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 Rule14a-6(e)(2)) |
☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Pursuant to§240.14a-12 |
BROADCOM LIMITEDBroadcom Limited
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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☒ | No fee required. | |||
☐ | Fee computed on table below per Exchange Act Rules14a-6(i)(1)and0-11. | |||
(1) | Title of each class of securities to which transaction applies:
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(2) | Aggregate number of securities to which transaction applies:
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4) | Proposed maximum aggregate value of transaction:
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(5) | Total fee paid:
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☐ | Fee paid previously with preliminary materials. | |||
☐ | Check box if any part of the fee is offset as provided by Exchange ActRule0-11(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:
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(2) | Form, Schedule or Registration Statement No.:
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(3) | Filing Party:
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(4) | Date Filed:
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BROADCOM LIMITEDDear Shareholders of Broadcom Limited:
IncorporatedAs we previously announced in November 2017, we have decided to restructure our corporate group to cause the parent company of the group to be a Delaware corporation. We are making this proxy statement available in connection with the solicitation by the board of directors of Broadcom Limited (“Broadcom-Singapore”) of proxies to be voted at the shareholder meeting to be convened for the purposes set forth in the accompanying Notice of Court Meeting of Broadcom Shareholders.
The board of directors of Broadcom-Singapore (the “Board”) has approved the entry by Broadcom-Singapore into an Implementation Agreement, dated as of February 28, 2018 (the “Implementation Agreement”), with a newly established Delaware corporation (also named Broadcom Limited and referred to herein as “Broadcom-Delaware”) relating to the restructuring of our corporate group. The Implementation Agreement provides for a statutory procedure known as a Scheme of Arrangement (the “Scheme of Arrangement”) to be implemented by Broadcom-Singapore and Broadcom-Delaware under Singapore law, subject to approval of the High Court of the Republic of Singapore
Company Registration Number 201505572G
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held on April 4, 2018
To our shareholders:
You are cordially invited (the “Singapore Court”). Pursuant to attend, and NOTICE IS HEREBY GIVENthe Scheme of Arrangement, all issued ordinary shares in the capital of Broadcom-Singapore as of immediately prior to the effective time of the 2018 Annual General MeetingScheme of Arrangement will be exchanged on aone-for-one basis for newly issued shares of common stock of Broadcom-Delaware, and Broadcom-Singapore will become a subsidiary of Broadcom-Delaware.
While our incorporation in Singapore has served us and our shareholders well, there are compelling reasons that support restructuring our corporate group to cause the parent company of our group to be an entity organized in the United States at this time. After considering various factors, the Board unanimously determined that restructuring our corporate group to cause the parent company of our group to be an entity incorporated in Delaware is in the best interests of the Company and its shareholders and will best help us accomplish our strategic objectives. Through our existing subsidiaries, we already have a substantial presence in the United States and it is important to note that a majority of Broadcom’s employees and a significant portion of operating assets are in the United States. We believe that the shareholder returns we can drive by continuing to execute our acquisition strategy far outweigh the additional income taxes we would expect to pay as a result of this restructuring, and the incremental tax cost of being based in the U.S. has decreased materially as a result of corporate tax reform in the United States.
For you, our shareholders, much will remain unchanged following the time the Scheme of Arrangement comes into effect. There will be some differences in your shareholder rights, given the differences in the laws between Singapore and Delaware. We have included a detailed chart outlining these differences in the attached proxy statement in the section titled “Comparison of Rights of Singapore Shareholders and Delaware Stockholders,” which begins on page 43.
Just as is the case today with our ordinary shares, the shares of common stock of Broadcom-Delaware will trade on the NASDAQ Global Select Market (“NASDAQ”), under the symbol “AVGO.” We will remain subject to the reporting requirements of the U.S. Securities and Exchange Commission (the “2018 AGM”) of Broadcom Limited (“BroadcomSEC”), whichthe mandates of the Sarbanes-Oxley Act of 2002 and the corporate governance rules of NASDAQ. We will report our consolidated financial results in U.S. dollars and under U.S. generally accepted accounting principles (“U.S. GAAP”).
It is intended that holders of our ordinary shares will not recognize any gain or loss for U.S. federal income tax purposes in connection with the transaction. Under Singapore tax law, no tax is due for Broadcom-Singapore’s ordinary shareholders in the transaction unless such shareholders are residents of or ordinarily reside in Singapore for Singapore tax purposes, or hold their shares in Broadcom-Singapore in connection with a trade carried on by such holder in Singapore.
Holders of ordinary shares and special preference shares in the capital of Broadcom-Singapore will be asked to vote on a proposal to approve the Scheme of Arrangement (the “Broadcom Redomiciliation Proposal”) at a meeting of Broadcom-Singapore’s shareholders that has been directed to be convened by the Singapore Court (the “Special Meeting”) on March 23, 2018, at 8:00 a.m. The Special Meeting will be held at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A., at 11:00 a.m., Pacific Time, At the Special Meeting, Broadcom-Singapore shareholders will be asked to approve the Broadcom Redomiciliation Proposal. The Scheme of Arrangement will also require the approval of the Singapore Court.
This proxy statement provides you with detailed information regarding the transaction contemplated by the Broadcom Redomiciliation Proposal (the “Broadcom Scheme”). We encourage you to read this entire document carefully.You should carefully consider “Risk Factors” beginning on Wednesday, April 4, 2018,page22 for a discussion of potential risks before voting.
The Board has unanimously determined that the following purposes,Scheme of Arrangement is advisable and in the best interests of Broadcom-Singapore and its shareholders and recommends that Broadcom-Singapore shareholders vote “FOR” the approval of the Broadcom Redomiciliation Proposal.
Please mark, date, sign and return the enclosed proxy card in the enclosed, postage-paid envelope as more fullypromptly as possible, as described in the attached proxy statement, accompanying this notice (the “Proxy Statement”):
As Ordinary Business
As Special Business
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:
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, assumed or otherwise 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, shall continue in effect until the earlier of the conclusion of our 2019 AGM or the expiration of the period within which our 2019 AGM is required by law to be held.
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 shareholders’ vote on this resolution is advisory andnon-binding in nature, will have no legal effect and will not be enforceable against Broadcom or our Board.
As Ordinary Business
Notes About the 2018 Annual General Meeting of Shareholders
Singapore Statutory Financial Statements. At the 2018 AGM, our shareholders will have the opportunity to discuss and ask questions regarding our Singapore audited financial statements for our fiscal year ended October 29, 2017, 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 2018 AGM.
Proxy Materials on the Internet. We use the internet as the primary means of furnishing proxy materials to our beneficial owners. We are sending a Notice of Internet Availability of Proxy Materials to our beneficial owners with instructions on how to access the proxy materials online or request a printed copy of the materials. We believe this allows 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 12, 2018, 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 ournon-economic voting preference shares (“Special Voting Shares” or “Special Preference Shares”) on April 4, 2018 will be entitled to vote at the 2018 AGM.
Quorum. Representation at the 2018 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 importantso that your shares may be represented at the 2018 AGM, either in person or by proxy.
Proxies. A registered shareholder, entitled to attendSpecial Meeting and vote at the 2018 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 2018 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 Trust Company, N.A. (“Computershare”), as the registered shareholder of all of the outstanding Special Voting Shares, how to vote their corresponding number of Special Voting Shares,voted in accordance with the Voting Trust Agreement, dated February 1, 2016, by and among Broadcom, the Partnership and Computershare as trustee.
your wishes. For detailed information regarding eligibility to vote at, and voting procedures for, the 2018 AGM,Special Meeting, please refer to ““The Special Meeting—Record Date; Voting Rights and Solicitation of Proxies”,Rights; Votes Required for Approval” starting on page 159 of the accompanying Proxy Statement.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.If you have any questions about the meeting, or if you require assistance, please call D.F. King & Co., Inc. our proxy solicitor, at (866)864-4943 (toll-free in the United States) or brokers and banks may call(212) 269-5550 (call collect).
Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of
Very truly yours, | ||
HOCK E. TAN President and Chief Executive Officer |
Shareholders to be held on April 4, 2018:
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,
Hock E. Tan
Director, Chief Executive Officer and President
February 20, 2018
You should read the entire accompanying Proxy Statement carefully prior to voting.
BROADCOM LIMITED
PROXY STATEMENT(Incorporated in the Republic of Singapore)
FOR(Company Registration Number 201505572G)
2018 ANNUAL GENERAL
NOTICE OF COURT MEETING OF BROADCOM LIMITED SHAREHOLDERS
TO BE HELD MARCH 23, 2018
IN THE HIGH COURT OF THE REPUBLIC OF SINGAPORE
Originating )
Summons )
Number 262 of 2018 )
In the Matter of | ||
Broadcom Limited | ||
(RC No. 201505572G) | ||
and | ||
In the Matter of Section 210 of the Companies Act, Chapter 50 |
Scheme of Arrangement
under Section 210 of the Companies Act, Chapter 50
between
Broadcom Limited, a public company limited by shares incorporated under the laws of the Republic of Singapore (“Broadcom-Singapore”),
and
the Scheme Shareholders (as defined herein)
and
Broadcom Limited, a Delaware corporation (“Broadcom-Delaware”)
NOTICE OF MEETING
NOTICE IS HEREBY GIVEN that, by an Order of Court dated March 9, 2018 made in the above matter, the High Court of the Republic of Singapore (the “Singapore Court”) has directed a Meeting to be convened of the Scheme Shareholders (as defined in the Schedule below) of Broadcom-Singapore, and such Meeting shall be held at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A., on March 23, 2018 at 8:00 a.m. Pacific time, for the purpose of considering and, if thought fit, approving (with or without modification) the following resolution:
“That the Scheme of Arrangement proposed to be made pursuant to Section 210 of the Companies Act, Chapter 50 of Singapore, between (i) Broadcom Limited (a public company limited by shares incorporated
under the laws of the Republic of Singapore), (ii) the Scheme Shareholders and (iii) Broadcom Limited (a Delaware corporation), a copy of which has been circulated with the Notice convening this Meeting, be and is hereby approved.”
A copy of the Scheme of Arrangement and the information required to be furnished pursuant to Section 211 of the Companies Act, Chapter 50 of Singapore, are incorporated in the proxy statement of which this Notice forms a part.
A Scheme Shareholder who was a shareholder of record of Broadcom-Singapore as at March 5, 2018, being the record date for the Meeting, may vote in person at the Meeting or may appoint one (and not more than one) person, whether a member of Broadcom-Singapore or not, as his or her proxy to attend and vote in his or her stead.
NOTICE OF COURT MEETING
A form of proxy applicable for the Meeting is enclosed with the proxy statement of which this Notice forms a part.
It is requested that forms appointing proxies be lodged at Proxy Services, c/o Computershare Investor Services, P.O. Box 43101, Providence, Rhode Island 02940-5067, not less than 24 hours before the time appointed for holding the Meeting (or within such other time as may be required by the Companies Act (Chapter 50) of Singapore) or such longer period as may be specified by the procedures of the participants of The Depository Trust Company.
In the case of joint Scheme Shareholders, any one of such persons may vote, but if more than one of such persons are present at the Meeting, the person whose name stands first on the Register of Members of Broadcom-Singapore shall alone be entitled to vote.
By the said Order of Court, the Singapore Court has appointed James V. Diller, or failing him, Hock E. Tan (or failing him, any other director of Broadcom-Singapore) to act as Chairman of the said Meeting and has directed the Chairman to report the results thereof to the Singapore Court.
The Scheme of Arrangement will be subject,inter alia, to the subsequent approval of the Singapore Court.
THE SCHEDULE
Expression | Meaning | |
“Scheme Shareholders” | (i) Persons who are registered as holders of ordinary shares or special preference shares in the capital of Broadcom-Singapore in the Register of Members of Broadcom-Singapore, other than CEDE & Co. (“Registered Holders”); and (ii) persons who are registered as holders of ordinary shares in the capital of Broadcom-Singapore in book-entry form on the register of The Depository Trust Company, which shares are held through CEDE & Co. as the registered holder of the said Broadcom-Singapore shares on the Register of Members of Broadcom-Singapore (“DTC Participants”). |
Dated this March 9, 2018
ALLEN & GLEDHILL LLP | ||
One Marina Boulevard#28-00 | ||
Singapore 018989 | ||
Solicitors for | ||
Broadcom-Singapore |
i
ii
ELECTRONIC DELIVERY OF OUR SHAREHOLDER COMMUNICATIONSCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We strongly encourageSome of the statements included in this proxy statement and the documents incorporated by reference may include forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended), in particular, statements about our shareholdersexpectations regarding the change of the parent company of the group from a Singapore company to conserve natural resources,a Delaware corporation. These statements include, but are not limited to, statements that address our expected future business and financial performance and statements about the proposed redomiciliation and other statements identified by words such as “will”, “expect”, “believe”, “anticipate”, “estimate”, “should”, “intend”, “plan”, “potential”, “predict” “project”, “aim”, and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as significantly reduce our printingassumptions made by, and mailing costs, by signing upinformation currently available to, receive shareholder communications viae-mail. With electronic delivery, we will notifysuch management, current market trends and market conditions and involve risks and uncertainties, many of which are outside Broadcom’s and management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you when our annual reports and proxy statements are availableshould not place undue reliance 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:
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 4, 2018:
The notice of meeting, proxy statement and annual report to shareholders are available at
http://investors.broadcom.com/phoenix.zhtml?c=203541&p=proxy.
i
PROXY STATEMENT
for the
2018 ANNUAL GENERAL MEETING
of
SHAREHOLDERS
of
BROADCOM LIMITED
To Be Held on Wednesday, April 4, 2018
11:00 a.m. (Pacific Time) 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 2018 Annual General Meeting of Shareholders, or at any adjournments or postponements thereof (the “2018 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, Broadcom Limited became the ultimate parent holding company of Avago and BRCM. Information reported in this Proxy Statement for the period prior to this acquisition relates to our predecessor, Avago.such statements. Unless the context otherwise requires, references in this Proxy Statementproxy statement to “Broadcom“Broadcom”,” “the Company “the Company”,” “our Company “our Company”,” “we “we”,” “our “our”,” “us” “us” and similar terms are to Broadcom-Singapore and to our predecessor, Avago Technologies Limited.
Particular uncertainties that could materially affect future results include risks associated with our proposed redomiciliation, including the timing of the proposed redomiciliation and our ability to obtain shareholder and Singapore court approvals and satisfy other closing conditions to the completion of the proposed redomiciliation; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; our dependency on a limited number of suppliers; any acquisitions we may make, including our proposed acquisition of Qualcomm Incorporated (“Qualcomm”), such as delays, challenges and expenses associated with receiving governmental and regulatory approvals and satisfying other closing conditions, and with integrating acquired companies with our existing businesses and our ability to achieve the growth prospects and synergies expected by such acquisitions; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; our significant indebtedness, including the need to generate sufficient cash flows to service and repay such debt; dependence on a small number of markets and the rate of growth in these markets; dependence on and risks associated with distributors of our products; dependence on senior management; quarterly and annual fluctuations in our operating results; global economic conditions and concerns; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities or other significant operations; our ability to improve our manufacturing efficiency and quality; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property and the unpredictability of any associated litigation expense; any expense or reputational damage associated with resolving customer product warranty and indemnification claims; cyclicality in the semiconductor industry or in our target markets; our ability to sell to new types of customers and to keep pace with technological advances; market acceptance of the end products into which our products are designed; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are set forth in this proxy statement, in particular in the section entitled “Risk Factors” and the documents that we file with the SEC. You may obtain copies of these documents as described under the heading “Where You Can Find More Information.”
Except as required under U.S. federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this proxy statement, whether as a result of new information, future events, changes in assumptions or otherwise.
We are seeking your approval of the scheme of arrangement under Singapore law, attached as Annex A to this proxy statement (the “Scheme of Arrangement”), pursuant to which, upon effectiveness, a newly formed Delaware corporation will become the publicly traded parent of the Broadcom corporate group (the “Broadcom group”). In this proxy statement, we refer to the transactions to be effected pursuant to the Scheme of Arrangement and the related transactions (including the transactions contemplated by the Mandatory Exchange Amendment described below) as the “Transaction.” The Transaction will create a new publicly traded parent company of the Broadcom group that is incorporated in Delaware and will result in you holding shares of common stock of a Delaware corporation instead of ordinary shares of a Singapore company.
Broadcom Limited, froma public company limited by shares incorporated under the laws of the Republic of Singapore, whose shares you currently own (“Broadcom-Singapore”), has formed a new Delaware corporation (also named Broadcom Limited and after the effective timereferred to herein “Broadcom-Delaware”). Broadcom-Delaware has formed a new Delaware subsidiary of this acquisition.
Proxy Mailing. This Proxy Statement, the enclosed proxy cardBroadcom-Delaware named Broadcom Technologies Inc. (“Broadcom US Sub”). Each of Broadcom-Delaware and Broadcom US Sub has only nominal assets and capitalization and has not engaged in any business or other activities other than in connection with its formation and the Notice were first made available on or about February 20, 2018Transaction.
The Scheme of Arrangement will be effected pursuant to our shareholdersthe Implementation Agreement between Broadcom-Singapore and Broadcom-Delaware, dated as of February 12, 2018.
Costs28, 2018, a copy of Solicitation. Wewhich is attached to this proxy statement as Annex B (the “Implementation Agreement”). The Scheme of Arrangement provides for the exchange of your ordinary shares in the capital of Broadcom-Singapore for shares of common stock of Broadcom-Delaware on aone-for-one basis. As a result of the Transaction, the ordinary shareholders of Broadcom-Singapore will bear the costbecome stockholders of soliciting proxies. We have retained D. F. King & Co., Inc., an independent proxy solicitation firm, to assist us in soliciting proxies for an estimated fee of $15,000 plus reimbursement of reasonable expenses. We and/or our agents, including certain of our officers, directorsBroadcom-Delaware and employees, may solicit proxies by mail, telephone,e-mail, fax or in person. No additional compensationsuch stockholders’ rights will be paidgoverned by Delaware law and by Broadcom-Delaware’s certificate of incorporation and bylaws, in substantially the forms attached hereto as Annex C and Annex D, respectively.
As part of the Transaction, we also intend to our officers, directors or employeesexecute an amendment (the “Mandatory Exchange Amendment”) to the Amended and Restated Limited Partnership Agreement (the “Partnership Agreement”) of Broadcom Cayman L.P. (the “Partnership”), pursuant to which, immediately prior to the completion of the transaction contemplated by the Scheme of Arrangement, all outstanding limited partnership units thereof (“LP Units”), other than any LP Units held by Broadcom-Singapore and its subsidiaries, will be mandatorily exchanged for such services. We will reimburse banks, brokerage firms and other custodians, nominees, trustees and fiduciaries for reasonableshares of common stock of Broadcom-Delaware on aout-of-pocketone-for-one expenses incurred by them in sending proxy materialsbasis (i.e., based on the existing conversion ratio of LP Units to and soliciting proxies from beneficial holders of our ordinary shares ornon-economic votingof Broadcom-Singapore). As a result, all outstanding limited partners of the Partnership would become common stockholders of Broadcom-Delaware. In addition, all related outstanding special preference shares.
Our Registered Office. The mailing addressshares in the capital of our registered office is 1 Yishun Avenue 7, Singapore 768923. Please note, however, that any communications from holdersBroadcom-Singapore will be automatically redeemed upon the exchange of our ordinary shares should be directed to the attention of our Chief Legal Officer at Broadcom Limited, 1320 Ridder Park Drive, San Jose, California 95131, U.S.A.
Financial Statements; Presentation. InLP Units in accordance with the lawsMandatory Exchange Amendment, pursuant to the constitution of Singapore, our Singapore statutory financial statementsBroadcom-Singapore.
The Mandatory Exchange Amendment is subject to the approval of the limited partners of the Partnership in accordance with the terms of the Partnership Agreement. For purposes of this proxy statement, we have assumed such approval will be obtained and that the mandatory exchange of LP Units will occur in connection with the effectiveness of the Scheme of Arrangement pursuant to the Mandatory Exchange Amendment. However, the Scheme of Arrangement is not conditioned on the approval of the Mandatory Exchange Amendment and therefore will occur whether or not the Mandatory Exchange Amendment has been executed. If the Scheme of Arrangement occurs without the Mandatory Exchange Amendment having been approved and executed, LP Units of the Partnership will remain outstanding and will thereafter be exchangeable for our fiscal year ended October 29, 2017 are providedcash or shares of common stock of Broadcom-Delaware in accordance with this Proxy Statement. Except as otherwise stated herein, all monetary amountsthe terms of the Partnership Agreement, and the holders of LP Units will continue to have the right to vote alongside the common stockholders of Broadcom-Delaware in this Proxy Statement have been presented in U.S. dollars.
VOTING RIGHTS AND SOLICITATION OF PROXIES
We have two classesaccordance with the terms of shares outstanding, (i) our ordinary shares, no par value, and (ii) ournon-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 Agreement”), by and among Broadcom-Singapore, the Partnership and Computershare Trust Company, N.A. (“Computershare”), as the registered shareholder of all of the outstanding special preference shares and as trustee thereunder.
The following diagrams depict our organizational structure before and after the Transaction.
Before
After
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION AND THE SPECIAL MEETING
Q. What am I being asked to vote on at the Special Meeting?
A. | Holders of ordinary shares and special preference shares in the capital of Broadcom-Singapore are being asked to vote at a court-convened meeting of holders of ordinary shares and special preference shares of Broadcom-Singapore (the “Special Meeting”) on a proposal to approve the Scheme of Arrangement attached as Annex A to this proxy statement (the “Broadcom Redomiciliation Proposal”). If the Scheme of Arrangement becomes effective, the ordinary shares of Broadcom-Singapore will be transferred to Broadcom-Delaware, which will issue one share of common stock of Broadcom-Delaware to the holders of Broadcom-Singapore ordinary shares for each ordinary share of Broadcom-Singapore that has been transferred. As a result, Broadcom-Delaware will become the parent company of Broadcom-Singapore. |
Q: Who can vote?
A: | As confirmed by the Singapore Court, holders of record of Broadcom-Singapore ordinary shares and special preference shares on March 5, 2018 (the “Record Date”), the record date for the Special Meeting, are entitled to vote. Our register of members will be available for inspection at least 10 days prior to the Special Meeting at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A. As of the Record Date, there were 410,751,985 ordinary shares and 22,090,052 special preference shares in the capital of Broadcom-Singapore outstanding and entitled to vote and we had 282 shareholders of record. Each holder of Broadcom-Singapore ordinary shares and special preference shares is entitled to one vote per share. The special preference shares are held solely by a voting trustee who votes such shares in accordance with the instructions of the holders of LP Units of the Partnership. |
Q: What quorum and shareholder votes are required for action at the Special Meeting?
A: | A quorum is required for the transaction of business at the Special Meeting. The presence, in person or by proxy, at the Special Meeting of the Scheme Shareholders as of the Record Date holding between them at least a majority of the total number of issued Broadcom-Singapore ordinary shares and special preference shares will constitute a quorum. |
To be approved, the Broadcom Broadcom Cayman L.P.,Redomiciliation Proposal must receive the affirmative vote of (i) a subsidiarymajority in number of Broadcom (the “Partnershipthe Scheme Shareholders present and voting, either in person or by proxy, at the Special Meeting and (ii) not less than 75% of the issued Broadcom-Singapore ordinary shares and special preference shares held by the Scheme Shareholders present and voting, either in person or by proxy, at the Special Meeting.
Pursuant to the directions of the Singapore Court, for the purposes of determining the number of Scheme Shareholders present and voting at the Special Meeting, Broadcom-Singapore ordinary shares that are deposited in book-entry form with The Depository Trust Company (“DTC”), and Computershare,registered in the name of CEDE & Co. (“CEDE”) as trustee (the
Eachsub-depositor need not vote the Broadcom-Singapore ordinary shares registered in its name in the same way. Accordingly, asub-depositor may:
For purposes of determining whether the Broadcom Redomiciliation Proposal is equal toapproved by a majority in number of Scheme Shareholders, if the number of outstanding restricted exchangeable units in the Partnership (the “Restricted Units”). As of February 1, 2017, the Restricted Units are exchangeable for ourBroadcom-Singapore ordinary shares onvoted “FOR” the Broadcom Redomiciliation Proposal by aone-for-onesub-depositor basis, which obligation we may elect to settle either in cash or inexceeds the number of Broadcom-Singapore ordinary shares at our option.voted “AGAINST” the Broadcom Redomiciliation Proposal by it, suchsub-depositor will be taken to have voted “FOR” the Broadcom Redomiciliation Proposal, or if the number of Broadcom-Singapore ordinary shares voted “AGAINST” the Broadcom Redomiciliation Proposal by asub-depositor exceeds the number of Broadcom-Singapore ordinary shares voted “FOR” the Broadcom Redomiciliation Proposal by it, suchsub-depositor will be taken to have voted “AGAINST” the Broadcom Redomiciliation Proposal.
Ordinary shares and Special Voting Shares issued and outstanding on April 4, 2018 are entitled to be voted atFor the 2018 AGM, voting together as a single class, on each matter being put before the meeting.
If you areavoidance of doubt, a holder of Restricted Units, you areBroadcom-Singapore ordinary shares who is not asub-depositor may only vote the Broadcom-Singapore ordinary shares registered in its name in the same way, and must vote all or part of its Broadcom-Singapore ordinary shares either “FOR” or “AGAINST” the Broadcom Redomiciliation Proposal, and not a mixture of both.
A holder of Broadcom-Singapore ordinary shares or special preference shares (including asub-depositor) voting by proxy shall be included in the count of Broadcom-Singapore shareholders present and voting at the Special Meeting as if that Broadcom-Singapore shareholder was voting in person, such that the votes of a proxy who has been appointed to represent more than one Broadcom-Singapore shareholder at the Special Meeting shall be counted as the votes of such number of appointing Broadcom-Singapore shareholders.
Each holder of Broadcom-Singapore ordinary shares or special preference shares represented in person or by proxy at the Special Meeting is entitled to direct the Trustee toone 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 12, 2018, is the record date for holders of ourper Broadcom-Singapore ordinary shares and Special Voting Shares entitled to receive notice of the 2018 AGM (the “Record Date”). Asshare or special preference share owned as of the Record Date, we had 410,487,054 ordinary sharesDate.
Please see “The Special Meeting—Record Date; Voting Rights; Vote Required for Approval.”
Q: What is the effect of brokernon-votes and 22,097,111abstentions?
A: | If a Scheme Shareholder abstains from voting, or if brokers holding their customers’ shares of record cause abstentions to be recorded, those shares are considered present and entitled to be voted at the Special Meeting, and, therefore, are considered for purposes of determining whether a quorum is present. However, abstentions will not be counted in the tabulation of votes cast or shares voting on a proposal, and, thus, have no effect on whether a proposal has been approved. A broker“non-vote” is not counted for the purposes of determining whether a proposal has been approved. The Broadcom Redomiciliation Proposal is considered a“non-routine” matter, and if you are a “street name” holder, your broker will not have the authority to vote your shares for or against this proposal without your instruction. |
Q. What vote does the board of directors recommend?
A. | The Broadcom-Singapore board of directors unanimously recommends that you vote “FOR” the Broadcom Redomiciliation Proposal. |
Q. How do I attend the Special Voting Shares issued and outstanding, and there were 22,097,111 Restricted Units in the Partnership issued and outstanding.Meeting?
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 2,
A. | All shareholders of Broadcom-Singapore, as of the Record Date, are invited to attend the Special Meeting at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A. commencing at 8:00 a.m. Pacific time on March 23, 2018. |
Ordinary Shares
If your ordinary shares are registered directly in your name with our transfer agent, Computershare, you are the “registered shareholder” with respect to those shares. If your shares are held byin the name of a bank, broker or other holder of record and you plan to attend the Special Meeting, you must present proof of your beneficial ownership of shares, such as a bank or brokerage firm,account statement or letter from your bank, trusteebroker or other nominee showing that you owned Broadcom-Singapore ordinary shares as of the record date, together with a form of personal identification and proof of address to be admitted to the Special Meeting.
Even if you establish proof of your beneficial ownership, you will not be entitled to vote at or otherwise participate in the Special Meeting unless you are a shareholder of record. Only shareholders, their proxy holders and Broadcom’s guests may attend the “beneficial owner”Special Meeting.
Q. How do I vote?
A. | Scheme Shareholders as of the Record Date may vote by personally attending the Special Meeting or attending by proxy, by completing and returning a proxy card. |
If you hold your ordinary shares in “street name” through a broker, you will be able to exercise your vote through your broker by completing a voting instruction form. Most “street name” holders may also submit their voting instructions to their broker by telephone or by Internet. If shares are held in “street name”.name,” beneficial holders must follow the procedures provided by their broker to vote.
Registered Holders
AIf you hold LP Units of the Partnership, you will be able to instruct Computershare, as the registered shareholder of all of the outstanding special preference shares, how to vote the corresponding number of special preference shares, in accordance with the Voting Trust Agreement.
Q. Why do you want your ultimate parent company to be incorporated in Delaware rather than Singapore?
A. | We and our predecessor, Avago Technologies Limited, have been incorporated in Singapore since 2005. While our incorporation in Singapore has served us and our shareholders well, there are compelling reasons that support restructuring our corporate group to cause the parent company of our group to be an entity organized in the United States at this time. |
We are a multi-national business with operations in many countries. However, our operations have become more focused in the United States, both through organic growth and as a result of multiple acquisitions of U.S.-based companies, and we expect to continue to invest in our operations in the United States. Through our existing subsidiaries, we already have a substantial presence in the United States and it is important to note that a majority of Broadcom’s employees and a significant portion of operating assets are in the United States. Further, we believe that a significant majority of our shareholders are U.S.-based institutional investors. As a result, we think it makes sense to have our parent company based in the United States. In addition, the incremental tax cost of being a U.S.-based multinational corporation has decreased materially as a result of U.S. corporate tax reform. The enactment of tax reform legislation on December 22, 2017 (the “2017 Tax Reform Act”) will also allow us to tax-efficiently deploy our capital in the United States in a way that was not practicable prior to the enactment of this legislation.
We also believe that the shareholder returns we can drive by continuing to execute our acquisition strategy far outweigh the additional income taxes we would expect to pay as a result of our ultimate parent company being incorporated in the United States. Further, as a U.S. corporation, our future acquisitions in the United States would not be subject to certain regulatory processes required for acquisitions by foreign corporations. Following a thorough review, we have determined that having our ultimate parent company incorporated in the United States will increase our opportunities for growth and is best for us, our shareholders and our employees.
After considering various factors, our board of directors determined that it was advisable to proceed with the Transaction. Our board of directors’ determination that Delaware is the preferred jurisdiction of incorporation of the parent of the Broadcom group was based on many factors, including the following:
Please see “The Broadcom Redomiciliation Proposal—Background and Reasons for the Transaction” for more information.
We cannot assure you that the anticipated benefits of the Transaction will be realized. In addition, despite the potential benefits described above, the Transaction will expose you and us to potential risks, including relating to future income tax policy in the United States. Please see the discussion under “Risk Factors.”
Our board of directors has considered both the potential advantages of the Transaction and these potential risks and has unanimously approved the Scheme of Arrangement and recommends that shareholders vote for the approval of the Scheme of Arrangement.
Q: Are there any risks associated with the consummation of the Transaction?
A: | While our board of directors has considered the potential risks to our shareholders and us associated with the Transaction and has recommended that shareholders vote for approval of the Broadcom Redomiciliation Proposal, there are risks and we cannot assure you that the anticipated benefits of the Transaction will be realized. For example: |
You should consider these risks carefully. For additional information, please see the discussion under “Risk Factors.”
Q. How will the Transaction affect Broadcom’s presence in the U.S. and around the world?
A. | Other than incorporation of our ultimate parent company in Delaware, at present, there are no changes planned for our operations or workforce in the U.S. or elsewhere as a result of the Transaction. |
Q. Will the Transaction affect Broadcom’s current or futureday-to-day operations?
A. | The Transaction will have no material impact on how we conduct ourday-to-day operations. |
Q: How will shares of Broadcom-Singapore differ from shares of Broadcom-Delaware?
A: | Broadcom-Delaware shares of common stock will be similar to Broadcom-Singapore ordinary shares. However, there are differences between what your rights as a common stockholder will be under Delaware law and what they currently are as an ordinary shareholder under Singapore law. In addition, there are differences between the organizational documents of Broadcom-Singapore and Broadcom-Delaware. |
We discuss these differences in detail under “Description of Broadcom-Delaware Capital Stock” and “Comparison of Rights of Singapore Shareholders and Delaware Stockholders.” Broadcom-Delaware’s certificate of incorporation and bylaws in the form substantially as they will be in effect upon consummation of the Transaction, are attached as Annex C and Annex D, respectively, to this proxy statement.
Q. Will the Transaction dilute my economic interest?
A. | No, your fully-diluted relative economic ownership in Broadcom will not change as a result of the Transaction. Your ordinary shares of Broadcom-Singapore will be exchanged on aone-to-one basis for shares of common stock of Broadcom-Delaware. |
Q. How will the Transaction affect Broadcom’s financial reporting and the information Broadcom provides to its shareholders?
A. | Upon completion of the Transaction, Broadcom-Delaware will be subject to the same reporting requirements of the SEC, the mandates of the Sarbanes-Oxley Act and the applicable corporate governance rules of NASDAQ as Broadcom-Singapore before the Transaction, and Broadcom-Delaware will report our consolidated financial results in U.S. dollars and in accordance with U.S. GAAP. Broadcom-Delaware will file reports on Form10-K,10-Q and8-K with the SEC and comply with the proxy rules applicable to domestic issuers, as we currently do. Broadcom-Delaware will also comply with any additional reporting requirements of Delaware law. |
Assuming completion of the mandatory exchange of LP Units of the Partnership, the Partnership will no longer be subject to the reporting requirements of the SEC and as such, the Partnership will no longer file reports on Form10-K,10-Q and8-K and will no longer be subject to the proxy rules.
Q. What impact will the Transaction have on Broadcom’s current debt arrangements?
A. | We expect no material impact on our currently outstanding indebtedness. In connection with the Transaction, we expect that Broadcom-Delaware and Broadcom US Sub will enter into supplemental indentures to the indentures governing our outstanding notes issued on January 19, 2017 and October 17, 2017 (collectively, the “2017 Notes”), pursuant to which Broadcom-Delaware and Broadcom US Sub will guarantee the obligations of the issuers of the 2017 Notes. |
Q. Will the Transaction impact Broadcom’s ability to access the capital and bank markets in the future?
A. | We believe that capital raising will be simpler and more efficient with a U.S. domiciled parent holding company. |
Q. Will the Transaction be conditioned upon Broadcom’s ability to complete any pending or proposed transactions?
A. | No. The Transaction is not conditioned upon the completion of any other transaction (including our proposed acquisition of Qualcomm). |
Q. Will the Transaction have any impact on Broadcom’s ability to pay dividends or, if it elects, to buy back shares?
A. | In accordance with Delaware law, Broadcom-Delaware will be able to declare and pay dividends and buy back shares. Generally, we expect that Delaware law will be more flexible than Singapore law as to these matters. |
Q. Am I entitled to attendappraisal or dissenters’ rights in the Transaction?
A. | No. Once the Broadcom Redomiciliation Proposal is approved by the requisite Broadcom-Singapore shareholders and by the Singapore Court, and the order of the Singapore Court approving the Scheme (“Singapore Court Order”) is lodged with the Accounting and Corporate Regulatory Authority of Singapore (“ACRA”), the Scheme of Arrangement becomes effective and will be binding on all shareholders of Broadcom. Under Singapore law, the ordinary shareholders of Broadcom-Singapore do not have dissenters’ rights or a right to an appraisal of the value of their shares or to receive payment for them in connection with the Transaction. |
Q. Is the Transaction taxable to me under U.S. federal income tax law?
A. | It is intended that holders of ordinary shares of Broadcom-Singapore will not recognize gain or loss for U.S. federal income tax purposes in the Transaction but the closing of the Transaction is not conditioned upon the receipt of any opinion or tax ruling from the United States Internal Revenue Service (“IRS”) to that effect. Please see “Material U.S. Federal Income Tax Considerations of the Transaction to Holders of Broadcom-Singapore Ordinary Shares” for a description of the material U.S. federal income tax consequences of the Transaction to Broadcom-Singapore ordinary shareholders. Determining the actual tax consequences of the Transaction to you may be complex and will depend on your specific situation. We urge you to consult your tax advisor for a full understanding of the tax consequences of the Transaction to you. |
Q. Will the Transaction impact Broadcom’s cash tax costs in fiscal year 2018 or later years?
A. | The United States corporate income tax regime (including applicable statutory tax rates) changed significantly due to the enactment of the 2017 Tax Reform Act. There is significant uncertainty as to how the 2017 Tax Reform Act will be implemented from an accounting standpoint. However, following the Transaction, we expect the cash tax costs and overall effective cash tax rate of the Broadcom group (which we define as cash tax costs as a percentage ofnon-GAAP income before tax) to increase due to Broadcom-Delaware becoming the parent company of the Broadcom group. We presently expect that our overall effective cash tax rate following the Transaction will be in the range of 9-11%. Due to the uncertainty described above, we do not believe it is practicable to reconcile the foregoing amount to an effective tax rate under GAAP. |
We also expect to incur additional cash tax costs as a result of the 2017 Tax Reform Act that would apply irrespective of the Transaction. Based on our initial analysis, we believe the 2017 Tax Reform Act will result in a mandatory deemed repatriation tax of between $1.6 billion and $2.6 billion on certain of ournon-US earnings, without taking into account available deductions and credits. The amount and timing of installment payments of this deemed repatriation tax depend, in part, on when the Transaction becomes effective. However, this tax liability will be payable over eight years, with the amount of payments more heavily weighted to the latter years of this period. We presently expect these installment payments to start in our fiscal year 2019.
Our preliminary estimates of the overall cash tax impact of the Transaction, as well as the amount and timing of installment payments of the mandatory deemed repatriation tax under the 2017 Tax Reform Act, are expected to change as we continue to refine our analysis and as additional guidance becomes available, particularly with respect to the 2017 Tax Reform Act. There is no assurance that the final determination of our income tax liability will not be materially different than what is reflected in our income tax provisions and accruals and in the estimated ranges provide above. Significant judgment is required to determine the recognition and measurement of tax liabilities prescribed in the relevant accounting guidance for uncertainty in income taxes.
Q. When do you expect the Transaction to be completed?
A. | Assuming the Scheme of Arrangement is approved by the requisite vote of Broadcom-Singapore shareholders and by the Singapore Court and the other conditions to the consummation of the Transaction |
are satisfied, we currently expect to complete the Transaction no later than May 6, 2018. However, in accordance with the terms of the Implementation Agreement and subject to the paragraph below, Broadcom-Singapore, without obtaining any further approval of Broadcom-Singapore shareholders, may select the effective time of the Transaction (including the Scheme of Arrangement), provided the effective time occurs on or prior to November 17, 2018 (the “Long-Stop Date”), notwithstanding Broadcom-Singapore shareholder or Singapore Court approval of the Scheme of Arrangement and/or the satisfaction of all of the other conditions to the Transaction. Please see “The Broadcom Redomiciliation Proposal—Effective Date of the Transaction.” |
Subject to the satisfaction of the conditions set forth in the Implementation Agreement, we will be required to lodge the Singapore Court Order by the Long-Stop Date. However, if the conditions set forth in the Implementation Agreement are not satisfied by such date, the Scheme of Arrangement will lapse pursuant to its terms and the Transaction will not be effected.
Q. What will I receive for my Broadcom-Singapore ordinary shares?
A. | You will receive one share of common stock of Broadcom-Delaware for each ordinary share of Broadcom-Singapore you hold immediately prior to the completion of the Transaction. |
Q. If the Scheme of Arrangement is approved, do I have to take any action to transfer my Broadcom-Singapore ordinary shares and receive Broadcom-Delaware shares of common stock?
A. | Upon effectiveness of the Transaction, your Broadcom-Singapore ordinary shares will be exchanged for shares of common stock of Broadcom-Delaware and will be issued to you in uncertificated book-entry form. Broadcom-Singapore share certificates outstanding immediately prior to the effective time of the Transaction will no longer be evidence of title of Broadcom-Singapore ordinary shares represented by such certificates, and following the Transaction, will only represent the right to receive a corresponding number of uncertificated book-entry shares of common stock of Broadcom-Delaware. Our transfer agent will request that you return such stock certificates for cancellation, together with a properly completed and executed letter of transmittal, in exchange for shares of common stock of Broadcom-Delaware following completion of the Transaction. Broadcom-Singapore ordinary shares held in “street name” through a bank, broker, custodian or other nominee will be automatically exchanged for uncertificated book-entry shares of common stock of Broadcom-Delaware without any action required on the part of the beneficial holder of such ordinary shares. Please see “The Broadcom Redomiciliation Proposal—Action Required to Transfer Broadcom-Singapore Ordinary Shares and Receive Broadcom-Delaware Shares of Common Stock.” |
Q. Can I trade Broadcom-Singapore ordinary shares between the date of this proxy statement and the consummation of the Transaction?
A. | Yes. Broadcom-Singapore ordinary shares will continue to trade on NASDAQ under the symbol “AVGO” during this period. |
Q. How will the Transaction affect the stock exchange listing of Broadcom-Singapore ordinary shares?
A. | There should be no disruption in the trading of your shares. We will submit a notification form with NASDAQ and expect that, following the consummation of the Transaction, the Broadcom-Delaware shares of common stock will be listed on NASDAQ under the symbol “AVGO,” the same symbol under which your Broadcom-Singapore ordinary shares are currently listed. |
Q. If my Broadcom-Singapore ordinary shares are held in “street name” by my broker, will my broker vote atmy shares for me?
A. | No. The vote on the Broadcom Redomiciliation Proposal is considered a“non-routine” matter, and your broker cannot exercise discretion to vote your Broadcom-Singapore ordinary shares. If you hold your |
Broadcom-Singapore ordinary shares in “street name,” you should follow the procedures provided by your broker regarding how to instruct your broker to vote your shares. Typically, you would submit your voting instructions by telephone or by the Internet in accordance with the procedures provided by your broker. |
All shares entitled to vote and represented by properly completed proxies received prior to the 2018 AGM may vote in personSpecial Meeting and not revoked will be voted at the meeting in accordance with your instructions. If a signed proxy card is returned without indicating how shares should be voted on a matter and the proxy is not revoked, the shares represented by such proxy will be voted as the Board recommends and, therefore, “FOR” the approval of the Broadcom Redomiciliation Proposal.
Q. May I revoke my proxy 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 2018 AGM by:change my vote?
A. | Yes, Scheme Shareholders have the right to revoke a proxy at any time prior to voting at the Special Meeting by (i) | submitting a subsequently dated proxy, which, if not delivered in person at the meeting, must be received by |
(ii) | by attending the meeting and voting in |
Q. Who is making and paying for this proxy solicitation?
A. | The proxy is being solicited on behalf of the Board. We have hired D.F. King & Co., Inc. to assist in the distribution of proxy materials and the solicitation of proxies for an initial fee estimated at $25,000, plus reimbursement ofout-of-pocket expenses. D.F. King & Co., Inc. will be indemnified against certain liabilities and expenses, including certain liabilities under the federal securities laws. We will also reimburse brokers for their reasonableout-of-pocket expenses for forwarding proxy materials to beneficial owners of Broadcom-Singapore ordinary shares or other persons for whom they hold Broadcom-Singapore ordinary shares. The directors, officers and employees of Broadcom-Singapore may also solicit proxies by personal interview, mail, email, telephone, facsimile or other means of communication. These persons will not be paid additional remuneration for their efforts. Subject to applicable law, Broadcom-Singapore may also reimburse brokerage houses and other custodians, nominees, and fiduciaries for their expenses for forwarding proxy materials to the beneficial owners of Broadcom-Singapore ordinary shares and special preference shares and in obtaining voting instructions from such beneficial owners. The extent to which this will be necessary depends upon how promptly proxies are returned. We urge you to send in your proxy without delay. |
Q. Whom should I call if I have questions about the Special Meeting or the Transaction?
A. | You should contact our proxy solicitor: |
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Bankers and Brokers Call Collect: (212)269-5550
All Others Call Toll-free: (866)864-4943
This summary highlights selected information from this proxy statement. It does not contain all of the information that is important to you. To understand the Transaction more fully, and for a more complete legal description of the Transaction, you should read carefully the entire proxy statement, including the Annexes. The Scheme of Arrangement and the Implementation Agreement, substantially in the forms attached as Annex A and Annex B, respectively, to this proxy statement, are the legal documents that govern the Transaction. The certificate of incorporation and bylaws of Broadcom-Delaware, substantially in the forms attached as Annex C and Annex D, respectively, to this proxy statement, will become the governing documents of Broadcom-Delaware upon the completion of the Transaction. We encourage you to read those documents carefully.
Broadcom-Singapore. We are a public company limited by shares incorporated under the laws of the Republic of Singapore and parent of a corporate group that is a leading designer, developer and global supplier of a broad range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analogIII-V based products. We have a history of innovation and offer thousands of products that are used in end products such as enterprise and data center networking, home connectivity,set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. We have four reportable segments: wired infrastructure, wireless communications, enterprise storage and industrial & other, which align with our principal target markets. Our ordinary shares are traded on NASDAQ under the symbol “AVGO.”
Broadcom-Delaware. Broadcom-Delaware is a newly formed Delaware corporation and is currently a direct, wholly-owned subsidiary of Broadcom-Singapore. Broadcom-Delaware has only nominal assets and capitalization and has not engaged in any business or other activities other than in connection with its formation and the Transaction. Immediately following the Transaction, Broadcom-Delaware will become the ultimate parent company of the Broadcom group.
Broadcom US Sub. Broadcom US Sub is a company newly incorporated under the laws of Delaware and a direct, wholly-owned subsidiary of Broadcom-Delaware. Broadcom US Sub has only nominal assets and capitalization and has not engaged in any business or other activities other than in connection with its formation and the Transaction.
The principal executive offices of Broadcom-Singapore are located at 1 Yishun Avenue 7, Singapore 768923. The telephone number of each party at that address is (65) 6755-7888. The principal offices of Broadcom-Delaware and Broadcom US Sub are located at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A., and the telephone number at that address is (408)433-8000.
The Transaction will cause the parent company of our corporate group to be a Delaware corporation.
On November 1, 2017, the Board held a board meeting to, among other things, discuss a potential transaction pursuant to which a publicly traded, Delaware corporation would become the ultimate parent of the Broadcom group. The intention to pursue a transaction to create a U.S. parent company was publicly announced on November 2, 2017. On January 29, 2018, the board of directors of Broadcom-Singapore approved the Transaction and the entry by Broadcom-Singapore into the Implementation Agreement. On March 9, 2018, we petitioned the Singapore Court to order, among other things, the convening of the Special Meeting to approve the
Scheme of Arrangement. We will hold the Special Meeting to approve the Scheme of Arrangement on March 23, 2018. If we obtain the necessary shareholder approvals, the Singapore Court will hold a second hearing to approve the Scheme of Arrangement. Assuming we receive the necessary approvals of the Scheme of Arrangement from Broadcom-Singapore’s shareholders and the Singapore Court and the other conditions to consummate the Transaction are satisfied, we will lodge the Singapore Court’s order approving the Scheme of Arrangement with ACRA on or prior to the Long-Stop Date, at which time the Scheme of Arrangement will become effective and binding in accordance with its terms and conditions.
As a result of the Transaction, the ordinary shareholders of Broadcom-Singapore will become stockholders of Broadcom-Delaware and such stockholders’ rights will be governed by Delaware law and Broadcom-Delaware’s certificate of incorporation and bylaws, in substantially the forms attached hereto as Annex C and Annex D, respectively.
Background and Reasons for the Transaction
We and our predecessor, Avago Technologies Limited, have been incorporated in Singapore since 2015 and 2005, respectively. While our incorporation in Singapore has served us and our shareholders well, there are compelling reasons that support restructuring our corporate group to cause the parent company of our group to be an entity organized in the United States at this time.
We are a multi-national business with operations in many countries. However, our operations have become more focused in the United States, both through organic growth and as a result of multiple acquisitions of U.S.-based companies, and we expect to continue to invest in our operations in the United States. Through our existing subsidiaries, we already have a substantial presence in the United States and it is important to note that a majority of Broadcom’s employees and a significant portion of operating assets are in the United States. Further, we believe that a significant majority of our shareholders are U.S.-based institutional investors. As a result, we think it makes sense to have our parent company based in the United States. In addition, the incremental tax cost of being a U.S.-based multinational corporation has now decreased materially as a result of U.S. corporate tax reform. The 2017 Tax Reform Act will allow us totax-efficiently deploy our capital in the United States in a way that was not practicable prior to the enactment of this legislation.
We also believe that the shareholder returns we can drive by continuing to execute our acquisition strategy far outweigh the additional income taxes we would expect to pay as a result of our ultimate parent company being incorporated in the United States, and that the incremental tax cost of being based in the U.S. has decreased materially with the enactment of corporate tax reform in the United States. Further, as a U.S. corporation, our future acquisitions in the United States would not be subject to certain regulatory processes required for acquisitions by foreign corporations. Following a thorough review, we have determined that having our ultimate parent company incorporated in the United States will increase our opportunities for growth and shareholder value creation and is best for us, our shareholders and our employees.
After considering various factors, our board of directors determined that it was advisable to proceed with the Transaction. Our board of directors’ determination that Delaware is the preferred choice for the domicile of the parent of the Broadcom group was based on many factors, including the following:
We cannot assure you that the anticipated benefits of the Transaction will be realized. In addition, despite the potential benefits described above, the Transaction will expose you and us to potential risks, including relating to future income tax policy in the United States. Please see the discussion under “Risk Factors.”
The Board has considered both the potential advantages of the Transaction and these potential risks and has unanimously approved the Scheme of Arrangement and recommends that shareholders vote for the approval of the Scheme of Arrangement.
Potential Tax Consequences to the Broadcom Group
The United States corporate income tax regime (including applicable statutory tax rates) changed significantly due to the enactment of the 2017 Tax Reform Act. There is significant uncertainty as to how the 2017 Tax Reform Act will be implemented from an accounting standpoint. However, following the Transaction, we expect the cash tax costs and overall effective tax rate of the Broadcom group (which we define as cash tax costs as a percentage ofnon-GAAP income before tax) to increase due to Broadcom-Delaware becoming the parent company of the Broadcom group. We presently expect that our overall effective cash tax rate following the Transaction will be in the range of 9-11%. Due to the uncertainty described above, we do not believe it is practicable to reconcile the foregoing amount to an effective tax rate under GAAP.
We also expect to incur additional cash tax costs as a result of the 2017 Tax Reform Act that would apply irrespective of the Transaction. Based on our initial analysis, we believe the 2017 Tax Reform Act will result in a mandatory deemed repatriation tax of between $1.6 billion and $2.6 billion on certain of ournon-US earnings, without taking into account available deductions and credits. The amount and timing of installment payments of this deemed repatriation tax depend, in part, on when the Transaction becomes effective. However, this tax liability will be payable over eight years, with the amount of payments more heavily weighted to the latter years of this period. We presently expect these installment payments to start in our fiscal year 2019.
Our preliminary estimates of the overall cash tax impact of the Transaction, as well as the amount and timing of installment payments of the mandatory deemed repatriation tax under the 2017 Tax Reform Act, are expected to change as we continue to refine our analysis and as additional guidance becomes available, particularly with respect to the 2017 Tax Reform Act. There is no assurance that the final determination of our income tax liability will not be materially different than what is reflected in our income tax provisions and accruals and in the estimated ranges provide above. Significant judgment is required to determine the recognition and measurement of tax liabilities prescribed in the relevant accounting guidance for uncertainty in income taxes.
In addition, taxing authorities in Singapore may hold a purchaser of Singapore shares liable for stamp duty in connection with a sale transaction at the rate of 0.2% of the consideration paid or the market value of the shares, whichever is higher. We do not currently believe that any stamp duty should be payable by Broadcom-Delaware in connection with the Transaction.
U.S. Federal Income Tax Considerations to Holders of Broadcom-Singapore Ordinary Shares
It is intended that holders of ordinary shares of Broadcom-Singapore will not recognize any gain or loss for U.S. federal income tax purposes on the Transaction but the closing of the Transaction is not conditioned upon the receipt of any opinion or tax ruling from the IRS to that effect. Please refer to “Material U.S. Federal Income Tax Considerations of the Transaction to Holders of Broadcom-Singapore Ordinary Shares” for a description of
material U.S. federal income tax consequences of the Transaction to Broadcom-Singapore ordinary shareholders. Determining the actual tax consequences of the Transaction to you may be complex and will depend on your specific situation. We urge you to consult your tax advisor for a full understanding of the tax consequences of the Transaction to you.
Many of the principal attributes of Broadcom-Singapore’s ordinary shares and Broadcom-Delaware’s shares of common stock will be similar. However, there are differences between what your rights will be under Delaware law and what they currently are under Singapore law. In addition, there are differences between Broadcom-Singapore’s constitution and Broadcom-Delaware’s certificate of incorporation and bylaws as they will be in effect upon the completion of the Transaction.
We discuss these differences under “Description of Broadcom-Delaware Capital Stock” and “Comparison of Rights of Singapore Shareholders and Delaware Stockholders.” Broadcom-Delaware’s certificate of incorporation and bylaws, in the form substantially as they will be in effect upon completion of the Transaction, are attached as Annex C and Annex D, respectively, to this proxy statement.
We will submit a notification form with NASDAQ and expect that, upon the consummation of the Transaction, Broadcom-Delaware shares of common stock will be listed on NASDAQ under the symbol “AVGO,” the same symbol under which your Broadcom-Singapore ordinary shares are currently listed.
Approval of the Scheme of Arrangement by the Singapore Court
Broadcom-Singapore has made an institution holding yourapplication to the Singapore Court for an order to convene the Special Meeting. Subsequent and subject to approval of the Broadcom Redomiciliation Proposal, Broadcom-Singapore must apply to the Singapore Court for the Singapore Court Order. If (i) the Singapore Court Order is granted, and (ii) the conditions to closing contained in the Implementation Agreement are satisfied, the Scheme of Arrangement will become effective on the date that we lodge a copy of the Singapore Court Order with ACRA.
The approval by the shareholders of Broadcom-Singapore and/or the Singapore Court of the Scheme of Arrangement shall remain valid notwithstanding any change in the business or financial condition of, or any transactions undertaken by us (including any changes arising as a result of our proposed acquisition of Qualcomm).
The Scheme of Arrangement may be amended, modified or supplemented at any time before or after its approval by the shareholders of Broadcom-Singapore at the Special Meeting. However, after approval, no amendment, modification or supplement may be made or effected that legally requires further approval by Broadcom-Singapore shareholders without obtaining such approval.
Effective Date of the Transaction
In accordance with the terms of the Implementation Agreement, Broadcom-Singapore, without obtaining any further approval of Broadcom-Singapore shareholders, may select when it will lodge a copy of the Singapore Court Order with ACRA, and, therefore, the effective time of the Transaction (including the Scheme of Arrangement), provided it is lodged with ACRA on or prior to the Long-Stop Date, notwithstanding Broadcom-
Singapore shareholder or Singapore Court approval of the Scheme of Arrangement and/or the satisfaction of all of the other conditions to the Transaction.
Subject to the satisfaction of the conditions set forth in the Implementation Agreement, we will be required to lodge the Singapore Court Order with ACRA by the Long-Stop Date. However, if the conditions set forth in the Implementation Agreement are not satisfied by such date, the Scheme of Arrangement will lapse pursuant to its terms and the Transaction will not be effected.
In connection with regulatory approvals relating to our November 2017 acquisition of Brocade Communication Systems Inc. (“Brocade”), we agreed to initiate a process to separate and divest the Brocade SAN business if we do not complete the Transaction within one year after the Brocade acquisition. Any such divestiture could materially and adversely affect our business and results of operations.
In connection with the Transaction, we expect Broadcom-Delaware and Broadcom US Sub to enter into supplemental indentures to the indentures governing the 2017 Notes that are currently guaranteed by Broadcom-Singapore and the Partnership and issued by Broadcom Cayman Finance Limited (“Broadcom Cayman Finance”) and Broadcom Corporation. We presently expect the supplemental indentures will provide that Broadcom-Delaware and Broadcom US Sub will guarantee the obligations of the issuers under the indentures governing the 2017 Notes.
