(c) John Evyn Slack-Smith.

The nature of the financial benefits

6.25 The nature of the financial benefits are described in paragraphs 6.7 and 6.20.

The recommendations of the directors of the company

6.26 Each of the Directors of the Company recommends that members approve the proposed

resolutions for the reasons set out below:

(a) the Directors wish to implement a remuneration plan for senior executives which

involves pay for performance, consistent with good corporate governance;

(b) the Directors believe that the implementation of the plan, if the proposed

resolutions are approved, will assist the Company to attract and retain key

employees who, in the opinion of the Board are able by virtue of their experience

and skills, to influence operational performance necessary to achieve sustained

growth in shareholder wealth;

(c) the Board believes that the proposed grant of options will align the remuneration

of the senior executive team with the long term strategic objectives of the

Company by tying performance conditions to measures, targets and initiatives

designed to execute and achieve the strategic objectives determined by the Board. For

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The interest of each director in the outcome of the proposed resolutions 9 - 11

Gerald Harvey

6.27 Gerald Harvey is an executive director of the Company and a shareholder in the

Company but otherwise Gerald Harvey has no interest in the outcome of Proposed

Resolutions 9 - 11.

Kay Lesley Page

6.28 Kay Lesley Page is an executive director of the Company and a shareholder in the

Company but otherwise Kay Lesley Page has no interest in the outcome of Proposed

Resolutions 9 - 11.

Chris Mentis

6.29 Chris Mentis is a director of the Company and holds options to acquire shares in the

Company. Chris Mentis is an employee of the Company and may benefit directly from

the outcome of Proposed Resolution 10, and as such Chris Mentis has an interest in the

outcome of Proposed Resolution 10.

6.30 If Proposed Resolution 10 is approved, Chris Mentis will obtain a benefit to the extent

that the market value of each ordinary share in the unissued capital of the Company the

subject of the options granted to Chris Mentis exceeds the respective exercise price of

each option at the Grant Date, and otherwise having the value set out in paragraph 6.20.

David Matthew Ackery

6.31 David Matthew Ackery is a director of the Company and a shareholder in the Company.

David Matthew Ackery is an employee of the Company and may benefit directly from

the outcome of Proposed Resolution 9, and as such David Matthew Ackery has an

interest in the outcome of Proposed Resolution 9.

6.32 If the Proposed Resolution 9 is approved, David Matthew Ackery will obtain a benefit to

the extent that the market value of each ordinary share in the unissued capital of the

Company the subject of the options granted to David Matthew Ackery exceeds the

respective exercise price of each option at the Grant Date, and otherwise having the value

set out in paragraph 6.20.

John Evyn Slack-Smith

6.33 John Evyn Slack-Smith is a director of the Company and a shareholder in the Company.

John Evyn Slack-Smith is an employee of the Company and may benefit directly from

the outcome of Proposed Resolution 11, and as such John Evyn Slack-Smith has an

interest in the outcome of Proposed Resolution 11.

6.34 If Proposed Resolution 11 is approved, John Evyn Slack-Smith will obtain a benefit to

the extent that the market value of each ordinary share in the unissued capital of the

Company the subject of the options granted to John Evyn Slack-Smith exceeds the

respective exercise price of each option at the Grant Date, and otherwise having the value

set out in paragraph 6.20.

Christopher Herbert Brown

6.35 Christopher Herbert Brown is a director of the Company and a shareholder in the

Company but otherwise Christopher Herbert Brown has no interest in the outcome of

Proposed Resolutions 9 -11.

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Michael John Harvey

6.36 Michael John Harvey is a director of the Company and a shareholder in the Company but

otherwise Michael John Harvey has no interest in the outcome of Proposed Resolutions 9

– 11.

Ian John Norman

6.37 Ian John Norman is a director of the Company and a shareholder in the Company but

otherwise Ian John Norman has no interest in the outcome of Proposed Resolutions 9 -

11.

Kenneth William Gunderson-Briggs

6.38 Kenneth William Gunderson-Briggs is a director of the Company and a shareholder in

the Company but otherwise Kenneth William Gunderson-Briggs has no interest in the

outcome of Proposed Resolutions 9 - 11.

Graham Charles Paton

6.39 Graham Charles Paton is a director of the Company and a shareholder in the Company

but otherwise Graham Charles Paton has no interest in the outcome of Proposed

Resolutions 9 - 11.

Opportunity costs



paragraph 6.20.

6.41 Independent valuation of these options for accounting purposes and in accordance with

AASB 2 will be undertaken at the time of grant and may vary from this value.

Taxation consequences (such as liability to fringe benefits tax)

6.42 The grant of the options to a grantee constitutes the acquisition by that grantee of a right

under an employee share scheme.

