Definitive Proxy Statement
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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                               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))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

BROADCOM LIMITED

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

     

  (2)  

Aggregate number of securities to which transaction applies:

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

     

  (4)  

Proposed maximum aggregate value of transaction:

     

  (5)  

Total fee paid:

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

     

  (2)  

Form, Schedule or Registration Statement No.:

     

  (3)  

Filing Party:

     

  (4)  

Date Filed:

     

 

 

 


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LOGO

BROADCOM LIMITED

Incorporated in the Republic of Singapore

Company Registration Number 201505572G

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

To Be Held on April 5, 2017

To our shareholders:

You are cordially invited to attend, and NOTICE IS HEREBY GIVEN of, the 2017 Annual General Meeting of Shareholders (the “2017 AGM”) of Broadcom Limited (“Broadcom”), which will be held at our subsidiary’s offices located at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A., at 11:00 a.m., Pacific Time, on Wednesday, April 5, 2017, for the following purposes, as more fully described in the proxy statement accompanying this notice (the “Proxy Statement”):

As Ordinary Business

 

  1. To elect each of the following persons to our board of directors (the “Board”), to serve until the next annual general meeting of shareholders:

 

  (a) Mr. Hock E. Tan;

 

  (b) Mr. James V. Diller;

 

  (c) Mr. Lewis C. Eggebrecht;

 

  (d) Mr. Kenneth Y. Hao;

 

  (e) Mr. Eddy W. Hartenstein;

 

  (f) Mr. Check Kian Low;

 

  (g) Mr. Donald Macleod;

 

  (h) Mr. Peter J. Marks; and

 

  (i) Dr. Henry Samueli.

 

  2. To approve the re-appointment of PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm and independent Singapore auditor for the fiscal year ending October 29, 2017, and to authorize the Audit Committee of the Board to fix PricewaterhouseCoopers LLP’s remuneration for services provided through our 2018 Annual General Meeting of Shareholders (the “2018 AGM”).

As Special Business

 

  3. To pass the following as an Ordinary Resolution:

RESOLVED THAT, pursuant to the provisions of Section 161 of the Singapore Companies Act, Chapter 50 (the “Singapore Companies Act”), and also subject otherwise to the provisions of the Singapore Companies Act and our Constitution, authority be, and hereby is, given to our directors:

(a) to:

 

  (i) allot and issue ordinary shares in our capital;

 

  (ii) subject to the provisions of our Constitution, allot and issue Special Preference Shares (as defined below) bearing the rights and obligations as set out in our Constitution; and/or


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  (iii) make or grant offers, agreements, options or other instruments (including the grant of awards or options pursuant to our equity-based incentive plans and agreements in effect or assumed from time to time) that might or would require ordinary shares to be allotted and issued, whether such allotment or issuance would occur during or after the expiration of this authority (including, but not limited to, the creation and issuance of warrants, rights, units, purchase contracts, debentures or other instruments (including debt instruments) convertible or exchangeable into ordinary shares),

at any time to and/or with such persons and upon such terms and conditions, for such purposes and for such consideration as our directors may in their sole discretion deem fit, and with such rights or restrictions as our directors may think fit to impose and as are set forth in our Constitution; and

(b) to allot and issue shares in our capital pursuant to any offer, agreement, award or other instrument made, granted or authorized by our directors while this resolution is or was in effect, regardless of whether the authority conferred by this resolution may have ceased to be in effect at the time of the allotment and issuance,

and that such authority, if approved by our shareholders, continue in effect until the earlier of the conclusion of our 2018 AGM or the expiration of the period within which our 2018 AGM is required by law to be held.

 

  4. To consider and put to a non-binding, advisory vote, the following resolution:

RESOLVED THAT, shareholders approve, on an advisory basis, the compensation of Broadcom’s named executive officers, as disclosed in “Compensation Discussion and Analysis” and in the compensation tables and accompanying narrative disclosure under “Executive Compensation” in the accompanying Proxy Statement.

This resolution is being proposed to shareholders as required pursuant to Section 14A of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). The shareholders’ vote on this resolution is advisory and non-binding in nature, will have no legal effect and will not be enforceable against Broadcom or our Board.

 

  5. To consider and put to a non-binding, advisory vote the following resolution:

RESOLVED THAT, shareholders recommend that a non-binding, advisory vote to approve the compensation of Broadcom’s named executive officers be put to shareholders for their consideration with one of the following three frequencies:

(a) every one year;

(b) every two years; or

(c) every three years.

This resolution is being proposed to shareholders as required pursuant to Section 14A of the Exchange Act. The shareholders’ vote on this resolution is advisory and non-binding in nature, will have no legal effect and will not be enforceable against Broadcom or our Board.

As Ordinary Business

 

  6. To transact any other business as may properly be transacted at the 2017 AGM.

Notes About the 2017 Annual General Meeting of Shareholders

Singapore Statutory Financial Statements. At the 2017 AGM, our shareholders will have the opportunity to discuss and ask questions regarding our Singapore audited financial statements for our fiscal year ended October 30, 2016, together with the directors’ statement and auditors’ report thereon, in compliance with the laws of Singapore. Shareholder approval of our Singapore audited financial statements is not being sought by the Proxy Statement and will not be sought at the 2017 AGM.

 

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Proxy Materials on the Internet. We are pleased to take advantage of Securities and Exchange Commission rules that allow issuers to furnish proxy materials to some or all of their shareholders on the Internet. In accordance with Singapore law, our registered shareholders (shareholders of record who own our ordinary shares in their own name registered with our transfer agent, Computershare Trust Company, N.A. (“Computershare”)) are not able to vote their shares over the Internet, but we provide this service to our beneficial owners (shareholders whose ordinary shares are held by a broker, a bank or other nominee). We believe these rules allow us to provide our shareholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our annual general meeting of shareholders.

Receipt of Notice; Eligibility to Vote at Annual General Meeting of Shareholders. Our Board has fixed the close of business on February 8, 2017, as the record date for determining which of our shareholders are entitled to receive copies of this notice and the accompanying Proxy Statement or the Notice of Internet Availability of Proxy Materials. However, only holders of our ordinary shares and the holder of our non-economic voting preference shares (“Special Voting Shares” or “Special Preference Shares”) on April 5, 2017 will be entitled to vote at the 2017 AGM.

Quorum. Representation at the 2017 AGM of shareholders entitled to vote, in person or by proxy or by representative, and holding among them at least a majority of all issued and outstanding ordinary shares and Special Voting Shares, treated as a single class, is required to constitute a quorum. Accordingly, it is important that your shares be represented at the 2017 AGM, either in person or by proxy.

Proxies. A registered shareholder, entitled to attend and vote at the 2017 AGM, is entitled to appoint one or more proxies to attend the meeting and vote on his or her behalf. A proxy need not also be a shareholder. Whether or not you plan to attend the meeting, please complete, date and sign the enclosed proxy card and return it in the enclosed envelope. A registered shareholder may revoke his or her proxy at any time prior to the time it is voted. Registered shareholders who are present at the meeting may (but are not required) to revoke their proxies and vote in person. The collection, use and disclosure by us and our agents, representatives and service providers of a shareholder’s, and their proxies’ or representatives’, personal data in connection with the 2017 AGM and related solicitation of proxies is governed by Article 102 of our Constitution.

If you are a beneficial owner of ordinary shares, you may vote by proxy over the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials, or, if you requested printed copies of the proxy materials by mail, you may vote by mail. Holders of restricted exchangeable units in our subsidiary, Broadcom Cayman, L.P. (the “Partnership”), may instruct Computershare, as the registered shareholder of all of the outstanding Special Voting Shares, how to vote their corresponding number of Special Voting Shares, in accordance with the Voting Trust Agreement, dated February 1, 2016, by and among Broadcom, the Partnership and Computershare as trustee.

For detailed information regarding eligibility to vote at, and voting procedures for, the 2017 AGM, please refer to “Voting Rights and Solicitation of Proxies”, starting on page 1 of the accompanying Proxy Statement.

FOR ADMISSION TO THE ANNUAL GENERAL MEETING, EACH SHAREHOLDER WILL BE ASKED TO PRESENT VALID PICTURE IDENTIFICATION, SUCH AS A DRIVER’S LICENSE OR PASSPORT, AND PROOF OF OWNERSHIP OF OUR ORDINARY SHARES AS OF THE MEETING DATE, SUCH AS A RECENT BROKERAGE STATEMENT, REFLECTING SHARE OWNERSHIP, OR A LEGAL PROXY TO VOTE SPECIAL VOTING SHARES FROM COMPUTERSHARE TRUST COMPANY N.A. PLEASE SEE PAGE 3 OF THE PROXY STATEMENT FOR MORE INFORMATION.

 

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Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of

Shareholders to be held on April 5, 2017:

The notice of meeting, Proxy Statement and annual report to shareholders are available at

http://investors.broadcom.com/phoenix.zhtml?c=203541&p=proxy.

By Order of the Board,

 

 

LOGO

Hock E. Tan

Director, Chief Executive Officer and President

February 17, 2017

You should read the entire accompanying Proxy Statement carefully prior to voting.

 

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BROADCOM LIMITED

PROXY STATEMENT

FOR

2017 ANNUAL GENERAL MEETING OF SHAREHOLDERS

TABLE OF CONTENTS

 

     Page  

ELECTRONIC DELIVERY OF OUR SHAREHOLDER COMMUNICATIONS

     i   

INTERNET AVAILABILITY OF PROXY MATERIALS

     i   

VOTING RIGHTS AND SOLICITATION OF PROXIES

     1   

PROPOSAL 1:

  

ELECTION OF DIRECTORS

     5   

CORPORATE GOVERNANCE

     10   

DIRECTORS’ COMPENSATION

     17   

PROPOSAL 2:

  

APPROVAL OF THE RE-APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND INDEPENDENT SINGAPORE AUDITOR FOR FISCAL YEAR 2017 AND AUTHORIZATION OF THE AUDIT COMMITTEE TO FIX ITS REMUNERATION

     20   

PROPOSAL 3:

  

ORDINARY RESOLUTION TO AUTHORIZE SHARE ALLOTMENTS AND ISSUANCES

     22   

PROPOSAL 4:

  

NON-BINDING, ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

     24   

PROPOSAL 5:

  

NON-BINDING, ADVISORY VOTE ON THE FREQUENCY OF SHAREHOLDERS’ VOTE TO APPROVE EXECUTIVE COMPENSATION

     25   

EXECUTIVE OFFICERS

     26   

COMPENSATION DISCUSSION AND ANALYSIS

     28   

COMPENSATION COMMITTEE REPORT

     48   

EXECUTIVE COMPENSATION

     49   

EQUITY COMPENSATION PLAN INFORMATION

     61   

AUDIT COMMITTEE REPORT

     63   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS

     64   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     68   

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     69   

HOUSEHOLDING OF PROXY MATERIALS

     69   

SHAREHOLDER PROPOSALS FOR THE 2018 ANNUAL GENERAL MEETING

     69   

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     70   

SINGAPORE STATUTORY FINANCIAL STATEMENTS

     70   

OTHER MATTERS

     71   

APPENDIX A: SINGAPORE STATUTORY FINANCIAL STATEMENTS

     A-1   

APPENDIX B: DRIVING DIRECTIONS

     B-1   


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ELECTRONIC DELIVERY OF OUR SHAREHOLDER COMMUNICATIONS

We strongly encourage our shareholders to conserve natural resources, as well as significantly reduce our printing and mailing costs, by signing up to receive shareholder communications via e-mail. With electronic delivery, we will notify you when our annual reports and proxy statements are available on the Internet. Electronic delivery can also help reduce the number of bulky documents in your personal files and eliminate duplicate mailings. To sign up for electronic delivery:

 

  1. If you are a registered shareholder (i.e., you hold your Broadcom ordinary shares in your own name through our transfer agent, Computershare Trust Company, N.A.), to enroll visit: www-us.computershare.com/investor/ or call (877) 373-6374 within the U.S., U.S. Territories and Canada, or +1 (781) 575-3100 outside the U.S., U.S. Territories and Canada.

 

  2. If you are a beneficial holder (i.e., your ordinary shares are held by a broker, bank or other nominee), the voting instruction form provided by most brokers or banks will contain instructions for enrolling in electronic delivery.

Your electronic delivery enrollment will be effective until you cancel it. If you have questions about electronic delivery, please call Computershare at the number above or your broker or bank.

INTERNET AVAILABILITY OF PROXY MATERIALS

 

Important Notice Regarding the Internet Availability of Proxy Materials for the

Annual Meeting of Shareholders to be held on April 5, 2017:

The notice of meeting, proxy statement and annual report to shareholders are available at

http://investors.broadcom.com/phoenix.zhtml?c=203541&p=proxy.

 

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PROXY STATEMENT

for the

2017 ANNUAL GENERAL MEETING

of

SHAREHOLDERS

of

BROADCOM LIMITED

To Be Held on Wednesday, April 5, 2017

11:00 a.m. (Pacific Time)

at our subsidiary’s offices located at

1320 Ridder Park Drive, San Jose, California 95131, U.S.A.

We are making this proxy statement (the “Proxy Statement”) available in connection with the solicitation by the board of directors of Broadcom Limited (the “Board”) of proxies to be voted at the 2017 Annual General Meeting of Shareholders, or at any adjournments or postponements thereof (the “2017 AGM”), for the purposes set forth in the accompanying Notice of Annual General Meeting of Shareholders (the “Notice”).

Broadcom Limited is the successor to Avago Technologies Limited (“Avago”). Following Avago’s acquisition of Broadcom Corporation (“BRCM”) on February 1, 2016 (the “Acquisition”), Broadcom Limited became the ultimate parent holding company of Avago and BRCM. Information reported in this Proxy Statement for the period prior to the Acquisition relates to our predecessor, Avago. Unless the context otherwise requires, references in this Proxy Statement to “Broadcom,” “the Company,” “our Company,” “we,” “our,” “us” and similar terms are to Broadcom Limited from and after the effective time of the Acquisition and, prior to that time, to our predecessor, Avago.

Proxy Mailing. This Proxy Statement, the enclosed Proxy Card and the Notice were first made available on or about February 17, 2017 to our shareholders as of February 8, 2017.

Costs of Solicitation. We will bear the cost of soliciting proxies. We have retained Okapi Partners LLC, an independent proxy solicitation firm, to assist us in soliciting proxies for an estimated fee of $12,500 plus reimbursement of reasonable expenses. We and/or our agents, including certain of our officers, directors and employees, may solicit proxies by mail, telephone, e-mail, fax or in person. No additional compensation will be paid to our officers, directors or employees for such services. We will reimburse banks, brokerage firms and other custodians, nominees, trustees and fiduciaries for reasonable out-of-pocket expenses incurred by them in sending proxy materials to and soliciting proxies from beneficial holders of our ordinary shares or non-economic voting preference shares.

Our Registered Office. The mailing address of our registered office is 1 Yishun Avenue 7, Singapore 768923. Please note, however, that any communications from holders of our ordinary shares should be directed to the attention of our General Counsel at the offices of our subsidiary, Avago Technologies U.S. Inc., at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A.

Financial Statements; Presentation. In accordance with the laws of Singapore, our Singapore statutory financial statements for our fiscal year ended October 30, 2016 are provided with this Proxy Statement. Except as otherwise stated herein, all monetary amounts in this Proxy Statement have been presented in U.S. dollars.

VOTING RIGHTS AND SOLICITATION OF PROXIES

We have two classes of shares outstanding, (i) our ordinary shares, no par value, and (ii) our non-economic voting preference shares, no par value (the “Special Voting Shares” or “Special Preference Shares”), with each class of shares having one vote per share.

All Special Voting Shares outstanding are held by Computershare Trust Company, N.A. (“Computershare”) pursuant to the Voting Trust Agreement, dated February 1, 2016 (the “Voting Trust”), among Broadcom,

 

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Broadcom Cayman L.P., a subsidiary of Broadcom (the “Partnership”), and Computershare, as trustee (the “Trustee”). The number of Special Voting Shares outstanding is equal to the number of outstanding restricted exchangeable units in the Partnership (the “Restricted Units”), which were issued in connection with the Acquisition. As of February 1, 2017, the Restricted Units are exchangeable for our ordinary shares, on a one-for-one basis, which obligation we may elect to settle either in cash or in ordinary shares, at our option.

Ordinary shares and Special Voting Shares issued and outstanding on April 5, 2017 are entitled to be voted at the 2017 AGM, voting together as a single class, on each matter being put before the meeting.

If you are a holder of Restricted Units, you are entitled to direct the Trustee to vote one Special Voting Share for each Restricted Unit that you hold, pursuant to the terms of the Voting Trust.

Record Date. The close of business on February 8, 2017, is the record date for holders of our ordinary shares and Special Voting Shares entitled to receive notice of the 2017 AGM (the “Record Date”). As of the Record Date, we had 401,038,999 ordinary shares and 22,804,591 Special Voting Shares issued and outstanding, and there were 22,804,591 Restricted Units in the Partnership issued and outstanding.

Voting Instructions. Unless otherwise noted below, voting instructions for all ordinary shares and Special Voting Shares must be received by 9:00 a.m. (Pacific Time) on April 3, 2017.

Ordinary Shares

If your ordinary shares are registered directly in your name with our transfer agent, Computershare, you are considered the “registered shareholder” with respect to those shares. If your shares are held by a brokerage firm, bank, trustee or other nominee, you are considered the “beneficial owner” of shares held in “street name”.

Registered Holders

A registered shareholder entitled to attend and vote at the 2017 AGM may vote in person at the meeting or by completing and returning the enclosed proxy card. A registered shareholder has the right to revoke his or her proxy at any time prior to voting at the 2017 AGM by:

 

  (i) submitting a subsequently dated proxy, which, if not delivered in person at the meeting, must be received by us c/o Proxy Services, c/o Computershare Investor Services, P.O. Box 43101, Providence, RI 02940-5067, no later than 9:00 a.m. (Pacific Time) on April 3, 2017; or

 

  (ii) by attending the meeting and voting in person.

If you are an institution holding your shares in a participant account with The Depository Trust Company (“DTC”), vote your shares through DTC’s procedures. You may not vote your shares in person at the 2017 AGM unless you obtain a legal proxy from DTC.

Beneficial Owners

If you are a beneficial owner of shares, you have the right to instruct the broker, bank or other nominee that holds your shares on how to vote them. Your broker, bank or nominee will send you a voting instruction form for you to use to direct how your shares should be voted. Your shares must be voted by such time as may be specified by your broker, bank or nominee, which may be earlier than 9:00 a.m. (Pacific Time) on April 3, 2017. If you wish to change or revoke your voting instructions, you must contact your broker, bank or other nominee holding your ordinary shares and follow their instructions. You may not vote your shares in person at the 2017 AGM unless you obtain a legal proxy from your broker, bank or other nominee giving you the right to vote the shares.

If you hold ordinary shares as, or through, a participant in DTC, we understand that in order for your vote to be counted at the 2017 AGM, you must have been a holder of ordinary shares as at, and with effect from the

 

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Record Date. If you become a beneficial owner of ordinary shares after the Record Date but before the meeting date and you wish to vote your shares, you must become a registered shareholder prior to the meeting date and (i) request a proxy card and return it to Computershare Investor Services in accordance with the procedures noted above or (ii) attend the meeting and vote in person. Please contact your broker, bank or other nominee holding your shares if you wish to become a registered shareholder.

Special Voting Shares

Only the Trustee may vote Special Voting Shares, either by proxy or in person at the 2017 AGM. If you hold Restricted Units, you must instruct the Trustee on how to vote your corresponding number of Special Voting Shares. The Trustee will inform you as to the manner in which such voting instructions are to be given to the Trustee, including the date and time by which such instructions must be received by the Trustee. If you wish to change or revoke your voting instructions, you must contact the Trustee and follow the Trustee’s instructions. If you do not provide instructions to the Trustee on how to vote the Special Voting Shares corresponding to your Restricted Units, those shares will not be voted at the 2017 AGM. You may not vote at or attend the 2017 AGM unless you obtain a legal proxy from the Trustee, giving you the right to vote your corresponding number of Special Voting Shares.

If you exchange any Restricted Units after the Record Date but prior to the 2017 AGM, a corresponding number of Special Voting Shares will be cancelled; and the related voting rights under the Voting Trust with respect to those Restricted Units will be terminated and will not be exercised at the 2017 AGM. If you receive ordinary shares upon exchange of your Restricted Units and you wish to vote those shares at the 2017 AGM, you must become a registered shareholder prior to the meeting date and (i) request a proxy card and return it to Computershare Investor Services in accordance with the procedures noted above or (ii) attend the meeting and vote in person. Please contact your broker, bank or other nominee holding your shares if you wish to become a registered shareholder.

Meeting Attendance and Admission. If you are a registered shareholder on April 5, 2017, you are entitled to attend the 2017 AGM. If you are a beneficial owner of shares held in “street name”, in order to attend the 2017 AGM you will need to bring a letter or recent account statement from that broker, bank or other nominee that confirms that you are the beneficial owner of those shares, as well as a picture identification, such as a valid driver’s license or passport, for purposes of personal identification.

Holders of Restricted Units wishing to attend the 2017 AGM must bring a legal proxy from the Trustee in respect of the corresponding number of Special Voting Shares, as well as picture identification, such as a valid driver’s license or passport, for purposes of personal identification.

Quorum. Representation at the 2017 AGM of shareholders entitled to vote, in person or by proxy or representative, and holding among them at least a majority of all issued and outstanding ordinary shares and Special Voting Shares, treated as a single class, is required to constitute a quorum.

Proxies. Ordinary shares and Special Voting Shares represented by proxies that are properly executed and received by us in accordance with the instructions set forth in the Notice will be voted by the individuals named therein—Hock E. Tan, Thomas H. Krause, Jr. or Patricia H. McCall or any of them, with full power of substitution (together, the “Proxy Holders”)—at the 2017 AGM in accordance with the shareholders’ instructions set forth in the proxy. A proxy holder need not also be a shareholder. The collection, use and disclosure by us and our agents, representatives and service providers of a shareholder’s, and their proxies’ or representatives’, personal data in connection with the 2017 AGM and related solicitation of proxies is governed by Article 102 of our Constitution.

If you sign and return your proxy but do not indicate how your ordinary shares are to be voted, then shares represented by proxies will be voted by the Proxy Holders in accordance with our Board’s recommendations as follows:

 

    FOR the election of each of our Board nominees named in Proposals 1(a) to 1(i);

 

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    FOR each of Proposals 2 to 4; and

 

    every ONE year for Proposal 5.

Management does not know of any matters to be presented at the 2017 AGM other than those set forth in this Proxy Statement and in the accompanying Notice, nor have we received notice of any matter by the deadline prescribed by Securities and Exchange Commission (“SEC”) Rule 14a-4(c). Without limiting our ability to apply the advance notice provisions in our Constitution with respect to the procedures that must be followed for a matter to be properly presented at an annual general meeting of shareholders, if other matters should properly come before the 2017 AGM, the Proxy Holders will vote on such matters in accordance with their best judgment.

Required Vote. Holders of ordinary shares and Special Voting Shares will vote together as a single class for each of the proposals to be voted upon at the 2017 AGM. The vote required for each proposal is as follows:

 

Proposals 1(a) to (i) (election of directors):

  Majority of votes cast
Proposal 2 (re-appointment of PricewaterhouseCoopers LLP):   Majority of votes cast
Proposal 3 (authorization of share allotments and issuances):   Majority of votes cast
Proposal 4 (advisory vote on executive compensation):   Majority of votes cast
Proposal 5 (advisory vote on the frequency of shareholders’ vote on executive compensation):  

 

Majority of votes cast; however, if none of the alternatives receives a majority vote, we will consider the alternative receiving the highest number of votes to be the frequency selected by our shareholders

Proposals 4 and 5 are being proposed to shareholders as required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Shareholders’ votes on Proposals 4 and 5 are advisory and non-binding in nature, will have no legal effect and will not be enforceable against us or our Board.

Abstentions and Broker Non-Votes. Abstentions and “broker non-votes” are counted in determining whether a quorum is present at the 2017 AGM, but are not counted in, and have no effect on, determining whether a proposal has been approved. A “broker non-vote” occurs when a broker, bank or other nominee holding ordinary shares on behalf of a beneficial owner cannot vote those shares because it (1) has not received voting instructions from such beneficial owner and (2) lacks discretionary voting power to vote those shares. If you are a beneficial owner of ordinary shares, your broker, bank or other nominee is entitled to vote your shares on “routine” matters, even if it does not receive voting instructions from you. The routine matters to be voted on at the 2017 AGM are Proposals 2 and 3. Without instructions from the beneficial owner, a broker, bank or other nominee will not be entitled to vote shares held for a beneficial owner on Proposals 1(a) to (i), 4 and 5, which are non-routine matters.

Voting Procedures and Tabulation. We have appointed a representative of Computershare as the inspector of elections of the 2017 AGM. The inspector of elections will determine the number of ordinary shares and Special Voting Shares outstanding and represented at the 2017 AGM and the validity of proxies and ballots, and will count and tabulate all votes. The determination of the inspector as to the validity of proxies will be final and binding.

 

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PROPOSAL 1:

ELECTION OF DIRECTORS

General

Pursuant to the Singapore Companies Act, Chapter 50 (the “Singapore Companies Act”) and our Constitution, our Board must have at least one director who is ordinarily resident in Singapore. Pursuant to our Constitution, our Board may consist of no more than 13 directors. Our Board currently consists of 10 members. On February 13, 2017, Ms. Page informed our Board that she will not be standing for re-election at the 2017 AGM. Our Board has decided that no other nominee for election will be named in Ms. Page’s place and as a result, nine directors are being nominated for election at the 2017 AGM. With effect from the 2017 AGM our Board will consist of nine members.

Director Nominees

Each director is elected annually at the annual general meeting of shareholders to hold office until the next annual general meeting of shareholders. Upon the recommendation of the Nominating and Corporate Governance Committee, our Board has nominated the nine individuals below for election as directors, all of whom are currently directors. Our Board expects that each of the nominees listed below will be available to serve as a director. Shareholders may not vote their proxies for a greater number of persons than the number of nominees named below.

In considering whether the director nominees have the experience, qualifications, attributes and skills, taken as a whole, to serve as directors of Broadcom, in light of our business and structure, the Nominating and Corporate Governance Committee and our Board focused primarily on the information discussed in each of the director nominee’s biographical information set forth below. Our Board believes that each nominee has relevant experience, personal and professional integrity, the ability to make independent, analytical inquiries, experience with and understanding of our business and business environment and willingness and ability to devote adequate time to Board duties. We also believe that the director nominees together have the skills and experience to form a board that is well suited to oversee our Company.

The following table sets forth certain information concerning the nominees for directors of Broadcom as of February 14, 2017.

 

(a) Hock E. Tan

Age 65

President, Chief

Executive Officer and

Director since

March 2006

  Mr. Tan has served as our President and Chief Executive Officer since March 2006. From September 2005 to January 2008, he served as Chairman of the board of directors of Integrated Device Technology, Inc. (“IDT”). Prior to becoming chairman of IDT, Mr. Tan was the President and Chief Executive Officer of Integrated Circuit Systems, Inc. (“ICS”), from June 1999 to September 2005. Prior to ICS, Mr. Tan was Vice President of Finance with Commodore International, Ltd. from 1992 to 1994, and previously held senior management positions with PepsiCo, Inc. and General Motors Corporation. Mr. Tan served as managing director of Pacven Investment, Ltd., a venture capital fund in Singapore from 1988 to 1992, and served as managing director for Hume Industries Ltd. in Malaysia from 1983 to 1988. Mr. Tan’s qualifications to serve on our Board include his role as our Chief Executive Officer, his extensive career in the technology industry in general and in the semiconductor industry in particular, including service as the chairman of the board of directors of a publicly-traded semiconductor company, and his extensive knowledge of our business developed over the course of his career at our Company.

 

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(b) James V. Diller

Age 81

Chairman of the Board

Director since

April 2006

  Mr. Diller was a founder of PMC-Sierra, Inc., serving as PMC’s Chief Executive Officer from 1983 to July 1997 and President from 1983 to July 1993. Mr. Diller also served as a director of PMC since its formation in 1983 until December 2013. Mr. Diller was Chairman of PMC’s board of directors from July 1993 until February 2000, and was its Vice Chairman from February 2000 until December 2013. Mr. Diller served as a director of Intersil Corporation from May 2002 to April 2015 and as its interim President and Chief Executive Officer from December 2012 to March 2013. Mr. Diller’s qualifications to serve on our Board include his more than 50 years of experience in semiconductor company management and oversight in positions such as Chief Executive Officer, President and General Manager and chairman of the board of directors, and his experience as a product development engineer.