Once the Broadcom Redomiciliation Proposal is approved by the requisite Scheme Shareholders and the Singapore Court, and the Singapore Court Order is lodged with ACRA, the Scheme of Arrangement becomes effective and will be binding on all shareholders of Broadcom. Holders of Broadcom-Singapore ordinary shares and special preference shares may file an objection with the Singapore Court against the approval of the Scheme of Arrangement, but no appraisal or dissenting rights are available to such holders in connection with a scheme of arrangement effected under Singapore law.
Accounting Treatment of the Transaction
Under U.S. GAAP, the Scheme of Arrangement represents a transaction between entities under common control. Assets and liabilities are transferred at carrying value between entities under common control. Accordingly, the assets and liabilities of Broadcom-Delaware will be reflected at the same carrying amounts as in the accounts of Broadcom-Singapore at the effective time of the Scheme of Arrangement.
Time, Place, Date and Purpose.
By order of the Singapore Court, the Special Meeting will be held on March 23, 2018 at 8:00 a.m. Pacific time at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A.
At the Special Meeting, Broadcom-Singapore’s board of directors will ask the holders of ordinary shares and special preference 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 2018 AGM unless you obtain a legal proxy from DTC.
Beneficial Owners
If you are a beneficial ownercapital of shares, you have the right to instruct the broker, bank or other nominee that holds your shares on howBroadcom-Singapore to vote them. Your broker, bank or nomineeto approve the Scheme of Arrangement. If the Scheme of Arrangement is approved and becomes effective, it will send you a voting instruction form for youeffect the Transaction, pursuant 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 2, 2018. If you wish to change or revoke your voting instructions, you must contact your broker, bank or other nominee holding your ordinary shares of Broadcom-Singapore will be transferred to Broadcom-Delaware and follow their instructions. You may not vote youryou will receive, on aone-for-one basis, new shares in person at the 2018 AGM unless you obtain a legal proxy from your broker, bank or other nominee giving you the right to vote the shares.of common stock of Broadcom-Delaware for each ordinary share of Broadcom-Singapore that has been transferred.
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 2018 AGM, you must have been a holder of ordinary shares as at, and with effect from the
Record Date. If you become a beneficial owner of ordinary shares after the
The Record Date but beforefor determining the meeting date and you wish to vote your shares at the 2018 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.
Special Voting Shares
Only the Trustee may vote Special Voting Shares, either by proxy or in person at the 2018 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 how 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 2018 AGM. You may not vote at or attend the 2018 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 2018 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 2018 AGM. If you receive ordinary shares upon exchange of your Restricted Units and you wish to vote those shares at the 2018 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 4, 2018, youScheme Shareholders who are entitled to attendvote at the 2018 AGM. If you are a beneficial owner of shares held in “street name”, in order to attend the 2018 AGM you will need to bring a letter or recent account statement from that broker, bank or other nominee that confirms 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.Special Meeting is March 5, 2018.
Holders of Restricted Units wishing to attend the 2018 AGM must bring a legal proxy from the Trustee in respectRecommendation of the corresponding numberBoard of Special Voting Shares, as well as picture identification, such as a valid driver’s license or passport,Directors
The Broadcom-Singapore board of directors unanimously recommends that Broadcom-Singapore shareholders vote“FOR” the Broadcom Redomiciliation Proposal.
A quorum is required for purposesthe transaction of personal identification.
Quorum. Representationbusiness at the 2018 AGM of shareholders entitled to vote,Special Meeting. The presence, in person or by proxy, or representative, andat the Special Meeting of the Scheme Shareholders as of the Record Date holding amongbetween them at least a majority of allthe total number of issued and outstandingBroadcom-Singapore ordinary shares and special preference shares will constitute a quorum.
To be approved, the Broadcom Redomiciliation Proposal must receive the affirmative vote of (i) a majority in number of the Scheme Shareholders present and voting, either in person or by proxy, at the Special Voting Shares, treatedMeeting and (ii) not less than 75% of the issued Broadcom-Singapore ordinary shares and special preference shares held by the Scheme Shareholders present and voting, either in person or by proxy, at the Special Meeting.
Each holder of Broadcom-Singapore ordinary shares or special preference shares represented in person or by proxy at the Special Meeting is entitled to one vote per Broadcom-Singapore ordinary share or special preference share owned as of the Record Date.
As of March 5, 2018, the Record Date, there were 410,751,985 ordinary shares and 22,090,052 special preference shares in the capital of Broadcom-Singapore outstanding and we had 282 shareholders of record.
Selected Historical Financial Data
The following tables set forth the selected historical consolidated financial data for Broadcom-Singapore and Broadcom Cayman L.P. for each of the last five full fiscal years, which have been derived from our audited consolidated financial statements.
The selected historical financial data below should be read in conjunction with the consolidated financial statements and their accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report onForm 10-K for the fiscal year ended October 29, 2017, which is incorporated by reference herein. Historical financial information may not be indicative of Broadcom-Delaware’s future performance.
We have included no data for Broadcom-Delaware because this entity was incorporated on January 17, 2018 and was not in existence during any of the periods shown below.
Fiscal Year Ended | ||||||||||||||||||||
October 29, 2017 | October 30, 2016 | November 1, 2015 | November 2, 2014 | November 3, 2013 | ||||||||||||||||
(In millions, except per share amounts) | ||||||||||||||||||||
Statement of Operations Data:(1) | ||||||||||||||||||||
Net revenue | $ | 17,636 | $ | 13,240 | $ | 6,824 | $ | 4,269 | $ | 2,520 | ||||||||||
Cost of products sold: | ||||||||||||||||||||
Cost of products sold(2) | 6,593 | 5,295 | 2,750 | 1,911 | 1,251 | |||||||||||||||
Purchase accounting effect on inventory | 4 | 1,185 | 30 | 210 | 9 | |||||||||||||||
Amortization of acquisition-related intangible assets | 2,511 | 763 | 484 | 249 | 61 | |||||||||||||||
Restructuring charges(3) | 19 | 57 | 7 | 22 | 1 | |||||||||||||||
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Total cost of products sold | 9,127 | 7,300 | 3,271 | 2,392 | 1,322 | |||||||||||||||
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Gross margin | 8,509 | 5,940 | 3,553 | 1,877 | 1,198 | |||||||||||||||
Research and development | 3,292 | 2,674 | 1,049 | 695 | 398 | |||||||||||||||
Selling, general and administrative(2) | 787 | 806 | 486 | 407 | 222 | |||||||||||||||
Amortization of acquisition-related intangible assets | 1,764 | 1,873 | 249 | 197 | 24 | |||||||||||||||
Restructuring, impairment and disposal charges (3) | 161 | 996 | 137 | 140 | 2 | |||||||||||||||
Litigation settlements(4) | 122 | — | — | — | — | |||||||||||||||
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Total operating expenses | 6,126 | 6,349 | 1,921 | 1,439 | 646 | |||||||||||||||
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Operating income (loss)(5) | 2,383 | (409 | ) | 1,632 | 438 | 552 | ||||||||||||||
Interest expense(6) | (454 | ) | (585 | ) | (191 | ) | (110 | ) | (2 | ) | ||||||||||
Loss on extinguishment of debt(7) | (166 | ) | (123 | ) | (10 | ) | — | — | ||||||||||||
Other income, net | 62 | 10 | 36 | 14 | 18 | |||||||||||||||
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Income (loss) from continuing operations before income taxes | 1,825 | (1,107 | ) | 1,467 | 342 | 568 | ||||||||||||||
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Provision for income taxes(8) | 35 | 642 | 76 | 33 | 16 | |||||||||||||||
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Income (loss) from continuing operations | 1,790 | (1,749 | ) | 1,391 | 309 | 552 | ||||||||||||||
Loss from discontinued operations, net of income taxes(9) | (6 | ) | (112 | ) | (27 | ) | (46 | ) | — | |||||||||||
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Net income (loss) | 1,784 | (1,861 | ) | 1,364 | 263 | 552 | ||||||||||||||
Net income (loss) attributable to noncontrolling interest(10) | 92 | (122 | ) | — | — | — | ||||||||||||||
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Net income (loss) attributable to ordinary shares | $ | 1,692 | $ | (1,739 | ) | $ | 1,364 | $ | 263 | $ | 552 | |||||||||
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Income (loss) per ordinary share (diluted): | ||||||||||||||||||||
Income (loss) per share from continuing operations | $ | 4.03 | $ | (4.57 | ) | $ | 4.95 | $ | 1.16 | $ | 2.19 | |||||||||
Loss per share from discontinued operations | (0.01 | ) | (0.29 | ) | (0.10 | ) | (0.17 | ) | — | |||||||||||
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Net income (loss) per share | $ | 4.02 | $ | (4.86 | ) | $ | 4.85 | $ | 0.99 | $ | 2.19 | |||||||||
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Cash dividend declared and paid per ordinary share | $ | 4.08 | $ | 1.94 | $ | 1.55 | $ | 1.13 | $ | 0.80 |
October 29, 2017 | October 30, 2016 | November 1, 2015 | November 2, 2014 | November 3, 2013 | ||||||||||||||||
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Balance Sheet Data:(1) | ||||||||||||||||||||
Cash and cash equivalents(11) | $ | 11,204 | $ | 3,097 | $ | 1,822 | $ | 1,604 | $ | 985 | ||||||||||
Total assets | $ | 54,418 | $ | 49,966 | $ | 10,515 | $ | 10,376 | $ | 3,415 | ||||||||||
Debt and capital lease obligations | $ | 17,569 | $ | 13,642 | $ | 3,872 | $ | 5,395 | $ | 2 | ||||||||||
Total shareholders’ equity | $ | 23,186 | $ | 21,876 | $ | 4,714 | $ | 3,243 | $ | 2,886 | ||||||||||
Other Financial Data: | ||||||||||||||||||||
Earnings to fixed charges ratio(12) | 4.20 | — | 7.60 | 3.70 | 94.40 |
Shareholders’ equity, partners’ capital and the limited partners’ noncontrolling interest in Broadcom-Singapore are the primary areas of difference between the consolidated financial statements of Broadcom-Singapore and those of the Partnership. The following table sets forth certain Partnership data, as well as these primary differences.
Fiscal Year Ended | ||||||||||||||||||||
October 29, 2017 | October 30, 2016 | November 1, 2015 | November 2, 2014 | November 3, 2013 | ||||||||||||||||
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Partnership Data: | ||||||||||||||||||||
General Partner’s interest in net income (loss) | $ | 1,692 | $ | (2,116 | ) | $ | — | $ | — | $ | — | |||||||||
Limited Partners’ interest in net income (loss) | $ | 92 | $ | (122 | ) | $ | — | $ | — | $ | — | |||||||||
Net income attributable to ordinary shareholders | $ | — | $ | 377 | $ | 1,364 | $ | 263 | $ | 552 | ||||||||||
Cash distribution paid per restricted exchangeable partnership unit | $ | 4.08 | $ | 1.50 | $ | — | $ | — | $ | — | ||||||||||
Cash distribution paid to General Partner | $ | 1,756 | $ | 594 | $ | — | $ | — | $ | — | ||||||||||
Cash dividends paid per ordinary share | $ | — | $ | 0.44 | $ | 1.55 | $ | 1.13 | $ | 0.80 | ||||||||||
Total partners’ capital/shareholders’ equity | $ | 23,083 | $ | 21,876 | $ | 4,714 | $ | 3,243 | $ | 2,886 |
(1) | On February 1, 2016, we acquired Broadcom Corporation for total consideration of approximately $35.7 billion. On May 5, 2015, we acquired Emulex Corporation (“Emulex”) for total consideration of approximately $587 million. On August 12, 2014, we acquired PLX Technology, Inc. for total consideration of approximately $308 million. On May 6, 2014, we acquired LSI Corporation (“LSI”) for total consideration of approximately $6.5 billion. On June 28, 2013, we acquired CyOptics, Inc. for total consideration of approximately $380 million. The results of operations of the acquired companies and estimated fair value of assets acquired and liabilities assumed were included in our financial statements from the respective acquisition dates. |
(2) | We incurred acquisition-related costs of $98 million, $139 million, $74 million and $74 million in fiscal years 2017, 2016, 2015 and 2014, respectively, of which $97 million, $138 million, $71 million and $67 million were presented as part of operating expenses, and the remainder was presented as part of cost of products sold. |
(3) | Fiscal years 2017, 2016, 2015 and 2014 restructuring charges primarily reflect actions taken to implement planned cost reduction and restructuring activities in connection with the acquisitions. We also incurred $56 million, $590 million and $61 millionin-process research and development and other asset impairment charges in fiscal years 2017, 2016 and 2015, respectively. |
(4) | Primarily represents litigation charges associated with certain legal settlement agreements. |
(5) | Includes share-based compensation expense of $920 million, $664 million, $232 million, $153 million and $77 million for fiscal years 2017, 2016, 2015, 2014 and 2013, respectively. Share-based compensation expense includes the impact of equity awards assumed as part of the acquisitions, as well as the impact of special long-term compensation and retention equity awards. |
(6) | Interest expense in fiscal years 2017 and 2016 includes coupon and contractual interest, accretion of the original issue discount, amortization of debt issuance costs related to our outstanding debt and debt modification fees related to financing the Broadcom Merger. Interest expense in fiscal years 2015 and 2014 includes interest on the 2.0% Convertible Senior Notes due 2021. |
(7) | Loss on extinguishment of debt was primarily due to the debt issuance costwrite-off that resulted from repayments of certain debt. |
(8) | Our provision for income taxes for fiscal year 2017 primarily relates to income from continuing operations, partially offset by $273 million of excess tax benefits from share-based awards recognized upon adoption of an accounting standards update. Our provision for income taxes for fiscal year 2016 included $93 million of expenses related to the undistributed earnings of foreign operations that were previously considered indefinitely reinvested, partially offset by income tax benefits from losses on continuing operations and the recognition of previously unrecognized tax benefits as a result of audit settlements. For fiscal years 2015, 2014, 2013 our provision for income taxes fluctuates mainly based on changes in jurisdictional mix of income. |
(9) | During fiscal years 2016, 2015 and 2014, we sold certain businesses related to the acquisitions of Broadcom Corporation, Emulex and LSI for a gain of $36 million, a loss of $14 million and a gain of $18 million, respectively. |
(10) | As a result of Broadcom-Singapore’s controlling interest in the Partnership, we consolidate the financial results of the Partnership and present a noncontrolling interest for the portion of the Partnership it does not own in our consolidated financial statements. This represents the portion of net income (loss) attributable to the economic interest in the Partnership owned by the limited partners. |
(11) | The Partnership’s cash and cash equivalents at October 29, 2017 and October 30, 2016 were $11.0 billion and $3.0 billion, respectively. The balance differences result from the timing of capital contributions from Broadcom-Singapore to the Partnership and distributions from the Partnership to Broadcom-Singapore. |
(12) | Fixed charges consist of interest expense on all indebtedness plus amortization of debt issuance costs and accretion of debt discount, capitalized interest and an estimate of interest expense within rental expense. Earnings consist of income from continuing operations before income taxes plus fixed charges and amortization of capitalized interest less capitalized interest. Earnings for the fiscal year 2016 were inadequate to cover fixed charges as the coverage deficiency was $1,123 million. |
Market Price and Dividend Policy
Broadcom-Singapore ordinary shares are traded on NASDAQ under the symbol “AVGO.” As of March 5, 2018, the Record Date, we had 281 record holders of our ordinary shares. The high and low sales price per ordinary share and the dividend paid per ordinary share for the following periods were as follows:
Price Range | ||||||||
Fiscal Quarter | High | Low | ||||||
Quarter ended February 1, 2016 | $ | 149.72 | $ | 115.21 | ||||
Quarter ended May 1, 2016 | $ | 159.65 | $ | 114.25 | ||||
Quarter ended July 31, 2016 | $ | 167.60 | $ | 139.18 | ||||
Quarter ended October 30, 2016 | $ | 179.42 | $ | 158.75 | ||||
Quarter ended January 29, 2017 | $ | 205.79 | $ | 160.62 | ||||
Quarter ended April 30, 2017 | $ | 227.75 | $ | 198.86 | ||||
Quarter ended July 30, 2017 | $ | 258.49 | $ | 219.91 | ||||
Quarter ended October 29, 2017 | $ | 259.36 | $ | 231.53 | ||||
Quarter ended January 31, 2018 | $ | 285.68 | $ | 237.01 |
On November 1, 2017, the last trading day before the public announcement of the Transaction, the closing price of the Broadcom-Singapore ordinary shares on NASDAQ was $259.29 per share. On March 8, 2018, the most recent practicable date before the date of this proxy statement, the closing price of the Broadcom-Singapore ordinary shares on NASDAQ was $246.95 per share.
The following dividends were paid to holders of Broadcom-Singapore ordinary shares and LP Units during fiscal years 2016 and 2017:
Record Date | Paid Date | Dividend per Share / LP Unit | ||||
March 18, 2016 | March 31, 2016 | $ | 0.49 | |||
June 17, 2016 | June 30, 2016 | $ | 0.50 | |||
September 19, 2016 | September 30, 2016 | $ | 0.51 | |||
December 16, 2016 | December 30 2016 | $ | 1.02 | |||
March 20, 2017 | March 31, 2017 | $ | 1.02 | |||
June 19, 2017 | June 30, 2017 | $ | 1.02 | |||
September 19, 2017 | September 29, 2017 | $ | 1.02 | |||
December 19, 2017 | December 29, 2017 | $ | 1.75 |
Broadcom-Singapore and the Partnership paid dividends and distributions totaling approximately $750 million during fiscal year 2016. In fiscal year 2017, Broadcom-Singapore and the Partnership have paid dividends and distributions totaling approximately $1,745 million and $1,848 million, respectively. During fiscal year 2017, the Partnership distributions included a $103 million distribution to Broadcom-Singapore, as General Partner, for reimbursement of expenses the General Partner incurred on behalf of the Partnership and its subsidiaries.
The Board reviews our dividend policy annually, targeting a projected quarterly per share dividend amount for the full fiscal year.
Future dividends, if any, on the Broadcom-Singapore ordinary shares, LP Units and/or Broadcom-Delaware shares of common stock will be at the discretion and approval of the Board and subject to its continuing determination that they are in our best interests. Future dividend payments will also depend upon factors such as our earnings levels, capital requirements, contractual restrictions, cash position, overall financial condition and any other factors deemed relevant by the Board. There can be no assurance that a dividend will be proposed or declared in the future, or as to the amount of any such dividends or other distributions of capital.
Also, because we are a holding company, our ability to pay cash dividends on Broadcom shares may be limited by restrictions on our ability to obtain sufficient funds through dividends from subsidiaries, including restrictions under the terms of agreements governing our indebtedness.
Unaudited Summary Pro Forma Financial Information
Full pro forma consolidated financial statements for Broadcom-Delaware to reflect the Transaction are not presented in this proxy statement because limited adjustments (as presented in the table on page 70 of this proxy statement) are required to reflect the impact of the Transaction to the audited consolidated financial statements of Broadcom-Singapore as of and for the fiscal year ended October 29, 2017. These pro forma adjustments are solely to reflect the mandatory exchange of LP Units of the Partnership for shares of common stock of Broadcom-Delaware, which is expected to be completed as part of the Transaction as described in this proxy statement.
Before you decide how to vote, you should consider carefully the following risk factors in addition to the other information contained in this proxy statement and the documents incorporated by reference, including, without limitation, our Annual Report onForm 10-K for the fiscal year ended October 29, 2017 (including the risk factors contained therein) and our subsequent filings with the SEC.
Your rights as a single class,shareholder will change as a result of the Transaction.
Due to the differences between Delaware law and Singapore law and differences between the governing documents of Broadcom-Delaware and Broadcom-Singapore, we are unable to adopt governing documents for Broadcom-Delaware that are identical to the governing documents for Broadcom-Singapore. We have sought to preserve in the certificate of incorporation and bylaws of Broadcom-Delaware a similar allocation of rights and powers between the shareholders and our board of directors that exists under Broadcom-Singapore’s constitution. Nevertheless, Broadcom-Delaware’s proposed certificate of incorporation and bylaws differ from Broadcom-Singapore’s constitution, both in form and substance, and your rights as a shareholder will change.
For a description of these differences, please see the comparison chart of your rights as an ordinary shareholder of Broadcom-Singapore against your rights as a common stockholder of Broadcom-Delaware, located in “Comparison of Rights of Singapore Shareholders and Delaware Stockholders.”
Our cash tax costs are likely to increase as a result of the Transaction, but the increase is not readily or precisely quantifiable.
The United States corporate income tax regime (including applicable statutory tax rates) changed significantly due to the enactment of the 2017 Tax Reform Act. There is significant uncertainty as to how the 2017 Tax Reform Act will be implemented from an accounting standpoint. However, following the Transaction, we expect the cash tax costs and overall effective cash tax rate of the Broadcom group (which we define as cash tax costs as a percentage ofnon-GAAP income before tax) to increase due to Broadcom-Delaware becoming the parent company of the Broadcom group. We presently expect that our overall effective cash tax rate following the Transaction will be in the range of 9-11%. Due to the uncertainty described above, we do not believe it is practicable to reconcile the foregoing amount to an effective tax rate under GAAP.
We also expect to incur additional cash tax costs as a result of the 2017 Tax Reform Act that would apply irrespective of the Transaction. Based on our initial analysis, we believe the 2017 Tax Reform Act will result in a mandatory deemed repatriation tax of between $1.6 billion and $2.6 billion on certain of ournon-US earnings, without taking into account available deductions and credits. The amount and timing of installment payments of this deemed repatriation tax depend, in part, on when the Transaction becomes effective. However, this tax liability will be payable over eight years, with the amount of payments more heavily weighted to the latter years of this period. We presently expect these installment payments to start in our fiscal year 2019.
Our preliminary estimates of the overall cash tax impact of the Transaction, as well as the amount and timing of installment payments of the mandatory deemed repatriation tax under the 2017 Tax Reform Act, are expected to change as we continue to refine our analysis and as additional guidance becomes available, particularly with respect to the 2017 Tax Reform Act. There is no assurance that the final determination of our income tax liability will not be materially different than what is reflected in our income tax provisions and accruals and in the estimated ranges provide above. Significant judgment is required to constitute a quorum.
Proxies. Ordinary sharesdetermine the recognition and Special Voting Shares represented by proxies that are properly executed and received by us in accordance with the instructions set forthmeasurement of tax liabilities prescribed in the Noticerelevant accounting guidance for uncertainty in income taxes.
The effective time of the Transaction is subject to change.
Under the terms of the Implementation Agreement, once the Scheme Shareholders and the Singapore Court have approved the Scheme of Arrangement, Broadcom-Singapore, without obtaining any further approval of its shareholders, may select the effective time of the Transaction (including the Scheme of Arrangement), provided
the effective time occurs on or before the Long-Stop Date. We intend to implement the Transaction at a time that is beneficial to Broadcom and its shareholders, considering our financial and strategic objectives. Factors that will be voted byconsidered in determining the individuals named therein—Hock E. Tan, Thomas H. Krause, Jr. or Mark D. Brazeal oreffective date of the Transaction will include tax considerations under, among other things, the 2017 Tax Reform Act, and the status of any other significant pending corporate events, such as the potential acquisition of them,Qualcomm. As a result, the effective time of the Transaction may be a significant time after the Special Meeting and is subject to change.
The expected benefits of the Transaction may not be realized.
There can be no assurance that all of the anticipated benefits of the Transaction will be achievable, particularly as the achievement of the benefits are in many important respects subject to factors that we do not and cannot control, including the reaction of third parties with full powerwhom we enter into contracts and do business and the reactions of substitution (together, the “Proxy Holders”)—at the 2018 AGM in accordance with the shareholders’ instructions set forthinvestors.
A delay in the proxy. A Proxy Holder needconsummation of the Transaction may require Broadcom-Singapore to divest certain business operations.
In connection with regulatory approvals relating to the completion of our November 2017 acquisition of Brocade, we agreed to initiate a process to separate and divest the Brocade SAN business if we do not alsocomplete the Transaction within one year after the Brocade acquisition. Any such divestiture could materially and adversely affect our business and results of operations.
The Transaction will result in additional direct and indirect costs, even if it is not completed.
We will incur additional costs as a result of the Transaction, although we do not expect these costs to be a shareholder. The collection, usematerial. We expect to incur attorneys’ fees, accountants’ fees, filing and disclosure by usother regulatory fees, mailing expenses, proxy solicitation fees and our agents, representatives and service providers of a shareholder’s, and their proxies’ or representatives’, personal datafinancial printing expenses in connection with the 2018 AGM and related solicitationTransaction, even if the Scheme of proxiesArrangement is governednot approved or completed. The Transaction also may negatively affect us by Article 102diverting attention of our Constitution.management and employees from our operating business during the period of implementation and by increasing other administrative costs and expenses.
If
THE BROADCOM REDOMICILIATION PROPOSAL
As explained in more detail below, the Scheme of Arrangement on which we are asking you sign and return yourto vote, in connection with the other steps of the Transaction described in this proxy but do not indicate how your ordinary shares arestatement, will restructure our corporate group to cause the parent company of the group to be voted, then shares representeda Delaware corporation. The Transaction cannot occur without the Scheme Shareholders’ approval of the Broadcom Redomiciliation Proposal.
On November 1, 2017, the Board held a board meeting to, among other things, discuss a potential transaction pursuant to which a publicly traded, Delaware corporation would become the ultimate parent of the Broadcom group. The intention to pursue a transaction to create a U.S. parent company was publicly announced on November 2, 2017. On January 29, 2018, the Board approved the Transaction and the entry by proxiesBroadcom-Singapore into the Implementation Agreement. On March 9, 2018, we petitioned the Singapore Court to order, among other things, the convening of the Special Meeting to approve the Scheme of Arrangement. We will be voted byhold the Proxy HoldersSpecial Meeting to approve the Scheme of Arrangement on March 23, 2018. If we obtain the necessary shareholder approvals, the Singapore Court will hold a second hearing to approve the Scheme of Arrangement. Assuming we receive the necessary approvals of the Scheme of Arrangement from Broadcom-Singapore’s shareholders and the Singapore Court and the other conditions to consummate the Transaction are satisfied, we will lodge the Singapore Court’s order approving the Scheme of Arrangement with ACRA on or prior to the Long-Stop Date, at which time the Scheme of Arrangement will become effective and binding in accordance with its terms and conditions.
As a result of the Transaction, the ordinary shareholders of Broadcom-Singapore will become stockholders of Broadcom-Delaware and such stockholders’ rights will be governed by Delaware law and Broadcom-Delaware’s certificate of incorporation and bylaws, in substantially the forms attached hereto as Annex C and Annex D, respectively.
Background and Reasons for the Transaction
We and our Board’s recommendationspredecessor, Avago Technologies Limited, have been incorporated in Singapore since 2015 and 2005, respectively. While our incorporation in Singapore has served us and our shareholders well, there are compelling reasons that support restructuring our corporate group to cause the parent company of our group to be an entity organized in the United States at this time.
We are a multi-national business with operations in many countries. However, our operations have become more focused in the United States, both through organic growth and as a result of multiple acquisitions of U.S.-based companies, and we expect to continue to invest in our operations in the United States. Through our existing subsidiaries, we already have a substantial presence in the United States and it is important to note that a majority of Broadcom’s employees and a significant portion of operating assets are in the United States. Further, we believe that a significant majority of our shareholders are U.S.-based institutional investors. As a result, we think it makes sense to have our parent company based in the United States. In addition, the incremental tax cost of being a U.S.-based multinational corporation has decreased materially as a result of U.S. corporate tax reform. The 2017 Tax Reform Act will also allow us to tax-efficiently deploy our capital in the United States in a way that was not practicable prior to the enactment of this legislation.
We also believe that the shareholder returns we can drive by continuing to execute our acquisition strategy far outweigh the additional income taxes we would expect to pay as a result of our ultimate parent company being incorporated in the United States. Further, as a U.S. corporation, our future acquisitions in the United States would not be subject to certain regulatory processes required for acquisitions by foreign corporations. Following a thorough review, we have determined that having our ultimate parent company incorporated in the United States will increase our opportunities for growth and is best for us, our shareholders and our employees.
After considering various factors, our board of directors determined that it was advisable to proceed with the Transaction. Our board of directors’ determination that Delaware is the preferred jurisdiction of incorporation of the parent of the Broadcom group was based on many factors, including the following:
We cannot assure you that the anticipated benefits of the Transaction will be realized. In addition, despite the potential benefits described above, the Transaction will expose you and us to potential risks, including relating to future income tax policy in the United States. Please see the discussion under “Risk Factors.”
The Board has considered both the potential advantages of the Transaction and these potential risks and has unanimously approved the Scheme of Arrangement and recommends that shareholders vote for the approval of the Scheme of Arrangement.
The Scheme of Arrangement may be amended, modified or supplemented at any time before or after its approval by the shareholders of Broadcom-Singapore at the Special Meeting. However, after approval, no amendment, modification or supplement may be made or effected that legally requires further approval by Broadcom-Singapore shareholders without obtaining such approval.
Conditions to Consummation of the Transaction
The Transaction will not be completed unless the following conditions are satisfied:
Approval of the Scheme of Arrangement by the Singapore Court
Broadcom-Singapore has made an application to the Singapore Court for an order to convene the Special Meeting. Subsequent and subject to approval of the Broadcom Redomiciliation Proposal by the shareholders of Broadcom-Singapore at the Special Meeting, Broadcom-Singapore must apply for the Singapore Court Order for its sanction of the Scheme of Arrangement. If (i) the Singapore Court Order is granted, and (ii) the conditions to closing contained in the Implementation Agreement are satisfied, the Scheme of Arrangement will become effective on the date that we lodge a copy of the Singapore Court Order with ACRA.
The approval by the shareholders of Broadcom-Singapore and/or the Singapore Court of the Scheme of Arrangement shall remain valid notwithstanding any change in our business or financial condition or any transactions undertaken by us (including any changes arising as a result of our proposed acquisition of Qualcomm).
Federal Securities Law Consequences; Resale Restrictions
The issuance of Broadcom-Delaware shares of common stock to Broadcom-Singapore shareholders in connection with the Transaction will not be registered under the Securities Act of 1933 (the “Securities Act”). Section 3(a)(10) of the Securities Act exempts securities issued in exchange for one or more outstanding securities from the general requirement of registration where the terms and conditions of the issuance and exchange of such securities have been approved by any court of competent jurisdiction, after a hearing upon the fairness of the terms and conditions of the issuance and exchange at which all persons to whom such securities will be issued have a right to appear and to whom adequate notice of the hearing has been given. The date, time and place of the hearing by the Singapore Court for the approval and confirmation of the Scheme of Arrangement (the “Scheme Approval Hearing”) are not yet known. Subsequent and subject to shareholder approval of the Broadcom Redomiciliation Proposal, Broadcom-Singapore will promptly apply to the Singapore Court for its approval and confirmation of the Scheme of Arrangement. Broadcom-Singapore intends to provide notice to its shareholders of the date, time and place of the Scheme Approval Hearing, once determined, so that shareholders can have the opportunity to appear at the hearing. Broadcom-Singapore currently intends to provide such notice through a press release distributed through press services and newswires in accordance with NASDAQ rules which would be filed on a Form8-K and a written notice to be mailed to Broadcom-Singapore shareholders not less than one week prior to the date of the Scheme Approval Hearing and, immediately upon the distribution of the foregoing materials, to release for publication notice in newspapers of national circulation in each of the United States and Singapore.
In determining whether it is appropriate to authorize the Scheme of Arrangement, the Singapore Court will consider whether the terms and conditions of the exchange of shares pursuant to the Scheme of Arrangement are fair to Broadcom-Singapore shareholders and we will have advised the Singapore Court before the hearing that we will rely on the Section 3(a)(10) exemption based on its approval of the Scheme of Arrangement. The Broadcom-Delaware shares of common stock issued to Broadcom-Singapore shareholders in connection with the Transaction will be freely transferable, except for restrictions applicable to certain “affiliates” of Broadcom-Singapore under the Securities Act, as follows:
Management does not knowsuch time will be permitted to resell any Broadcom-Delaware common stock shares they receive pursuant to the Transaction in the manner permitted by Rule 144. In computing the holding period of any mattersthe Broadcom-Delaware shares of common stock for the purposes of Rule 144(d), such persons will be permitted to “tack” the holding period of their Broadcom-Singapore ordinary shares held prior to the consummation of the Transaction.
Persons who may be deemed to be presented ataffiliates of Broadcom-Singapore and Broadcom-Delaware for these purposes generally include individuals or entities that control, are controlled by, or are under common control with, Broadcom-Singapore or Broadcom-Delaware, and would generally not be expected to include shareholders who are not executive officers, directors or significant shareholders of Broadcom-Singapore or Broadcom-Delaware.
We have not filed a registration statement with the 2018 AGM other than those set forthSEC covering any resales of the Broadcom-Delaware shares of common stock to be received by Broadcom-Singapore’s shareholders in this Proxy Statementconnection with the Transaction. Broadcom-Delaware intends to file certain post-effective amendments to existing effective registration statements of Broadcom-Singapore concurrently with the completion of the Transaction. Broadcom-Delaware also intends to file a registration statement which will include a consent solicitation statement of the Partnership and a prospectus of Broadcom-Delaware relating to the approval of the Mandatory Exchange Amendment and in order to register the accompanying Notice, nor have we received noticeshares 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 matterBroadcom-Delaware to be properly presented at an annual general meeting of shareholders, if other matters should properly come before the 2018 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 eachissued to limited partners of the proposalsPartnership in connection therewith under the Securities Act.
Upon consummation of the Transaction, the shares of common stock of Broadcom-Delaware will be deemed to be voted upon at the 2018 AGM. The vote required for each proposal is as follows:
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Proposal 4 is being proposed to shareholders as required pursuant toregistered under Section 14A12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), by virtue ofRule 12g-3 under the Exchange Act, without the filing of any Exchange Act registration statement.
Effective Date of the Transaction
Assuming we receive the necessary approvals from Broadcom-Singapore’s shareholders and the Singapore Court and the other conditions to consummate the Transaction are satisfied, we will lodge the Singapore Court’s order approving the Scheme of Arrangement with ACRA, at which time the Scheme of Arrangement will become effective and binding in accordance with its terms and conditions. We currently expect to complete the Transaction no later than May 6, 2018.
In accordance with the terms of the Implementation Agreement, Broadcom-Singapore, without obtaining any further approval of Broadcom-Singapore shareholders, may select the effective time of the Transaction (including the Scheme of Arrangement), provided the effective time occurs on or prior to the Long-Stop Date, notwithstanding Broadcom-Singapore shareholder or Singapore Court approval of the Scheme of Arrangement and/or the satisfaction of all of the other conditions to the Transaction.
Subject to the satisfaction of the conditions set forth in the Implementation Agreement, we will be required to lodge the Singapore Court Order with ACRA by the Long-Stop Date. However, if the conditions set forth in the Implementation Agreement are not satisfied by such date, the Scheme of Arrangement will lapse pursuant to its terms and the Transaction will not be effected.
Management of Broadcom-Delaware
When the Transaction is completed, the executives and directors of Broadcom-Singapore immediately prior to the completion of the Transaction will be the executives and directors of Broadcom-Delaware. Broadcom-Delaware’s certificate of incorporation and bylaws, as they will be in effect after the Transaction, provide for a single class of directors, just as Broadcom-Singapore currently has, and Broadcom-Delaware’s directors will be subject tore-election at the next annual meeting of stockholders of Broadcom-Delaware following the completion of the Transaction.
Broadcom-Singapore’s constitution requires it to indemnify, to the fullest extent permitted by law, any director, alternate director, officer or trustee acting in relation to any of the affairs of the company against all liabilities incurred or suffered by such person as a director or officer, including the costs of defending any proceedings (including civil, criminal, investigative or administrative proceedings), provided that they are not indemnified for any liability arising from (a) accounting of profits made from the purchase or sale by an indemnitee of securities of Broadcom-Singapore, (b) knowingly fraudulent or deliberately dishonest conduct or willful misconduct, (c) any liability that cannot be indemnified by reason of section 172 of the Singapore Companies Act, (d) a breach of such indemnitee’s duty of loyalty, or (e) any payment made under a valid and collectible insurance policy, (f) indemnification is not lawful under the Singapore Companies Act or (g) any
proceeding initiated by such indemnitee. Broadcom-Singapore’s constitution also requires Broadcom-Singapore to pay reasonable expenses incurred in a proceeding in advance of the final disposition of any such proceeding, provided that the indemnified person undertakes to repay Broadcom-Singapore if it is ultimately determined that such person was not entitled to indemnification. In addition, Broadcom-Singapore has entered into indemnification agreements with each of its directors and executive officers.
Each of the Broadcom-Delaware certificate of incorporation and bylaws will provide that we are required to indemnify the directors and officers of Broadcom-Delaware, in each case to the fullest extent permitted by Delaware law. The Broadcom-Delaware bylaws will also obligate us to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under Delaware law. We have entered into agreements with the Broadcom-Singapore directors, officers and other employees and expect to enter into agreements to indemnify the Broadcom-Delaware directors, executive officers and other employees as determined by the Broadcom-Delaware board of directors. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding to the fullest extent permitted by applicable law.
In connection with the Transaction, we expect that we will continue to be a party to an indemnification agreement with each of Broadcom-Delaware’s directors and certain officers, as well as with individuals serving as directors or officers of our subsidiaries. The current indemnification agreements between Broadcom-Singapore and its officers and directors provide for the indemnification of, and advancement of expenses to, these persons. We expect that the indemnification and expense advancement to be provided to directors and certain officers of Broadcom-Delaware under the indemnification agreement will be the same or substantially similar to that afforded in the current indemnification agreements between Broadcom-Singapore and its officers and directors.
Interests of Certain Persons in the Transaction
Except for the indemnification arrangements described above, no person who has been a director or executive officer of Broadcom-Singapore at any time since the beginning of the last fiscal year, or any associate of any such person, has any substantial interest in the Transaction, except for any interest arising from his or her ownership of securities of Broadcom-Singapore or the Partnership.
Other than court approval of the Scheme of Arrangement, we are not aware of any other governmental approvals or actions that are required to complete the Transaction other than compliance with U.S. federal and state securities laws and Singapore and Delaware corporate law. We do not believe that any significant regulatory approvals will be required to effect the Transaction.
Once the Broadcom Redomiciliation Proposal is approved by the requisite Scheme Shareholders, is approved by the Singapore Court and the Singapore Court Order is lodged with ACRA, the Scheme of Arrangement becomes effective and will be binding on all shareholders of Broadcom. Holders of Broadcom-Singapore ordinary shares and special preference shares may file an objection with the Singapore Court against the approval of the Scheme of Arrangement, but no appraisal or dissenting rights are available to such holders in connection with a scheme of arrangement effected under Singapore law.
Action Required to Transfer Broadcom-Singapore Ordinary Shares and Receive Broadcom-Delaware Shares of Common Stock
Assuming the Transaction becomes effective, your Broadcom-Singapore ordinary shares will be exchanged for shares of common stock of Broadcom-Delaware, which will be issued to you in uncertificated book-entry form. Broadcom-Singapore stock certificates outstanding immediately prior to the effective time of the Transaction will no longer be evidence of title of Broadcom-Singapore ordinary shares represented by such certificates, and following the Transaction, will only represent the right to receive a corresponding number of uncertificated book-entry shares of common stock of Broadcom-Delaware. Our transfer agent will request that you return such share certificates for cancellation, together with a properly completed and executed letter of transmittal, in exchange for shares of common stock of Broadcom-Delaware following completion of the Transaction. Broadcom-Singapore ordinary shares held in “street name” through a bank, broker, custodian or other nominee will be automatically exchanged for uncertificated book-entry shares of common stock of Broadcom-Delaware without any action required on the part of the beneficial holder of such ordinary shares.
If the Transaction is completed, Broadcom-Delaware will assume and adopt Broadcom-Singapore’s existing rights and obligations in connection with awards granted under Broadcom-Singapore’s equity incentive plans and other similar equity awards. To the extent Broadcom-Singapore currently sponsors those equity incentive plans, then as of the consummation of the Transaction, Broadcom-Delaware will become the sponsor of the assumed equity incentive plans. The plans will be amended as necessary to give effect to the Transaction, including to provide (1) for the assumption and adoption by Broadcom-Delaware of the applicable equity incentive plans and the various rights, duties or obligations thereunder; (2) that shares of common stock of Broadcom-Delaware will be issued, held, available or used to measure benefits as appropriate under the plans, in lieu of ordinary shares of Broadcom-Singapore, including upon exercise of any options or upon vesting of restricted share units issued under those plans on aone-for-one basis; and (3) for the appropriate substitution of Broadcom-Delaware for Broadcom-Singapore in those plans. Shareholder approval of the Transaction will also constitute shareholder approval of the adoption and assumption of the equity incentive plans by Broadcom-Delaware as contemplated by this proxy statement.
Holders of outstanding options, restricted share units or other equity-based awards may be subject to tax as a result of the conversion of the underlying Broadcom-Singapore ordinary shares to Broadcom-Delaware shares of common stock as of the consummation of the Transaction, depending on the country where the holders are citizens or tax residents or the country where they resided during the life of such equity awards. In general, however, U.S. taxpayers should not recognize ordinary income at the time Broadcom-Delaware assumes their equity awards. Tax withholding and/or reporting may be required by Broadcom-Delaware or one of its affiliates and/or the holder of the applicable equity award, and certain employer social insurance contributions or other taxes may be due as a result of the conversion of the equity awards. Depending on the country where the holders are citizens or residents or the country where they resided during the life of the Broadcom-Singapore awards, the conversion of equity awards may trigger certain regulatory filings or notices to employees concerning the tax or regulatory consequences of the Transaction.
Broadcom-Singapore’s ordinary shares are currently listed on NASDAQ. There is currently no established public trading market for the shares of common stock of Broadcom-Delaware. We will submit a notification form with NASDAQ and expect that, immediately following the consummation of the Transaction, the Broadcom-Delaware shares of common stock will be listed on NASDAQ under the symbol “AVGO,” the same symbol under which your Broadcom-Singapore ordinary shares are currently listed.
Accounting Treatment of the Transaction
Under U.S. GAAP, the Scheme of Arrangement represents a transaction between entities under common control. Assets and liabilities are transferred at carrying value between entities under common control. Accordingly, the assets and liabilities of Broadcom-Delaware will be reflected at the same carrying amounts as in the accounts of Broadcom-Singapore at the effective time of the Scheme of Arrangement.
In connection with the Transaction, we expect Broadcom-Delaware and Broadcom US Sub to enter into supplemental indentures to the indentures governing the 2017 Notes. We presently expect the supplemental indentures will provide that Broadcom-Delaware and Broadcom US Sub will guarantee the obligations of the issuers under the indentures governing the 2017 Notes.
Any other changes in connection with entering into such supplemental indentures shall be made in accordance with the terms of the indentures governing the 2017 Notes.
Effect of the Transaction on Reporting Obligations of the Broadcom Corporate Group
Upon completion of the Transaction, Broadcom-Delaware will be subject to the same reporting requirements of the SEC, the mandates of the Sarbanes-Oxley Act and the applicable corporate governance rules of NASDAQ as Broadcom-Singapore before the Transaction, and Broadcom-Delaware will report our consolidated financial results in U.S. dollars and in accordance with U.S. GAAP. Broadcom-Delaware will file reports onForm 10-K,10-Q and8-K with the SEC and comply with the proxy rules, as we currently do. We will also comply with any additional reporting requirements of Delaware law. Broadcom-Delaware will cease to provide our financial results under Singapore generally accepted accounting principles.
Assuming completion of the mandatory exchange of LP Units of the Partnership, the Partnership will no longer be subject to the reporting requirements of the SEC and as such, the Partnership will no longer file reports on Form10-K,10-Q and8-K and will no longer be subject to the proxy rules.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE TRANSACTION TO HOLDERS OF BROADCOM-SINGAPORE ORDINARY SHARES
The following discussion is a summary of the material U.S. federal income tax consequences to U.S. Holders and toNon-U.S. Holders (each as defined below) of (i) exchanging Broadcom-Singapore ordinary shares for Broadcom-Delaware shares of common stock pursuant to the Scheme of Arrangement and (ii) owning and disposing of Broadcom-Delaware shares of common stock that are received pursuant to the Scheme of Arrangement. This discussion is based on and subject to the U.S. Internal Revenue Code of 1986, as amended (the “Code”), the U.S. Treasury Regulations promulgated thereunder, published guidance of the U.S. Internal Revenue Service (the “IRS”) and court decisions, in each case, as of the date hereof, all of which are subject to change, possibly with retroactive effect, and to differing interpretations. The following discussion assumes that the Scheme of Arrangement will be consummated as described in this proxy statement and applies only to U.S. Holders andNon-U.S. Holders that hold their Broadcom-Singapore ordinary shares, and that will hold their Broadcom-Delaware shares of common stock received pursuant to the Scheme of Arrangement, as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). Shareholders’This discussion does not address any tax consequences to holders of LP Units of the Partnership. This discussion does not constitute tax advice and does not address all aspects of U.S. federal income taxation that may be relevant to any particular holders in light of their personal circumstances, including any tax consequences arising under the Medicare contribution tax on net investment income, or to any holders subject to special treatment under the Code, such as:
This discussion also does not address any considerations under the U.S. federal tax laws other than those pertaining to the income tax, nor does it address any state, local ornon-U.S. tax considerations. We do not intend to seek any rulings from the IRS with respect to the Scheme of Arrangement, and there can be no assurance that the IRS will not take a position contrary to the tax consequences described herein or that such a contrary position would not be sustained by a court.
For purposes of this discussion, a “U.S. Holder” means a beneficial owner of Broadcom-Singapore ordinary shares or, after the completion of the Scheme of Arrangement, Broadcom-Delaware shares of common stock received in the Scheme of Arrangement, that for U.S. federal income tax purposes is:
For purposes of this discussion, a“Non-U.S. Holder” means a beneficial owner of Broadcom-Singapore ordinary shares or, after the completion of the Scheme of Arrangement, Broadcom-Delaware shares of common stock received in the Scheme of Arrangement, that is an individual, corporation, estate or trust and, in each case, is not a U.S. Holder.
If a partnership, including for this purpose any arrangement or entity that is treated as a partnership for U.S. federal income tax purposes, holds Broadcom-Singapore ordinary shares or, after the completion of the Scheme of Arrangement, Broadcom-Delaware shares of common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A holder that is a partnership for U.S. federal income tax purposes and the partners in such partnership are urged to consult their tax advisors about the U.S. federal income tax consequences of the Scheme of Arrangement and of the ownership and disposition of Broadcom-Delaware shares of common stock.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. HOLDERS OF BROADCOM-SINGAPORE ORDINARY SHARES OR, AFTER THE COMPLETION OF THE SCHEME, BROADCOM-DELAWARE SHARES OF COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SCHEME OF ARRANGEMENT AND OF THE OWNERSHIP AND DISPOSITION OF BROADCOM-DELAWARE SHARES OF COMMON STOCK IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER U.S. FEDERAL TAX LAWS OTHER THAN THOSE PERTAINING TO INCOME TAX, INCLUDING ESTATE OR GIFT TAX LAWS, OR UNDER ANY STATE, LOCAL ORNON-U.S. TAX LAWS OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Characterization of the Exchange of Broadcom-Singapore Ordinary Shares for Broadcom-Delaware Shares of Common Stock Pursuant to the Scheme of Arrangement
For U.S. federal income tax purposes, the exchange of Broadcom-Singapore ordinary shares for Broadcom-Delaware shares of common stock pursuant to the Scheme of Arrangement is expected to qualify as a reorganization
within the meaning of Section 368(a) of the Code, and, taken together with the mandatory exchange of LP Units of the Partnership for Broadcom-Delaware shares of common stock, is also expected to qualify as a transaction described in Section 351 of the Code. However, there is some uncertainty regarding whether the exchange of Broadcom-Singapore ordinary shares for Broadcom-Delaware shares of common stock pursuant to the Scheme of Arrangement will qualify for such treatment because there is no authority directly addressing a transaction involving the same facts as the Scheme of Arrangement. In addition, the Transaction is not conditioned on Proposal 4the receipt of a tax opinion, and we do not intend to request a ruling from the IRS regarding the U.S. federal income tax treatment of the Scheme of Arrangement. Consequently, no assurance can be given that the IRS will not challenge the qualification of the Scheme of Arrangement as a reorganization within the meaning of Section 368(a) of the Code, or, taken together with the mandatory exchange of LP Units of the Partnership for Broadcom-Delaware shares of common stock, as a transaction described in Section 351 of the Code, or that a court would not sustain such challenge.
Material U.S. Federal Income Tax Consequences of the Scheme of Arrangement to U.S. Holders of Broadcom-Singapore Ordinary Shares
Receipt of Broadcom-Delaware Shares of Common Stock in a Section 368(a) Reorganization or a Section 351 Exchange
Assuming that (i) the exchange of Broadcom-Singapore ordinary shares for Broadcom-Delaware shares of common stock pursuant to the Scheme of Arrangement qualifies as a reorganization within the meaning of Section 368(a) of the Code and/or, taken together with the mandatory exchange of LP Units of the Partnership for Broadcom-Delaware shares of common stock, as a transaction described in Section 351 of the Code, and (ii) Broadcom-Singapore is advisorynot and has not been a passive foreign investment company (as discussed below under “Passive Foreign Investment Company Status”), a U.S. Holder that exchanges Broadcom-Singapore ordinary shares for Broadcom-Delaware shares of common stock pursuant to the Scheme of Arrangement will not recognize any gain or loss with respect to such exchange. Such U.S. Holder will have an adjusted tax basis in the Broadcom-Delaware shares of common stock received pursuant to the Scheme of Arrangement equal to the adjusted tax basis of the Broadcom-Singapore ordinary shares surrendered in exchange therefor by that U.S. Holder pursuant to the Scheme of Arrangement. The holding period for Broadcom-Delaware shares of common stock received pursuant to the Scheme of Arrangement will include the U.S. Holder’s holding period for the Broadcom-Singapore ordinary shares surrendered in exchange therefor.
U.S. Holders should consult their tax advisors about any reporting requirements and information statements that could be applicable with respect to the Scheme of Arrangement and any potential consequences, including penalties, associated with a failure to satisfy such requirements.
Passive Foreign Investment Company Status
Broadcom-Singapore believes that it was not a “passive foreign investment company” (generally, a foreign corporation that has a specified percentage of “passive” income or assets in a taxable year, after the application of certain “look-through” rules) for U.S. federal income tax purposes for its 2016 or 2017 taxable year or any prior taxable year and does not expect to be a passive foreign investment company for its 2018 taxable year. If Broadcom-Singapore was a passive foreign investment company for any taxable year during which a U.S. Holder held Broadcom-Singapore ordinary shares, certain adverse tax consequences, including recognition of gain and application of an interest charge, could apply to such U.S. Holder as a result of the Scheme of Arrangement, unless an exception under the relevant U.S. Treasury Regulations can be relied upon. You should consult your tax advisor with respect to the U.S. federal income tax consequences of the Scheme of Arrangement regarding the status of Broadcom-Singapore as a passive foreign investment company for any taxable year during which you held Broadcom-Singapore ordinary shares and the implications of such status on the U.S. federal income tax consequences of the Scheme of Arrangement to you.
Material U.S. Federal Income Tax Considerations to U.S. Holders of Owning and Disposing of Broadcom-Delaware Shares of Common Stock Received in the Scheme of Arrangement
Dividends and Other Distributions on Broadcom-Delaware Shares of Common Stock
Any distribution made by Broadcom-Delaware to a U.S. Holder with respect to Broadcom-Delaware shares of common stock will generally be includible in the U.S. Holder’s gross income, in the year actually or constructively received, as a dividend to the extent that such distribution is paid out of Broadcom-Delaware’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent that the amount of the distribution exceeds Broadcom-Delaware’s current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess will be treated first as anon-bindingtax-free return of the U.S. Holder’s tax basis in nature,the Broadcom-Delaware shares of common stock, and then, to the extent such excess amount exceeds the U.S. Holder’s tax basis in the Broadcom-Delaware shares of common stock, as capital gain. Subject to applicable limitations and requirements, dividends received on Broadcom-Delaware’s shares of common stock generally should be eligible for the “dividends received deduction” available to corporate shareholders. A dividend paid by Broadcom-Delaware to certainnon-corporate U.S. Holders, including individuals, generally will be subject to taxation at preferential rates if certain holding period requirements are met.
Dispositions of Broadcom-Delaware Shares of Common Stock
A U.S. Holder will generally recognize taxable gain or loss on any sale, taxable exchange or other taxable disposition of a Broadcom-Delaware share of common stock equal to the difference between the amount realized for such Broadcom-Delaware share of common stock and the U.S. Holder’s adjusted tax basis in such Broadcom-Delaware share of common stock. Any such gain or loss will generally be capital gain or loss and will be long-term capital gain or loss if, on the date of the disposition, the U.S. Holder has a holding period in such Broadcom-Delaware share of common stock that exceeds one year. Long-term capital gains derived by certainnon-corporate U.S. Holders, including individuals, are generally subject to taxation at preferential rates. The deductibility of capital losses is subject to limitations.
Information Reporting and Backup Withholding
Dividend payments with respect to Broadcom-Delaware shares of common stock and proceeds of a disposition of Broadcom-Delaware shares of common stock will generally be subject to information reporting to the IRS and may be subject to U.S. backup withholding (currently, at a rate of 24%) unless a U.S. Holder furnishes such U.S. Holder’s correct U.S. taxpayer identification number (generally on IRS FormW-9) and complies with other applicable certification requirements, or otherwise establishes an exemption. Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules will be credited against a U.S. Holder’s federal income tax liability, and may entitle a U.S. Holder to a refund, provided that the required information is furnished to the IRS in a timely manner.
Material U.S. Federal Income Tax Consequences of the Scheme of Arrangement toNon-U.S. Holders of Broadcom-Singapore Ordinary Shares
Assuming that the exchange of Broadcom-Singapore ordinary shares for Broadcom-Delaware shares of common stock pursuant to the Scheme of Arrangement qualifies as a reorganization within the meaning of Section 368(a) of the Code and/or, taken together with the mandatory exchange of LP Units of the Partnership for Broadcom-Delaware shares of common stock, as a transaction described in Section 351 of the Code, aNon-U.S. Holder that receives Broadcom-Delaware shares of common stock pursuant to the Scheme of Arrangement will not recognize any gain or loss with respect to the receipt of such Broadcom-Delaware shares of common stock for U.S. federal income tax purposes. SuchNon-U.S. Holder will, for U.S. federal income tax purposes, have an adjusted tax basis in the Broadcom-Delaware shares of common stock received pursuant to the Scheme of Arrangement equal to the adjusted tax basis of the Broadcom-Singapore ordinary shares surrendered in exchange
therefor by thatNon-U.S. Holder pursuant to the Scheme of Arrangement. The holding period for Broadcom-Delaware shares of common stock received pursuant to the Scheme of Arrangement will include theNon-U.S. Holder’s holding period for the Broadcom-Singapore ordinary shares surrendered in exchange therefor.
Even if the exchange of Broadcom-Singapore ordinary shares for Broadcom-Delaware shares of common stock pursuant to the Scheme of Arrangement did not qualify as a reorganization within the meaning of Section 368(a) of the Code or an exchange described in Section 351 of the Code as described above, aNon-U.S. Holder generally would not be subject to U.S. federal income tax on any gain recognized pursuant to the exchange except in the situations described in the first two bullet points below under the heading “Material U.S. Federal Income Tax Considerations toNon-U.S. Holders of Owning and Disposing of Broadcom-Delaware Shares of Common Stock Received in the Scheme of Arrangement—Dispositions of Broadcom-Delaware Shares of Common Stock.”
Non-U.S. Holders should consult their tax advisors about reporting requirements and information statements that could be applicable with respect to the Scheme of Arrangement and any potential consequences, including penalties, associated with a failure to satisfy such requirements.