6.43 So far as each of the directors in the Company are aware, there are no adverse taxation

consequences for the Company, arising out of the grant of the options. In particular, the

grant of the options should constitute a benefit constituted by the acquisition by the

grantee of a right under an employee share scheme, and accordingly not constitute a

"fringe benefit" for the purposes of the Fringe Benefits Tax Assessment Act 1986 (Cth).

Benefits foregone by whoever would give the benefits



paragraph 6.20.

6.45 So far as each of the directors and the Company are aware, there are no other benefits

foregone by any party.

Dilution Impact

6.46 As at 23 September 2010:

(a) 1,062,316,784 shares in the Company were issued; and

(b) no options over shares in the Company were issued.

6.47 If all the options the subject of proposed resolutions 9 - 11 ("Proposed Options") are

exercised, 9,000,000 shares would be issued as a consequence of such exercise and a

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total of 1,071,316,784 shares would then be issued (i.e. the dilution impact of the

Proposed Options is 0.84%).

Holdings of Executive Directors

6.48 The following table set out a summary of the existing interest of each grantee as at 23

September 2010.

David Matthew Ackery Chris Mentis John Slack-Smith Unrelated Third Parties

Shares Held as at 23

Nov 2010

146,667 Nil 259,999 1,061,910,118

Proportion of Shares

Held as at 23 Nov 2010

0.014% Nil 0.024% 99.962%

Options Held as at 23

Nov 2010

Nil Nil Nil Nil

Options Proposed to be

Issued

3,000,000 3,000,000 3,000,000 Nil

New Proportion of

Shares Held if all

Options were Exercised

0.294% 0.280% 0.304% 99.122%

Recent Trading History

6.49 In respect of the period 28 September 2009 to 27 September 2010:

(a) the lowest price at which shares in the Company were traded on ASX was $3.22 on

7 May 2010;

(b) the highest price at which shares in the Company were traded on ASX was $4.85

on 15 October 2009.

The closing price of shares in the Company at 27 September 2010 was $3.86.

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ATTACHMENT C

See Proxy Form attached

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YOUR VOTE IS IMPORTANT

FOR YOUR VOTE TO BE EFFECTIVE IT MUST BE RECORDED BEFORE 11.00AM SUNDAY 21 NOVEMBER 2010

TO VOTE ONLINE STEP 1 : VISIT www.registries.com.au/vote/hvnagm2010

STEP 2: Enter your holding/Investment type

STEP 3: Enter your Reference Number and VAC: <VAC NUMBER>

TO VOTE BY COMPLETING THE PROXY FORM STEP 1 Appointment of Proxy Indicate here who you want to appoint as your Proxy If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If you wish to appoint someone other than the Chairman of the Meeting as your proxy please write the full name of that individual or body corporate. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a security holder of the company. Do not write the name of the issuer company or the registered securityholder in the space. Proxy which is a Body Corporate Where a body corporate is appointed as your proxy, the representative of that body corporate attending the meeting must have provided an “Appointment of Corporate Representative” prior to admission. An Appointment of Corporate Representative form can be obtained from the company’s securities registry. Appointment of a Second Proxy You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company’s securities registry or you may copy this form. To appoint a second proxy you must: (a) complete two Proxy Forms. On each Proxy Form state the percentage

of your voting rights or the number of securities applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.

(b) return both forms together in the same envelope.

STEP 2 Voting Directions to your Proxy You can tell your Proxy how to vote To direct your proxy how to vote, place a mark in one of the boxes opposite each item of business. All your securities will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of securities you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given item, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

STEP 3 Sign the Form The form must be signed In the spaces provided you must sign this form as follows: Individual: This form is to be signed by the securityholder. Joint Holding: where the holding is in more than one name, all the securityholders must sign. Power of Attorney: to sign under a Power of Attorney, you must have already lodged it with the registry. Alternatively, attach a certified photocopy of the Power of Attorney to this form when you return it. Companies: this form must be signed by a Director jointly with either another Director or a Company Secretary. Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. Please indicate the office held by signing in the appropriate place.

STEP 4 Lodgement of a Proxy This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below not later than 48 hours before the commencement of the meeting at 11.00am on Tuesday, 23 November 2010. Any Proxy Form received after that time will not be valid for the scheduled meeting. Proxies may be lodged using the reply paid envelope or:

BY MAIL Share Registry – Registries Limited, GPO Box 3993, Sydney NSW 2001 Australia

BY FAX + 61 2 9290 9655 IN PERSON Share Registry – Registries Limited, Level 7, 207 Kent Street, Sydney

NSW 2000 Australia

Vote online at: www.registries.com.au/vote/hvnagm2010 or turnover to complete the Form

Name and Address

Harvey Norman Holdings Limited

ABN 54 003 237 545

FOR ALL ENQUIRIES CALL:

(within Australia) 1300 737 760 (outside Australia) +61 2 9290 9600

FACSIMILE

+61 2 9290 9655

ALL CORRESPONDENCE TO:

Registries Limited

GPO Box 3993

Sydney NSW 2001

Australia

Your Address This is your address as it appears on the company’s share register. If this is incorrect, please mark the box with an “X” and make the correction on the form. Securityholders sponsored by a broker should advise your broker of any changes. Please note, you cannot change ownership of your securities using this form.