(c) Lewis C. Eggebrecht

Age 73

Director since

April 2014

  Mr. Eggebrecht served as Vice President and Chief Scientist of ICS from 1998 through May 2003. Mr. Eggebrecht has held various other technical and executive management positions for more than 30 years, including as Chief Multimedia Architect at Phillips Semiconductor Manufacturing Inc., as Graphics Architect at S3 Graphics Limited, and Vice President of Research and Development at Commodore International Limited, and as a small systems architect for 15 years at International Business Machines Corporation (“IBM”). While at IBM, Mr. Eggebrecht was the Chief Architect and Design Team Leader on the original IBM PC. He has also previously served on the board of directors of a number of public and private companies, including, most recently, as a director of IDT, where he served as a director from 2005 to 2012, and as a director of ICS from 2003 to 2005. Mr. Eggebrecht holds six patents on the IBM PC and has authored two books on PC architecture, over 20 IBM Technical Disclosure Bulletins and trade press articles. He also serves on the board of directors of a number of private companies. Mr. Eggebrecht’s qualifications to serve on our Board include his extensive experience in personal computer architecture, integrated circuit design and networking, wireless and timing technologies, as well as his experience serving on the board of directors of other public technology companies.

(d) Kenneth Y. Hao

Age 48

Director since

September 2005

  Mr. Hao is a Managing Partner and Managing Director of Silver Lake Partners (“Silver Lake”). Prior to joining Silver Lake in 2000, Mr. Hao was an investment banker with Hambrecht & Quist for 10 years, most recently serving as a Managing Director in the Technology Investment Banking group. Mr. Hao has spent his career investing in and advising technology companies. Mr. Hao also serves or has served on the board of directors of a number of Silver Lake portfolio companies, including Symantec Corporation, where he also serves on its compensation and leadership development committee. Mr. Hao’s qualifications to serve on our Board include his depth of experience in financial and investment matters and his familiarity with a broad range of companies in technology industries.

(e) Eddy W. Hartenstein

Age 66

Director since

February 2016

  Mr. Hartenstein was the publisher and Chief Executive Officer of the Los Angeles Times from August 2008 to August 2014. In addition, he served as co-President of the Tribune Company from October 2010 to May 2011 and as President and Chief Executive Officer from May 2011 to January 2013.

 

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  Previously, Mr. Hartenstein was Vice Chairman and a member of the board of directors of The DIRECTV Group Inc. (formerly Hughes Electronics Corp.), from December 2003 until his retirement in December 2004. He served as Chairman and Chief Executive Officer of DIRECTV Inc. from late 2001 through 2004 and as President from its inception in 1990 to 2001. He currently serves as non-executive chairman of the board of tronc, Inc. (formerly known as Tribune Publishing Company); as lead independent director of the board of SIRIUS XM Holdings Inc., where he also serves on the audit committee; as a director of Yahoo, Inc., where he also serves on the compensation and leadership development committee; and as a director of TiVo Corporation, where he also serves on the compensation and strategic committees. Mr. Hartenstein also served as a director of BRCM from June 2008 through January 2016; SanDisk Corporation from 2005 to May 2016; and Rovi Corporation from September 2015 until its acquisition by TiVo in September 2016. Mr. Hartenstein’s qualifications to serve on our Board include his business leadership and extensive senior management experience, including successfully creating and entering new markets, as well as his considerable public company directorial and governance experience.

(f) Check Kian Low

Age 57

Director since

December 2016

  Mr. Low was one of the founding partners and is a director of NewSmith Capital Partners LLP (“NewSmith”), an independent partnership providing corporate finance advice and investment management services, for which he manages the Asia Pacific offices. He is also an owner, and has served as a director of, Cluny Capital Limited (BVI) since February 2007. Prior to founding NewSmith in 2003, Mr. Low served as Senior Vice-President and Member of the Executive Management Committee of Merrill Lynch & Co., as well as its Chairman for the Asia Pacific Region, where he held various positions since the start of his employment with that firm in October 1995. Mr. Low serves as the lead independent director of Singapore Telecommunications Limited, a public company listed on the Singapore Stock Exchange. He also serves on the board of directors of a number of private companies and is a trustee of the Singapore London School of Economics Trust and the Nanyang Technological University. Mr. Low previously served as a director of the following public, Singapore listed companies: Neptune Orient Lines Limited from April 2011 to June 2016, Fibrechem Technologies Limited from January 2005 to September 2012 and Singapore Exchange Limited from July 2000 to October 2011. Mr. Low’s qualifications to serve on our Board include his considerable public company directorial experience with Singapore-based companies, as well as his considerable executive management and financial and investment experience.

(g) Donald Macleod

Age 68

Director since

November 2007

  Mr. Macleod served as President and Chief Executive Officer of National Semiconductor Corporation (“NSC”) from November 2009 to September 2011, when NSC was acquired by Texas Instruments Incorporated. He served as its President and Chief Operating Officer from the beginning of 2005 until November 2009, and before that he held various other executive and senior management positions at the company including Executive Vice President and Chief Operating Officer and Executive Vice President, Finance and Chief Financial Officer. Mr. Macleod also served as the Chairman of the board of directors of NSC from May 2010 to September 2011. Mr. Macleod serves as

 

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  the Chairman of the board of directors of Intersil Corporation, where he also serves on its compensation and audit committees, and as a director of Knowles Corporation, where he also serves on its nominating & governance and compensation committees. Mr. Macleod also serves on the board of directors of a number of private companies and business organizations. Mr. Macleod’s qualifications to serve on our Board include his more than 30 years of experience in senior management and executive positions in the semiconductor industry, both in Europe and in the United States, and his accounting and finance qualifications and experience.

(h) Peter J. Marks

Age 63

Director since

December 2013

  Mr. Marks is the Chief Executive Officer of Executive Consultant, which he founded in 2013, where he advises business leaders on leadership. Prior to this, Mr. Marks served in various senior management roles with Robert Bosch GmbH, which he originally joined in 1977 and where he remained until December 2011. Most recently, from 2006 until his departure in December 2011, Mr. Marks served as Chairman, President and Chief Executive Officer of Robert Bosch LLC, where he managed all of its business sectors in the Americas, and as a member of Board of Management of Robert Bosch GmbH, with responsibility for worldwide coordination for manufacturing and capital investment. Prior to that he also served as a senior executive of Robert Bosch GmbH responsible for various divisions; automotive electronics, semiconductors, body electronics/electric drivers and energy systems. Mr. Marks’ qualifications to serve on our Board include his extensive leadership experience in senior management and executive positions with a large, multinational organization, as well as his familiarity with operational and strategic issues relating to technology focused companies with international operations.

(i) Henry Samueli, Ph.D.

Age 62

Chief Technical Officer

and Director since

February 2016

  Dr. Samueli has served as our Chief Technical Officer since February 1, 2016. He was a co-founder of BRCM and served as its Chief Technical Officer from its inception in 1991 to May 2008 and from December 2009 through January 2016. Dr. Samueli also served as BRCM’s Vice President of Research and Development from 1991 to May 2003 and as a technology advisor from May 2008 to December 2009. Dr. Samueli has also been a Professor in the Electrical Engineering Department at the University of California, Los Angeles since 1985 (on leave of absence since 1995) and a Distinguished Adjunct Professor in the Electrical Engineering and Computer Science Department of the University of California, Irvine since 2003. Prior to BRCM, Dr. Samueli was the Chief Scientist and one of the founders of PairGain Technologies. From 1980 until 1985, he was employed in various engineering management positions in the Electronics and Technology Division of TRW, Inc. Dr. Samueli is a Fellow of the Institute of Electrical and Electronics Engineers (IEEE), a Fellow of the American Academy of Arts and Sciences, and a Member of the National Academy of Engineering. Dr. Samueli served as Chairman or Co-Chairman of the board of directors of BRCM from 1991 to May 2008 and from May 2011 to January 2016. He received a B.S., M.S. and Ph.D. in Electrical Engineering from the University of California, Los Angeles. He is a named inventor in 75 U.S. patents. Dr. Samueli’s qualifications to serve on our Board include his over 35 years of advanced engineering and leadership experience in the fields of communications systems and digital signal processing. In addition, his co-founding of BRCM and his service as its Chief Technical Officer provide unique insights into, and understanding of, our operations, technologies and industry.

 

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Mr. Low is our Singapore resident director. Due to the Singapore Companies Act requirement that we have at least one director who ordinarily resides in Singapore in office at all times, in the event that Mr. Low is not elected at the 2017 AGM, he will continue to serve as a director after the 2017 AGM until his qualifying successor (i.e., a Singapore resident director) is appointed.

In the event that a director resigns from our Board or otherwise becomes unwilling or unable to serve after the mailing of this Proxy Statement but before the 2017 AGM, our intention would be to make a public announcement of such resignation and either leave such Board seat vacant or appoint a substitute nominee in accordance with our Constitution. If such Board seat were left vacant, this would reduce the number of director nominees to be elected at the 2017 AGM. Votes received in respect of such director would not be counted in such circumstances. In the event that we instead propose to elect a different director nominee at the 2017 AGM to fill any such vacancy, it is intended that the shares represented by the proxy will be voted for such substitute nominee as may be designated by our Board.

There are no family relationships between any of our directors or executive officers.

Our Board recommends a vote FOR the election of each of the director nominees in Proposals 1(a) to (i) listed above to our Board.

 

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CORPORATE GOVERNANCE

Board of Directors

Our Constitution gives our Board general powers to manage our business. Our Board oversees and provides policy guidance on our strategic and business planning processes, oversees the conduct of our business by senior management and is principally responsible for the succession planning for our key executives, including our President and Chief Executive Officer.

Our Board held a total of 6 meetings during the fiscal year ended October 30, 2016 (“Fiscal Year 2016”). During Fiscal Year 2016, each director attended at least 75% of the aggregate number of meetings of our Board and all committees of our Board on which he or she served, counting only those meetings during which such person was a member of our Board and of the relevant committee(s). Our independent directors meet at regularly scheduled executive sessions without management participation.

Our Board has adopted a policy that encourages each director to attend the annual general meetings of our shareholders, but attendance is not required. All of our directors then serving attended our 2016 Annual General Meeting of Shareholders (“2016 AGM”).

Director Independence

Our Board undertakes a review of the independence of each director and nominee for director and considers whether any director or nominee for director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Our Board has made the determination that transactions or relationships between us and an entity where a director or nominee for director serves as a non-employee director and/or is the beneficial owner, directly or indirectly of less than 10% of such entity, or where a director or nominee for director serves on a non-employee advisory board of, or in a non-employee advisory capacity to, such an entity are presumed immaterial for the purposes of assessing a director’s independence.

In reviewing the directors’ independence, with respect to Mr. Hao our Board considered that (i) two entities affiliated with Silver Lake, where Mr. Hao is a Managing Partner and a Managing Director, beneficially owned an aggregate of 10,644,567 ordinary shares at the time of such determination and (ii) representatives of Silver Lake assisted us with the debt financing for the Acquisition of BRCM, for which no payment was made.

As a result of its review, our Board has determined that Messrs. Diller, Eggebrecht, Hao, Hartenstein, Low, Macleod and Marks, representing seven of our nine director nominees, as well as Ms. Page, are currently “independent directors” as defined under the applicable rules and regulations of the SEC and the Nasdaq Stock Market (“Nasdaq”). In addition, our Board has determined that each of the members of:

 

    the Audit Committee meets the additional requirements for financial literacy, and satisfies the heightened independence standards established by the SEC and Nasdaq for membership of that committee; and

 

    the Compensation Committee satisfies the heightened independence standards established by the SEC and Nasdaq for membership of that committee, and is a non-employee director within the meaning of Section 16 of the Exchange Act.

 

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Board Committees

Our Board has an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and an Executive Committee. Each committee can engage outside experts, advisors and counsel to assist the committee in its work. The table below provides the membership for each of the committees as of February 14, 2017, and the number of meetings held by each committee during Fiscal Year 2016.

 

  Director   Audit
Committee
  Compensation
Committee
  Nominating and
Corporate
Governance
Committee
      Executive    
     Committee
(1)    

James V. Diller

          X         X (C)       X (C)

Lewis C. Eggebrecht

          X          

Eddy W. Hartenstein

          X         X      

Donald Macleod

      X         X (C)           X  

Peter J. Marks

      X              

Justine F. Page

      X (C)           X         X  

Hock E. Tan

                  X  

Number of meetings in Fiscal Year 2016

      7         5         4         N/A  

 

(C) Denotes the Chairperson of the committee.
(1) The Executive Committee was established effective October 31, 2016, the first day of our fiscal year 2017.

The functions performed by these committees, which are set forth in more detail in their respective charters, are summarized below. Each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee operates under a charter that satisfies the applicable standards of the SEC and Nasdaq. The charters for all four committees are available in the “Investor Center—Corporate Governance—Documents” section of our website (http://investors.broadcom.com/phoenix.zhtml?c=203541&p=irol-govhighlights). Shareholders may also request a copy in print from: Investor Relations, c/o Avago Technologies U.S. Inc., 1320 Ridder Park Drive, San Jose, CA 95131, U.S.A.

Audit Committee

The Audit Committee is responsible for assisting our Board with its oversight responsibilities regarding the following:

 

    the quality and integrity of our financial statements and internal controls;

 

    the appointment, compensation, retention, qualifications and independence of our independent registered public accounting firm;

 

    the performance of our internal audit function and independent registered public accounting firm;

 

    our compliance with legal and regulatory requirements; and

 

    related party transactions.

Our Board has determined that Mr. Macleod is an audit committee financial expert under applicable SEC rules, and has the requisite financial sophistication required by applicable Nasdaq rules.

Compensation Committee

The Compensation Committee is responsible for:

 

    determining our executives’ base compensation and incentive compensation (other than that of our Chief Executive Officer);

 

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    providing input and recommendations to the full Board regarding our Chief Executive Officer’s compensation;

 

    designing (in consultation with management or our Board) and evaluating our compensation plans, policies and programs, and recommending same to our Board for approval; and

 

    administering our equity-based plans and approving the terms of equity-based grants pursuant to those plans.

To the extent permitted by applicable law, our Constitution and the rules of the Nasdaq, the Compensation Committee may delegate its responsibilities to a subcommittee or to individual directors or executive officers, and may authorize members of our Human Resources department to carry out certain administrative duties regarding our compensation programs.

For information on the processes and procedures followed by the Compensation Committee and our Board, and the role of its compensation consultant and our Chief Executive Officer, in the consideration and determination of executive compensation, see the “Compensation Discussion and Analysis” section beginning on page 28 of this Proxy Statement.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for:

 

    identifying and recommending to our Board qualified candidates to become directors;

 

    overseeing the annual evaluation of our Board and its committees; and

 

    taking a leadership role in shaping our corporate governance.

The Nominating and Corporate Governance Committee will consider candidates for director who are recommended by its members, by other Board members and members of our management, as well as those identified by any third-party search firms retained by it to assist in identifying and evaluating possible candidates. The Nominating and Corporate Governance Committee will also consider recommendations for director candidates submitted by our shareholders if they meet the specific criteria set forth under “Shareholder Nominations to Our Board of Directors” below. The Nominating and Corporate Governance Committee will evaluate and recommend to our Board qualified candidates for election, re-election or appointment to our Board, as applicable.

When evaluating director candidates, the Nominating and Corporate Governance Committee seeks to ensure that our Board has the requisite skills, experience and expertise and that its members consist of persons with appropriately diverse and independent backgrounds. The Nominating and Corporate Governance Committee will consider all aspects of a candidate’s qualifications in the context of the needs of Broadcom, including: independence from management; personal and professional integrity, ethics and values; experience and expertise as an officer in corporate management; experience in our industry and international business and familiarity with Broadcom; experience as a board member of another publicly traded company; practical and mature business judgment; current Board size and composition and the extent to which a candidate would fill a present need on our Board; and the other ongoing commitments and obligations of the candidate. However, the Nominating and Corporate Governance Committee does not have any minimum criteria for director candidates. Consideration of new director candidates will typically involve a series of internal discussions, review of information concerning candidates and interviews with selected candidates. Mr. Low, who joined our Board in December 2016, was first suggested as a prospective Board candidate by one of our independent directors and was then evaluated by the Nominating and Corporate Governance Committee according to its practice described above.

Executive Committee

The Executive Committee has the authority, among other things and subject to specified limitations, to review and approve on behalf of our Board:

 

    investments, acquisitions, dispositions and capital expenditures;

 

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    new or incremental debt financings or borrowings, or amendments thereto, or refinancings thereof, including convertible debt; and

 

    treasury, cash management and other banking matters.

In addition, the Executive Committee may review and provide recommendations to our Board on matters requiring full Board approval, including:

 

    business opportunities, strategies and proposals, and other strategic matters;

 

    business plans, annual budgets, targets, operational plans, capital structure and dividend policy;

 

    proposed transactions that exceed the Executive Committee’s approval thresholds; and

 

    efficient organization and management structure of our Company.

Board Leadership Structure and Role in Risk Management

Our Board believes that Broadcom and its shareholders are best served by a Board leadership structure in which the roles of the Chief Executive Officer and the Chairman of the Board are held by different individuals. Under this structure our Chief Executive Officer is generally responsible for setting the strategic direction of our Company and for the day-to-day leadership of our operations. The Chairman provides strong independent leadership to assist our Board in fulfilling its role of overseeing the management of Broadcom and our risk management practices, approves the agenda for meetings of our Board and presides over Board meetings and over the meetings of our independent directors in executive session. Currently, Mr. Tan serves as our President and Chief Executive Officer and Mr. Diller, an independent director, serves as Chairman of the Board.

Our Board is responsible for overseeing the management of risks facing our Company, both as a whole and through its committees. Our Board regularly reviews and discusses with management information regarding our operations, liquidity and credit, as well as the risks associated with each. The Audit Committee reviews and discusses with management significant financial, legal and regulatory risks and the steps management takes to monitor, control and report such exposures. It also oversees our periodic enterprise-wide risk evaluations conducted by our management. The Compensation Committee oversees management of risks relating to our compensation plans and programs for executives and employees in general. The Nominating and Corporate Governance Committee oversees management of risks associated with Board governance, director independence and conflicts of interest. Additional details regarding the responsibilities of each of these committees are discussed in more detail above, under “Board Committees”. The committees report regularly to our Board on matters relating to the specific areas of risk the committees oversee. Members of management periodically report on our risk management policies and practices to the relevant committees and to the full Board.

Compensation Committee Interlocks and Insider Participation

The current members of the Compensation Committee, Messrs. Macleod, Diller, Eggebrecht and Hartenstein, are not, and have never been, officers or employees of Broadcom. During Fiscal Year 2016, none of our executive officers served on the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or the Compensation Committee.

Risk Assessment and Compensation Practices

Our management conducted its annual review of our compensation policies and practices for our employees, as they relate to our risk management, in January 2017, and reported their findings to the Compensation Committee. Management has concluded that our compensation policies and practices (described in more detail under “Compensation Discussion and Analysis” and “Executive Compensation” below) balance short- and long-term goals and awards, as well as the mix of the cash and equity components. Based upon this review, management believes the elements of our compensation programs do not encourage unnecessary or excessive risk-taking, and are not reasonably likely to have a material adverse effect on us in the future.

 

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Shareholder Communications With Our Board

Holders of our ordinary shares may communicate with our Board at the following address:

The Board of Directors

Broadcom Limited

c/o General Counsel

Avago Technologies U.S. Inc.

1320 Ridder Park Drive

San Jose, CA 95131

U.S.A.

Communications are distributed to our Board or to any individual director, as appropriate, depending on the facts and circumstances outlined in the communication. Communications that are unduly hostile, threatening, illegal or similarly unsuitable will be excluded, with the provision that any communication that is excluded will be made available to any director upon request.

Shareholder Nominations to Our Board of Directors

Under our Constitution, no person is eligible for appointment as a director at any general meeting of shareholders (including an incumbent director), without the recommendation of our Board for election; except for persons proposed by (a) a shareholder or shareholders who in aggregate hold(s) more than 50% of the total number of our issued and paid-up ordinary shares (excluding treasury shares), which shareholder or shareholders, not less than 10 days before, or (b) a shareholder or shareholders who in aggregate hold(s) more than five percent of the total number of our issued and paid-up ordinary shares (excluding treasury shares), which shareholder or shareholders, not less than 120 days before, the date of the notice provided to shareholders in connection with the general meeting lodges at our registered office in Singapore a written notice signed by such shareholder or shareholders (other than the person to be proposed for appointment), who (i) are qualified to attend and vote at the meeting for which such notice is given, and (ii) have held ordinary shares representing the prescribed threshold in (a) or (b) above, for a continuous period of at least one year prior to the date on which such notice is given. Such a notice must also include the consent to serve as a director of the person nominated, as well as the information specified below.

Holders of our ordinary shares can recommend qualified candidates for our Board by submitting recommendations to our General Counsel, c/o Avago Technologies U.S. Inc., 1320 Ridder Park Drive, San Jose, CA 95131, U.S.A. Submissions that include the following requirements will be forwarded to our Nominating and Corporate Governance Committee for review and consideration:

 

    the candidate’s name and personal and business addresses;

 

    a resume or curriculum vitae describing the candidate’s principal occupation, business experience, education and other relevant qualifications, and an explanation that clearly indicates how he or she has the necessary experiences, skills and qualifications to serve as a director;

 

    a description of any relationship, agreement or understanding between the candidate or any affiliate of the candidate and any customer, supplier or competitor of our, or any other relationship or understanding that might be relevant to a determination of the independence of the candidate as director, or affect the independent status of our independent registered public accounting firm;

 

    a statement as to whether or not, during the past 10 years, the candidate has been convicted in a criminal proceeding (excluding minor traffic violations) and, if so, the dates, the nature of the conviction, the name or other disposition of the case, and whether the individual has been involved in any other legal proceeding during the past 10 years, and any other information that would be required under SEC rules to be included a proxy statement soliciting proxies for the election of such candidate as a director;

 

    a signed statement from the candidate that he or she consents to serve on our Board if elected and that he or she is not disqualified under the Singapore Companies Act from acting as a director; and

 

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    a statement from the person submitting the candidate that he or she is the registered holder of ordinary shares, or if the shareholder is not the registered holder, a written statement from the record holder of the ordinary shares (usually a broker or bank) verifying that at the time the shareholder submitted the candidate that he or she was a beneficial owner of ordinary shares.

Qualified director candidates suggested by holders of our ordinary shares will be evaluated in the same manner as any other candidate for election to our Board (other than those standing for re-election).

Code of Ethics and Business Conduct

Our Board has adopted a Code of Ethics and Business Conduct that is applicable to all members of our Board, executive officers and employees, including our Chief Executive Officer, Chief Financial Officer and principal accounting officer. A copy of the Code of Ethics and Business Conduct is available in the “Investor Center—Corporate Governance” section of our website (http://investors.broadcom.com/phoenix.zhtml?c=203541&p=irol-govhighlights) under “Documents.” Shareholders may also request a copy in print from: Investor Relations, c/o Avago Technologies U.S. Inc., 1320 Ridder Park Drive, San Jose, CA 95131, U.S.A.

Corporate Governance Guidelines

Our Board is committed to using sound corporate governance practices to help fulfill our responsibilities to our shareholders. As such, our Board has adopted formal Corporate Governance Guidelines to clarify how it exercises its responsibilities and provide a framework within which it will conduct its business. A copy of the Corporate Governance Guidelines is available in the “Investor Center—Corporate Governance” section of our website (http://investors.broadcom.com/phoenix.zhtml?c=203541&p=irol-govhighlights) under “Documents.” Shareholders may also request a copy in print from: Investor Relations, c/o Avago Technologies U.S. Inc., 1320 Ridder Park Drive, San Jose, CA 95131, U.S.A. Among the policies included in our Corporate Governance Guidelines are the following:

Directors with Significant Job Change

Any director who retires from his or her present employment, or who materially changes his or her position, is required to submit an offer of resignation as a director of our Board. Our Board will then evaluate whether the individual should continue to sit on our Board in light of his or her new occupational status and decide whether or not to accept the director’s offer of resignation.

Director’s Offer of Resignation at Age 75

Our Board does not currently believe that a mandatory retirement age for non-employee directors is necessary, and that continued service by a particular director may be in the best interests of the Company and its shareholders, regardless of such director’s age. However, when a non-employee director reaches the age of 75 years, he or she is required to offer his or her resignation to our Board, to be effective as of the next annual general meeting of shareholders. Our Board will determine, based on individual circumstances, the needs of our Board and the interests of our Company and its shareholders, whether or not to accept such resignation. Accordingly, no person would be eligible to stand for election or re-election to our Board after attaining the age of 75 without being specifically nominated as a candidate by our Board.

Director Share Ownership Guidelines

The director share ownership guidelines, as adopted in February 2016, encourage our non-employees directors to hold our ordinary shares having a fair market value equal to three times the annual cash retainer paid to non-employee directors for service on our Board (which amounts to $240,000 currently), measured using the closing price per ordinary share as quoted on the Nasdaq Global Select Market on the date of valuation. Outstanding restricted share units (“RSUs”) held by a director count in full toward achieving the guideline level of share ownership. The guidelines encourage our non-employee directors to reach this goal by August 28, 2017 or within five years of the date of their appointment or election to our Board, whichever is

 

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later, and to hold at least such minimum value in shares for as long as he or she serves on our Board. As of February 8, 2017, all of our non-employee directors, other than Mr. Low, who was appointed to our Board in December 2016, had achieved the guideline level of share ownership.

Forward-Looking Statements

This Proxy Statement contains forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events. Forward-looking statements contained in this Proxy Statement should be considered in light of the many uncertainties that affect our business and specifically those factors discussed from time to time in our public reports filed with the SEC, such as those discussed under the heading, “Risk Factors,” in our Annual Report on Form 10-K for Fiscal Year 2016 (the “2016 Form 10-K”), and as may be updated in our subsequent SEC filings.

 

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DIRECTORS’ COMPENSATION

Our non-employee directors (which are those directors not employed by us or any subsidiary) receive cash and equity compensation in consideration for their service on our Board, as set forth in more detail below. Non-employee directors are reimbursed, or we pay, for travel and other out-of-pocket expenses related to their attendance at Board and committee meetings. Non-employee directors do not receive any non-equity incentive compensation, or participate in any company pension plan or deferred compensation plan. Under the laws of Singapore, our shareholders must approve all cash compensation paid to our non-employee directors. We do not compensate our management directors for their service on our Board or any committee of our Board.

Non-Employee Directors’ Cash Compensation

At the 2016 AGM, our shareholders approved the cash compensation arrangements for our non-employee directors currently in effect. During Fiscal Year 2016, our non-employee directors were entitled to receive the following annual cash compensation, payable quarterly:

 

     Annual Fees
(April 7, 2016
to present)
  

Annual Fees

(November 2,

2015-April 6,

2016)

    

Board membership (including the Chairperson of the Board)

       $      80,000          $  65,000       

Additional amounts, as applicable, payable to:

              

Chairperson of the Board

       $    150,000          $  80,000       

Chairperson of the Audit Committee

       $      35,000          $  25,000       

Chairperson of the Compensation Committee

       $      22,500          $  15,000       

Chairperson of the Nominating and Corporate Governance Committee

       $      18,000          $  12,500       

Member of the Audit Committee (other than chairperson)

       $      12,500          $  10,000       

Member of the Compensation Committee (other than chairperson)

       $      10,000          $  10,000       

Member of the Nominating and Corporate Governance Committee (other than chairperson)

       $        6,000          $  10,000       

Non-Employee Directors’ Equity Compensation

Effective December 8, 2015, our non-employee directors are entitled to receive the following equity compensation:

 

    upon appointment to our Board, an initial RSU award with a target value of $200,000 on the date of grant, prorated based on the expected portion of a year to be served between the time of such director’s appointment and the anticipated date of our annual general meeting of shareholders immediately following the director’s appointment, issued under the Avago Technologies Limited 2009 Equity Incentive Award Plan (the “2009 Plan”), and vesting in full one year from the grant date, subject to the director’s continued service on our Board; and, thereafter,

 

    an annual RSU award issued under the 2009 Plan with a value of $200,000 on the date of grant, to be granted on the date of each annual general meeting of shareholders, subject to the director’s re-election at such meeting, with such award vesting in full one year from the date of grant, subject to the director’s continued service on our Board.

To determine the number of shares to be awarded to a non-employee director pursuant to any such grants, the value of the grant is divided by the average of our per share closing market prices, as quoted on the Nasdaq Global Select Market, over the 30 calendar days immediately preceding the effective date of grant.

 

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Directors’ Compensation for Fiscal Year 2016

The following table sets forth information regarding compensation earned by our non-employee directors during Fiscal Year 2016.