Material U.S. Federal Income Tax Considerations toNon-U.S. Holders of Owning and Disposing of Broadcom-Delaware Shares of Common Stock Received in the Scheme of Arrangement
Dividends and Other Distributions on Broadcom-Delaware Shares of Common Stock
Any distribution made by Broadcom-Delaware to aNon-U.S. Holder with respect to Broadcom-Delaware shares of common stock will generally constitute a dividend for U.S. federal income tax purposes to the extent that such distribution is paid out of Broadcom-Delaware’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent that the amount of the distribution exceeds Broadcom-Delaware’s current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess will be treated first as atax-free return of theNon-U.S. Holder’s tax basis in the Broadcom-Delaware shares of common stock, and then, to the extent such excess amount exceeds theNon-U.S. Holder’s tax basis in the Broadcom-Delaware shares of common stock, as capital gain.
Subject to the discussion below regarding effectively connected income, dividends paid to aNon-U.S. Holder with respect to suchNon-U.S. Holder’s Broadcom-Delaware shares of common stock generally will be subject to U.S. federal withholding tax at a rate of 30% (or a lower rate specified by an applicable income tax treaty, provided that theNon-U.S. Holder furnishes a valid IRS FormW-8BEN orW-8BEN-E (or other applicable documentation) certifying its qualification for the lower treaty rate). ANon-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty and the procedures for claiming such benefits.
If dividends paid to aNon-U.S. Holder are effectively connected with theNon-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, theNon-U.S. Holder maintains a permanent establishment in the United States to which such dividends are attributable), theNon-U.S. Holder generally will not be subject to the 30% U.S. federal withholding tax described in the previous paragraph provided that theNon-U.S. Holder furnishes a valid IRS FormW-8ECI, certifying that the dividends are effectively connected with theNon-U.S. Holder’s conduct of a trade or business within the United States. Any such effectively connected dividends will instead be subject to U.S. federal income tax on a net income basis at regular graduated tax rates, generally in the same manner as if suchNon-U.S. Holder were a United States person. ANon-U.S. Holder that is a corporation may also be subject to a branch profits tax at a rate of 30% (or a lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items.Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Dispositions of Broadcom-Delaware Shares of Common Stock
Subject to the discussions below relating to backup withholding and foreign accounts, aNon-U.S. Holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale, taxable exchange or other taxable disposition of Broadcom-Delaware shares of common stock, unless:
Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at regular graduated tax rates, generally in the same manner as if suchNon-U.S. Holder were a United States person. ANon-U.S. Holder that is a corporation may also be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.
Gain described in the second bullet point above generally will be subject to U.S. federal income tax at a rate of 30% (or a lower rate specified by an applicable income tax treaty), which may be offset by certain U.S. source capital losses of theNon-U.S. Holder, provided theNon-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, we currently do not anticipate Broadcom-Delaware being or becoming a USRPHC. However, because the determination at any time of whether Broadcom-Delaware is a USRPHC will depend on the fair market value of its USRPIs relative to the fair market value of itsnon-U.S. real property interests and other trade or business assets, there can be no assurance that Broadcom-Delaware will not be or become a USRPHC in the future. Even if Broadcom-Delaware were to be or become a USRPHC, gain arising from the sale or other taxable disposition by aNon-U.S. Holder of Broadcom-Delaware shares of common stock will not be subject to U.S. federal income tax if Broadcom-Delaware shares of common stock are “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and suchNon-U.S. Holder did not own, actually or constructively, more than 5% of the Broadcom-Delaware shares of common stock at any time during the shorter of the five-year period ending on the date of the sale or other taxable disposition of the Broadcom-Delaware shares of common stock or theNon-U.S. Holder’s holding period for the Broadcom-Delaware shares of common stock.
Information Reporting and Backup Withholding
Payments of dividends on Broadcom-Delaware shares of common stock will not be subject to backup withholding, provided that the applicable withholding agent does not have actual knowledge or reason to know the holder is a United States person and the holder either properly certifies itsnon-U.S. status, such as by furnishing a valid IRS FormW-8BEN,W-8BEN-E orW-8ECI, or other applicable documentation, or otherwise establishes an exemption. However, information reporting will apply in connection with any dividends on Broadcom-Delaware shares of common stock paid to aNon-U.S. Holder, regardless of whether any tax was actually withheld.
Proceeds of a sale or other taxable disposition of Broadcom-Delaware shares of common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that the holder is a United States person, or the holder otherwise establishes an exemption. Proceeds of a disposition of Broadcom-Delaware shares of common stock conducted through anon-U.S. office of anon-U.S. broker generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which theNon-U.S. Holder resides or is established.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against aNon-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under Sections 1471 through 1474 of the Code (commonly referred to as the “Foreign Account Tax Compliance Act” or “FATCA”) on certain types of payments made tonon-U.S. financial institutions and certain othernon-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or gross proceeds from the sale or other disposition of, Broadcom-Delaware shares of common stock paid to a “foreign financial institution” or a“non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) thenon-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner or (3) the foreign financial institution ornon-financial foreign entity otherwise qualifies for an exemption from these rules. Such certification or exemption must typically be evidenced by aNon-U.S. Holder’s delivery of a properly executed IRS FormW-8BEN-E. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts and withhold 30% on certain payments tonon-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States relating to FATCA may be subject to different rules.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA currently applies to payments of dividends on Broadcom-Delaware shares of common stock, but will apply to payments of gross proceeds from the sale or other disposition of Broadcom-Delaware shares of common stock only with respect to sales or dispositions effected on or after January 1, 2019.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in Broadcom-Delaware shares of common stock.
THE U.S. FEDERAL INCOME TAX CONSIDERATIONS SUMMARIZED ABOVE ARE FOR GENERAL INFORMATION ONLY. EACH SHAREHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES THAT MAY APPLY TO SUCH SHAREHOLDER.
DESCRIPTION OF BROADCOM-DELAWARE CAPITAL STOCK
The following description of Broadcom-Delaware’s capital stock is a summary. This summary is subject to the General Corporation Law of the State of Delaware (the “DGCL”) and the complete text of Broadcom-Delaware’s certificate of incorporation and bylaws to be in place at the closing of the Transaction which will be substantially in the forms attached as Annex C and Annex D, respectively, to this proxy statement. We encourage you to read that law and those documents carefully.
There are differences between Broadcom-Singapore’s constitution and Broadcom-Delaware’s certificate of incorporation and bylaws as they are expected to be in effect after the Transaction, especially relating to changes (i) that are required by Delaware law (i.e., certain provisions of the Broadcom-Singapore constitution were not replicated in the Broadcom-Delaware certificate of incorporation or bylaws because the DGCL would not permit such replication, and certain provisions were included in the Broadcom-Delaware certificate of incorporation and bylaws although they were not in the Broadcom-Singapore constitution because the DGCL requires such provisions to be included in the certificate of incorporation and bylaws of a Delaware corporation or to provide for related provisions customarily provided in respect of publicly-traded Delaware corporations), or (ii) that are necessary in order to preserve the current rights of shareholders and powers of the board of directors of Broadcom following the Transaction. See “Comparison of Rights of Singapore Shareholders and Delaware Stockholders.”
The Broadcom-Delaware certificate of incorporation will authorize 2,900,000,000 shares of common stock, $0.001 par value per share, and 100,000,000 shares of preferred stock, $0.001 par value per share.
Voting Rights
Each holder of Broadcom-Delaware common stock will be entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Broadcom-Delaware stockholders will not have cumulative voting rights in the election of directors. Accordingly, in an uncontested election, holders of a majority of the voting shares will be able to elect all of the directors.
Dividends
Subject to preferences that may be applicable to any then outstanding preferred stock, holders of Broadcom-Delaware common stock will be entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds. Dividends may be paid in cash, in property or in shares of common stock. Declaration and payment of any dividend will be subject to the discretion of the Broadcom-Delaware board of directors. The time and amount of dividends will be dependent upon our financial condition, operations, cash requirements and availability, debt repayment obligations, capital expenditure needs, restrictions in our debt instruments, industry trends, the provisions of Delaware law affecting the payment of distributions to stockholders and any other factors the Broadcom-Delaware board of directors may consider relevant.
Liquidation
In the event of Broadcom-Delaware’s liquidation, dissolution or winding up, holders of Broadcom-Delaware common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of Broadcom-Delaware’s debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.
Rights and Preferences
Holders of Broadcom-Delaware common stock will have no legalpreemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of Broadcom-Delaware common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of Broadcom-Delaware preferred stock that we may designate in the future.
Fully Paid and Nonassessable
All outstanding shares of common stock of Broadcom-Delaware are, and the shares of common stock to be issued upon the completion of this Transaction will be, fully paid andnon-assessable.
The Broadcom-Delaware certificate of incorporation will authorize the board of directors of Broadcom-Delaware to issue preferred stock in one or more series and to determine the preferences, limitations and relative rights of any shares of preferred stock that it shall choose to issue, without vote or action by the stockholders.
The Broadcom-Delaware certificate of incorporation and bylaws will provide that annual stockholder meetings will be held at a date, place (if any) and time, as exclusively selected by the Broadcom-Delaware board of directors. To the extent permitted under applicable law, we may but are not obligated to conduct meetings by remote communications, including by webcast.
Anti-Takeover Effects of Provisions of the Broadcom-Delaware Certificate of Incorporation and Bylaws and Delaware Law
Some provisions of Delaware law and the Broadcom-Delaware certificate of incorporation and bylaws could make the following transactions difficult: acquisition of Broadcom-Delaware by means of a tender offer; acquisition of Broadcom-Delaware by means of a proxy contest or otherwise; or removal of incumbent officers and directors of Broadcom-Delaware. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in the best interests of Broadcom-Delaware, including transactions that might result in a premium over the market price for Broadcom-Delaware shares. These provisions will replace and substitute applicable provisions of Singapore law and we cannot predict whether they will make an acquisition more or less likely compared to those provisions.
These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of Broadcom-Delaware to first negotiate with the company’s board of directors. We believe that the benefits of protection to Broadcom-Delaware’s potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure Broadcom-Delaware outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
Delaware Anti-Takeover Statute
Broadcom-Delaware will be subject to Section 203 of the DGCL, which prohibits persons deemed “interested stockholders” from engaging in a “business combination” with a publicly-held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner
or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock and a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, such as discouraging takeover attempts that might result in a premium over the market price of our common stock.
Undesignated Preferred Stock
The ability to authorize undesignated preferred stock will make it possible for the Broadcom-Delaware board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of Broadcom-Delaware. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.
Special Stockholder Meetings
The Broadcom-Delaware bylaws will provide that a special meeting of stockholders may be called only by the company’s board of directors or by two or more stockholders holding at least 10% of the total number of issued and outstanding shares of Broadcom-Delaware.
Requirements for Advance Notification of Stockholder Nominations and Proposals
The bylaws of Broadcom-Delaware will establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.
No Stockholder Action by Written Consent
The Broadcom-Delaware certificate of incorporation and bylaws will not provide for the right of stockholders to act by written consent without a meeting.
Composition of the Board of Directors; Election and Removal of Directors; Filling Vacancies
The Broadcom-Delaware board of directors will consist of not less than one nor more than 13 directors. In any uncontested elections of directors, a director nominee for the board of directors of Broadcom-Delaware will be enforceable against us or our Board.
Abstentionselected by the affirmative vote of a majority of the votes cast with respect to such director by the shares represented and BrokerNon-Votes.Abstentions and “brokernon-votes” are counted in determining whetherentitled to vote at a meeting of the stockholders for the election of directors at which a quorum is present, at the 2018 AGM, but are not counted in,voting together as a single class. An incumbent director who is nominated for an uncontested election and have no effect on, determining whetherfails to receive a proposal has been approved. A “brokernon-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 2018 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 (j) and 4, which arenon-routine matters.
Voting Procedures and Tabulation. We have appointed a representative of Computershare as the inspector of electionsmajority of the 2018 AGM. The inspector of elections will determine the number of ordinary sharesvotes present and Special Voting Shares outstanding and represented at the 2018 AGM and the validity of proxies and ballots, and will count and tabulate all votes. The determination of the inspector asvoting for such director’s reelection would be required to tender his or her resignation to the validityboard of proxies will be final and binding.
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 ordinarily resides in Singapore. Our Constitution also stipulates that our Board consist of no more than 13 directors. Our Board currently consists of 10 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 theThe Nominating and Corporate Governance Committee of the board of directors (or any future committee the equivalent thereof) will make a recommendation to the board of directors on whether to accept or reject the resignation, or whether other action should be taken. The board of directors will act on the recommendation of such committee and will publicly disclose its decision within 90 days from the date of the certification of the election results. In a contested election, a plurality voting standard will apply to director elections. The directors of Broadcom-Delaware are elected until the expiration of the term for which they are elected and until their respective successors are duly elected and qualified.
The directors of Broadcom-Delaware may be removed only by the affirmative vote of at least a majority of the holders of our Board has nominatedthen-outstanding common stock. Furthermore, any vacancy on the 10 individuals belowBroadcom-Delaware board of directors, however occurring, including a vacancy resulting from an increase in the size of the board, may be filled only by a majority vote of the board of directors then in office, even if less than a quorum, or by the sole
remaining director. This system of electing and removing directors and filling vacancies may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of Broadcom-Delaware, because it generally makes it more difficult for electionstockholders to replace a majority of the directors.
Choice of Forum
The Broadcom-Delaware certificate of incorporation and bylaws will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, the Broadcom-Delaware certificate of incorporation or bylaws; or any action asserting a claim against Broadcom-Delaware that is governed by the internal affairs doctrine. Although the Broadcom-Delaware certificate of incorporation will contain the choice of forum provision described above, it is possible that a court could find that such a provision is inapplicable for a particular claim or action or that such provision is unenforceable.
Amendment of the Certificate of Incorporation and Bylaws
The amendment of any of the provisions in the certificate of incorporation would require approval by a stockholder vote by the holders of at least a majority of the voting power of the then outstanding voting stock. The bylaws of Broadcom-Delaware may be amended by the board of directors or by the holders of at least a majority of the voting power of the then outstanding voting stock.
The provisions of the DGCL, the Broadcom-Delaware certificate of incorporation and bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of Broadcom-Delaware common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the management of Broadcom-Delaware. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
Limitations of Liability and Indemnification Matters
The Broadcom-Delaware certificate of incorporation will contain provisions that limit the liability of the directors and officers of Broadcom-Delaware for monetary damages to the fullest extent permitted by Delaware law. Consequently, Broadcom-Delaware directors and officers will not be personally liable to the company or its stockholders for monetary damages for any breach of fiduciary duties as directors, allexcept liability for:
Each of the Broadcom-Delaware certificate of incorporation and bylaws will provide that we are required to indemnify the directors and officers of Broadcom-Delaware, in each case to the fullest extent permitted by Delaware law. The Broadcom-Delaware bylaws will also obligate us to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under Delaware law. We have entered into agreements with the Broadcom-Singapore directors, officers and other employees and expect to enter into agreements to indemnify the Broadcom-Delaware directors, executive officers and other
employees as determined by the Broadcom-Delaware board of directors. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding to the fullest extent permitted by applicable law. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. Broadcom-Delaware also maintains directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions in the Broadcom-Delaware certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against Broadcom-Delaware directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against Broadcom-Delaware directors and officers, even though an action, if successful, might benefit the company and its stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage.
Holders of shares of common stock of Broadcom-Delaware will not have the right to require Broadcom-Delaware to issue certificates for their shares. Broadcom-Delaware will only issue uncertificated shares of common stock.
We will submit a notification form with NASDAQ and expect that, upon the consummation of the Transaction, the Broadcom-Delaware shares of common stock will be listed on NASDAQ under the symbol “AVGO,” the same symbol under which your Broadcom-Singapore ordinary shares are currently directors. Our Board expects that eachlisted.
The Broadcom-Delaware shares of common stock have no sinking fund provisions.
The transfer agent and registrar for our common stock will be Computershare Trust Company, N.A. The transfer agent and registrar’s address is 250 Royall Street, Canton, Massachusetts 02021.
COMPARISON OF RIGHTS OF SINGAPORE SHAREHOLDERS AND DELAWARE STOCKHOLDERS
Your rights as an ordinary shareholder of Broadcom-Singapore and the powers of Broadcom-Singapore’s board of directors are governed by Singapore law and Broadcom-Singapore’s constitution. As a result of the nominees listed belowTransaction, you will become a stockholder of Broadcom-Delaware, and your rights and the powers of Broadcom-Delaware’s board of directors will be availablegoverned by Delaware law and Broadcom-Delaware’s certificate of incorporation and bylaws as they will be in effect upon the completion of the Transaction.
Many of the principal attributes of Broadcom-Singapore’s ordinary shares and Broadcom-Delaware’s shares of common stock will be similar. However, there are differences between what your rights are under Singapore law and what they will be after the Transaction under Delaware law. In addition, there are differences between Broadcom-Singapore’s constitution and Broadcom-Delaware’s certificate of incorporation and bylaws as they will be in effect after the Transaction, especially as it relates to serve aschanges (i) that are required by Singapore law (i.e., certain provisions of the Broadcom-Singapore constitution were not replicated in the Broadcom-Delaware certificate of incorporation and bylaws because Delaware law would not permit such replication, and certain provisions were included in the Broadcom-Delaware certificate of incorporation and bylaws although they were not in the Broadcom-Singapore constitution because Delaware law requires such provisions to be included in the certificate of incorporation and bylaws of a director. Shareholders may not vote their proxiesDelaware corporation or to provide for a greater numberprovisions customarily provided in respect of persons thanpublicly-traded Delaware corporations), or (ii) that are necessary in order to preserve the numbercurrent rights of nominees named below.
In considering whethershareholders and powers of the director nominees have the experience, qualifications, attributes and skills, taken as a whole, to serve asboard of directors of Broadcom in light of our business and structure,following 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 the relevant experience, personal and professional integrity, the ability to make independent, analytical inquiries, experience with and understanding of our business and business environment, and the 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.Transaction.
The following table sets forth certaindiscussion is a summary of material changes in your rights resulting from the Transaction. This summary does not cover all of the differences between Singapore law and Delaware law affecting companies and their shareholders or all the differences between Broadcom-Singapore’s constitution and Broadcom-Delaware’s certificate of incorporation and bylaws. This summary is subject to the complete text of the relevant provisions of the Singapore Companies Act (the “SCA”), the DGCL, Broadcom-Singapore’s constitution and Broadcom-Delaware’s certificate of incorporation and bylaws as they will be in effect after the Transaction. We encourage you to read those laws and documents carefully.
The form of Broadcom-Delaware’s certificate of incorporation and bylaws substantially as they will be in effect after the Transaction are attached as Annex C and Annex D, respectively, to this proxy statement. For information concerningas to how you can obtain Broadcom-Singapore’s constitution, please see “Where You Can Find More Information.” Except where otherwise indicated, the nominees for directorsdiscussion of BroadcomBroadcom-Delaware below reflects Broadcom-Delaware’s certificate of incorporation and bylaws as those documents will be in effect upon completion of February 12, 2018.the Transaction.
| Broadcom-Singapore | |
Authorized Capital Stock or Share Capital | ||
The Broadcom-Delaware certificate of incorporation will authorize Broadcom-Delaware to issue 3,000,000,000 shares: 2,900,000,000 shares of common stock, par value $0.001 per share and 100,000,000 shares of preferred stock, par value $0.001 per share. | There is no concept of authorized share capital under Singapore law. | |
Outstanding Capital Stock or Share Capital | ||
Assuming the Transaction had become effective as of the Record Date, there would be 432,842,037 shares of Broadcom-Delaware common stock outstanding and there will be no shares of preferred stock outstanding. | As of the Record Date, Broadcom-Singapore has |
Broadcom-Delaware | Broadcom-Singapore | |
The shares within each class have identical rights in all respects and rank equally with the other shares in the same class and have the respective rights under Singapore law and Broadcom-Singapore’s constitution, as the case may be. | ||
Authority to Issue Shares | ||
Broadcom-Delaware’s board of directors may authorize the issuance of additional shares of common stock or preferred shares up to the amounts authorized in the Broadcom-Delaware certificate of incorporation, without stockholder approval, subject only to the restrictions of the DGCL and the Broadcom-Delaware certificate of incorporation. | Broadcom-Singapore’s constitution provides that our | |
Board of Directors | ||
The certificate of incorporation and | Under the SCA, the minimum number of directors is at least one director who is ordinarily resident in Singapore. Broadcom-Singapore’s constitution provides that the number of directors will not be less than the minimum required by the SCA or more than 13. | |
Classification of Board of Directors | ||
The DGCL permits, but does not require, a classified board of directors, which can be divided into two or three classes with staggered terms of office, with only one class of directors standing for election each year. Broadcom-Delaware will not have a classified board. | There is no classification of our board of directors under Singapore law. | |
Annual Election of Directors | ||
In any uncontested elections of directors, a director nominee for the board of directors of Broadcom-Delaware will be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares represented and entitled to vote at such meeting with respect to the election of such director. An incumbent director who is nominated for an uncontested election and fails to receive a majority of the votes present and voting for such director’s reelection will be required to tender his or her resignation to the board of directors. The Nominating and Corporate Governance Committee of the board of directors (or any future committee the equivalent thereof) will make a recommendation to the board of | In any uncontested elections of |
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should be taken. The board of directors will act on the recommendation of such committee and will publicly disclose its decision within ninety days from In a contested election of directors, a director nominee for the board of directors of Broadcom-Delaware will be elected by the affirmative vote of a plurality of the votes cast by the shares represented and entitled to | ||
Removal of Directors | ||
The certificate of incorporation and bylaws of Broadcom-Delaware will provide that, subject to the rights of holders of any preferred stock, directors may be removed at any time by the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares present and entitled to vote generally in the election of directors, voting together as a single class. | According to the SCA, directors of a Singapore public company may be removed before expiration of their term of office with | |
Filling Vacancies on the Board of Directors | ||
The certificate of incorporation and | Broadcom-Singapore’s constitution provides that our board of directors may appoint any person to be a | |
Amendment of | ||
The amendment of any of the | Broadcom-Singapore’s constitution may be altered by special resolution (i.e., a resolution passed by majority of not less than three-fourths of the votes attached to the fullypaid-up shares that are represented at a meeting, and voted on such |
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Broadcom-Delaware may be amended by the board of directors or by the holders of at least a majority of the voting power of the then outstanding voting stock. | resolution in person or by proxy). The board of directors has no right to amend the constitution. | |
Meetings of Stockholders | ||
| All Singapore companies are required to hold an annual general meeting once every calendar year. The first annual general meeting must be held within 18 months of the company’s incorporation and subsequently, not more than 15 months may elapse between annual general meetings. Any general meeting other than the annual general meeting is called an “extraordinary general meeting.” Two or more shareholders holding not less than 10% of the total number of issued shares (excluding treasury shares) may call an extraordinary general meeting. Notwithstanding anything in a | |
Quorum for Stockholder Meetings | ||
The Broadcom-Delaware bylaws will provide that the holders of a majority in voting power of the stock issued and outstanding and entitled to | Broadcom-Singapore’s constitution provides that shareholders entitled to vote holding a majority of the number of our issued and | |
Voting at Stockholder Meetings | ||
Each holder of Except for the election of directors | Every shareholder present in person or represented by proxy has one vote for each ordinary share or special preference share that he or she holds. With respect to any ordinary resolution proposed for consideration of |
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certificate of incorporation or bylaws, the DGCL provides that the affirmative vote of the majority of shares present in person or represented by proxy at a meeting and | of the total votes attached to With respect to any special resolution proposed for consideration of Broadcom-Singapore, the resolution will be approved if it is passed by a majority of not less than three-fourths of the total votes attached to all the fully paid-up shares which are represented at the meeting and voted on such resolution in person or by proxy. Broadcom-Singapore’s constitution provides that in the case of an equality of votes, the chairman of the meeting is entitled to a second or casting vote. | |
Notice Requirements for Stockholder Meetings | ||
The bylaws of Broadcom-Delaware will provide that written notice of an annual or special meeting must be sent or otherwise given not less than 10 but not more than | Broadcom-Singapore’s constitution provides that at least 21 days’ notice in writing must be given in respect of any general meeting at which it is proposed to pass a special resolution or resolution of which special notice has been given to Broadcom-Singapore, provided that at least 45 days’ notice must be given in respect of any resolution for the removal of a director. Save as | |
Stockholder Proposals | ||
The bylaws of Broadcom-Delaware will establish advance notice procedures with respect to stockholder proposals and In addition, the bylaws of Broadcom-Delaware will provide that a stockholder or a group of up to 20 eligible stockholders may include their director nominees in Broadcom-Delaware’s annual meeting proxy materials if certain requirements specified in the bylaws are met, including that such stockholder or group of stockholders has owned at least 3% of Broadcom-Delaware’s outstanding common stock continuously for at least three years. The number of such “proxy access” nominees appearing in any annual meeting proxy | Under the SCA, shareholders representing at least 5% of the total voting rights or shareholders representing not fewer than 100 shareholders holding shares on which there has been an average paid up sum, per shareholder, of at least S$500 each may, at their expense, request that the company includes and Any such requisition must be signed by all the requisitionists and be deposited at the registered office of the company. In the case of a |
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statement cannot exceed the greater of two or 20% of the number of directors then serving on the Broadcom-Delaware board. | ||
Shareholder Approval of Business Combinations | ||
Under the DGCL, the completion of a merger, consolidation, or the sale, lease or exchange of substantially all of a corporation’s assets or dissolution requires approval by the board of directors and by a majority of outstanding stock of the corporation entitled to vote, subject to certain exceptions. | The SCA mandates that specified corporate actions require approval by the shareholders in a general meeting, notably: • notwithstanding anything in the company’s constitution, directors are not permitted to carry into effect any proposals for disposing of the whole or substantially the whole of the company’s undertaking or property unless those proposals have been approved by shareholders in a general meeting; • subject to the constitution of each amalgamating company, an amalgamation proposal must be approved by the shareholders of each amalgamating company via special resolution at a general meeting; and • notwithstanding anything in the company’s constitution, the directors may not, without the prior approval of shareholders, issue shares, including shares being issued in connection with corporate actions. In addition, a scheme of arrangement under the SCA requires the affirmative vote of (i) a majority in number of shareholders present and voting, either in person or by proxy, at a court-convened shareholder meeting to approve such scheme and (ii) not less than 75% of the issued shares held by shareholders present and voting, either in person or by proxy, at such meeting. | |
Takeover Restrictions | ||
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and also preclude stockholders from realizing a potential premium over the market value of their shares. | the next annual general meeting of the company, the date by which such annual general meeting is required to be held, or the expiration of such other period as prescribed by the SCA, whichever is the earliest. Singapore law does not generally prohibit a corporation from adopting “poison pill” arrangements which could prevent a takeover attempt and also preclude shareholders from realizing a potential premium over the market value of their shares. However, under the Singapore Code on Takeovers and Mergers, if, in the course of an offer, or even before the date of the offer, the board of the offeree company has reason to believe that a bona fide offer is imminent, the board must not, except pursuant to a contract entered into earlier, take any action, without the approval of shareholders at a general meeting, on the affairs of the offeree company that | |
Interested Stockholders | ||
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provided that any such shareholder will be an interested stockholder if, following the Transaction, such person acquires additional shares of | ||
Shareholder Action Without A Meeting | ||
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Shareholder Suits | ||
Delaware law provides that a stockholder may bring a derivative action on behalf of the corporation to enforce the rights of the corporation. An individual also may commence a class action suit on behalf of himself or herself and
| Standing Only registered shareholders of Broadcom-Singapore reflected in its shareholder register are recognized under Singapore law as Derivative Actions The SCA has a provision, which is limited in its scope to companies that are not listed on the |
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mechanism enabling shareholders to apply to the court for leave to bring a In the case of the It should be noted that this provision of the SCA is primarily used by minority shareholders to bring an action or arbitration in the name and on behalf of the company or intervene in an action or arbitration to which the company is a party for the purpose of prosecuting, defending or discontinuing the action or arbitration on behalf of the company. Prior to commencing a derivative action, the court will need to be satisfied that, the applicant has given 14 days’ notice to the directors of the company of its intention to apply to the court for leave to bring an action or arbitration if the directors of the company do not bring, diligently prosecute or defend or discontinue the action or arbitration, the applicant is acting in good faith, and it appears to be prima facie in the interests of the company that the action or arbitration be brought, prosecuted, defended or discontinued. Class Actions The concept of class action suits, which allows individual shareholders to bring an action seeking to represent the class or classes of shareholders, does not exist in Singapore. However, it is possible as a matter of procedure for a number of shareholders to lead an action and establish liability on behalf of themselves and other shareholders who join in or who are made parties to the action. These shareholders are commonly known as “lead plaintiffs.” | ||
Limitation on Personal Liability of Directors | ||
The certificate of incorporation of Broadcom-Delaware will provide for the elimination of personal monetary liability of directors for breach of fiduciary duties as directors to the fullest extent permissible under the laws of Delaware. The certificate of incorporation of Broadcom-Delaware will also provide that if the DGCL | Under the SCA, any provision that purports to exempt a director or officer of a company from, or by which a company directly or indirectly provides an indemnity for a director or officer of the company against, any liability attaching to him or her in connection with any negligence, default, breach of |
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is amended or interpreted so as to allow further elimination of, or limitations on, director liability, then the liability of directors will be eliminated or limited to the fullest extent permitted by the DGCL as so amended or interpreted. | duty or breach of trust in relation to the company is void, except that, in addition to purchasing and maintaining for any director and officer insurance against any liability attaching to such director or officer in connection with any negligence, default, breach of duty or breach of trust in relation to the company, a company may indemnify such director or officer against any liability incurred by the director or officer to a person other than the company, except when the indemnity is against: (a) any liability of the director or officer to pay (i) a fine in criminal proceedings, or (ii) a penalty sum payable to a regulatory authority for noncompliance with any requirement of a regulatory nature; or (b) any liability incurred by the director or officer (i) in defending criminal proceedings in which he is convicted, (ii) in defending civil proceedings brought by the company or a related company in which judgment is given against such director or officer; or (iii) in connection with an application for relief, as described below, in which the court refuses to grant him relief. | |
Indemnification of Officers, Directors and Employees | ||
Under Section 145 of the DGCL, a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation (or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. In the case of an action brought by or in the right of a corporation, the corporation may indemnify any person who was or is a party or is threatened to be made a party to any such threatened, pending or completed action by reason of the fact that the person is or was a director, officer, employee or agent of the corporation (or is or was serving at the request of the corporation as a director, officer, employee or agent of | Broadcom-Singapore’s constitution provides that subject to the provisions of and so far as may be permitted by the SCA, every director, secretary and other officer of Broadcom-Singapore and its subsidiaries and affiliates, will be indemnified by Broadcom-Singapore against all costs, charges, losses, expenses and liabilities incurred by him or her or to be incurred by him or her in the execution and discharge of his or her duties or in relation thereto and without prejudice to the generality of the foregoing, no director, secretary or other officer of our company or our subsidiaries and affiliates shall be liable for the acts, receipts, neglects or defaults of any other director or officer or for joining in any receipt or other act for conformity or for any loss or expense happening to our company through the insufficiency or deficiency of title to any property acquired by order of the directors for or on behalf of our company or for the insufficiency or deficiency of any security in or upon which any of the moneys of our company shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person with whom any moneys, securities or effects shall be deposited or left or for any other loss, damage or misfortune whatever which |
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another corporation, partnership, joint venture, trust or other enterprise) only against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent the appropriate court finds that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. The Broadcom-Delaware certificate of incorporation and bylaws will provide that its directors and officers will be indemnified by Broadcom-Delaware to the fullest extent authorized by Delaware law as it now exists or may in the future be amended, against all expenses, liabilities and loss incurred in connection with their service as a director or officer on behalf of the corporation. | shall happen in the execution of the duties of his or her office or in relation thereto unless the same happen through his or her own negligence, default, breach of duty or breach of trust.. | |
Advancement of Expenses | ||
The Broadcom-Delaware bylaws will provide that, to the fullest extent not prohibited by applicable law, Broadcom-Delaware shall pay the expenses (including attorneys’ fees) incurred by a director or officer of Broadcom-Delaware, and may pay the expenses incurred by any employee or agent of Broadcom-Delaware, in defending any action, suit or proceeding in advance of its final disposition; provided, that to the extent required by law, such payment of expenses in advance of the final disposition of the action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the person to repay all amounts advanced if it is ultimately determined that such person is not entitled to be indemnified by Broadcom-Delaware. | Under the SCA, a company may also provide a director with a loan to meet expenditures incurred or to be incurred by him for: (a) defending criminal or civil proceedings in connection with any alleged negligence, default, breach of duty or breach of trust by him in relation to the company, or in connection with an application for relief, subject to the terms stipulated in the SCA, which include requiring the director to repay the loan if he is convicted in the criminal proceedings or where judgment is given against him in civil proceedings or where the court refuses to grant him relief on the application; or (b) defending himself in an investigation or against any action proposed to be taken by a regulatory authority, in connection with any alleged negligence, default, breach of duty or breach of trust by him in relation to the company. | |
Distributions and Dividends; Repurchases and Redemptions | ||
The DGCL permits a corporation to declare and pay dividends out of statutory surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year | The SCA provides that no dividends can be paid to shareholders except out of profits. |
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as long as the amount of capital of the corporation following the declaration and payment of the dividend is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets. Under the DGCL, any corporation may purchase or redeem its own shares, except that generally it may not purchase or redeem these shares if the capital of the corporation is impaired at the time or would become impaired as a result of the redemption. A corporation may, however, purchase or redeem out of capital shares that are entitled upon any distribution of its assets to a preference over another class or series of its shares if the shares are to be retired and the capital reduced. | The SCA does not provide a definition on when profits are deemed to be available for the purpose of paying dividends and this is accordingly governed by case law. Broadcom-Singapore’s constitution provides that no dividend can be paid otherwise than out of profits. Acquisition of a Company’s Own Shares The SCA generally prohibits a company from acquiring its own shares subject to certain exceptions. Any contract or transaction by which a company acquires or transfers its own shares in contravention of the said prohibition is void. However, provided that it is expressly permitted to do so by its constitution and subject to the special conditions of each permitted acquisition contained in the SCA, a company may: • make an • make a selectiveoff-market purchase of its own shares in accordance with an agreement authorized in advance at a general meeting by a special resolution where persons whose shares are to be acquired and their associated persons have abstained from voting; and • make an acquisition of its own shares under a contingent purchase contract which has been authorized in advance at a general meeting by a special resolution, provided that the total number of ordinary shares that may be acquired by a company in a relevant period may not exceed 20% of the total number of ordinary shares in that class as of the date of the resolution to acquire the shares. Where, however, a company has reduced its share capital by a special resolution or a Singapore court made an order to such effect, the total number of ordinary shares in any class shall be taken to be the total number of ordinary shares in that class as altered by the special resolution or the order of the court. Payment must be made out of the company’s distributable profits or capital, provided that the company is solvent. |
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Broadcom-Singapore’s constitution provides that subject to the provisions of the SCA, the shareholders may at a general meeting authorize the board of directors to purchase or otherwise acquire its own shares, upon such terms and subject to such conditions as the shareholders may deem fit. These shares may be held as treasury shares or cancelled as provided in the SCA or dealt with in such manner as may be permitted under the SCA. On cancellation of Redemption of preference shares A company may redeem redeemable preference shares, provided that preference shares shall not be redeemed out of capital unless all the directors make a solvency statement in relation to such redemption in accordance with the SCA. In addition, certain filings are also required to be made to the Registrar of Companies in connection with such redemption of redeemable preference shares. Financial Assistance for the Acquisition of Shares A public company may not give financial assistance to any person whether directly or indirectly for the purpose of: • the acquisition or proposed acquisition of shares in the company or units of such shares; or • the acquisition or proposed acquisition of shares in its holding company or ultimate holding company or units of such shares, subject to certain exceptions. Financial assistance may take the form of a loan, the giving of a guarantee, the provision of security, the release of an obligation, the release of a debt or otherwise. However, it should be noted that a company may provide financial assistance for the acquisition of its shares or shares in its holding company or ultimate holding company if (i) the giving or the financial assistance does not materially prejudice the interest of the company or its shareholders or the company’s ability to pay its creditors, and the board of directors approves the giving of the financial assistance in accordance with the provisions of the SCA; or (ii) it complies with the requirements (including but not limited to approval |
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of the shareholders by special resolution) set out in the SCA. Broadcom-Singapore’s constitution provides that the company may not, except as provided and in accordance with the SCA, give financial assistance for the purpose of, or in connection with, the acquisition or proposed acquisition of shares or units of shares in the company. | ||
Transferability of Shares | ||
Broadcom-Delaware’s certificate of incorporation and bylaws does not provide for any restrictions on the transferability of shares of common stock. Subject to applicable securities laws, shares of Broadcom-Delaware’s common stock will be freely transferable on NASDAQ. | Broadcom-Singapore’s constitution provides that there shall be no restriction on the transfer of shares (except where restricted by law, by contract or by the listing rules, rules and/or bylaws of any stock exchange upon which the shares of Broadcom-Singapore may be listed). | |
Transactions with Officers or Directors | ||
Under the DGCL, some contracts or transactions in which one or more of a corporation’s directors has an interest are not void or voidable because of such interest provided that some conditions, such as obtaining the required approval and fulfilling the requirements of good faith and full disclosure, are met. Under the DGCL, either (a) the stockholders or the board of directors must approve in good faith any such contract or transaction after full disclosure of the material facts or (b) the contract or transaction must have been “fair” as to the corporation at the time it was approved. If board approval is sought, the contract or transaction must be approved in good faith by a majority of disinterested directors after full disclosure of the material facts, even though less than a majority of a quorum. | Under the SCA, directors and chief executive officer are not prohibited from In addition, a director and any chief executive officer who holds any office or possesses any property which directly or indirectly might create interests in conflict with such director’s duties as director or chief executive officer is required to declare the fact and the nature, character and extent of the conflict either at a meeting of directors or by sending a written notice to the company. An interest of a member of a director’s or chief executive officer’s family (including spouse, son, adopted son,step-son, daughter, adopted daughter and step-daughter) will be treated as an interest of the director or chief executive officer, as applicable. |
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There is however no requirement for disclosure where the interest of the director or chief executive officer consists only of being a member or creditor of a corporation which is interested in the transaction or proposed transaction with the company if the interest may properly be regarded as immaterial. Where the transaction or proposed transaction relates to any loan to the company, no disclosure need be made where the director or chief executive officer, as applicable, has only guaranteed the repayment of such loan, unless the constitution provides otherwise. Further, where the proposed transaction is to be made with or for the benefit of a related company (i.e. the holding company, subsidiary or subsidiary of a common holding company) no disclosure need be made of the fact that the director or chief executive officer is also a director or chief executive officer, where applicable, of that company, unless the constitution provides otherwise. Subject to specified exceptions, the SCA prohibits a Singapore company from | ||
Appraisal / Dissenters’ Rights | ||
Under the DGCL, a stockholder of a corporation participating in some types of major corporate transactions may, under varying circumstances, be entitled to appraisal rights pursuant to which the stockholder may receive cash in the amount of the fair market value of his or her shares in lieu of the consideration he or she would otherwise receive in the transaction. | There are no equivalent provisions in Singapore under the SCA. | |
Forum Selection; Exclusive Jurisdiction | ||
The Broadcom-Delaware certificate of incorporation and | There are no equivalent provisions in Singapore under the SCA. |
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without limitation (i) any derivative action or proceeding brought on behalf of Broadcom-Delaware, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Broadcom-Delaware to Broadcom-Delaware or the stockholders of Broadcom-Delaware, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Broadcom-Delaware certificate of incorporation or the Broadcom-Delaware bylaws (in each case, as they may be amended from time to time), or (iv) any action asserting a claim governed by the |
Mr. Low is our Singapore resident director. Due
We are furnishing this proxy statement 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 2018 AGM, he will continue to serve as a director after the 2018 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 2018 AGM, our intention would be to make a public announcement of such resignation and either reduce the sizeholders of our Board or appointordinary shares and special preference shares in connection with the solicitation of proxies by Broadcom-Singapore’s board of directors for use at a substitute nomineeSpecial Meeting to consider the Scheme of Arrangement.
The Special Meeting will be conducted in accordance with our Constitution. If we reduce the sizedirections of our Board, this would reduce the number of director nominees to be elected at the 2018 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 2018 AGM to fill any such vacancy, it is intended that the shares represented by the proxySingapore Court.
The Special Meeting 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 (j) listed above to our Board.
Board of Directors
Our Constitution gives our Board general powers to manage our business. Our Board oversees and provides policy guidanceheld 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 6 meetings during the fiscal year ended October 29, 2017 (“Fiscal Year 2017”). During Fiscal Year 2017, each director attendedMarch 23, 2018 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 met8:00 a.m. Pacific time 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. All of our directors then serving attended our 2017 Annual General Meeting of Shareholders (“2017 AGM”).
Director Independence
Our Board annually reviews 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 anon-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 anon-employee advisory board of, or in anon-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) from time to time, representatives of Silver Lake have provided advice and assistance to us in connection with obtaining debt financing for acquisition transactions, for which no payment is made and (ii) Silver Lake offered to provide up to $5 billion in convertible debt financing in connection with our proposed acquisition of Qualcomm Incorporated (“Qualcomm”). Our Board also considered our commercial relationships with Silver Lake portfolio companies (a) of which Mr. Hao serves as a director and/or (b) in which Silver Lake has an ownership interest of 10% or more (and in each such case, Mr. Hao’s indirect personal interest is less than 1%). Transactions between each of these companies and Broadcom represented less than 5% of Broadcom’s and the other entity’s revenue in their respective 2016 and 2017 fiscal years.
As a result of its review, our Board has determined that Messrs. Diller, Eggebrecht, Hao, Hartenstein, Low, Macleod and Marks and Ms. Delly, representing eight of our 10 director nominees 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:
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 12, 2018, and the number of meetings held by each committee during Fiscal Year 2017.
Director | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Executive Committee | ||||||||||||||||
James V. Diller | X | X | (C) | X | (C) | |||||||||||||||
Gayla J. Delly(1) | X | X | ||||||||||||||||||
Lewis C. Eggebrecht | X | |||||||||||||||||||
Eddy W. Hartenstein | X | X | (C) | X | ||||||||||||||||
Check Kian Low | X | |||||||||||||||||||
Donald Macleod | X | (C) | X | X | ||||||||||||||||
Peter J. Marks | X | X | ||||||||||||||||||
Hock E. Tan | X | |||||||||||||||||||
Number of meetings in Fiscal Year 2017 | 8 | 6 | 4 | 1 |
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, Broadcom Limited, 1320 Ridder Park Drive, San Jose, California 95131, U.S.A.
Audit Committee
The Audit Committee is responsible for assisting our Board with its oversight responsibilities regarding the following:
Our Board has determined that Ms. Delly and Mr. Macleod are each 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:
To the extent permitted by applicable law, our Constitution and the Nasdaq rules, 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 26 of this Proxy Statement.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for:
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 contextPurpose 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 andSpecial Meeting
At the extent to which a candidate would fill a present need on our Board; and the other ongoing commitments and obligations of the candidate. The Nominating and Corporate Governance Committee also routinely considers diversity as part of their deliberations, including with respect to the appointment of Ms. Delly to the Board, which is discussed below. 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. Ms. Delly,
who joined our Board in December 2017, was first suggested as a prospective Board candidate by a third party search firm retained by the Nominating and Corporate Governance Committee. Ms. Delly 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:
In addition, the Executive Committee may review and provide recommendations to our Board on matters requiring full Board approval, including:
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 theday-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 corporate 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 report, at least annually, 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. Diller, Eggebrecht, Hartenstein and Macleod, are not, and have never been, officers or employees of Broadcom. During Fiscal Year 2017, none of our executive officers served on themeeting, Broadcom-Singapore’s board of directors or compensation committeewill ask the ordinary shareholders and the holders of any other entityspecial preference shares in the capital of Broadcom-Singapore to vote to approve the Scheme of Arrangement. If the Scheme of Arrangement is approved and becomes effective, it will effect the Transaction, pursuant to which your ordinary shares of Broadcom-Singapore will be transferred to Broadcom-Delaware and you will receive, on aone-for-one basis, new shares of common stock of Broadcom-Delaware for each ordinary share of Broadcom-Singapore that has onebeen transferred.
Broadcom-Singapore’s board of directors has unanimously approved the Scheme of Arrangement and recommends that you vote “FOR” the Broadcom Redomiciliation Proposal.
Record Date; Voting Rights; Votes Required for Approval
March 5, 2018 has been fixed as the Record Date for the Special Meeting.
Only holders of record of Broadcom-Singapore ordinary shares or more executive officers servingspecial preference shares on the Record Date are entitled to notice of and to vote at the meeting. You will not be the holder of record of shares that you hold “beneficially.” Instead, the depository (for example, Cede & Co., as a membernominee for DTC) or other nominee will be the holder of our Board orrecord of such shares.
On the Compensation Committee.
Risk AssessmentRecord Date, approximately 410,751,985 ordinary shares and Compensation Practices
Our management conducted its annual review22,090,052 special preference shares in the capital of our compensation policiesBroadcom-Singapore were outstanding and practicesentitled to be voted at the meeting and we had 282 shareholders of record. A list of shareholders will be available for our employees, as they relate to our risk management, in January 2018, and reported their findingsinspection at least ten days prior 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 our Company in the future.
Shareholder Communications With Our Board
Holders of our ordinary shares may communicate with our Boardmeeting at the following address:
The Board of Directors
Broadcom Limited
c/o Chief Legal Officer
1320 Ridder Park Drive,
San Jose, California 95131, U.S.A. Each Broadcom-Singapore ordinary share or special preference share entitles the holder to one vote.
U.S.A.
Communications are distributed to our BoardAt the Special Meeting, the presence, in person or to any individual director,by proxy, of the Scheme Shareholders as appropriate, depending onof the facts and circumstances outlined in the communication. Communications that are unduly hostile, threatening, illegal or similarly unsuitable will be excluded, but 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 asRecord Date holding between them at least a director at any general meeting of shareholders (including an incumbent director), without the recommendation of our Board for election. In addition, a person may be appointed as director if such person is proposed by (a) a shareholder or shareholders who in aggregate hold(s) more than 50%majority of the total number of our issued andpaid-upBroadcom-Singapore ordinary shares (excluding treasury shares), which shareholderand special preference shares constitutes a quorum for the conduct of business. A broker“non-vote” occurs when a nominee (such as a broker) holding shares for a beneficial owner abstains from voting on a particular proposal because the nominee does not have discretionary voting power for that proposal and has not received instructions from the beneficial owner on how to vote those shares. Accordingly, it is important for beneficial owners to follow their broker’s instructions for providing voting instructions.
Assuming the presence of a quorum, the affirmative vote of (i) a majority in number of the Scheme Shareholders present and voting, either in person or shareholders,by proxy, at the Special Meeting and (ii) not less than 10 days before,75%
of the issued Broadcom-Singapore ordinary shares and special preference shares held by the Scheme Shareholders present and voting, either in person or (b)by proxy, at the Special Meeting, is required for the approval of the Broadcom Redomiciliation Proposal.
Pursuant to the directions of the Singapore Court, for the purposes of determining the number of Scheme Shareholders present and voting at the Special Meeting, Broadcom-Singapore ordinary shares that are deposited in book-entry form with DTC, and registered in the name of CEDE as nominee of DTC and holder of record in the Register of Members of Broadcom-Singapore, will be treated as follows:
Eachsub-depositor need not vote the Broadcom-Singapore ordinary shares registered in its name in the same way. Accordingly, asub-depositor may:
For purposes of determining whether the Broadcom Redomiciliation Proposal is approved by a majority in number of Scheme Shareholders, if the number of Broadcom-Singapore ordinary shares voted “FOR” the Broadcom Redomiciliation Proposal by asub-depositor exceeds the number of Broadcom-Singapore ordinary shares voted “AGAINST” the Broadcom Redomiciliation Proposal by it, suchsub-depositor will be taken to have voted “FOR” the Broadcom Redomiciliation Proposal, or if the number of Broadcom-Singapore ordinary shares voted “AGAINST” the Broadcom Redomiciliation Proposal by asub-depositor exceeds the number of Broadcom-Singapore ordinary shares voted “FOR” the Broadcom Redomiciliation Proposal by it, suchsub-depositor will be taken to have voted “AGAINST” the Broadcom Redomiciliation Proposal.
For the avoidance of doubt, a holder of Broadcom-Singapore ordinary shares who is not asub-depositor may only vote the Broadcom-Singapore ordinary shares registered in its name in the same way, and must vote all or part of its Broadcom-Singapore ordinary shares either “FOR” or “AGAINST” the Broadcom Redomiciliation Proposal, and not a mixture of both.
A holder of Broadcom-Singapore ordinary shares or special preference shares (including asub-depositor) voting by proxy shall be included in the count of Broadcom-Singapore shareholders present and voting at the Special Meeting as if that Broadcom-Singapore shareholder was voting in person, such that the votes of a proxy who in aggregate hold(s)has been appointed to represent more than five percentone Broadcom-Singapore shareholder at the Special Meeting shall be counted as the votes of such number of appointing Broadcom-Singapore shareholders.
Each holder of Broadcom-Singapore ordinary shares or special preference shares represented in person or by proxy at the Special Meeting is entitled to one vote per Broadcom-Singapore ordinary share or special preference share owned as of the total numberRecord Date.
Holders of our issued andpaid-upBroadcom-Singapore ordinary shares (excluding treasury shares), which shareholder or shareholders, not less than 120 days before,and special preference shares may file an objection with the dateSingapore Court against the approval of the notice providedScheme of Arrangement, but no appraisal or dissenting rights are available to shareholderssuch holders in connection with a scheme of arrangement effected under Singapore law.
Our directors and executive officers have indicated that they intend to vote their Broadcom-Singapore ordinary shares in favor of the general meeting lodges atBroadcom Redomiciliation Proposal. On the Record Date, our registered office in Singapore a written notice signed by such shareholder or shareholders (other thancurrent directors and executive officers and their affiliates beneficially owned 4,869,727 Broadcom-Singapore ordinary shares and were entitled to instruct the personvoting of 9,514,984 Broadcom-Singapore special preference shares entitled to be proposed for appointment), who (i) are qualified to attend and vote at the meeting forSpecial Meeting, which such notice is given,approximately 3.3% in the aggregate of the outstanding Broadcom-Singapore shares.
A proxy card is being sent to each Broadcom-Singapore ordinary shareholder of record as of the record date. If you properly received a proxy card, you may grant a proxy to vote on the Broadcom Redomiciliation Proposal presented in one of the two ways which are explained below under “How You Can Vote.”
If you properly complete, sign and (ii) have helddate the enclosed proxy card and timely send it to us or timely properly appoint your proxy over the Internet or by telephone, your proxy holder (one of the individuals named on the enclosed proxy card) will vote your Broadcom-Singapore ordinary shares representingas you have directed.
If you do not specify on the prescribed thresholdenclosed proxy card that is submitted (or when appointing your proxy over the Internet or by telephone) how you want to vote your Broadcom-Singapore ordinary shares, the proxy holders will vote them “FOR” the Broadcom Redomiciliation Proposal set forth in (a)this proxy statement.
You may abstain on the Broadcom Redomiciliation Proposal by marking “ABSTAIN.”
An abstention or (b) above, forbrokernon-vote on the proposal to approve the Scheme of Arrangement has the effect of a continuous period of at least one year priorvote not being cast with respect to the date on whichrelevant shares. As a consequence, such noticeshares will not be considered when determining whether the Broadcom Redomiciliation Proposal has received the required shareholder approval.
You may revoke your proxy at any timebefore it is given. Such a notice must also includeexercised at the consentSpecial Meetingin any of the person nominated to serve as a director, if elected, as well as the information specified below.following ways:
Holders of our ordinary shares can recommend qualified candidates for our Board
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 forre-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—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, Broadcom Limited, 1320 Ridder Park Drive, San Jose, California 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 Corporate Governance Guidelines, a copy of, which is 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, Broadcom Limited, 1320 Ridder Park Drive, San Jose, California 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 fornon-employee directors is necessary, and that continued service by a particular director may be in the best interests of our Company and our shareholders, regardless of such director’s age. However, when anon-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 our shareholders, whether or not to accept such resignation.
Accordingly, no person would be eligible to stand for election orre-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 ournon-employees directors to hold our ordinary shares having a fair market value equal to three times the annual cash retainer paid tonon-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 ournon-employee directors to reach this goal within five years of the date of their appointment or election to our Board, and to hold at least such minimum value in shares for as long as he or she serves on our Board. As of February 12, 2018, all of ournon-employee directors, other than Ms. Delly, who was appointed to our Board in December 2017, have 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 onForm 10-K for Fiscal Year 2017 (the “2017 Form10-K”), and as may be updated in our subsequent SEC filings.
Ournon-employee directors 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 otherout-of-pocket expenses related to their attendance at Board and committee meetings and other travel at our request.Non-employee directors do not receive anynon-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 ournon-employee directors. We do not compensate Mr. Tan and Dr. Samueli for their service on our Board or any committee of our Board.
Non-Employee Directors’ Cash Compensation
At our 2016 AGM, our shareholders approved the cash compensation arrangements for ournon-employee directors currently in effect. Ournon-employee directors are entitled to receive the following annual cash compensation, payable quarterly:
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Non-Employee Directors’ Equity Compensation
Ournon-employee directors are also entitled to receive the following equity compensation:
To determine the number of shares to be awarded to anon-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.
Directors’ Compensation for Fiscal Year 2017
The following table sets forth information regarding compensation earned by ournon-employee directors during Fiscal Year 2017.
Name | Fees Earned or Paid in Cash | Share Awards(1) | Dividends(2) | Total | ||||||||||||||||
James V. Diller | $ | 257,750 | $ | 193,041 | $ | 489,600 | (3) | $ | 940,391 | |||||||||||
Lewis C. Eggebrecht | $ | 90,000 | $ | 193,041 | — | $ | 283,041 | |||||||||||||
Kenneth Y. Hao | $ | 80,000 | $ | 193,041 | $ | 204,000 | (4) | $ | 477,041 | |||||||||||
Eddy W. Hartenstein | $ | 105,500 | $ | 193,041 | — | $ | 298,541 | |||||||||||||
Check Kian Low | $ | 63,000 | $ | 259,001 | — | $ | 322,001 | |||||||||||||
Donald Macleod | $ | 120,000 | $ | 193,041 | — | $ | 313,041 | |||||||||||||
Peter J. Marks | $ | 95,500 | $ | 193,041 | — | $ | 288,541 | |||||||||||||
Justine F. Page(5) | $ | 60,500 | — | — | $ | 60,500 | ||||||||||||||
Lucien Y. K. Wong(6) | $ | 20,000 | — | — | $ | 20,000 |
Name | Number of Ordinary Shares Underlying Restricted Share Units (#) | Number of Ordinary Shares Underlying Outstanding Share Options (#) | |||||||||||||
James V. Diller | 906 | 15,077 | |||||||||||||
Lewis C. Eggebrecht | 906 | 5,121 | |||||||||||||
Kenneth Y. Hao | 906 | 15,077 | |||||||||||||
Eddy W. Hartenstein | 906 | — | |||||||||||||
Check Kian Low | 1,294 | — | |||||||||||||
Donald Macleod | 906 | 5,223 | |||||||||||||
Peter J. Marks | 906 | 23,474 |
APPROVAL OF THERE-APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM AND INDEPENDENT SINGAPORE AUDITOR FOR FISCAL YEAR 2018 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 2017, 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, there-appointment of PwC as our independent registered public accounting firm and independent Singapore auditor for the fiscal year ending November 4, 2018 (“Fiscal Year 2018”). 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 2019 Annual General Meeting of Shareholders (the “2019 AGM”). We expect a representative from PwC to be present at the 2018 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 fees for all services rendered by PwC to us relating to Fiscal Year 2017. Also set forth below are audit fees for services rendered by PwC to us and Avago, our predecessor, relating to the fiscal year ended October 30, 2016 (“Fiscal Year 2016”), as well as 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.
Fiscal Year 2017 Services to Broadcom | Fiscal Year 2016 Services to Broadcom and Avago | ||||||||||||||
($ in thousands) | |||||||||||||||
Audit Fees | $ 9,736 | $ 10,096 | |||||||||||||
Audit-Related Fees | 941 | 575 | |||||||||||||
Tax Fees | 1,694 | 1,458 | |||||||||||||
All Other Fees | 3 | 3 | |||||||||||||
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Total | $ 12,374 | $ 12,132 | |||||||||||||
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Audit Feesconsist 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 controls 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 include audit fees related to business combination accounting for our recently closed acquisitions.