Reference Number <SRN/HIN>

Please note it is important you keep this confidential

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http://www.registries.com.au/vote/hvnagm2010

Harvey Norman Holdings Limited

STEP 1 - Appointment of Proxy

I/We being a member/s of Harvey Norman Holdings Limited and entitled to attend and vote hereby appoint

If you are not appointing the Chairman of the Meeting as your proxy please write here the full name of the individual or body corporate (excluding the registered Securityholder) you are appointing as your proxy.

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy at the Annual General Meeting of Harvey Norman Holdings Limited to be held at the Tattersalls Club, 181 Elizabeth Street, Sydney NSW on Tuesday, the 23rd of November 2010 at 11.00am and at any adjournment of that meeting, to act on my/our behalf and to vote in accordance with the following directions or if no directions have been given, as the proxy sees fit.

If the Chairman of the Meeting is appointed as your proxy or may be appointed by default, and you do not wish to direct your proxy how to vote in respect of a resolution, please mark this box. By marking this box, you acknowledge that the Chairman of the Meeting may vote as your proxy even if he has an interest in the outcome of the resolution and votes cast by the Chairman of the Meeting for those resolutions, other than as proxy holder, will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chairman of the Meeting will not cast your votes on the resolution and your votes will not be counted in calculating the required majority if a poll is called. The Chair intends to vote all undirected proxies in favour of the resolution.

STEP 2 - Voting directions to your Proxy – please mark to indicate your directions

For Against Abstain*

Resolution 1. To receive the Company’s Financial Report for 30 June 2010

Resolution 2. To adopt the Remuneration Report for 30 June 2010

Resolution 3. To declare a dividend as recommended by the Board

Resolution 4 That Michael John Harvey, a Director who retires by rotation at the close of the meeting in accordance with Article 63A of the Constitution of the Company and being eligible, be re-elected as a Director of the Company

Resolution 5 That Ian John Norman, a Director who retires by rotation at the close of the meeting in accordance with Article 63A of the Constitution of the Company and being eligible, be re-elected as a Director of the Company

Resolution 6 That Kay Lesley Page, a Director who retires by rotation at the close of the meeting in accordance with Article 63A of the Constitution of the Company and being eligible, be re-elected as a Director of the Company

Resolution 7 That John Evyn Slack-Smith, a Director who retires by rotation at the close of the meeting in accordance with Article 63A of the Constitution of the Company and being eligible, be re-elected as a Director of the Company

Resolution 8 That the constitution of the Company be amended as follows: (a) by inserting the following words at the end of Article 1(1):

References to Act or Code include reference to the Corporations Act 2001 (Cth). (b) by amending Article 87 to read as follows:

Subject to Article 88, the directors may authorise the payment by the company to the members of such interim dividends as appear to the directors to be justified by the profits of the company and not in contravention of the Act.

(c) by amending Article 88 to read as follows: No dividend shall be payable by the company if payment is prohibited by Section 254T of the Act. Interest is not payable by the company in respect of any dividend.

(Note this is a special resolution)

Resolution 9 That the Company approve the issue of 3,000,000 options to subscribe for 3,000,000 fully paid ordinary shares in the Company to David Matthew Ackery, subject to the conditions set out in the Explanatory Notes

Resolution 10 That the Company approve the issue of 3,000,000 options to subscribe for 3,000,000 fully paid ordinary shares in the Company to Chris Mentis, subject to the conditions set out in the Explanatory Notes

Resolution 11 That the Company approve the issue of 3,000,000 options to subscribe for 3,000,000 fully paid ordinary shares in the Company to John Evyn Slack-Smith, subject to the conditions set out in the Explanatory Notes

In addition to the intentions advised above. The Chairman of the Meeting intends to vote undirected proxies in favour of each of the items of business.

*If you mark the Abstain box for a particular item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

STEP 3 - PLEASE SIGN HERE This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented.

Individual or Securityholder 1 Securityholder 2 Securityholder 3

Sole Director and Sole Company Secretary Director Director/Company Secretary

Contact Name ……………………………….…….. Contact Daytime Telephone ………………………………….. Date / /2010

the Chairman of the Meeting (mark with an ‘X’)

OR

<BARCODE> SRN/HIN

NameAddress 1 F

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harvey norman holdings limited - asx · 2010-10-21 · harvey norman holdings limited a.c.n 003 237...

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