 

Name    Fees Earned or
Paid in Cash
   Stock
Awards
(1)
   Dividends(2)    Total

James V. Diller

     $ 213,000        $ 205,759        $ 232,800 (3)      $   651,559  

Lewis C. Eggebrecht

     $ 82,500          —            —          $ 82,500  

Bruno Guilmart(4)

     $ 37,500          —            —          $ 37,500  

Kenneth Y. Hao

     $ 72,500        $ 205,759        $ 97,000 (5)      $ 375,259  

Eddy W. Hartenstein

     $ 69,250        $ 240,191          —          $ 309,441  

Donald Macleod

     $ 102,500        $ 205,759          —          $ 308,259  

Peter J. Marks

     $ 83,750          —            —          $ 83,750  

Justine F. Page

     $ 110,500        $ 205,759          —          $ 316,259  

Lucien Y. K. Wong(6)

     $ 40,000        $ 205,759          —          $ 245,759  

 

 

(1) Represents the grant date fair value of RSU awards granted in Fiscal Year 2016, determined in accordance with Accounting Standards Codification Topic Number 718 (“ASC 718”). The grant date fair value of RSU awards is based on the closing price of our ordinary shares on the date of grant. The amounts shown represent the grant date fair value of 1,325 RSUs granted to the director on April 6, 2016 following his or her election to our Board. With respect to Mr. Hartenstein, the amount shown also includes the grant date fair value of 262 RSUs granted on February 1, 2016 in connection with his appointment to our Board. The table below shows the aggregate number of ordinary shares underlying the stock options and RSUs held by our non-employee directors as of October 30, 2016:

 

Name    Number of Ordinary
Shares Underlying
Restricted Share Units (#)
   Number of Ordinary
Shares Underlying
Outstanding Stock Options (#)
    

James V. Diller

       1,325                  15,077              

Lewis C. Eggebrecht

       1,707                  10,241              

Kenneth Y. Hao

       1,325                  22,707              

Eddy W. Hartenstein

       1,587                        

Donald Macleod

       1,325                  5,223              

Peter J. Marks

       2,609                  23,474              

Justine F. Page

       1,325                  15,077              

Lucien Y. K. Wong

       1,325                        
(2) Represents dividends paid on shares received upon exercise of options previously granted to the director as compensation, as dividends were not factored into the grant date fair value for the options because they were granted prior to our adoption of ASC 718. These option awards were accounted for under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations and provided the required pro forma disclosures of SFAS No. 123, “Accounting for Stock-Based Compensation.”
(3) Shares on which dividends were paid are held by Mr. Diller as Trustee for the James & June Diller Trust UA dated 7/20/77, for the June P. Diller Annuity Trust—2010B dated May 10, 2010 and for the James V. Diller Annuity Trust—2010B dated May 10, 2010.
(4) Mr. Guilmart did not stand for re-election at the 2016 AGM and ceased to be a director on April 6, 2016.

 

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(5) Pursuant to Mr. Hao’s arrangement with Silver Lake, dividends on shares received by Mr. Hao upon the exercise of certain options or the vesting of certain RSUs received as director compensation are required to be remitted to Silver Lake.
(6) Mr. Wong resigned from our Board effective December 15, 2016.

 

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PROPOSAL 2:

APPROVAL OF THE RE-APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM AND INDEPENDENT SINGAPORE AUDITOR FOR FISCAL YEAR 2017 AND

AUTHORIZATION OF THE AUDIT COMMITTEE TO FIX ITS REMUNERATION

PricewaterhouseCoopers LLP (“PwC”) is our independent registered public accounting firm in the United States and audits our consolidated financial statements. During Fiscal Year 2016, PwC in Singapore was our independent Singapore auditor of our Singapore statutory financial statements. Pursuant to Section 205(2) and 205(4) of the Singapore Companies Act, any appointment after our Board’s initial appointment of our independent Singapore auditor, or its subsequent removal, requires the approval of our shareholders. The Audit Committee has approved, subject to shareholder approval, the re-appointment of PwC as our independent registered public accounting firm and independent Singapore auditor for the fiscal year ending October 29, 2017 (“Fiscal Year 2017”). Pursuant to Section 205(16) of the Singapore Companies Act, the remuneration of a company’s auditors shall be fixed by the shareholders in a general meeting or the shareholders may authorize directors to fix the remuneration. Our Board believes that it is appropriate for the Audit Committee, as part of its oversight responsibilities, to fix the auditors’ remuneration. Our Board is therefore also requesting that the shareholders authorize the Audit Committee to fix the auditors’ remuneration for services rendered through our 2018 Annual General Meeting of Shareholders (the “2018 AGM”). We expect a representative from PwC to be present at the 2017 AGM. This representative will have the opportunity to make a statement if he or she so desires and is expected to be available to respond to appropriate questions.

Principal Accounting Fees and Services

Set forth below are the audit fees for services rendered by PwC to us and Avago, our predecessor, relating to Fiscal Year 2016 and to Avago for the fiscal year ended November 1, 2015 (“Fiscal Year 2015”). Also set forth below are fees billed for audit-related services, tax services and all other services rendered by PwC to Avago from November 2, 2015 to January 31, 2016 and to us from February 1, 2016 to October 30, 2016, and to Avago for Fiscal Year 2015.

 

     Fiscal Year 2016
Services to Avago
and Broadcom
   Fiscal Year 2015
Services to
Avago
   
     ($ in thousands)    

Audit Fees

           $      10,096            $      5,300      

Audit-Related Fees

       575          180      

Tax Fees

       1,458          1,161      

All Other Fees

       3          3      
    

 

 

      

 

 

     

Total

           $      12,132            $      6,644      
    

 

 

      

 

 

     

Audit Fees consist of fees billed for professional services provided in connection with the integrated audit of our or Avago’s annual consolidated financial statements, audit of internal control over financial reporting, the review of our or Avago’s quarterly consolidated financial statements, and audit services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years, such as statutory audits. The fees for Fiscal Year 2015 and Fiscal Year 2016 include fees related to business combination accounting for our recently closed acquisitions.

Audit-Related Fees consist of fees billed for assurance and related services by PwC that are reasonably related to the performance of the audit or review of our or Avago’s consolidated financial statements and not included in Audit Fees. In Fiscal Year 2016, these fees also included fees related to merger and acquisition due diligence.

 

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Tax Fees consist of fees billed for professional services for tax compliance, including various transfer pricing studies. In Fiscal Year 2015, these services also included restructuring consultation for an acquisition completed in Fiscal Year 2015.

All Other Fees consist of fees for professional services rendered by PwC for permissible non-audit services. In Fiscal Year 2015 and Fiscal Year 2016, these fees consisted of a license for specialized accounting research software.

In considering the nature of the services provided by PwC, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with PwC and our management to determine that they are permitted under the rules and regulation concerning independent registered public accounting firms’ independence promulgated by the SEC, as well as by the American Institute of Certified Public Accountants.

Other than as stated above, no fees were billed to us by PwC for Fiscal Year 2015 and Fiscal Year 2016. The Audit Committee considers the provision of these services to be compatible with maintaining the independence of PwC.

Audit Committee Pre-Approval Policy

The Audit Committee is responsible for selecting the independent registered public accounting firm to be employed by us to audit our financial statements, subject to approval by our shareholders of such appointment. The Audit Committee also assumes responsibility for the retention, compensation, oversight and termination of any independent auditor employed by us. All engagements with our independent registered accounting firm, regardless of amount, must be authorized in advance by the Audit Committee. The Audit Committee has delegated its pre-approval authority to the Chairperson of the Audit Committee, provided that any matters approved in such manner are presented to the Audit Committee at its next meeting. Pursuant to the charter of the Audit Committee, committee approval of non-audit services (other than review and attest services) is not required, if such services fall within available exceptions established by the SEC. However, to date, the Audit Committee’s policy has been to approve all services provided by our independent registered accounting firm. The independent registered public accounting firm and our management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with the Audit Committee’s pre-approval, and the fees for the services performed to date.

During Fiscal Year 2015 and Fiscal Year 2016, all services provided to either Avago or us by PwC were approved by the Audit Committee pursuant to paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X.

Our Board recommends a vote FOR the resolution to approve of the re-appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm and independent Singapore auditor for Fiscal Year 2017 and to authorize the Audit Committee to fix its remuneration as described in the Notice.

 

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PROPOSAL 3:

ORDINARY RESOLUTION TO AUTHORIZE SHARE ALLOTMENTS AND ISSUANCES

We are incorporated in the Republic of Singapore. Under the laws of Singapore, our directors may issue shares and make offers or agreements or grant equity awards that might or would require the allotment and issuance of shares only with the prior approval of our shareholders. We are submitting this proposal to authorize our directors to allot and issue our shares from time to time, as set forth in the Notice, because we are required to do so under the laws of Singapore before we can issue any (i) ordinary shares in connection with our equity compensation plans, possible future strategic transactions, or public and private offerings or (ii) Special Preference Shares in accordance with our Constitution.

If this proposal is approved, the authorization would be effective from the date of the 2017 AGM and continue until the earlier of (i) the conclusion of the 2018 AGM or (ii) the expiration of the period within which the 2018 AGM is required by the laws of Singapore to be held. The 2018 AGM is required to be held no later than 15 months after the date of the 2017 AGM or six months after our financial year end, whichever is the earlier. The laws of Singapore allow for an application to be made with the Singapore Accounting and Corporate Regulatory Authority for an extension of up to an additional two months of the time in which to hold an annual general meeting of shareholders, which may be granted in the discretion of that Authority.

Our Board believes that it is advisable and in the best interests of our shareholders for our shareholders to authorize the directors to issue shares and to make offers or agreements or grant equity awards that might or would require the issuance of ordinary shares. In the future, the directors may need to issue shares or make agreements that would require the allotment and issuance of new shares. For example:

 

    in connection with strategic transactions and acquisitions;

 

    pursuant to public and private offerings of our ordinary shares, as well as instruments (including debt instruments) convertible into our ordinary shares;

 

    in connection with our equity compensation plans and arrangements; or

 

    in respect of the Special Preference Shares, as required by our Constitution.

Notwithstanding this general authorization to allot and issue our ordinary shares, we will be required to seek shareholder approval with respect to future issuances of ordinary shares, where required under the Nasdaq Stock Market rules, such as if we were to propose an issuance of ordinary shares that would result in a change in control of Broadcom or in connection with a transaction involving the issuance of ordinary shares representing 20% or more of our outstanding ordinary shares.

We expect that we will continue to issue ordinary shares and grant equity-based awards in the future under circumstances similar to those in the past. As of the date of this Proxy Statement, other than issuances of ordinary shares (i) in connection with our equity compensation plans, awards and arrangements, including any equity compensation plans and awards we have assumed or may assume as a result of any acquisitions we have made or may make, or (ii) as we may choose to issue in exchange for Restricted Units, we have no specific plans, agreements or commitments to issue any ordinary shares for which approval of this proposal is required. Nevertheless, our Board believes that it is advisable and in the best interests of our shareholders for our shareholders to provide this general authorization in order to avoid the delay and expense of obtaining shareholder approval at a later date, and to provide us with greater flexibility to pursue strategic transactions and acquisitions and raise additional capital through public and private offerings of our ordinary shares, as well as instruments convertible into our ordinary shares.

We will only issue additional Special Preference Shares if and to the extent required, and in the manner provided, by our Constitution.

If this proposal is approved, our directors would be authorized to allot and issue, during the period described above, shares subject to and in accordance with our Constitution, applicable Singapore laws and the

 

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Nasdaq rules. The issuance of a large number of ordinary shares (or instruments convertible into or exchangeable for ordinary shares) could be dilutive to existing shareholders or reduce the trading price of our ordinary shares on the Nasdaq Global Select Market. If this proposal is not approved, we would not be permitted to issue shares (other than shares issuable on exercise or settlement of outstanding options, RSUs and other instruments convertible or exchangeable into, or exercisable for, ordinary shares or the like, which were previously granted when prior shareholder approved share issuance mandates were in effect). If we are unable to rely upon equity as a component of compensation, we would have to review our compensation practices, and would likely have to substantially increase cash compensation to retain key personnel.

Our Board recommends a vote FOR the resolution to authorize share allotments and issuances as described in the Notice.

 

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PROPOSAL 4

NON-BINDING, ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

We are seeking a non-binding, advisory vote to approve the compensation of our named executive officers as described in “Compensation Discussion and Analysis” beginning on page 28 and in the tables and accompanying narrative disclosure under “Executive Compensation” beginning on page 49.

Shareholders are encouraged to read the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this Proxy Statement, which discuss our compensation policies, procedures and programs and the Fiscal Year 2016 compensation for our named executive officers listed in the Fiscal Year 2016 Summary Compensation Table included in the “Executive Compensation” section of the Proxy Statement.

Our Board recommends that shareholders vote “FOR” the following resolution:

“Resolved, that shareholders approve, on an advisory basis, the compensation of Broadcom’s named executive officers, as disclosed in “Compensation Discussion and Analysis” and the compensation tables and the accompanying narrative disclosure under “Executive Compensation” of the Proxy Statement.”

While the vote on this resolution is advisory and not binding on us, the Compensation Committee or our Board, the Compensation Committee and our Board values thoughtful input from shareholders and will consider the outcome of the vote on this resolution when considering future executive compensation decisions. As discussed under Proposal 5, our Board has adopted a policy of providing for annual advisory votes from shareholders on executive compensation. We currently expect to conduct the next advisory vote on executive compensation at our 2018 AGM, but will take into account the outcome of the advisory vote under Proposal 5.

Our Board recommends that shareholders vote, on a non-binding, advisory basis, FOR the resolution to approve executive compensation as described in the Notice.

 

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PROPOSAL 5

NON-BINDING, ADVISORY VOTE ON THE FREQUENCY OF SHAREHOLDERS’ VOTE

TO APPROVE EXECUTIVE COMPENSATION

In accordance with the U.S. Dodd-Frank Act of 2010, we are seeking a non-binding, advisory vote as to the frequency with which shareholders would have an opportunity to provide an advisory vote to approve the executive compensation of our named executive officers. Shareholders have the option of selecting a frequency of one, two or three years, or abstaining.

While we will continue to monitor developments in this area, our Board believes that an advisory vote to approve executive compensation every year is appropriate. This will enable our shareholders to vote, on an advisory basis, to approve the most recent executive compensation information that is presented in our proxy statement, leading to a more meaningful and coherent communication between us and our shareholders on the executive compensation of our named executive officers.

Based on the factors discussed, our Board recommends that future advisory votes to approve executive compensation occur every year until the next advisory vote on the frequency of advisory votes to approve executive compensation. Shareholders are not being asked to approve or disapprove our Board’s recommendation, but rather to indicate their choice among the following frequency options: one year, two years or three years, or to abstain from voting.

This vote is advisory, and therefore not binding on us, the Compensation Committee or our Board.

Our Board recommends that shareholders select every ONE year as the frequency of future advisory votes to approve executive compensation as described in the Notice.

 

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EXECUTIVE OFFICERS

Executive Officers

The following table sets forth certain information about our executive officers as of February 14, 2017:

 

 

  Name

 

  

 

Age

 

  

 

Title

 

  Hock E. Tan

 

      

 

65

 

 

 

  

President, Chief Executive Officer and Director

 

  Thomas H. Krause Jr.

 

      

 

39

 

 

 

  

Vice President and Chief Financial Officer

 

  Charlie B. Kawwas, Ph.D.

 

      

 

46

 

 

 

  

Senior Vice President and Chief Sales Officer

 

  Henry Samueli, Ph.D.

 

      

 

62

 

 

 

  

Chief Technical Officer and Director

 

  Bryan T. Ingram

 

      

 

52

 

 

 

  

Senior Vice President and General Manager, Wireless Semiconductor Division

 

  Patricia H. McCall

 

      

 

62

 

 

 

  

Vice President and General Counsel

 

  Kirsten M. Spears

 

      

 

52

 

 

 

  

Chief Accounting Officer, Vice President and
Corporate Controller

 

Hock E. Tan has served as our President, Chief Executive Officer and a director since March 2006. From September 2005 to January 2008, he served as chairman of the board of directors of IDT. Prior to becoming chairman of IDT, Mr. Tan was the President and Chief Executive Officer of ICS, from June 1999 to September 2005. Prior to ICS, Mr. Tan was Vice President of Finance with Commodore International, Ltd. from 1992 to 1994, and previously held senior management positions with PepsiCo, Inc. and General Motors Corporation. Mr. Tan served as managing director of Pacven Investment, Ltd., a venture capital fund in Singapore from 1988 to 1992, and served as managing director for Hume Industries Ltd. in Malaysia from 1983 to 1988.

Thomas H. Krause, Jr. has served as our Vice President and Chief Financial Officer since October 2016, and served as our acting Chief Financial Officer and principal financial officer from March 2016 to October 2016. Mr. Krause also served as our Vice President, Corporate Development from January 2012 to October 2016. Prior to joining us, he was an independent management consultant representing several public and private technology companies. Mr. Krause previously served as Vice President of Business Development at Techwell, Inc., a mixed-signal fabless semiconductor company, and held various roles with Technology Crossover Ventures and Robertson Stephens.

Charles B. Kawwas, Ph.D. has served as our Senior Vice President and Chief Sales Officer since June 2015 and served as our Senior Vice President, Worldwide Sales from May 2014 to June 2015. Dr. Kawwas served as Senior Vice President of Sales for LSI Corporation (“LSI”) from 2010 to May 2014, when we acquired LSI, having joined LSI in 2007 as Vice President of Marketing through its acquisition of Agere Systems. Prior to joining Agere Systems in 2005, he served as the leader of product line management for optical Ethernet and multiservice edge portfolio at Nortel Networks.

Henry Samueli, Ph.D. has served as our Chief Technical Officer and a director since February 1, 2016. He was a co-founder of BRCM and served as its Chief Technical Officer from its inception in 1991 to May 2008 and from December 2009 to January 2016. Dr. Samueli also served as BRCM’s Vice President of Research and Development from 1991 to May 2003 and as a technology advisor from May 2008 to December 2009. Dr. Samueli has also been a Professor in the Electrical Engineering Department at the University of California, Los Angeles since 1985 (on leave of absence since 1995) and a Distinguished Adjunct Professor in the Electrical Engineering and Computer Science Department of the University of California, Irvine since 2003. Prior to BRCM, Dr. Samueli was the Chief Scientist and one of the founders of PairGain Technologies. From 1980 until 1985, he was employed in various engineering management positions in the Electronics and Technology Division of TRW, Inc. Dr. Samueli is a Fellow of the Institute of Electrical and Electronics Engineers (IEEE), a Fellow of the American Academy of Arts and Sciences, and a Member of the National Academy of Engineering. Dr. Samueli

 

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served as Chairman or Co-Chairman of the board of directors of BRCM from 1991 to May 2008 and from May 2011 to January 2016. He received a B.S., M.S. and Ph.D. in Electrical Engineering from the University of California, Los Angeles. He is a named inventor in 75 U.S. patents.

Bryan T. Ingram has served as our Senior Vice President and General Manager, Wireless Semiconductor Division since November 2015 and prior to that served as our Senior Vice President and Chief Operating Officer from April 2013. Mr. Ingram previously served as our Senior Vice President and General Manager, Wireless Semiconductor Division from November 2007 and as Vice President of that division from December 2005. Prior to the closing of our acquisition of the Semiconductor Products Group (“SPG”) of Agilent Technologies, Inc., Mr. Ingram was the Vice President and General Manager, Wireless Semiconductor Division of SPG. He has held various other positions with Hewlett-Packard Company and Agilent Technologies, Inc. Mr. Ingram joined Hewlett-Packard Company in 1990.

Patricia H. McCall has served as our Vice President and General Counsel since March 2007. She served as Director of Litigation at Adobe Systems from 2006 to 2007. Prior to this, Ms. McCall served as Senior Vice President, General Counsel and Secretary of ChipPAC Inc. from January 2003 to August 2004, when ChipPAC Inc. merged with ST Assembly Test Services Ltd. in August 2004. Ms. McCall served as the Senior Vice President Administration, General Counsel and Secretary of ChipPAC Inc. from November 2000 to January 2003. From November 1995 to November 2000, Ms. McCall was at National Semiconductor Corporation, most recently as Associate General Counsel, and prior to that was a partner at the law firm of Pillsbury, Madison & Sutro. Ms. McCall is also a Barrister in England.

Kirsten M. Spears has served as our Chief Accounting Officer since March 2016 and as our Vice President and Corporate Controller since May 2014. Prior to our acquisition of LSI, Ms. Spears served as Vice President and Corporate Controller of LSI. She joined LSI in September of 1997 and held a number of management positions in accounting and reporting before becoming the Corporate Controller in 2007. Before joining LSI, Ms. Spears worked for Price Waterhouse LLP in audit; for Raychem Corporation, managing a variety of accounting functions; and for Bank of America, managing branch operations.

Our executive officers are appointed by, and serve at the discretion of, our Board. There are no family relationships among our directors and executive officers.

 

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COMPENSATION DISCUSSION AND ANALYSIS

The following Compensation Discussion & Analysis (the “CD&A”) describes the philosophy, objectives and structure of our Fiscal Year 2016 executive compensation program. This CD&A is intended to be read in conjunction with the tables and other information beginning on page 49, which provide further historical compensation information for our named executive officers. Our named executed officers for Fiscal Year 2016 were Hock E. Tan, President and Chief Executive Officer (“CEO”), Thomas H. Krause, Jr., Vice President and Chief Financial Officer (“CFO”), Charlie B. Kawwas, Ph.D., Senior Vice President and Chief Sales Officer, Henry Samueli, Ph.D., Chief Technical Officer, and Bryan T. Ingram, Senior Vice President and General Manager, Wireless Semiconductor Division, as well as our former CFO, Anthony E. Maslowski (the “NEOs”). Dr. Samueli became an executive officer on February 1, 2016, upon the closing of the acquisition of BRCM. Mr. Maslowski went on an indefinite leave of absence for medical reasons on March 24, 2016, at which time Mr. Krause was appointed as acting CFO. Effective October 14, 2016, Mr. Maslowski’s employment with us ended due to continuing uncertainty regarding his health, and Mr. Krause was appointed as CFO effective as of October 17, 2016.

 

I. Executive Summary

Our Fiscal Year 2016 performance was strong on many measures: continued gains in total shareholder return (“TSR”), increasing revenues, and the successful completion of the strategic acquisition of BRCM, the integration of which is on target. Our executive compensation is structured around the achievement of near-term corporate financial and operational targets (fiscal year metrics) and longer-term business objectives and strategies. We believe in rewarding performance; likewise, we believe pay should reflect underperformance, when that occurs. We seek to closely align our executives’ interests with those of our shareholders and allocate a significant portion of our executives’ compensation opportunity to equity-based compensation.

Business Performance

Under our CEO’s leadership, we have created long-term, sustained value for our shareholders. We believe that our overall results in the past fiscal year were impressive. We achieved a number of important strategic objectives, including the acquisition of BRCM, while remaining focused on our core operations and delivering strong operating performance as well as share price performance.

Financial

 

    Our TSR, based on an investment of $100 in our ordinary shares on the first day of fiscal year 2011, continued to be very strong on both an absolute and relative basis over the last five years.

 

    For Fiscal Year 2016, our TSR increased 38.5%, surpassing all of the companies in our peer group, as well as the Philadelphia Semiconductor Index (the “PHLX”) and the S&P 500 Index (the “S&P Index”). For example, in that same period the PHLX increased by 22.5%, and the S&P Index rose only 1.1% (see chart below).

 

    In the last five fiscal years, our cumulative TSR has increased by 40.8% annually, and significantly outperformed these indices (see chart below)

 

    Our revenue continued to show strong growth as well, reaching $13.2 billion in Fiscal Year 2016 (see graphic below).

 

    GAAP operating income increased $2,041 million or 125% over Fiscal Year 2015. Non-GAAP operating income increased $2,394 million or 81.8% over Fiscal Year 2015, primarily due to the acquisition of BRCM on February 1, 2016. Please see page 39 for a reconciliation of Non-GAAP operating income to GAAP operating income.

 

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    We generated $2,688 million in free cash flow (cash flow from operations of $3,411 million less capital expenditures of $723 million), a 56% increase over Fiscal Year 2015, and ended Fiscal Year 2016 with $3,097 million in cash and cash equivalents, a 70% increase over Fiscal Year 2015.

 

LOGO

Strategic

 

    We completed our acquisition of BRCM on February 1, 2016, creating a global, diversified leader in wired and wireless communication semiconductors.

 

    We continued to focus the scope of our business, divesting substantially all of the non-core BRCM businesses held for sale.

 

    We delivered on projected synergies across the combined business.

 

    We are on target to complete the integration of BRCM into our infrastructure as planned.

Cash Incentives Reflected Positive 2016 Company Performance. Payouts under the Fiscal Year 2016 Annual Performance Bonus Plan (the “APB Plan”), our annual cash incentive bonus program, are tied to pre-established financial and division or function performance goals.

 

    Our non-GAAP revenue exceeded target but was below the maximum plan performance metric, and non-GAAP operating income as a percentage of non-GAAP revenue for the year exceeded the maximum plan performance metric, which together resulted in 132% attainment of the corporate performance metrics.

 

    The APB Plan metrics are designed to be challenging to achieve. The achievement of the divisional or functional performance targets were mixed, with some targets not being achieved and others being met or exceeded, which is due in part to differing business conditions across our various businesses.

 

    As a result of the individual performance of each of the NEOs, NEOs were awarded an individual performance multiplier ranging from 100% to 150%, including 150% for Mr. Tan, our CEO. These achievements resulted in attainment levels ranging between 66% and 131% of target for the NEOs under our APB Plan. The aggregate amount paid to our NEOs under our APB Plan decreased to $4.2 million in Fiscal Year 2016 from $6.0 million in Fiscal Year 2015.

Generally Modest Increases to Base Salaries and No Changes to Target Bonus Opportunities. The Compensation Committee or our Board, as applicable, approved generally modest increases to cash compensation levels for our NEOs (the sum of base salary and target annual incentive bonus payouts) in Fiscal Year 2016:

 

   

Dr. Kawwas’ and Mr. Ingram’s salaries were increased by 3%. Mr. Krause’s salary was increased 10% to reflect his increased responsibilities as acting CFO. Dr. Samueli’s salary, which, due to his position

 

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as a co-founder of BRCM, was historically set at a nominal level, was increased from $37,440 to $100,000, to eliminate the need to annually increase his base salary to meet various minimum wage requirements. Finally, our CEO, Mr. Tan, received a base salary increase of 13.6% to compensate him for running a significantly larger organization following the BRCM acquisition and to position his base salary closer to the median of the peer group. In each case, salary increase decisions for our NEOs were based, in part, on a review of competitive market data.

 

    Target annual performance cash bonus opportunities for Fiscal Year 2016 under the APB Plan were set at the same levels as the prior year for all of our NEOs.

Equity as a Key Component of Compensation

 

    CEO Equity Award. During Fiscal Year 2016, Mr. Tan received a 100% performance-based restricted stock unit (“PRSU”) award, pursuant to which he is eligible to earn up to a maximum of 240,000 ordinary shares based on our relative TSR performance as compared to the S&P Index as well as absolute growth in our share price (the “2016 Grant”). No shares will be earned if our TSR over the three year performance period is below the 25th percentile of the S&P Index. In order to earn the maximum number of shares, our TSR over this three-year period will need to be at or above the 90th percentile of the S&P Index and we must achieve a share price growth of at least 130%. When designing this award, our Board took into account shareholder feedback received in 2013, when we last granted our CEO an equity award, and currently plans to grant Mr. Tan similarly structured performance-based equity awards on an annual basis going forward.

 

    Annual Equity Awards. In Fiscal Year 2016, we continued our policy of annually granting our other executives an equal mix of PRSU and service-based restricted stock unit (“RSU”) awards, in line with prevailing market and industry practice. To more closely align our executives’ interests with those of our shareholders, the performance criteria for the PRSUs were based on sustained increases in our share price. The performance criteria for these awards will be met only if, and at such time as, the average of the closing prices of our ordinary shares over a 20 consecutive trading day period is equal to or greater than 120% of the closing share price on the grant date.

Key Takeaways

We made substantial financial, operational and strategic achievements in Fiscal Year 2016, delivering significant shareholder value. The Compensation Committee and our Board remain committed to ensuring that our executives are focused and incentivized to enhance the long-term sustainable shareholder value.

 

  Our pay program is strongly tied to enhancing shareholder value and increasing our TSR.

 

  We have successfully increased our TSR since our initial public offering in 2009.

 

  The Compensation Committee’s actions reflect shareholder interests.

 

  The Compensation Committee and select members of management have conducted substantial shareholder outreach activities over the last several years, as we believe listening to our shareholders is an important factor in designing an effective executive compensation program. Last year, we communicated with shareholders beneficially owning approximately 45% of our then outstanding ordinary shares.

 

  In connection with our CEO’s equity grant in 2013, the Compensation Committee solicited shareholder feedback and took that feedback into consideration when designing the 2016 Grant. Specifically, the Compensation Committee designed the 2016 Grant to include a relative TSR performance metric, in addition to an absolute metric to further align management and shareholder interest.

 

  To further align our pay program with shareholder interests and market best practices, beginning June 2016, our Board has decided that future equity awards for our CEO will be granted every year, rather than every few years.

 

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  The Compensation Committee has managed executive turnover responsibly, when it occurs.

 

  In October 2016, we transitioned our CFO position when Mr. Maslowski’s employment with our Company ended due to continuing uncertainty regarding his health. The severance arrangements for our former CFO, Mr. Maslowski, were consistent with the terms of his existing severance agreement and our Policy on Acceleration of Executive Staff Equity Awards in the Event of Death or Disability (the “Death and Disability Policy”).

 

  - When Mr. Krause was promoted to the CFO role in October 2016, the Compensation Committee considered the significant increase in his responsibilities in determining his compensation in that role. Mr. Krause’s base salary was increased to bring him closer to the market median for that position. His bonus target and equity compensation was also reviewed for, and is consistent with, internal parity with our other senior executives.