Audit-Related Feesconsist 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 both Fiscal Year 2017 and Fiscal Year 2016, these fees also included fees related to merger and acquisition due diligence.
Tax Feesconsist of fees billed for professional services for tax compliance, including various transfer pricing studies.
All Other Feesconsist of fees for professional services rendered by PwC for permissiblenon-audit services. In both Fiscal Year 2017 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 2017 and Fiscal Year 2016. The Audit Committee considers the provision of these services to be compatible with maintaining the independence of PwC.
Audit CommitteePre-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 public accounting firm, regardless of amount,notice must be authorized in advance by the Audit Committee. The Audit Committee has delegated itspre-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 regularly scheduled meeting. Pursuant to the charter of the Audit Committee, committee approval ofnon-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 public 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’spre-approval, and the fees for the services performed to date.
During Fiscal Year 2017 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) ofRule 2-01 ofRegulation S-X.
Our Board recommends a vote FOR the resolution to approve there-appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm and independent Singapore auditor for Fiscal Year 2018 and to authorize the Audit Committee to fix its remuneration as described in the Notice.
ORDINARY RESOLUTION TO AUTHORIZE SHARE ALLOTMENTS AND ISSUANCES
Under the laws of Singapore, our directors may issue shares and make offers, agreements, options or other instruments (including the grant of 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 2018 AGM and continue until the earlier of (i) the conclusion of the 2019 AGM or (ii) the expiration of the period within which the 2019 AGM is required by the laws of Singapore to be held. The 2019 AGM is required to be heldreceived no later than 15 months after the date of the 2018 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 the8:00 a.m. Pacific 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, grant or enter into, offers or agreements and issue options or other instruments (including the grant of equity awards and equity-related securities) that might or would require the allotment and 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:
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 Nasdaq 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 connectionsubmitting another properly signed proxy card with a transaction involving the issuance of ordinary shares representing 20%later date 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 assumedanother Internet 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 agreements or commitments that would result in the issuance by our Company of 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 approvaltelephone proxy 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 offeringswhich proxy must be received no later than 8:00 a.m. Pacific time on March 22, 2018; or
Your proxy will not be revoked merely by attending the Special Meeting. To revoke a proxy, you must take one of our ordinarythe actions described above. If you hold your 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 mannername of a broker, custodian or depository, you should follow the instructions provided by our Constitution.
If this proposal is approved, our directors would be authorized to allot and issue, during the period described above, ordinary shares subject to andyour broker in accordance with our Constitution, applicable Singapore laws and 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 under our equity compensation plans (other than ordinary 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 wererevoking your previously granted when prior shareholder approved share issuance mandates were in effect). instructions.
If we are unable to rely upon equity asyou do not appoint a component of compensation, we would have to review our compensation practices,proxy and would likely have to substantially increase cash compensation to retain key personnel. If we are unable to rely on equity as a source of capital financing for acquisitions or other transactions, we may be unable to achieve our desired strategic goals which may harm our ability to grow our Company.
Our Board recommends a vote FOR the resolution to authorize share allotments and issuances as described in the Notice.
NON-BINDING, ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
At our 2017 AGM, our Board recommended and shareholders voted in favor of having an annual,non-binding, advisory vote to approve the compensation of our named executive officers, as described in “Compensation Discussion and Analysis” beginning on page 26 and in the tables and accompanying narrative disclosure under “Executive Compensation” beginning on page 48. Accordingly, we are seeking this advisoryyou do not vote at the 2018 AGM.
ShareholdersSpecial Meeting, you will still be bound by the outcome. You are encouragedtherefore strongly urged to readattend and vote at 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 2017 compensation for our named executive officers listedmeeting in the Fiscal Year 2017 Summary Compensation Table included in the “Executive Compensation” section of this Proxy Statement.
Our Board recommends that shareholders vote “FOR” the following resolution as described in the Notice:
“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.”
While the vote on this resolution is advisory and not binding on us, the Compensation Committeeperson 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.
Our Board recommends that shareholders vote, on anon-binding, advisory basis, FOR the resolution to approve executive compensation as described in the Notice.
Executive Officersby proxy.
The following table sets forth certain information about our executive officers as of February 12, 2018:
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Hock E. Tanhas served as our President, Chief Executive Officer and a director since March 2006. From September 2005 to January 2008, he served as chairmanaccompanying proxy is being solicited on behalf of the board of directors of IDT. PriorBroadcom-Singapore. We have hired D.F. King & Co., Inc. 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 Chief Financial Officer since October 2016, and served as our Vice President and 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 aco-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 Professorassist in the Electrical Engineering Departmentdistribution of proxy materials and the solicitation of proxies for an initial fee estimated at $25,000, plus reimbursement ofout-of-pocket expenses. D.F. King & Co., Inc. will be indemnified against certain liabilities and expenses, including certain liabilities under the Universityfederal securities laws. We will also reimburse brokers for their reasonableout-of-pocket expenses for forwarding proxy materials to
beneficial owners or other persons for whom they hold Broadcom-Singapore ordinary shares. The directors, officers and employees of California, Los Angeles since 1985 (on leaveBroadcom-Singapore may also solicit proxies by personal interview, mail, email, telephone, facsimile or other means of absence since 1995)communication. These persons will not be paid additional remuneration for their efforts. Subject to applicable law, Broadcom-Singapore may also reimburse brokerage houses and other custodians, nominees, and fiduciaries for their expenses for forwarding proxy materials to the beneficial owners of Broadcom-Singapore ordinary shares and special preference shares and in obtaining voting instructions from such beneficial owners. The extent to which this will be necessary depends upon how promptly proxies are returned. We urge you to send in your proxy without delay.
If you are 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. SamueliScheme Shareholder who 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 orCo-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.
Mark D. Brazealhas served as our Chief Legal Officer since April 2017. Mr. Brazeal is responsible for the legal, governance and compliance functions across the company. Prior to his current role, he served as the Chief Legal Officer and Senior Vice President, IP Licensing for SanDisk Corporation, from December 2014 until it was acquired by Western Digital Corporation in 2016. Before joining SanDisk, Mr. Brazeal spent 15 years at BRCM in various positions of increasing responsibility, most recently as the Senior Vice President and Senior Deputy General Counsel in charge of all commercial, operational, IP licensing and litigation matters for BRCM. Prior to that, Mr. Brazeal was an attorney in the transactional and IP groups at the law firms of Wilson Sonsini Goodrich & Rosati in Palo Alto, CA, Yuasa & Hara in Tokyo, Japan and Howrey & Simon in Washington, D.C. He earned a J.D. and a B.A. in American Government from the University of Virginia.
Bryan T. Ingramhas 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.
Kirsten M. Spearshas 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.
COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion & Analysis (the “CD&A”) describes the philosophy, objectives and structure of our Fiscal Year 2017 executive compensation program. This CD&A is intended to be read in conjunction with the tables and other information beginning on page 48, which provide further historical compensation information for our named executive officers.
Our named executive officers (our “NEOs”) for Fiscal Year 2017 were:
Our Fiscal Year 2017 performance continued to be strong on many measures, with exceptional gains in total shareholder return (“TSR”), robust revenue growth and the successful integration of BRCM. Our executive compensation program is structured around the achievement of near-term financial and operational targets 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, accordingly, allocate a significant portion of our executives’ compensation opportunity to equity-based compensation, the value of which depends on our performance relative to our peers.
Our Financial Performance
Our Strategic Performance
Fiscal Year 2017 Compensation Highlights and Key Decisions
Payouts under the Fiscal Year 2017 Annual Performance Bonus Plan (the “APB Plan”), our annual cash incentive bonus plan, were tied to challengingpre-established annual corporate and divisional or functional performance goals, as well as the individual contributions and performance of each executive.
The Compensation Committee and the Independent Directors, in the case of our CEO, reviewed and approved the target cash compensation levels for our NEOs in Fiscal Year 2017 (the sum of base salary and target annual cash incentive bonus opportunity) and determined that, other than in connection with new appointments:
During Fiscal Year 2017, the Independent Directors granted Mr. Tan a performance-based RSU (“PSU”) award consisting of an aggregate of 168,000 units, which gives him the opportunity to earn up to 756,000Registered Holder, you can vote your Broadcom-Singapore ordinary shares based on our TSR performance as compared toand special preference shares directly by attending the S&P 500 (“Relative TSR”), as well as our absolute TSR over a three-yearSpecial Meeting and four-year period. This PSU award is a multi-year grant and when granting the award the Independent Directors intended that no further awards would be granted to Mr. Tan that could be earned or vest through 2021. No service-based awards were granted to Mr. Tan in Fiscal Year 2017, other than a service-based RSU granted in lieu of a cash payment in respect of a portion of his bonus under the Fiscal Year 2016 APB Plan.
Mr. Tan has served as our President and CEO since March 2006 and during that time has delivered exceptional value to our shareholders. Under Mr. Tan’s leadership, our annual revenues have grown from $1.4 billion in Fiscal Year 2006 to $17.6 billion in Fiscal Year 2017, and our market capitalization has grown from $3.2 billion since our initial public offering in 2009 to over $100 billion as of the end of Fiscal Year 2017. The
Independent Directors believe that it is very important to continue to retain and motivate Mr. Tan to lead our Company over the next four years based on this history of exceptional performance.
This PSU award is intended to incentivize Mr. Tan to continue to lead us to sustained, superior financial and operational performance through 2021, to provide a substantial long-term retention incentive to Mr. Tan and to reinforce ourpay-for-performance philosophy to our shareholders.
The amounts Mr. Tan may earn in 2020 and 2021 under this PSU award are entirely dependent upon, and will be aligned with, our Relative TSR performance.
To align our NEOs’ interests with those of our shareholders, in Fiscal Year 2017 a significant portion of the equity compensation awarded to our other NEOs were PSU awards that may be earned, if at all, based on our Relative TSR and absolute TSR performance over four overlapping performance periods beginning on the grant date and ending on each of March 14, 2018, 2019, 2020 and 2021, subject to the NEO remaining employed by us as of the end of each performance period.
Key Takeaways
We recorded substantial financial, operational and strategic achievements in Fiscal Year 2017, delivering exceptional 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.
Overview of Our Executive Compensation Program
The Compensation Committee believes that a significant portion of our executives’ target total direct compensation should be dependent upon our performance. Our executive compensation program is designed to reward our executives for producing sustainable growth in share value, consistent with our strategic plan, to attract and retain top talent and to align their interests with the interests of our shareholders.
Our annual, direct compensation consists of three main components:
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Target Total Direct Compensation
The following charts compare the percentage breakdown of target total direct compensation for Fiscal Year 2017 for our CEO compared to our other NEOs. This consists of base salary, target STI, and target LTI awards granted to the NEOs during the fiscal year (divided between service-based RSUs and PSUs) based on the fair market value of the awards on the grant date. As Mr. Tan’s Fiscal Year 2017 PSU award is a multi-year award, the chart below annualizes this PSU award over four years, assuming target performance level attainment.
Executive Compensation Program Governance
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Shareholder Engagement
Over the last several years we have conducted significant 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 then recent Compensation Committee actions and decisions. Our then Chairman of the Compensation Committee participated in those discussions. Topics that were discussed included:
These shareholders indicated that they were supportive of our then recent compensation actions and decisions and program design. The input received from our shareholders was reported to the Compensation Committee and to our Board.
Say-on-Pay and Frequency Vote
At our 2017 AGM, we submitted our executive compensation program to anon-binding, advisorycasting your vote of our shareholders (the “say-on-pay proposal”). Shareholders representing more than 88% of ordinary shares represented in person or by completing and returning a proxy card, which when properly executed and received by Broadcom-Singapore, will be voted at the meeting and entitled to vote on the matter votedSpecial Meeting in favor of thesay-on-pay proposal. Following the 2017 AGM, the Compensation Committee reviewed the results of the
say-on-pay proposal. In light of this approval, the Compensation Committee did not make any significant changes to our executive compensation program other than setting the performance goals under the performance-based RSUs based on both relative and absolute TSR, rather than based on a share price contingency metric, based, in part, on shareholder feedback received in Fiscal Year 2016 and in connectionaccordance with our 2017 AGM.
Additionally, at our 2017 AGM, shareholders representing a majority of ordinary shares represented in person or by proxy at the meeting and entitled to vote on the matter voted in favor of voting on asay-on-pay proposal annually, consistent with our Board’s recommendation. Our Board has determined to submitsay-on-pay annually until the next requiredsay-on-pay frequency vote.
Our executive compensation program is designed to achieve the following:
Equity awards are a long-term retention tool for key executives, intended to reflect the value we place on their expected contributions to our Company. When granting equity awards or, in the case of our CEO, when recommending an equity award to the Independent Directors for approval, 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 opportunities) competitive with that of compensation for similarly situated executives at other companies (i) in our compensation peer group and (ii) included in the third-party market salary surveys it reviews. Generally, where the Compensation Committee believes that the positions in the market match our internal roles, it views target total cash compensation as competitive when the compensation falls within the 25th to 75th percentiles of the competitive market, dependent on the area of responsibility. 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 this philosophy when it determines it to be necessary or appropriate. As a result, target total cash compensation for an executive may fall outside the referenced range from time to time.
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 our executives to pursue corporate strategic and financial goals that will create sustainable, long-term shareholder value.
The Compensation Committee reviews and approves compensation for our key executives, except for our CEO, which is reviewed and approved by the Independent Directors based on recommendations from the Compensation Committee.
Individual Executive Compensation Assessment
In addition to market compensation data provided by our independent compensation consultant, the Compensation Committee (and, in the case of our CEO, the Independent Directors) considers the following information for each executive when determining his or her compensation:
This information helps the Compensation Committee and the Independent Directors, in the case of our CEO, to understand the long-term retentive elements and total compensation being delivered to our executives.
Internal Pay Parity
While we do not maintain a formal policy regarding internal pay parity, it is often considered as a factor by the Compensation Committee and the Independent Directors when determining compensation.
Our CEO is compensated at a higher level than our 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 LTI compensation through PSU awards as compared to the other executives. Given Mr. Tan’s responsibility for our overall performance, the Independent Directors believe 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 of our Board regularly assesses risk in connection with executing their responsibilities. The Compensation Committee reviews and discusses those risks that relate to all of 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 2017, Compensia, Inc. (“Compensia”) provided consulting services to the Compensation Committee and the Independent Directors, including the preparation of an assessment of executive compensation based on an analysis of market compensation data. In addition, the Compensation Committee relied on Compensia for periodic updates on regulatory developments and market trends related to executive compensation matters. Compensia does not provide any other services to us other than advising the Compensation Committee and the Independent Directors on compensation-related matters.
The Compensation Committee has assessed the independence of Compensia pursuant to the six independence factorsyour instructions set forth in the SECproxy. Under Singapore law, the Registered Holder may not vote their shares over the Internet and Nasdaq rules and has concluded that Compensiaso must return a proxy card by mail or in person at the Special Meeting to vote their shares. If you are a Scheme Shareholder who is independent, and that its work for the Compensation Committee does not raise any conflict of interest.
The Compensation Committee works with Compensia to develop a meaningful compensation peer group for purposes of understanding competitive market compensation practices. This peer group is evaluated annually for comparative purposes only; the Compensation Committee does not benchmark any pay
components or target total direct compensation to a specific percentile. However, the Compensation Committee and, in the case of our CEO, the Independent Directors view generally compensation as competitive when it 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.
In August 2016, the Compensation Committee approved the compensation peer group for Fiscal Year 2017, which appears below. The following selection criteria were considered when developing our compensation peer group:
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Percentile | Revenue ($mm)(1) | Market Capitalization ($mm)(2) | ||||||||
Fiscal Year 2017 Peer Group | 25th Median 75th | | $10,032 $12,744 $22,200 | | $16,321 $30,796 $61,679 | |||||
Broadcom Limited | $10,892 | $61,869 | ||||||||
Rank | 28% | 75% |
(1) Represents publicly reported revenue for the trailing four quarters ended July 30, 2016.
(2) As of July 15, 2016, using publicly reported data available at such date.
In September 2017, the compensation peer group for Fiscal Year 2018 was updated to reflect the growth in our revenue and market capitalization. Agilent Technologies, Inc., Lam Research Corporation and Seagate Technology PLC were removed due to their revenues or market capitalizations falling below the financial selection criteria set forth above. Companies addedDTC Participant, vote your shares through DTC’s procedures. Your shares must be voted no less than 24 hours prior to the peer group were Mastercard, Inc., NVIDIA Corporation, PayPal Holdings, Inc., The Priceline Group, Inc., and Visa Inc., which were viewedmeeting, or such longer time as appropriate peers because they have revenues and market capitalizations alignedmay be specified by DTC or its participants. If you hold your ordinary shares in “street name,” please vote in accordance with the applicable selection criteria detailed above, even though some of these companiesinstructions provided by your broker. Most “street name” holders, or beneficial owners holding through a broker, may also vote by telephone or by Internet, in accordance with instructions provided by their broker. All shares entitled to vote and represented by properly completed proxies received prior to the Special Meeting and not revoked will be voted at the Special Meeting in accordance with your instructions. If you are a Scheme Shareholder who is a Registered Holder and you return a signed proxy card without indicating how your shares should be voted on a matter and do not operate inrevoke your proxy, the semiconductor-related or other technology-focused industry.shares represented by your proxy will be voted as the Board recommends, and therefore, “FOR” the approval of the Broadcom Redomiciliation Proposal.
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:
The principal components of our executive compensation program are:
Base Salary
We believe that a competitive base salary is an important component of our compensation program designedAny Scheme Shareholder entitled 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 positionsvote at the companies in our compensation peer group and/or inSpecial Meeting that has submitted a proxy has the market salary surveys, and taking into account internal pay parity among our executives. The base salaries of our key executives are reviewed annually by the Compensation Committee.
Our CEO makes recommendationsright to the Compensation Committee with respect to base salary adjustments for key executives (other than himself). The Compensation Committee reviews and considers several factors in determining annual adjustments to an executive’s base salary, including:
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.
For Fiscal Year 2017, the Compensation Committee and, in the case of our CEO, the Independent Directors elected to maintain the base salary for our NEOs at their Fiscal Year 2016 levels.
NEO | Title | Base Salary July 1, 2016 | Base Salary July 1, 2017 | % Change | ||||||||
Hock E. Tan | President and Chief Executive Officer | $1,100,000 | $1,100,000 | 0% | ||||||||
Thomas H. Krause Jr. | Chief Financial Officer | $ 371,158 | $ 400,000 | (1) | 7.8% | |||||||
Charlie B. Kawwas, Ph.D. | Senior Vice President and Chief Sales Officer | $ 488,529 | $ 488,529 | 0% | ||||||||
Mark D. Brazeal(2) | Chief Legal Officer | — | $ 450,000 | 0% | ||||||||
Bryan T. Ingram | Senior Vice President and General Manager, Wireless Semiconductor Division | $ 592,250 | $ 592,250 | 0% |
Annual Cash Incentive Bonus Plan
We believe that a significant portion of our executives’ target total direct compensation should be dependent upon performance. We use the APB Plan to provide a performance-based annual cash incentive opportunity for our executives. 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, and to drive positive contribution to our Company’s growth and performance.
Each executive is annually assigned a specified target annual cash incentive bonus opportunity under the APB Plan, expressed as a percentage ofrevoke his or her base salary. The Compensation Committee considersproxy at any time prior to voting at the compensation peer group dataSpecial Meeting by (i) submitting a subsequently dated proxy, which, if not delivered in person at the meeting, must be received by us no less than 24 hours before the appointed time of the meeting or (ii) by attending the meeting and market survey datavoting in person. You can submit your subsequently dated proxy to Broadcom-Singapore at c/o Proxy Services, c/o Computershare Investor Services, P.O. Box 43101, Providence, Rhode Island 02940-5067. Attendance at the Special Meeting will not, by itself, revoke your proxy; you must elect to vote in person at the Special Meeting in order to revoke or change your vote. If you are a Scheme Shareholder who is a DTC Participant and would like to change your voting instruction, you should follow DTC’s or the relevant participant’s procedures for changing your vote instructions. If you hold ordinary shares in “street name” through a broker and would like to change your vote instruction, you should follow the directions provided by your broker. Most brokers provide means by which “street name” holder may vote by telephone or by Internet, as one factorwell as by signing and returning voting instructions.
If the Special Meeting is postponed or adjourned, as a Scheme Shareholder your proxy will remain valid and may be voted at the postponed or adjourned meeting. You will still be able to revoke your proxy until it is voted.
Proxies received at any time before the Special Meeting, and not revoked or superseded before being voted, will be voted at the Special Meeting. A validly signed proxy will be voted in determining an executive’s target annual cash incentive bonus opportunityaccordance with the specification.
Subject to space availability, all Broadcom-Singapore shareholders as of the Record Date, or their duly appointed proxies, may attend the Special Meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 8:00 a.m. Pacific time on March 23, 2018. Each Broadcom-Singapore shareholder, or their duly authorized representative, will be asked to present valid photo identification issued by a government agency, such as a driver’s license or passport and, if applicable, evidence of such person’s authorization to represent a Broadcom-Singapore shareholder.
If your Broadcom-Singapore ordinary shares are held in the casename of our CEO, its recommendationa bank, broker, custodian, nominee or other holder of record and you plan to attend the Special Meeting, you must present proof of your beneficial ownership of Broadcom-Singapore ordinary shares, such as a recent bank or brokerage account statement, together with a form of personal identification and proof of address to be admitted to the Independent Directors. In addition, the Compensation Committee determines Special Meeting. If you would rather have an admission ticket, you can obtain one in advance by mailing a written request,along with proof of your beneficial ownership of Broadcom-Singapore ordinary shares, to:
Chief Legal Officer
Broadcom Limited
1320 Ridder Park Drive
San Jose, California 95131
U.S.A.
Even if you establish proof of your beneficial ownership and/or have a valid admission ticket, you will not be entitled to vote at or otherwise participate in the case of our CEO, recommendsmeeting unless you are a Scheme Shareholder entitled to vote at the Independent Directors for approval, target annual cash incentive bonus opportunities based on an executive’s experience in his or her role with us and his or her level of responsibility, which the Compensation Committee believes directly correlates to his or her ability to influence corporate and operational results.Special Meeting.
Fiscal Year 2017 APB Plan
The target annual cash incentive bonus opportunities for our NEOs for Fiscal Year 2017, other than in connection with new appointments, remained the same as for Fiscal Year 2016.
Target Annual Cash Incentive Bonus Opportunities
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Annual cash incentive bonuses under the APB Plan are calculated as follows:
Bonuses under the APB Plan are payable to our NEOs in cash, with the exception of our CEO in certain circumstances. In the event the Independent Directors assign our CEO an individual performance multiplier (discussed in more detail below) greater than 100%, they may elect to pay the difference between the dollar amount of our CEO’s actual annual cash incentive bonus amount and the dollar amount of his annual cash incentive 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 the Independent Directors. The Independent Directors believe that this feature gives them the flexibility to further incentivize our CEO to focus on ourmid-term to long-term performance and to further provide for value creation for our shareholders, to more closely align our CEO’s interests with those of our shareholders generally, and to provide additional retention incentive to our CEO.
Corporate Performance Components
The corporate performance goals for the Fiscal Year 2017 APB Plan were:
Each goal carried an equal weighting of 50%If you hold LP Units of the corporate performance component. In determiningPartnership, you will be able to instruct Computershare, as the actual attainmentregistered shareholder of these goals, the calculation ofnon-GAAP revenue andnon-GAAP operating margin also excluded the financial effects of extraordinary items not considered when the performance goals were originally set.
The target attainment level fornon-GAAP revenue for Fiscal Year 2017 was set at $15,716 million, and the maximum attainment level was set at $16,502 million. The target attainment level fornon-GAAP operating margin for Fiscal Year 2017 was set at 44.9%, and the maximum attainment level was set at 46.9%. These target and maximum attainment levels were established by the Compensation Committee, based on the recommendation of our CEO, and approved by the Independent Directors. They were set at levels significantly above our Fiscal Year 2016 actual performance levels and were designed to be difficult to attain and to require substantial effort to achieve.
Divisional or Functional Performance Components
The Compensation Committee, following consideration of our CEO’s recommendations (with respect to executives other than himself), determined an executive’s divisional or functional goals and sets their weightings 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 divisional or functional goal was set by the Compensation Committee to be difficult to attain and to require substantial effort on behalf of the division or function, and the NEO in charge of the division or function, to achieve. The table below under “Fiscal Year 2017 APB Plan Attainment and Payout Amounts” sets forth the divisional and functional goals for Fiscal Year 2017.
Individual Performance Multiplier
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 our CEO’s) is approved by the Compensation Committee based, in part, on the recommendations of our CEO and by the Independent Directors in the case of our CEO with input from the Compensation Committee. In evaluating individual performance to determine the multiplier, the Compensation Committee considers the requirements of the NEO’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 NEO’s senior leadership ability, and how each of these factors impact the overall performance of the NEO’s division or function. Based on their respective division or function’s levels of performance and their individual contribution to that performance, the Compensation Committee or, in the case of our CEO, the Independent Directors, assigns each NEO an individual performance multiplier of between 50% and 150%. NEOs who consistently meet or exceed the requirements of their position, as determined by the Compensation Committee, receive an individual performance multiplier of between 100% and 150%. NEOs who meet some, but not all of the requirements of their position or for whomoutstanding special preference shares, how to vote the Compensation Committee believes that improvement is needed receive a bonus multiplier of between 50% and 100%.
Fiscal Year 2017 APB Plan Attainment
Corporate Performance Components
In December 2017, the Compensation Committee and the Independent Directors determined that we achieved Fiscal Year 2017 adjustednon-GAAP revenue of $17,658 million and adjustednon-GAAP operating
margin of 48.1%, which were above thepre-established maximum attainment levels of performance. The following tables show thenon-GAAP revenue andnon-GAAP operating margin actually achieved for Fiscal Year 2017 and used for the purposes of determining the level of achievement of the corporate performance goals under the Fiscal Year 2017 APB Plan.
Non-GAAP Revenue Performance Goal Attainment
Fiscal Year 2017 Non-GAAP Revenue Target Attainment Level (in millions) | Fiscal Year 2017 Non- GAAP Revenue Maximum (in millions) | Fiscal Year 2017 Revenue Achieved (in millions) | Fiscal Year 2017 Revenue from (in millions) | Fiscal Year 2017 APB GAAP Revenue Achieved (in millions) | ||||||||||||||||
$15,716 | $16,502 | $17,665(1) | $(7)(2) | $17,658 |
Non-GAAP Operating Margin Performance Goal Attainment
Fiscal Year 2017 Margin Target | Fiscal Year 2017 Non-GAAP Operating Margin Maximum Attainment Level | Fiscal Year GAAP | Provisions or Accruals Payouts Under (in millions) | Other Provisions Accruals, Net (in millions) | Fiscal Year 2017 APB Plan (in millions) | Fiscal Year 2017 APB Plan Adjusted Non-GAAP Operating Margin Achieved | ||||||||||||||||||||||||
44.9% | 46.9% | $8,011(1) | $458 | $16(2) | $8,485 | 48.1% |
Corporate Performance Attainment Level
Corporate Performance Goals | Actual Fiscal Year (in millions) | As a % of Target Attainment | Weight | Weighted Attainment | ||||||||||||||||
Non-GAAP Revenue
| $17,658
| 150%
| 50%
| 75%
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Non-GAAP Operating Margin
| 48.1%
| 150%
| 50%
| 75%
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Total Attainment
| 150% |
Divisional or Functional Performance Components
For purposes of the Fiscal Year 2017 APB Plan, the Compensation Committee determined an executive’s divisional or functional performance percentage based on the achievement of specified goals by the division or function overseen by him or her. In December 2017,the Independent Directors and the Compensation
Committee determined that the divisional or functional goals had been achieved at the levels set forth in the table below under “Fiscal Year 2017 APB Plan Attainment and Payout Amounts”.
Individual Performance Multiplier
The Compensation Committee, with input from our CEO, determined that each of our NEOs (other than the CEO) should receive an individual performance multiplier of between 120% and 130% based on these individuals’ respective contributions towards the corporate goal achievements and their respective divisional or functional achievements.
The Independent Directors, based upon the recommendation of the Compensation Committee, determined that Mr. Tan should receive a performance multiplier of 150% for his performance in delivering extremely strong financial and operational results, above the APB Plan maximum performance goals.
Each of the corporate and divisional or functional goals for our NEOs, and their respective weighting is described in the following table.
Fiscal Year 2017 APB Plan Attainment and Payout Amounts
Name | Bonus Target Percent | Fiscal Year 2017 Bonus Goals | Fiscal Year 2017 Bonus Achievement | Fiscal Year 2017 Payout Amount in Dollars (USD) and as a Percentage of Base Salary Paid(1) | ||||||||
Hock E. Tan | 150% | Non-GAAP Revenue (50%) | 150% | |||||||||
President and Chief Executive Officer | Non-GAAP Operating Margin (50%) | 150% | ||||||||||
Fiscal Year 2017 Attainment | 150% | $ 3,712,500 | 337.5% | |||||||||
Thomas H. Krause Jr. | 75% | Non-GAAP Revenue (25%) | 150% | |||||||||
Chief Financial Officer | Non-GAAP Operating Margin (25%) | 150% | ||||||||||
Direct Expenses (50%)(2) | 117% | |||||||||||
Fiscal Year 2017 Attainment | 134% | $ 520,888 | 130.2% | |||||||||
Charlie B. Kawwas, Ph.D. | 75% | Non-GAAP Revenue (25%) | 150% | |||||||||
Senior Vice President and Chief Sales Officer | Non-GAAP Operating Margin (25%) | 150% | ||||||||||
Design Wins (15%) | 122% | |||||||||||
Direct Expenses (15%)(2) | 120% | |||||||||||
Product Revenue (10%) | 150% | |||||||||||
Margin Improvement (10%) | 150% | |||||||||||
Fiscal Year 2017 Attainment | 141% | $ 672,688 | 137.7% | |||||||||
Mark D. Brazeal | 60% | Non-GAAP Revenue (25%) | 150% | |||||||||
Chief Legal Officer | Non-GAAP Operating Margin (25%) | 150% | ||||||||||
Direct Expenses (35%)(2) | 120% | |||||||||||
Litigation Expense (15%) | 120% | |||||||||||
Fiscal Year 2017 Attainment | 135% | $ 243,935(3) | 97.2% | |||||||||
Bryan T. Ingram | 100% | Non-GAAP Revenue (25%) | 150% | |||||||||
Senior Vice President and General Manager, Wireless Semiconductor Division | Non-GAAP Operating Margin (25%) | 150% | ||||||||||
WSD Revenue (25%) | 150% | |||||||||||
WSD Operating Margin (25%) | 145% | |||||||||||
Fiscal Year 2017 Attainment | 149% | $ 1,145,780 | 193.5% |
Discretionary Bonuses
Each year, the Compensation Committee may supplement the APB Plan payout 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 $100,000 discretionary cash bonus due to his contributions outside of the regular scope of his responsibility, in particular due to his significant efforts toward the completion of the acquisition of Brocade.
Long-Term 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 each 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 RSU and PSU awards promotes long-term retention of our executive. This combination provides an element of certainty of value from their service-based RSU awards, while motivating the executive to improve performance and maximize our TSR, thereby more closely aligning their interests with those of our shareholders generally, through the PSU awards.
The Compensation Committee approves equity awards granted under our annual equity program to our NEOs, other than our CEO whose equity awards are approved by the Independent Directors, typically in March of each year. These awards are 50% service-based and 50% performance-based. In addition, the Compensation Committee may grant additional awards to our NEOs (other than the CEO) from time to time. In granting initial and subsequent equity awards, the Compensation Committee takes into consideration our CEO’s recommendation, except with respect to his own awards, the executive’s position and level, past equity awards, his or her other compensation and the perceivedvalue he or she brings to our Company based on his or her technical experience, 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 awards compared to his or her base salary.
Fiscal Year 2017 Mix of Equity Awards
Consistent with our compensation philosophy, the Compensation Committee granted equity awards to our NEOs (other than our CEO) in Fiscal Year 2017 as set forth in the table below. The awards vest over four years, with 25% of the ordinary shares subject to the awards vesting annually, subject to the executive’s continued service on the vesting dates. The PSU awards however are also subject to the satisfaction of the applicable performance criteria, discussed in more detail below under “Fiscal Year 2017 Performance-Based Equity Awards”.
Fiscal Year 2017 Equity Awards Granted to NEOs other than our CEO
November 2016(1) | December 2016(2) | March 2017 | April 2017(4) | |||||||||||||||||||||||||
NEO | Performance- Based RSUs (Number of Shares) | Service- Based RSUs (Number of Shares) | Service-Based (Number of | PSUs (Maximum of | Service- Based (Number | PSUs (Maximum | Service- Based (Number | |||||||||||||||||||||
Thomas H. Krause Jr. | 10,000 | 10,000 | 5,000 | 25,000 | 12,500 | |||||||||||||||||||||||
Charlie B. Kawwas, Ph.D. | 5,000 | 25,000 | 12,500 | |||||||||||||||||||||||||
Mark D. Brazeal | 25,000 | 12,500 | ||||||||||||||||||||||||||
Bryan T. Ingram | 5,000 | 25,000 | 12,500 |
Fiscal Year 2017 Performance-Based Equity Awards
Share Price Contingency Performance-Based RSUs
The ordinary shares subject to the PSU award granted to Mr. Krause in November 2016 in connection with his promotion to CFO will not be earned 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 November 15, 2016, the date of grant, and vest over a four-year period at the rate of 25% per year subject to Mr. Krause remaining employed with us through the relevant vesting dates. On November 15, 2016, the closing price per share of our ordinary shares was $166.45; 120% of this price is $199.74 per share.
This share price contingency was met in February 2017 and all ordinary shares subject to this award have the potential to vest (assuming Mr. Krause’s continued service with us).
If the share price contingency had not been met by the fourth anniversary of the grant date or, in the event and at, the time Mr. Krause ceases to provide services to us, the PSU award would not have vested and the award would have expired or immediately terminated, as applicable.
Relative TSR PSUs
To more closely align the NEOs’ interests with those of our shareholders, in Fiscal Year 2017 our NEOs were granted PSU awards that are earned based on our Relative TSR and absolute TSR performance over four overlapping performance periods beginning on the grant date and ending on each of March 14 of 2018, 2019, 2020 and 2021. Thecorresponding number of ordinary shares that may be earned is capped atone-quarter of the target number of ordinary shares for each of the first three performance periods. In the aggregate, each NEO may earn up to 200% of the total target number of ordinary shares, if at the end of the fourth performance period our Relative TSR is at or above the 75th percentile of the S&P 500 and our absolute TSR is not negative. The PSU awards vest on the later of (i) the last day of each performance period and (ii) each anniversary of the grant date, subject to the NEO’s continued employment with us on the relevant vesting date. Within 60 days after the end of each performance period, the Compensation Committee will determine the number of ordinary shares earned based on our Relative TSR over the performance period expressed as a percentile. The number of ordinary shares earned will be determined by multiplying the target number of ordinary shares subject to each performance period(one-quarter of the total target number of ordinary shares) by an achievement factor (the “Achievement Factor”). The Achievement Factor is based on our Relative TSR for the performance period determined as follows:
The maximum number of ordinary shares that can be earned in the fourth performance period includes ordinary shares that were not earned in the prior three performance periods based on the sum of the Achievement Factors for these three performance periods (the “Prior Achievement Sum”). However, if our
absolute TSR is negative for the fourth performance period, then the maximum number of ordinary shares that may be earned in the fourth performance period is 100% of the target number of ordinary shares.
At the end of each performance period, the Achievement Factor will be determined as follows:
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CEO Equity Award
On June 15, 2017, the Independent Directors granted Mr. Tan a PSU award consisting of an aggregate number of 168,000 units, which gives him the opportunity to earn up to a maximum of 756,000 ordinary shares. In designing this award, the Independent Directors consulted with Compensia to create a multi-year grant that would incentivize Mr. Tan to continue to lead us to long-term sustained, superior financial and operational performance. The PSU award emphasizes sustainable shareholder value creation and serves as an effective method to retain and motivate Mr. Tan, who has played a critical role in our exceptional performance since he joined in 2006.The value Mr. Tan will realize from the PSU award will depend on his ability to continue to successfully lead our Company toout-perform our peers over the next three to four years. The actual amounts Mr. Tan realizes under the PSU award will be well-aligned with our Company’s performance over the Performance Periods and the corresponding value created for our shareholders. Target performance under the award will result in an annualized value delivered to Mr. Tan that aligns with market median pay for CEOs in our compensation peer group (based on their annual grant values), as measured at the time of grant. Mr. Tan has the ability to earn significantly higher amounts if he can deliver significant sustained, superior performance over the next four years that creates a corresponding substantial value to our shareholders in comparison to an investment in the S&P 500.
Pursuant to the terms of the PSU award, the number of ordinary shares, if any, that may be earned will depend on the level of performance achieved based on both our Relative TSR and our absolute TSR. This PSU award vests in two overlapping performance periods; Performance Period #1 ending in 2020 and Performance Period #2 ending in 2021, with each Performance Period commencing June 15, 2017.
The number of ordinary shares earned at the end of each Performance Period will be fully vested on the last day of each Performance Period, subject to Mr. Tan’s continued service through such date. Within 60 days after the end of each Performance Period, the Independent Directors will determine the number of ordinary shares that Mr. Tan is entitled to receive by reference to our Relative TSR over the respective Performance Period expressed as a percentile as follows:
If our Relative TSR is at or above the 90th percentile of the S&P 500 in Performance Period #2 and our absolute TSR is not negative, Mr. Tan will earn the maximum amount available under the PSU award, which is 756,000 ordinaryspecial preference shares, in aggregate over the two Performance Periods.
No more than the target number of ordinary shares (84,000 ordinary shares) may be earned with respect to a Performance Period if our absolute TSR is negative.
Performance Period #1 | Performance Period #2 | |||||||||
Relative TSR | % of Target Share Number Earned | Number of Shares Earned | % of Target Share Number Earned | Number of Shares Earned | Maximum Number of Catch-Up Shares Earned | |||||
At or above 90th Percentile of the S&P 500 | 300% | 252,000 | 450% | 378,000 | 378,000 | |||||
At the 75th Percentile of the S&P 500 | 300% | 252,000 | 300% | 252,000 | 252,000 | |||||
At the 50th Percentile of the S&P 500 | 100% | 84,000 | 100% | 84,000 | 84,000 | |||||
At the 25th Percentile of the S&P 500 | 25% | 21,000 | 25% | 21,000 | 21,000 | |||||
Below the 25th Percentile of the S&P 500 | 0% | - | 0% | - | - |
Executive Share Ownership Guidelines
Based on competitive market data and after consultation with Compensia, the Compensation Committee has set the following executive share ownership guidelines:
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Our executive officers, including the CEO, are expected to satisfy the applicable guidelines within five years of the date on which they become an executive officer and to hold at least such minimum value in ordinary shares for so long as he or she is an executive officer.
Ordinary 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 performance-based RSUs for which the performance criteria have been met count toward achieving the applicable guideline level of share ownership at a rate of 100%.
As of August 29, 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 executives 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, from making short sales, 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”). Our ESPP provides eligible employeesaccordance with the opportunity to acquire our ordinary shares through periodic payroll deductions, at a 15% discount, based on asix-month “look-back” period. Our ESPP is structured in the U.S. as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code. Our ESPP requires participants to hold their purchased ordinary 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 ordinary shares become freely tradable, subject to applicable securities laws and our insider trading policy.Voting Trust Agreement.
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 NEOs, 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 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 the 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.
The 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 (a “qualifying termination”). 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 NEOs), bonus payment (100% in the case of Mr. Tan and 50% in the case of the other NEOs) and, other than in the case of Mr. Tan, health benefits continuation coverage (for 6 months) upon a qualifying termination.
In the event of a qualifying termination 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 such a change in control) (a “CICqualifying 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 NEOs), bonus (200% in the case of Mr. Tan and 100% in the case of the other NEOs) 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 outstanding service-based equity awards and acceleration of outstanding performance-based equity awards based on actual performance. Vesting of the equity awards held by the NEOs will only accelerate following a CIC qualifying termination of employment, which is commonly referred to as a “double trigger” provision. We believe our double trigger change in control arrangements 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 in control arrangements, our NEOs 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 the 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 an estimate of the post-employment payments and benefits that the NEOs are eligible to receive, see “Severance and Change in Control Agreements with Named Executive Officers; Death and Disability Policy; Employment Arrangements” below.
Other Compensation
The Compensation Committee provides modest perquisites and other personal benefits to our executives on acase-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 him or her 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 2017, 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 the Independent Directors. For additional information on the perquisites and other personal benefits provided to Mr. Tan in Fiscal Year 2017, see the “Fiscal Year 2017 Summary Compensation Table” below.
Accounting and 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) disallowed a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for our CEO and each of the other NEOs (other than our CFO), referred to as “covered employees”. Prior to the enactment of tax reform legislation on December 22, 2017 (the “2017 Tax Reform Act”), “qualified performance-based compensation” was exempt from this $1 million limitation. As part of the 2017 Tax Reform Act, the ability to rely on this “qualified performance-based compensation” exception was eliminated and the limitation on deductibility generally was expanded to include all NEOs. The Compensation Committee has not previously taken the deductibility limit imposed by Section 162(m) into consideration in setting compensation and as a result of the 2017 Tax Reform Act, a deduction for any compensation paid to our NEOs in excess of $1 million is disallowed.
COMPENSATION COMMITTEE REPORTValidity
The Compensation Committee has reviewed and discussed with members of management the Compensation Discussion and Analysis section included in this proxy statement, as required by Item 402(b) of RegulationS-K. Based upon such review and related discussions, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this proxy statement for the Company’s 2018 Annual General Meeting of Shareholders.
Submitted by the Compensation Committee of the Board of Directors:
Eddy W. Hartenstein, Chairperson
James V. Diller
Lewis C. Eggebrecht
Donald Macleod
Fiscal Year 2017 Summary Compensation Table
The following table sets forth information about compensation earned (or failing him, Hock E. Tan or failing him any other director of Broadcom-Singapore) has been appointed by our NEOs during Fiscal Year 2017, Fiscal Year 2016 and Fiscal Year 2015. Our NEOs consist of our CEO, our CFO, and each of our three other most highly compensated executive officers serving at the end of Fiscal Year 2017.
Name and Principal Positions | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) |
Non-Equity | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Hock E. Tan | 2017 | 1,100,000 | 0 | 98,322,843 | 3,712,500 | 75,820 | (3) | 103,211,163 | ||||||||||||||||||||
President and Chief Executive Officer | 2016 | 1,011,662 | 0 | 21,656,268(4) | 1,980,516 | (5) | 43,601 | 24,692,047 | ||||||||||||||||||||
2015 | 910,461 | 0 | 0 | 3,061,384 | 53,923 | 4,025,768 | ||||||||||||||||||||||
Thomas H. Krause Jr. | 2017 | 400,000 | 100,000 | (6) | 10,101,125 | 520,888 | 16,200 | (7) | 11,138,213 | |||||||||||||||||||
Chief Financial Officer | 2016 | 349,687 | 200,000 | 2,574,300 | 312,924 | 15,900 | 3,452,811 | |||||||||||||||||||||
Charlie B. Kawwas, Ph.D. | 2017 | 488,529 | 0 | 7,322,750 | 672,688 | 16,200 | (7) | 8,500,167 | ||||||||||||||||||||
Senior Vice President and Chief Sales Officer | 2016 | 479,007 | 0 | 4,273,410 | 549,885 | 20,278 | 5,322,580 | |||||||||||||||||||||
2015 | 424,284 | 300,000 | 3,256,875 | 670,326 | 224,596 | 4,876,081 | ||||||||||||||||||||||
Mark D. Brazeal(8) | 2017 | 268,269 | 0 | 5,906,188 | 243,935 | 12,462 | (7) | 6,430,854 | ||||||||||||||||||||
Chief Legal Officer | ||||||||||||||||||||||||||||
Bryan T. Ingram | 2017 | 592,250 | 0 | 7,322,750 | 1,145,780 | 16,200 | (7) | 9,076,980 | ||||||||||||||||||||
Senior Vice President and General Manager, Wireless Semiconductor Division | 2016 | 580,706 | 0 | 3,123,580 | 380,423 | 15,900 | 4,100,609 | |||||||||||||||||||||
2015 | 542,308 | 0 | 6,014,925 | 810,577 | 15,900 | 7,383,710 | ||||||||||||||||||||||
Fiscal Year 2017 Grants of Plan-Based Awards Table
The following table sets forth information regarding grants of plan-based awards during Fiscal Year 2017 to each of our NEOs. All awards were granted under the 2009 Plan unless otherwise noted.
Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||||||||||||||||||||||||||||||||
Name | Approval Date(1) | Grant Date(1) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||
Hock E. Tan | 206,250 | 1,650,000 | 3,712,500 | |||||||||||||||||||||||||||||||||||||
12/7/2016 | 12/15/2016 | 6,010 | (5) | 1,021,700 | ||||||||||||||||||||||||||||||||||||
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Thomas H. Krause Jr. | 18,750 | 300,000 | 675,000 | |||||||||||||||||||||||||||||||||||||
10/14/2016 | 11/15/2016 | 10,000 | (7) | 1,214,275 | ||||||||||||||||||||||||||||||||||||
10/14/2016 | 11/15/2016 | 10,000 | 1,564,100 | |||||||||||||||||||||||||||||||||||||
12/6/2016 | 12/15/2016 | 5,000 | 850,000 | |||||||||||||||||||||||||||||||||||||
3/3/2017 | 3/15/2017 | 1,562 | 12,500 | (8) | 25,000 | 3,773,750 | ||||||||||||||||||||||||||||||||||
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Charlie B. Kawwas, Ph.D. | 9,160 | 366,397 | 824,393 | |||||||||||||||||||||||||||||||||||||
12/6/2016 | 12/15/2016 | 5,000 | 850,000 | |||||||||||||||||||||||||||||||||||||
3/3/2017 | 3/15/2017 | 1,562 | 12,500 | (8) | 25,000 | 3,773,750 | ||||||||||||||||||||||||||||||||||
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Mark D. Brazeal | 5,647 | 150,577 | 338,798 | |||||||||||||||||||||||||||||||||||||
3/17/2017 | 4/15/2017 | 1,562 | 12,500 | (8) | 25,000 | 3,389,813 | ||||||||||||||||||||||||||||||||||
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Bryan T. Ingram | 37,016 | 592,250 | 1,332,563 | |||||||||||||||||||||||||||||||||||||
12/06/2016 | 12/15/2016 | 5,000 | 850,000 | |||||||||||||||||||||||||||||||||||||
3/3/2017 | 3/15/2017 | 1,562 | 12,500 | (8) | 25,000 | 3,773,750 | ||||||||||||||||||||||||||||||||||
3/3/2017 | 3/15/2017 | 12,500 | 2,699,000 |
Fiscal Year 2017 Outstanding Equity Awards at FiscalYear-End Table
The following table sets forth information about share options and RSU awards outstanding on October 29, 2017, the last day of Fiscal Year 2017, held by each of our NEOs.
Option Awards(1) | Restricted Share Unit Awards(1) | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Securities Underlying Unearned Units of Stock (#) | Market Stock that | |||||||||||||||||||||||||||
Hock E. Tan | ||||||||||||||||||||||||||||||||||||
3/8/2011 | 30,000 | — | 32.39 | 3/7/2018 | — | — | — | — | ||||||||||||||||||||||||||||
3/12/2013 | 131,250 | — | 35.45 | 3/11/2020 | — | — | — | — | ||||||||||||||||||||||||||||
9/13/2013 | 1,547,916 | — | 38.99 | 9/12/2020 | — | — | — | — | ||||||||||||||||||||||||||||
1/2/2014 | 562,500 | 187,500(3) | 52.65 | 1/1/2021 | — | — | — | — | ||||||||||||||||||||||||||||
6/15/2016 | — | — | — | — | 240,000(4) | 60,696,000 | ||||||||||||||||||||||||||||||
12/15/2016 | — | — | 6,010(5) | 1,519,929 | — | — | ||||||||||||||||||||||||||||||
6/15/2017 | — | — | — | — | 756,000(6) | 191,192,400 | ||||||||||||||||||||||||||||||
Thomas H. Krause Jr. |
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3/11/2014 | — | 22,500(7) | 62.02 | 3/10/2021 | 7,500(5) | 1,896,750 | — | — | ||||||||||||||||||||||||||||
3/15/2015 | — | — | 5,000(5) | 1,264,500 | — | — | ||||||||||||||||||||||||||||||
3/15/2015 | — | — | 5,000(8) | 1,264,500 | — | — | ||||||||||||||||||||||||||||||
3/15/2016 | — | — | 7,500(5) | 1,896,750 | — | — | ||||||||||||||||||||||||||||||
3/15/2016 | — | — | 7,500(8) | 1,896,750 | — | — | ||||||||||||||||||||||||||||||
11/15/2016 | — | — | 10,000(5) | 2,529,000 | — | — | ||||||||||||||||||||||||||||||
11/15/2016 | — | — | 10,000(8) | 2,529,000 | — | — | ||||||||||||||||||||||||||||||
12/15/2016 | — | — | 5,000(5) | 1,264,500 | — | — | ||||||||||||||||||||||||||||||
3/15/2017 | — | — | 12,500(5) | 3,161,250 | 25,000(9) | 6,322,500 |
Option Awards(1) | Restricted Share Unit Awards(1) | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Securities Underlying Unearned Units of Stock (#) | Market Stock that | |||||||||||||||||||||||||||
Charlie B. Kawwas, Ph.D. |
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3/1/2013 | 3,668 | — | 38.92 | 3/1/2020 | — | — | — | — | ||||||||||||||||||||||||||||
3/1/2014 | 2,831 | 2,831(10) | 62.63 | 3/1/2021 | 2,859 | (11) | 723,041 | — | — | |||||||||||||||||||||||||||
6/10/2014 | 30,000 | 30,000(7) | 71.86 | 6/9/2021 | 10,000 | (5) | 2,529,000 | — | — | |||||||||||||||||||||||||||
3/15/2015 | — | — | 7,500 | (5) | 1,896,750 | — | — | |||||||||||||||||||||||||||||
3/15/2015 | — | — | 7,500 | (8) | 1,896,750 | — | — | |||||||||||||||||||||||||||||
12/15/2015 | — | — | 2,250 | (5) | 569,025 | — | — | |||||||||||||||||||||||||||||
3/15/2016 | — | — | 11,250 | (5) | 2,845,125 | — | — | |||||||||||||||||||||||||||||
3/15/2016 | — | — | 11,250 | (8) | 2,845,125 | — | — | |||||||||||||||||||||||||||||
12/15/2016 | — | — | 5,000 | (5) | 1,264,500 | — | — | |||||||||||||||||||||||||||||
3/15/2017 | — | — | 12,500 | (5) | 3,161,250 | 25,000(9) | 6,322,500 | |||||||||||||||||||||||||||||
Mark D. Brazeal | 4/15/2017 | 12,500 | (5) | 3,161,250 | 25,000(9) | 6,322,500 | ||||||||||||||||||||||||||||||
Bryan T. Ingram | ||||||||||||||||||||||||||||||||||||
3/11/2014 | — | 60,000(7) | 62.02 | 3/10/2021 | 20,000 | (5) | 5,058,000 | — | — | |||||||||||||||||||||||||||
12/9/2014 | — | — | 3,000 | (5) | 758,700 | — | — | |||||||||||||||||||||||||||||
3/15/2015 | — | — | 12,500 | (5) | 3,161,250 | — | — | |||||||||||||||||||||||||||||
3/15/2015 | — | — | 12,500 | (8) | 3,161,250 | — | — | |||||||||||||||||||||||||||||
12/15/2015 | — | — | 3,000 | (5) | 758,700 | — | — | |||||||||||||||||||||||||||||
3/15/2016 | — | — | 7,500 | (5) | 1,896,750 | — | — | |||||||||||||||||||||||||||||
3/15/2016 | — | — | 7,500 | (8) | 1,896,750 | — | — | |||||||||||||||||||||||||||||
12/15/2016 | — | — | 5,000 | (5) | 1,264,500 | — | — | |||||||||||||||||||||||||||||
3/15/2017 | — | — | 12,500 | (5) | 3,161,250 | 25,000(9) | 6,322,500 |
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Fiscal Year 2017 Option Exercises and Share Vested Table
The following table shows information regarding the exercise of share options and the vesting of RSUs during Fiscal Year 2017. Share option award value realized is calculated by subtracting the aggregate exercise priceSingapore Court as Chairman of the share options exercised from the aggregate market value on the date of exerciseSpecial Meeting. The Chairman of the ordinary shares acquired. RSU award value realized is calculated by multiplyingSpecial Meeting will count the number of ordinary shares shown in the table by the closing market price of our ordinary shares, as reported on the Nasdaq Global Select Market, on the date the RSUs vested. Value Realized on Exercise and Value Realized on Vesting/Release represent long-term gain over multiple years of service by the NEO and it is not considered as part of an NEO’s Fiscal Year 2017 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 | 170,000 | 33,020,048 | 20,833 | 4,227,073 | ||||||||||||||||
Thomas H. Krause Jr. | 28,500 | 4,838,590 | 19,500 | 4,342,175 | ||||||||||||||||
Charlie B. Kawwas, Ph.D. | 30,000 | 3,690,478 | 34,252 | 7,912,678 | ||||||||||||||||
Mark D. Brazeal | — | — | — | — | ||||||||||||||||
Bryan T. Ingram | 92,000 | 16,777,515 | 46,666 | 10,227,446 |
Fiscal Year 2017Non-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 2017 with respect to our NEOs who participated in this plan. This plan was terminated effective May 31, 2016 and all remaining funds were distributed to participants on or before May 31, 2017.
Name | Executive Contributions in Fiscal Year 2017 ($) | Registrant Contributions in Fiscal Year 2017 ($) | Aggregate Earnings in Fiscal Year 2017 ($)(1) | Aggregate Withdrawals / Distribution ($) | Aggregate Balance at ($) | ||||||||||||||||||||
Bryan T. Ingram | — | — | 2,221 | 25,962 | — |
Severance and Change in Control Agreements with Named Executive Officers; Death and Disability Policy; Employment Arrangements
Severance Benefit Agreements
Each of our NEOs is party to a severance benefits agreement with us. The severance benefit agreements provide each NEO with a severance payment and other benefits 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” (“qualifying termination”), provided that the NEO timely executes a general release of all claims in our favor. If a qualifying termination 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) of our Company, 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 | % | ||||||||||||||
Mark D. Brazeal | 12 months | 100 | % | 12 months | 100 | % | ||||||||||||||
Bryan T. Ingram | 12 months | 100 | % | 12 months | 100 | % |
If the qualifying termination takes place other than in connection with a change in control of our Company, we must provide the NEO with:
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The definition of “change in 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 NEO’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 NEO’s duties and responsibilities; (C) the elimination or reduction of the NEO’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 NEO’s primary workplace to a location that is more than 50 miles from the location of the NEO’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 NEO or a member of the NEO’s family that requires the NEO to terminate his or her employment because of substantial interference with the NEO’s duties; provided, that at our request the NEO provides us with a written physician’s statement confirmingvotes, determine the existence of such mental or physical illness.
Policy on Accelerationa quorum, validity of Executive Staff Equity Awards inproxies and ballots, and certify 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 eventresults of the death or permanent disability, of (i) any officer of our Company, as such term is defined in Exchange Act Rule16a-1, and (ii) any member of our CEO’s executive staff, including the NEOs, as determined by our CEO.voting.
Continuing Employment Agreement – Mr. Ingram
Pursuant to his Letter Agreement, entered into on October 16, 2015, if Mr. Ingram had experienced a qualifying termination during the period commencing on November 2, 2015 and ending on October 31, 2017 (the “Retention Period”) or he elected in writing within 30 days immediately following the end of the Retention Period (the “Election Period”) to resign as of such date, then his outstanding and 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”), would have vested in full as of such termination date. The Letter Agreement also provided that if Mr. Ingram remained available to provide limited consulting services through the first anniversary of such termination date and refrained from engaging in a competing business or activity during this time (or if he died or became
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 had been met following his termination date but prior to the first anniversary of the termination date, would have fully vested on the first anniversary of the termination date.
The Letter Agreement further provided that if Mr. Ingram’s employment was terminated as a result of a Covered Termination or he elected in writing during the Election Period to resign as of such date and such termination date occurred 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 would have been entitled to receive his cash bonus, based upon actual performance under the APB Plan in effect on the bonus payment date. Mr. Ingram did not make such an election during the Election Period and, as such, effective as of December 1, 2017, the Letter Agreement terminated by its terms.
Potential Severance Payments and Benefits upon Certain Terminations of Employment
The following table reflects the potential payments and benefits to which the NEOs would be entitled under their severance benefits agreements in effect as of the end of Fiscal Year 2017, in the event of a qualifying termination taking place not in connection with a change in control of our Company. The amounts presented in the table assume an employment termination date of October 29, 2017 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 ($) | |||||||||||||||||||||||||||||
Hock E. Tan | 1,100,000 | 1,650,000 | — | — | — | 2,750,000 | |||||||||||||||||||||||||||||
Thomas H. Krause Jr. | 300,000 | 150,000 | 10,566 | — | — | 460,566 | |||||||||||||||||||||||||||||
Charlie B. Kawwas, Ph.D. | 366,397 | 183,198 | 11,327 | — | — | 560,922 | |||||||||||||||||||||||||||||
Mark D. Brazeal | 337,500 | 135,000 | 10,419 | — | — | 482,919 | |||||||||||||||||||||||||||||
Bryan T. Ingram | 444,188 | 296,125 | 10,356 | 11,452,800 | (4) | 5,816,700 | (4) | 18,020,169 |
Potential Severance Payments and Benefits upon Certain Terminations of Employment in Connection with a Change in Control
The following table reflects the potential payments and benefits to which the NEOs would be entitled under their severance benefits agreements in effect as of the end of Fiscal Year 2017 in the event of a qualifying termination taking place within 12 months following a change in control of our Company (or in the case of Mr. Tan three months before or 12 months following a change in control of our Company). The amounts presented in the table assume an employment termination date of October 29, 2017 and that all eligibility requirements contemplated by the NEO’s respective agreements and our policies and practices, as applicable, were met.
Name | Cash Severance Base Salary ($) | Cash Severance Bonus ($) | Health Benefits Continuation Coverage ($)(1) | Value of Options Acceleration ($)(2) | Value of RSU/PSU Acceleration ($)(3) | Total ($) | ||||||||||||||||||||
Hock E. Tan | 2,200,000 | 3,300,000 | — | 37,546,875 | 146,762,422 | (4) | 189,809,297 | |||||||||||||||||||
Thomas H. Krause Jr. | 400,000 | 300,000 | 21,132 | 4,294,800 | 22,980,011 | (5) | 27,995,943 | |||||||||||||||||||
Charlie B. Kawwas, Ph.D. | 488,529 | 366,397 | 22,654 | 5,969,854 | 23,007,578 | (5) | 29,855,012 | |||||||||||||||||||
Mark D. Brazeal | 450,000 | 270,000 | 20,838 | — | 8,438,261 | (5) | 9,179,099 | |||||||||||||||||||
Bryan T. Ingram | 592,250 | 592,250 | 20,712 | 11,452,800 | 26,394,161 | (5) | 39,052,173 |
Potential Payments under the Death and Disability Policy
The following table reflects the potential payments and benefits to which the NEOs would be entitled under the Death and Disability Policy in effect as of October 29, 2017, in the event of death or permanent disability. The amounts presented in the table assume a termination of employment date of October 29, 2017 and that all eligibility requirements contemplated by the Death and Disability Policy were met.
Name | Value of Option Acceleration ($)(1) | Value of RSU/PSU Acceleration ($)(2)(3) | Total ($) | |||||||||||||||||
Hock E. Tan | 37,546,875 | 22,763,529 | (4) | 60,310,404 | ||||||||||||||||
Thomas H. Krause Jr. | 4,294,800 | 17,703,000 | 21,997,800 | |||||||||||||||||
Charlie B. Kawwas, Ph.D. | 5,969,854 | 17,730,566 | 23,700,420 | |||||||||||||||||
Mark D. Brazeal | — | 3,161,250 | 3,161,250 | |||||||||||||||||
Bryan T. Ingram | 11,452,800 | 21,117,150 | 32,569,950 |
EQUITY COMPENSATION PLAN INFORMATION
Plans Approved by our Shareholders
We have two equity compensation plans that have been approved by our shareholders: the 2009 Plan and the ESPP.
Plans Not Approved by our Shareholders
As at October 29, 2017, we had two equity compensation plans that had not been approved by our shareholders and pursuant to which we may continue to grant equity awards: the LSI Plan, which we assumed in connection with our acquisition of LSI, and the BRCM 2012 Stock Incentive Plan (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, 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 share options and RSUs, and the number of securities remaining available for future issuance under all of our equity compensation plans, as at October 29, 2017.
Plan Category | Number of Ordinary (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($) (b)(1) | Number of Ordinary Shares (c) | |||||||
Equity Compensation plans approve by shareholders | 14,711,780 | (2) | $46.26 | 19,016,705 (3) | ||||||
Employee stock purchase plans approved by shareholders | 7,962,854 (4) | |||||||||
Equity compensation plans not approved by shareholders | 13,717,730 | (5) | $73.32 | 85,743,067 (6)(7) | ||||||
Total | 28,429,510 | $49.54 | 112,722,626 (3)(7) |
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For additional information regarding our equity compensation plans, please refer to Note 9 of Notes to Consolidated Financial Statements included in Part II, Item 8 of our 2017 Form10-K.
The Audit Committee is responsible for assisting the Board of Directors with its oversight responsibilities regarding the following:
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the Company’s financial statements for the fiscal year ended October 29, 2017 (“Fiscal Year 2017”) 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 controls 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 Auditing Standard No. 1301, “Communications with Audit Committees,” issued by the Public Company Accounting Oversight Board. 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 topre-approve all audit and permissiblenon-audit services provided by the Company’s independent registered public accounting firm. All audit andnon-audit services performed by our independent registered public accounting firm during Fiscal Year 2017 werepre-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 2017 be included in the Company’s Annual Report on Form10-K for Fiscal Year 2017 for filing with the Securities and Exchange Commission.
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 the fiscal year ending November 4, 2018.
Submitted by the Audit Committee of the Board of Directors:
Donald Macleod, Chairperson
Gayla J. Delly(1)
Eddy W. Hartenstein
Peter J. Marks
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
DIRECTORS AND EXECUTIVE OFFICERSMANAGEMENT
The following table sets forth information about (i) the beneficial ownership of our ordinary shares and the RestrictedLP Units, in the Partnership, the holders of which are entitled to vote an equal number of our Special Voting Shares,special preference shares, and (ii) aggregate voting power at February 12, 2018 for:
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated byTo our knowledge, unless it is otherwise stated in the footnotes, each person listed below we believe, based on the information furnished to us, that the persons and entities named in the table below havehas sole voting and investment power with respect to all ordinary shares and RestrictedLP Units that they beneficially own.owned, subject to applicable community property laws.
The terms of the RestrictedLP 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 22,097,111 Special Voting Shares outstanding as at February 12, 2018, and the number of Special Voting Shares outstanding is equal to the number of outstanding Restricted Units as at such date.Agreement. As of February 1, 2017, holders of RestrictedLP Units have the right to exchange their RestrictedLP Units for cash or our ordinary shares, at our discretion.discretion, in accordance with the terms of the Partnership Agreement. If an exchange is settled in ordinary shares, the holder will receive one ordinary share for each exchanged RestrictedLP Unit. In addition, holders of LP Units are entitled to direct a voting trustee to vote one special preference share for each LP Unit that they hold, pursuant to the terms of the Voting Trust Agreement. The voting trustee is the sole registered shareholder of the 22,097,111 special preference shares outstanding as of February 12, 2018, and the number of special preference shares outstanding is equal to the number of outstanding LP Units as at such date.
Ordinary shares subject to options that are currently exercisable or exercisable within 60 days of February 12, 2018 and RSUsrestricted stock units (“RSUs”) that vest within 60 days of February 12, 2018 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.
In the table below, percentage ownership is based on 410,487,054 ordinary shares and 22,097,111 RestrictedLP Units outstanding as of February 12, 2018. Total percentage of voting power assumes that all holders of RestrictedLP Units provide proper voting instructions to the Trustee in respect of their corresponding Special Voting Shares,special preference shares, and is based on an aggregate of 432,584,165 ordinary shares and Special Voting Sharesspecial preference shares outstanding as of February 12, 2018.
Voting Securities Beneficially Owned(1) |
Voting Securities Beneficially Owned(1) | |||||||||||||||||||||||||||||||||||||||||||||||
Name and Address of Beneficial Owner | Number of Ordinary Shares | Percentage of Ordinary Shares | Number of Restricted Units |
Percentage | Total Shares Beneficially Owned | Total Percentage of Voting Power(2) | Number of Ordinary Shares | Percentage of Ordinary Shares | Number of LP Units |
Percentage | Total Shares Beneficially Owned | Total Percentage of Voting Power(2) | ||||||||||||||||||||||||||||||||||||
5% Shareholders:
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Capital World Investors(3) | 43,340,719 | 10.6% | — | — | 43,340,719 | 10.0% | 43,340,719 | 10.6% | — | — | 43,340,719 | 10.0% | ||||||||||||||||||||||||||||||||||||
333 South Hope Street | ||||||||||||||||||||||||||||||||||||||||||||||||
Los Angeles, CA 90071
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The Vanguard Group(4) | 28,923,720 | 7.0% | — | — | 28,923,720 | 6.7% | 28,923,720 | 7.0% | — | — | 28,923,720 | 6.7% | ||||||||||||||||||||||||||||||||||||
100 Vanguard Blvd. | ||||||||||||||||||||||||||||||||||||||||||||||||
Malvern, PA 19355 | ||||||||||||||||||||||||||||||||||||||||||||||||
BlackRock, Inc. (5) | 24,924,721 | 6.1% | — | — | 24,924,721 | 5.8% | 24,924,721 | 6.1% | — | — | 24,924,721 | 5.8% | ||||||||||||||||||||||||||||||||||||
55 East 52nd Street | ||||||||||||||||||||||||||||||||||||||||||||||||
New York, NY 10055
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Capital Research Global Investors(6) | 24,332,311 | 5.9% | — | — | 24,332,311 | 5.6% | 24,332,311 | 5.9% | — | — | 24,332,311 | 5.6% | ||||||||||||||||||||||||||||||||||||
333 South Hope Street | ||||||||||||||||||||||||||||||||||||||||||||||||
Los Angeles, CA 90071
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Henry T. Nicholas III(7) | — | — | 11,457,605 | 51.9% | 11,457,605 | 2.6% | — | — | 11,457,605 | 51.9% | 11,457,605 | 2.6% | ||||||||||||||||||||||||||||||||||||
15 Enterprise Suite 550 | ||||||||||||||||||||||||||||||||||||||||||||||||
Aliso Viejo, CA 92656
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Named Executive Officers, Directors | ||||||||||||||||||||||||||||||||||||||||||||||||
Hock E. Tan(8) | 2,504,493 | * | — | — | 2,504,493 | * | 2,504,493 | * | — | — | 2,504,493 | * | ||||||||||||||||||||||||||||||||||||
Thomas H. Krause, Jr.(9) | 57,215 | * | — | — | 57,215 | * | 57,215 | * | — | — | 57,215 | * | ||||||||||||||||||||||||||||||||||||
Charles B. Kawwas, Ph.D.(10) | 71,638 | * | — | — | 71,638 | * | 71,638 | * | — | — | 71,638 | * | ||||||||||||||||||||||||||||||||||||
Henry Samueli, Ph.D.(11) | 126,468 | * | 9,514,984 | 43.1% | 9,641,452 | 2.2% | 126,468 | * | 9,514,984 | 43.1% | 9,641,452 | 2.2% | ||||||||||||||||||||||||||||||||||||
Mark D. Brazeal | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Bryan T. Ingram(12) | 116,570 | * | — | — | 116,570 | * | 116,570 | * | — | — | 116,570 | * | ||||||||||||||||||||||||||||||||||||
Gayla J. Delly | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
James V. Diller(13) | 143,397 | * | — | — | 143,397 | * | 143,397 | * | — | — | 143,397 | * | ||||||||||||||||||||||||||||||||||||
Lewis C. Eggebrecht(14) | 12,647 | * | — | — | 12,647 | * | 12,647 | * | — | — | 12,647 | * | ||||||||||||||||||||||||||||||||||||
Kenneth Y. Hao(15) | 1,708,951 | * | — | — | 1,708,951 | * | 1,708,951 | * | — | — | 1,708,951 | * | ||||||||||||||||||||||||||||||||||||
Eddy W. Hartenstein(16) | 34,141 | * | — | — | 34,141 | * | 34,141 | * | — | — | 34,141 | * | ||||||||||||||||||||||||||||||||||||
Check Kian Low(17) | 1,294 | * | — | — | 1,294 | * | 1,294 | * | — | — | 1,294 | * | ||||||||||||||||||||||||||||||||||||
Donald Macleod(18) | 58,981 | * | — | — | 58,981 | * | 58,981 | * | — | — | 58,981 | * | ||||||||||||||||||||||||||||||||||||
Peter J. Marks(19) | 32,205 | * | — | — | 32,205 | * | 32,205 | * | — | — | 32,205 | * | ||||||||||||||||||||||||||||||||||||
All 15 executive officers and directors as | 4,887,798 | 1.2% | 9,514,984 | 43.1% | 14,402,782 | 3.3% | 4,887,798 | 1.2% | 9,514,984 | 43.1% | 14,402,782 | 3.3% |
* | Represents beneficial ownership of less than 1%. |
(1) | Amounts 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. |
(2) | Ordinary shares and |
(3) | Number of ordinary shares is based solely on information reported by Capital World Investors on the Schedule 13G/A filed with the SEC on February 14, 2018, reporting ownership as of December 31, 2017. 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 12, 2018. |
(4) | Number of shares is based solely on information reported by The Vanguard Group on the Schedule 13G/A filed with the SEC on February 12, 2018, reporting ownership as of December 31, 2017. According to such Schedule 13G/A, The Vanguard Group has sole voting power over 581,625 of these shares, sole dispositive power over 28,269,362 of these shares, shared voting power over 87,332 of these shares and shared dispositive power over 654,358 of these shares. Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 12, 2018. |
(5) | Number of shares is based solely on information reported by BlackRock, Inc. on the Schedule 13G/A filed with the SEC on January 30, 2018, reporting ownership as of December 31, 2017. According to such Schedule 13G/A, BlackRock, Inc. has sole dispositive power over these shares and sole voting power over 21,260,683 of these shares. Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 12, 2018. |
(6) | Number of shares is based solely on information reported by Capital Research Global Investors on the Schedule 13G/A filed with the SEC on February 14, 2018, reporting ownership as of December 31, 2017. According to such Schedule 13G/A, 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 12, 2018. |
(7) | Shares in the table represent 11,456,699 |
(8) | Shares shown in the table above include 2,399,166 shares that Mr. Tan has the right to acquire within 60 days after February 12, 2018 upon the exercise of share options. |
(9) | Shares shown in the table above include 22,500 shares that Mr. Krause has the right to acquire within 60 days after February 12, 2018 upon the exercise of share options and 20,625 shares that he has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. These shares do not include any shares that may be earned pursuant to a PSU award for the performance period ending March 15, 2018. |
(10) | Shares shown in the table above include 39,330 shares that Dr. Kawwas has the right to acquire within 60 days after February 12, 2018 upon the exercise of share options and 20,984 shares that he has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. These shares do not include any shares that may be earned pursuant to a PSU award for the performance period ending March 15, 2018. |
(11) | The shares in the table include 6,519 shares that Dr. Samueli has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs, but does not include any shares that may be earned pursuant to a PSU award for the performance period ending March 15, 2018. Shares in the table also include (i) 5,752,978 |
(12) | Shares shown in the table above include 60,000 shares that Mr. Ingram has the right to acquire within 60 days after February 12, 2018 upon the exercise of share options and 40,625 shares that he has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. These shares do not include any shares that may be earned pursuant to a PSU award for the performance period ending March 15, 2018. |
(13) | Shares shown in the table above include 119,500 shares held by the James & June Diller Trust UA dated 7/20/77 and 906 shares that Mr. Diller has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. |
(14) | 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 12, 2018 upon the exercise of share options and (iii) 906 shares that he has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. |
(15) | Amounts disclosed for Mr. Hao include (i) 1,587,737 shares held by SLP Argo I Ltd. (“Argo I”) and (ii) 30,830 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) 64,816 shares acquired by Mr. Hao upon the exercise of a share option, (ii) 9,567 shares acquired by him upon the vesting of RSUs granted to him, (iii) 15,077 shares that he has the right to acquire within 60 days after February 12, 2018 upon the exercise of share options, and (iv) 906 shares that he has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. |
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. |
(16) | Shares shown in the table above include 906 shares that Mr. Hartenstein has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. |
(17) | Shares shown in the table above include 906 shares that Mr. Low has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. |
(18) | Shares shown in the table above include 5,223 shares that Mr. Macleod has the right to acquire within 60 days after February 12, 2018 upon the exercise of share options and 906 shares that he has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. |
(19) | Shares shown in the table above include 906 shares that Mr. Marks has the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. |
(20) | Shares shown in the table above include 2,554,667 shares that directors and executive officers have the right to acquire within 60 days after February 12, 2018 upon the exercise of share options and 104,994 shares that directors and executive officers have the right to acquire within 60 days after February 12, 2018 upon the vesting of RSUs. These shares do not include any shares that may be earned by our executive officers pursuant to their respective PSU awards for the performance period ending March 15, 2018. |
CERTAIN RELATIONSHIPSMARKET PRICE AND RELATED PARTY TRANSACTIONSDIVIDEND INFORMATION
Related Party TransactionsInformation regarding the principal market for our ordinary shares and related shareholder matters is as follows.
Other than compensation and other arrangements described aboveBroadcom-Singapore’s ordinary shares are traded on NASDAQ under “Directors’ Compensation,the symbol “AVGO.” “Executive Compensation” and as set forth below, since October 31, 2016, there was not, nor is there currently planned, any transaction or seriesAs of similar transactions to whichMarch 5, 2018, the Record Date, we were or will be a party in which:
Price Range | ||||||||
Fiscal Quarter | High | Low | ||||||
Quarter ended February 1, 2016 | $ | 149.72 | $ | 115.21 | ||||
Quarter ended May 1, 2016 | $ | 159.65 | $ | 114.25 | ||||
Quarter ended July 31, 2016 | $ | 167.60 | $ | 139.18 | ||||
Quarter ended October 30, 2016 | $ | 179.42 | $ | 158.75 | ||||
Quarter ended January 29, 2017 | $ | 205.79 | $ | 160.62 | ||||
Quarter ended April 30, 2017 | $ | 227.75 | $ | 198.86 | ||||
Quarter ended July 30, 2017 | $ | 258.49 | $ | 219.91 | ||||
Quarter ended October 29, 2017 | $ | 259.36 | $ | 231.53 | ||||
Quarter ended January 31, 2018 | $ | 285.68 | $ | 237.01 |
On November 1, 2017, the last trading day before the public announcement of the Transaction, the closing price of the Broadcom-Singapore ordinary shares on NASDAQ was $259.29 per share. On March 8, 2018, the most recent practicable date before the date of this proxy statement, the closing price of the Broadcom-Singapore ordinary shares on NASDAQ was $246.95 per share.
The following dividends were paid to holders of Broadcom-Singapore ordinary shares and LP Units during fiscal years 2016 and 2017:
Record Date | Paid Date | Dividend per Share / LP Unit | ||||
March 18, 2016 | March 31, 2016 | $ | 0.49 | |||
June 17, 2016 | June 30, 2016 | $ | 0.50 | |||
September 19, 2016 | September 30, 2016 | $ | 0.51 | |||
December 16, 2016 | December 30 2016 | $ | 1.02 | |||
March 20, 2017 | March 31, 2017 | $ | 1.02 | |||
June 19, 2017 | June 30, 2017 | $ | 1.02 | |||
September 19, 2017 | September 29, 2017 | $ | 1.02 | |||
December 19, 2017 | December 29, 2017 | $ | 1.75 |
Broadcom-Singapore and the Partnership paid dividends and distributions totaling approximately $750 million during fiscal year 2016. In fiscal year 2017, Broadcom-Singapore and the Partnership paid dividends and distributions totaling approximately $1,745 million and $1,848 million, respectively. During fiscal year 2017, the Partnership distributions included a $103 million distribution to Broadcom-Singapore, as General Partner, for reimbursement of expenses the General Partner incurred on behalf of the Partnership and its subsidiaries.
Future dividends, if any, on the Broadcom-Singapore ordinary shares, LP Units and/or Broadcom-Delaware shares of common stock will be at the Restricteddiscretion and approval of the Board and subject to its continuing determination that they are in our best interests. Future dividend payments will also depend upon factors such as our earnings levels, capital requirements, contractual restrictions, cash position, overall financial condition and
any other factors deemed relevant by our board of directors. There can be no assurance that a dividend will be proposed or declared in the future, or as to the amount of any such dividends or other distributions of capital.
Also, because we are a holding company, our ability to pay cash dividends on Broadcom shares may be limited by restrictions on our ability to obtain sufficient funds through dividends from subsidiaries, including restrictions under the terms of agreements governing our indebtedness.
UNAUDITED SUMMARY PRO FORMA FINANCIAL INFORMATION
Full pro forma consolidated financial statements for Broadcom-Delaware to reflect the Scheme of Arrangement and the Mandatory Exchange Amendment are not presented in this proxy statement because the impact is limited to the pro forma adjustments presented below. Such adjustments reflect the mandatory exchange of LP Units of the Partnership or any memberfor shares of their immediate family had or will have a direct or indirect material interest.
We refercommon stock of Broadcom-Delaware, which is expected 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 topre-approve related party transactions, provided such approvals are presented to the Audit Committee at its next scheduled meeting. In approving or rejecting the proposed transaction, 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 to (i) the Nominating and Corporate Governance Committee or the Audit Committee, in the case of directors and officers, or (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.
Note Purchase Agreement with Silver Lake
In connection with our proposed acquisition of Qualcomm (the “Qualcomm Acquisition”), on February 11, 2018, Broadcom and our newly formed Delaware subsidiary corporation (also named Broadcom Limited and referred to as “Broadcom-Delaware”) entered into a Note Purchase Agreement (“Purchase Agreement”) to sell to Silver Lake Partners V, L.P., an investment fund affiliated with Silver Lake (“SLP Fund”), and the other purchasers named therein $6 billion aggregate principal amount of Broadcom-Delaware’s 3.00% Convertible Senior Notes due seven years from the date of original issuance (the “Convertible Notes”), with $3.5 billion principal amount of the Convertible Notes being issuable to the SLP Fund. Mr. Hao is a Managing Director of Silver Lake. The proceeds from the issuance of the Convertible Notes will be used to fund a portion of the Qualcomm Acquisition.
The issuance and sale of the Convertible Notes is contingentcompleted based on the consummationMandatory Exchange Amendment as described in this proxy statement. The Scheme of the Qualcomm AcquisitionArrangement has no impact other than as presented and related debt financingdiscussed below as well as the satisfaction or waiverit is aone-for-one exchange of customary closing conditions (the “Convertible Notes Closing”) as set forth in the Purchase Agreement. The Convertible Notes will bear interest at a rate of 3.0% per annum payable semiannually in cash. The initial conversion rate is 3.5415Broadcom-Singapore ordinary shares of Broadcom-Delaware common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $282.37 per sharefor shares of Broadcom-Delaware common stock. The conversion ratefollowing table presents a summary of such adjustments to our balance sheet as if the Scheme of Arrangement and the Mandatory Exchange Amendment had been completed as of October 29, 2017:
Broadcom-Singapore Balance Sheet Items(1) | Historical Amounts (as reported as of October 29, 2017) | Pro Forma Adjustments | Pro Forma Amounts | |||||||||
(In millions, except share amounts) | ||||||||||||
Shareholders’ equity (2): | ||||||||||||
Ordinary shares, no par value; 408,732,155 shares actual and 430,877,758 shares pro forma issued and outstanding on October 29, 2017(3) | $ | 20,505 | $ | 2,901 | (4) | $ | 23,406 | |||||
Non-economic voting preference shares, no par value; 22,145,603 shares actual and no shares pro forma issued and outstanding on October, 29, 2017(5) | — | — | — | |||||||||
Accumulated deficit | (129 | ) | — | (129 | ) | |||||||
Accumulated other comprehensive loss | (91 | ) | — | (91 | ) | |||||||
Total Broadcom-Singapore shareholders�� equity(1) (2) | 20,285 | 2,901 | 23,186 | |||||||||
Noncontrolling interest | 2,901 | (2,901 | ) (4) | — | ||||||||
Total shareholders’ equity(2) | 23,186 | — | 23,186 | |||||||||
Total liabilities and shareholders’ equity(2) | $ | 54,418 | — | $ | 54,418 |
(1) | Upon consummation of the Scheme of Arrangement, Broadcom-Delaware will become the ultimate parent company of the Broadcom group. Accordingly, all references in this section to Broadcom-Singapore will be replaced with Broadcom-Delaware. |
(2) | Upon consummation of the Scheme of Arrangement, the ordinary shareholders of Broadcom-Singapore will become stockholders of Broadcom-Delaware. Accordingly, all references in this section to shareholders’ will be replaced with stockholders’. |
(3) | The Scheme of Arrangement will provide for the exchange of all of the ordinary shares of Broadcom-Singapore for shares of common stock of Broadcom-Delaware on aone-for-one basis. Accordingly, upon consummation of the Scheme of Arrangement, each ordinary share of Broadcom-Singapore will be exchanged into one share of common stock of Broadcom-Delaware. |
(4) | Represents the elimination of noncontrolling interest upon the conversion of LP Units of the Partnership into newly issued shares of common stock of Broadcom-Delaware upon completion of the exchange pursuant to the Mandatory Exchange Amendment. |
(5) | On conversion of the LP Units into newly issued shares of the common stock of Broadcom-Delaware upon completion of the exchange pursuant to the Mandatory Exchange Amendment, thesenon-economic voting preference shares will be redeemed by Broadcom-Singapore, such that there are none outstanding on a pro forma basis. |
The following table presents a summary of such adjustments to Broadcom-Singapore’s statement of operations as if the Mandatory Exchange Amendment had been completed as of the first day of our fiscal year ended October 29, 2017:
Broadcom-Singapore Statement of Operations(1) | Historical Amounts (as reported for the fiscal year ended October 29, 2017) | Pro Forma Adjustments | Pro Forma Amounts | |||||||||
(In millions, except per share data) | ||||||||||||
Income from continuing operations | $ | 1,790 | — | $ | 1,790 | |||||||
Loss from discontinued operations, net of income taxes | (6 | ) | — | (6 | ) | |||||||
Net income | 1,784 | — | 1,784 | |||||||||
Net income attributable to noncontrolling interest | 92 | (92 | ) (3) | — | ||||||||
Net income attributable to ordinary shares(2) | $ | 1,692 | $ | 92 | (3) | $ | 1,784 | |||||
Basic income (loss) per share attributable to ordinary shares(2): | ||||||||||||
Income per share from continuing operations | $ | 4.19 | — | $ | 4.19 | |||||||
Loss per share from discontinued operations | (0.01 | ) | — | (0.01 | ) | |||||||
Net income per share | $ | 4.18 | — | $ | 4.18 | |||||||
Diluted income (loss) per share attributable to ordinary shares(2): | ||||||||||||
Income per share from continuing operations | $ | 4.03 | $ | 0.01 | (5) | $ | 4.04 | |||||
Loss per share from discontinued operations | (0.01 | ) | — | (0.01 | ) | |||||||
Net income per share | $ | 4.02 | $ | 0.01 | $ | 4.03 | ||||||
Weighted-average shares: | ||||||||||||
Basic | 405 | 22 | (4) | 427 | ||||||||
Diluted | 421 | 22 | (4) | 443 |
(1) | Upon consummation of the Scheme of Arrangement, Broadcom-Delaware will become the ultimate parent company of the Broadcom group. Accordingly, all references in this section to Broadcom-Singapore will be replaced with Broadcom-Delaware. |
(2) | The Scheme of Arrangement provides for the exchange of ordinary shares in the capital of Broadcom-Singapore for shares of common stock of Broadcom-Delaware on aone-for-one basis. Accordingly, upon consummation of the Scheme of Arrangement, all references in this section to ordinary shares will be removed. |
(3) | Represents the elimination of net income attributable to noncontrolling interest upon completion of the exchange pursuant to the Mandatory Exchange Amendment. As a result of the Mandatory Exchange Amendment, the LP Units of the Partnership will be converted into newly issued shares of common stock of Broadcom-Delaware. |
(4) | Represents the increase to weighted-average basic and diluted shares outstanding upon completion of the exchange pursuant to the Mandatory Exchange Amendment. Upon completion of the exchange pursuant to the Mandatory Exchange Amendment, the LP Units of the Partnership will be exchanged into newly issued shares of common stock of Broadcom-Delaware on aone-for-one basis. |
(5) | Represents the change in diluted income per share from continuing operations as a result of the conversion of LP Units of the Partnership into common stock of Broadcom-Delaware. |
Other impacts to such financial statements due to the Scheme of Arrangement would primarily be subjecttax-related as a result of causing our parent company to adjustment from timebe a U.S. corporation. Pro forma adjustments to time uponreflect such tax impacts are not readily determinable or quantifiable, and therefore are not presented herein. In addition, the occurrenceUnited States corporate income tax regime (including applicable statutory tax rates) changed significantly due to the enactment on December 22, 2017 of certain events. Holders may surrender their Convertible Notes for conversion under limited circumstancesthe 2017 Tax Reform Act. Any pro formatax-related adjustments calculated as if the Scheme of Arrangement had been completed as of the first day of our fiscal year ended October 29, 2017 would reflect the impact of the corporate income tax regime in effect prior to the date that is three months priorenactment of the 2017 Tax Reform Act and would not present any meaningful information for investors as to the maturity datelikely actual tax impacts.
In addition to the inability to determine the pro forma tax impact of the Convertible Notes.consummation of the Scheme of Arrangement, there is also significant uncertainty as to how the 2017 Tax Reform Act will be implemented. However, following the Scheme of Arrangement, we expect the cash tax costs and overall effective cash tax rate of the Broadcom group to increase due to Broadcom-Delaware becoming the parent company of the Broadcom group.
Broadcom-DelawareWe also expect to incur additional cash tax costs as a result of the 2017 Tax Reform Act that would apply irrespective of the Scheme of Arrangement. Based on our initial analysis, we believe the 2017 Tax Reform Act will result in a mandatory deemed repatriation tax of between $1.6 billion and $2.6 billion on certain of ournon-US earnings, without taking into account available deductions and credits. The amount and timing of installment payments of this deemed repatriation tax depend, in part, on when the other investors, includingScheme of Arrangement becomes effective. However, this tax liability will be payable over eight years, with the SLP Fund, will also enter into a Registration Rights Agreement pursuantamount of payments more heavily weighted to which the investors will have certain registration rightslatter years of this period. We presently expect these installment payments to start in our fiscal year 2019.
Our preliminary estimates of the overall cash tax impact of the Scheme of Arrangement, as well as the amount and timing of installment payments of the mandatory deemed repatriation tax under the 2017 Tax Reform Act, are expected to change as we continue to refine our analysis and as additional guidance becomes available, particularly with respect to the Convertible Notes2017 Tax Reform Act. There is no assurance that the final determination of our income tax liability will not be materially different than what is reflected in our income tax provisions and accruals and in the sharesestimated ranges provide above. Significant judgment is required to determine the recognition and measurement of Broadcom-Delaware common stock issuable upon conversion oftax liabilities prescribed in the Convertible Notes.
The issuance ofPricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited our consolidated financial statements included in the Convertible Notes, andAnnual Report on Form10-K for the terms thereof, and entry into the Purchase Agreement, Registration Rights Agreement and all other agreementsfiscal year ended October 29, 2017, as set forth in their report, which is incorporated by reference in this proxy statement.
Latham & Watkins LLP has advised us on certain matters relating to the issuance of the Convertible NotesU.S. corporate and federal tax laws. Allen & Gledhill LLP has advised us on certain matters relating to the investors, including the SLP Fund, were reviewedSingapore corporate and approved by our Board with Mr. Hao recused from such review and approval.tax law.
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 2017 these entities were (i) Benchmark, on whose board of directors Ms. Delly served as a director until September 2016, (ii) Symantec Corporation, on whose board of directors Mr. Hao serves as a director, and (iii) TiVo Corporation and SIRUS XM Holdings, Inc., on whose boards of directors Mr. Hartenstein serves as a director.
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 financings of this nature. Silver Lake did not receive any compensation for the provision of such services.
In addition, Silver Lake portfolio companies, such as Dell Inc., 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.FUTURE SHAREHOLDER PROPOSALS
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 Nasdaq, 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, we assist our executive officers and directors in preparing initial ownership reports and reporting ownership changes, and typically file 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 2017, all Reporting Persons complied with all applicable filing requirements except, due to administrative oversight, a Form 4 for Mr. Hao was not timely filed reflecting ordinary shares issued to Mr. Hao upon exercise of share options. Once the omission was discovered, the filing was promptly made to reflect this transaction.
HOUSEHOLDING OF PROXY MATERIALS
Some banks, brokers and other nominee 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 2017 Form10-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: Broadcom Limited, 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, or you may contact us at the above address and phone number.
SHAREHOLDER PROPOSALS FOR THE 2019 ANNUAL GENERAL MEETINGBroadcom-Singapore
Pursuant to RuleRule 14a-8 under the Exchange Act, some shareholder proposals may be eligible for inclusion in our 2019 proxy statement. Any such shareholder proposalthe 2018 Annual General Meeting of Shareholders of Broadcom-Singapore (the “2018 AGM”) must behave been submitted, along with proof of ownership of ourBroadcom-Singapore ordinary shares in accordance with RuleRule 14a-8(b)(2), to us at c/o Broadcom Limited, Attention: Chief Legal Officer, 1320 Ridder Park Drive, San Jose, California 95131, U.S.A. We must receive all submissions no later than October 19, 2018. We strongly encourage any shareholder interested in submitting a proposal to contact our Chief Legal Officer in advance of this deadline to discuss20, 2017.
If the proposal, and shareholders may want to consult legal counsel with regardTransaction is completed prior to the detailed requirements2018 AGM, it is anticipated that Broadcom-Delaware’s stockholder meeting will be more than 30 days from the 2017 Annual General Meeting of submittingShareholders of Broadcom-Singapore such that the deadline for stockholder proposals will be a shareholder proposal under applicable securities laws. Submitting a shareholder proposal does not guarantee that wereasonable time before Broadcom-Delaware prints and distributes its proxy materials, in accordance with Rule14a-8(e)(2). If the Transaction is completed after the 2018 AGM, Broadcom-Delaware 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 2019 AGM so long as they are provided to us on a timely basis and satisfy the other conditions set forth in our Constitution and applicable rules and regulations promulgated by the SEC. Shareholder proposals are also currently subject to the 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 2019 AGM unlessprovide notice of such proposal is received byits annual stockholder meeting in 2019 and solicit stockholder proposals in a subsequent filing with the applicable deadlines prescribed bySEC in accordance with Rule 14a-8 under the Singapore Companies Act.Exchange Act and the DGCL.
In addition, underUnder 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 $500500 Singapore Dollars each may, at their expense, request that we include and give notice of their proposal for the 20192018 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 20192018 AGM in the case of a request requiring notice of a resolution, or at least one week prior to the date of the 20192018 AGM in the case of any other request.
Under our Constitution,the constitution of Broadcom-Singapore, no person other than a director retiring at a general meeting is eligible for appointment as a director at any general meeting of shareholders, (including an incumbent director), without the recommendation of our Boardthe board of directors of Broadcom-Singapore for election, except for persons proposed byunless (a) in the case of a shareholder or shareholders who in aggregate hold(s) more than 50% of the total number of our issued andpaid-up shares (excluding treasury shares), which shareholder or shareholders, not less than 10 days, before, 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 andpaid-up 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 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.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.
RedomiciliationBroadcom-Delaware
As we previously announced in November 2017, we have decided to restructure our corporate group to cause the parent companyAssuming consummation of the group to be a Delaware corporation. We are seeking our shareholders’ approval at a special meeting of a Scheme of Arrangement under Singapore law pursuant to which, upon effectiveness, Broadcom-Delaware will become the publicly traded parent of the Broadcom corporate group, thereby effecting this restructuring. A separate proxy statement will be mailed to shareholders in connection with that special meeting. The Scheme of Arrangement provides for the exchange of shareholders’ ordinary shares for shares of common stock of Broadcom-Delaware on aone-for-one basis. Broadcom-Delaware will be the successor to our Company for SEC and financial reporting purposes under the Exchange Act following this restructuring.
We presently expect to complete our restructuring after the date of the 2018 AGM and prior to the date of our 2019 AGM. In such event:
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
The broker, bank or other nominee for any shareholder who is a beneficial owner, but not the record holder, of our shares may deliver only one copy of the proxy statement and
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s public reference rooms located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at1-800-SEC-0330 for further information on the public reference rooms. These SEC filings are also available to the public on the SEC’s website at:http://www.sec.gov.
Our website is located athttp://www.broadcom.com. Broadcom-Singapore’s Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q, Current Reports onForm 8-K and other filings with the SEC are available, free of charge, through this website as soon as reasonably practicable after those reports or filings are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference in this proxy statement and does not constitute a part of this proxy statement.
SEC rules and regulations permit us to “incorporate by reference” the information we file with the SEC. This means that we can disclose important information to you by referring you to those documents. Some documents or information, such as that called for by Items 2.02 or 7.01 ofForm 8-K, are deemed furnished and not filed in accordance with SEC rules. None of those documents and none of that information is incorporated by reference into this proxy statement. The deadline for submission of all stockholder proposalsinformation incorporated by reference is considered to be considered for inclusion in Broadcom-Delaware’spart of this proxy statement for its 2019 annual meeting is expected to be October 19, 2018,statement. Information that we file later with the same as set forth above for our Company,SEC will automatically update and the procedures and time periods with respect to the submission of proposals required by Broadcom-Delaware’s bylaws and the DGCL will apply.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCEsupersede this information.
We incorporate by reference the documents listed below (copies of which are being delivered to you with this proxy statement) and any subsequent filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (excluding any information “furnished” but not “filed”) following sectionsthe date of our 2017Form 10-K:this document, but prior to the date of the meeting. The documents incorporated by reference are:
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”our Current Reports on Form8-K filed with the SEC nor shall suchon November 2, 2017, November 6, 2017, November 17, 2017, December 6, 2017, February 5, 2018, February 9, 2018, February 12, 2018, February 15, 2018 and March 6, 2018 except, in each case, for any information betherein furnished under Items 2.02 or 7.01.
You may request a free copy of the above filings or any filings subsequently incorporated by reference into this proxy statement (other than any exhibits to such filings undernot specifically incorporated by reference) by writing or calling:
Investor Relations, Broadcom Limited
1320 Ridder Park Drive
San Jose, California 95131
U.S.A.
Telephone No.: (408)433-8000
Email:investor.relations@broadcom.com
In order to ensure timely delivery of these documents before the U.S. Securities Act of 1933, as amended,Special Meeting, you should make such request by March 16, 2018.
We have not authorized anyone to give any information or undermake any representation about the Exchange Act,Transaction or be subjectabout us that differs from or adds to the liabilities of Section 18information in this proxy statement or in the documents incorporated by reference. Therefore, you should not rely upon any information that differs from or is in addition to the information contained in this proxy statement or in the documents incorporated by reference.
The information contained in this proxy statement speaks only as of the Exchange Act, except todate on the extentcover, unless the information specifically indicates that we specifically incorporate this informationanother date applies.
ACCOMPANYING DOCUMENTS
This proxy statement is accompanied by reference into any such filing.
SINGAPORE STATUTORY FINANCIAL STATEMENTS
Our Singapore audited financial statementsa copy of our Annual Report on Form 10-K for ourthe fiscal year ended October 29, 2017 prepared in conformity withas well as copies of the provisionsCurrent Reports on Form 8-K noted above.
FORM OF SCHEME OF ARRANGEMENT
IN THE HIGH COURT OF THE REPUBLIC OF SINGAPORE
Originating Summons )
No.[●] of[●] )
In the Matter of
Broadcom Limited
(RC No. 201505572G)
…Applicant
and
In the Matter of Section 210 of the Companies Act, Chapter 50
SCHEME OF ARRANGEMENT
under Section 210 of the Companies Act, Chapter 50
Between
Broadcom Limited,
a public company limited by shares incorporated under the laws of the Republic of Singapore, Companies Act and
And
the Singapore Financial Reporting Standards, together with the accompanying directors’ statement (together, the “Singapore Statutory Financial Statements”), and the auditors’ report thereon are required under Singapore law to be provided to shareholders for discussion (but not approval) at the 2018 AGM, and have therefore been provided as Appendix A toScheme Shareholders (as defined herein)
And
Broadcom Limited, a Delaware corporation
PRELIMINARY
In 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 ActScheme of 1933, as amended, or under the Exchange Act, or be subject to the liabilities of Section 18 of the Exchange Act,Arrangement, except to the extent that we specifically incorporatethe context requires otherwise, the following expressions shall bear the following respective meanings:
“ACRA” | : | Accounting and Corporate Regulatory Authority of Singapore | ||||
“Broadcom-Singapore Certificates” | : | Existing share certificates representing a holding of Broadcom-Singapore Ordinary Shares by any holder of Broadcom-Singapore Ordinary Shares as at the Effective Time | ||||
“Broadcom-Singapore OrdinaryShares” | : | Issued andpaid-up ordinary shares in the capital of the Company | ||||
“Broadcom-Singapore Preference Shares” | : | Redeemable preference shares in the capital of the Company bearing the rights, privileges and restrictions set forth in the constitution of the Company | ||||
“Broadcom-Singapore Shares” | : | Broadcom-Singapore Ordinary Shares and Broadcom-Singapore Preference Shares | ||||
“CEDE” | : | CEDE & Co., as nominee of DTC | ||||
“Companies Act” | : | The Companies Act, Chapter 50 of Singapore | ||||
“Company” or “Broadcom” or “Broadcom-Singapore” | : | Broadcom Limited, a public company limited by shares incorporated under the laws of the Republic of Singapore | ||||
“Court” | : | The High Court of the Republic of Singapore, or where applicable on appeal, the Court of Appeal of the Republic of Singapore | ||||
“Court Meeting” | : | The meeting of Scheme Shareholders to be convened pursuant to the order of the Court to approve this Scheme, notice of which is set out on pages[●]to[●] of the Proxy Statement, and any adjournment thereof | ||||
“DTC” | : | The Depository Trust Company | ||||
“Effective Date” | : | The date on which this Scheme becomes effective and binding in accordance with its terms | ||||
“Effective Time” | The time on the Effective Date at which the Scheme becomes effective and binding in accordance with its terms | |||||
“Entitled Scheme Shareholders” | : | Scheme Shareholders of record as at the Effective Time | ||||
“Exchange Agent” | A nationally-recognized U.S. financial institution appointed by New US Topco to act as exchange agent in the Scheme | |||||
“Implementation Agreement” | : | The implementation agreement dated[●], 2018entered into between the Company and New US Topco to implement,inter alia,this Scheme | ||||
“Latest Practicable Date” | : | [●], being the latest practicable date prior to the printing of the document containing this Scheme for the purpose of ascertaining certain information for inclusion herein | ||||
“Long-Stop Date” | : | Has the meaning ascribed to it in the Implementation Agreement | ||||
“New US Topco” | : | Broadcom Limited, a Delaware corporation |
“Proxy Statement” | : | The document dated[●], 2018containing this Scheme and any other document(s) which may be issued by or on behalf of the Company to amend, revise, supplement or update the document(s) from time to time | ||||
“Register of Members” | : | The register of members maintained by the Company pursuant to Section 190 of the Companies Act | ||||
“Register of Transfers” | : | The register maintained by the Company to record transfers of Broadcom-Singapore Shares made by persons on the Register of Members | ||||
“Scheme” | : | This scheme of arrangement in its present form or with or subject to any modification thereof or amendment or addition thereto in accordance with its terms (includingparagraph 13 herein) or condition(s) approved or imposed by the Court | ||||
“Scheme Consideration” | : | One fully paid share of common stock, par value $0.001 per share, of New US Topco to be issued to each Entitled Scheme Shareholder (either directly or to be held in the name of CEDE) on ashare-for-share basis for each Broadcom-Singapore Ordinary Share transferred by such Entitled Scheme Shareholder (either directly or in the name of CEDE) to New US Topco in accordance with the terms of this Scheme | ||||
“Scheme Shareholders” | : | (i) Persons who are registered as holders of Broadcom-Singapore Shares in the Register of Members, other than CEDE, and (ii) persons who are registered as holders of Broadcom-Singapore Ordinary Shares in book entry form on the register of the DTC, which Broadcom-Singapore Ordinary Shares are held through CEDE as the registered holder of the said Broadcom-Singapore Ordinary Shares on the Register of Members | ||||
“Share Registrar” | : | Computershare Trust Company, N.A. |
The term “Shareholder”, in relation to any Broadcom-Singapore Share, includes a person entitled to that Broadcom-Singapore Share by transmission.
Words importing the singular shall, where applicable, include the plural and vice versa and words indicating a specific gender shall, where applicable, include the other genders (male, female or neuter). References to persons shall, where applicable, include corporations.
A reference intoto an enactment or statutory provision shall include a reference to any such filing.
Our management does not know ofsubordinate legislation and any mattersregulation made under the relevant enactment or statutory provision and is a reference to be presented at the 2018 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 authoritythat enactment, statutory provision, subordinate legislation or regulation as from time to the individuals named as proxies to vote the shares represented by proxy, as to those matters.
Accompanying this Proxy Statement is our 2017 Formtime amended, consolidated, modified,10-K.re-enacted Copies of this Proxy Statement and the 2017Form 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.
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 2017 Form10-K. You may request a copy of this information, at no cost, by writingreplaced, whether before or telephoning us at:
Broadcom Limited
Attn: Investor Relations
1320 Ridder Park Dive
San Jose, California 95131 U.S.A.
Telephone: +1(408) 433-8000
Email: investor.relations@broadcom.com
To ensure timely delivery of any materials requested prior toafter the date of this Scheme.
Any reference to a time of day and date shall be a reference to Singapore time and date respectively, unless otherwise specified.
RECITALS
(A) | The Company was incorporated in Singapore on 3 March 2015 and is listed on the Nasdaq Global Select Market. As at the Latest Practicable Date, the Company has an issued andpaid-up share capital of US$[●] comprising[●]Broadcom-Singapore Ordinary Shares and S$[●] comprising[●] Broadcom-Singapore Preference Shares. |
(B) | The primary purpose of this Scheme is the transfer by Scheme Shareholders who hold Broadcom-Singapore Ordinary Shares (either directly or in the name of CEDE) of all of the Broadcom-Singapore Ordinary Shares held by them (either directly or in the name of CEDE) to New US Topco, in consideration for the issuance of the Scheme Consideration to such Scheme Shareholders by New US Topco. |
(C) | The Company and New US Topco have entered into the Implementation Agreement to set out their respective rights and obligations with respect to,inter alia, this Scheme and the implementation thereof. |
(D) | Each of the Company and New US Topco has agreed to appear by legal counsel at the hearing of the Originating Summons to approve this Scheme, and to consent thereto, and to undertake to the Court to be bound thereby and to execute and do and procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed or done by it for the purpose of giving effect to this Scheme. |
PART I
CONDITIONS PRECEDENT
1. | This Scheme is conditional upon: |
(a) | each condition precedent set out in Clause 3 of the Implementation Agreement being satisfied; and |
(b) | the Implementation Agreement not having been terminated in accordance with its terms. |
PART II
TRANSFER OF THE SHARES
2. | With effect from the Effective Date, upon the effectiveness of the Scheme, all outstanding Broadcom-Singapore Ordinary Shares shall be transferred to New US Topco fully paid, free and clear of any liens, pledges, security interests or other encumbrances, and New US Topco shall become the holder of all outstanding Broadcom-Singapore Ordinary Shares, together with all rights, benefits and entitlements as at the Effective Date and thereafter attaching thereto, including the right to receive and retain all dividends and other distributions (if any) which may be declared, paid or made thereon by the Company on or after the Effective Date, but excluding the right to receive and retain all dividends and distributions (if any), the record date of which falls before the Effective Date, together with all interest accrued thereon. |
3. | For the purpose of giving effect to the transfer of the Broadcom-Singapore Ordinary Shares provided for inparagraph 2 of this Scheme, the Company shall authorise any person to execute or effect on behalf of all the Entitled Scheme Shareholders as well as on behalf of CEDE, an instrument or instruction of transfer of all the Broadcom-Singapore Ordinary Shares held by such Entitled Scheme Shareholders (whether directly or held in the name of CEDE) and every such instrument or instruction of transfer so executed shall be effective as if it had been executed by such Entitled Scheme Shareholders and by CEDE respectively. |
PART III
SATISFACTION OF SCHEME CONSIDERATION
4. | At or immediately after the Effective Time and subject to and upon the terms and conditions of the Implementation Agreement and the applicable provisions of the Companies Act, in consideration for the transfer of the Broadcom-Singapore Ordinary Shares provided for inparagraph 2of this Scheme, New US Topco shall issue to each Entitled Scheme Shareholder the Scheme Consideration for each Broadcom-Singapore Ordinary Share transferred by that Scheme Shareholder to New US Topco. |
5. | At or immediately after the Effective Time, New US Topco shall deposit with the Exchange Agent, acting as exchange agent and solely for the account and benefit of the Entitled Scheme Shareholders, book entry shares representing the full number of shares of common stock of New US Topco to be issued as Scheme Consideration (the “Broadcom Consideration Fund”). |
6. | Promptly after the Effective Time, New US Topco shall cause the Exchange Agent to mail to each holder of Broadcom-Singapore Ordinary Shares who is a holder of record of Broadcom-Singapore Certificates: (i) a letter of transmittal in customary form and (ii) instructions for use in effecting the surrender of the Broadcom-Singapore Certificates in exchange for payment of the Scheme Consideration, the form and substance of which letter of transmittal and instructions shall be in a form prepared by New US Topco. Upon surrender of a Broadcom-Singapore Certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and with such other documents as may be required pursuant to such instructions, the holder of such Broadcom-Singapore Certificate shall be entitled to receive in exchange therefor, the Scheme Consideration, and the Broadcom-Singapore Certificate so surrendered shall forthwith be cancelled. |
7. | The issuance of the Scheme Consideration by New US Topco shall be deemed as good discharge to New US Topco and the Company in respect of the consideration for the Broadcom-Singapore Ordinary Shares. |
8. | Any portion of the Broadcom Consideration Fund deposited with the Exchange Agent that has not been transferred to the Entitled Scheme Shareholders for 90 calendar days after the Effective Time shall (upon request by New US Topco) be delivered to New US Topco, and any holder of Broadcom-Singapore Certificates shall thereafter look only to New US Topco for payment of the Scheme Consideration, without any interest thereon. |
9. | On and from the Effective Time, each Broadcom-Singapore Certificate will cease to be evidence of title of the Broadcom-Singapore Ordinary Shares represented thereby. The Scheme Shareholders will be notified of the procedures to submit the Broadcom-Singapore Certificates to the address of the Share Registrar for cancellation. |
PART IV
EFFECTIVE DATE
10. | Subject to the satisfaction of the conditions set out inparagraphs 1(a) and 1(b)of this Scheme, this Scheme shall become effective upon a copy of the order of the Court approving this Scheme under Section 210 of the Companies Act (the “Court Order”) being duly lodged with ACRA. The Company may determine, at its sole discretion, the date on which the Court Order is lodged with ACRA, notwithstanding the obtainment of the approval of this Scheme by the Scheme Shareholders, the grant of the order of the Court approving this Scheme and/or the satisfaction of all of the other conditions precedent in the Implementation Agreement; provided, that, subject to the satisfaction of the conditions set forth in the Implementation Agreement, the Court Order shall be lodged with ACRA no later than the Long-Stop Date. |
11. | For the avoidance of doubt, prior to the Scheme becoming effective in accordance withparagraph 10of this Scheme, the approval by the Scheme Shareholders and/or the Court of this Scheme shall remain valid notwithstanding any change in the business or financial condition of, or any transactions undertaken by the Company (including any changes arising as a result of the Company’s proposed acquisition of Qualcomm Incorporated). |
12. | Unless this Scheme shall have become effective as aforesaid on or before the Long-Stop Date (or such other date as the Court on the application of the Company or New US Topco, may allow), this Scheme shall lapse. |
13. | The Company and New US Topco may jointly consent, for and on behalf of all concerned, to any modification of, or amendment to, this Scheme or to any condition which the Court may think fit to approve or impose. |
14. | In the event that this Scheme does not become effective and binding for any reason, the costs and expenses incurred by the Company in connection with this Scheme will be borne by the Company. |
15. | This Scheme shall be governed by, and construed in accordance with, the laws of Singapore, and the Company, New US Topco and the Scheme Shareholders submit to thenon-exclusive jurisdiction of the courts of Singapore. Save as provided for in this Scheme, a person who is not a party to this Scheme has no rights under the Contracts (Rights of Third Parties) Act, Chapter 53B of Singapore, to enforce any term or provision of this Scheme. |
Dated[●]
IMPLEMENTATION AGREEMENT
THIS AGREEMENTis made on February 28, 2018
BETWEEN:
(1) | BROADCOM LIMITED,a company incorporated under the laws of Delaware and having its registered office at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A. (“New US Topco”); and |
(2) | BROADCOM LIMITED(Company Registration Number: 201505572G), a company incorporated in Singapore and having its registered office at 1 Yishun Avenue 7 Singapore 768923 (the “Company” or “Broadcom”), |
(each, | a “Party” and collectively, the “Parties”). |
WHEREAS:
The Company proposes to cause the 2018 AGM, you should request such materialstransfer of all the issued ordinary shares in the capital of the Company (the “Broadcom Limited Ordinary Shares”) to New US Topco by way of a scheme of arrangement (the “Redomiciliation”) in accordance with Section 210 of the Companies Act (Chapter 50 of Singapore) (the “Companies Act”), and New US Topco and the Company have agreed in good faith to implement the Redomiciliation upon and subject to the terms and conditions of this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. | DEFINITIONS AND INTERPRETATION |
1.1 | In this Agreement and the Schedules, unless the context otherwise requires: |
“ACRA” means the Accounting and Corporate Regulatory Authority of Singapore;
“Broadcom Consideration Fund” shall have the meaning ascribed to it in Clause 4.6.1;
“Broadcom Limited Certificate” shall have the meaning ascribed to it in Clause 4.3;
“Broadcom Limited Equity Plans” means (i) the Avago Technologies Limited 2009 Equity Incentive Award Plan, (ii) the LSI Corporation 2003 Equity Incentive Plan, (iii) the Avago Technologies Limited Employee Share Purchase Plan, (iv) the Emulex Corporation 2005 Equity Incentive Plan, (v) the Broadcom Corporation 2012 Stock Incentive Plan, (vi) the Broadcom Corporation 1998 Stock Incentive Plan, (vii) the Brocade Communication Systems, Inc. 2009 Stock Plan, and (viii) the Brocade Communications Systems, Inc. Amended and Restated Inducement Award Plan, each as amended to date;
“Broadcom Limited ESPP” means the Broadcom Limited Second Amended and Restated Employee Share Purchase Plan;
“Broadcom Limited ESPP Award” shall have the meaning ascribed to it in Clause 5.4;
“Broadcom Limited Ordinary Shares” shall have the meaning ascribed to it in the Recital;
“Broadcom Limited Preference Shares” means the redeemable preference shares in the capital of the Company bearing the rights, privileges and restrictions set forth in the constitution of the Company;
“Broadcom Limited PSU Award” means a performance share unit denominated in Broadcom Limited Ordinary Shares granted pursuant to one of the Broadcom Limited Equity Plans;
“Broadcom Limited RSU Award” means a restricted share unit award denominated in Broadcom Limited Ordinary Shares granted pursuant to one of the Broadcom Limited Equity Plans;
“Broadcom Limited Share Option” means an option to purchase Broadcom Limited Ordinary Shares granted pursuant to one of the Broadcom Limited Equity Plans;
“Broadcom Limited Shares” means the Broadcom Limited Ordinary Shares and the Broadcom Limited Preference Shares;
“Business Day” means a day (excluding Saturdays, Sundays and gazetted public holidays) on which commercial banks are open for business in the State of California and the Republic of Singapore;
“CEDE” shall have the meaning ascribed to it in Clause 7.1.2;
“Companies Act” shall the meaning ascribed to it in the Recital;
“Consideration” shall have the meaning ascribed to it in Clause 4.2;
“Converted Topco Option” shall have the meaning ascribed to it in Clause 5.1;
“Converted Topco RSUs” shall have the meaning ascribed to it in Clause 5.2;
“Court” means the High Court of the Republic of Singapore, or where applicable on appeal, the Court of Appeal of the Republic of Singapore;
“Court Meeting” means the meeting of the Shareholders to be convened pursuant to the order of the Court, to approve the Redomiciliation and any adjournment thereof;
“Court Order” means the order of the Court sanctioning the Redomiciliation under Section 210 of the Companies Act;
“Effective Date” means the date on which the Redomiciliation becomes effective in accordance with Clause 4.4 of this Agreement and Section 210(5) of the Companies Act, and which date shall, in any event, be no later than March 21, 2018.the Long-Stop Date;
By“Effective Time” means the time on the Effective Date at which the Court Order is lodged with ACRA;
“Encumbrances” means any liens, equities, mortgages, charges, encumbrances, security interests, hypothecations, easements, pledges, title retention, trust arrangement, hire purchase, judgment, preferential right, rights ofpre-emption and other rights or interests conferring security or similar rights in favour of a third party;
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended;
“Exchange Agent” shall have the meaning ascribed to it in Clause 4.6.1;
“Governmental Agency” means any international, national, federal, state, provincial or local government or governmental, semi-governmental, administrative, regulatory, fiscal or judicial agency, authority, body, commission, department, exchange, tribunal or entity;
“Law” means any federal, state, local or foreign law (including common law), statute, ordinance, regulation, judgment, order, decree, injunction, arbitration award, franchise, license, agency requirement or permit of any Governmental Agency;
“Long-Stop Date” meansNovember 17, 2018;
“NASDAQ” means The NASDAQ Global Select Market;
“NASDAQ Shares” shall have the meaning ascribed to it in Clause 7.1.2;
“New US Topco Shares” means theshares of common stock, par value $0.001 per share, of New US Topco;
“Ordinary Shareholders” means the holders of Broadcom Limited Ordinary Shares as at the Effective Time;
“Proxy Statement” means the definitive proxy statement (including any amendment or supplement thereto) relating to the Redomiciliation and this Agreement to be sent by Broadcom to the Shareholders relating to the Court Meeting;
“Redomiciliation” shall have the meaning ascribed to it in the Recital;
“Right” shall have the meaning ascribed to it in Clause 9.6;
“SEC” means the United States Securities and Exchange Commission;
“Shareholders” means the holders of Broadcom Limited Shares;
“Taxes” or “Taxation” means all forms of taxation and statutory, governmental, state, provincial, local governmental or municipal impositions, duties, contributions and levies, including income, withholding, stamp, goods and services tax and any other form of value-added tax, in each case whether of Singapore, the United States or elsewhere in the world, and all penalties, charges, costs and interest relating thereto;
“Warranties” means the representations, warranties, covenants and undertakings made by New US Topco in Schedule 1 or the representations, warranties, covenants and undertakings made by the Company in Schedule 2 (as the case may be) and “Warranty” means any one of them; and
“%” or “per cent.” means per centum or percentage.