Overview of Our Pay Program

The Compensation Committee believes that a significant portion of our executives’ total compensation should be dependent upon our performance. Our compensation program is designed to reward executives for producing sustainable growth in share value consistent with our strategic plan, to attract and retain top talent, and to align our executives’ interests with the interests of our shareholders.

Our annual, direct compensation consists of three main components:

 

Base Salary    Individual salaries are based on an executive’s responsibilities. Salaries are set to be competitive with market and industry norms, and to reflect individual performance.    

Short-Term

Incentives (“STI”)

  

The APB Plan is intended to reward the achievement of annual corporate and divisional or functional goals, as well as the individual contributions and performance of each executive.

 

In Fiscal Year 2016, our corporate performance measures were non-GAAP revenue and non-GAAP operating income as a percentage of non-GAAP revenue (excluding the expense related to the APB Plan).

   

Long-Term

Incentives (“LTI”)

   Equity awards, in the form of service-based RSUs and PRSUs, are granted to incentivize our executives to grow long-term sustainable shareholder value. Further, these serve as retention tools for our key executives, and are intended to reflect the value we place on their contribution to our Company. Our CEO’s 2016 Grant was 100% performance-based.    

 

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Target Pay

The charts below show a comparison of the percentage breakdown of target total direct compensation for Fiscal Year 2016 for our CEO compared to certain of our other NEOs. This consists of base salary for Fiscal Year 2016, target STI, and grant date fair value of equity awards granted to the executives during the fiscal year, referred to in the chart as LTI.

 

LOGO

Compensation Program Governance

 

 

Best Practices We Employ

 

  

 

Practices We Do Not Employ

 

 

  

Majority of CEO and NEO compensation tied to long term performance

 

  

X      

 

  

Incentive plan designs that encourage excessive risk taking

 

 

  

Performance metrics are directly tied to value creation for shareholders

 

  

X      

 

  

Perquisites, other than in modest amounts

 

   Caps on incentive plan payouts   

X      

 

  

Hedging and short sales of our shares

 

 

  

Change-in-Control (“CIC”) severance requires a double trigger

 

  

X      

 

  

Pledging of shares

 

 

  

Compensation Committee is comprised entirely of independent directors

 

  

X      

 

  

Repricing of underwater share options

 

 

  

Compensation Committee engages an independent compensation consultant

 

  

X      

 

  

Excise tax gross-ups

 

 

  

Executive stock ownership guidelines of 3x base salary for CEO and 1x base salary for all other executive officers

 

  

X      

 

  

Supplemental retirement and pension benefits

 

 

  

Compensation Committee regularly meets in executive session without management present

 

     
  

Proactive shareholder engagement process

 

     

 

  

Annual risk assessment of the compensation program

 

     
   CEO compensation reviewed by Board      

 

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Shareholder Outreach

Over the last several years we have conducted substantial shareholder outreach efforts. In Fiscal Year 2016, we contacted shareholders beneficially owning over 45% of our then outstanding ordinary shares to discuss our compensation philosophy, structure and recent Compensation Committee decisions. Topics that were discussed included:

 

    our Board’s approach to setting CEO long-term compensation, including shifting from a periodic to an annual equity grant process;

 

    the logic in choosing our incentive compensation performance measures and related target levels; and

 

    how our program design has provided incentives to Mr. Tan and our other executives for significantly increasing the size and diversity of our Company through recent acquisitions.

Our shareholders indicated that they were supportive of our recent compensation decisions and program design. The input received from our shareholders was reported to the Compensation Committee and to our Board.

Frequency of Say-on-Pay Vote

At our 2011 Annual General Meeting of Shareholders, a majority of voting shareholders supported holding a say-on-pay proposal once every three years. At the 2017 AGM, in addition to the non-binding advisory vote to approve executive compensation of our NEOs sought in Proposal 4, Proposal 5 seeks shareholder approval of the frequency of such vote. Our Board is recommending annual say-on-pay votes. Not only do we recognize that this has become market best practice, we also believe that this is in the best interest of shareholders, as it facilitates an open and ongoing dialogue between us and our investors.

 

II. Compensation Philosophy and Objectives

Our executive compensation program is designed to achieve the following:

 

    attract qualified, experienced and talented executives, in a highly competitive market;

 

    motivate and reward these executives whose skills, knowledge and performance are critical to our on-going success;

 

    encourage our executives to focus on the achievement of corporate and financial performance goals by aligning their APB Plan payment to the achievement of both corporate and divisional or functional goals; and

 

    retain our executives and align their interests with those of our shareholders by linking a significant portion of each executive’s compensation to returns realizable by our shareholders. A significant portion of the target total direct compensation opportunity of our executives is typically in the form of annual equity awards, at least half of which is subject to the attainment of pre-established performance-based objectives, and the rest of which vest based on service over four years.

Equity awards are a long-term retention tool for key executives intended to reflect the value we place on their contributions to our Company. When granting equity awards or, in the case of our CEO when recommending an equity award to our Board, the Compensation Committee considers each executive’s level of experience and expertise and overall value to us, as well as how much vested and unvested equity he or she then holds.

The Compensation Committee has adopted a compensation philosophy that is intended to keep our executives’ target total cash compensation (base salary plus target APB Plan payouts) competitive with that of compensation for similarly situated executives at other companies (i) in our compensation peer group and (ii) included in the market salary surveys it reviews. Generally, where the Compensation Committee believes that the positions in the market match our internal roles, we view target total cash compensation as competitive when it falls within the 25th to 75th percentiles of the competitive market, dependent on the area

 

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of responsibility relative to product development, sales or support functions. The Compensation Committee believes that positioning target total cash compensation within this range of the market provides us a competitive position for attracting and retaining executives. However, the Compensation Committee bases its compensation decisions on the needs of our Company and an executive’s level of expertise, experience and marketability and will make exceptions to the above philosophy when it determines it is necessary. As a result, target total cash compensation for an executive may be outside of the reference range.

 

III. Compensation Determination Process

Role of the Compensation Committee

The Compensation Committee devotes significant time throughout the year to our executive compensation program to ensure that it aligns executive pay with corporate performance and incentivizes executives to pursue corporate strategic and financial goals that will create sustainable, long-term shareholder value.

The Compensation Committee reviews and approves compensation for all our executive officers, except the compensation of our CEO which is reviewed and approved by the non-employee directors on our Board, following recommendations from the Compensation Committee.

Individual Executive Compensation Assessment

In addition to market compensation data, the Compensation Committee considers the following information for each executive when determining his or her compensation:

 

    current base salary, APB Plan target payouts, the accumulated value of unvested outstanding equity awards and other benefits; and

 

    the CEO’s recommendation with respect to executives other than himself, the executive’s performance and the executive’s importance to the organization, among other things.

This information helps the Compensation Committee to understand the total compensation being delivered to executives and the long-term retentive elements in place for our executives.

Internal Pay Parity

While we do not maintain a formal policy regarding internal pay parity, it may be considered by the Compensation Committee as a factor when determining compensation.

Our CEO is compensated at a higher level than other executives because he has a significantly higher level of responsibility, accountability and experience. Mr. Tan also receives more of his target total direct compensation in the form of long-term, performance-based incentive compensation, as compared to the compensation of the other NEOs. Given Mr. Tan’s responsibility for our overall performance, our Board believes that compensating him at a higher level than our other executives and weighting his total compensation more heavily toward long-term, performance-based, incentive compensation is consistent with market practice, appropriately reflects his contributions and directly aligns his incentives with the interests of our shareholders.

Compensation Risk Oversight

While our Board has overall responsibility for risk oversight, each of the committees regularly assesses risk in connection with executing their responsibilities. The Compensation Committee reviews and discusses those risks that relate to our compensation policies and practices and it does not believe that our compensation policies encourage excessive or inappropriate risk taking.

Role of Compensation Consultant

In Fiscal Year 2016, Compensia, Inc. (“Compensia”) provided consulting services to the Compensation Committee, including the preparation of an assessment of executive compensation based on market compensation data. In addition, the Compensation Committee relied on Compensia for periodic updates on

 

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regulatory developments and market trends related to executive compensation matters. Compensia does not provide any other services to our Company other than advising the Compensation Committee on compensation-related matters.

The Compensation Committee has assessed the independence of Compensia pursuant to the six independence factors set forth in the SEC and Nasdaq rules. The Compensation Committee has concluded that Compensia is independent, as Compensia’s work for the Compensation Committee does not raise any conflict of interest.

 

IV. Compensation Competitive Analysis

The Compensation Committee works with Compensia to create a meaningful compensation peer group for purposes of understanding competitive market practices. This peer group is evaluated annually in September for its appropriateness for comparative purposes only; the Compensation Committee does not benchmark any pay components, or total pay, to a specific percentile. However, we view compensation as competitive when it generally falls within the 25th to 75th percentile range relative to our compensation peer group. In the absence of relevant competitive data, the Compensation Committee reviews industry-based market compensation survey data as described below.

The compensation peer group approved by the Compensation Committee for Fiscal Year 2016 appears below. For Fiscal Year 2017, the peer group remains largely unchanged, with the exceptions of removing SanDisk Corporation, which was acquired by Western Digital Corporation, and EMC Corporation, which was acquired by Dell Inc. The following selection criteria were considered when developing our compensation peer group:

 

    Revenues: comparability across annual revenue, generally 0.5 to 2.0 times that of Broadcom;

 

    Market capitalization: market capitalizations that generally fall between 0.3 to 3.0 times that of Broadcom; and

 

    Industry: companies in semiconductor-related and other technology-focused industries having a similar scale.

 

Fiscal Year 2016 Peer Group

  Agilent Technologies, Inc.

   eBay, Inc.    Micron Technology, Inc.    TE Connectivity Ltd.

  Applied Materials, Inc.

   Emerson Electric Company    QUALCOMM, Inc.    Texas Instruments, Inc.

  Cisco Systems, Inc.

   EMC Corporation    Oracle Corporation    Thermo Fisher Scientific, Inc.

  Cognizant Technology

  Solutions Corporation

   Intel Corporation    SanDisk Corporation    Western Digital
Corporation

  Corning, Inc.

   Lam Research Corporation    Seagate Technology PLC   

 

       Percentile     

Revenue

($mm)(1)

      

Market Capitalization

($mm)(2)

 

  Fiscal Year 2016 Peer Group

     25th
Median
75th
      
 
 
$10,437
$14,572
$24,032
  
  
  
      
 
 
$18,648
$32,900
$53,085
  
  
  

  Broadcom Limited

     AVGO        $14,756        $62,305
     Rank          50%*           79%*   

 

(1) Represents publicly reported revenue for the trailing four quarters ended July 31, 2015.

(2) As of August 14, 2015, using publicly reported data available at such date.

* Represents the combined publicly reported revenue and market capitalization of Avago and BRCM.

 

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Where the peer group data does not provide sufficient information for a particular executive position, the Compensation Committee reviews industry-based market compensation survey data (“market salary surveys”) from the following data sources:

 

    Radford Global Technology Survey;

 

    Radford Global Sales Survey; and

 

    Mercer High Tech Salary Survey (Asia).

 

V. Elements of Executive Compensation

The principal components of our executive compensation program are:

 

    Base salary;

 

    Annual cash incentive program;

 

    Equity incentive compensation, including performance-based awards;

 

    Severance and change-in-control benefits; and

 

    Limited perquisites and other personal benefits.

Base Salary

The Compensation Committee believes that a competitive base salary is an important element of our compensation program designed to attract, engage and retain key executives. Base salaries provide fixed, baseline compensation and are set at levels intended to reflect an executive’s level and scope of responsibility, to be within a competitive range for similar positions at the companies in our peer group or in the market salary surveys, where applicable, and internal pay parity between executives, where applicable. The base salaries of all our executives are reviewed annually by the Compensation Committee.

Our CEO makes recommendations to the Compensation Committee with respect to base salary adjustments for each executive (other than himself). The Compensation Committee reviews and considers many factors in determining annual adjustments to an executive’s base salary, including:

 

    economic and business conditions and outlook;

 

    individual performance throughout the prior fiscal year, including senior leadership ability and fiscal responsibility;

 

    the actual pay rate of our executives as compared to market pay rates from the market data;

 

    internal pay equity, where applicable; and

 

    the other factors described above.

The Compensation Committee reviews and considers many factors in determining individual performance for the purposes of adjusting base salaries. These factors include such measures as division or function performance against budget, achievement of divisional or functional goals, new product introductions and corporate strategy implementation.

 

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On May 31, 2016, the Compensation Committee approved the following increases in base salaries for our NEOs to be effective July 1, 2016.

 

NEO    Title   

Base Salary
(USD)
Effective

July 1, 2015

    

Base Salary
(USD)
Effective

July 1, 2016

     % Change

  Hock E. Tan

   President and Chief Executive Officer      $968,000         $1,100,000       13.6%

  Thomas H. Krause Jr.

   Chief Financial Officer      $337,417         $371,158       10.0%

  Charlie B. Kawwas, Ph.D.

   Senior Vice President and Chief Sales Officer      $474,300         $488,529       3.0%

  Henry Samueli, Ph.D.

   Chief Technical Officer      $37,440         $100,000       167%

  Bryan T. Ingram

   Senior Vice President and General Manager, Wireless Semiconductor Division      $575,000         $592,250       3.0%

Historically, Dr. Samueli received a nominal base salary designed to satisfy various minimum wage requirements. However, in order to avoid having to minimally increase Dr. Samueli’s base salary each year to comply with such requirements, his base salary was increased to $100,000. Mr. Tan’s base salary increase followed by a review of his base salary as compared to the peer group, which reflects our increased size following the BRCM acquisition and moves his base salary closer to the peer group median. In connection with Mr. Krause’s appointment as CFO in October 2016, the Compensation Committee approved a further increase in Mr. Krause’s base salary from $371,158 to $400,000. Mr. Maslowski went on a leave of absence for health reasons effective March 24, 2016, and therefore was not considered for a base salary increase.

Annual Cash Incentive Program

The Compensation Committee believes that a significant portion of our executives’ target total direct compensation should be dependent upon performance. We have the APB Plan for all of our executives and a separate, similarly structured, plan for all other employees. The APB Plan is designed to encourage and motivate our CEO to achieve overall corporate goals and our other executives to achieve both corporate and divisional or functional goals, to drive positive contribution to our growth and performance.

Each NEO has a specified target bonus amount under the APB Plan expressed as a percentage of base salary, other than Dr. Samueli as he does not participate in our APB Plan. The structure of the APB Plan for Fiscal Year 2016 was substantially the same as for Fiscal Year 2015 and the NEOs’ bonus target percentages remained the same. Annual cash bonuses under the APB Plan are calculated as follows:

 

 

LOGO

 

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Potential Bonus Targets as a Percentage of Base Salary

 

NEO    APB Plan Target Bonus
(as a % of base salary)

  Hock E. Tan

   150%

  Thomas H. Krause Jr.

   60%(1)

  Charlie B. Kawwas, Ph.D.

   75%

  Bryan T. Ingram

   100%

  Anthony E. Maslowski

   75%(2)

 

 

  (1) In connection with Mr. Krause’s appointment as CFO in October 2016, the Compensation Committee increased his target bonus percentage under the APB Plan from 60% of base salary to 75% of base salary, effective for Fiscal Year 2017.
  (2) A target bonus percentage and performance metrics were established for Mr. Maslowski under the APB Plan. However, due to his departure during the fiscal year, Mr. Maslowski was not entitled to receive a payout under the APB Plan for Fiscal Year 2016.

The Compensation Committee reviews the compensation market data as a point of reference in determining each executive’s bonus target percentage. In addition, the Compensation Committee sets, or in the case of our CEO, recommends to our Board for approval, target bonus percentages based on each executive’s experience in his or her role with us and the level of responsibility held by each executive, which the Compensation Committee believes directly correlates to his or her ability to influence corporate and operational results.

For Fiscal Year 2016, if an executive’s role or function changed during the fiscal year such that the applicable performance metrics were also changed, the executive’s performance-based bonus under the APB Plan was calculated on a pro-rated basis using the relevant metrics for the periods served in each capacity during the fiscal year. Beginning in Fiscal Year 2017, for executives who change roles or functions during the year, their performance for the entire fiscal year will be measured based on the metrics applicable to the role or function they are performing at the end of the fiscal year.

Bonuses under the APB Plan are payable to the NEOs in cash, with the exception of our CEO in certain circumstances. In the event our Board assigns our CEO an individual performance multiplier (discussed in more detail below) greater than 100%, it may elect to pay the difference between the dollar amount of our CEO’s actual bonus amount and the dollar amount of his bonus calculated using a performance factor of 100% in the form of an equity award under the 2009 Plan. The type and terms of any such equity award would be determined by our Board. Our Board believes that this feature allows it to further incentivize our CEO to focus on our mid- to long-term performance and to further provide for value creation for our shareholders, to more closely align the CEO’s interests with those of shareholders generally, as well as to provide additional retention incentive to the CEO.

Corporate Performance

The corporate performance measures for Fiscal Year 2016 were (i) non-GAAP revenue, which includes the effect of acquisition-related purchase accounting adjustments relating to licensing revenue and (ii) non-GAAP operating income as a percentage of non-GAAP revenue, adjusted to exclude the effects of provisions or accruals for anticipated payouts under the APB Plan, which would otherwise have the effect of reducing non-GAAP operating income margin, referred to as “non-GAAP operating margin”. The performance measures for Fiscal Year 2016 were established including three quarters of projected contributions from the acquired BRCM businesses, and each goal carried an equal weighting of 50% of the corporate performance component.

The target attainment level for non-GAAP revenue for Fiscal Year 2016 was set at $13,227 million, and the maximum attainment level was set at $13,491 million. The target attainment level for non-GAAP operating

 

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margin for Fiscal Year 2016 was set at 39.9%, and the maximum attainment level was set at 42%. These metrics were established by the Compensation Committee, based on the recommendation of management, and approved by our Board, and were designed to be difficult to attain and to require substantial effort by management to achieve.

In December 2016, the Compensation Committee and our Board determined that we achieved Fiscal Year 2016 non-GAAP revenue of $13,292 million, which was above the target level of performance but below maximum specified level of performance, and non-GAAP operating margin of 42.3%, which was above the maximum specified level of performance. The tables below show the non-GAAP revenue and non-GAAP operating margin actually achieved for Fiscal Year 2016 and used for the purposes of assessing attainment of the corporate goals under the APB Plan.

Fiscal 2016 Results Achieved

 

Fiscal Year 2016
Revenue Achieved

(in millions)

  

Fiscal Year 2016 Licensing
Revenue Achieved

(in millions)

  

Fiscal Year 2016 Non-GAAP  Revenue
Achieved

(in millions)

$13,240

   $52    $13,292

 

Fiscal Year 2016    (in millions)   Provisions or Accruals
for Anticipated Payouts
Under APB Plan (in
millions)
  

Adjusted Non-GAAP
Operating Income

(in millions)

  Non-GAAP Operating Income achieved

   $5,320(1)   $300    $5,620

  Non-GAAP Operating Margin achieved

        42.3%

 

(1) Non-GAAP operating income of $5,320 million for Fiscal Year 2016 is calculated from our consolidated audited financial statements in our 2016 Form 10-K by adding to our $409 million GAAP operating loss: $52 million related to the acquisition-related purchase accounting revenue adjustment, $1,185 million related to the acquisition-related purchase accounting effect on inventory, $2,636 million related to the amortization of acquisition-related intangibles ($763 million reported as amortization of intangible assets as part of cost of products sold and $1,873 million reported in amortization of intangible assets as part of operating expenses), $664 million related to share-based compensation expense ($48 million reported as part of cost of products sold and $616 million reported as part of operating expenses), $1,053 million related to restructuring charges ($57 million reported as part of cost of products sold and $996 million reported as part of operating expenses), and $139 million in acquisition-related costs ($1 million reported as part of cost of products sold and $138 million reported as part of operating expenses).

Fiscal Year 2016 Actual Performance

 

Corporate Performance Metric  

Actual Fiscal Year
2016 Performance

(in millions)

  As a % of
Target
Attainment
  Weight  

Weighted  

Attainment  

  Non-GAAP Revenue

 

  $13,292

 

  112.3%

 

  50%

 

  56.2%

 

  Non-GAAP Operating Margin

 

  42.3%

 

  150%

 

  50%

 

  75.0%

 

  Total Attainment

        131.2%

The Compensation Committee determines an executive’s divisional or functional performance percentage based on the achievement of specified goals by the division or function overseen by the executive. The Compensation Committee sets divisional or functional goals and their weightings annually, based on its assessment of the business requirements of the particular division or function to which the goals relate and the relative importance of the goals to the division or function. Each of the divisional or functional goals, and its respective weighting, for our NEOs that participated in the APB Plan is described in the table below. Each

 

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divisional or functional goal is set by the Compensation Committee to be difficult to attain and to require substantial effort on behalf of the division or function, and the executive in charge of the division or function, to achieve. In December 2016, the Board, with input from the Compensation Committee determined that the divisional or functional goals had been achieved at the levels set forth in the table below.

Fiscal Year 2016 Corporate, Divisional and Functional Performance Metrics, Attainment and Payout Amounts

 

  Name   Bonus
Target
Percent
   Fiscal Year 2016 Bonus Metric   Fiscal Year
2016 Bonus
Metric
Achievement
 

Fiscal Year 2016 Payout

Amount

in Dollars (USD) and as a

Percentage of Base

Salary Paid (1)

 

  Hock E. Tan

  150%    Non-GAAP Revenue (50%)   112%    

  President and Chief

     Non-GAAP Operating Margin (50%)   150%    

  Executive Officer

     Fiscal Year 2016 Attainment   131%   $2,970,774     295.1%   

  Thomas H. Krause Jr.

  60%    Non-GAAP Revenue (50%)   112%    

  Vice President,

     Non-GAAP Operating Margin (50%)   150%    

  Corporate Development

     Pro-Rated Fiscal Year 2016 Attainment(2)   131%    

  Thomas H. Krause Jr.

  60%    Non-GAAP Revenue (25%)   112%    

  Vice President and Chief

     Non-GAAP Operating Margin (25%)   150%    

  Financial Officer

     Direct Expenses (20%)(3)   120%    
     Days Sales Outstanding (20%)(4)   83%    
     Zero Audit Adjustments (10%)   150%    
     Pro-Rated Fiscal Year 2016 Attainment(2)   121%    
     Fiscal Year 2016 Attainment   125.1%   $312,924     90.1%   

  Charlie B. Kawwas, Ph.D.

  75%    Non-GAAP Revenue (25%)   112%    

  Senior Vice President

     Non-GAAP Operating Margin (25%)   150%    

  and Chief Sales Officer

     Product Revenue (20%)   106%    
     Design Wins (15%)   88%    
     Direct Expenses (15%)(3)   120%    
     Fiscal Year 2016 Attainment   118%   $549,885     114.9%   

  Bryan T. Ingram

  100%    Non-GAAP Revenue (25%)   112%    

  Senior Vice President

  and General Manager,

  Wireless Semiconductor

  Division (“WSD”)

     Non-GAAP Operating Margin (25%)   150%    
     WSD Revenue (25%)   0%    
     WSD Operating Margin (25%)   0%    
     Fiscal Year 2016 Attainment   66%   $380,423     65.6%   

 

  (1) Includes the quantitative effect of the individual’s applicable performance multiplier, discussed below.
  (2) Pro-rated attainment is calculated based on approximately five months of service as Vice President, Corporate Development and seven months of service in the CFO role.
  (3) Represents direct expenses of the division or function, as applicable.
  (4) Delta between Days Sales Outstanding and Days Payables Outstanding target for Fiscal Year 2016 was 18 days.

The performance metrics and weightings established for Mr. Maslowski were the same as set forth in the table above for Mr. Krause in his capacity as CFO. However, because Mr. Maslowski left the Company prior to the end of the fiscal year, his attainment of those metrics was not assessed and he did not receive a payout under the APB Plan.

Individual Performance

The final payouts under the APB Plan include the effect of each NEO’s applicable individual performance multiplier. Each individual NEO’s performance multiplier (other than the CEO’s) is approved by the

 

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Compensation Committee based in part on the recommendations of our CEO for each executive (other than for himself) and by our Board in the case of our CEO with input from the Compensation Committee. In determining individual performance, the Compensation Committee also considers the requirements of the executive’s position, including the achievement of the divisional or functional goals, fiscal responsibility as determined by the Compensation Committee with input from our CEO, the executive’s senior leadership capability, and how each of these factors impacts the overall performance of the executive’s division or function. Based on their respective levels of performance and individual contribution, the Compensation Committee, or our Board in the case of our CEO, assigns each executive an individual performance multiplier of between 50% and 150%. Executives, who consistently meet or exceed the requirements of the position, as determined by the Compensation Committee, receive a bonus multiplier of between 100% and 150%. Executives who meet some, but not all, of the requirements of the position or for whom the Compensation Committee believes that improvement is needed will receive a bonus multiplier of between 50% and less than 100%. The Compensation Committee, or our Board in the case of our CEO, may adjust our executives’ individual performance multiplier upwards or downwards in its sole discretion, based on any criteria it determines appropriate.

For Fiscal Year 2016, our Board, based upon the recommendations of the Compensation Committee, determined that Mr. Tan should receive a performance multiplier of 150% in recognition of his successful acquisition strategy and strategic decision making, the successful progression of the integration of BRCM, cash generation and shareholder value creation during Fiscal Year 2016, in addition to strong revenue growth and non-GAAP operating profitability for the fiscal year. Mr. Tan’s bonus payout amount under the APB Plan for Fiscal Year 2016 was $2,970,774. However, our Board determined that it would pay $1,980,516 of that amount, which represents his payout based on a performance multiplier of 100%, in cash, and deliver the remaining $990,258 in the form of a time-based vesting RSU award of 6,010 RSUs granted effective December 15, 2016 (with the number of RSUs calculated based on a closing share price of $164.76 on December 6, 2016, the day prior to the date on which the award was approved by our Board), which vests 25% annually subject to continued service on each vesting date). The Compensation Committee with input from our CEO (other than with respect to himself), determined that each of our other NEOs should receive an individual performance multiplier of between 100% and 150% based on these individuals’ respective contributions towards these achievements and their respective divisional or functional achievements.

Discretionary Bonuses

Each year, the Compensation Committee may supplement the performance-based cash incentive plan awards earned by our NEOs with discretionary bonuses that are awarded based on our CEO’s recommendations, other than with respect to himself, and the Compensation Committee’s assessment of individual contributions. Mr. Krause received a $200,000 discretionary cash bonus due to his service as acting CFO for a portion of the year and his contributions to the integration of BRCM.

Equity Incentive Compensation

Our equity awards provide a long-term retention tool for our executives and are intended to reflect the value we place on their contribution to our Company. The philosophy behind equity awards is to provide the executive with a strong incentive to remain with, and build value in, us over an extended period of time. The Compensation Committee believes that a combination of service-based and performance-based equity awards balances promoting long-term retention of executives by providing an element of certainty of value from service-based awards, with motivating the executive to improve performance and maximize our share price, thereby more closely aligning executives’ interests with those of our shareholders generally, through the performance-based awards.

The Compensation Committee approves all equity awards granted to our executive officers, other than our CEO whose equity awards are approved by our Board. In making initial and subsequent equity awards, the Compensation Committee takes into consideration the executive’s position and level, past equity awards, other compensation and the value the executive brings to our Company based on his or her technical experience,

 

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expertise and leadership capabilities. The Compensation Committee also reviews annually the amount of vested and unvested equity that an executive holds and the fair market value of the unvested equity compared to the executive’s base salary.

Fiscal Year 2016 Mix of Equity Incentive Awards

We grant equity awards to our executives annually, typically in March of each year, and which are generally awarded under the 2009 Plan. Consistent with its philosophy behind equity awards and the considerations in Fiscal Year 2016, the Compensation Committee granted equity awards to our executives (other than the CEO) that were 50% service-based and 50% performance-based. The service-based awards vest over four years, with 25% vesting annually, subject to the executive’s continued service on the vesting dates. The performance-based awards are also scheduled to vest over four-years at the rate of 25% annually, but are also subject to the satisfaction of the applicable share-price performance criteria within that four-year period, discussed in more detail below under “Fiscal Year 2016 Performance-Based Restricted Share Units”, and subject to the executive’s continued service on the vesting dates.

Fiscal Year 2016 Equity Grants to NEOs other than the CEO

 

          March 2016
NEO    December 2015
Service-Based RSUs
(Number of Shares)
(1)
  

Service-Based RSUs

(Number of Shares)

  

Performance-Based RSUs    

(Number of Shares)    

 

  Thomas H. Krause Jr.(2)

   -     10,000     10,000

 

  Charlie B. Kawwas, Ph.D.

   3,000     15,000     15,000

 

  Henry Samueli, Ph.D.

   -    11,588(3)    11,588(3)

 

  Bryan T. Ingram

   4,000     10,000     10,000

 

  Anthony E. Maslowski

   3,000     13,000     13,000

 

  (1) In December 2015, the Compensation Committee granted service-based RSU awards to certain executives in recognition of an increase in their responsibilities as a result of planning for the then-pending acquisition of BRCM, and to provide additional retention incentives to these executives. These service-based RSU awards vest at the rate of 25% per year, subject to continued service on each vesting date.
  (2) In connection with Mr. Krause’s appointment as CFO in October 2016, the Compensation Committee also awarded Mr. Krause 10,000 service-based RSUs and 10,000 PRSUs with an effective grant date of November 15, 2016, after the end of Fiscal Year 2016, and which are not included in the table. The service-based RSUs vest at the rate of 25% per year, subject to continued service on each vesting date. The PRSUs are scheduled to vest over four years at the rate of 25% annually, subject to the satisfaction of the applicable share-price performance condition, discussed in more detail below under “ Fiscal Year 2016 Performance-Based Restricted Share Units”, and subject to continued service on each vesting date.
  (3) Granted under the BRCM 2012 Stock Incentive Plan (the “2012 Plan”).

Fiscal Year 2016 Performance-Based Restricted Share Units

The PRSUs awarded to executives other than the CEO are scheduled to vest over a four-year period at the rate of 25% per year, but are not earned, and will not vest, unless and until the date on which the average of the closing prices of our ordinary shares (as reported on the Nasdaq Global Select Market), over a period of 20 consecutive trading days is equal to or greater than 120% of the closing price of our ordinary shares on the date of grant, and subject to the executive remaining employed with us through the relevant vesting dates. On the March 15, 2016 grant date, the closing price per share of our ordinary shares was $148.47 per share; 120% of this price is $178.164 per share.

If this share price contingency is met on or prior to the fourth anniversary of the grant date, then all of the PRSUs have the potential to vest (assuming continued service). In addition, any PRSUs that would have vested on a scheduled vesting date occurring before the date on which the share price contingency is met will vest on

 

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or shortly after the date on which the share price contingency is met. If the share price contingency is not met by the earlier of the fourth anniversary of the grant date or the time the executive ceases to provide services to us, the PRSUs will not vest and the award will expire or immediately terminate, as applicable.

CEO Equity Award

On June 15, 2016, our Board approved Mr. Tan’s 2016 Grant, consisting of 80,000 PRSUs. The 2016 Grant is intended to incentivize Mr. Tan to lead us to sustained, superior financial and operational performance.

In designing the award, our Board took into consideration the shareholder feedback we previously received regarding Mr. Tan’s last equity award in 2013 (the “2013 Grant”). During the Compensation Committee chair’s shareholder outreach efforts at the time of the 2013 Grant, our shareholders provided positive feedback regarding the grant and its design; however, some indicated a preference for a performance metric based on our relative performance as compared to our peers in addition to the absolute share price increase metric. Our Board considered this feedback and included a relative TSR performance metric in the 2016 Grant. We believe that the design of the 2016 Grant emphasizes sustainable shareholder value creation and strengthens the link between pay and performance as it aligns payouts more directly with performance metrics that increase shareholder value and drives our performance. Further, given that Mr. Tan had not received a long-term incentive award since the 2013 Grant, the 2016 Grant served as an effective method to retain and motivate Mr. Tan, who has played a key role in our exceptional performance since he joined in 2006. Our Board currently expects that future annual equity awards to Mr. Tan will be on terms substantially similar to those of the 2016 Grant.

Pursuant to the terms of the 2016 Grant, Mr. Tan is eligible to earn up to a maximum of 240,000 ordinary shares based on the level of performance achieved, both based on our relative TSR as compared to the S&P Index companies, and our absolute share price performance over a period of three years from the grant date (the “performance period”). Our relative TSR performance will be determined by comparing our TSR performance with the TSR of companies in the S&P Index, as measured at the end of the performance period; and the change in our share price over the performance period. Our share price growth will be determined by dividing the trailing 90 day average of the per share closing prices, as quoted on the Nasdaq Global Select Market (the “average market value”), of our shares on the last day of the performance period by the average market value of our shares on the grant date, expressed as a percentage (the “Share Price Growth”).

The final number of ordinary shares earned will be determined by multiplying the number of PRSUs granted at the target performance level by an achievement factor (the “Achievement Factor”). The Achievement Factor will be calculated by multiplying the applicable TSR Performance Multiplier (determined based on relative TSR) by the applicable Share Price Growth Multiplier (determined based on Share Price Growth). No ordinary shares will be earned if we do not achieve the minimum relative performance goal (relative TSR at the 25th percentile of the S&P Index).

 

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At the end of the performance period, the Achievement Factor will be determined as follows:

 

Relative TSR   TSR
Performance
Multiplier
(1)
  Share Price
Growth
(2)
  Share Price
Growth
Multiplier
 

 

Achievement Factor
(TSR Performance
Multiplier x Share
Price Growth
Multiplier)

 

 

Number of Shares
to be Delivered
Pursuant to Award
(Achievement
Factor x 80,000)

 

At or above 90th Percentile

of the S&P Index

  200%   ³130%   1.5   3   240,000

 

At the 75th Percentile of the

S&P Index

  150%   ³130%   1.5   2.25   180,000

 

At or above 90th Percentile

of the S&P Index

  200%   <130%   1   2   160,000

 

At the 75th Percentile of the

S&P Index

  150%   <130%   1   1.5   120,000

 

At the 50th Percentile of the

S&P Index

  100%   -   1   1   80,000

 

At the 25th Percentile of the

S&P Index

  50%   -   1   0.5   40,000

 

Below the 25th Percentile

of the S&P Index

  0%   -   1   0   0

 

  (1) If the Relative TSR is between two of the levels set forth in the table above, the TSR Performance Multiplier will be determined using liner interpolation. However, no ordinary shares will be issued pursuant to the 2016 Grant, and the vested PRSUs will be cancelled and the 2016 Grant terminated, if the Relative TSR is at less than the 25th percentile. In addition, in no event can more than 240,000 ordinary shares be issued pursuant to the 2016 Grant.
  (2) Based on a grant date average market value of an ordinary share of $152.2390, 130% Share Price Growth would be achieved if the average market value of an ordinary share at the end of the performance period were $197.9107.

 

VI. Additional Compensation Practices and Policies

Executive Share Ownership Guidelines

Based on competitive market data and after consultation with Compensia, the Compensation Committee has set the following executive stock ownership guidelines:

 

  Position        Required Salary Multiple    

  CEO

 

   3x base salary

 

  All other executive officers

 

   1x base salary

 

Our executive officers, including the CEO, are expected to satisfy the applicable guidelines by August 28, 2017 or within five years of the date on which they become an executive officer, whichever is later, and to hold at least such minimum value in ordinary shares for so long as he or she is an executive officer.

Shares held in a trust or other estate-planning vehicle established by an executive officer, which continue to be beneficially owned by such executive officer under SEC rules, count toward the executive officer achieving the applicable guideline level of share ownership. Vested and exercisable option awards held by an executive officer count toward achieving the applicable guideline level of share ownership at a rate of 50%, i.e. two vested option shares will count as one ordinary share. Outstanding service-based RSUs and outstanding PRSUs for which the performance criteria have been met count toward achieving the applicable guideline level of share ownership at a rate of 100%.

 

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As of February 8, 2017, all of our executive officers had achieved their guideline level of share ownership, as reflected above.

The Compensation Committee may, in its discretion, determine whether exceptions should be made in the case of any executive officer who, due to his or her financial circumstances or other special circumstances, would incur a hardship by complying with these share ownership guidelines.

Hedging and Pledging Prohibitions

A core element of our compensation philosophy is to align the interests of our executive officers with those of our shareholders by providing appropriate long-term incentives. In furtherance of this philosophy, our insider trading policy prohibits our executives from hedging or pledging our securities or trading in derivative securities related to our securities.

Employee Stock Purchase Plan

Executives employed by our participating subsidiaries, including all of our NEOs, may also participate in our Employee Share Purchase Plan (“ESPP”). The ESPP provides eligible employees with the opportunity to acquire our ordinary shares through periodic payroll deductions, at a 15% discounted price, based on a six-month “look-back” period. The ESPP is structured in the U.S. as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code. The ESPP requires participants to hold shares for a minimum of six months after any purchase date, unless they cease to be eligible to participate in the ESPP in which case the shares become freely tradable, subject to our applicable securities laws and our insider trading policy.

Severance and Change-in-Control Benefits

The Compensation Committee believes that change in control and severance arrangements are important parts of the overall compensation program for our NEOs. Change in control provisions help to secure the continued employment and dedication of our executive officers, to reduce any concern that they might have regarding their own continued employment prior to or following a change in control of our Company, and to promote a continuity of management during a corporate transaction. Severance arrangements provide a stable work environment and are used primarily to attract, retain and motivate individuals with the requisite experience and ability to drive our success.

Each of our NEOs, with the exception of Dr. Samueli, is eligible for severance and change-in-control payments and benefits under his or her respective severance benefits agreement with us. The Compensation Committee provides such payments and benefits to these NEOs based on its review of severance practices at the companies in our compensation peer group and as the result of arms’ length negotiations at the time our NEOs enter into employment with us, when they are requested to take on additional responsibilities, or from time to time if deemed necessary or desirable to achieve parity with other NEOs or otherwise.

These NEOs are entitled to severance and other benefits upon termination of employment without “cause” or for “good reason” (as each of those terms is defined in the agreement) or in the event of death or disability. The severance benefits agreements generally provide for continued base salary (12 months in the case of Mr. Tan and 9 months in the case of the other eligible NEOs), bonus (100% in the case of Mr. Tan and 50% in the case of each other eligible NEO) and, other than in the case of Mr. Tan, health benefits continuation coverage (for 6 months) upon a termination of employment without cause or for good reason or a termination in the event of death or disability (a “qualifying termination”). In the event of a qualifying termination within 12 months following a change in control of the Company (or in the case of Mr. Tan, three months before or 12 months following such a change in control) (a “CIC qualifying termination”), the severance benefits agreements generally provide for continued base salary (24 months in the case of Mr. Tan and 12 months in the case of the other eligible NEOs), bonus (200% in the case of Mr. Tan and 100% in the case of each other eligible NEO) and, other than in the case of Mr. Tan, health benefits continuation coverage (for 12 months). In the event of a CIC qualifying termination, the agreements also provide for acceleration of all time-vesting equity awards and acceleration of performance-based equity awards based on actual performance. Vesting of the equity awards

 

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held by these NEOs will only accelerate following a qualifying termination of employment if in connection with a change in control of the Company, which is commonly referred to as a “double trigger” provision. We believe our double trigger change of control arrangement protects shareholder value by allowing us the opportunity to deliver a motivated management team to any potential acquirer. If we did not offer any such change of control arrangements, our executives could be less motivated to pursue a potential acquisition even if such a transaction would benefit our shareholders, due to the possibility that they would lose potential value of their unvested equity compensation upon an acquisition.

For a summary of the material terms and conditions of these arrangements, as well as the post-employment payments and benefits which the NEOs are eligible to receive, see “Severance and Change of Control Agreements with Named Executive Officers; Death and Disability Policy; Employment Arrangements” below.

Separation Agreement – Mr. Maslowski

Mr. Maslowski, our former Senior Vice President and CFO, ceased to be employed with us effective October 14, 2016. Pursuant to the terms of his Separation Agreement, dated October 14, 2016, Mr. Maslowski is entitled to the following severance payments and other benefits:

 

    continued payment of his base salary for a period of nine months following the date of his separation;

 

    50% of the lesser of (i) his actual cash bonus for Fiscal Year 2015 and (ii) his target cash bonus for Fiscal Year 2015; and

 

    continued company-paid healthcare coverage under COBRA for him and his covered dependents for up to six months following his date of separation,

all of which are consistent with the benefits provided pursuant to Mr. Maslowski’s severance agreement with us, dated as of January 24, 2014.

Additionally, pursuant to the terms of the Separation Agreement (and consistent with the benefits provided under our Death and Disability Policy), each of Mr. Maslowski’s outstanding and unvested equity and equity-linked awards that, as of October 14, 2016, were subject to vesting solely based upon his continued service with our Company, automatically vested and, if applicable, any forfeiture restrictions thereon immediately lapsed, in each case, with respect to one-hundred percent (100%) of that number of unvested ordinary shares underlying such equity award. For a summary of the payments and benefits that he received, see “Severance and Change of Control Agreements with Named Executive Officers: Death and Disability Policy; Employment Arrangements” below.

Employment Offer Letter – Dr. Samueli

In connection with the acquisition of BRCM, we entered into an offer letter dated February 2, 2016, with Dr. Samueli, who was appointed our Chief Technical Officer. Pursuant to his offer letter, Dr. Samueli receives a nominal salary and does not participate in the APB Plan. As provided for this offer letter Dr. Samueli was also granted an RSU award, effective March 15, 2016, with a grant date value of $3 million, half of which consists of service-based vesting RSUs and half of which are PRSUs, as discussed in more detail under “– Fiscal Year 2016 Equity Grants to NEOs other than the CEO” and “ Fiscal Year 2016 Performance-Based Restricted Share Units” above.

Other Compensation

The Compensation Committee provides perquisites and other personal benefits to our executives on a case-by-case basis. Typically, the Compensation Committee will provide a perquisite to an executive in limited circumstances, such as where it believes that such benefit is appropriate to assist an individual executive in the performance of his or her duties, to make him or her more efficient and effective, and for recruitment, motivation or retention purposes. In Fiscal Year 2016, Mr. Tan received reimbursement for travel to his residence in Pennsylvania and a car service for business-related travel in the San-Francisco Bay Area, both of which were approved by our Board.

 

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Section 162(m) Tax Considerations

While the Compensation Committee and our Board generally consider the accounting and tax implications of their executive compensation decisions, neither element has been a material consideration in the compensation awarded to our NEOs historically. In addition, the Compensation Committee and our Board have considered the potential future effects of Section 162(m) of the Internal Revenue Code on the compensation paid to our executive officers. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for our Chief Executive Officer and each of the other NEOs (other than our Chief Financial Officer), referred to as “covered employees”, unless compensation is “qualified performance-based compensation.” The Compensation Committee has not previously taken the deductibility limit imposed by Section 162(m) into consideration in setting compensation. However, the Compensation Committee will continue to evaluate the effects of the Section 162(m) and related U.S. Treasury regulations and the advisability of qualifying its executive compensation for deductibility of such compensation. To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy that all compensation payable to a covered employee must be deductible under Section 162(m).

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee is responsible for determining executive base compensation and incentive compensation and approving the terms of equity grants pursuant to our equity incentive plans. The Chief Executive Officer’s compensation is determined by the full Board, with input and recommendations from the Compensation Committee. The Compensation Committee has reviewed and discussed with members of management the Compensation Discussion and Analysis section included in this proxy statement, as required by Item 402(b) of Regulation S-K. Based upon such review and related discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement for its 2017 Annual General Meeting of Shareholders.

Submitted by the Compensation Committee of the Board of Directors:

Donald Macleod, Chairperson

James V. Diller

Lewis C. Eggebrecht

Eddy W. Hartenstein

 

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EXECUTIVE COMPENSATION

Fiscal Year 2016 Summary Compensation Table

The following table sets forth information about compensation earned by our NEOs during Fiscal Year 2016, Fiscal Year 2015 and Fiscal Year 2014. Our NEOs consist of our CEO, our CFO, and each of our three other most highly compensated executive officers serving at the end of Fiscal Year 2016, as well as our former CFO.

 

 Name and Principal

 Positions

   Fiscal
Year
     Salary
($)
     Bonus
($)
    Stock
Awards
($)
(1)
    Option
Awards
($)
(2)
   

 

Non-Equity
Incentive Plan
Compensation
($)
(3)

    All Other
Compensation
($)
    Total
($)
 

 

 Hock E. Tan

     2016         1,011,662                21,656,268 (4)             1,980,516 (5)      43,601 (6)      24,692,047   

President and Chief Executive Officer

  

 

 

 

2015

 

  

     910,461                —                       3,061,384        53,923        4,025,768   
  

 

 

 

2014

 

  

     827,692                —                14,483,625        1,855,385        35,894        17,202,596   
                  

 Thomas H. Krause Jr.(7)

Vice President and Chief Financial Officer

     2016         349,687         200,000 (8)      2,574,300 (9)             312,924        15,900 (10)      3,452,811   

 Charlie B. Kawwas, Ph.D.

     2016         479,007                4,273,410               549,885        20,278 (10)      5,322,580   

Senior Vice President and Chief Sales Officer

     2015         424,284         300,000        3,256,875               670,326        224,596        4,876,081   
                  

 Henry Samueli, Ph.D.(11)

Chief Technical Officer

     2016         48,773                2,983,099               —                —                3,031,872   

 

 Bryan T. Ingram

     2016         580,706                3,123,580               380,423        15,900 (10)      4,100,609   

Senior Vice President and General Manager, Wireless Semiconductor Division

  

 

 

 

2015

 

  

  

 

 

 

542,308

 

  

  

 

 

 

 

  

 

 

 

 

6,014,925

 

  

 

 

 

 

 

  

 

 

 

 

810,577

 

  

 

 

 

 

15,900

 

  

 

 

 

 

7,383,710

 

  

     2014         508,654                4,961,600        5,355,000        761,539        15,600        11,602,393   
                  

 

 Anthony Maslowski

     2016         185,315                8,323,839  (12)      6,565,711 (13)      —                503,102  (14)      15,577,967   

Former Senior Vice

President and Chief Financial Officer

  

 

 

 

2015

 

  

     418,005                3,550,275               580,444        15,900        4,564,624   
  

 

 

 

2014

 

  

     396,750                1,033,687        1,115,625        445,500        16,749        3,008,311   

 

(1) Represents the grant date fair value of RSUs awarded, determined in accordance with ASC 718. The amounts for Fiscal Year 2016 consist of grant date fair value of PRSU awards and service-based RSU awards. Except as otherwise noted, these awards are scheduled to vest at the rate of 25% per year subject to continued service through the relevant vesting dates, but in the case of the PRSUs will only vest once a share price contingency (set at the grant date) is met. Since the awards, other than respect to Mr. Tan’s award, do not have performance conditions as defined under ASC 718, such awards have no maximum grant date fair values that differ from the fair values presented in this table. The amount presented in this table for Mr. Tan represents the grant date fair value assuming achievement of the highest level of performance conditions. The amounts in this column do not reflect compensation actually received by the NEOs or the actual value that will be recognized by the NEO. For a discussion of valuation assumptions used in the calculation, see Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of our 2016 Form 10-K.

 

(2) Represents the grant date fair value of options granted, determined in accordance with ASC 718. The amounts shown represent the grant date fair values of performance-based option awards. The single performance measure that determines the number of ordinary shares subject to the options to be earned is our share price, which is a market condition as defined under ASC 718. The performance-based option awards vest at the rate of 25% per year, subject to continued service through the relevant vesting dates, but only become exercisable once the share price contingency (set at the grant date) is met. Since these awards do not have performance conditions as defined under ASC 718, such awards have no maximum grant date fair values that differ from the fair values presented in the table above. The amounts in this column do not reflect compensation actually received by the NEO or the actual value that will be recognized by the NEO. For a discussion of valuation assumptions used in the calculation, see Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of our 2016 Form 10-K.

 

(3) Represents amounts paid for under the APB Plan for each fiscal year.

 

(4)

Includes Mr. Tan’s PRSU award granted on June 15, 2016 under the 2009 Plan, which will vest in full on the third anniversary of grant date subject to continued employment with us through the performance period and subject to the achievement of specified

 

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  performance goals over the specified performance period, as determined by our Board within 60 days following the end of performance period. Please see description of the PRSU award in “Compensation Discussion and Analysis—Elements of Executive Compensation—Equity Incentive Compensation—CEO Equity Award” above. Also includes Mr. Tan’s service-based RSU award granted on December 15, 2016, in respect of a portion of his Fiscal Year 2016 APB Plan payout amount. See footnote (5) for additional information.

 

(5) Represents the portion of Mr. Tan’s Fiscal Year 2016 APB Plan payout amount paid in cash. Mr. Tan’s total APB Plan payout amount for Fiscal Year 2016 was $2,970,774. However, our Board determined that it would pay $1,980,516 of that amount, which represents his payout based on a performance multiplier of 100%, in cash, and deliver the remaining $990,258 in the form of a service-based RSU award. Please “Compensation Discussion and Analysis—Elements of Executive Compensation—Annual Cash Incentive Program” above for additional details.

 

(6) Represents $20,990 in expense reimbursements for travel to Mr. Tan’s residence in Pennsylvania, $15,900 401(k) employer matching contribution and $6,711 for car service.

 

(7) Mr. Krause was appointed acting CFO and principal financial officer on March 24, 2016 and as CFO on October 17, 2016.

 

(8) Represents a discretionary cash bonus paid to Mr. Krause due to his service as acting CFO and his contributions to the integration of BRCM.

 

(9) Does not include an RSU award for Mr. Krause approved by the Compensation Committee on October 17, 2016, in connection with his appointment as CFO. The effective grant date of the award was November 15, 2016, which was after the end of Fiscal Year 2016. The award consists of 10,000 service-based vesting RSUs and 10,000 PRSUs. The service-based RSUs vest at the rate of 25% per year, subject to continued service through the relevant vesting dates. The PRSUs are scheduled to vest over four years at the rate of 25% annually, subject to the satisfaction of the applicable share-price performance condition and continued service through the relevant vesting dates.

 

(10) Represents 401(k) employer matching contributions.

 

(11) Dr. Samueli was appointed Chief Technical Officer on February 1, 2016.

 

(12) Includes the incremental fair value of $4,565,289 associated with the acceleration of the vesting of service-based RSU awards on October 14, 2016 in connection with the termination of Mr. Maslowski’s employment.

 

(13) Represents the incremental fair value associated with the acceleration of the vesting of service-based option awards on October 14, 2016 in connection with the termination of Mr. Maslowski’s employment.

 

(14) Mr. Maslowski’s employment ended effective October 14, 2016. This represents severance payments of $481,950, the value of six months of company-paid COBRA benefits of $13,045, and $8,107 401(k) employer matching contribution.

 

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Fiscal Year 2016 Grants of Plan-Based Awards Table

The following table sets forth information regarding grants of plan-based awards during Fiscal Year 2016 to each of our NEOs.

 

                Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(2)
    Estimated Future Payouts
Under Equity Incentive Plan
Awards(3)
   

 

All Other
Stock
Awards:
Number of
Shares of
Stock or

Units
(#)(4)

   

All Other
Option
Awards:
Number of
Securities

Underlying
(#)

   

Exercise
or Base
Price of
Option

Awards
($/Sh)

   

Grant
Date Fair
Value of
Stock
and
Option

Awards
($)(5)

 
 Name   Approval
Date(1)
   

Grant

Date(1)

    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
          Target
(#)
    Maximum
(#)
         

 

 Hock E. Tan

        188,735        1,509,877        3,397,223                   
    06/15/2016        06/15/2016                     (6)        80,000 (6)      240,000 (6)            20,574,408   
    12/07/2016        12/15/2016                      6,010 (7)          1,081,860   

 

 Thomas H. Krause Jr.(8)

        5,209        208,368        468,828                   
    03/01/2016        03/15/2016                      10,000            1,420,200   
   

 

03/01/2016

 

  

 

   

 

03/15/2016

 

  

 

             

 

10,000

 

  

 

           

 

1,154,100

 

  

 

 

 Charlie B. Kawwas, Ph.D.

        13,457        358,844        807,400                   
    12/07/2015        12/15/2015                      3,000            411,960   
    03/01/2016        03/15/2016                      15,000            2,130,300   
   

 

03/01/2016

 

  

 

   

 

03/15/2016

 

  

 

             

 

15,000

 

  

 

           

 

1,731,150

 

  

 

 

 Henry Samueli, Ph.D.

    03/01/2016        03/15/2016                      11,588            1,645,728   
   

 

03/01/2016

 

  

 

   

 

03/15/2016

 

  

 

             

 

11,588

 

  

 

           

 

1,337,371

 

  

 

 

 Bryan T. Ingram

        36,253        580,042        1,305,095                   
    12/07/2015        12/15/2015                      4,000            549,280   
    03/01/2016        03/15/2016                      10,000            1,420,200   
   

 

03/01/2016

 

  

 

   

 

03/15/2016

 

  

 

             

 

10,000

 

  

 

           

 

1,154,100

 

  

 

 

 Anthony E. Maslowski

    12/07/2015        10/14/2016                      3,000            510,270 (9) 
    03/01/2016        10/14/2016                      13,000            2,211,170 (10) 
    03/01/2016        03/15/2016                  13,000                1,500,330   
    10/14/2016        10/14/2016                        15,000        35.42        1,812,471 (11) 
    10/14/2016        10/14/2016                        22,500        39.22        2,620,618 (11) 
    10/14/2016        10/14/2016                        25,000        61.97        2,132,621 (11) 
    10/14/2016        10/14/2016                      5,000            673,200 (11) 
    10/14/2016        10/14/2016                      7,500            981,300 (11) 
    10/14/2016        10/14/2016                      8,333            900,547 (11) 
    10/14/2016        10/14/2016                      2,250            162,653 (11) 
    10/14/2016        10/14/2016                      11,250            571,163 (11) 
   

 

10/14/2016

 

  

 

   

 

10/14/2016

 

  

 

                 

 

11,250

 

  

 

       

 

813,206

 

(11)  

 

 

(1) The approval date represents the date on which the award was approved by the Compensation Committee or our Board, as applicable. The grant date is the date on which the award became effective.
(2)

Represents estimated potential payouts under the APB Plan for Fiscal Year 2016. Target bonus amount for Fiscal Year 2016 for Mr. Tan was 150%, Mr. Krause, 60%, Dr. Kawwas, 75% and Mr. Ingram, 100% of their respective base salaries. The threshold amount for Mr. Tan was 12.5% of his target bonus amount, calculated based on the achievement of a single corporate goal at 50% of the target for such goal and with the individual performance multiplier set at target 50%. The threshold amount for Mr. Krause was 2.5% of his target bonus amount, calculated based on the achievement of a single corporate or divisional goal at 10% of the target for such goal and with the individual performance multiplier set at target 50%. The threshold amount for Dr. Kawwas was 3.75% of his target bonus amount, calculated based on the achievement of a single corporate or divisional goal at 15% of the target for such goal and with the individual performance multiplier set at target 50%. The threshold amount for Mr. Ingram was 6.25% of his target bonus amount, calculated based on the achievement of a single corporate or divisional goal at 25% of the

 

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  target for such goal and with the individual performance multiplier set at target 50%. The maximum bonus payable was 225% of the target bonus amount for Mr. Tan, which assumes maximum (150%) performance for each corporate goal and with the individual performance multiplier set at 150%. The maximum bonus payable was 225% of the target bonus amount for Messrs. Krause and Ingram and Dr. Kawwas, which assumes maximum (150%) performance for each corporate goal and (150%) for each divisional or functional goal and with the maximum individual performance multiplier set at 150%. Mr. Maslowski was not eligible to receive a payout under the APB Plan for Fiscal Year 2016 due to his termination effective October 14, 2016.
(3) Represents PRSUs granted under the 2009 Plan or, in the case of Dr. Samueli, under the 2012 Plan, which are scheduled to vest at the rate of 25% per year, subject to the satisfaction of a share price contingency (set at the grant date) and continued service through the relevant vesting dates. The share price contingency provides that the PRSUs will vest only if the average closing price per share of our ordinary shares over a 20 consecutive trading day period is equal to or greater than 120% of the fair market value of an ordinary share on the grant date. If this share price contingency is met on or prior to the fourth anniversary of the grant date, then all of the PRSUs have the potential to vest (assuming continued service), and any PRSUs that would have vested on a scheduled vesting date occurring before the date on which the share price contingency was met will vest on or shortly after the date the share price contingency is met. If the share price contingency is not met by the fourth anniversary of the grant date or the time the executive ceases to provide services to us, the PRSUs will not vest and will expire or immediately terminate, as applicable. As a result, the threshold, target and maximum amounts are the same. The share-price contingency for these PRSUs had not been met as at the end of Fiscal Year 2016.
(4) The awards shown in this column are service-based RSU awards granted under the 2009 Plan or, in the case of Dr. Samueli, under the 2012 Plan. These awards vest at the rate of 25% per year, subject to the executive remaining employed by us through the relevant vesting date.
(5) Represents the grant date fair value of the equity awards, as determined in accordance with ASC 718. For a discussion of the valuation assumptions used in the calculations, see Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of our 2016 Form 10-K.
(6) Represents PRSUs granted to Mr. Tan under the 2009 Plan, which shall vest in full on the third anniversary of grant date subject to continued employment with us through such date and subject to the achievement of specified performance goals over the Performance Period, as determined by our Board within 60 days following the end of Performance Period. Our Board shall determine the achievement of two factors (i) our relative TSR compared to the S&P Index over the performance period and (ii) share price growth over the performance period, based on 90-day trailing average prices at the start and end of the performance period. Based upon the level of performance achieved, a maximum of 240,000 shares may be awarded under this award. If the minimum performance criterion is not met, no shares will be issued under this award and it will be cancelled.
(7) Represents an award granted to Mr. Tan in respect of a portion of his Fiscal Year 2016 APB Plan bonus payout amount. Please see “Compensation Discussion and Analysis—Elements of Executive Compensation—Annual Cash Incentive Program” above for additional details.
(8) Table does not include an RSU award for Mr. Krause approved by the Compensation Committee on October 17, 2016 in connection with his appointment as CFO. The effective grant date of the award was November 15, 2016, which was after the end of Fiscal Year 2016.
(9) Includes the incremental fair value of $98,310 associated with the acceleration of the equity award on October 14, 2016.
(10) Includes the incremental fair value of $364,910 associated with the acceleration of the equity award on October 14, 2016.
(11) Represents the incremental fair value associated with the acceleration of the equity award on October 14, 2016.