1.1 | Modification of Statutes. Any reference in this Agreement to a statutory provision shall include that provision and any regulations made in pursuance thereof as from time to time modified orre-enacted, whether before or after the date of this Agreement, so far as such modification orre-enactment applies or is capable of applying to any transactions entered into and (so far as liability thereunder may exist or can arise) shall include also any past statutory provision or regulation (as from time to time modified orre-enacted) which such provision or regulation has directly or indirectly replaced. |
1.2 | Companies Act |
The words “company”, “corporation”, and “subsidiary” shall have the same meanings in this Agreement as their respective definitions in the Companies Act.
1.3 | Miscellaneous |
1.1.1 | In this Agreement, a reference to: |
(i) | “this Agreement” includes all amendments, additions, and variations thereto agreed between the Parties; |
(ii) | “month” is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month; and |
(iii) | “person” shall include an individual, corporation, company, partnership, firm, trustee, trust, executor, administrator or other legal personal representative, unincorporated association, joint venture, syndicate or other business enterprise, any governmental, administrative or regulatory authority or agency (notwithstanding that, “person” may be sometimes used herein in conjunction with some of such words), and their respective successors, legal personal representatives and assigns, as the case may be, and pronouns shall have a similarly extended meaning. |
1.1.2 | The headings in this Agreement are inserted for convenience only and shall be ignored in construing this Agreement. The words “written” and “in writing” include any means of visible reproduction. References to “Clauses”, “Schedules” and “Recital” are to the clauses of, schedules to, and recital of this Agreement. The word “paragraph” is a reference to a paragraph of the Clause or the Schedule, as the case may be, in which such reference appears. The use of the words “include”, “includes” or “including” followed by one or more examples is intended to be illustrative and shall |
not be construed restrictively to limit the scope or extent of the description or term in respect of which the examples are provided, and shall bear the same meaning as the words “include without limitation”, “includes without limitation” or “including without limitation” respectively. |
1.1.3 | Any thing or obligation to be done under this Agreement which requires or falls to be done on a stipulated day, shall be done on the next succeeding Business Day, if the day upon which that thing or obligation to be done falls on a day which is not a Business Day. |
1.1.4 | Unless the context otherwise requires, words importing the singular shall include the plural andvice versa and words importing a specific gender shall include the other genders (male, female or neuter). |
1.1.5 | The Schedules form part of this Agreement and have the same force and effect as if expressly set out in the body of this Agreement. |
2. | AGREEMENT TO PROCEED WITH THE REDOMICILIATION |
The Parties hereby agree to effect the Redomiciliation upon the terms and subject to the conditions of this Agreement.
3. | CONDITIONS PRECEDENT |
3.1 | Conditions.The Redomiciliation is conditional upon the following: |
3.1.1 | Shareholders’ Approval: the approval of the Redomiciliation by the Shareholders in compliance with the requirements under Section 210(3) of the Companies Act having been obtained; |
3.1.2 | Court Order: the grant of the Court Order by the Court and such Court Order having become final; and |
3.1.3 | No Prohibitions: between the date of this Agreement and immediately prior to the Effective Time, (a) no statute, rule or regulation is enacted or promulgated by any governmental entity of competent jurisdiction which prohibits or makes illegal the consummation of the Redomiciliation and (b) no order or injunction of a court of competent jurisdiction shall be in effect that prevents the consummation of the Redomiciliation. |
3.2 | Non-Satisfaction/Waiver.The Parties agree that none of the conditions precedent in Clause 3.1 are capable of being waived by either or both Parties. |
3.3 | All Actions.Subject to the terms and conditions provided in this Agreement, each Party agrees to use its reasonable efforts to take, or cause to be taken, all actions and to use its reasonable best efforts to do, or cause to be done, all things necessary, proper or advisable under applicable Laws and regulations to consummate and make effective the transactions contemplated under this Agreement and the Redomiciliation. |
4. | THE REDOMICILIATION |
4.1 | Redomiciliation.The Parties agree that the Redomiciliation will involve,inter alia, the transfer of all the outstanding Broadcom Limited Ordinary Shares to New US Topco, fully paid, free from all Encumbrances and together with all rights, benefits and entitlements as at the Effective Date and thereafter attaching thereto, including the right to receive and retain all dividends, rights and other distributions (if any) declared by the Company on or after the Effective Date. On the Effective Date, upon the effectiveness of the Redomiciliation, New US Topco will hold 100 per cent. of the Broadcom Limited Ordinary Shares. |
4.2 | Redomiciliation Consideration.The consideration to be paid by New US Topco to the Ordinary Shareholders for their Broadcom Limited Ordinary Shares pursuant to the Redomiciliation shall be one fully paid New US Topco Share for each such Broadcom Limited Ordinary Share (the “Consideration”). |
4.3 | Broadcom Limited Ordinary Shares.From and after the Effective Time, each existing share certificate representing a holding of Broadcom Limited Ordinary Shares by or on behalf of the Ordinary Shareholders (a “Broadcom Limited Certificate”) and each existing Broadcom Limited Ordinary Share held in uncertificated book-entry form will cease to be evidence of title of the Broadcom Limited Ordinary Shares represented by such certificate or book-entry notation and New US Topco shall issue to each Ordinary Shareholder the New US Topco Shares issued in exchange therefor. |
4.4 | Effective Date.The Redomiciliation shall become effective upon the lodgement of the Court Order with ACRA. At the Effective Time, all of the issued Broadcom Limited Ordinary Shares will be transferred to New US Topco, fully paid, free from all Encumbrances and together with all rights, benefits and entitlements attaching thereto as at such date and thereafter attaching thereto. |
4.5 | Directors and Officers.The directors of the Company immediately before the Effective Time shall, from and after the Effective Time, be the directors of New US Topco until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with applicable Laws. The officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of New US Topco until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with applicable Laws. |
4.6 | Exchange Procedures for Broadcom Limited Ordinary Shares |
4.6.1 | Prior to the Effective Time, New US Topco will designate a nationally-recognized U.S. financial institution to act as exchange agent in the Redomiciliation (the “Exchange Agent”). At or immediately after the Effective Time, New US Topco shall deposit with the Exchange Agent, acting as exchange agent and solely for the account and benefit of the Ordinary Shareholders, for exchange in accordance with Clauses 4.2 and 4.3, book entry shares representing the full number of New US Topco Shares issuable pursuant to Clauses 4.2 and 4.3 in exchange for outstanding Broadcom Limited Ordinary Shares (such New US Topco Shares, the “Broadcom Consideration Fund”). |
4.6.2 | Promptly following the Effective Time, New US Topco shall cause the Exchange Agent to mail to each Ordinary Shareholder who is a holder of record of Broadcom Limited Certificates whose shares were converted into the right to receive the Consideration pursuant to Clauses 4.2 and 4.3: (i) a letter of transmittal in customary form and (ii) instructions for use in effecting the surrender of the Broadcom Limited Certificates in exchange for payment of the Consideration, the form and substance of which letter of transmittal and instructions shall be in a form prepared by New US Topco. Upon surrender of a Broadcom Limited Certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and with such other documents as may be required pursuant to such instructions, the holder of such Broadcom Limited Certificate shall be entitled to receive in exchange therefor, subject to any required withholding of Taxes, the Consideration, if any, pursuant to the provisions of this Clause 4 and Clause 5.7, and the Broadcom Limited Certificate so surrendered shall forthwith be cancelled. No interest will be paid to holders of Broadcom Limited Certificates in connection with, or accrued on, the Consideration. If any Consideration is to be paid to a person other than a person in whose name the Broadcom Limited Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that the person requesting such exchange shall pay to the Exchange Agent any transfer or other Taxes required by reason of payment of the Consideration to a person other than the registered holder of the Broadcom Limited Certificate surrendered, or shall establish to the reasonable satisfaction of the Exchange Agent that such Tax has been paid or is not applicable. |
4.6.3 | At and after the Effective Time, there shall be no transfers on the register of transfer of Broadcom of Broadcom Limited Ordinary Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Broadcom Limited Certificates are presented to New US Topco, |
Broadcom or the Exchange Agent for any reason, they shall be cancelled and exchanged for the Consideration pursuant to this Clause 4, except as otherwise provided by applicable Laws. |
4.6.4 | Any portion of the Broadcom Consideration Fund that remains unclaimed by the Ordinary Shareholders ninety calendar days after the Effective Time shall (upon request by New US Topco) be delivered to New US Topco. Any holders of Broadcom Limited Certificates who have not theretofore complied with this Clause 4 with respect to such Broadcom Limited Certificates shall thereafter (subject to applicable abandoned property, escheat or similar laws) look only to New US Topco for payment of their claim for the Consideration in respect thereof. |
4.6.5 | Notwithstanding anything herein to the contrary, neither the Exchange Agent nor any party hereto shall be liable to any person in respect of Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Broadcom Limited Certificate shall not have been surrendered or transferred prior to the date on which any Consideration in respect thereof would otherwise escheat to or become the property of any Governmental Agency pursuant to applicable Laws, any Consideration in respect of such Broadcom Limited Certificate shall, to the extent permitted by applicable Law, become the property of New US Topco. |
4.6.6 | If any Broadcom Limited Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact (such affidavit shall be in a form reasonably satisfactory to New US Topco and the Exchange Agent) by the person claiming such certificate to be lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Broadcom Limited Certificate, the Consideration to which such person is entitled in respect of such Broadcom Limited Certificate pursuant to this Clause 4; provided, however, that New US Topco may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Broadcom Limited Certificate to deliver a bond in such reasonable and customary amount as New US Topco may direct as indemnity against any claim that may be made against New US Topco, the Company or the Exchange Agent with respect to the Broadcom Limited Certificate alleged to have been lost, stolen or destroyed. |
4.6.7 | No dividends or other distributions with respect to New US Topco Shares with a record date after the Effective Time shall be paid to the holder of any Broadcom Limited Certificate representing Broadcom Limited Ordinary Shares as at the Effective Time until the surrender of such Broadcom Limited Certificate in accordance with this Clause 4. Subject to applicable Laws, following surrender of any such Broadcom Limited Certificate, there shall be paid to the holder of the New US Topco Shares issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole New US Topco Shares and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to New US Topco Shares. |
5. | BROADCOM EQUITY AWARDS |
5.1 | At the Effective Time, each Broadcom Limited Share Option outstanding immediately prior to the Effective Time shall, without any further action on the part of any holder thereof, be assumed by New US Topco and converted into an option to purchase the same number of New US Topco Shares as the number of Broadcom Limited Ordinary Shares subject to such Broadcom Limited Share Option immediately prior to the Effective Time at the same exercise price per New US Topco Share as the per share exercise price for the Broadcom Limited Ordinary Shares applicable to such Broadcom Limited Share Option immediately prior to the Effective Time (each, as so adjusted, a “Converted Topco Option”). Subject to applicable Laws, the Converted Topco Options shall continue to have, and shall be subject to, the same terms and conditions (including any applicable vesting and change in control provisions, provided that in no event shall this transaction constitute a change in control for the purposes of such provisions) that applied to the Broadcom Limited Share Options immediately prior to the Effective Time. |
5.2 | At the Effective Time, each Broadcom Limited RSU Award outstanding immediately prior to the Effective Time shall, without any further action on the part of any holder thereof, be assumed by New US Topco and converted into an award of restricted share units over that number of New US Topco Shares (“Converted Topco RSUs”) equal to the number of Broadcom Limited Ordinary Shares underlying such Broadcom Limited RSU Award immediately prior to the Effective Time. Subject to applicable Laws, the Converted Topco RSUs shall continue to have, and shall be subject to, the same terms and conditions (including any applicable vesting and change in control provisions, provided that in no event shall this transaction constitute a change in control for the purposes of such provisions) that applied to the Broadcom Limited RSU Awards immediately prior to the Effective Time. |
5.3 | At the Effective Time, each Broadcom Limited PSU Award outstanding immediately prior to the Effective Time shall, without any further action on the part of any holder thereof, be assumed by New US Topco and converted into an award consisting of that number of performance share units of New US Topco (“Converted Topco PSUs”) equal to the number of performance share units underlying such Broadcom Limited PSU Award, and the number of New US Topco Shares issuable upon vesting of each Converted Topco PSU shall be equal to the number of Broadcom Limited Ordinary Shares issuable upon vesting of each performance share unit underlying such Broadcom Limited PSU Award, in each case, immediately prior to the Effective Time. Subject to applicable Laws, the Converted Topco PSUs shall continue to have, and shall be subject to, the same terms and conditions (including any applicable vesting and change in control provisions, provided that in no event shall this transaction constitute a change in control for the purposes of such provisions) that applied to the Broadcom Limited PSU Awards immediately prior to the Effective Time. |
5.4 | At the Effective Time, each option to purchase Broadcom Limited Ordinary Shares that is outstanding under the Broadcom Limited ESPP (each, a “Broadcom Limited ESPP Award”) shall be assumed by New US Topco and converted into an option to purchase, on the same terms and conditions (including per share exercise price) as in effect under the Broadcom Limited ESPP immediately prior to the Effective Time, a number of New US Topco Shares equal to the total number of Broadcom Limited Ordinary Shares subject to such Broadcom Limited ESPP Award immediately prior to the Effective Time in accordance with Section 19(d) of the Broadcom Limited ESPP. |
5.5 | With respect to any Converted Topco Option, Converted Topco RSU and Converted Topco PSU for which the related Broadcom Limited Share Option, Broadcom Limited RSU Award or Broadcom Limited PSU Award vests based upon the achievement of applicable performance goals, New US Topco may, in its discretion and in accordance with the terms of the Broadcom Limited Equity Plan and award agreement applicable to each such award, adjust the applicable performance goals to reflect the consummation of the transactions contemplated by this Agreement. |
5.6 | Prior to the Effective Date, Broadcom shall take all actions necessary to effectuate the provisions set forth in this Clause 5; provided, that no action taken by Broadcom shall be required to be irrevocable until immediately prior to the Effective Time. The Parties may, to the extent necessary to minimize the tax impact to holders of Broadcom Limited Share Options, Broadcom Limited RSU Awards and Broadcom Limited PSU Awards of the provisions set forth in this Clause 5, cooperate in good faith prior to the Effective Date to develop an alternate mechanism for the conversion of such Broadcom Limited Share Options, Broadcom Limited RSU Awards and Broadcom Limited PSU Awards held by individuals subject to Taxes imposed by the Laws of a country other than the United States. |
5.7 | Each of Broadcom and New US Topco shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement, such amounts, if any, as it is required to deduct and withhold with respect to the making of such payment under the U.S. Internal Revenue Code of 1986, as amended, the rules and regulations promulgated thereunder, or any other applicable state, local or foreign Tax Law. |
6. | TERMINATION |
6.1 | Termination for Governmental Order Prohibiting Redomiciliation. This Agreement may be terminated at any time prior to the Effective Time by either Party if any court of competent jurisdiction or Governmental Agency has issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Redomiciliation or any part thereof, or has refused to do anything necessary to permit the Redomiciliation or any part thereof, and such order, decree, ruling, other action or refusal shall have become final andnon-appealable. |
6.2 | Failure of Conditions Prior to Long-Stop Date. Notwithstanding anything contained in this Agreement, this Agreement shall terminate if any of the conditions precedent in Clause 3.1 has not been satisfied, or if the Redomiciliation has not become effective, on or before the Long-Stop Date. |
6.3 | Effect of Termination. In the event of termination of this Agreement by either Party pursuant to this Clause 6, this Agreement shall terminate (except for Clauses 1 and 9) and there shall be no other liability on any Party. |
7. | IMPLEMENTATION |
7.1 | The Company’s Obligations. The Company must use its reasonable best efforts to execute all documents and do all acts and things necessary for the implementation of the Redomiciliation, including the following: |
7.1.1 | Proxy Statement: the preparation and filing with the SEC the Proxy Statement (including in preliminary form) and any other forms or notices required in connection with the issuance of New US Topco Shares, and furnishing the information required to be provided to its shareholders pursuant to the Laws of Singapore (including an explanatory statement in relation to the Redomiciliation complying with the requirements of the Companies Act) and the Exchange Act; |
7.1.2 | Court Meeting: the application to the Court for order(s) convening the Court Meeting and for any ancillary orders relating thereto (including an order that for the purposes of the Court Meeting, (i) CEDE & Co. (“CEDE”), as nominee of The Depositary Trust Company, shall be deemed not to be a shareholder of the Company, and (ii) instead, each of the persons or entities who are registered on the list maintained by CEDE as holders of the Broadcom Limited Ordinary Shares which are listed on NASDAQ (the “NASDAQ Shares”) shall be deemed to be a shareholder of Broadcom in respect of such number of NASDAQ Shares held in such persons or entities account under CEDE); |
7.1.3 | Court Order: if the Redomiciliation is approved by the Shareholders at the Court Meeting, applying to the Court as promptly as reasonably practicable thereafter in writing for seeking its sanction and confirmation of the Redomiciliation; |
7.1.4 | ACRA Lodgement: following the grant of the Court Order, delivering the same to ACRA for lodgement as promptly as practicable thereafter; provided, however, notwithstanding the obtainment of the approval of the Redomiciliation by the Shareholders, the grant of the Court Order by the Court and/or the satisfaction of all the conditions precedent in Clause 3.1, the Company may delay delivering the Court Order to ACRA for lodgement until the Long-Stop Date; and |
7.1.5 | Provision of Information: subject and without prejudice to the Company’s legal or regulatory obligations, from the date of this Agreement until (and including) the Effective Date, the Company will and will procure that its subsidiaries authorise and direct its officers, employees, auditors, legal advisers and other advisers to provide reasonable assistance and toco-operate with New US Topco as New US Topco may reasonably request for the completion and implementation of the Redomiciliation. |
7.2 | New US Topco’s Obligations. New US Topco must use its reasonable best efforts to execute all documents and do all acts and things necessary for the implementation of the Redomiciliation, including the following: |
7.2.1 | Provision of Information: subject and without prejudice to New US Topco’s legal or regulatory obligations, from the date of this Agreement until (and including) the Effective Date, New US Topco will and will procure that its subsidiaries authorise and direct its officers, employees, auditors, legal advisers and other advisers to provide reasonable assistance and toco-operate with the Company as the Company may reasonably request for the completion and implementation of the Redomiciliation; |
7.2.2 | Representation: if requested by the Court, New US Topco shall do all things and take all steps as are reasonably possible to ensure the fulfilment of its obligations under this Agreement and the Redomiciliation; and |
7.2.3 | Satisfaction of Consideration:subject to the fulfilment the conditions precedent in Clause 3.1, it will be bound by the Redomiciliation, and will issue the relevant New US Topco Shares in satisfaction of the Consideration pursuant to the Redomiciliation and on the terms set out in this Agreement. |
7.3 | Appeal Process: If the Court refuses to make any orders convening the Court Meeting or approving the Redomiciliation, the Company shall appeal the Court’s decision to the maximum extent permitted by Law. |
8. | REPRESENTATIONS AND WARRANTIES |
8.1 | New US Topco’s Warranties. New US Topco represents and warrants to the Company on the terms set out in Schedule 1, subject only to: |
8.1.1 | any matter expressly provided for under the terms of this Agreement; and |
8.1.2 | any matter or thing hereafter done or omitted to be done pursuant to this Agreement or otherwise at the request in writing or with the approval in writing of the Company (such approval not to be unreasonably withheld, conditioned or delayed). |
8.2 | The Company’s Warranties. The Company represents and warrants to New US Topco on the terms set out in Schedule 2 subject only to: |
8.2.1 | any matter expressly provided for under the terms of this Agreement; and |
8.2.2 | any matter or thing hereafter done or omitted to be done pursuant to this Agreement or otherwise at the request in writing or with the approval in writing of the New US Topco (such approval not to be unreasonably withheld, conditioned or delayed). |
9. | MISCELLANEOUS |
9.1 | Intended US Federal Income Tax Treatment. The Parties acknowledge that the transfer of the Broadcom Limited Ordinary Shares to New US Topco in exchange for New US Topco Shares pursuant to the Redomiciliation is intended to constitute a transfer of property qualifying under Section 351 of the U.S. Internal Revenue Code of 1986, as amended. |
9.2 | Successors and Assigns. This Agreement shall be binding on and shall enure for the benefit of the Parties and their respective successors and assigns. Any reference in this Agreement to either Party shall be construed accordingly. The Parties agree that the benefit of any provision of this Agreement may not be assigned by any Party without the prior written consent of the other Party. |
9.3 | Variation. No variation of this Agreement shall be effective unless agreed to by the Parties in writing and signed by or on behalf of each Party. |
9.4 | Costs. Each Party shall bear its own fees, costs and expenses in connection with the negotiation, preparation, execution and performance by it of this Agreement and requisite documentation in relation to the Redomiciliation, and all other costs and expenses relating to the Redomiciliation. |
9.5 | Entire Agreement. This Agreement and any other documents delivered pursuant to this Agreement (a) contain the entire agreement of the Parties with respect to the subject matter hereof and (b) supersede all prior agreements, arrangements, understanding, promises, covenants, representations and communications between the Parties, whether written or oral, with respect to the subject matter hereof. |
9.6 | Release, Indulgence and Waiver. Any liability to a Party under this Agreement may in whole or in part be released, compounded or compromised, or time or indulgence given, by that Party in writing, in its absolute discretion as regards the Party under such liability without in any way prejudicing or affecting its other rights against the other Party unless any such other rights are expressly waived in writing. No failure of any Party to exercise, and no delay by it in exercising, any right, power or remedy in connection with this Agreement (each, a “Right”) will operate as a waiver thereof, nor will any single or partial exercise of any Right preclude any other or further exercise of such Right or the exercise of any other Right. |
9.7 | Further Assurance. Each Party undertakes with the other Party that it will execute such documents and do such acts and things as that other Party may reasonably require for the purpose of giving effect to the provisions of this Agreement. |
9.8 | Invalidity and Severability. If any provision in this Agreement shall be held by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, under any enactment or rule of Law, such provision or part shall to that extent be deemed not to form part of this Agreement but the legality, validity and enforceability of the remainder of this Agreement shall not be affected. |
9.9 | No Representation or Reliance.Each Party acknowledges that: |
9.9.1 | neither Party (nor any person acting on its behalf) has made any representation or other inducement to it to enter into this Agreement, except for representations or inducements expressly set out in this Agreement; and |
9.9.2 | it does not enter into this Agreement in reliance of any representation or other inducement by or on behalf of the other Party, except for any representation or inducement expressly set out in this Agreement. |
9.10 | Notices.All notices, demands or other communications required or permitted to be given or made under or in connection with this Agreement shall be in writing in the English language and delivered personally or sent by prepaid registered post or by fax addressed to the intended recipient thereof at its address or fax number and marked for the attention of such person (if any), set out against its name below (or to such other address or fax number as such Party may from time to time notify the other Party): |
New US Topco: | 1320 Ridder Park Drive San Jose, California 95131 | |||||
Attention: | Thomas H. Krause, Jr. | |||||
with a copy to: | ||||||
Latham & Watkins LLP | 140 Scott Drive Menlo Park, California 94025 | |||||
Attention: | Anthony J. Richmond | |||||
Telephone: | (650) 463-2643 | |||||
Fax: | (650) 463-2600 | |||||
The Company: | 1320 Ridder Park Drive San Jose, California 95131 | |||||
Attention: | Thomas H. Krause, Jr. |
A demand, notice, or other communication made or given by one Party to another Party in accordance with this Clause 9.10 shall be effected and deemed to be duly served:
(a) | if it is delivered by hand, when left at the address required by this Clause 9.10; |
(b) | if it is sent by prepaid post(air-mail, if international), two Business Days after it is posted; and |
(c) | if it is sent by facsimile transmission, on the day of dispatch. |
In proving such service itshall be sufficient to prove that delivery by hand was made, the envelope containing such notice or document was properly addressed and posted as a prepaid mail letter, and the facsimile confirmation note indicates the transmission was successful, as the case may be.
9.11 | Equitable Remedies. Without prejudice to any other rights or remedies a Party may have, each Party acknowledges and agrees that damages may not be an adequate remedy for any breach of this Agreement and each Party shall be entitled to seek the remedies of injunction, specific performance and other equitable relief (but for the avoidance of doubt no right of rescission or, unless expressly provided hereunder, termination) for any threatened or actual breach of this Agreement. |
9.12 | No Merger. The rights and obligations of the Parties will not merge on completion of any transaction under this Agreement. They will survive the execution and delivery of any assignment or other document entered into for the purpose of implementing any transaction relating to the Redomiciliation. |
9.13 | Counterparts. This Agreement may be signed in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any Party may enter into this Agreement by signing any such counterpart and each counterpart shall be as valid and effectual as if executed as an original. |
9.14 | Continuing Effect of Agreement. All provisions of this Agreement shall, as far as they have not been performed as of the Effective Date, not in any respect be extinguished or affected by the implementation of the Redomiciliation or by any other event or matter whatsoever and shall continue in full force and effect. |
9.15 | Contracts (Rights Of Third Parties) Act. A person who is not a party to this Agreement has no rights under the Contracts (Rights of Third Parties) Act (Chapter 53B of Singapore) to enforce any term of this Agreement. |
9.16 | Governing Law and Submission to Jurisdiction. This Agreement and the documents to be entered into pursuant to it shall be governed by and construed in accordance with the laws of Singapore and the Parties agree to submit to thenon-exclusive jurisdiction of the courts of Singapore. |
Schedule 1
New US Topco’s Warranties
New US Topco represents and warrants to the Company that:
1. | Incorporation |
New US Topco is a company duly incorporated and validly existing under the laws of the Board,State of Delaware.
2. | Power |
New US Topco has the corporate power to enter into and perform its obligations under this Agreement and to carry out the transactions contemplated by this Agreement.
Hock E. Tan
3. | Authority |
New US Topco has taken all necessary corporate action and obtained all necessary corporate approval to authorise entry into this Agreement and the performance of this Agreement and to carry out the transactions contemplated by this Agreement.
Director, Chief Executive Officer
4. | Binding Obligation |
New US Topco’s obligations under this Agreement are valid, legally binding and Presidentenforceable in accordance with its terms.
February 20, 2018
Schedule 2
San Jose, California
1. | Incorporation |
The Company is a company duly incorporated under the laws of Singapore, with company registration number 201505572G and validly existing under its law of incorporation.
2. | Power |
The Company has the corporate power to enter into and perform its obligations under this Agreement and to carry out the transactions contemplated by this Agreement.
3. | Authority |
The Company has taken all necessary corporate action and obtained all necessary corporate approval to authorise entry into this Agreement and the performance of this Agreement and to carry out the transactions contemplated by this Agreement.
4. | Binding Obligation |
The Company’s obligations under this Agreement are valid, legally binding and enforceable in accordance with its terms.
APPENDIX AIn witness whereofthisAgreement has been entered into on the date stated at the beginning.
SINGAPORE STATUTORY FINANCIAL STATEMENTS
BROADCOM LIMITED
(Incorporated in Singapore)
ANNUAL REPORT
For the financial year ended October 29, 2017
INDEXNEW US TOPCO
SIGNED by | ý ï ï ï ï þ ï ï ï ï ý | |||
for and on behalf of | /s/ Thomas H. Krause, Jr. Thomas H. Krause, Jr. | |||
BROADCOM LIMITED | ||||
in the presence of: | ||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
For the financial year ended 29 October 2017
The directors present their statement to the members together with the audited consolidated financial statements of Broadcom Limited and its subsidiaries (the “Group”) for the financial year ended 29 October 2017 and the unconsolidated balance sheet of Broadcom Limited (the “Company” or “Broadcom”) as of 29 October 2017. Broadcom Limited is the successor to Avago Technologies Limited (“Avago”) from and after 1 February 2016. Information contained in this statement for the period prior to 1 February 2016, relates to our predecessor, Avago.
In the opinion of the directors,
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Directors
The directors of the Company in office at the date of this report are as follows.
Gayla J. Delly (appointed on 4 December 2017)
James V. Diller
Lewis C. Eggebrecht
Kenneth Y. Hao
Eddy W. Hartenstein
Check Kian Low
Donald Macleod
Peter J. Marks
Henry Samueli, Ph.D.
Hock E. Tan
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”.
BROADCOM LIMITED AND ITS SUBSIDIARIES
DIRECTORS’ STATEMENT
For the financial year ended 29 October 2017
Directors’ Interests in Shares or Debentures
|
Holdings in which director is deemed to have an Interest | ||||||||
As of 29 October | As of 30 October of if later | |||||||
Broadcom Limited | ||||||||
(No. of Ordinary Shares) | ||||||||
James V. Diller | 127,414 | (1) | 126,589 | |||||
Lewis C. Eggebrecht | 6,620 | (2) | 4,913 | |||||
Kenneth Y. Hao | 1,692,968 | (3) | 10,713,355 | |||||
Eddy W. Hartenstein | 33,235 | 31,648 | ||||||
Donald Macleod | 52,852 | 51,527 | ||||||
Peter J. Marks | 7,825 | 5,216 | ||||||
Henry Samueli, Ph.D. | 86,783 | 30,163 | ||||||
Hock E. Tan | 104,613 | 106,625 | ||||||
Broadcom Limited | ||||||||
(Share Options, RSUs* and Convertible Securities) | ||||||||
James V. Diller | 15,983 | (4) | 16,402 | |||||
Lewis C. Eggebrecht | 6,027 | (5) | 11,948 | |||||
Kenneth Y. Hao | 15,983 | (6) | 24,032 | |||||
Eddy W. Hartenstein | 906 | 1,587 | ||||||
Check Kian Low | 1,294 | (7) | — | |||||
Donald Macleod | 6,129 | (8) | 6,548 | |||||
Peter J. Marks | 24,380 | (9) | 26,083 | |||||
Henry Samueli, Ph.D. | 9,637,759 | (10) | 9,714,600 | |||||
Hock E. Tan | 3,461,176 | (11) | 2,889,999 |
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Witness’ signature | |||
Name: Virginia A. Mutoza | |||
Address: 1320 Ridder Park Dr. San Jose, California 95131 USA |
BROADCOM LIMITED AND ITS SUBSIDIARIES
DIRECTORS’ STATEMENT
For the financial year ended 29 October 2017
Directors’ Interests in Shares or Debentures(continued)COMPANY
SIGNED by |
ï ï ï ï þ ï ï ï ï ý | |||
for and on behalf of | /s/ Thomas H. Krause, Jr. Thomas H. Krause, Jr. | |||
BROADCOM LIMITED | ||||
in the presence of: |
/s/ Virginia A. Mutoza | ||
Witness’ signature | ||
Name: Virginia A. Mutoza | ||
Address: 1320 Ridder Park Dr. San Jose, California 95131 USA |
FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BROADCOM LIMITED
Broadcom Limited (the “Corporation”), a corporation organized and existing under the laws of the State of Delaware, does hereby certify as follows:
1. The name of the Corporation is Broadcom Limited. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on January 17, 2018.
2. This Amended and Restated Certificate of Incorporation of the Corporation has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware (as the same exists or may hereafter be amended, the “DGCL”) and by the written consent of its sole stockholder in accordance with Section 228 of the DGCL.
3. The Amended and Restated Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety to read as follows:
ARTICLE I
NAME
The name of the corporation is Broadcom Limited (the “Corporation”).
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the Corporation’s registered office in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, 19808. The name of its registered agent at such address is The Corporation Service Company.
ARTICLE III
PURPOSE AND DURATION
The purpose of the Corporation is to engage in any lawful activity for which corporations may be organized under the DGCL. The Corporation is to have a perpetual existence.
ARTICLE IV
CAPITAL STOCK
Section 1.Authorized Shares. The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares of capital stock which the Corporation shall have authority to issue is three billion (3,000,000,000). The total number of shares of Common Stock that the Corporation is authorized to issue is two billion nine hundred million (2,900,000,000), having a par value of $0.001 per share, and the total number of shares of Preferred Stock that the corporation is authorized to issue is one hundred million (100,000,000), having a par value of $0.001 per share.
Section 2.Common Stock.
(a)Voting. Each holder of Common Stock shall be entitled to one (1) vote for each share of Common Stock held by such holder on all matters put to a vote of the stockholders of the Corporation.
The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.
(b)Dividends. Subject to the rights of any holders of any shares of Preferred Stock which may from time to time come into existence and be outstanding, the holders of Common Stock shall be entitled to the payment of dividends when and as declared by the Board of Directors of the Corporation (the “Board of Directors”) in accordance with applicable law and to receive other distributions from the Corporation. Any dividends declared by the Board of Directors to the holders of the then outstanding Common Stock shall be paid to the holders thereofprorata in accordance with the number of shares of Common Stock held by each such holder as of the record date of such dividend.
(c)Liquidation. Subject to the rights of any holders of any shares of Preferred Stock which may from time to time come into existence and be outstanding, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the funds and assets of the Corporation that may be legally distributed to the Corporation’s stockholders after payments to creditors shall be distributed among the holders of the then outstanding Common Stockprorata in accordance with the number of shares of Common Stock held by each such holder.
Section 3.Preferred Stock. Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided. Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate of designations relating thereto in accordance with the DGCL, to determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the fullest extent now or hereafter permitted by the DGCL. Without limiting the generality of the foregoing, the resolution or resolutions providing for the issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of Preferred Stock to the extent permitted by law.
The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.
ARTICLE V
BOARD OF DIRECTORS
Section 1.Authority. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
Section 2.Number of Directors. The Board of Directors shall consist of not fewer than one nor more than thirteen (13) members, the exact number of which shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the Board of Directors then in office.
Section 3.Term. Each director shall hold office until the next annual election and until his or her successor is duly elected and qualified, or until his or her earlier death, resignation or removal.
Section 4.Removal. Subject to the rights of any holders of any shares of Preferred Stock which may from time to time come into existence and be outstanding, directors may be removed at any time by the affirmative vote of the holders of at least a majority of the voting power of the then-outstanding shares present and entitled to vote generally in the election of directors, voting together as a single class.
Section 5.Vacancies. Any vacancy on the Board of Directors, whether arising through death, resignation, retirement, disqualification, removal, an increase in the number of directors or any other reason, may be filled only by a majority of the Board of Directors then in office, even if less than a quorum, or by the sole remaining director.
Section 6.Powers. In addition to the powers and authority herein or by statute expressly conferred upon the Board of Directors, the Board of Directors is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Amended and Restated Certificate of Incorporation, and the Bylaws of the Corporation;provided, however, the amendment or repeal of any provision of the Bylaws, or the adoption of any new bylaw, after the effectiveness of this Amended and Restated Certificate of Incorporation, shall not invalidate any prior act of the Board of Directors which would have been valid if such bylaws had not been adopted.
Section 7.Officers. Except as otherwise expressly delegated by resolution of the Board of Directors, the Board of Directors shall have the exclusive power and authority to appoint and remove officers of the Corporation.
ARTICLE VI
STOCKHOLDERS
Section 1.Actions by Consent. Except as may be provided in a resolution or resolutions of the Board of Directors providing for any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by written consent in lieu of a meeting.
Section 2.Special Meetings of Stockholders. Subject to the rights of holders of any series of Preferred Stock, unless otherwise required by law, special meetings of the stockholders, for any purpose or purposes, may only be called by either (i) the Chair of the Board of Directors or by the Secretary of the Corporation upon direction of the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors constituting the Board of Directors or (ii) two or more stockholders as provided in the Bylaws of the Corporation.
Section 3.Meeting Location. Meetings of stockholders may be held within or outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors, or in the Bylaws of the Corporation. The books of the Corporation may be kept within or outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors, or in the Bylaws of the Corporation.
Section 4.Advance Notice. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.
ARTICLE VII
LIABILITY AND INDEMNIFICATION
Section 1.Director Limitation of Liability. To the maximum extent permitted by Delaware law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If Delaware law is amended or interpreted after approval by the stockholders of this Article VII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by Delaware law as so amended or interpreted.
Section 2.Right to Indemnification.
(a)Directors and Officers. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, except for liability (i) for any breach of a director’s loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL (relating to the liability of directors for unlawful payment of a dividend or an unlawful stock purchase or redemption) or (iv) for any transaction from which the director derived an improper personal benefit, any director or officer of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise ornon-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees, judgments, fines, excise taxes or penalties under the Employment Retirement Income Security Act of 1974 and amounts paid in settlement) reasonably incurred by such person in connection with any such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in the Bylaws, the Corporation shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized in the specific case by the Board of Directors.
(b)Employees and Agents. The Corporation shall have the power to indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any employee or agent of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise ornon-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.
Section 3.Contract Rights. The rights conferred upon indemnitees in this Article VII shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer or employee of the Corporation and shall inure to the benefit of the indemnitee’s heirs, executors and administrators.
Section 4.Not Exclusive Remedy. The rights to indemnification and to the advancement of expenses conferred on any indemnitee in this Article VII shall not be exclusive of any other rights that such indemnitee may have or hereafter acquire under any statute, provision of this Amended and Restated Certificate of Incorporation, provision of the Bylaws of the Corporation, agreement, vote of stockholders or disinterested directors, or otherwise.
Section 5.Amendment or Repeal. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any Proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
EXCLUSIVE FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (c) any action arising pursuant to any provision of the DGCL or the Bylaws of the Corporation or this Amended and Restated Certificate of Incorporation (as either may be amended from time to time) or (d) any action asserting a claim against the Corporation governed by the internal affairs doctrine. If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VIII.
ARTICLE IX
AMENDMENT
From time to time any of the provisions of this Amended and Restated Certificate of Incorporation may be amended, altered, changed or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Amended and Restated Certificate of Incorporation are granted subject to the provisions of this Article IX.
In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, the Board of Directors shall have the power of adopt, amend, alter or repeal the Bylaws of the Corporation as provided therein. The Bylaws of the Corporation also may be adopted, amended, altered or repealed by the affirmative vote of the holders of at least a majority of the voting power of the then-outstanding shares of voting stock of the Corporation with the power to vote at an election of directors, voting together as a single class. The Corporation may in the Bylaws of the Corporation confer powers upon its Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by applicable law.
(Signature Page to Follow.)
IN WITNESS WHEREOF, the Corporation has executed this Amended and Restated Certificate of Incorporation on this [●] day of [●], 2018.
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[Signature Page to Broadcom Limited Certificate of Incorporation]
BROADCOM LIMITED AND ITS SUBSIDIARIESForm of Amended and Restated Bylaws of
DIRECTORS’ STATEMENTBroadcom Limited
For the financial year ended 29 October 2017(a Delaware corporation)
Directors’ Interests in Shares or Debentures(continued)Table of Contents
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The following table shows for the financial year ended 29 October 2017, 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 | ||||||||||||
US$ | ||||||||||||||||
James V. Diller | 9,854 | (1) | 0.03 | 35.38 | 04/09/2018 | |||||||||||
5,223 | (1) | 0.02 | 62.47 | 04/08/2019 | ||||||||||||
Lewis C. Eggebrecht | 5,121 | (1) | 0.02 | 62.47 | 04/08/2019 | |||||||||||
Kenneth Y. Hao | 9,854 | (1) | 0.03 | 35.38 | 04/09/2018 | |||||||||||
5,223 | (1) | 0.02 | 62.47 | 04/08/2019 | ||||||||||||
Donald Macleod | 5,223 | (1) | 0.02 | 62.47 | 04/08/2019 | |||||||||||
Peter J. Marks | 23,474 | (1) | 0.08 | 46.60 | 12/09/2018 | |||||||||||
Hock E. Tan | 30,000 | (1) | 0.11 | 32.39 | 03/07/2018 | |||||||||||
131,250 | (2) | 0.46 | 35.45 | 03/11/2020 | ||||||||||||
1,547,916 | (3) | 5.44 | 38.99 | 09/12/2020 | ||||||||||||
750,000 | (3) | 2.64 | 52.65 | 01/01/2021 |
BROADCOM LIMITED AND ITS SUBSIDIARIES
DIRECTORS’ STATEMENT
For the financial year ended 29 October 2017
Directors’ Interests in Shares or Debentures (continued)
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1.2 | Other Offices | D-1 | | ||||||||||||
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2.1 | Place of Meetings | D-1 | | ||||||||||||
2.2 | Annual Meeting | D-1 | | ||||||||||||
2.3 | Special Meeting | D-1 | | ||||||||||||
2.4 | Advance Notice Procedures for Business Brought before a Meeting | D-4 | | ||||||||||||
2.5 | Advance Notice Procedures for Nominations of Directors | D-8 | | ||||||||||||
2.6 | Proxy Access | D-10 | | ||||||||||||
2.7 | Notice of Stockholders’ Meetings | D-17 | | ||||||||||||
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2.8 | Manner of Giving Notice; Affidavit of Notice | D-17 | | ||||||||||||
2.9 | Quorum | D-17 | | ||||||||||||
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Conduct of Business | D-18 | |||||||
2.12 | Voting | D-18 | ||||||
2.13 | Record Date for Stockholder Meetings and Other Purposes | D-18 | ||||||
2.14 | Proxies | D-19 | ||||||
2.15 | List of Stockholders Entitled to Vote | D-19 | ||||||
2.16 | Inspectors of Election | D-19 | ||||||
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Powers | D-20 | |||||||
3.2 | Number of Directors | D-20 | ||||||
3.3 | Election, Qualification and Term of Office of Directors | D-20 | ||||||
3.4 | Resignation, Removal and Vacancies | D-21 | ||||||
3.5 | Place of Meetings; Meetings by Telephone | D-21 | ||||||
3.6 | Regular Meetings | D-22 | ||||||
3.7 | Special Meetings; Notice | D-22 | ||||||
3.8 | Quorum | D-22 | ||||||
3.9 | Board Action by Written Consent without a Meeting | D-22 | ||||||
3.10 | Fees and Compensation of Directors | D-23 | ||||||
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4.1 | Committees of Directors | D-23 | ||||||
4.2 | Committee Minutes | D-23 | ||||||
4.3 | Meetings and Actions of Committees | D-23 | ||||||
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5.1 | Officers | D-24 | ||||||
5.2 | Appointment of Officers | D-24 | ||||||
5.3 | Subordinate Officers | D-24 | ||||||
5.4 | Removal and Resignation of Officers | D-24 | ||||||
5.5 | D-24 | |||||||
5.6 | D-24 | |||||||
5.7 | Authority and | D-25 |
BROADCOM LIMITED AND ITS SUBSIDIARIES
DIRECTORS’ STATEMENT
For the financial year ended 29 October 2017
D-i
Directors’ Interests in Shares or Debentures (continued)
Table of Contents
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BROADCOM LIMITED AND ITS SUBSIDIARIES
DIRECTORS’ STATEMENT
For the financial year ended 29 October 2017
Equity Awards
A summary of award activities under all of the Company’s equity incentive plans is as set out below:
Ordinary Shares Underlying AwardsOutstanding | ||||||||||||
Number outstanding | Weighted- average exercise price per share | Expiration date | ||||||||||
(in millions) | (US$) | |||||||||||
Balance as of 31 October 2016 | 15 | 48.77 | ||||||||||
Exercised | (4 | ) | 45.48 | |||||||||
Cancelled | (1 | ) | 66.08 | |||||||||
Balance as of 29 October 2017 | 10 | 49.54 | | 06/12/2017 – 14/03/2022 | | |||||||
Balance as of 2 November 2015 | 21 | 47.92 | ||||||||||
Exercised | (5 | ) | 44.35 | |||||||||
Cancelled | (1 | ) | 53.56 | |||||||||
Balance as of 30 October 2016 | 15 | 48.77 | | 19/11/2017 – 14/03/2022 | | |||||||
A summary of RSU activity related to our equity incentive plans for the financial year ended 29 October 2017 is as follows:
Group RSU Awards Outstanding | ||||||||
Number Outstanding | Weighted- Average Grant | |||||||
(in millions) | (US$) | |||||||
Balance as of 31 October 2016 | 17 | 130.71 | ||||||
Granted | 8 | 199.33 | ||||||
Vested | (5 | ) | 126.81 | |||||
Forfeited | (2 | ) | 142.78 | |||||
Balance as of 29 October 2017 | 18 | 163.42 | ||||||
Balance as of 2 November 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 30 October 2016 | 17 | 130.71 | ||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
DIRECTORS’ STATEMENT
For the financial year ended 29 October 2017
Independent auditor
The Company’s independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to acceptre-appointment.
On behalf of the directors
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9 February, 2018
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BROADCOM LTD
Report on the Audit of the Financial Statements
Our opinion
In our opinion, the accompanying consolidated financial statements of Broadcom Limited (“the Company”) and its subsidiaries (“the Group”) and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Financial Reporting Standards in Singapore (“FRSs”) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at 29 October 2017 and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group for the financial year ended on that date.
What we have audited
The financial statements of the Company and the Group comprise:
the consolidated statement of comprehensive income of the Group for the year ended 29 October 2017;
the balance sheet of the Group as at 29 October 2017;
the balance sheet of the Company as at 29 October 2017;
the consolidated statement of changes in equity of the Group for the year then ended;
the consolidated statement of cash flows of the Group for the year then ended; and
the notes to the financial statements, including a summary of significant accounting policies.
Basis for Opinion
We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code.
Our Audit Approach
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the accompanying financial statements. In particular, we considered where management made subjective judgments; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BROADCOM LTD
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the financial year ended 29 October 2017. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BROADCOM LTD
Key Audit Matters(continued)
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BROADCOM LTD
Other Information
Management is responsible for the other information. The other information refers to the “Directors’ Statement” section on pages 1 to 8 of the annual report but does not include the financial statements and our auditor’s report thereon, which we obtained prior to the date of this auditor’s report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Directors for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Act and FRSs, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.
In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The directors’ responsibilities include overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BROADCOM LTD
Auditor’s Responsibilities for the Audit of the Financial Statements(continued)
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BROADCOM LTD
Other Matters
As stated in Note 2 to the financial statements, the Company adopted FRSs on 31 October 2016 with a transition date of 2 November 2015. These standards were applied retrospectively by management to the comparative information in these financial statements, including the statement of financial position as at 30 October 2016 and 2 November 2015, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the financial year ended 30 October 2016 and related disclosures. We were not engaged to report on the restated comparative information. Our responsibilities as part of our audit of the financial statements of the Group and of the Company for the financial year ended 29 October 2017 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 31 October 2016 do not contain misstatements that materially affect the financial position as of 29 October 2017 and financial performance and cash flows for the financial year then ended.
The Company has prepared a separate set of financial statements for the year ended 29 October 2017 in accordance with accounting principles generally accepted in the United States of America, on which a separate auditor’s report to the members of Broadcom Limited dated 21 December 2017 was issued.
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 subsidiary corporations incorporated in Singapore, of which we are the auditors, have been properly kept in accordance with the provisions of the Act.
The engagement partner on the audit resulting in this independent auditor’s report is Lee Chian Yorn.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Public Accountants and Chartered Accountants
Singapore,
BROADCOM LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the financial year ended 29 October 2017
Note | 2017 (US$ millions) | 2016 (US$ millions) | ||||||||||
Continuing operations | ||||||||||||
Sales | 4 | 17,636 | 13,240 | |||||||||
Cost of sales | 5 | (9,127) | (7,300) | |||||||||
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Gross profit | 8,509 | 5,940 | ||||||||||
Other income | 62 | 10 | ||||||||||
Expenses | ||||||||||||
- Research and development | 5 | (3,292) | (2,674) | |||||||||
- Selling, general and administrative | 5 | (789) | (806) | |||||||||
- Other expenses | 5 | (2,047) | (2,869) | |||||||||
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Operating profit/(loss) | 2,443 | (399) | ||||||||||
Finance expenses | 8 | (620) | (708) | |||||||||
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Profit/(loss) before income taxes | 1,823 | (1,107) | ||||||||||
Income tax expense | 9 | (35) | (642) | |||||||||
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Profit/(loss) from continuing operations | 1,788 | (1,749) | ||||||||||
Discontinued operations | ||||||||||||
Loss from discontinued operations | 10 | (6) | (112) | |||||||||
|
| |||||||||||
Total Profit/(loss) | 1,782 | (1,861) | ||||||||||
|
| |||||||||||
Other comprehensive income: | ||||||||||||
Items that may be reclassified subsequently to profit or loss: | ||||||||||||
- Unrealised profit/(loss) on defined benefit pension plans andpost-retirement benefit plans | 42 | (80) | ||||||||||
- Reclassification of net income | 1 | 4 | ||||||||||
|
| |||||||||||
Other comprehensive profit/(loss), net of tax | 43 | (76) | ||||||||||
|
| |||||||||||
Total comprehensive profit/(loss) | 1,825 | (1,937) | ||||||||||
|
| |||||||||||
Profit/(loss) attributable to: | ||||||||||||
Equity holders of the Company | 1,690 | (1,739) | ||||||||||
Non-controlling interests | 92 | (122) | ||||||||||
|
| |||||||||||
1,782 | (1,861) | |||||||||||
|
| |||||||||||
Profit/(loss) attributable to equity holders of the Company relates to: | ||||||||||||
Profit/(loss) from continuing operations | 1,696 | (1,633) | ||||||||||
Loss from discontinued operations | (6) | (106) | ||||||||||
|
| |||||||||||
1,690 | (1,739) | |||||||||||
|
|
The accompanying notes form an integral part of these financial statements.
BROADCOM LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the financial year ended 29 October 2017
Note | 2017 (US$ millions) | 2016 (US$ millions) | ||||||||||
Total comprehensive profit/(loss) attributable to: | ||||||||||||
Equity holders of the Company | 1,733 | (1,815) | ||||||||||
Non-controlling interests | 92 | (122) | ||||||||||
|
| |||||||||||
1,825 | (1,937) | |||||||||||
|
| |||||||||||
Earnings per share for profit from continuing and discontinued operations attributable to equity holders of the Company (US$ per share) | ||||||||||||
Basic earnings/(loss) per share | 11(a) | |||||||||||
From continuing operations | 4.19 | (4.46) | ||||||||||
From discontinued operations | (0.01) | (0.29) | ||||||||||
|
| |||||||||||
Diluted earnings/loss per share | 11(b) | |||||||||||
From continuing operations | 4.03 | (4.57) | ||||||||||
From discontinued operations | (0.01) | (0.29) | ||||||||||
|
|
The accompanying notes form an integral part of these financial statements.
BROADCOM LIMITED AND ITS SUBSIDIARIES
As at 29 October 2017
Note | 29 October 2017 | 30 October 2016 | 2 November 2015 | |||||||||||||
�� | (US$ millions) | (US$ millions) | (US$ millions) | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | 12 | 11,204 | 3,097 | 1,822 | ||||||||||||
Trade receivables, net | 13 | 2,448 | 2,180 | 1,019 | ||||||||||||
Inventories | 14 | 1,447 | 1,400 | 524 | ||||||||||||
Other current assets | 13 | 711 | 423 | 258 | ||||||||||||
|
| |||||||||||||||
15,810 | 7,100 | 3,623 | ||||||||||||||
Asset of disposal group classified asheld-for-sale | 10 | 13 | 24 | 21 | ||||||||||||
|
| |||||||||||||||
15,823 | 7,124 | 3,644 | ||||||||||||||
|
| |||||||||||||||
Non-current assets | ||||||||||||||||
Property, plant and equipment | 17 | 2,599 | 2,509 | 1,460 | ||||||||||||
Goodwill | 18 | 24,706 | 24,732 | 1,674 | ||||||||||||
Intangible assets, net | 18 | 10,832 | 15,068 | 3,277 | ||||||||||||
Other long-term assets | 16 | 437 | 224 | 137 | ||||||||||||
Deferred income tax assets | 22 | 21 | 308 | 323 | ||||||||||||
|
| |||||||||||||||
38,595 | 42,841 | 6,871 | ||||||||||||||
|
| |||||||||||||||
Total assets | 54,418 | 49,965 | 10,515 | |||||||||||||
|
| |||||||||||||||
LIABILITIES | ||||||||||||||||
Current liabilities | ||||||||||||||||
Trade payables | �� | 19 | 1,105 | 1,261 | 617 | |||||||||||
Current income tax liabilities | 981 | 886 | 289 | |||||||||||||
Borrowings – Current portion of long-term debts | 20 | 117 | 454 | 46 | ||||||||||||
Employee compensation and benefits | 626 | 517 | 250 | |||||||||||||
Other current liabilities | 19 | 579 | 750 | 191 | ||||||||||||
|
| |||||||||||||||
3,408 | 3,868 | 1,393 | ||||||||||||||
|
| |||||||||||||||
Non-current liabilities | ||||||||||||||||
Borrowings – long-term debt | 20 | 17,431 | 13,188 | 3,826 | ||||||||||||
Deferred income tax liabilities | 22 | 10,019 | 10,287 | 8 | ||||||||||||
Pension and post-retirement benefit obligations | 7 | 129 | 546 | 475 | ||||||||||||
Othernon-current liabilities | 19 | 262 | 215 | 99 | ||||||||||||
|
| |||||||||||||||
27,841 | 24,236 | 4,408 | ||||||||||||||
|
| |||||||||||||||
Total liabilities | 31,249 | 28,104 | 5,801 | |||||||||||||
|
| |||||||||||||||
NET ASSETS | 23,169 | 21,861 | 4,714 | |||||||||||||
|
| |||||||||||||||
EQUITY | ||||||||||||||||
Capital and reserves attributable to equity holders of the Company | ||||||||||||||||
Share capital | 23 | 18,805 | 18,462 | * | ||||||||||||
Other reserves | 32 | 1,594 | 630 | 2,474 | ||||||||||||
(Accumulated deficit)/Retained profits | (131) | (215) | 2,240 | |||||||||||||
|
| |||||||||||||||
20,268 | 18,877 | 4,714 | ||||||||||||||
Non-controlling interests | 2,901 | 2,984 | - | |||||||||||||
|
| |||||||||||||||
Total equity | 23,169 | 21,861 | 4,714 | |||||||||||||
|
|
|
The accompanying notes form an integral part of these financial statements.