 

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Fiscal Year 2016 Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth information about share options and share awards outstanding on October 30, 2016, the last day of Fiscal Year 2016, held by each of our NEOs.

 

          Option Awards    

 

Restricted Share Unit Awards

 
Name   Grant Date     Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(1)
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(1)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock that
Have Not
Vested
(#)
(1)
   

Market

Value of
Shares or
Units of
Stock that
Have Not
Vested ($)
(2)

    Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unearned
Units of
Stock
(#)
(1)
    Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($)
(2)
 

 

Hock E. Tan

    03/08/2011        200,000          32.39        03/07/2018           
    11/26/2012                6,250 (3)      1,058,438       
    03/12/2013        87,500        43,750 (4)      35.45        03/11/2020        14,583 (5)      2,469,631       
    09/13/2013        1,110,416        437,500 (6)      38.99        09/12/2020           
    01/02/2014        375,000        375,000 (6)      52.65        01/01/2021           
   

 

06/15/2016

 

  

 

               

 

240,000

 

(7) 

 

   

 

20,574,408

 

  

 

 

Thomas H. Krause Jr.

    03/12/2013          6,000 (4)      35.45        03/11/2020        2,000 (5)      338,700       
    03/11/2014          45,000 (4)      62.02        03/10/2021        15,000 (5)      2,540,250       
    03/15/2015                7,500 (5)      1,270,125       
    03/15/2015                7,500 (8)      1,270,125       
   

 

03/15/2016

 

  

 

           

 

10,000

 

(5) 

 

   

 

1,693,500

 

  

 

   

 

10,000

 

(9) 

 

   

 

1,693,500

 

  

 

 

Charlie B. Kawwas, Ph.D.

    03/01/2013          3,668 (10)      38.92        03/1/2020        1,245 (11)      210,841       
    03/01/2014          5,662 (10)      62.63        03/1/2021        5,718 (11)      968,343       
    03/01/2014                4,398 (12)      744,801       
    06/10/2014        30,000        60,000 (4)      71.86        06/09/2021        20,000 (5)      3,387,000       
    03/15/2015                11,250 (5)      1,905,188       
    03/15/2015                11,250 (8)      1,905,188       
    12/15/2015                3,000 (5)      508,050       
   

 

03/15/2016

 

  

 

           

 

15,000

 

(5) 

 

   

 

2,540,250

 

  

 

   

 

15,000

 

(9) 

 

   

 

2,540,250

 

  

 

 

Henry Samueli, Ph.D.

    02/14/2013                9,180 (13)      1,554,633       
    02/20/2014                34,824 (14)      5,897,444       
    02/19/2015                61,353 (15)      10,390,131       
    01/25/2016                58,609 (16)      9,925,434       
    01/25/2016                7,323 (17)      1,240,150       
   

 

03/15/2016

 

  

 

           

 

11,588

 

(5) 

 

   

 

1,962,428

 

  

 

   

 

11,588

 

(9) 

 

   

 

1,962,428

 

  

 

 

Bryan T. Ingram

    03/12/2013          20,000 (4)      35.45        03/11/2020        6,666 (5)      1,128,887       
    03/11/2014        12,000        120,000 (4)      62.02        03/10/2021        40,000 (5)      6,774,000       
    12/09/2014                4,500 (5)      762,075       
    03/15/2015                18,750 (5)      3,175,313       
    03/15/2015                18,750 (8)      3,175,313       
    12/15/2015                4,000 (5)      677,400       
   

 

03/15/2016

 

  

 

           

 

10,000

 

(5) 

 

   

 

1,693,500

 

  

 

   

 

10,000

 

(9) 

 

   

 

1,693,500

 

  

 

 

Anthony E. Maslowski

    03/12/2013        15,000          35.45        10/14/2017           
    09/11/2013        27,500          39.25        10/14/2017           
   

 

03/11/2014

 

  

 

   

 

30,000

 

  

 

     

 

62.02

 

  

 

   

 

10/14/2017

 

  

 

       

 

(1) The awards shown in this column are awards granted under our 2009 Plan unless otherwise noted.

 

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(2) The amounts shown in this column represent the number of ordinary shares that have not vested multiplied by $169.35, the closing price of an ordinary share on October 28, 2016, the last trading day of Fiscal Year 2016.

 

(3) This RSU vests in two installments of 50% each on approximately the third and fourth anniversaries of the grant date, subject to the executive’s continued employment with us.

 

(4) This performance-based option vests at the rate of 25% of the shares subject thereto on each anniversary of the grant date, subject to the executive’s continued employment with us. This performance-based option is not exercisable until the date on which the average of the closing prices of our ordinary shares, over a 10 consecutive trading day period, is equal to or greater than 120% of the exercise price of the option. The exercisability condition for this option has been met.

 

(5) This RSU vests in four annual installments of 25% each, commencing on approximately the first anniversary of the grant date, subject to the executive’s continued employment with us.

 

(6) This performance-based option vests at the rate of 25% of the shares subject thereto on each anniversary of the grant date, subject to the executive’s continued employment with us. This performance-based option will only become exercisable as to any tranche of 20% of the shares covered by the option if the share price target applicable to that tranche is met. In order for a share price target to be met, the average of the closing share prices of our ordinary shares, over a 30 consecutive trading day period, must be equal to or greater than the share price target. The share price targets range from $50.00 per share to $75.00 per share. All share price targets for this option have been met.

 

(7) Represents PRSUs, which vest in full upon completion of the performance period, subject to continued employment with us and upon achievement of performance goals over the performance period, as determined by our Board within 60 days following the end of Performance Period. Our Board shall determine the achievement of two factors (i) relative TSR compared to the S&P Index over the performance period and (ii) share price growth over the performance period, based on 90-day trailing average prices at the start and end of the performance period. Based upon the level of performance achieved, a maximum of 240,000 shares may be awarded under this grant. If the minimum performance criterion is not met, no shares will be issued under this grant and the grant will be cancelled.

 

(8) This PRSU is scheduled to vest at the rate of 25% a year, subject to the executive’s continued employment with us and satisfaction of the relevant performance criteria. No shares will vest until the average closing price per share of our ordinary shares over a 20 consecutive trading day period is equal to or greater than 120% of the fair market value of an ordinary share on the grant date. If this share price contingency is met on or prior to the fourth anniversary of the grant date, then all of the PRSUs have the potential to vest (assuming continued service) and any PRSUs that would have vested on a scheduled vesting date occurring before the date on which the share price contingency is met will vest on or shortly after the date the share price contingency is met. If the share price contingency is not met by the fourth anniversary of the grant date or the time the executive ceases to provide services to us, the PRSUs will not vest and the award will expire or immediately terminate, as applicable. The vesting condition for this PRSU was met during Fiscal Year 2016.

 

(9) This PRSU is scheduled to vest at the rate of 25% a year, subject to the executive’s continued employment with us and satisfaction of the relevant performance criteria. No shares will vest until the average closing price per share of our ordinary shares over a 20 consecutive trading day period is equal to or greater than 120% of the fair market value of an ordinary share on the grant date. If this share price contingency is met on or prior to the fourth anniversary of the grant date, then all of the PRSUs have the potential to vest (assuming continued service) and any PRSUs that would have vested on a scheduled vesting date occurring before the date on which the share price contingency is met will vest on or shortly after the date the share price contingency is met. If the share price contingency is not met by the fourth anniversary of the grant date or the time the executive ceases to provide services to us, the PRSUs will not vest and the award will expire or immediately terminate, as applicable. The vesting condition for this PRSU had not been met as of the end of Fiscal Year 2016.

 

(10) This option was assumed in connection with the acquisition of LSI and was issued under the LSI Corporation 2003 Equity Incentive Plan (the “LSI Plan”). This option vests in four annual installments of 25% each, commencing on approximately the first anniversary of the grant date, subject to the executive’s continued employment with us.

 

(11) This RSU was assumed in connection with the acquisition of LSI and was issued under the LSI Plan. This RSU vests in four annual installments of 25% each, commencing on approximately the first anniversary of the grant date, subject to the executive’s continued employment with us.

 

(12) This RSU was assumed in connection with the acquisition of LSI and was issued under the LSI Plan. This RSU vests 100% on April 1, 2017 subject to the executive’s continued employment with us.

 

(13) This RSU was assumed in connection with the acquisition of BRCM on February 1, 2016 and was issued under the 2012 Plan. This RSU vested in equal quarterly installments, such that the RSU was fully vested on February 5, 2017, subject to the executive’s continued employment with us.

 

(14) This RSU was assumed in connection with the acquisition of BRCM on February 1, 2016 and was issued under the 2012 Plan. This RSU vests in equal quarterly installments, such that the RSU will be fully vested on February 5, 2018, subject to the executive’s continued employment with us.

 

(15) This RSU was assumed in connection with the acquisition of BRCM on February 1, 2016 and was issued under the 2012 Plan. This RSU vests in equal quarterly installments, such that the RSU will be fully vested on February 5, 2019, subject to the executive’s continued employment with us.

 

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(16) This RSU was assumed in connection with the acquisition of BRCM on February 1, 2016 and was issued under the 2012 Plan. This RSU vests in equal quarterly installments and such that the RSU will be fully vested on February 5, 2020, subject to the executive’s continued employment with us.

 

(17) This RSU was assumed in connection with the acquisition of BRCM on February 1, 2016 and was issued under the 2012 Plan. This RSU vests in equal quarterly installments and such that the RSU will be fully vested on February 5, 2021, subject to the executive’s continued employment with us.

Fiscal Year 2016 Option Exercises and Stock Vested

The following table shows information regarding the exercise of options to purchase our ordinary shares and the vesting of RSUs during Fiscal Year 2016. Option award value is calculated by subtracting the aggregate exercise price of the options exercised from the aggregate market value of the ordinary shares acquired on the date of exercise. RSU award value realized is calculated by multiplying the number of shares shown in the table by the closing price of our ordinary shares, as reported on the Nasdaq Stock Market, on the date the RSUs vested. Value Realized on Exercise and Value Realized on Vesting represent long-term gain over many years of service by the executive and we do not consider it as part of an executive’s Fiscal Year 2016 compensation.

 

     Option Awards    RSU Awards
  Name   

Number of

Shares Acquired

on Exercise
(#)

   Value Realized on
Exercise
($)
  

Number of Shares
Acquired on

Release
(#)

  

Value Realized

on Vesting

/Release
($)

  Hock E. Tan

       317,187          30,269,443          20,833          2,959,849  

  Thomas H. Krause Jr.

       53,500          5,300,606          22,833          3,249,922  

  Charlie B. Kawwas, Ph.D.

       20,380          1,786,560          24,881          3,846,833  

  Henry Samueli, Ph.D.

                 —                   61,081          9,093,260  

  Bryan T. Ingram

       80,000          8,200,277          40,667          5,844,933  

  Anthony E. Maslowski(1)

       97,500          10,897,455          90,667          14,853,913  

 

(1) The amounts reflect the acceleration of unvested service-based options and RSUs in connection with his termination of service as a result of permanent disability.

Fiscal Year 2016 Non-Qualified Deferred Compensation Table

The following table sets forth information regarding contributions and earnings under the Avago Technologies U.S. Inc. Deferred Compensation Plan during Fiscal Year 2016, with respect to our NEOs who participated in this plan. This plan was terminated effective May 31, 2016 and all funds will be distributed to participants on June 1, 2017.

 

Name   

Executive

Contributions

in Fiscal Year

2016

($)(1)

  

Registrant

Contributions

in Fiscal Year

2016

($)(1)

  

Aggregate

Earnings

in Fiscal

Year 2016

($)(2)

  

Aggregate

Withdrawals /

Distribution

($)

  

Aggregate

Balance at

October 30,

2016

($)

Bryan T. Ingram

             1,052             23,741  

Anthony E. Maslowski

             46,946             1,122,193  

 

(1)

The Avago Technologies U.S. Inc. Deferred Compensation Plan is a non-qualified Plan under the Internal Revenue Code and is exempt from the reporting and fiduciary requirements of ERISA. The Deferred Compensation Plan is designed to allow the participants to defer a specified percentage of their base salary, commissions and/or bonuses in a manner similar to the way in which the Avago Technologies U.S. Inc. 401(k) plan operates, but without regard to the maximum deferral limitations imposed on 401(k) plans by the Internal Revenue Code. In addition, we may make discretionary contributions to participant accounts. As required by applicable law, participation in the Deferred Compensation Plan is limited to a group of our employees who have an annual base salary plus targeted commissions of at least $175,000, which group includes each of our U.S. based NEOs. Amounts deferred by each participant pursuant to the Deferred Compensation Plan are held in a “rabbi” trust. The trust protects the assets from the effects of a change in management control or takeover, but not against insolvency for bankruptcy of the company. Amounts invested by each participant under the Deferred Compensation Plan are periodically adjusted for earnings and/or losses at a rate that is equal to one or more of the measurement funds elected by a participant. Currently, the measurement funds consist of the following: Fidelity Retirement US Treasury Money Market Fund, MetWest Total Return Bond Fund Plan Class, Fidelity 500 Index Instl Prem. Class , Fidelity Contra Fund- Class K , Wells Fargo Advantage Discovery Fund Class Institutional Class, Vanguard Total Bond Mkt Inst., Vanguard Short-Term Bond

 

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  Index IS, Goldman Sachs Small Cap Value Fund Institutional, Fidelity Growth Co K, Vanguard Total International Stock Index Fund Signal Shares, Vanguard Target Inc., Vanguard Target 2010 Fund, Vanguard Target 2015, Vanguard 2020 Target 2020, Vanguard Target 2025, Vanguard Target 2030, Vanguard Target 2035, Vanguard Target 2040, Vanguard Target 2045, Vanguard Target 2050, Vanguard Target 2055, Vanguard Target 2060, Vanguard Tot Wld Stk Inv, Vanguard REIT Institutional, Vanguard Small Cap Index Institutional, Vanguard Mid-Cap Index ID PL, PIMCO High Yield Institutional, and AF Europac Growth R6. Distributions are made in accordance with elections filed by participants at the time of their initial deferrals and distributions occur in a lump sum upon death or total disability and in a lump sum or installments upon a participant’s choice of in service or separation of service. Distributions are also made in the event of a change in control of our Company.

 

(2) Amounts reflected are not included in the “Fiscal Year 2016 Summary Compensation Table” because the earnings are not above-market. These amounts include dividends, interest and changes in market value.

Severance and Change of Control Agreements with Named Executive Officers; Death and Disability Policy; Employment Arrangements

Severance Benefit Agreements

Each of our NEOs, other than Dr. Samueli, is party to a severance benefits agreement with us. The severance benefit agreements provide each NEO with a severance payment in the event of the termination of the NEO’s employment without cause, because of death or permanent disability or a resignation by the NEO for “good reason” (“Covered Termination”), provided that the NEO timely executes a general release of all claims in our favor. If such a termination of employment takes place within 12 months following (or in the case of Mr. Tan, within three months prior to or 12 months following) a “change in control” (as defined in the severance benefit agreement), we must provide the NEO with:

 

 Name   

Continued

 Base Salary 

      Bonus(1)     

Health

Benefits

Continuation

        Coverage        

  

Equity Award

Vesting

    Acceleration(2)    

 Hock E. Tan

       24 months          200 %       —                100 %

 Thomas H. Krause, Jr.

       12 months          100 %       12 months              100 %

 Charlie B. Kawwas, Ph.D.

       12 months          100 %       12 months              100 %

 Bryan T. Ingram

       12 months          100 %       12 months              100 %

 Anthony E. Maslowski

       12 months          100 %       12 months              100 %

 

  (1) Bonus payments are calculated using the lesser of the executive’s prior year’s actual bonus or prior year’s target bonus.
  (2) Upon a qualifying termination of an NEO’s employment in connection with a change of control, the NEO will also receive full acceleration of all outstanding time-vesting equity awards, and acceleration of outstanding performance-based equity awards to the extent (i) the effective price per share paid by the acquirer meets or exceeds any share price contingency applicable to any share-price performance awards, and (ii) other performance goals have been deemed satisfied, in the discretion of the Board, based on Company performance through the date of the change in control, for all other types of performance-based awards.

If the NEO’s termination of employment takes place other than in connection with a change in control, we must provide the NEO with:

 

 Name    Continued Base
Salary
             Bonus(1)              Health Benefits
  Continuation Coverage  
 

 Hock E. Tan

     12 months                 100     —               

 Thomas H. Krause, Jr.

     9 months                 50     6 months             

 Charlie B. Kawwas, Ph.D.

     9 months                 50     6 months             

 Bryan T. Ingram

     9 months                 50     6 months             

 Anthony E. Maslowski

     9 months                 50     6 months             

 

  (1) Bonus payments are calculated using the lesser of the executive’s prior year’s actual bonus or prior year’s target bonus.

 

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The definition of “change of control” under the severance benefit agreements is the same as the definition of “change in control” under our 2009 Plan, which captures acquisitions of more than 50% of our voting shares by any person or group, as well as the sale of all or substantially all of our assets. Mr. Tan’s severance benefit agreement was approved by our shareholders, as required by Singapore law, at our 2014 Annual General Meeting of Shareholders.

The definition of “good reason” means any of the following: (A) a material reduction in the executive’s salary (other than as part of a broad salary reduction program instituted because we are in financial distress); (B) a substantial reduction in the executive’s duties and responsibilities; (C) the elimination or reduction of the executive’s eligibility to participate in our benefit programs that is inconsistent with the eligibility of our executive employees to participate therein; (D) we inform the executive of our intention to transfer the executive’s primary workplace to a location that is more than 50 miles from the location of the executive’s primary workplace as of such date; (E) our material breach of the severance benefits agreement that is not cured within sixty (60) days written notice thereof; and (F) any serious chronic mental or physical illness of the executive or a member of the executive’s family that requires the executive to terminate his or her employment because of substantial interference with the executive’s duties; provided, that at our request the executive provides us with a written physician’s statement confirming the existence of such mental or physical illness.

Policy on Acceleration of Executive Staff Equity Awards in the Event of Death or Disability

In September 2015, our Board approved the Death and Disability Policy. This policy was effective immediately upon adoption, and provides for the full acceleration upon an executive’s death or permanent disability of his or her outstanding and unvested equity awards that would otherwise vest solely based on the executive’s continued service, including performance-based equity awards for which the performance criteria have been met as of such date. The Death and Disability Policy applies in the event of the death or permanent disability, of (i) any officer of our Company, as such term is defined in Exchange Act Rule 16a-1, and (ii) any member of our CEO’s executive staff, including the NEOs, as determined by our CEO.

Continuing Employment Agreement – Mr. Ingram

Pursuant to Mr. Ingram’s Letter Agreement, entered into on October 16, 2015, if Mr. Ingram experiences a Covered Termination during the period commencing on November 2, 2015 and ending on October 31, 2017 (the “Retention Period”) or he elects in writing within thirty days immediately following the end of the Retention Period (the “Election Period”) to resign as of such date, then his unvested equity and equity-linked awards that were granted prior to March 15, 2015 and vest solely based upon his continued service, including performance-based awards for which the performance criteria has been met (“Time-Based Awards”), will vest in full as of such termination date. The Letter Agreement also provides that if Mr. Ingram remains available to provide limited consulting services through the first anniversary of such termination date and refrains from engaging in a competing business or activity during this time (or if he dies or becomes permanently disabled during such time), then the Time-Based Awards granted on March 15, 2015 and each performance-based award granted on March 15, 2015 for which the performance criteria is met following his termination date but prior to the first anniversary of the termination date, will fully vest on the first anniversary of the termination date.

The Letter Agreement further provides that if Mr. Ingram’s employment is terminated as a result of a Covered Termination or he elects in writing during the Election Period to resign as of such date and such termination date occurs after the end of the fiscal year but prior to the payment date of his cash bonus under the APB Plan in effect for that year, then he will continue to be entitled to receive his cash bonus, based upon actual performance under the APB Plan in effect on the bonus payment date.

Other than as discussed above, Mr. Ingram’s severance benefit agreement remains in full force and effect.

 

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Anthony Maslowski’s Separation Agreement

Anthony Maslowski’s, our former Senior Vice President and Chief Financial Officer, employment terminated effective October 14, 2016 as a result of permanent disability. Pursuant to the terms of his Separation Agreement, dated October 14, 2016 (the “Separation Agreement”), Mr. Maslowski is entitled to the following severance and other benefits:

 

    Continued payment of his base salary for nine months following the date of his separation;
    50% of the lesser of (i) his actual cash bonus for Fiscal Year 2016 and (ii) his target cash bonus for Fiscal Year 2016; and
    Continued healthcare coverage under COBRA for Mr. Maslowski and his covered dependents for up to six months following his date of separation.
    Automatic vesting of each of Mr. Maslowski’s outstanding and unvested equity and equity-linked awards that, as of October 14, 2016, would have vested solely based upon his continued service, and, if applicable, the immediate lapse of any forfeiture restrictions thereon, in each case, with respect to one-hundred percent (100%) of that number of unvested ordinary shares underlying such equity award.

All of the foregoing is consistent with the benefits that would have been provided to Mr. Maslowski pursuant to (i) his severance agreement with us, dated as of January 24, 2014 and (ii) the Death and Disability Policy.

Potential Severance Payments and Benefits upon Certain Terminations

The following table reflects the potential payments and benefits to which the NEOs, other than Dr. Samueli, would be entitled under their severance benefits agreements in effect as of the end of Fiscal Year 2016, in the event of a Covered Termination taking place not in connection with a change in control of our Company. Dr. Samueli does not have a severance benefits agreement with us. The amounts presented in the table assume an employment termination date of October 30, 2016 and that all eligibility requirements contemplated by the NEO’s respective agreements or our policies and practices, as applicable, were met.

 

  Name  

Cash

Severance
Base Salary
($)

  Cash
Severance
Bonus
($)
  Health
Benefits
Continuation
Coverage
($)
(1)
  Value of
Options
Acceleration
($)
(2)
 

Value of RSU
Acceleration

($)(3)

  Total
($)
   

  Hock E. Tan

      1,100,000         1,650,000             -                     2,750,000      

  Thomas H. Krause Jr.

      300,000         120,000         11,733                 431,733      

  Charlie B. Kawwas, Ph.D.

      366,397         183,198         11,770                 561,365      

  Bryan T. Ingram

      444,188         296,125         11,527         15,557,600         17,386,487         33,695,927      

 

(1) Represents the cost of our subsidized continued benefits, based on our current costs to provide such coverage.
(2) The amounts in this column represent, for each option that would have accelerated, the number of ordinary shares that would have vested multiplied by the difference between $169.35, the closing price per ordinary share on October 28, 2016, the last trading day of Fiscal Year 2016, and the exercise price of the option. As of such date, all price contingencies contained in performance-based options had been met. As a result, all performance-based options would have accelerated in the event of a covered termination.
(3) The amounts in this column represent, for each RSU award that would have accelerated, the number of ordinary shares that would have vested multiplied by $169.35, the closing price per ordinary share on October 28, 2016, the last trading day of Fiscal Year 2016. As of such date, the stock price contingencies contained in PRSU had not been met. As a result, none of the PRSUs would have accelerated in the event of a covered termination.

Potential Severance Payments and Benefits upon Certain Terminations in Connection with a Change in Control

The following table reflects the potential payments and benefits to which the NEOs, other than Dr. Samueli, would be entitled under their severance benefit agreements in effect as of the end of Fiscal Year

 

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2016 in the event of a Covered Termination taking place within 12 months following a change in control of our Company (or in the case of Mr. Tan three months before or 12 months following a change in control of our Company). The amounts presented in the table assume an employment termination date of October 30, 2016 and that all eligibility requirements contemplated by the NEO’s respective agreements and our policies and practices, as applicable, were met.

 

Name   Cash
Severance
Base Salary
($)
    Cash
Severance
Bonus
($)
    Health Benefits
Continuation
Coverage
($)
(1)
  Value of
Options
Acceleration
($)
(2)
   

Value of RSU
Acceleration

($)(3)

   

Total

($)

       

Hock E. Tan

    2,200,000        3,300,000          106,653,125        3,528,069 (4)      115,681,194     

Thomas H. Krause Jr.

    400,000        240,000      23,466     5,633,250        7,112,700        13,409,416     

Charlie B. Kawwas, Ph.D.

    488,529        366,397      23,539     6,932,066        12,169,660        19,980,191     

Bryan T. Ingram

    592,250        592,250      23,053     15,557,600        17,386,487        34,151,640     

 

(1) Represents the cost of our subsidized continued benefits based on our current costs to provide such coverage.
(2) The amounts in this column represent, for each option that would have accelerated, the number of ordinary shares that would have vested multiplied by the difference between $169.35, the closing price per ordinary share on October 28, 2016, the last trading day of Fiscal Year 2016, and the exercise price of the option. As of such date, all price contingencies contained in performance-based options had been met. As a result, all performance-based options would have accelerated in the event of a covered termination.
(3) The amounts in this column represent, for each RSU award that would have accelerated, the number of ordinary shares that would have vested multiplied by $169.35, the closing price per ordinary share on October 28, 2016, the last trading day of Fiscal Year 2016. As of such date, the stock price contingencies contained in PRSU had not been met. As a result, none of the PRSUs would have accelerated in the event of a covered termination.
(4) This amount does not include accelerations of the 2016 Grant as the performance criteria cannot be determined until the vesting date and thus not subject to any acceleration.

Potential Payments under the Death and Disability Policy

The following table reflects the potential payments and benefits to which the NEOs would be entitled under the Death and Disability Policy in effect as of October 30, 2016, in the event of death or permanent disability. The amounts presented in the table assume a termination of employment date of October 30, 2016 and that all eligibility requirements contemplated by the Death and Disability Policy were met.

 

  Name    Value of Option Acceleration
($)
(1)
   Value of RSU Acceleration
($)
(2)
   Total
($)
    

  Hock E. Tan

       106,653,125          3,528,069          110,181,194       

  Thomas H. Krause Jr.

       5,633,250          7,112,700          12,745,950       

  Charlie B. Kawwas, Ph.D.

       6,932,066          12,169,660          19,101,726       

  Henry Samueli, Ph.D.

       —                      30,970,220          30,970,220       

  Bryan T. Ingram

       15,557,600          17,386,487          32,944,087       

 

(1) The amounts in this column represent, for each option that would have accelerated, the number of ordinary shares that would have vested multiplied by the difference between $169.35, the closing price per ordinary share on October 28, 2016, the last trading day of Fiscal Year 2016, and the exercise price of the option. As of such date, all price contingencies contained in performance-based options had been met. As a result, all performance-based options would have accelerated in the event of a covered termination.
(2) The amounts in this column represent, for each RSU award that would have accelerated, the number of ordinary shares that would have vested multiplied by $169.35, the closing price per ordinary share on October 28, 2016, the last trading day of Fiscal Year 2016. As of such date, the stock price contingencies contained in PRSU had not been met. As a result, none of the PRSUs would have accelerated in the event of a covered termination.

 

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Payments under Mr. Maslowski’s Separation Agreement

The following table reflects the payments and benefits Mr. Maslowski received under the Separation Agreement:

 

Name    Cash
Severance
Base Salary
($)
     Cash Severance
Bonus
($)
     Health Benefits
Continuation
Coverage
($)
(1)
     Value of Options
Acceleration
($)
    

Value of RSU
Acceleration

($)(2)

    

Total

($)

 

Anthony E. Maslowski

     325,553         156,398         13,045         7,665,250                10,474,652         18,634,898   

 

(1) Represents the cost of our subsidized continued benefits based on our current costs to provide such coverage.
(2) The amounts in this column represent the RSU awards that accelerated upon his separation, multiplied by $170.09, the closing price per ordinary share on October 14, 2016, his separation date.

 

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EQUITY COMPENSATION PLAN INFORMATION

Plans Approved by our Shareholders

We have four equity compensation plans that have been approved by our shareholders: the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries (the “Executive Plan”), the Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries (the “Senior Management Plan” and together with the Executive Plan, the “Prior Plans”), the 2009 Plan and the ESPP. We ceased to make grants under the Prior Plans in August 2009.

Plans Not Approved by our Shareholders

As at October 30, 2016, we had two equity compensation plan that had not been approved by our shareholders and pursuant to which we may continue to grant additional equity awards: the LSI Plan, which we assumed in connection with our acquisition of LSI, and the 2012 Plan, which we assumed in connection with our acquisition of BRCM. We have also assumed outstanding equity awards granted under the LSI Plan and the 2012 Plan and under other equity compensation plans or agreements that were assumed by us in connection with our acquisitions of LSI and BRCM and other companies that originally granted those awards.

The following table sets forth the number and weighted-average exercise price of ordinary shares to be issued upon exercise of outstanding options and RSUs, and the number of securities remaining available for future issuance under all of our equity compensation plans, as at October 30, 2016.

 

  Plan Category  

Number of Ordinary Shares to
be Issued Upon Exercise of
Outstanding Options,
Warrants and Rights

(a)

   

Weighted Average
Exercise Price

of Outstanding Options,
Warrants and Rights
(b)
(1)

   

Number of Ordinary Shares Remaining
Available for Future Issuance Under
Equity Compensation Plans (Excluding
Securities Reflected in Column

(c)

  Equity compensation plans

  approved by shareholders

    17,003,767   (2)      $45.24        15,400,224  (3)

  Employee stock purchase plans

  approved by shareholders

                    8,432,648  (4)

  Equity compensation plans not

  approved by shareholders

    14,236,133   (5)      $72.59        77,677,799  (6)(7)

  Total

    31,240,110        $48.77      101,510,671  (3)(7)

 

  (1) Shares issuable upon vesting of RSUs have been excluded from the calculation of the weighted average exercise price because they have no exercise price associated with them.
  (2) Represents 12,777,867 shares subject to outstanding options and 4,225,900 shares that may be issued upon vesting of outstanding RSUs, in each case pursuant to equity awards issued under the 2009 Plan and the Prior Plans.
  (3) The 2009 Plan has an automatic annual share renewal formula pursuant to which the aggregate number of shares available for issuance under the 2009 Plan increases automatically on the first day each fiscal year by the least of (i) 6,000,000 shares, (ii) 3% of the ordinary shares outstanding on the last day of the immediately preceding fiscal year and (iii) such smaller number of shares as determined by our Board. In accordance with this formula, on October 31, 2016 (the first day of our Fiscal Year 2017), the number of shares available for future issuance under the 2009 Plan increased by 6,000,000, which is not reflected in the table.
  (4) The ESPP has an automatic annual share renewal formula pursuant to which the aggregate number of shares available for issuance under the ESPP increases automatically on the first day each fiscal year by the least of (i) 2 million shares, (ii) 1% of the ordinary shares outstanding on the last day of the immediately preceding fiscal year and (iii) such smaller number of shares as determined by our Board. Our Board determined not to increase the number of shares available for issuance under the ESPP for Fiscal Year 2017.
  (5) Includes (i) 1,885,413 shares subject to options and 2,133,450 shares that may be issued upon vesting of RSUs, all of which were awarded under the LSI Plan, (ii) 10,176,963 shares that may be issued upon vesting of RSUs, all of which were awarded under the 2012 Plan and (iii) 5,088 shares subject to options and 35,219 shares that may be issued upon vesting of RSUs issued pursuant to other equity compensation plans and agreements assumed by us in connection with our acquisitions of LSI, BRCM and other companies that originally established those plans or agreements.

 

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  (6) Represents shares available under the LSI Plan and the 2012 Plan, of which 2,135,238 shares and 73,269,471 shares, respectively, may be used for RSU awards.
  (7) The 2012 Plan has an automatic annual share renewal provision pursuant to which the aggregate number of shares available for issuance under the 2012 Plan increases automatically on the first trading day of January each calendar year, beginning with the first trading day of January 2017, by 12,195,965. In accordance with this provision, on January 3, 2017 (the first trading day in January 2017), the number of shares available for future issuance under the 2012 Plan increased by 12,195,965, which is not reflected in the table.

For additional information regarding our equity compensation plans, please refer to Note 9 of Notes to Consolidated Financial Statements included in Part IV, Item 8 of our 2016 Form 10-K.

 

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AUDIT COMMITTEE REPORT

The Audit Committee is responsible for assisting the Board with its oversight responsibilities regarding the following:

 

    the quality and integrity of the Company’s financial statements and internal controls;

 

    the appointment, compensation, retention, qualifications and independence of the Company’s independent registered public accounting firm;

 

    the performance of the Company’s internal audit function and independent registered public accounting firm;

 

    the Company’s compliance with legal and regulatory requirements; and

 

    related party transactions.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the Company’s financial statements for Fiscal Year 2016 with the Company’s management and PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm. In addition, the Audit Committee has discussed with PricewaterhouseCoopers LLP, with and without management present, the Company’s internal control over financial reporting and overall quality of the Company’s financial reporting. The Audit Committee also discussed with PricewaterhouseCoopers LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee also received the written disclosures and the letter from PricewaterhouseCoopers LLP required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed the independence of PricewaterhouseCoopers LLP with that firm. The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the Company’s independent registered public accounting firm. All audit and non-audit services performed by our independent registered public accounting firm during Fiscal Year 2016 were pre-approved by the Audit Committee in accordance with established procedures.

Based on the Audit Committee’s review and discussions noted above, as well as such other matters deemed relevant and appropriate by the Audit Committee, the Audit Committee recommended to the Board that the audited financial statements for Fiscal Year 2016 be included in the Company’s 2016 Form 10-K, for filing with the SEC.

The Audit Committee and the Board of Directors have approved, subject to shareholder approval, the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm and independent Singapore auditor for Fiscal Year 2017.

Submitted by the Audit Committee of the Board of Directors:

Justine F. Page, Chairperson

Donald Macleod

Peter J. Marks

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information about (i) the beneficial ownership of our ordinary shares and Restricted Units in the Partnership, the holders of which are entitled to vote an equal number of our Special Voting Shares, and (ii) aggregate voting power, at February 8, 2017 for:

 

    each named executive officer;

 

    each of our directors and nominees for director;

 

    each person known to us to be the beneficial owner of more than 5% of our ordinary shares or of the Restricted Units; and

 

    all of our executive officers and directors as a group.

We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all ordinary shares and Restricted Units that they beneficially own.

The terms of the Restricted Units are governed by the Amended and Restated Exempted Limited Partnership Agreement dated February 1, 2016, of the Partnership. Holders of Restricted Units are entitled to direct the Trustee to vote one Special Voting Share for each Restricted Unit that they hold, pursuant to the terms of the Voting Trust. The Trustee is the sole registered shareholder of the 22,804,591 Special Voting Shares outstanding as at February 8, 2017, and the number of Special Voting Shares outstanding is equal to the number of outstanding Restricted Units as at such date. As of February 1, 2017, holders of Restricted Units have the right to exchange their Restricted Units for cash or our ordinary shares, at our discretion. If an exchange is settled in ordinary shares, the holder will receive on ordinary share for each exchanged Restricted Unit.

Ordinary shares subject to options that are currently exercisable or exercisable within 60 days of February 8, 2017 and RSUs that vest within 60 days of February 8, 2017 are deemed to be outstanding and to be beneficially owned by the person holding the equity award for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

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In the table below, percentage ownership is based on 401,038,999 ordinary shares and 22,804,591 Restricted Units outstanding as of February 8, 2017. Total percentage of voting power assumes that all holders of Restricted Units provide proper voting instructions to the Trustee in respect of their corresponding Special Voting Shares, and is based on an aggregate of 423,843,590 ordinary shares and Special Voting Shares outstanding as of February 8, 2017.

 

   

 

Voting Securities Beneficially Owned(1)

 
Name and Address of
Beneficial Owner
  Number of
Ordinary
Shares
    Percentage
of Ordinary
Shares
    Number of
Restricted
Units
   

 

Percentage
of
Restricted
Units

    Total
Shares
Beneficially
Owned
    Total
Percentage
of Voting
Power
(2)
 

5% Shareholders:

 

           

Capital World Investors(3)

    43,828,990        10.9%                      43,828,990        10.3%   

333 South Hope Street

           

Los Angeles, CA 90071

 

           

Capital Research Global Investors(4)

    31,748,432        7.9%                      31,748,432        7.5%   

333 South Hope Street

           

Los Angeles, CA 90071

 

           

The Vanguard Group(5)

    25,022,291        6.2%                      25,022,291        5.9%   

100 Vanguard Blvd.

           

Malvern, PA 19355

           

BlackRock, Inc. (6)

    22,896,460        5.7%                      22,896,460        5.4%   

55 East 52nd Street

           

New York, NY 10055

 

           

The Growth Fund of America(7)

    20,764,905        5.2%                      20,764,905        4.9%   

333 South Hope Street

           

Los Angeles, CA 90071

 

           

Henry T. Nicholas III(8)

                  11,457,605        50.2%        11,457,605        2.7%   

15 Enterprise Suite 550

           

Aliso Viejo, CA 92656

 

           

Named Executive Officers, Directors and Nominees:

           

Hock E. Tan(9)

    2,116,365        *                      2,116,365        *   

Thomas H. Krause, Jr.(10)

    49,192        *                      49,192        *   

Charles B. Kawwas, Ph.D. (11)

    41,971        *                      41,971        *   

Henry Samueli, Ph.D.(12)

    56,693        *        9,573,784        42.0%        9,630,477        2.3%   

Bryan T. Ingram(13)

    131,297        *                      131,297        *   

Anthony E. Maslowski(14)

    62,052        *                      62,052        *   

James V. Diller(15)

    142,991        *                      142,991        *   

Lewis C. Eggebrecht(16)

    11,741        *                      11,741        *   

Kenneth Y. Hao(17)

    2,708,045        *                      2,708,045        *   

Eddy W. Hartenstein(18)

    33,235        *                      33,235        *   

Donald Macleod(19)

    58,075        *                      58,075        *   

Peter J. Marks(20)

    31,299        *                      31,299        *   

Check Kian Low

                                         

Justine F. Page(21)

    19,128        *                      19,128        *   

All 15 executive officers and directors as a group(22)

    5,660,747        1.4%        9,573,784        42.0%        15,234,531        3.6%   

 

* Represents beneficial ownership of less than 1%.
(1) Shares shown in the table above include securities held in the beneficial owner’s name or jointly with others, or in the name of a bank, nominee or trustee for the beneficial owner’s account.

 

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(2) Ordinary shares and Special Voting Shares are entitled to one vote per share and vote as a single class on all matters except any amendment to our Constitution that adversely affects the voting rights of the Special Voting Shares.
(3) Number of shares is based solely on information reported by Capital World Investors on the Schedule 13G/A filed with the SEC on February 13, 2017, reporting ownership as of December 31, 2016. According to such Schedule 13G/A, Capital World Investors has sole voting power and sole dispositive power over these shares. Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 8, 2017.
(4) Number of shares is based solely on information reported by Capital Research Global Investors on the Schedule 13G filed with the SEC on February 13, 2017, reporting ownership as of December 31, 2016. According to such Schedule 13G, Capital Research Global Investors has sole voting power and sole dispositive power over these shares. Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 8, 2017.
(5) Number of shares is based solely on information reported by The Vanguard Group on the Schedule 13G filed with the SEC on February 10, 2017, reporting ownership as of December 31, 2016. According to such Schedule 13G, The Vanguard Group has sole voting power over 619,406 of these shares, sole dispositive power over 24,338,532 of these shares, shared voting power over 72,999 of these shares and shared dispositive power over 683,759 of these shares. Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 8, 2017.
(6) Number of shares is based solely on information reported by BlackRock, Inc. on the Schedule 13G filed with the SEC on January 30, 2017, reporting ownership as of December 31, 2016. According to such Schedule 13G, BlackRock, Inc. has sole voting power over 19,355,480 of these shares, sole dispositive power over 22,891,356 of these shares, shared voting power over 5,104 of these shares and shared dispositive power over 5,104 of these shares. Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 8, 2017.
(7) Number of shares is based solely on information reported by The Growth Fund of America, Inc. on the Schedule 13G filed with the SEC on February 14, 2017, reporting beneficial ownership as of December 31, 2016. According to such Schedule 13G, The Growth Fund of America, Inc., which is advised by Capital Research and Management Company, disclaims voting and dispositive power over such shares. These shares may also be reflected in the Schedule 13G/A filed with the SEC by Capital World Investors (see footnote (3) above) and/or the Schedule 13G filed with the SEC by Capital Research Global Investors (see footnote (4) above). Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 8, 2017.
(8) Shares in the table represent 11,456,699 Restricted Units held by Nicholas Technology Holding Trust and 302 Restricted Units held by each of (i) Henry T. Nicholas III Custodian Robert Brett Nicholas UGMA, (ii) Henry T. Nicholas III Custodian Shelby Vanessa Nicholas UGMA and (iii) Henry T. Nicholas III Custodian Matthew Carter Nicholas UGMA. Mr. Nicholas has dispositive power over these Restricted Units and power to direct the vote of the Special Voting Shares associated with these Restricted Units.
(9) Shares shown in the table above include 2,004,166 shares that Mr. Tan has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options and 14,583 shares that he has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.
(10) Shares shown in the table above include 28,500 shares that Mr. Krause has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options and 19,500 shares that he has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.
(11) Shares shown in the table above include 16,499 shares that Dr. Kawwas has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options and 23,502 shares that he has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.
(12) The shares in the table include 5,794 shares that Dr. Samueli has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs. Shares in the table also include (i) 5,937,658 Restricted Units held by HS Portfolio L.P., (ii) 399,918 Restricted Units held by HS Management, L.P., (iii) 459,690 Restricted Units held by H&S Portfolio II L.P., and (iv) 2,722,869 Restricted Units held by H&S Investments I L.P. Dr. Samueli disclaims beneficial ownership of the shares held by HS Portfolio L.P. and HS Management, L.P., except to the extent of his pecuniary interest therein. H&S Ventures LLC is the general partner of HS Management, L.P., HS Portfolio L.P., H&S Portfolio II, L.P and H&S Investments I, L.P. As the indirect owner of H&S Ventures LLC, Dr. Samueli has sole dispositive power over these Restricted Units and sole power to direct the vote of the Special Voting Shares associated with these Restricted Units.
(13) Shares shown in the table above include 80,000 shares that Mr. Ingram has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options and 44,166 shares that he has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.

 

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(14) The number of shares includes (i) 14,237 shares held by Mr. Maslowski as Trustee for the Anthony E. Maslowski Trust dated May 20, 2011, based on information provided by Mr. Maslowski as of December 12, 2016, and (ii) 39,427 shares that Mr. Maslowski has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options.
(15) Shares shown in the table above include (i) 120,000 shares held by the James & June Diller Trust UA dated 7/20/77, (ii) 15,077 shares that Mr. Diller has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options and (iii) 1,325 shares that he has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.
(16) Shares shown in the table above include (i) 1,500 shares held by the Lewis & Rebecca Eggebrecht Trust UA dated 6/21/97, (ii) 5,121 shares that Mr. Eggebrecht has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options and (iii) 1,707 shares that he has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.
(17) Amounts disclosed for Mr. Hao include (i) 2,568,690 shares held by SLP Argo I Ltd. (“Argo I”) and (ii) 49,877 shares held by SLP Argo II Ltd (“Argo II”).

 

     Silver Lake Partners IV Cayman (AIV II), L.P. (the “Main Fund”) is the sole shareholder of Argo I. Silver Lake Technology Investors IV Cayman, L.P. (the “Side Fund”) is the sole shareholder of Argo II. Silver Lake Technology Associates IV Cayman, L.P. (the “Lower GP”) is general partner of each of the Main Fund and the Side Fund. Silver Lake (Offshore) AIV GP IV, Ltd. (the “Upper GP”) is the general partner of the Lower GP. Argo I, Argo II, the Main Fund, the Side Fund, the Lower GP and the Upper GP are collectively referred to as the “Silver Lake Entities”. Mr. Hao is a director of the Upper GP. Mr. Hao disclaims beneficial ownership of any shares beneficially owned by the Silver Lake Entities, except to the extent of his pecuniary interest therein.

 

     Shares shown in the table also include (i) 57,186 shares acquired by Mr. Hao upon the exercise of a share option, (ii) 8,242 shares acquired by him upon the vesting of RSUs granted to him, (iii) 22,707 shares that he has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options, and (iv) 1,325 shares upon the vesting of RSUs within 60 days after February 8, 2017.

 

     Pursuant to Mr. Hao’s arrangement with Upper GP with respect to director compensation in the form of securities received by him in his capacity as a representative of Upper GP, he is required to remit the proceeds from the sale of such securities to Upper GP. Accordingly, Mr. Hao disclaims beneficial ownership of the shares described above, except to the extent of his pecuniary interest therein, except for 18 shares, which are held by his family limited partnership, and 9,854 shares that he has the right to acquire upon the exercise of a vested share option.
(18) Shares shown in the table above include 1,325 shares that Mr. Hartenstein has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.
(19) Shares shown in the table above include 5,223 shares that Mr. Macleod has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options and 1,325 shares that he has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.
(20) Shares shown in the table above include 23,474 shares that Mr. Marks has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options.
(21) Shares shown in the table above include 15,077 shares that Ms. Page has the right to acquire within 60 days after February 8, 2017 upon the exercise of share options and 1,325 shares that she has the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.
(22) Shares shown in the table above include (i) 2,434,713 shares that directors and executive officers have the right to acquire within 60 days after February 8, 2017 upon the exercise of share options and (ii) 135,742 shares that directors and executive officers have the right to acquire within 60 days after February 8, 2017 upon the vesting of RSUs.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Related Party Transactions

Other than compensation and other arrangements described above under “Director Compensation,” “Executive Compensation” and as set forth below, since November 2, 2015, there was not, nor is there currently planned, any transaction or series of similar transactions to which we were or will be a party in which:

 

    the amount involved exceeded or will exceed $120,000; and

 

    any director, nominee, executive officer, holder of more than 5% of our ordinary shares or any member of their immediate family had or will have a direct or indirect material interest.

We refer to these types of transactions as “related party transactions.”

Procedures for Approval of Related Party Transactions

As provided by our Audit Committee Charter, the Audit Committee must review all related party transactions on an ongoing basis and all such transactions must be approved by the Audit Committee. The Audit Committee may delegate to one or more designated members of the committee the authority to pre-approve related party transactions, provided such approvals are presented to the Audit Committee at its next scheduled meeting. In approving or rejecting the proposed agreement, the Audit Committee considers the relevant facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products, and, if applicable, the impact on a director’s independence. Our written Code of Ethics and Business Conduct requires that directors, officers and employees make appropriate disclosure of potential conflicts of interest situations to (i) the Nominating and Corporate Governance Committee or the Audit Committee, in the case of directors and officers, and (ii) to their supervisor, in the case of employees, who will then seek authorization from our compliance officer. Our Board has authority to approve related party transactions in lieu of the Audit Committee.

Provision of Legal Services by Allen and Gledhill LLP (“A&G”)

We periodically engage the services of attorneys at A&G to provide advice on matters of Singapore law. Lucien Y. K. Wong, who served as one of our directors from April 2016 to December 2016, was Chairman and a Senior Partner of A&G until December 2016. During Fiscal Year 2016, we incurred legal fees with A&G of approximately $625,232, primarily for legal advice and services in relation to the Acquisition. These services are provided in the ordinary course, on an arm’s length by various attorneys within A&G. The Audit Committee pre-approved, on a prospective basis, the provision of legal services by A&G to us of less than $1,000,000 individually or in the aggregate in any fiscal year.

Honda Center Arena Suite Lease Agreement

Our subsidiary, BRCM, was party to a lease agreement entered into prior to the Acquisition for the use of a luxury suite at the Honda Center in Anaheim, California. The suite is owned by H&S Ventures LLC and Anaheim Ducks Hockey Club, LLC, both of which are controlled directly or indirectly by Dr. Samueli. The Audit Committee pre-approved, on a prospective basis, the aggregate fees of approximately $175,000 payable under the lease, which expired in June 2016.

Other Relationships

From time to time in the ordinary course of business, on an arm’s length basis, we purchase from, and/or sell to, certain entities where one of our directors also serves or served as a director of that entity. During Fiscal Year 2016 these entities were Symantec Corporation, as well as SMART Modular Technologies (Global Holdings), Inc., on whose boards of directors Mr. Hao serves as a director, and TiVo Corporation and SIRUS XM Holdings, Inc., on whose boards of directors Mr. Hartenstein serves as a director.

 

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From time to time, at our request, representatives of Silver Lake, where Mr. Hao is a Managing Partner and Managing Director, have provided advice and assistance to us in connection with obtaining debt financing for acquisition transactions, given their extensive experience with debt financing of this nature. Silver Lake did not receive any compensation for the provision of such services.

Silver Lake portfolio companies have from time to time entered into, and may continue to enter into, arrangements with us to purchase our products or to sell products to us in the ordinary course of their and our business, and on an arms’ length basis and such purchases may be substantial.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under the securities laws of the United States, our directors, executive officers and any persons holding more than 10 percent of our ordinary shares (“Reporting Persons”) are required to report, to the SEC and to the Nasdaq Stock Market, their initial ownership of our ordinary shares and other equity securities and any subsequent changes in that ownership, and to furnish us with copies of all these reports they file. As a matter of practice, an administrative staff member assists our executive officers and directors in preparing initial ownership reports and reporting ownership changes, and typically files these reports on their behalf.

Based solely on our review of the copies of such reports received by us or written representations from the Reporting Persons, we believe that during Fiscal Year 2016, all Reporting Persons complied with all applicable filing requirements except as follows. Due to the timing of receipt or consolidation of share information related to the Acquisition or, in one instance, administrative oversight, (i) a Form 4 filed for Dr. Samueli omitted to report the assumption by us in the Acquisition of certain outstanding RSUs, (ii) a Form 4 for Dr. Samueli was not timely filed to report the mandatory sale of sufficient shares to cover withholding taxes due upon vesting of certain RSUs assumed in the Acquisition, and (iii) a Form 4 for Mr. Hao was not timely filed reflecting ordinary shares issued to Mr. Hao in exchange for his shares of common stock in BRCM in connection with the Acquisition. Once the omissions were discovered, filings were promptly made or amended to reflect these holdings.

HOUSEHOLDING OF PROXY MATERIALS

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy materials and our 2016 Form 10-K may have been sent to multiple shareholders in your household, unless we have received contrary instructions from one or more shareholders in your household. We will promptly deliver a separate copy of either document to you if you request one by writing or calling as follows: c/o Avago Technologies U.S. Inc., Attn: Investor Relations, 1320 Ridder Park Drive, San Jose, California 95131, U.S.A., Telephone: +1 (408) 433-8000. If you want to receive separate copies of our proxy materials or annual reports in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address and phone number.

SHAREHOLDER PROPOSALS FOR THE 2018 ANNUAL GENERAL MEETING

Pursuant to Rule 14a-8 under the Exchange Act, some shareholder proposals may be eligible for inclusion in our 2018 proxy statement. Any such shareholder proposals must be submitted, along with proof of ownership of our ordinary shares in accordance with Rule 14a-8(b)(2), to us at c/o Avago Technologies U.S. Inc., Attention: General Counsel, 1320 Ridder Park Drive, San Jose, CA 95131, U.S.A. We must receive all submissions no later than October 20, 2017. We strongly encourage any shareholder interested in submitting a proposal to contact our General Counsel in advance of this deadline to discuss the proposal, and shareholders may want to consult knowledgeable counsel with regard to the detailed requirements of applicable securities laws. Submitting a shareholder proposal does not guarantee that we will include it in our proxy statement. Our Board will review any shareholder proposals. These shareholder proposals may be included in our proxy statement for the 2018 AGM so long as they are provided to us on a timely basis and satisfy the other conditions set forth in applicable rules and regulations promulgated by the SEC. Shareholder proposals are also subject to the

 

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requirements of the Singapore Companies Act, as described in the following paragraph. The proxies designated by us will have discretionary authority to vote on any matter properly presented by a shareholder for consideration at the 2018 AGM unless notice of such proposal is received by the applicable deadlines prescribed by the Singapore Companies Act.

In addition, under Section 183 of the Singapore Companies Act, only registered shareholders representing not less than 5% of the total voting rights or registered shareholders representing not fewer than 100 registered shareholders having an average paid up sum of at least $500 Singapore Dollars each may, at their expense, request that we include and give notice of their proposal for the 2018 AGM. Subject to satisfaction of the requirements of Section 183 of the Singapore Companies Act, any such requisition must be signed by all the shareholders making the request and be deposited at our registered office in Singapore, 1 Yishun Avenue 7, Singapore 768923, at least six weeks prior to the date of the 2018 AGM in the case of a request requiring notice of a resolution, or at least one week prior to the date of the 2018 AGM in the case of any other request.

Under our Constitution, no person other than a director retiring at a general meeting is eligible for appointment as a director at any general meeting of shareholders, without the recommendation of our Board for election, unless (a) in the case of a shareholder or shareholders who in aggregate hold(s) more than 50% of the total number of our issued and paid-up shares (excluding treasury shares), not less than 10 days, or (b) in the case of a shareholder or shareholders who in aggregate hold(s) more than five percent of the total number of our issued and paid-up shares (excluding treasury shares), not less than 120 days, before the date of the notice provided to shareholders in connection with the general meeting, a written notice signed by such shareholder or shareholders (other than the person to be proposed for appointment) who (i) are qualified to attend and vote at the meeting for which such notice is given, and (ii) have held shares representing the prescribed threshold in (a) or (b) above, for a continuous period of at least one year prior to the date on which such notice is given, is lodged at our registered office in Singapore. Such a notice must also include the consent to serve as a director of the person nominated.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

We incorporate by reference the following sections of our 2016 Form 10-K:

 

    Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

 

    Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”; and

 

    Item 8, “Financial Statements and Supplementary Data.”

The information contained under the captions “Compensation Committee Report” and “Audit Committee Report” in this Proxy Statement shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings under the U.S. Securities Act of 1933, as amended, or under the Exchange Act, or be subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing.

SINGAPORE STATUTORY FINANCIAL STATEMENTS

Our Singapore audited financial statements for our fiscal year ended October 30, 2016, prepared in conformity with the provisions of the laws of Singapore Act and United States generally accepted accounting principles, together with the accompanying directors’ statement (together, the “Singapore Statutory Financial Statements”) and the auditors’ reports thereon are required under Singapore law to be provided to shareholders for discussion (but not approval) at the 2017 AGM, and have therefore been provided as Appendix A to this Proxy Statement solely to satisfy this requirement.

Neither the Singapore Statutory Financial Statements nor the auditors’ report thereon shall be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings under the U.S. Securities Act of 1933, as amended, or under the Exchange Act, or be subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing.

 

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OTHER MATTERS

Our management does not know of any matters to be presented at the 2017 AGM other than those set forth herein and in the Notice accompanying this Proxy Statement. If any other matters are properly presented for a vote, the enclosed proxy confers discretionary authority to the individuals named as proxies to vote the shares represented by proxy, as to those matters.

Accompanying this Proxy Statement is our 2016 Form 10-K. Copies of this Proxy Statement and the 2016 Form 10-K, as filed with the SEC, are also available free of charge on our website at www.broadcom.com or you can request a copy free of charge by calling Investor Relations at +1 (408) 433-8000 or toll-free at (877) 673-9442 (within the United States).

Upon request, we will furnish without charge to each person to whom this Proxy Statement is delivered a copy of any exhibit listed in our 2016 Form 10-K. You may request a copy of this information, at no cost, by writing or telephoning us at:

Broadcom Limited

Attn: Investor Relations

c/o Avago Technologies U.S. Inc.

1320 Ridder Park Dive

San Jose, California 95131 U.S.A.

Telephone: (877) 673-9442 (toll-free within the United States) or +1 (408) 433-8000

Email: investor.relations@broadcom.com

To ensure timely delivery of any materials requested prior to the date of the 2017 AGM, you should request such materials no later than March 22, 2017.

By Order of the Board,

 

 

LOGO

Hock E. Tan

Director, Chief Executive Officer and President

February 17, 2017

San Jose, California

 

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APPENDIX A

SINGAPORE STATUTORY FINANCIAL STATEMENTS

BROADCOM LIMITED

(Incorporated in Singapore)

ANNUAL REPORT

For the financial year ended October 30, 2016

INDEX

 

     Page  

Directors’ Statement

     A-2   

Independent Auditor’s Report

     A-12   

Consolidated Statement of Operations

     A-13   

Consolidated Statement of Comprehensive Income

     A-14   

Balance Sheet

     A-15   

Consolidated Statement of Changes in Equity

     A-16   

Consolidated Statement of Cash Flows

     A-18   

Notes to the Financial Statements

     A-19   

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

The directors present their statement to the members together with the audited consolidated financial statements of Broadcom Limited and its subsidiaries (“we” or the “Group”) for the financial year ended October 30, 2016 and the unconsolidated balance sheet of Broadcom Limited (the “Company”) as of October 30, 2016. Broadcom Limited is the successor to Avago Technologies Limited (“Avago”). On February 1, 2016, pursuant to an Agreement and Plan of Merger dated as of May 28, 2015, Broadcom, Avago, Broadcom Corporation (“BRCM”), Broadcom Cayman L.P. and certain other parties completed various transactions, including a scheme of arrangement under Singapore law between Avago and Broadcom (the “Avago Scheme”). Pursuant to the Avago Scheme, all issued ordinary shares of Avago were exchanged on a one-for-one basis for newly issued ordinary shares of Broadcom. Immediately following the consummation of the Avago Scheme, two subsidiaries of Broadcom merged with and into BRCM with BRCM as the surviving corporation of each such merger (the “Broadcom Merger”). Following the Avago Scheme and the Broadcom Merger, Broadcom Limited became the ultimate parent holding company of Avago and BRCM. Information contained in this statement for the period prior to February 1, 2016, relates to our predecessor, Avago.