BROADCOM LIMITED AND ITS SUBSIDIARIES
As at 29 October 2017
Note | 29 October 2017 | 30 October 2016 | 2 November 2015 | |||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||
ASSETS | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | 12 | 187 | 53 | 20 | ||||||||||
Other current assets | 13 | 9 | 42 | 586 | ||||||||||
|
| |||||||||||||
196 | 95 | 606 | ||||||||||||
|
| |||||||||||||
Non-current assets | ||||||||||||||
Investments in subsidiaries | 15 | 22,494 | 21,229 | 4,121 | ||||||||||
|
| |||||||||||||
Total assets | 22,690 | 21,324 | 4,727 | |||||||||||
|
| |||||||||||||
LIABILITIES | ||||||||||||||
Current liabilities | ||||||||||||||
Trade payables | 19 | 180 | 155 | 13 | ||||||||||
Employee compensation and benefits | - | 6 | - | |||||||||||
|
| |||||||||||||
180 | 161 | 13 | ||||||||||||
|
| |||||||||||||
Total liabilities | 180 | 161 | 13 | |||||||||||
|
| |||||||||||||
NET ASSETS | 22,510 | 21,163 | 4,714 | |||||||||||
|
| |||||||||||||
EQUITY | ||||||||||||||
Capital and reserves attributable to equity holders of the Company | ||||||||||||||
Share capital | 23 | 18,805 | 18,462 | * | ||||||||||
Other reserves | 32 | 1,545 | 624 | 2,474 | ||||||||||
Retained profits | 24 | 2,160 | 2,077 | 2,240 | ||||||||||
|
| |||||||||||||
Total equity | 22,510 | 21,163 | 4,714 | |||||||||||
|
|
|
The accompanying notes form an integral part of these financial statements.
BROADCOM LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the financial year ended 29 October 2017
Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||
Note | Share capital | Share-based payment reserve | Retained profits | Accumulated other comprehensive loss | Total | Non-controlling interests | Total equity | |||||||||||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||||||||||||||||
2017 | ||||||||||||||||||||||||||||||||
Balance as of 31 October 2016 | 18,462 | 779 | (215 | ) | (149 | ) | 18,877 | 2,984 | 21,861 | |||||||||||||||||||||||
Profit for the year | - | - | 1,690 | - | 1,690 | 92 | 1,782 | |||||||||||||||||||||||||
Other comprehensive income for the year | - | - | - | 43 | 43 | - | 43 | |||||||||||||||||||||||||
Total comprehensive income for the year | 18,462 | 779 | 1,475 | (106 | ) | 20,610 | 3,076 | 23,686 | ||||||||||||||||||||||||
Share-based compensation | 32 | - | 921 | - | - | 921 | - | 921 | ||||||||||||||||||||||||
Issuance of ordinary shares in connection with equity incentive plans | 23 | 257 | - | - | - | 257 | - | 257 | ||||||||||||||||||||||||
Exchange of restricted exchangeable partnership units for ordinary shares | 23 | 86 | - | - | - | 86 | (86 | ) | - | |||||||||||||||||||||||
Dividend paid | 25 | - | - | (1,653 | ) | - | (1,653 | ) | - | (1,653 | ) | |||||||||||||||||||||
Cash distribution paid by the Partnership on restricted exchangeable partnership units | - | - | - | - | - | (92 | ) | (92 | ) | |||||||||||||||||||||||
Cumulative impact of accounting change | - | - | 47 | - | 47 | 3 | 50 | |||||||||||||||||||||||||
Total transactions with owners, recognised directly in equity | 343 | 921 | (1,606 | ) | - | (342 | ) | (175 | ) | (517 | ) | |||||||||||||||||||||
Balance as of 29 October 2017 | 18,805 | 1,700 | (131 | ) | (106 | ) | 20,268 | 2,901 | 23,169 | |||||||||||||||||||||||
The accompanying notes form an integral part of these financial statements.
BROADCOM LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the financial year ended 29 October 2017
Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||||
Note | Share capital | Share-based payment reserve | Capital reserve | Retained profits | Accumulated other comprehensive loss | Total | Non-controlling interests | Total equity | ||||||||||||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | |||||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||||||||||||
Balance as of 2 November 2015 | * | - | 2,547 | 2,240 | (73 | ) | 4,714 | - | 4,714 | |||||||||||||||||||||||||
Loss for the year | - | - | - | (1,739 | ) | - | (1,739 | ) | (122 | ) | (1,861 | ) | ||||||||||||||||||||||
Other comprehensive income for the year | - | - | - | - | (76 | ) | (76 | ) | - | (76 | ) | |||||||||||||||||||||||
Total comprehensive income for the year | * | - | 2,547 | 501 | (149 | ) | 2,899 | (122 | ) | 2,777 | ||||||||||||||||||||||||
Share-based compensation | 32 | - | 690 | - | - | - | 690 | - | 690 | |||||||||||||||||||||||||
Excess tax benefits from share-based compensation | 32 | - | 89 | - | - | - | 89 | - | 89 | |||||||||||||||||||||||||
Issuance of ordinary shares in connection with equity incentive plans | 23 | 295 | - | - | - | - | 295 | - | 295 | |||||||||||||||||||||||||
Fair value of partially vested equity awards assumed in connection with the acquisition of Broadcom Corporation | 23 | 182 | - | - | - | - | 182 | - | 182 | |||||||||||||||||||||||||
Issuance by the Partnership of restricted exchangeable partnership units upon the acquisition of Broadcom Corporation | - | - | - | - | - | - | 3,140 | 3,140 | ||||||||||||||||||||||||||
Issuance of ordinary shares upon the acquisition of Broadcom Corporation | 23 | 15,438 | - | - | - | - | 15,438 | - | 15,438 | |||||||||||||||||||||||||
Dividend paid | 25 | - | - | - | (716 | ) | - | (716 | ) | - | (716 | ) | ||||||||||||||||||||||
Cash distribution paid by the Partnership on restricted exchangeable partnership units | - | - | - | - | - | - | (34 | ) | (34 | ) | ||||||||||||||||||||||||
Effect of capital reorganisation | 32 | 2,547 | - | (2,547 | ) | - | - | - | - | - | ||||||||||||||||||||||||
Total transactions with owners, recognised directly in equity | 18,462 | 779 | (2,547 | ) | (716 | ) | - | 15,978 | 3,106 | 19,084 | ||||||||||||||||||||||||
Balance as of 30 October 2016 | 18,462 | 779 | - | (215 | ) | (149 | ) | 18,877 | 2,984 | 21,861 | ||||||||||||||||||||||||
|
The accompanying notes form an integral part of these financial statements.
BROADCOM LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the financial year ended 29 October 2017
Note | 2017 (US$ millions) | 2016 (US$ millions) | ||||||||||
Cash flows from operating activities | ||||||||||||
Total profit / (loss) | 1,782 | (1,861 | ) | |||||||||
Adjustments for: | ||||||||||||
- Income tax expense | 35 | 642 | ||||||||||
- Employee share option expense | 921 | 679 | ||||||||||
- Amortisation of intangible assets | 4,285 | 2,638 | ||||||||||
- Depreciation of property, plant and equipment | 451 | 402 | ||||||||||
- Excess tax benefits from share-based compensation | - | (89 | ) | |||||||||
-Non-cash restructuring, impairment and disposal charges | 71 | 662 | ||||||||||
- Interest expense | 454 | 585 | ||||||||||
- Deferred taxes | (173 | ) | 365 | |||||||||
- Amortisation of debt discount issuance costs and accretion of debt discount | 24 | - | ||||||||||
-Non-cash portion of debt extinguishment loss, net | 166 | 100 | ||||||||||
- Others | 7 | (7 | ) | |||||||||
|
| |||||||||||
8,023 | 4,116 | |||||||||||
Change in working capital, net of effects from acquisition and disposal of subsidiaries: | ||||||||||||
- Inventories and constructionwork-in-progress | (39 | ) | 996 | |||||||||
- Trade and other receivables | (267 | ) | (491 | ) | ||||||||
- Trade and other payables | (97 | ) | 33 | |||||||||
- Employee compensation and benefits | 109 | 163 | ||||||||||
- Other current liabilities | (678 | ) | (596 | ) | ||||||||
- Othernon-current assets and liabilities | 159 | (120 | ) | |||||||||
|
| |||||||||||
Cash generated from operations | 7,210 | 4,101 | ||||||||||
Income tax paid | (349 | ) | (242 | ) | ||||||||
|
| |||||||||||
Net cash provided by operating activities | 6,861 | 3,859 | ||||||||||
|
| |||||||||||
Cash flows from investing activities | ||||||||||||
Acquisition of a subsidiary, net of cash acquired | (40 | ) | (10,055 | ) | ||||||||
Additions to property, plant and equipment | (1,069 | ) | (723 | ) | ||||||||
Disposal of a subsidiary, net of cash disposed of | 10 | 898 | ||||||||||
Disposal of property, plant and equipment | 441 | 5 | ||||||||||
Purchase of investments | (207 | ) | (58 | ) | ||||||||
Proceeds from sales and maturities of investments | 200 | 104 | ||||||||||
Others | (9 | ) | (11 | ) | ||||||||
|
| |||||||||||
Net cash used in investing activities | (674 | ) | (9,840 | ) | ||||||||
|
| |||||||||||
Cash flows from financing activities | ||||||||||||
Proceeds from issuance of ordinary shares | 257 | 295 | ||||||||||
Proceeds from borrowings | 17,426 | 19,510 | ||||||||||
Repayment of borrowings | (13,668 | ) | (11,317 | ) | ||||||||
Interest paid | (310 | ) | (448 | ) | ||||||||
Debt issuance cost | (24 | ) | (123 | ) | ||||||||
Dividends paid to equity holders of the Company | (1,745 | ) | (750 | ) | ||||||||
Excess tax benefits from share-based compensation | - | 89 | ||||||||||
Payment of capital lease obligations | (16 | ) | - | |||||||||
|
| |||||||||||
Net cash provided by financing activities | 1,920 | 7,256 | ||||||||||
|
| |||||||||||
Net increase in cash and cash equivalents | 8,107 | 1,275 | ||||||||||
Cash and cash equivalents | ||||||||||||
Beginning of financial year | 12 | 3,097 | 1,822 | |||||||||
Effects of currency translationon cash and cash equivalents | - | - | ||||||||||
|
| |||||||||||
End of financial year | 12 | 11,204 | 3,097 | |||||||||
|
|
Reconciliation of liabilities arising from financing activities
30 October 2016 (US$ millions) | Principal and interest payments (US$ millions) | Proceeds from borrowings (US$ millions) | Non-cash changes (US$ millions) | 29 October 2017 (US$ millions) | ||||||||||||||||||||
Debt issuance and extinguishment costs | Interest expense | |||||||||||||||||||||||
Bank borrowings | 13,642 | (14,155 | ) | 17,426 | 181 | 454 | 17,548 |
The accompanying notes form an integral part of these financial statements.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
|
Broadcom Limited (“the Company” or “Broadcom”) and its subsidiaries (“the Group”) is a leading designer, developer and global supplier of a broad range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analogIII-V based products. Broadcom has a history of innovation and offers thousands of products that are used in end products such as enterprise and data center networking, home connectivity,set-top boxes, broadband access, telecommunication equipment, mobile handsets and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom has four reportable segments: wired infrastructure, wireless communications, enterprise storage and industrial & others, which align with the Group’s principal target markets.
The Company is listed on the NASDAQ Global Select Market and incorporated and domiciled in Singapore. The address of its registered office is 1 Yishun Avenue 7, Singapore 768923.
The financial statements are presented in U.S. dollar, rounded off to the nearest million. U.S. dollar is the functional currency of the Company.
|
|
These financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”) under the historical cost convention, except as disclosed in the accounting policies below.
The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.
Broadcom operates on a52- or53-week financial year ending on the Sunday closest to October 31 in a52-week year and the first Sunday in November in a53-week year. The financial year ended 29 October 2017 (“financial year 2017”), was a52-week financial year. The financial year ended 30 October 2016, (“financial year 2016”), was also a52-week financial year.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards
These financial statements for financial year 2017 are the first set of financial statements the Group and Company prepared in accordance with the FRS. The Group’s previously issued financial statements for periods up to and including financial year 2016 were prepared in accordance with accounting principles generally accepted in the United States of America (“previous GAAP” or “US GAAP”). The board of directors has concluded that it is in the Company’s best interest to adopt FRS.
In adopting FRS on 31 October 2016, the Group is required to apply all of the specific transition requirements in FRS 101 “First-time Adoption of Financial Reporting Standards”. Under FRS 101, these financial statements are required to be prepared using the accounting policies that comply with FRS effective as at 29 October 2017. The board of directors have assessed the accounting policies adopted by the Group in accordance with FRS, and have considered the differences between the requirements of the previous GAAP and those of FRS. Except for those that resulted in differences that are disclosed in Note 2.1, the directors are satisfied that there are no other material differences between the financial statements prepared under FRS and those under the previous GAAP. The same accounting policies are applied throughout all periods presented in these financial statements, subject to mandatory exemptions and optional exemptions under FRS 101. The Group’s opening balance sheet has been prepared as at 2 November 2015, which is Group’s date of transition to FRS (“date of transition”).
|
FRS 101 allows the exemption from application of certain requirements under FRS on a retrospective basis. The Group has applied the following exemptions in preparing its first set of financial statements in accordance with FRS:
|
FRS 103 “Business Combinations” has not been applied to business combinations that occurred before the date of transition. The same classification as in its previous GAAP financial statements have been adopted. In addition, the Group has also applied FRS 27Consolidated and separate financial statements from the date of transition.
The Group has not applied FRS 21 “TheEffects of Changes in Foreign Exchange rates”retrospectively to the fair value adjustments and goodwill from business combinations that occurred before the date of transition of FRS.Such fair value adjustments and goodwill continue to be accounted for using the same basis as under previous GAAP.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards(continued)
|
|
The Group elected to regard the Company’s cost of investments in subsidiaries as their deemed cost at the date of transition. US$4,121 million is the Company’s carrying value of investments in subsidiaries under the previous GAAP at the date of transition.
|
The Group elected not to apply FRS 101 for pension accounting under FRS 19. All numbers disclosed are based on a full retrospective approach. At transition, the Group recognized all cumulative actuarial gains and losses on defined benefit pension schemes and other post-retirement benefits in shareholders’ equity. Application of the full retrospective approach results in the adjustments described in A4 below.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards(continued)
|
The financial impact on the Group’s and Company’s financial statements that may be adjusted from the adoption of FRS as described above are summarised below:
|
Expla- natory Note | 30 October 2016 reported under previous GAAP | Effect of transition to FRS | 30 October FRS | 2 November 2015 reported under previous GAAP | Effect of transition to FRS | 2 November 2015 reported under FRS | ||||||||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | |||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||
Cash and cash equivalents | 3,097 | - | 3,097 | 1,822 | - | 1,822 | ||||||||||||||||||||||
Trade receivables, net | 2,181 | (1) | 2,180 | 1,019 | - | 1,019 | ||||||||||||||||||||||
Inventories | 1,400 | - | 1,400 | 524 | - | 524 | ||||||||||||||||||||||
Other current assets | A1, A2 | 447 | (24) | 423 | 394 | (136) | 258 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
7,125 | (25) | 7,100 | 3,759 | (136) | 3,623 | |||||||||||||||||||||||
Assets of disposal group classified asheld-for-sale | A1 | - | 24 | 24 | - | 21 | 21 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
7,125 | (1) | 7,124 | 3,759 | (115) | 3,644 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||||||
Property, plant and equipment | 2,509 | - | 2,509 | 1,460 | - | 1,460 | ||||||||||||||||||||||
Goodwill | 24,732 | - | 24,732 | 1,674 | - | 1,674 | ||||||||||||||||||||||
Intangible assets, net | 15,068 | - | 15,068 | 3,277 | - | 3,277 | ||||||||||||||||||||||
Other long-term assets | A2 | 532 | (308) | 224 | 345 | (208) | 137 | |||||||||||||||||||||
Deferred income tax assets | A2 | - | 308 | 308 | - | 323 | 323 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
42,841 | - | 42,841 | 6,756 | 115 | 6,871 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total assets | 49,966 | (1) | 49,965 | 10,515 | - | 10,515 | ||||||||||||||||||||||
|
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards(continued)
|
|
Expla- natory Note | 30 October 2016 reported under previous GAAP | Effect of transition to FRS | 30 October 2016 reported under FRS | 2 November 2015 reported under previous GAAP | Effect of transition to FRS | 2 November 2015 reported under FRS | ||||||||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | |||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||
Trade payables | 1,261 | - | 1,261 | 617 | - | 617 | ||||||||||||||||||||||
Current income tax liabilities | A2 | - | 886 | 886 | - | 289 | 289 | |||||||||||||||||||||
Borrowings – Current portion of long-term debts | 454 | - | 454 | 46 | - | 46 | ||||||||||||||||||||||
Employee compensation and benefits | 517 | - | 517 | 250 | - | 250 | ||||||||||||||||||||||
Other current liabilities and other provisions | A2 | 846 | (96) | 750 | 206 | (15) | 191 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
3,078 | 790 | 3,868 | 1,119 | 274 | 1,393 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||||||||||
Borrowings – Long-term debt | 13,188 | - | 13,188 | 3,826 | - | 3,826 | ||||||||||||||||||||||
Deferred income tax liabilities | A2 | - | 10,287 | 10,287 | - | 8 | 8 | |||||||||||||||||||||
Pension and post-retirement benefit obligations | A4 | 531 | 15 | 546 | 475 | - | 475 | |||||||||||||||||||||
Other long-term liabilities | A2 | 11,293 | (11,078) | 215 | 381 | (282) | 99 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
25,012 | (776) | 24,236 | 4,682 | (274) | 4,408 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total liabilities | 28,090 | 14 | 28,104 | 5,801 | - | 5,801 | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
NET ASSETS | 21,876 | (15) | 21,861 | 4,714 | - | 4,714 | ||||||||||||||||||||||
|
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards(continued)
|
|
Expla- natory Note | 30 October 2016 reported under previous GAAP | Effect of transition to FRS | 30 October FRS | 2 November 2015 reported under previous GAAP | Effect of transition to FRS | 2 November 2015 reported under FRS | ||||||||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | |||||||||||||||||||||||
EQUITY | ||||||||||||||||||||||||||||
Capital and reserves attributable to equity holders of the Company | ||||||||||||||||||||||||||||
Share capital | A3 | 19,241 | (779) | 18,462 | 2,547 | (2,547) | * | |||||||||||||||||||||
Other reserves | A3, A4 | - | 630 | 630 | - | 2,474 | 2,474 | |||||||||||||||||||||
(Accumulated deficit)/Retained profits | (215) | - | (215) | 2,240 | - | 2,240 | ||||||||||||||||||||||
Accumulated other comprehensive loss | A3, A4 | (134) | 134 | - | (73) | 73 | - | |||||||||||||||||||||
Non-controlling interests | 2,984 | - | 2,984 | - | - | - | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total equity | 21,876 | (15) | 21,861 | 4,714 | - | 4,714 | ||||||||||||||||||||||
|
|
|
|
The Group has changed the presentation of certain amounts under “Other current assets” in the balance sheet to meet the presentation requirements under FRS 1 and FRS 105. Under FRS 1, the balance sheet shall present “Assets of disposal group classified asheld-for-sale”, which was not presented on the balance sheet under the previous GAAP.
US$24 million and US$21 million of “Other current assets” under the previous GAAP are reclassified to be presented as “Assets of disposal group classified asheld-for-sale” in the balance sheet presented as at 30 October 2016 and 2 November 2015, respectively.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards(continued)
|
|
|
The Group has changed the presentation of certain amounts under “Other current assets”, “Other current liabilities”, “Other long-term assets” and “Other long-term liabilities” in the balance sheet to meet the presentation requirements under FRS 1 and FRS 12. Under FRS 1, the balance sheet shall present “Deferred income tax assets”, “Current income tax liabilities” and “Deferred income tax liabilities”, which were not required to be presented on the balance sheet under the previous GAAP.
|
|
|
|
The reclassification of “Other long-term liabilities” to “Current income tax liabilities” as described above pertains to uncertain tax positions that are not expected to be settled within 12 months of the reporting date. Under the previous GAAP, such balances are classified asnon-current while under FRS, these balances are presented as current as they pertains to the Group’s probable current tax exposure.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards (continued)
|
|
|
|
|
The Group has changed the presentation of certain amounts under “Share Capital” to reflect FRS 1 requirement to disclose the ordinary class of share capital and other reserves in equity which is described in detail in Note 32.
US$779 million and US$2,547 million of “Share Capital” under the previous GAAP are reclassified to be presented as “Other reserves” in the balance sheet presented as at 30 October 2016 and 2 November 2015, respectively.
US$134 million and US$73 million of “Accumulated other comprehensive loss” under the previous GAAP are subsumed and presented under “Other reserves” in the balance sheet presented as at 30 October 2016 and 2 November 2015, respectively.
|
The Post-Employment Benefit plan consists of the US Group Life plan and the Avago Retiree Medical plan. The US Group Life plan is funded by the Agere Systems Inc. Post-retirement Life Insurance Benefit Trust. As the United States’ Internal Revenue Service’s rules effectively prohibit a reversion of any excess assets in the Trust back to the Company, adjustments are made to the respective balances relating to the US Group Life plan to recognise an irrevocable surplus under FRS 19. FRS 19 limits the amount of net pension liabilities that can be offset on the balance sheet whereas the previous GAAP does not have such limitations.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards (continued)
|
|
|
This resulted in an adjustment of $15 million to the accumulated other comprehensive income, which is currently subsumed and presented under “Other reserves”, and a corresponding adjustment to the “Pension and post-retirement benefit obligations” of the Group.
|
Expla- natory Note | 2016 reported under previous GAAP | Effect of transition to FRS | 2016 reported under FRS | |||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||||
Sales | 13,240 | - | 13,240 | |||||||||||||
Cost of sales | B, B1 | (5,295 | ) | (2,005) | (7,300) | |||||||||||
Purchase accounting effect on inventory | B, B1 | (1,185) | 1,185 | - | ||||||||||||
Amortisation of acquisition-related intangible assets | B, B1 | (763) | 763 | - | ||||||||||||
Restructuring charges | B, B1 | (57) | 57 | - | ||||||||||||
|
| |||||||||||||||
Gross margin | 5,940 | - | 5,940 | |||||||||||||
Other income, net | 10 | - | 10 | |||||||||||||
- Research and development | (2,674) | - | (2,674) | |||||||||||||
- Selling, general and administrative | (806) | - | (806) | |||||||||||||
- Amortisation of acquisition-related intangible assets | B, B2 | (1,873) | 1,873 | - | ||||||||||||
- Restructuring, impairment and disposal charges | B, B2 | (996) | 996 | - | ||||||||||||
- Other expenses | B, B2 | - | (2,869) | (2,869) | ||||||||||||
|
| |||||||||||||||
Operating loss | (399) | - | (399) | |||||||||||||
Interest expense | B, B3 | (585) | 585 | - | ||||||||||||
Loss on extinguishment of debt | B, B3 | (123) | 123 | - | ||||||||||||
Finance costs | B, B3 | - | (708) | (708) | ||||||||||||
|
| |||||||||||||||
Loss before income taxes | (1,107) | - | (1,107) | |||||||||||||
Income tax expense | (642) | - | (642) | |||||||||||||
|
| |||||||||||||||
Loss from continuing operations | (1,749) | - | (1,749) | |||||||||||||
Loss from discontinued operations | (112) | - | (112) | |||||||||||||
|
| |||||||||||||||
Total loss | (1,861) | - | (1,861) | |||||||||||||
|
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards (continued)
|
|
Expla- natory Note | 2016 reported under previous GAAP | Effect of transition to FRS | 2016 reported under FRS | |||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||||
Other comprehensive income: | ||||||||||||||||
Items that may be reclassified subsequently to profit or loss: | ||||||||||||||||
Unrealised loss on defined benefit pension plans and post-retirement benefit plans | A4 | (65) | (15) | (80) | ||||||||||||
Reclassification of net income | 4 | - | 4 | |||||||||||||
|
| |||||||||||||||
Other comprehensive loss, net of tax | (61) | (15) | (76) | |||||||||||||
|
| |||||||||||||||
Total comprehensive loss | (1,922) | (15) | (1,937) | |||||||||||||
|
| |||||||||||||||
Loss attributable to: | ||||||||||||||||
Equity holders of the Company | (1,739) | - | (1,739) | |||||||||||||
Non-controlling interests | (122) | - | (122) | |||||||||||||
|
| |||||||||||||||
(1,861) | - | (1,861) | ||||||||||||||
|
| |||||||||||||||
Total comprehensive loss attributable to: | ||||||||||||||||
Equity holders of the Company | (1,800) | (15) | (1,815) | |||||||||||||
Non-controlling interests | (122) | - | (122) | |||||||||||||
|
| |||||||||||||||
(1,922) | (15) | (1,937) | ||||||||||||||
|
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards (continued)
|
|
|
Under the previous GAAP, expenses are presented in a multiple-step format. Under FRS, the Group has reclassified expenses into their functional groups. Expenses based on nature are disclosed in Note 5 of this FRS financial statements. The following explanatory notes reconcile the difference between expenses reported under FRS to those reported under the previous GAAP.
|
Cost of sales amounting to US$7,300 million for the financial year ended 30 October 2016 under FRS represents the aggregated line items under the previous GAAP of “Cost of products sold”, “Purchase accounting effect on inventory”, “Amortisation of acquisition-related intangible assets” and “Restructuring charges” in the financial year.
|
Other expenses amounting to US$2,869 million for the financial year ended 30 October 2016 under FRS represent the aggregated line items under the previous GAAP of “Amortisation of acquisition-related intangible assets” and “Restructuring, impairment and disposal charges” in the financial year.
|
Finance costs amounting to US$708 million for the financial year ended 30 October 2016 under FRS represent the aggregated line items under the previous GAAP of “Interest expense” and “Loss on extinguishment of debt” in the financial year.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards (continued)
|
|
Expla- natory Note | 30 October 2016 | 2 November 2015 | ||||||||||||||||||||||||||
As previously reported | As restated | As previously reported | As restated | |||||||||||||||||||||||||
(a) | (b) | (c) = (a)+(b) | (d) | (e) | (f) = (d)+(e) | |||||||||||||||||||||||
US$ millions | US$ millions | US$ millions | US$ millions | US$ millions | US$ millions | |||||||||||||||||||||||
Non-current asset | ||||||||||||||||||||||||||||
Cost of investments in subsidiaries | C1 | 18,958 | 2,271 | 21,229 | 4,121 | - | 4,121 | |||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||
(Accumulated deficits)/Retained profits | C1 | (215) | 2,292 | 2,077 | 2,240 | - | 2,240 | |||||||||||||||||||||
Share Capital | C2 | 19,241 | (779) | 18,462 | 2,547 | (2,547) | * | |||||||||||||||||||||
Other reserves | C1, C2 | - | 624 | 624 | - | 2,474 | 2,474 | |||||||||||||||||||||
Accumulated other comprehensive loss | C1, C2 | (134) | 134 | - | (73) | 73 | - | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
18,892 | 2,271 | 21,163 | 4,714 | - | 4,714 | |||||||||||||||||||||||
|
|
|
|
The Group has elected to adopt deemed cost for investments in subsidiaries as described in Note 2.1(a)(ii) at the date of transition.
As of 30 October 2016, the carrying amount of the cost of investments in subsidiaries is accounted for at costs less accumulated impairment losses in accordance with accounting policy described in Note 2.3. As a result, the carrying amount of the cost of investments increased by US$2,271 million. This is due to the reversal of accounting entries made under the previous GAAP for the share of the Company’s subsidiaries’ accumulated losses and dividends amounting to US$2,292 million and the share of the Company’s subsidiaries’ other reserves and accumulated other comprehensive loss amounting to a net amount of US$21 million. Under the previous GAAP, these amounts were recorded in the cost of investments in subsidiaries using the equity method of accounting.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
FRS 101 first-time adoption of Financial Reporting Standards (continued)
|
|
|
The Company has changed the presentation of certain amounts under “Share Capital” to reflect FRS 1 requirement to disclose the ordinary class of share capital and other reserves in equity which is described in detail in Note 32.
US$779 million and US$2,547 million of “Share Capital” under the previous GAAP are reclassified to be presented as “Other reserves” in the balance sheet presented as at 30 October 2016 and 2 November 2015, respectively.
US$134 million and US$73 million of “Accumulated other comprehensive loss” under the previous GAAP are reclassified to be presented as “Other reserves” in the balance sheet presented as at 30 October 2016 and 2 November 2015, respectively.
|
Sales comprise the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Group’s activities. Sales are presented, net of value-added tax, rebates and discounts, and after eliminating sales within the Group.
The Group assesses its role as an agent or principal for each transaction and in an agency arrangement the amounts collected on behalf of the principal are excluded from revenue. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that the collectability of the related receivables is reasonably assured and when the specific criteria for each of the Group’s activities are met as follows:
|
The Group recognises revenue related to sales of products, net of trade discounts and allowances, provided that (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and title and risk of loss have transferred, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. The Group considers the price to be determinable when the price is not subject to refund or adjustments or when any such adjustments can be
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
estimated. The Group evaluates the creditworthiness of its customers to determine that appropriate credit limits are established prior to the acceptance of an order. Revenue, including sales to resellers and distributors, is reduced for estimated returns and distributor allowances. The Group recognises revenue from sales of products to distributors upon delivery of product to the distributors. An allowance for distributor credits covering price adjustments is made based on an estimate of historical experience rates as well as considering economic conditions and contractual terms. To date, actual distributor claims activity has been materially consistent with the provisions made based on historical estimates. The Group also records reductions of revenue for rebates, in the same period that the related revenue is recorded. The Group accrues 100% of potential rebates at the time of sale and does not apply a breakage factor. The Group reverses the accrual of unclaimed rebate amounts as specific rebate programs contractually end and when unclaimed rebates are no longer subject to payment and will not be paid. Thus, the reversal of unclaimed rebates may have a positive impact on the Group’s net revenue and results of operations in subsequent periods.
|
The Group recognises revenue from the sales and licensing of its intellectual property when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the sales price is fixed or determinable, and (iv) collection of resulting receivables is reasonably assured. Revenue from upfront payments for the licensing of the Group’s patents is recognised when the arrangement is mutually signed, if there is no future delivery or future performance obligation and all other criteria are met. Revenue from guaranteed royalty streams are recognised when paid, or collection is reasonably assured and all other criteria are met. When patent licensing arrangements include royalties for future sales of the licensees’ products using the Group’s licensed patented technology, revenue is recognised when the royalty report is received from the licensee, at which time the sales price is determinable, provided that all other criteria have been met.
|
The Group enters into development agreements with some of its customers and recognises revenue from these agreements upon completion and acceptance by the customer of contract deliverables or as services are provided, depending on the terms of the arrangement. Revenue is deferred for any amounts billed or received prior to completion or delivery of services. As the Group retains the intellectual property generated from these development agreements, costs related to these arrangements are included in research and development expense.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
|
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date on that control ceases.
In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment indicator of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests comprise the portion of a subsidiary’s net results of operations and its net assets, which is attributable to the interests that are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated statement of comprehensive income, statement of changes in equity, and balance sheet. Total comprehensive income is attributed to thenon-controlling interests based on their respective interests in a subsidiary, even if this results in thenon-controlling interests having a deficit balance.
|
The acquisition method of accounting is used to account for business combinations entered into by the Group. The consideration transferred for the acquisition of a subsidiary or business comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes any contingent consideration arrangement and anypre-existing equity interest in the subsidiary measured at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On anacquisition-by-acquisition basis, the Group recognises anynon-controlling interest in the acquiree at the date of acquisition either at fair value or at thenon-controlling interest’s proportionate share of the acquiree’s identifiable net assets.
The excess of (a) the consideration transferred, the amount of anynon-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the (b) fair value of the identifiable net assets acquired is recorded as goodwill. Please refer to Note 2.5(a) for the subsequent accounting policy on goodwill.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
|
When a change in the Group’s ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts previously recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings if required by a specific Standard.
Any retained equity interest in the entity isre-measured at fair value. The difference between the carrying amount of the retained interest at the date when control is lost and its fair value is recognised in profit or loss.
Please refer to Note 2.7 for the subsequent accounting policy on investments in subsidiaries.
|
Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control over the subsidiary are accounted for as transactions with equity owners of the Company. Any difference between the change in the carrying amounts of thenon-controlling interest and the fair value of the consideration paid or received is recognised within equity attributable to the equity holders of the Company.
|
|
|
Land and buildings are initially recognised at cost. Buildings are subsequently carried at the revalued amounts less accumulated depreciation and accumulated impairment losses.
|
All other items of property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
|
The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Cost also includes borrowing costs (refer to Note 2.6 on borrowing costs).
|
Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:
|
| ||||
| |||||
| |||||
|
The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise.
|
Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in profit or loss when incurred.
|
On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in profit or loss within “other gains and (losses)”.
|
|
Goodwill on acquisitions of subsidiaries and businesses, represents the excess of (i) the sum of the consideration transferred, the amount of anynon-controlling interest in the acquiree and the
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
acquisition-date fair value of any previous equity interest in the acquiree over (ii) the fair value of the identifiable net assets acquired. Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated impairment losses.
Gains and losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the entity sold.
|
Identified finite-lived intangible asset acquired such as developed technology, customer contracts and related relationships, order backlog and trade name, are initially recognised at cost and are subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line method over periods up to 25 years, which is the shorter of their estimated useful lives and periods of contractual rights.
|
Purchasedin-process research and development (“IPR&D”) projects are capitalised at fair value as an indefinite lived intangible asset and assessed for impairment thereafter. Upon completion of each underlying project, IPR&D assets are reclassified to acquired identified finite-lived intangible assets and amortised over their estimated useful lives.
|
Borrowing costs are recognised in profit or loss using the effective interest method except for those costs that are directly attributable to the construction or development of properties and assets under construction.
The actual borrowing costs incurred during the period up to the issuance of the temporary occupation permit less any investment income on temporary investment of these borrowings, are capitalised in the cost of the property under development. Borrowing costs on general borrowings are capitalised by applying a capitalisation rate to construction or development expenditures that are financed by general borrowings.
|
Investments in subsidiaries are carried at cost less accumulated impairment losses in the Company’s balance sheet. On disposal of such investments, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
Goodwill recognised separately as an intangible asset is tested for impairment annually and whenever there is indication that the goodwill may be impaired.
For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating-units (“CGU”) expected to benefit from synergies arising from the business combination.
An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount of the CGU. The recoverable amount of a CGU is the higher of the CGU’s fair value less cost to sell andvalue-in-use.
The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGUpro-rata on the basis of the carrying amount of each asset in the CGU.
An impairment loss on goodwill is recognised as an expense and is not reversed in a subsequent period.
|
Intangible assets, property, plant and equipment and investments in subsidiaries are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and thevalue-in-use) is determined on an individual asset basis unless the asset does not generate cash inflows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the CGU to which the asset belongs.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount is recognised as an impairment loss in profit or loss.
An impairment loss for an asset other than goodwill is reversed only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense, a reversal of that impairment is also recognised in profit or loss.
Purchased IPR&D projects are capitalised at fair value as an indefinite lived intangible asset and assessed for impairment thereafter. If an IPR&D project is abandoned, the Group recognises the carrying value of the related intangible asset in the consolidated statements of comprehensive income in the period it is abandoned. On a quarterly basis, the Group monitors factors and changes in circumstances that could indicate carrying amounts of long-lived assets, including purchased intangible assets, and property, plant and equipment, may not be recoverable.
Factors the Group considers important which could trigger an impairment review include (i) significant under-performance relative to historical or projected future operating results, (ii) significant changes in the manner of the use of the acquired assets or the strategy for the overall business, and (iii) significant negative industry or economic trends. An impairment loss must be measured if the sum of the expected future cash flows (undiscounted and before interest) from the use and eventual disposition of the asset (or asset group) is less than the net book value of the asset (or asset group). The amount of the impairment loss will generally be measured as the difference between the net book value of the asset (or asset group) and the estimated fair value.
|
|
The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition.
Loans and receivables
Loans and receivables arenon-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those expected to be realised later than 12 months after the balance sheet date which are presented asnon-current assets. Loans and receivables are presented as “trade receivables and other current assets” (Note 13) and “cash and cash equivalents” (Note 12) on the balance sheet.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. Any amount previously recognised in other comprehensive income relating to that asset is reclassified to profit or loss.
|
Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit or loss are recognised immediately as expenses.
|
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists.
|
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default or significant delay in payments are objective evidence that these financial assets are impaired.
The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised against the same line item in profit or loss.
The impairment allowance is reduced through profit or loss in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost had no impairment been recognised in prior periods.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
|
The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries. These guarantees are financial guarantees as they require the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of their borrowings.
Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s balance sheet.
Financial guarantees are subsequently amortised to profit or loss over the period of the subsidiaries’ borrowings, unless it is probable that the Company will reimburse the banks for an amount higher than the unamortised amount. In this case, the financial guarantees shall be carried at the expected amount payable to the banks in the Company’s balance sheet.
Intra-group transactions are eliminated on consolidation.
|
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date, in which case they are presented asnon-current liabilities.
Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
|
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Otherwise, they are presented asnon-current liabilities.
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
The Group leases certain buildings, machinery and equipment under finance leases and buildings, machinery and equipment under operating leases fromnon-related parties.
|
Leases where the Group assumes substantially all risks and rewards incidental to ownership of the leased assets are classified as finance leases.
The leased assets and the corresponding lease liabilities (net of finance charges) under finance leases are recognised on the balance sheet as plant and equipment and borrowings, respectively, at the inception of the leases based on the lower of the fair value of the leased assets and the present value of the minimum lease payments.
Each lease payment is apportioned between the finance expense and the reduction of the outstanding lease liability. The finance expense is recognised in profit or loss on a basis that reflects a constant periodic rate of interest on the finance lease liability.
|
Leases where substantially all risks and rewards incidental to ownership are retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in profit or loss on a straight-line basis over the period of the lease.
Contingent rents are recognised as an expense in profit or loss when incurred.
|
Inventories are carried at the lower of cost and net realisable value. Cost is determined using thefirst-in,first-out method. The cost of finished goods andwork-in-progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and applicable variable selling expenses.
|
Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.
Deferred income tax is measured:
|
|
Current and deferred income taxes are recognised as income or expense in profit or loss, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition.
The Group accounts for investment tax credits (for example, productivity and innovative credit) similar to accounting for other tax credits where deferred tax asset is recognised for unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax credit can be utilised.
|
Provisions for warranty, accrued rebates and restructuring liabilities are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
Other provisions are measured at the present value of the expenditure expected to be required to settle the obligation using apre-tax discount rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised in the statement of comprehensive income as finance expense.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Changes in the estimated timing or amount of the expenditure or discount rate are recognised in profit or loss when the changes arise.
|
Employee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset.
|
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid.
|
The Group operates an equity-settled, share-based compensation plan. The value of the employee services received in exchange for the grant of options is recognised as an expense with a corresponding increase in the share option reserve over the vesting period. The total amount to be recognised over the vesting period is determined by reference to the fair value of the options granted on grant date.Non-market vesting conditions are included in the estimation of the number of shares under options that are expected to become exercisable on the vesting date. At each balance sheet date, the Group revises its estimates of the number of shares under options that are expected to become exercisable on the vesting date and recognises the impact of the revision of the estimates in profit or loss, with a corresponding adjustment to the share option reserve over the remaining vesting period.
When the options are exercised, the proceeds received (net of transaction costs) and the related balance previously recognised in the share option reserve are credited to share capital account.
|
Termination benefits are those benefits which are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the Group recognises costs for a restructuring that is within the scope of FRS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in Other Comprehensive Income. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability/(asset), taking into account any changes in the net defined benefit liability/(asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged to other comprehensive income in the period when they arise. The experience adjustments are not to be reclassified to profit or loss in a subsequent period.
|
Post-retirement benefit plan assets and liabilities are estimates of benefits that the Group expects to pay to eligible retirees. The Group considers various factors in determining the value of the post-retirement net assets, including the number of employees that the Group expects to receive benefits and other actuarial assumptions.
|
The Group considers various factors in determining the respective pension liabilities and net periodic benefit costs, including the number of employees that the Group expects to receive benefits, their salary levels and years of service, the expected return on plan assets, the discount rate, the timing of the payment of benefits, and other actuarial assumptions. If the actual results and events of the retirement benefit plans differ from current assumptions, the benefit obligations may be over- or under-valued. The key benefit plan
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
|
assumptions are the discount rate and the expected rate of return on plan assets. The assumptions discussed below are for the U.S. retirement benefit plans. For thenon-U.S. plans, the Group chooses assumptions specific to each country.
The U.S. discount rates are based on the results of matching expected plan benefit payments with cash flows from a hypothetical yield curve constructed with high-quality corporate bond yields. The Group bases the salary increase assumptions on historical experience and future expectations. In developing the expected rate of return, the Group considers long-term compound annualized returns based on historical market data, historical and expected returns on the various categories of plan assets, and the target investment portfolio allocation among debt, equity securities and other investments.
|
|
Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The financial statements are presentedin U.S. dollar which is the functional currency of the Company.
|
Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency exchange differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised in profit or loss. However, in the consolidated financial statements, currency translation differences arising from borrowings in foreign currencies and other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations, are recognised in other comprehensive income and accumulated in the currency translation reserve.
When a foreign operation is disposed of or any loan forming part of the net investment of the foreign operation is repaid, a proportionate share of the accumulated currency translation differences is reclassified to profit or loss, as part of the gain or loss on disposal.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
Foreign exchange gains and losses that relate to borrowings are presented in the income statement within “finance cost”. All other foreign exchange gains and losses impacting profit or loss are presented in the income statement within “other gains and losses”.
Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined.
|
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
|
|
|
Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and translated at the closing rates at the reporting date.
Broadcom operates in a U.S. dollar functional currency environment. As such, foreign currency assets and liabilities arere-measured into U.S. dollar at current exchange rates except fornon-monetary items such as inventory and property, plant and equipment, which arere-measured at historical exchange rates. The effects of foreign currencyre-measurement were not material for any period presented.
|
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer of Broadcom, who has been identified as the Chief Operating Decision Maker (“CODM”) who is responsible for allocating resources and assessing performance of the operating segments.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
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For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash on hand and deposits with financial institutions which are subjected to an insignificant risk of change in value. For cash subjected to restriction, assessment is made on the economic substance of the restriction and whether they meet the definition of cash and cash equivalents.
|
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account.
|
Dividends to the Company’s shareholders are recognised when the dividends are approved for payment.
|
On 1 February 2016, Broadcom effected the Avago Scheme as described in Note 31. Upon completion of the Avago Scheme, shareholders of Avago became shareholders of Broadcom.
The Avago Scheme has been accounted for as a capital reorganisation and is presented as follows:
|
|
|
|
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
|
|
Broadcom recognises revenue from sales of products to distributors upon delivery of product to the distributors. An allowance for distributor credits covering price adjustments is made based on estimate of historical experience rates as well as considering economic conditions and contractual terms. To date, actual distributor claims activity has been materially consistent with the provisions Broadcom has made based on historical estimates. However, because of the inherent nature of estimates, there is always a risk that there could be significant differences between actual amounts and estimates. Different judgments or estimates could result in variances that might be significant to reported operating results.
Broadcom also records reductions of revenue for rebates, in the same period that the related revenue is recorded. Broadcom accrues 100% of potential rebates at the time of sale and do not apply a breakage factor. The accrual of unclaimed rebate amounts is reversed as specific rebate programs contractually end and when it is assessed that the unclaimed rebates are no longer subject to payment and will not be paid. Thus the reversal of unclaimed rebates may have a positive impact on the net revenue and net income in subsequent periods.
|
Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, restructuring liabilities,pre-acquisition contingencies and contingent consideration, where applicable. Although the assumptions and estimates made in the past have been reasonable and appropriate, they are based, in part, on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain of the intangible assets acquired include, but are not limited to: future expected cash flows from product sales, customer contracts and acquired technologies, expected costs to developin-process research and development into commercially viable products, estimated cash flows from the projects when completed, and discount rates. The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Critical accounting estimates and assumptions(continued)
|
Broadcom performs an annual impairment review of goodwill during the fourth financial quarter of each year, and more frequently if indicators for impairment exist. The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment. To review for impairment Broadcom assesses qualitative factors to determine whether events or circumstances lead to a determination that the fair value of any of cash generating units (“CGU”) is less than its carrying amount. The qualitative assessment of the recoverability of goodwill, whether performed annually or based on specific events or circumstances, considers various macroeconomic, industry-specific and company-specific factors. Those factors include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of financial performance; or (iv) a sustained decrease in market capitalisation below net book value.
Management will assess and compute the fair value of goodwill allocated to each cash generating unit (“CGU”) taking into account the qualitative factor discussed above.
Determining the fair value of a CGU involves the use of significant estimates and assumptions. Management’s goodwill impairment test uses the income approach to estimate a CGU’s fair value. The income approach is based on the discounted cash flow method that uses the CGU estimates for forecasted future financial performance including revenues, operating expenses, and taxes, as well as working capital and capital asset requirements. These estimates are developed as part of Broadcom’s long-term planning process based on assumed market segment growth rates and assumed segment share, estimated costs based on historical data and various internal estimates. Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risk unique to the subjected cash flows.
|
Significant management judgment is required in developing provision for income taxes, including the determination of deferred tax assets and liabilities and the assessment of recoverability of deferred tax assets. Management has considered projected future taxable income and ongoing prudent and feasible tax planning strategies in assessing the recoverability of deferred tax assets. If management determines, in the future, that a deferred tax asset balance cannot be recovered, an adjustment to the deferred tax assets would increase the tax expense in the period in which such determination is made. In evaluating the exposure associated with various tax filing positions, an accrual of income tax liability is made when such positions do not meet themore-likely-than-not threshold for recognition.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Critical accounting estimates and assumptions(continued)
|
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. Broadcom recognises potential liabilities for anticipated tax audit issues in Singapore and other tax jurisdictions based on management’s estimate of whether, and the extent to which, additional taxes and interest will be due. If estimation of income tax liabilities proves to be less than the actual amount ultimately assessed, a further charge to tax expense would be required. If the payment of these amounts ultimately proves to be unnecessary, the reversal of the accrued liabilities would result in tax benefits being recognised in the period when it is determined that the liabilities no longer exist.
The Group is subjected to Singapore income tax examination for financial years 2011 and later. The Group’s acquired companies are subject to tax examinations in major jurisdictions outside Singapore for financial years 2010 and later. Management has identified a gross unrecognised tax benefits of US$2,256 million for financial year 2017 and US$1,983 million for financial year 2016).
|
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Sale of goods | 17,036 | 12,790 | ||||||
Revenue from licensing of intellectual property | 338 | 199 | ||||||
Revenue from development agreement | 262 | 251 | ||||||
17,636 | 13,240 | |||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
The major components of cost of products sold, research and development, selling, general and administrative and other expenses include the following:
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Purchases of inventories and construction materials | 5,735 | 5,650 | ||||||
Amortisation of intangible assets (Note 18(d)) | 4,285 | 2,638 | ||||||
Depreciation of property, plant and equipment(Note 17) | 451 | 402 | ||||||
Write-off of property, plant and equipment (Note 17) | 15 | 151 | ||||||
Write-off and impairment of intangible assets (Note 18(b),(c)) | 13 | 423 | ||||||
Total amortisation, depreciation and impairment | 4,764 | 3,614 | ||||||
Employee compensation (Note 6) | 3,297 | 3,061 | ||||||
Sub-contractor charges | 230 | 129 | ||||||
Rental expense on operating leases | 109 | 93 | ||||||
Manufacturing supplies | 200 | 228 | ||||||
Professional services | 116 | 145 | ||||||
Restructuring expense | 129 | 482 | ||||||
Litigation settlements | 122 | - | ||||||
Litigation settlements relates to matters that existed at the balance sheet date of 29 October 2017, which primarily consists of expenses that became probable and reasonably estimable prior to the issuance of these consolidated financial statements. This amount does not take into consideration the receipt of any potential indemnity or contribution amounts the Group may become entitled to as a result of these settlements because such amounts are not probable or reasonably estimable as of the date hereof.
|
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Wages and salaries | 2,087 | 1,778 | ||||||
Other short-term benefits | 196 | 189 | ||||||
Employer’s contribution to defined contribution plans | 7 | 13 | ||||||
Termination benefits | 86 | 417 | ||||||
Share-based compensation expenses | 921 | 664 | ||||||
3,297 | 3,061 | |||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Defined benefit plans
The U.S. defined benefit pension plans include a management plan and a represented plan. Benefits under the management plan are provided under either an adjustedcareer-average-pay program or a cash-balance program. Benefits under the represented plan are based on adollar-per-month formula. Benefit accruals under the management plan were frozen in 2009. Participants in the adjustedcareer-average-pay program no longer earn service accruals. Participants in the cash-balance program no longer earn service accruals, but continue to earn 4% interest per year on their cash-balance accounts. There are no active participants under the represented plan. The Group also has anon-qualified supplemental pension plan in the United States that principally provides benefits based on compensation in excess of amounts that can be considered under the management plan. The Group also has pension plans covering certainnon-U.S. employees.
Post-retirement benefit plans
Certain of the Group’s U.S. employees who were age 49 or younger on January 1, 2005 and who meet the retirement eligibility requirements as of their termination dates, may receive post-retirement medical benefits under the Group’s retiree medical account program. Eligible employees receive a medical benefit spending account of $55,000 upon retirement to pay premiums for medical coverage through the maximum age of 75 as retiree.
The Group’s group life insurance plan offers post-retirement life insurance coverage for certain U.S. employees.
Non-US retirement benefit plans
In addition to the defined benefit plans for certain employees in Taiwan, India, Japan, Israel, Italy and Germany, other eligible employees outside of the United States receive retirement benefits under various defined contribution retirement plans. Eligibility is generally determined based on the terms of the Group’s plans and local statutory requirements.
Net periodic benefit income
Pension Benefits | Post-Retirement Benefits | |||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||
(US$ millions) | ||||||||||||||||||||||||||||
Net periodic benefit income | ||||||||||||||||||||||||||||
Service cost | 4 | 3 | 3 | - | - | - | ||||||||||||||||||||||
Interest cost | 53 | 59 | 61 | 3 | 3 | 3 | ||||||||||||||||||||||
Expected return on plan assets | (65 | ) | (72 | ) | (77 | ) | (4 | ) | (4 | ) | (5 | ) | ||||||||||||||||
Net actuarial loss and prior service costs | 2 | 1 | 1 | - | - | - | ||||||||||||||||||||||
Curtailments | (1 | ) | - | - | - | - | - | |||||||||||||||||||||
Settlements | - | 3 | - | - | - | - | ||||||||||||||||||||||
Net periodic benefit income | (7 | ) | (6 | ) | (12 | ) | (1 | ) | (1 | ) | (2 | ) | ||||||||||||||||
Net actuarial (income)/loss | (60 | ) | 88 | 36 | (3 | ) | 11 | 1 | ||||||||||||||||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
The Group expects to recognise $2 million of net actuarial losses in net periodic benefit income in financial year 2018 related to the Group’s defined benefit pension plans.
Funded status
Pension Benefits | Post-Retirement Benefits | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(US$ millions) | ||||||||||||||||||||
Change in plan assets: | ||||||||||||||||||||
Fair value of plan assets — beginning of period | 1,050 | 1,052 | 78 | 78 | ||||||||||||||||
Actual return on plan assets | 108 | 64 | 7 | 1 | ||||||||||||||||
Employer contributions | 361 | 33 | - | - | ||||||||||||||||
Payments from plan assets | (93) | (93) | (2) | (1) | ||||||||||||||||
Settlements | - | (11) | - | - | ||||||||||||||||
Plan assets acquired in acquisitions | - | 5 | - | - | ||||||||||||||||
Fair value of plan assets — end of period | 1,426 | 1,050 | 83 | 78 | ||||||||||||||||
Pension Benefits | Post-Retirement Benefits | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(US$ millions) | ||||||||||||||||||||
Change in benefit obligations: | ||||||||||||||||||||
Benefit obligations — beginning of period | 1,566 | 1,511 | 79 | 69 | ||||||||||||||||
Service cost | 4 | 3 | - | - | ||||||||||||||||
Interest cost | 53 | 59 | 3 | 3 | ||||||||||||||||
Actuarial (gain) loss | (13) | 80 | - | 8 | ||||||||||||||||
Benefit payments | (93) | (93) | (2) | (1) | ||||||||||||||||
Curtailments | (4) | - | - | - | ||||||||||||||||
Settlements | (8) | (11) | - | - | ||||||||||||||||
Benefit obligations assumed in acquisitions | - | 17 | - | - | ||||||||||||||||
Foreign currency impact | 3 | - | - | - | ||||||||||||||||
Benefit obligations — end of period | 1,508 | 1,566 | 80 | 79 | ||||||||||||||||
Overfunded (underfunded) status of benefit obligations | (82) | (516) | 3 | (1) | ||||||||||||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Funded status (continued)
|
Pension Benefits | Post-Retirement Benefits | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(US$ millions) | ||||||||||||||||||||
Projected benefit obligations | 701 | 1,565 | - | - | ||||||||||||||||
Accumulated benefit obligations | 696 | 1,557 | 15 | 16 | ||||||||||||||||
Fair value of plan assets | 603 | 1,048 | - | - |
|
Pension Benefits | Post-Retirement Benefits | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(US$ millions) | ||||||||||||||||||||
Projected benefit obligations | 807 | 1 | - | - | ||||||||||||||||
Accumulated benefit obligations | 805 | 1 | 65 | 63 | ||||||||||||||||
Fair value of plan assets | 823 | 2 | 83 | 78 |
The fair value of pension plan assets as at 29 October 2017 and 30 October 2016 included US$20 million and US$21 million, respectively, of assets for the Group’snon-U.S. pension plans. Contributions to the Group’snon-U.S. plans were US$2 million and US$1 million for financial years 2017 and 2016, respectively.
The projected benefit obligations as of 29 October 2017 and 30 October 2016 included US$106 million and US$118 million, respectively, of obligations related to the Group’snon-U.S. plans. The accumulated benefit obligations as of 29 October 2017 and 30 October 2016 included US$100 million and US$110 million, respectively, of obligations related to the Group’snon-U.S. plans. In financial years 2016 and 2017 a settlement of US$3 and US$8 million, respectively, was reached on the pension benefits.