In the opinion of the directors,

 

(a)

the balance sheet of the Company and the consolidated financial statements of the Group are drawn up so as to give a true and fair view of the financial positions of the Company and of the Group as of October 30, 2016 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended; and

 

(b)

at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

Directors

The directors of the Company in office at the date of this report are as follows. All directors listed below, except for Henry Samueli, Ph.D., Eddy W. Hartenstein and Check Kian Low, were directors of Avago and became directors of the Broadcom Limited on February 1, 2016 in connection with the completion of the Avago Scheme. Dr. Samueli and Mr. Hartenstein were former directors of BRCM. Mr. Low was appointed to the Company’s board of directors (the “Board”) effective December 15, 2016.

James V. Diller

Lewis C. Eggebrecht

Kenneth Y. Hao

Eddy W. Hartenstein

Check Kian Low

Donald Macleod

Peter J. Marks

Justine F. Page

Henry Samueli, Ph.D.

Hock E. Tan

 

 

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

 

Arrangements to Enable Directors to Acquire Shares and Debentures

Neither at the end of, nor at any time during, the financial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than as disclosed under “Equity Awards”.

Directors’ Interests in Shares or Debentures

 

(a)

According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or its related corporations, except as follows:

 

    

Holdings in which

director is deemed

to have an Interest

 
    

As of

October 30,

2016

   

As of

November 1,

2015 or date

of appointment,

if later

 

Broadcom Limited

    

(No. of Ordinary Shares)

    

James V. Diller

     126,589 (1)      125,026   

Lewis C. Eggebrecht

     4,913 (2)      3,206   

Kenneth Y. Hao

     10,713,355 (3)      59,964   

Eddy W. Hartenstein

     31,648 (4)        

Donald Macleod

     51,527        49,964   

Peter J. Marks

     5,216        2,608   

Justine F. Page

     2,726        1,741   

Henry Samueli, Ph.D.

     30,163        -   

Hock E. Tan

     106,625        96,590   

Lucien Y. K. Wong(5)

              

Broadcom Limited

    

(Share Options, RSUs* and Convertible Securities)

    

James V. Diller

     16,402 (6)      16,640   

Lewis C. Eggebrecht

     11,948 (7)      18,775   

Kenneth Y. Hao

     24,032 (8)      31,456   

Eddy W. Hartenstein

     1,587          

Donald Macleod

     6,548 (9)      6,786   

Peter J. Marks

     26,083 (10)      28,691   

Justine F. Page

     16,402 (11)      16,640   

Henry Samueli, Ph.D.

     9,714,600 (12)        

Hock E. Tan

     2,889,999 (13)      2,988,019   

Lucien Y. K. Wong

     1,325 (14)        

 

  *

Restricted Share Units

 

 

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

 

Directors’ Interests in Shares or Debentures (continued)

 

(a)

(continued)

 

(1)

   Includes 120,000 shares held in family trusts of which Mr. Diller is a trustee

(2)

   Includes 1,500 shares held in a family trust of which Mr. Eggebrecht is a trustee.

(3)

  

(i)    Pursuant to Mr. Hao’s arrangement with Silver Lake Partners with respect to director compensation, upon the sale of shares received by him from the exercise of options or the vesting of RSUs, the proceeds of such sale are expected to be remitted to Silver Lake. Accordingly, Mr. Hao disclaims beneficial ownership of such shares, except for (x) 3,342 shares, which are held in a family trust of which Mr. Hao is a trustee, of which 57 shares were acquired upon conversion of BRCM common stock into the Company’s ordinary shares in connection with our acquisition of BRCM on February 1, 2016, and (y) 18 shares held by Mr. Hao’s family limited partnership acquired upon conversion of BRCM common stock into the Company’s ordinary shares in connection with our acquisition of BRCM on February 1, 2016.

  

 

(ii)   Also includes (x) 10,441,819 shares issued held by SLP Argo I Ltd. (“Argo I”) and (y) 202,748 shares held by SLP Argo II Ltd. (“Argo II” and together with Argo I, the “Silver Lake Entities”). The Silver Lake Entities are affiliates of Silver Lake Partners, of which Mr. Hao is a Managing Partner and Managing Director. Silver Lake Partners IV Cayman (AIV II), L.P. (or the “Main Fund”) is the sole shareholder of Argo I. Silver Lake Technology Investors IV Cayman, L.P. (or the “Side Fund”) is the sole shareholder of Argo II. Silver Lake Technology Associates IV Cayman, L.P. (or the “Lower GP”) is general partner of each of the Main Fund and the Side Fund. Silver Lake (Offshore) AIV GP IV, Ltd. (or the “Upper GP”) is the general partner of the Lower GP. Michael Bingle, James Davidson, Sahil Desai, Mark Gillett, Kenneth Hao, Yolande Jun, Karen King, Gregory Mondre, Joseph Osnoss, Andrew Schader and Andrew Wagner are directors of the Upper GP. Each of them, and each of the Main Fund, the Side Fund, the Lower GP and the Upper GP, disclaims beneficial ownership of the shares, except to the extent of their respective pecuniary interest therein. Mr. Hao disclaims beneficial ownership of any shares beneficially owned by the Silver Lake Entities, except to the extent of his pecuniary interest therein.

 

  (4)

Represents shares acquired upon conversion of BRCM common stock into the Company’s ordinary shares in connection with our acquisition of BRCM on February 1, 2016.

  (5)

Mr. Wong was elected to the Board at the 2016 Annual General Meeting of Shareholders on April 6, 2016 and resigned from the Board on December 15, 2016...

  (6) 

Mr. Diller has the right to acquire 15,077 of these shares as of October 30, 2016 upon the exercise of share options.

  (7) 

Mr. Eggebrecht has the right to acquire 5,120 of these shares as of October 30, 2016 upon the exercise of share options.

  (8) 

Includes 22,707 shares Mr. Hao has the right to acquire as of October 30, 2016 upon the exercise of share options. Pursuant to Mr. Hao’s arrangement with Silver Lake with respect to director compensation in the form of securities received by him in his capacity as a representative of Silver Lake, he is required to remit the proceeds from the sale of such securities to Silver Lake. Accordingly, Mr. Hao disclaims beneficial ownership of all but 9,854 of these shares.

  (9) 

Mr. Macleod has the right to acquire 5,223 of these shares as of October 30, 2016 upon the exercise of share options.

  (10) 

Mr. Marks has the right to acquire (i) 15,649 of these shares as of October 30, 2016 upon the exercise of share options and (ii) an additional 7,825 of these shares upon the exercise of share options and 2,609 of these shares upon vesting of RSUs within 60 days after October 30, 2016.

  (11) 

Ms. Page has the right to acquire 15,077 of these shares as of October 30, 2016 upon the exercise of share options.

(12)

  

(i)    Dr. Samueli has the right to acquire 20,715 of these shares upon the vesting of RSUs within 60 days after October 30, 2016.

  

(ii)   Also includes (w) 5,937,658 shares that may be issued upon exchange of restricted exchangeable partnership units in Broadcom Cayman L.P., a subsidiary of the Company (“REUs”), held by HS Portfolio L.P.,

 

 

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

 

Directors’ Interests in Shares or Debentures (continued)

 

(a)

(continued)

 

 

(x) 399,918 shares that may be issued upon exchange of REUs held by HS Management L.P., (y) 459,690 share that may be issued upon exchange of REUs held by H&S Portfolio II L.P., and (z) 2,722,869 shares that may be issue upon exchange of REUs held by H&S Investments I L.P.

 

  (13) 

Mr. Tan has the right to acquire 1,772,916 of these shares as of October 30, 2016 upon the exercise of share options and 6,250 of these shares upon the vesting of RSUs within 60 days after October 30, 2016.

  (14) 

This award was cancelled on December 15, 2016, without vesting, upon Mr. Wong’s resignation from the Company’s board of directors.

 

(b)

According to the register of directors’ shareholdings, directors holding office at the end of the financial year had interests in options to subscribe for ordinary shares of the Company (as set forth under “Share Options and RSUs Outstanding” in (a) above) granted pursuant to the Equity Incentive Plans as set out below under the caption “Equity Awards”.

The following table shows for the financial year ended October 30, 2016, certain information regarding options and RSUs granted to, and held at the end of the financial year by the Company’s directors.

 

    

Individual Grant

 

Name

  

Number of

remaining

securities underlying

Options outstanding

as at end of

financial year

   

% of Total

equity awards

outstanding

as of end of

financial year

    

Exercise or

base price

per share

    

Expiration

date

 
                  U.S.$         

James V. Diller

     9,854 (1)      0.06         35.38         04/09/2018   
     5,223 (1)      0.03         62.47         04/08/2019   

Lewis C. Eggebrecht

     10,241 (2)      0.06         62.47         04/08/2019   

Kenneth Y. Hao

     7,630 (1)      0.04         37.41         04/03/2017   
     9,854 (1)      0.06         35.38         04/09/2018   
     5,223 (1)      0.03         62.47         04/08/2019   

Donald Macleod

     5,223 (1)      0.03         62.47         04/08/2019   

Peter J. Marks

     23,474 (2)      0.14         46.60         12/09/2018   

Justine F. Page

     9,854 (1)      0.06         35.38         04/09/2018   
     5,223 (1)      0.03         62.47         04/08/2019   

Hock E. Tan

     200,000 (1)      1.18         32.39         03/07/2018   
     131,250 (3)      0.77         35.45         03/11/2020   
     1,547,916 (4)      9.10         38.99         09/12/2020   
     750,000 (4)      4.41         52.65         01/01/2021   

 

 

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

 

Directors’ Interests in Shares or Debentures (continued)

 

(b)

(continued)

 

Name    Grant date     

Number of

securities underlying

RSUs

outstanding as at end
of financial year

 

% of Total equity

awards outstanding

as at end of

financial year

James V. Diller

     04/06/2016           1,325(5)   0.01

Lewis C. Eggebrecht

     04/09/2014           1,707(6)   0.01

Kenneth Y. Hao

     04/06/2016           1,325(5)   0.01

Eddy W. Hartenstein

     04/06/2016           1,325(5)   0.01
     02/01/2016              262(5)   0.00

Donald Macleod

     04/06/2016           1,325(5)   0.01

Peter J. Mark

     12/10/2013           2,609(6)   0.01

Justine F. Page

     04/06/2016           1,325(5)   0.01

Henry Samueli, Ph.D.

     02/14/2013           9,180(7)   0.05
     02/20/2014         34,824(8)   0.20
     02/19/2015         61,353(9)   0.36
     01/25/2016         58,609(10)   0.34
     01/25/2016           7,323(11)   0.04
     03/15/2016         11,588(12)   0.07
     03/15/2016         11,588(13)   0.07

Hock E. Tan

     11/26/2012           6,250(14)   0.04
     03/12/2013         14,583(12)   0.09
     06/15/2016       240,000(15)   1.41

Lucien Y. K. Wong

     04/06/2016           1,325(5)   0.01

 

  (1)

Options vested and exercisable as of October 30, 2016.

  (2)

Option vests one-third annually over three years on the anniversaries of the grant date, subject to the director’s continued service with the Company. Two-thirds of this option was vested as of October 30, 2016.

  (3) 

This performance-based option vests over four years, with 25% vesting on each anniversary of the date of grant, subject to Mr. Tan’s continued employment with the Group; however, the option is not exercisable until the date on which the average of the closing prices of the Company’s ordinary shares (as reported on the Nasdaq), over a 10 consecutive trading day period is equal to or greater than 120% of the exercise price of the option. The exercisability condition for this option has been met.

  (4) 

This performance-based option vests at the rate of 25% the shares subject thereto on each anniversary of the grant date, subject to the executive’s continued employment with the Company. This performance share option will only become exercisable as to any tranche of 20% of the shares covered by the option if the price target applicable to that target is met. In order for a price target to be met, the average of the closing prices of the Company’s ordinary shares, over a 30 consecutive trading day period must be equal to or greater than the price target. The price targets range from $50.00 per share to $75.00 per share. All price targets for this option have been met.

  (5) 

Granted during the financial year ended October 30, 2016 and vest in full on the first anniversary of the grant date, subject to the director’s continued service with the Company on the vesting date.

  (6) 

This RSU vests one-third annually over three years, subject to the director’s continued service with the Company on the vesting dates.

  (7)

This RSU was assumed in connection with the acquisition of BRCM on 2/1/2016 and was issued under the 2012 BRCM Plan. This RSU vests in equal quarterly installments and such that the RSU vested in full on February 5, 2017, subject to the executive’s continued employment with us.

  (8)

This RSU was assumed in connection with the acquisition of BRCM on 2/1/2016 and was issued under the 2012 BRCM Plan. This RSU vests in equal quarterly installments and such that the RSU vests in full on February 5, 2018, subject to the executive’s continued employment with us.

 

 

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

 

Directors’ Interests in Shares or Debentures (continued)

 

(b)

(continued)

 

  (9)

This RSU was assumed in connection with the acquisition of BRCM on 2/1/2016 and was issued under the 2012 BRCM Plan. This RSU vests in equal quarterly installments and such that the RSU vests in full on February 5, 2019, subject to the executive’s continued employment with us.

  (10)

This RSU was assumed in connection with the acquisition of BRCM on 2/1/2016 and was issued under the 2012 BRCM Plan. This RSU vests in equal quarterly installments and such that the RSU vests in full on February 5, 2020, subject to the executive’s continued employment with us.

  (11) 

This RSU was assumed in connection with the acquisition of BRCM on 2/1/2016 and was issued under the 2012 BRCM Plan. This RSU vests in equal quarterly installments and such that the RSU vests in full on February 5, 2021, subject to the executive’s continued employment with us.

  (12) 

This RSU vests in four annual installments of 25% each, commencing on approximately the first anniversary of the grant date, subject to the executive’s continued employment with the Company.

  (13)

This performance-based RSU is scheduled to vest at the rate of 25% a year, subject to the executive’s continued employment with us and satisfaction of the relevant performance criteria. No shares will vest until the average closing price per share of our ordinary shares over a 20 consecutive trading day period is equal to or greater than 120% of the fair market value of an ordinary share on the grant date. If this share price contingency is met on or prior to the fourth anniversary of the grant date, then all of the RSUs have the potential to vest (assuming continued service) and any RSUs that would have vested on a scheduled vesting date occurring before the date on which the share price contingency is met will vest on or shortly after the date the share price contingency is met. If the share price contingency is not met by the fourth anniversary of the grant date or the time the executive ceases to provide services to us, the RSUs will not vest and the award will expire or immediately terminate, as applicable. The vesting condition for this RSU had not been met as of the end of the financial year.

  (14)

This RSU vests in two installments of 50% each on approximately the third and fourth anniversaries of the grant date, subject to the executive’s continued service with the Company.

  (15)

This performance-based RSUs shall vest in full on the third anniversary of grant date subject to continued employment with us through such date and subject to the achievement of specified performance goals over the three-year period ending on, and including, the vesting date (the “Performance Period”), as determined by the Board within 60 days following the end of Performance Period. The Board shall determine the achievement of two factors (i) the relative total shareholder return of the Company compared to the S&P 500 Index over the Performance Period and (ii) our share price growth over the Performance Period, based on 90-day trailing average prices at the start and end of the Performance Period. Based upon the level of performance achieved, a maximum of 240,000 shares may be awarded under this grant. If the minimum performance criterion is not met, no shares will be issued under this grant and the grant will be cancelled.

Equity Awards

Summary of Equity Plans

The Company has four equity compensation plans that have been approved by its shareholders: the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries (the “Executive Plan”), the Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries (the “Senior Management Plan” and together with the Executive Plan, the “Legacy Plans”), the Avago Technologies Limited 2009 Equity Incentive Plan (the “2009 Plan”) and Avago Technologies Employee Share Purchase Plan (the “ESPP”). We ceased to make grants under the Legacy Plans in August 2009.

As at October 30, 2016, the Company had two equity compensation plans that had not been approved by the Company’s shareholders and pursuant to which it may continue to grant additional equity awards: the

 

 

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

 

Equity Awards (continued)

 

Summary of Equity Plans (continued)

 

LSI 2003 Equity Incentive Plan (the “2003 Plan”), which was assumed in connection with the acquisition of LSI Corporation in May 2014, and the Broadcom Corporation 2012 Stock Incentive Plan (the “2012 Plan”, and together with the 2009 Plan, the 2003 Plan and the Legacy Plans, the “Equity Incentive Plans”), which was assumed in connection with our acquisition of BRCM in February 2016. The Company has also assumed certain outstanding equity awards granted under the 2003 Plan and the 2012 Plan and under other equity compensation plans or agreements in connection with the acquisition of LSI and BRCM and other companies that originally granted those awards.

Shares Available for Issuance Under the Equity Incentive Plans and the ESPP.

2009 Plan: The 2009 Plan initially reserved for issuance 20 million ordinary shares, subject to automatic annual increases equal to the least of (a) 6 million shares, (b) 3% of the ordinary shares outstanding on the last day of the immediately preceding financial year and (c) such smaller number of ordinary shares as determined by the Board. To the extent that an outstanding award under the 2009 Plan terminates, expires or lapses for any reason, any shares subject to the award at such time will be available for future grants under the 2009 Plan. In addition, any outstanding share options terminated, cancelled or forfeited under the Legacy Plans after July 27, 2009 also become available for issuance under the 2009 Plan. However, no more than an aggregate of 90 million ordinary shares may be issued upon the exercise or vesting of equity awards issued under the 2009 Plan. As of October 30, 2016, 15.4 million ordinary shares were available for issuance under the 2009 Plan

2003 Plan: As at May 6, 2014, the date the plan was assumed, 6.7 million ordinary shares were reserved for issuance under the 2003 Plan, of which 3 million shares were available for RSU awards. To the extent that an outstanding award under the 2003 Plan terminates, expires or lapses for any reason, any shares subject to the award at such time will be available for future grants under the 2003 Plan. As of October 30, 2016, 4.4 million shares were available for issuance under to the 2003 Plan, of which 2.1 million shares were available for issuance for RSU awards.

2012 Plan: As at February 1, 2016, the date the plan was assumed, 79.3 million ordinary shares were reserved for issuance under the 2012 Plan. The 2012 Plan provides for an automatic annual increase in the number of shares available for issuance of 12.2 million shares on the first trading day of January each calendar year. To the extent that an outstanding award under the 2012 Plan terminates, expires or lapses for any reason, any shares subject to the award at such time will be available for future grants under the 2012 Plan. However, no more than an aggregate of 100 million ordinary shares may be issued upon the exercise or vesting of equity awards issued under the 2012 Plan. As of October 30, 2016, 73.3 million ordinary shares were available for issuance under the 2012 Plan.

ESPP: The ESPP initially reserved for issuance 8 million ordinary shares, subject to automatic annual increases in the aggregate number of shares available for issuance under the ESPP on the first day each fiscal year by the least of (i) 2 million shares, (ii) 1% of the ordinary shares outstanding on the last day of the immediately preceding fiscal year and (iii) such smaller number of shares as determined by the Board. However, no more than an aggregate of 24 million ordinary shares may be issued under the ESPP. As of October 30, 2016, 8.4 million shares were available for issuance under the ESPP.

 

 

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

 

Equity Awards (continued)

 

Summary of Equity Plans (continued)

 

Legacy Plans: The Company ceased to make grants under the Legacy Plans in August 2009.

Awards, Eligibility and Terms. Options, RSUs (which represent the right to receive one ordinary share per RSU upon the vesting thereof, for no additional consideration) and various other share-based and cash-based awards may be granted under the 2009 Plan to individuals who are then the Company’s officers, employees or consultants or who are the officers, employees or consultants of certain of the Company’s subsidiaries. Such awards also may be granted to non-employee directors of the Company. Only employees may be granted incentive stock options (“ISOs”). The Company may also grant options, RSUs and other awards under the 2003 Plan and 2012 Plan to former employees of LSI or BRCM, respectively, and any other employees who were not employees of the Company or its subsidiaries at the time of the acquisition of LSI or BRCM, respectively.

Options issued to employees generally vest over a four-year period from the date of grant, subject to continued service with the Company or its subsidiaries on each vesting date, and are granted with an exercise price equal to the fair market value on the date of grant. Options typically expire between seven and 10 years after the date of grant, other than options granted to non-employees, which expire no more than five years after the date of grant. The Company has not issued options since March 2015. RSUs issued to employees generally vest over four years, subject to continued service with the Company or its subsidiaries on each vesting date. The vesting of a portion of the options and RSUs issued to members of senior management may also be made subject to the satisfaction of specified performance conditions, and if such performance condition is not met prior to the expiration of the award or, in the case of RSUs the last scheduled vesting date, no shares will be issued pursuant to that award.

The ESPP allows eligible employees of the Company and its participating subsidiaries to purchase ordinary shares at semi-annual intervals (March 15 and September 15 of each year), with their accumulated payroll deductions, at a 15% discounted price per ordinary share, based on the fair market value per ordinary share at the beginning or end of the six-month offering period, whichever is lower (the “Purchase Price”). The number of ordinary shares subject to the option can only be determined at the end of each six-month offering period based on the accumulated payroll deductions from each participant as well as Purchase Price of the ordinary shares.

As of October 30, 2016, options to acquire 15 million ordinary shares at exercise prices ranging between US$6.48 to US$125.90 per ordinary share with expiration dates ranging between October 31, 2016 and April 14, 2022) were outstanding, and an aggregate of 17 million RSUs were outstanding under Equity Incentive Plans. During the financial years ended October 30, 2016 and November 1, 2015, 0.4 million and 0.2 million shares, respectively, were purchased under the ESPP.

Administration.

The Compensation Committee of the Board administers our Equity Incentive Plans and the ESPP. Subject to the terms and conditions of the Equity Incentive Plans and the ESPP, the Compensation Committee has the exclusive authority to select the persons to whom awards are to be made, to determine the number of shares

 

 

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

 

Equity Awards (continued)

 

Summary of Equity Plans (continued)

 

to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the such plan. The Compensation Committee is also generally authorized to adopt, amend or rescind rules relating to administration of the Equity Incentive Plans and the ESPP. The Board may at any time remove the Compensation Committee as the administrator and re-vest in itself the authority to administer the Equity Incentive Plans and the ESPP. The full Board administers the 2009 Plan with respect to awards to non-employee directors and with respect to our President and Chief Executive Officer.

A summary of award activities under the Equity Incentive Plans is as set out below (in millions, except per share amounts):

 

     Ordinary Shares Underlying
Awards Outstanding
 
    

Number

outstanding

   

Weighted-

average

exercise price

per share ($)

 

Balance as of November 1, 2015

     21        47.92   

Exercised

     (5     44.35   

Cancelled

     (1     53.56   
        

Balance as of October 30, 2016

     15        48.77   
                

Balance as of November 2, 2014

     29        44.97   

Granted

     1        95.97   

Exercised

     (7     34.40   

Cancelled

     (2     65.32   
                

Balance as of November 1, 2015

     21        47.92   
                

 

 

 

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BROADCOM LIMITED

DIRECTORS’ STATEMENT

For the financial year ended October 30, 2016

 

 

Equity Awards Outstanding

A summary of RSU activity related to our Equity Incentive Plans for the financial year ended October 30, 2016 is as follows (in millions, except years and per share amounts):

 

           Group         
     RSU Awards Outstanding  
    

Number

Outstanding

   

Weighted-

Average

Grant Date

Fair Market

Value

    

Weighted-

Average

Remaining

Contractual

Life (in years)

 

Balance as of November 1, 2015

     5        95.17      

Assumed in Broadcom Merger

     6        135.58      

Granted

     12        138.45      

Vested

     (4     114.49      

Forfeited

     (2     130.30      
             

Balance as of October 30, 2016

     17        130.71         1.65   
             

Balance as of November 2, 2014

     4        48.82      

Granted

     3        119.30      

Vested

     (1     57.29      

Forfeited

     (1     79.51      
             

Balance as of November 1, 2015

     5        95.17         1.70   
             

Independent auditor

The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.

On behalf of the directors

 

/s/ James V. Diller

    

/s/ Hock E. Tan

James V. Diller

Director

    

Hock E. Tan

Director

25 January 2017

 

 

 

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BROADCOM LIMITED

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Broadcom Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the consolidated balance sheet of the Group and the balance sheet of the Company as of October 30, 2016 and the related consolidated statement of operations, statement of comprehensive income, statement of shareholder’s equity and statement of cash flows of the Group for the financial year then ended.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the provisions of the Singapore Companies Act (the “Act”) and accounting principles generally accepted in the United States of America, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition; and transactions are properly authorized and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.

Auditor’s Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group and of the Company as of October 30, 2016 and the financial performance and their cash flows for the year then ended, in accordance with the provisions of the Act and accounting principles generally accepted in the United States of America.

Report on other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Public Accountants and Chartered Accountants

Singapore, 27 January 2017

 

 

 

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BROADCOM LIMITED

CONSOLIDATED STATEMENT OF OPERATIONS

For the financial year ended October 30, 2016

 

 

 

    

October 30,
2016

(In millions,
except per
share data)

    

November 1,
2015

(In millions,
except per
share data)

 

Net revenue

     13,240               6,824        
  

 

 

 

Costs of products sold:

     

Cost of products sold

     5,295               2,750        

Purchase accounting effect on inventory

     1,185               30        

Amortization of acquisition-related intangible assets

     763               484        

Restructuring charges

     57               7        
  

 

 

 

Total cost of products sold

     7,300               3,271        
  

 

 

 

Gross margin

     5,940               3,553        
  

 

 

 

Research and development

     2,674               1,049        

Selling, general and administrative

     806               486        

Amortization of acquisition-related intangible assets

     1,873               249        

Restructuring, impairment and disposal charges

     996               137        
  

 

 

 

Total operating expenses

     6,349               1,921        
  

 

 

 

Operating (loss) income

     (409)              1,632        

Interest expense

     (585)              (191)       

Loss on extinguishment of debt

     (123)              (10)       

Other income, net

     10               36        
  

 

 

 

(Loss) Income from continuing operations before income taxes

     (1,107)              1,467        

Provision for income taxes

     642               76        
  

 

 

 

(Loss) Income from continuing operations

     (1,749)              1,391        

Loss from discontinued operations, net of income taxes

     (112)              (27)       
  

 

 

 

Net (loss) income

     (1,861)              1,364        

Net loss attributable to noncontrolling interest

     (122)              -        
  

 

 

 

Net (loss) income attributable to ordinary shares

     (1,739)              1,364        
  

 

 

 

Basic (loss) income per share attributable to ordinary shares:

     

(Loss) income per share from continuing operations

     (4.46)              5.27        

Loss per share from discontinued operations

     (0.29)              (0.10)       
  

 

 

 

Net (loss) income per share

     (4.75)              5.17        
  

 

 

 

Diluted (loss) income per share attributable to ordinary shares:

     

(Loss) income per share from continuing operations

     (4.57)              4.95        

Loss per share from discontinued operations

     (0.29)              (0.10)       
  

 

 

 

Net (loss) income per share

     (4.86)              4.85        
  

 

 

 

Weighted-average shares:

     

Basic

     366               264        

Diluted

     383               281        
  

 

 

 

Cash dividends declared and paid per share

     1.94               1.55        
  

 

 

 

 

 

 The accompanying notes form an integral part of these financial statements.

 

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Table of Contents

BROADCOM LIMITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the financial year ended October 30, 2016

 

 

 

   

October 30,
2016

(In millions)

 

   

November 1,
2015

(In millions)

 

 

Net (loss) income

    (1,861)             1,364        
 

 

 

 

Other comprehensive loss, net of tax:

   

Unrealised loss on defined benefit pension plans and post-retirement benefit plans

    (65)             (24)       

Reclassification to net income

    4              1        

Other comprehensive loss

    (61)             (23)       
 

 

 

 

Comprehensive (loss) income

    (1,922)             1,341        

Comprehensive loss attributable to noncontrolling interest

    (122)             -        
 

 

 

 

Comprehensive (loss) income attributable to ordinary shares

    (1,800)             1,341        
 

 

 

 

 

 

 The accompanying notes form an integral part of these financial statements.

 

A-14


Table of Contents

BROADCOM LIMITED

BALANCE SHEETS

As of October 30, 2016

 

 

 

    

Group

   

Company

 
     October 30,
2016
   

November 1,

2015

    October 30,
2016
   

November 1,

2015

 
     (In millions)     (In millions)     (In millions)     (In millions)  

ASSETS

        

Cash and cash equivalents

     3,097        1,822        53        20   

Trade accounts receivable, net

     2,181        1,019        -        -   

Inventory

     1,400        524        -        -   

Other current assets

     447        394        42        586   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     7, 125        3,759        95        606   

Long-term assets

        

Property, plant and equipment, net

     2,509        1,460        -        -   

Goodwill

     24,732        1,674        -  &n