The following table presents amounts recognized on the consolidated balance sheets:
Pension Benefits | Post-Retirement Benefits | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(US$ millions) | ||||||||||||||||||||
Other long-term assets | 17 | 1 | 18 | 15 | ||||||||||||||||
Employee compensation and benefits | 1 | 1 | 1 | 1 | ||||||||||||||||
Pension and post-retirement benefit obligations | 98 | 516 | 31 | 30 | ||||||||||||||||
Amounts recognized in accumulated other comprehensive loss, net of taxes: | ||||||||||||||||||||
Actuarial losses and prior service costs, net of taxes | (85) | (126) | (21) | (23) |
The Group currently expects to make contributions of US$118 million to itsdefined benefit pension plans in financial year 2018. The Group does not expect to make any contributions to its post-retirement medical benefit plans in financial year 2018.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Expected Future Benefit Payments
The following table presents expected payments from the Group’s benefit plans over the next 10 financial years as of 29 October 2017:
Pension Benefits | Post- Retirement Benefits | |||||||||||
2017 | 2016 | |||||||||||
(US$ millions) | ||||||||||||
2018 | 92 | 3 | ||||||||||
2019 | 92 | 3 | ||||||||||
2020 | 91 | 3 | ||||||||||
2021 | 91 | 3 | ||||||||||
2022 | 90 | 3 | ||||||||||
2023 - 2027 | 451 | 19 |
|
Plan assets of the funded defined benefit pension plans are invested in funds held by third-party fund managers or are deposited into government-managed accounts in which the Group has no active involvement in and no control over investment strategy, other than establishing broad investment guidelines and parameters. The plan assets held by third-parties consist primarily of equities, and fixed income funds. As of 30 October 2016, the plan assets also included commingled funds. The fund managers monitor the fund’s asset allocation within the guidelines established by the Group’s plan’s investment committee. In line with plan investment objectives and consultation with the Group’s management, the Group’s investment committee set an allocation benchmark among equity, bond and other assets based on the relative weighting of overallnon-U.S. market indices. The overall investment objectives of the plan are 1) to acquire suitable assets of appropriate liquidity which will generate income and capital growth to meet current and future plan benefits, 2) to limit the risk of the assets failing to meet the long-term liabilities of the plan, and 3) to minimize the long-term costs of the plan by maximizing the return on the assets. Performance is regularly evaluated by the investment committee and is based on actual returns achieved by the fund manager relative to its benchmark.
For the defined benefit pension plans, the investment strategy for the U.S. plans is to allocate assets in a manner that seeks both to maximize the safety of promised benefits and to minimize the cost of funding those benefits. The Group directs the overall portfolio allocation and use a third-party investment consultant that has discretion to structure portfolios and select the investment managers within those allocation parameters. Multiple investment managers are utilized, including both active and passive management approaches. The plan assets are invested using a liability driven investment strategy intended to minimize market and interest rate risks, and those assets are periodically rebalanced toward asset allocation targets.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
The target asset allocation for U.S. plans reflects a risk/return profile that the Group believes is appropriate relative to the liability structure and return goals for the plans. The Group periodically reviews the allocation of plan assets relative to alternative allocation models to evaluate the need for adjustments based on forecasted liabilities and plan liquidity needs. The fixed-income allocation is primarily directed toward long-term core bond investments, with smaller allocations to Treasury Inflation-Protected Securities and high-yield bonds. As of 29 October 2017, there are no material equity investments in the plans.
The following table presents the Group’s defined benefit pension plans’ weighted-average asset allocations by category:
Defined Benefit Pension Plans | ||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||
Actual % | Target % | Actual % | Target % | |||||||||||||||||
Equity investments | - | - | 33 | 40 | ||||||||||||||||
Fixed income | 100 | 100 | 67 | 55 | ||||||||||||||||
Real estate | - | - | - | 5 | ||||||||||||||||
Total | 100 | 100 | 100 | 100 | ||||||||||||||||
Fair Value Measurement of Plan Assets
2017 | ||||||||||||||||
Fair value measurement at reporting date using: | Total | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
(US$ millions) | ||||||||||||||||
Cash equivalents | 943 | a | - | - | 943 | |||||||||||
Equity securities: | ||||||||||||||||
Non-U.S. equity securities | 7 | b | - | - | 7 | |||||||||||
Fixed-income securities: | ||||||||||||||||
U.S. treasuries | - | 39 | c | - | 39 | |||||||||||
Corporate bonds | - | 393 | c | - | 393 | |||||||||||
Asset-backed and mortgage-backed securities | - | 1 | c | - | 1 | |||||||||||
Municipal bonds | - | 25 | c | - | 25 | |||||||||||
Government bonds | - | 18 | c | - | 18 | |||||||||||
Total plan assets | 950 | 476 | - | 1,426 | ||||||||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Defined benefit plan investment policy(continued)
Fair Value Measurement of Plan Assets(continued)
2016 | ||||||||||||||||
Fair value measurement at reporting date using: | Total | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
(US$ millions) | ||||||||||||||||
Cash equivalents | 38a | - | - | 38 | ||||||||||||
Equity securities: | ||||||||||||||||
U.S. equity securities | 155b | - | - | 155 | ||||||||||||
Non-U.S. equity securities | 72b | - | - | 72 | ||||||||||||
Fixed-income securities: | ||||||||||||||||
U.S. treasuries | - | 39c | - | 39 | ||||||||||||
Corporate bonds | - | 393c | - | 393 | ||||||||||||
Asset-backed and mortgage-backed securities | - | 3c | - | 3 | ||||||||||||
Agency-backed bonds | - | 3c | - | 3 | ||||||||||||
Municipal bonds | - | 25c | - | 25 | ||||||||||||
Government bonds | - | 11c | - | 11 | ||||||||||||
Total assets measured by fair value hierarchy | 265 | 474 | - | 739 | ||||||||||||
Assets measured at NAV: | ||||||||||||||||
Commingled funds – equities | 116d | |||||||||||||||
Commingled funds – bonds | 195e | |||||||||||||||
|
| |||||||||||||||
Total plan assets | 1,050 | |||||||||||||||
|
|
|
|
|
|
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Post-retirement benefit plan investment policy
The Group’s overall investment strategy for the group life insurance plan is to allocate assets in a manner that seeks to both maximize the safety of promised benefits and minimize the cost of funding those benefits. The target asset allocation for plan assets reflects a risk/return profile that the Group believes is appropriate relative to the liability structure and return goals for the plan. The Group periodically review the allocation of plan assets relative to alternative allocation models to evaluate the need for adjustments based on forecasted liabilities and plan liquidity needs. The Group sets the overall portfolio allocation and uses an investment manager that directs the investment of funds consistent with that allocation. The investment manager invests the plan assets in index funds that it manages. Current allocation is a strategic asset mix comprising of (i) equity securities, (ii) government bonds and (iii) other investments.
The following table presents the plan asset allocations by category:
2017 |
| 2016 | ||||||||||||||||||
Actual % | Target % | Actual % | Target % | |||||||||||||||||
Commingled funds - U.S. equities | 20 | 20 | 20 | 20 | ||||||||||||||||
Commingled funds -Non-U.S. equities | 20 | 20 | 20 | 20 | ||||||||||||||||
Commingled funds - bonds | 60 | 60 | 60 | 60 | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Total | 100 | 100 | 100 | 100 | ||||||||||||||||
|
|
|
|
|
|
Assumptions
The assumptions used to determine the benefit obligations and expense for the Group’s defined benefit and post-retirement benefit plans are presented in the table below. The expected long-term return on assets shown in the table below represents an estimate of long-term returns on investment portfolios primarily consisting of combinations of debt, equity and other investments, depending on the plan. The Group considers long-term rates of return, which are weighted based on the asset classes (both historical and forecasted) in which the Group expects the pension and post-retirement funds to be invested. Discount rates reflect the current rate at which defined benefit and post-retirement benefit obligations could be settled based on the measurement dates of the plans, which in each case is the financial year end. The range of assumptions that are used for defined benefit pension plans reflects the different economic environments within various countries.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Post-retirement benefit plan investment policy(continued)
Assumptions(continued)
Assumptions for Benefit Obligations | Assumptions for Expense Financial Year | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2015 | ||||||||||||||||||
Defined benefit pension plans: | ||||||||||||||||||||||
Discount rate | 0.50%-7.00% | 0.50%-7.00% | 0.50%-7.00% | 0.75%-7.75% | 1.00%-4.10% | |||||||||||||||||
Average increase in compensation levels | 2.00%-11.00% | 2.00%-9.16% | 2.00%-9.15% | 2.50%-11.72% | 2.50%-6.00% | |||||||||||||||||
Expected long-term return on assets | N/A | N/A | 0.25%-8.00% | 1.50%-9.00% | 1.50%-7.30% | |||||||||||||||||
Post-retirement benefits plans: | ||||||||||||||||||||||
Discount rate | 3.40%-3.80% | 3.30%-3.90% | 3.30%-3.90% | 3.90%-4.50% | 3.80%-4.40% | |||||||||||||||||
Average increase in compensation levels | 3.00% | 3.50% | 3.50% | 3.50% | 3.50% | |||||||||||||||||
Expected long-term return on assets | N/A | N/A | 4.40% | 5.10% | 5.40% | |||||||||||||||||
Current healthcare cost trend rate | 7.00% | 7.33% | 7.33% | 7.67% | 8.00% | |||||||||||||||||
Ultimate healthcare cost trend rate | 3.50% | 3.50% | 3.50% | 3.50% | 3.50% | |||||||||||||||||
Healthcare cost trend rate decreases to ultimate trend rate in year | 2031 | 2031 | 2031 | 2031 | 2031 |
Changes in the assumed health care cost trend rates could have a significant effect on the amounts reported for the U.S. post-retirement medical benefit plans. A one percentage point change in the assumed healthcare cost trend rates for financial year 2017 would have the following effects:
1% increase | 1% Decrease | |||
(US$ millions) | ||||
Effect on U.S. post-retirement benefit obligation | 1 | (1) | ||
Percentage effect on U.S. post-retirement benefit obligation | 1% | (1%) |
The effect of a one percentage point increase or decrease in the healthcare cost trend rates on the service and interest cost components of the net periodic benefit cost would have been immaterial.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Post-retirement benefit plan investment policy (continued)
401(k) Defined Contribution Plans
The Group’s eligible U.S. employees participate in company-sponsored 401(k) plans. Under these plans, the Group provides matching contributions to employees up to 6% of their eligible earnings. All matching contributions vest immediately. During fiscal years 2017, 2016 and 2015, the Group made contributions of $61 million, $43 million and $26 million, respectively, to the 401(k) plans.
|
Group | ||||||||||||
2017 | 2016 | |||||||||||
(US$ millions) | (US$ millions) | |||||||||||
Interest expense | 454 | 585 | ||||||||||
Loss on extinguishment of debt | 166 | 123 | ||||||||||
Finance expenses recognised in profit or loss | 620 | 708 | ||||||||||
|
|
Group | ||||||||||||
2017 | 2016 | |||||||||||
(US$ millions) | (US$ millions) | |||||||||||
Tax expense attributable to profit is made up of: | ||||||||||||
- Profit/(loss) for the financial year: | ||||||||||||
From continuing operations | ||||||||||||
Current income tax | ||||||||||||
- Singapore | 112 | 59 | ||||||||||
- Foreign | 158 | 165 | ||||||||||
270 | 224 | |||||||||||
Deferred income tax | (235 | ) | 418 | |||||||||
35 | 642 | |||||||||||
From discontinued operations | ||||||||||||
Current income tax | ||||||||||||
- Foreign | - | (62 | ) | |||||||||
35 | 580 | |||||||||||
Tax expense is attributable to: | ||||||||||||
- continuing operations | 35 | 642 | ||||||||||
- discontinued operations (Note 10(a)) | - | (62 | ) | |||||||||
35 | 580 | |||||||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Income tax expense (continued)
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the Singapore standard rate of income tax as follows:
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Profit/(loss) before tax from | ||||||||
- continuing operations | 1,823 | (1,107 | ) | |||||
- discontinued operations (Note 10(a)) | (6 | ) | (216 | ) | ||||
1,817 | (1,323 | ) | ||||||
Tax calculated at tax rate of 17% (2016: 17%) | 309 | (225 | ) | |||||
Effects of: | ||||||||
- different tax rates in other countries | (14 | ) | 1,030 | |||||
- tax incentives | (256 | ) | (169 | ) | ||||
- other | (4 | ) | 6 | |||||
Tax charge | 35 | 642 | ||||||
|
During financial year 2016, Broadcom Group sold certain Broadcom Corporation (“BRCM”) businesses for aggregate cash proceeds of US$830 million. The following table summarises the selected financial information of discontinued operations:
|
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Revenue | 15 | 103 | ||||||
Expenses | (21 | ) | (319 | ) | ||||
Loss before tax from discontinued operations | (6 | ) | (216 | ) | ||||
Tax | - | - | ||||||
Loss after tax from discontinued operations | (6 | ) | (216 | ) | ||||
Gain on disposal of discontinued operations | - | 42 | ||||||
Benefit from income taxes | - | 62 | ||||||
After tax gain recognised on there-measurement of disposal group to fair value less costs to sell | - | 104 | ||||||
Loss for the year from discontinued operations | (6 | ) | (112 | ) | ||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Operating cash inflows/(outflows) | 2 | (27 | ) | |||||
Investing cash inflows | - | 4 | ||||||
Total cash inflows/(outflows) | 2 | (23 | ) | |||||
|
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Property, plant and equipment | 13 | 1 | ||||||
Trademark and licences | - | 16 | ||||||
Goodwill | - | 5 | ||||||
Inventory | - | 2 | ||||||
13 | 24 | |||||||
In accordance with FRS 105, the assets of disposal groups classified asheld-for-sale and liabilities directly associated with disposal groups classified asheld-for-sale were written down to their fair value less costs to sell of US$13 million in financial year 2017 and US$24 million in financial year 2016. This is anon-recurring fair value which is determined on the basis that the disposal groups were recently transacted or that there were agreements in place for sales that would be taking place after the balance sheet date.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year.
Continuing operations | Discontinued operations | Total | ||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||||
Net profit/(loss) attributable to equity holders of the Company (US$ millions) | 1,696 | (1,633) | (6) | (106) | 1,690 | (1,739) | ||||||||||||||||||||||||||
Weighted average number of ordinary shares outstanding for basic earnings per share(millions) | 405 | 366 | 405 | 366 | 405 | 366 | ||||||||||||||||||||||||||
Basic earnings/(loss) per share (US$ per share) | 4.19 | (4.46) | (0.01) | (0.29) | 4.18 | (4.75) | ||||||||||||||||||||||||||
|
For the purpose of calculating diluted earnings per share, profit attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding are adjusted for the effects of all dilutive potential ordinary shares. The Company’s dilutive potential ordinary shares include Broadcom ordinary shares issuable upon exchange of the partnership restricted exchangeable units (“Partnership REUs”) in Broadcom Cayman L.P. (the “Partnership”) and outstanding equity awards.
For Broadcom ordinary shares issuable upon exchange of the Partnership REUs, the weighted average number of ordinary shares issuable has been adjusted as if exchange was undertaken. The number of shares that could have been issued upon the exchange of all Partnership REUs is added to the denominator as the number of shares issued for no consideration. No adjustment is made to the net profit.
Diluted net income (loss) per share excluded the potentially dilutive effect of the exchange of Partnership REUs for up to 22 million ordinary shares for financial year 2017 and weighted average outstanding equity awards to acquire 12 million ordinary shares for financial year 2016, as their effect was antidilutive.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Diluted earnings per share for continuing operations and discontinued operations attributable to equity holders of the Company is calculated as follows:
Continuing operations | Discontinued operations | Total | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
Net profit/(loss) attributable to equity holders of the Company (US$ millions) | 1,696 | (1,749) | (6) | (112) | 1,690 | (1,861) | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Weighted average number of ordinary shares outstanding for basic earnings per share (millions) | 405 | 366 | 405 | 366 | 405 | 366 | ||||||||||||||||||
Adjustments for (millions) | ||||||||||||||||||||||||
- Equity awards | 16 | - | 16 | - | 16 | - | ||||||||||||||||||
- Exchange of REUs for ordinary shares | - | 17 | - | 17 | - | 17 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
421 | 383 | 421 | 383 | 421 | 383 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Diluted earnings/(loss) per share (US$ per share) | 4.03 | (4.57) | (0.01) | (0.29) | 4.02 | (4.86) | ||||||||||||||||||
|
|
|
|
|
|
|
Group | Company | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | |||||||||||||||||
Cash on hand | 4,302 | 2,075 | 87 | 9 | ||||||||||||||||
Short-term bank deposits | 6,902 | 1,022 | 100 | 44 | ||||||||||||||||
11,204 | 3,097 | 187 | 53 | |||||||||||||||||
Acquisition and disposal of subsidiaries
Please refer to Note 31 for the effects of acquisitions of subsidiaries on the cash flows of the Group. In 2016, US$10,055 million of cash consideration were used in the acquisition of subsidiaries, net of cash acquired, of which US$10,032 million were used in the Broadcom Merger (Note 31(a)(ii)).
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
On April 28, 2016, the Company signed a definitive agreement to sell its Internet of Things (“IoT”) Business to Cypress Semiconductor Corporation for $550 million. The effects of the disposal on the cash flows of the Group were:
Page | |||||||||
D-25 | |||||||||
D-25 | |||||||||
| |||||||||
| 7.1 | Execution of Corporate Contracts and | |||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
7.2 | |||||||||
| |||||||||
7.3 |
The aggregate cash inflows arising from the disposal of IoT were:
| ||||
| ||||
7.4 | ||||
| ||||
| ||||
7.5 | ||||
| ||||
7.6 |
On May 9, 2016, the Company signed a definitive agreement to sell its µWave Business to MaxLinear, Inc. for $80 million. The effects of the disposal on the cash flows of the Group were:
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
7.7 | ||||
| ||||
7.8 |
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
The aggregate cash inflows arising from the disposal of µWave Business were:
| ||||
| ||||
7.9 | ||||
| ||||
| ||||
7.10 | ||||
| ||||
7.11 |
On August 8, 2016 the Company signed a definitive agreement to sell its Secure Element business to NXP B.V. for $200 million. The effects of the disposal on the cash flows of the Group were:
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
7.12 | ||||||||
| ||||||||
D-27 | ||||||||
8.1 | Notice by Electronic Transmission | D-27 | ||||||
8.2 | D-28 |
The aggregate cash inflows arising from the disposal of its Secure Element business were:
D-28 | ||||||||
9.1 | ||||||||
| ||||||||
| ||||||||
9.2 | ||||||||
| ||||||||
| ||||||||
9.3 | ||||||||
| ||||||||
9.4 | D-29 | |||||||
9.5 | D-29 | |||||||
9.6 | D-29 | |||||||
9.7 | D-29 | |||||||
9.8 | D-29 | |||||||
9.9 | D-30 | |||||||
D-30 | ||||||||
D-31 |
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
D-ii
Amended and Restated Bylaws of
Broadcom Limited
(Adopted as of [●], 2018)
| Registered Office. |
Group | Company | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | |||||||||||||||||
Trade receivables | ||||||||||||||||||||
- Related parties | 31 | 15 | - | - | ||||||||||||||||
-Non-related parties | 2,417 | 2,175 | - | - | ||||||||||||||||
2,448 | 2,190 | - | - | |||||||||||||||||
Less: Allowance for impairment of receivables -non-related parties | - | (10 | ) | - | - | |||||||||||||||
Trade receivables - net | 2,448 | 2,180 | - | - | ||||||||||||||||
Deposits | - | 149 | - | - | ||||||||||||||||
Prepayments | 440 | 155 | - | - | ||||||||||||||||
Other receivables | 271 | 119 | 9 | 42 | ||||||||||||||||
3,159 | 2,603 | 9 | 42 | |||||||||||||||||
|
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Finished goods | 562 | 431 | ||||||
Work-in-progress | 696 | 596 | ||||||
Raw materials | 189 | 373 | ||||||
1,447 | 1,400 | |||||||
The cost of inventories recognised as an expense and included in “cost of sales” amounted to US$5,735 million in financial year 2017 and US$5,650 million in financial year 2016.
|
Company | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Equity investments at cost | 22,494 | 21,229 | ||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
The Company had the following direct subsidiary as at 29 October 2017 and 30 October 2016:
Name | Country of business/ incorporation | Proportion of partnership by parent | Proportion of partnership units held by non- controlling interests | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
% | % | % | % | |||||||||||||||||
Broadcom Cayman L.P. | Cayman Island | 95 | 95 | 5 | 5 |
A listaddress of the Group’s significant subsidiaries is disclosed in Note 35.
Carrying value ofnon-controlling interests | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Non-controlling interest | 2,901 | 2,984 | ||||||
The summarised financial information of the Partnershipis set out below:
Summarised balance sheet
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Current assets | 15,720 | 7,125 | ||||||
Current liabilities | (2,529 | ) | (3,078 | ) | ||||
Non-current assets | 38,595 | 42,841 | ||||||
Non-current liabilities | (28,703 | ) | (25,012 | ) | ||||
Net assets | 23,083 | 21,876 | ||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
The summarised financial informationregistered office of Broadcom Cayman L.P.is set out below:
Summarised income statement
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Revenue | 17,636 | 13,240 | ||||||
Expenses | ||||||||
Includes: | ||||||||
- Depreciation and amortisation | (4,737 | ) | (3,042 | ) | ||||
- Interest expense | (454 | ) | (585 | ) | ||||
Profit/(loss) before income tax | 1,825 | (1,107 | ) | |||||
Income tax expense | (35 | ) | (642 | ) | ||||
Post-tax profit/(loss) from continuing operations | 1,790 | (1,749 | ) | |||||
Post-tax loss from discontinued operations | (6 | ) | (112 | ) | ||||
Total comprehensive profit/(loss) | 1,784 | (1,861 | ) | |||||
Summarised cash flows
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Cash flows from operating activities | ||||||||
Cash generated from operations | 7,210 | 4,101 | ||||||
Interest paid | (310 | ) | (448 | ) | ||||
Income tax paid | (349 | ) | (242 | ) | ||||
Net cash provided by operating activities | 6,551 | 3,411 | ||||||
Net cash used in investing activities | (674 | ) | (9,840 | ) | ||||
Net cash provided by financing activities | 2,096 | 7,651 | ||||||
Net increase in cash and cash equivalents | 7,973 | 1,222 | ||||||
Cash and cash equivalent at beginning of year | 3,044 | 1,822 | ||||||
Cash and cash equivalent at end of year | 11,017 | 3,044 | ||||||
|
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Deposits | 3 | 19 | ||||||
Prepayments | 131 | 139 | ||||||
Other receivables | 303 | 66 | ||||||
437 | 224 | |||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Land
(US$ millions) | Buildings and
(US$ millions) | Machinery
(US$ millions) | Construction in Progress
(US$ millions) | Total
(US$ millions) | ||||||||||||||||
Group | ||||||||||||||||||||
2017 | ||||||||||||||||||||
Cost | ||||||||||||||||||||
Beginning of financial year | 268 | 534 | 2,475 | 361 | 3,638 | |||||||||||||||
Additions | - | - | 471 | 577 | 1,048 | |||||||||||||||
Reclassified to assets held for sale | (8) | - | - | (16) | (24) | |||||||||||||||
Reclassified from Construction in Progress | 5 | 52 | 100 | (157) | - | |||||||||||||||
Disposals | (85) | (7) | (121) | (342) | (555) | |||||||||||||||
Write-off | (3) | - | - | (12) | (15) | |||||||||||||||
|
| |||||||||||||||||||
End of financial year | 177 | 579 | 2,925 | 411 | 4,092 | |||||||||||||||
|
| |||||||||||||||||||
Accumulated depreciation and impairment losses |
| |||||||||||||||||||
Beginning of financial year | 2 | 133 | 994 | - | 1,129 | |||||||||||||||
Depreciation charge | - | 45 | 406 | - | 451 | |||||||||||||||
Disposals | - | (4) | (83) | - | (87) | |||||||||||||||
|
| |||||||||||||||||||
End of financial year | 2 | 174 | 1,317 | - | 1,493 | |||||||||||||||
|
| |||||||||||||||||||
Net book value | ||||||||||||||||||||
End of financial year | 175 | 405 | 1,608 | 411 | 2,599 | |||||||||||||||
|
| |||||||||||||||||||
Group | ||||||||||||||||||||
2016 | ||||||||||||||||||||
Cost | ||||||||||||||||||||
Beginning of financial year | 37 | 419 | 1,627 | 153 | 2,236 | |||||||||||||||
Additions | - | 7 | 408 | 359 | 774 | |||||||||||||||
Acquisition of subsidiaries (Note 31(a)(iii)) | 245 | 64 | 374 | 206 | 889 | |||||||||||||||
Reclassified to assets held for sale | - | - | (1) | - | (1) | |||||||||||||||
Reclassified from Construction in Progress | 15 | 61 | 149 | (225) | - | |||||||||||||||
Disposals | - | (15) | (81) | (13) | (109) | |||||||||||||||
Write-off | (29) | (2) | (1) | (119) | (151) | |||||||||||||||
|
| |||||||||||||||||||
End of financial year | 268 | 534 | 2,475 | 361 | 3,638 | |||||||||||||||
|
| |||||||||||||||||||
Accumulated depreciation and impairment losses |
| |||||||||||||||||||
Beginning of financial year | 2 | 95 | 679 | - | 776 | |||||||||||||||
Depreciation charge | - | 43 | 361 | - | 404 | |||||||||||||||
- Discontinued operations | - | (1) | (1) | - | (2) | |||||||||||||||
Disposals | - | (4) | (45) | - | (49) | |||||||||||||||
|
| |||||||||||||||||||
End of financial year | 2 | 133 | 994 | - | 1,129 | |||||||||||||||
|
| |||||||||||||||||||
Net book value | ||||||||||||||||||||
End of financial year | 266 | 401 | 1,481 | 361 | 2,509 | |||||||||||||||
|
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Included within additionsLimited (the “Corporation”) in the consolidated financial statements are machineryState of Delaware, and equipment acquired under finance lease amounting to US$48 million in financial year 2017. There was no property, plant and equipment acquired under finance lease in financial year 2016.
The carrying amountthe name of machinery and equipment held under finance lease is US$40 millionits registered agent at the balance sheet date for financial year 2017.
|
Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Composition: | ||||||||
Goodwill (Note (a)) | 24,706 | 24,732 | ||||||
Acquired finite-lived intangible asset (Note (b)) | 10,120 | 13,732 | ||||||
In-process research and development (Note (c)) | 712 | 1,336 | ||||||
Total intangible assets | 10,832 | 15,068 | ||||||
35,538 | 39,800 | |||||||
|
Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Cost | ||||||||
Beginning of financial year | 24,732 | 1,674 | ||||||
Acquisition of subsidiary (Note 31) | 6 | 23,058 | ||||||
Measurement period adjustment | (32) | - | ||||||
End of financial year | 24,706 | 24,732 | ||||||
Accumulated impairment | ||||||||
Beginning of financial year | - | - | ||||||
Impairment charge (Note 5) | - | - | ||||||
End of financial year | - | - | ||||||
Net book value | 24,706 | 24,732 | ||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
In financial year 2017, the Group recorded a measurement period adjustment related to the estimated tax impact of Employee Stock Purchase Plan deductions in relation to the Broadcom Merger (as described in Note 31) completed in financial year 2016.
Impairment tests for goodwill
Goodwill is allocated to the Group’s CGUs identified according its business segments.
A segment-level summary of the goodwill allocation issuch address, shall be as follows:
Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Wired Infrastructure | 17,622 | 17,641 | ||||||
Wireless Communication | 5,945 | 5,952 | ||||||
Enterprise Storage | 995 | 995 | ||||||
Industrial & Other | 144 | 144 | ||||||
24,706 | 24,732 | |||||||
The recoverable amount of a CGU was determined based on fair value less cost to sell. Cash flow projections usedset forth in the fair value less cost to sell calculations were based on financial budgets approved by management covering a five-year period. Cash flows beyondCorporation’s certificate of incorporation, as the five-year period were extrapolated using the estimated rates stated below. The growth rate did not exceed the long-term average growth rate for the component parts business in which the CGU operates.
Key assumptions used in the income approach to obtain the fair values of the four segments for financial year 2017 includes growth rates and discount rates in the ranges of3.6%-9.2%(2016: 1.6%-9.9%) and10.8%-14.8% (2016:9.8%-14.2%) respectively.
These assumptions were used for the analysis of each CGU within the business segment. The growth rates used were consistent with forecasts included in industry reports. The discount rates used werepre-tax and reflected specific risks relating to the relevant segments.
The results of impairment reviews undertaken indicate that if there is significant change in the discount rates and/or significant change in projected performance of the business, itsame may be necessaryamended and/or restated from time to take impairment charge to profit and loss in the future.
Based on the impairment assessment, no impairment is required for goodwill attributed to the respective CGUs.
There are no reasonably possible changes in anytime (the “Certificate of the key assumptions that would cause the carrying amount of these CGUs to materially exceed the recoverable amount
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Cost | ||||||||
Beginning of financial year | 17,048 | 4,918 | ||||||
Acquisition of subsidiaries | 34 | 12,871 | ||||||
Additions | 28 | 31 | ||||||
Reclassified fromin-process research and development | 611 | 341 | ||||||
Reclassified to disposal group | - | (9) | ||||||
Disposals | - | (16) | ||||||
Write-offs | (94) | (1,088) | ||||||
End of financial year | 17,627 | 17,048 | ||||||
Accumulated amortisation and impairment losses | ||||||||
Beginning of financial year | 3,316 | 1,766 | ||||||
Amortisation charge | ||||||||
- Continuing operations | 4,285 | 2,638 | ||||||
- Discontinued operations | - | - | ||||||
Reclassified to disposal group | - | (1) | ||||||
Disposals | - | (5) | ||||||
Impairment and write-offs | (94) | (1,082) | ||||||
End of financial year | 7,507 | 3,316 | ||||||
Net book value | 10,120 | 13,732 | ||||||
In financial year 2016, US$12,871 million of finite-lived intangible assets were acquired in business combinations, of which US$12,858 million were acquired in the Broadcom Merger (Note 31(a)(vi)Incorporation”).
| Other Offices. |
Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Cost | ||||||||
Beginning of financial year | 1,336 | 125 | ||||||
Acquisition of subsidiaries | - | 1,969 | ||||||
Reclassified to acquired finite-lived intangible assets | (611) | (341) | ||||||
Write-offs | (13) | (417) | ||||||
End of financial year | 712 | 1,336 | ||||||
Accumulated impairment losses | ||||||||
Beginning and end of financial year | - | - | ||||||
Net book value | 712 | 1,336 | ||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
ForThe Corporation may have additional offices at any place or places, within or outside the financial year ended 29 October 2017
|
|
During financial year 2016, US$1,969 millionState of IPR&D were acquired inDelaware, as the Corporation’s board of directors (the “Board”) may from time to time establish or as the business combinations, of which US$1,950 million were acquired in the Broadcom Merger (Note 31(a)(vi)).
|
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Cost of sales | 2,511 | 763 | ||||||
Research and development | 10 | 2 | ||||||
Administrative | 1,764 | 1,873 | ||||||
Total (Note 5) | 4,285 | 2,638 | ||||||
|
Group | Company | ||||||||||||||||||||||||
2017 (US$ millions) | 2016 (US$ millions) | 2017 (US$ millions) | 2016 (US$ millions) | ||||||||||||||||||||||
Current | |||||||||||||||||||||||||
Trade payables to: | |||||||||||||||||||||||||
-non-related parties | 1,093 | 1,254 | 7 | 4 | |||||||||||||||||||||
- subsidiaries | - | - | 173 | 151 | |||||||||||||||||||||
- other related parties | 12 | 7 | - | - | |||||||||||||||||||||
Total trade payables | 1,105 | 1,261 | 180 | 155 | |||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Other payables | 198 | 64 | - | - | |||||||||||||||||||||
Deferred income | 51 | 101 | - | - | |||||||||||||||||||||
Accruals for operating expenses | 154 | 122 | - | - | |||||||||||||||||||||
Provisions (Note 21) | 176 | 463 | - | - | |||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Total other current liabilities | 579 | 750 | - | - | |||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Non-current | |||||||||||||||||||||||||
Deferred Income | 17 | 18 | - | - | |||||||||||||||||||||
Other Payables | 6 | 9 | - | - | |||||||||||||||||||||
Provisions (Note 21) | 136 | 121 | - | - | |||||||||||||||||||||
Accruals for operating expenses | 103 | 67 | - | - | |||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Total othernon-current liabilities | 262 | 215 | - | - | |||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Total trade payables and other liabilities | 1,946 | 2,226 | 180 | 155 | |||||||||||||||||||||
|
|
|
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Group | ||||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||||
Current | ||||||||||
Term loans and senior notes | 117 | 454 | ||||||||
117 | 454 | |||||||||
Non-current | ||||||||||
Term loans and senior notes | 17,431 | 13,188 | ||||||||
Total borrowings | 17,548 | 13,642 | ||||||||
The following table presents the details of the senior unsecured notes issued and sold in January 2017 (the “January 2017 Senior Notes”) and in October 2017 (the “October 2017 Senior Notes”, and collectively, the “2017 Senior Notes”) and the term loans (the “2016 Term Loans”) under our guaranteed collateralized credit agreement (the “2016 Credit Agreement”):Corporation may require.
Article II - Meetings of Stockholders
Group | ||||||||||||
Interest rate |
| Amount (US$ millions) | ||||||||||
January 2017 Senior Notes | ||||||||||||
Fixed rate 2.375% notes due January 2020 | 2.615% | 2,750 | ||||||||||
Fixed rate 3.000% notes due January 2022 | 3.214% | 3,500 | ||||||||||
Fixed rate 3.625% notes due January 2024 | 3.744% | 2,500 | ||||||||||
Fixed rate 3.875% notes due January 2027 | 4.018% | 4,800 | ||||||||||
October 2017 Senior Notes | ||||||||||||
Fixed rate 2.200% notes due January 2021 | 2.406% | 750 | ||||||||||
Fixed rate 2.650% notes due January 2023 | 2.781% | 1,000 | ||||||||||
Fixed rate 3.125% notes due January 2025 | 3.234% | 1,000 | ||||||||||
Fixed rate 3.500% notes due January 2028 | 3.596% | 1,250 | ||||||||||
Unaccreted discount and unamortised debt issuance costs |
| (141 | ) | |||||||||
|
|
|
| |||||||||
Carrying value of 2017 Senior Notes |
| 17,409 | ||||||||||
|
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Group | ||||||||||||||
Interest rate | Applicable margins† | Effective | Amount (US$ millions) | |||||||||||
Term A Loan due February 2021 | 2.28 | % | Variable based on applicable credit rating. | 2.52 | % | 7,090 | ||||||||
TermB-3 Loan due February 2023 | 3.53 | % | Eurocurrency Loans: 3.0%, Base Rate Loans: 2.0%. No LIBOR floor(a) | 3.84 | % | 6,578 | ||||||||
Unaccreted discount and unamortised debt issuance costs | (165) | |||||||||||||
Carrying value of 2016 Term Loans |
| 13,503 | ||||||||||||
|
Meetings of stockholders shall be held at such place, if any, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive offices or at such other place as designated by the Board.
|
Senior Notes
The fair valueBoard shall designate the date and time of outstanding Assumed Senior Notes (defined below) as at 29 October 2017the annual meeting. At the annual meeting, directors shall be elected and 30 October 2016 is as follows:other business properly brought before the meeting in accordance with Section 2.4 may be transacted.
Interest rate | Effective | Amount (US$ millions) | ||||||||||
Fixed rate notes due November 2018 | 2.70% | 2.70% | 117 | |||||||||
Fixed rate notes due August 2022 - August 2034 | 2.50% - 4.50% | 2.50% - 4.50% | 22 | |||||||||
Carrying value of Senior Notes | 139 | |||||||||||
2.3 | Special Meeting. |
Future Principal Payments(i) Special meetings of Debtthe stockholders for any purpose or purposes may be called only (a) by the Chair of the Board or by the Secretary of the Corporation upon direction of the Board pursuant to a resolution adopted by a majority of the total number of directors constituting the Board or (b) by the Secretary of the Corporation, following his or her receipt of one or more written demands to call a special meeting of the stockholders in accordance with, and subject to, this Section 2.3 from two or more stockholders of record as of the record date fixed in accordance with Section 2.3(iv) who hold, in the aggregate, at least ten percent (10%) of the voting power of the outstanding shares of the Corporation. The notice of a special meeting shall state the purpose or purposes of the special meeting, and the business to be conducted at the special meeting shall be limited to the purpose or purposes stated in the notice. Except in accordance with this Section 2.3, stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders. Stockholders who nominate persons for election to the Board at a special meeting must also comply with the requirements set forth in Section 2.5.
The future scheduled principal payments
(ii) No stockholder may demand that the Secretary of the Corporation call a special meeting of the stockholders pursuant to Section 2.3(i) unless a stockholder of record has first submitted a request in writing that the Board fix a record date (a “Demand Record Date”) for the outstanding 2017 Senior Notespurpose of determining the stockholders entitled to demand that the Secretary of the Corporation call such special meeting, which request shall be in proper form and delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation.
(iii) To be in proper form for purposes of this Section 2.3, a request by a stockholder of record for the Board to fix a Demand Record Date shall set forth:
(a) As to each Requesting Person (as defined below), the Stockholder Information (as defined in Section 2.4(iii)(a), except that for purposes of this Section 2.3 the term “Requesting Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(a));
(b) As to each Requesting Person, any Disclosable Interests (as defined in Section 2.4(iii)(b), except that for purposes of this Section 2.3 the term “Requesting Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(b) and the senior unsecured notes thatdisclosure in clause (10) of Section 2.4(iii)(b) shall be made with respect to the Group assumedbusiness proposed to be conducted at the special meeting or the proposed election of directors at the special meeting, as the case may be);
(c) As to the purpose or purposes of the special meeting, (1) a reasonably brief description of the purpose or purposes of the special meeting and the business proposed to be conducted at the special meeting, the reasons for conducting such business at the special meeting and any material interest in such business of each Requesting Person, and (2) a reasonably detailed description of all agreements, arrangements and understandings (x) between or among any of the Requesting Persons or (y) between or among any Requesting Person and any other person or entity (including their names) in connection with the Broadcom Merger (the “Assumed Senior Notes”request for the special meeting or the business proposed to be conducted at the special meeting; and
(d) If directors are proposed to be elected at the special meeting, the Nominee Information (as defined below) for each person whom a Requesting Person expects to nominate for election as a director at the special meeting.
For purposes of this Section 2.3(iii), the term “Requesting Person” shall mean (A) the stockholder of record making the request to fix a Demand Record Date for the purpose of determining the stockholders entitled to demand that the Secretary of the Corporation call a special meeting, (B) the beneficial owner or beneficial owners, if different, on whose behalf such request is made, and (C) any affiliate of such stockholder of record or beneficial owner.
(iv) Within ten (10) days after receipt of a request to fix a Demand Record Date in proper form and otherwise in compliance with this Section 2.3 from any stockholder of record, the Board may adopt a resolution fixing a Demand Record Date for the purpose of determining the stockholders entitled to demand that the Secretary of the Corporation call a special meeting, which date shall not precede the date upon which the resolution fixing the Demand Record Date is adopted by the Board. If no resolution fixing a Demand Record Date has been adopted by the Board within the ten (10) day period after the date on which such a request to fix a Demand Record Date was received, the Demand Record Date in respect thereof shall be deemed to be the twentieth (20th) day after the date on which such a request is received. Notwithstanding anything in this Section 2.3 to the contrary, no Demand Record Date shall be fixed if the Board determines that the demand or demands that would otherwise be submitted following such Demand Record Date could not comply with the requirements set forth in clauses (b), (d), (e) or (f) of Section 2.3(vi).
(v) Without qualification, a special meeting of the stockholders shall not be called pursuant to Section 2.3(i) unless two or more stockholders of record as of 29 October 2017the Demand Record Date who hold, in the aggregate, at least ten percent (10%) of the voting power of the outstanding shares of the Corporation (the
“Requisite Percentage”) timely provide one or more demands to call such special meeting in writing and in proper form to the Secretary of the Corporation at the principal executive offices of the Corporation. Only stockholders of record on the Demand Record Date shall be entitled to demand that the Secretary of the Corporation call a special meeting of the stockholders pursuant to Section 2.3(i). To be timely, a stockholder of record’s demand to call a special meeting must be delivered to, or mailed and received at, the principal executive offices of the Corporation not later than the sixtieth (60th) day following the Demand Record Date. To be in proper form for purposes of this Section 2.3, a demand to call a special meeting shall set forth (a) the business proposed to be conducted at the special meeting or the proposed election of directors at the special meeting, as the case may be, (b) the text of the proposal or business (including the text of any resolutions proposed for consideration), if applicable, and (c) with respect to any stockholders of record submitting a demand to call a special meeting (except for any stockholder that has provided such demand in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”) by way of a solicitation statement filed on Schedule 14A) (a “Solicited Stockholder”) the information required to be provided pursuant to this Section 2.3 of a Requesting Person. A stockholder of record may revoke a demand to call a special meeting by written revocation delivered to the Secretary of the Corporation at any time prior to the special meeting. If any such revocation(s) are received by the Secretary of the Corporation after the Secretary of the Corporation’s receipt of written demands from the holders of the Requisite Percentage of stockholders, and as follows:a result of such revocation(s), there no longer are unrevoked demands from the Requisite Percentage of stockholders to call a special meeting, the Board shall have the discretion to determine whether or not to proceed with the special meeting.
Financial Year | Amount (US$ millions) | |||
2018 | 117 | |||
2019 | - | |||
2020 | 2,750 | |||
2021 | 750 | |||
2022 | 3,509 | |||
Thereafter | 10,563 | |||
Total | 17,689 | |||
(vi) The Secretary of the Corporation shall not accept, and shall consider ineffective, a written demand from a stockholder to call a special meeting (a) that does not comply with this Section 2.3, (b) that relates to an item of business to be transacted at such meeting that is not a proper subject for stockholder action under applicable law, (c) that includes an item of business to be transacted at such meeting that did not appear on the written request that resulted in the determination of the Demand Record Date, (d) that relates to an item of business (other than the election of directors) that is identical or substantially similar to an item of business (a “Similar Item”) for which a record date for notice of a stockholder meeting (other than the Demand Record Date) was previously fixed and such demand is delivered between the time beginning on the sixty-first (61st) day after such previous record date and ending on theone-year anniversary of such previous record date, (e) if a Similar Item will be submitted for stockholder approval at any stockholder meeting to be held on or before the one hundred twentieth (120th) day after the Secretary of the Corporation receives such demand, or (f) if a Similar Item has been presented at the most recent annual meeting or at any special meeting held within one (1) year prior to receipt by the Secretary of the Corporation of such demand to call a special meeting.
BROADCOM LIMITED AND ITS SUBSIDIARIES(viii) In connection with a special meeting called in accordance with this Section 2.3, the stockholders of record (except for any Solicited Stockholder) who requested that the Board fix a record date for notice and voting for the special meeting in accordance with this Section 2.3 or who delivered a demand to call a special meeting to the Secretary of the Corporation shall further update and supplement the information previously provided to the Corporation in connection with such request or demand, if necessary, so that the
NOTES TO THE FINANCIAL STATEMENTS
information provided or required to be provided in such request or demand pursuant to this Section 2.3 shall be true and correct as of the record date for stockholders entitled to vote at the special meeting and as of the date that is ten (10) business days prior to the special meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for stockholders entitled to vote at the special meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the special meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the special meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the special meeting or any adjournment or postponement thereof).
For(ix) Notwithstanding anything in these Bylaws to the financial year ended 29 October 2017
contrary, the Secretary of the Corporation shall not be required to call a special meeting pursuant to this Section 2.3 except in accordance with this Section 2.3. If the Board shall determine that any request to fix a record date for notice and voting for the special meeting or demand to call and hold a special meeting was not properly made in accordance with this Section 2.3, or shall determine that the stockholders of record requesting that the Board fix such record date or submitting a demand to call the special meeting have not otherwise complied with this Section 2.3, then the Board shall not be required to fix such record date or to call and hold the special meeting. In addition to the requirements of this Section 2.3, each Requesting Person shall comply with all requirements of applicable law, including all requirements of the Exchange Act, with respect to any request to fix a record date for notice and voting for the special meeting or demand to call a special meeting.
Advance Notice Procedures for Business Brought before a Meeting. |
(i) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in a notice of meeting given by or at the direction of the Board, (b) if not specified in a notice of meeting, otherwise brought before the meeting by or at the direction of the Board or the chairperson of the meeting, or (c) otherwise properly brought before the meeting by a stockholder present in person who (1)(A) was a stockholder of the Corporation both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting, (B) is entitled to vote at the meeting and (C) has complied with this Section 2.4 or (2) properly made such proposal in accordance with Rule14a-8 under the Exchange Act, which proposal has been included in the proxy statement for the annual meeting. The foregoing clause (c) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders. The only matters that may be brought before a special meeting are the matters specified in the Corporation’s notice of meeting given by or at the direction of the Person calling the meeting pursuant to the Certificate of Incorporation and Section 2.3 of these Bylaws. As used in these Bylaws, unless the context otherwise requires, the term “Person” shall mean any individual, general partnership, limited partnership, limited liability company, corporation, trust, business trust, joint stock company, joint venture, unincorporated association, cooperative or association or any other legal entity or organization of whatever nature, and shall include any successor (by merger or otherwise) of such entity. For purposes of this Section 2.4 and Section 2.5 of these Bylaws, “present in person” shall mean that the stockholder proposing that the business be brought before the annual or special meeting of the Corporation, or, if the proposed stockholder is not an individual, a qualified representative of such proposing stockholder, appear at such annual meeting. A “qualified representative” of such proposing stockholder shall be, if such proposed stockholder is (x) a general or limited partnership, any general partner or person who functions as a general partner of the general or limited partnership or who controls the general or limited partnership, (y) a corporation or a limited liability company, any officer or person who functions as an officer of the corporation or a limited liability company, any officer or person who functions as an officer of the corporation or limited liability company or any officer, director, general partner or person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (z) a trust, any trustee of such trust. This Section 2.4 shall apply to any business that may be brought
before an annual or special meeting of stockholders other than nominations for election to the Board at an annual meeting, which shall be governed by Sections 2.5 and 2.6 of these Bylaws. Stockholders seeking to nominate persons for election to the Board must comply with Section 2.5 or Section 2.6 of these Bylaws, and this Section 2.4 shall not be applicable to nominations for election to the Board except as expressly provided in Section 2.5 or Section 2.6 of these Bylaws.
(ii) Without qualification, for business to be properly brought before an annual meeting by a stockholder, the stockholder must (a) provide Timely Notice (as defined below) thereof in writing and in proper form to the Secretary of the Corporation and (b) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholder’s notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to theone-year anniversary of the preceding year’s annual meeting;provided, however, that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not later than the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “Timely Notice”). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.
(iii) To be in proper form for purposes of this Section 2.4, a stockholder’s notice to the Secretary of the Corporation shall set forth:
(a) As to each Proposing Person (as defined below), (1) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the Corporation’s books and records); and (2) the number of shares of each class or series of stock of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of stock of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (1) and (2) are referred to as “Stockholder Information”);
(b) As to each Proposing Person, (1) the full notional amount of any securities that, directly or indirectly, underlie any “derivative security” (as such term is defined in Rule16a-1(c) under the Exchange Act) that constitutes a “call equivalent position” (as such term is defined in Rule16a-1(b) under the Exchange Act) (“Synthetic Equity Position”) and that is, directly or indirectly, held or maintained by such Proposing Person with respect to any shares of any class or series of stock of the Corporation;provided that, for the purposes of the definition of “Synthetic Equity Position,” the term “derivative security” shall also include any security or instrument that would not otherwise constitute a “derivative security” as a result of any feature that would make any conversion, exercise or similar right or privilege of such security or instrument becoming determinable only at some future date or upon the happening of a future occurrence, in which case the determination of the amount of securities into which such security or instrument would be convertible or exercisable shall be made assuming that such security or instrument is immediately convertible or exercisable at the time of such determination; and,provided, further, that any Proposing Person satisfying the requirements of Rule13d-1(b)(1) under the Exchange Act (other than a Proposing Person that so satisfies Rule13d-1(b)(1) under the Exchange Act solely by reason of Rule13d-1(b)(1)(ii)(E)) shall not be deemed to hold or maintain the notional amount of any securities that underlie a Synthetic Equity Position held by such Proposing Person as a hedge with respect to a bona fide derivatives trade or position of such Proposing Person arising in the ordinary course of such Proposing Person’s business as a derivatives dealer, (2) any rights to dividends on the shares of any class or series of stock of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (3)(x) if such
Proposed Person is (i) a general or limited partnership, syndicate or other group, the identity of each general partner and each person who functions as a general partner of the general or limited partnership, each member of the syndicate or group and each person controlling the general partner or member, (ii) a corporation or a limited liability company, the identity of each officer and each person who functions as an officer of the corporation or limited liability company, each person controlling the corporation or limited liability company and each officer, director, general partner and person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (iii) a trust, any trustee of such trust (each such Person or Persons set forth in the preceding clauses (i), (ii) and (iii), a “Responsible Person”), any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such Proposing Person and any material interests or relationships of such Responsible Person that are not shared generally by other record or beneficial holders of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, and (y) if such Proposing Person is a natural person, any material interests or relationships of such natural person that are not shared generally by other record or beneficial holders of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, (4) any material shares or any Synthetic Equity Position in any principal competitor of the Corporation in any principal industry of the Corporation held by such Proposing Persons, (5) a summary of any material discussions regarding the business proposed to be brought before the meeting (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other record or beneficial holder of the shares of any class or series of the Corporation (including their names), (6) any material pending or threatened legal proceeding in which such Proposing Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (7) any other material relationship between such Proposing Person, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand, (8) any direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), (9) a representation that such Proposing Person intends or is part of a group which intends to deliver a proxy statement or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or otherwise solicit proxies from stockholders in support of such proposal and (10) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (1) through (10) are referred to as “Disclosable Interests”);provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner; and
(c) As to each item of business that the stockholder proposes to bring before the annual meeting, (1) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (2) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), (3) a reasonably detailed description of all agreements, arrangements and understandings (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other Person (including their names) in connection with the proposal of such business by such stockholder and (4) any other
information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act;provided, however, that the disclosures required by this Section 2.4(iii) shall not include any disclosures with respect to any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner.
(iv) For purposes of this Section 2.4, the term “Proposing Person”shall mean (a) the stockholder of record providing the notice of business proposed to be brought before an annual meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made, (c) any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of Schedule 14A) with such stockholder in such solicitation or associate (within the meaning of Rule12b-2 under the Exchange Act for the purposes of these Bylaws) of such stockholder or beneficial owner and (d) any other Person with whom such stockholder or such beneficial owner (or any of their respective other participants in such solicitation) is Acting in Concert. A Person shall be deemed to be “Acting in Concert” with another Person for purposes of these Bylaws if such Person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert or in parallel with, or towards a common goal with such other Person, relating to changing or influencing the control of the Corporation or in connection with or as a participant in any transaction having that purpose or effect, where (1) each Person is conscious of the other Person’s conduct, and this awareness is an element in their decision-making processes, and (2) at least one additional factor suggests that such Persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions or making or soliciting invitations to act in concert or in parallel;provided, that a Person shall not be deemed to be Acting in Concert with any other Person solely as a result of the solicitation or receipt of (A) revocable proxies or consents from such other Person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A or (B) tenders of securities from such other Person in a public tender or exchange offer made pursuant to, and in accordance with, Section 14(d) of the Exchange Act by means of a tender offer statement filed on Schedule TO. A Person Acting in Concert with another Person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.
(v) A Proposing Person shall update and supplement its notice to the Corporation of its intent to propose business at an annual meeting, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for stockholders entitled to vote at the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).
(vi) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting that is not properly brought before the meeting in accordance with this Section 2.4. The presiding officer of the meeting shall, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 2.4, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
(vii) This Section 2.4 is expressly intended to apply to any business proposed to be brought before an annual meeting of stockholders, other than any proposal made in accordance with Rule14a-8 under the Exchange Act and included in the Corporation’s proxy statement. In addition to the requirements of this Section 2.4 with respect to any business proposed to be brought before an annual meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule14a-8 under the Exchange Act.
(viii) For purposes of these Bylaws, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission (the “Commission”) pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
2.5 | Advance Notice Procedures for Nominations of Directors. |
(i) Nominations of any person for election to the Board at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may only be made at such meeting only (a) by or at the direction of the Board, including by any committee or Persons authorized to do so by the Board or these Bylaws, (b) by a stockholder present in person (as defined in Section 2.4) (1) who was a beneficial owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.5 as to such notice and nomination, or (c) by a stockholder of the Corporation pursuant to Section 2.6 of these Bylaws;provided that this clause (c) shall apply only in the case of an annual meeting. The foregoing clauses (b) and (c) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board at an annual or special meeting of stockholders.
(ii) Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting, the stockholder must (a) provide Timely Notice (as defined in Section 2.4(ii) of these Bylaws) thereof in writing and in proper form to the Secretary of the Corporation, (b) provide the information, agreements and questionnaires with respect to such stockholder and its candidate for nomination as required to be provided by this Section 2.5, and (c) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. If the election of directors is a matter specified in the notice of meeting given by or at the direction of the Person calling such special meeting, then for a stockholder to make any nomination of a person or persons for election to the Board at a special meeting, the stockholder must (a) provide timely notice thereof in writing and in proper form to the Secretary of the Corporation at the principal executive offices of the Corporation, (b) provide the information, agreements and questionnaires with respect to such stockholder and its proposed nominee as required to be provided by this Section 2.5, and (c) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. To be timely, a stockholder’s notice for nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal executive offices of the Corporation not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than the ninetieth (90th) day prior to such special meeting or, if later, the tenth (10th) day following the day on which public disclosure (as defined in Section 2.4(viii) of these Bylaws) of the date of such special meeting was first made. In no event shall any adjournment or postponement of an annual or special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.
(iii) To be in proper form for purposes of this Section 2.5, a stockholder’s notice to the Secretary of the Corporation shall set forth:
(a) As to each Nominating Person (as defined below), the Stockholder Information (as defined herein, except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(a));
(b) As to each Nominating Person, any Disclosable Interests (as defined herein, except that for purposes of this Section 2.5 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(b) and the disclosure with respect to the business to be brought before the meeting in Section 2.4(iii)(c) shall be made with respect to nomination of each person for election as a director at the meeting); and
(c) As to each candidate whom a Nominating Person proposes to nominate for election as a director, (1) all information with respect to such candidate for nomination that would be required to be set forth in a stockholder’s notice pursuant to this Section 2.5 if such candidate for nomination were a Nominating Person, (2) all information relating to such candidate for nomination that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such candidate’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (3) a description of any direct or indirect material interest in any material contract or agreement between or among any Nominating Person, on the one hand, and each candidate for nomination or his or her respective other participants in such solicitation, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under RegulationS-K if such Nominating Person were the “registrant” for purposes of such rule and the candidate for nomination were a director or executive officer of such registrant (the disclosures to be made pursuant to the foregoing clauses (1) through (3) are referred to as “Nominee Information”), and (4) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(vi).
(iv) For purposes of this Section 2.5, the term “Nominating Person”shall mean (a) the stockholder providing the notice of the nomination proposed to be made at the meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made and (c) any other participant in such solicitation.
(v) A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for stockholders entitled to vote at the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).
(vi) To be eligible to be a candidate for election as a director of the Corporation at an annual or special meeting, a candidate must be nominated in the manner prescribed in this Section 2.5 and the candidate for nomination, if not nominated by the Board, must have previously delivered (in accordance with the time period prescribed for delivery in a notice to such candidate given by or on behalf of the Board), to the Secretary of the Corporation at the principal executive offices of the Corporation, (a) a completed written questionnaire (in the form provided by the Corporation) with respect to the background, qualifications, stock ownership and independence of such candidate for nomination and (b) a written representation and agreement (in the form provided by the Corporation) that such candidate for nomination (1) is not and, if elected as a director during his or her term of office, will not become a party to (A) any agreement, arrangement or understanding with, and has not given and will not give any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a director of the Corporation, will act or vote on any issue or
question (a “Voting Commitment”) or (B) any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a director of the Corporation, with such proposed nominee’s fiduciary duties under applicable law, (2) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service as a director of the Corporation that has not been disclosed therein or to the Corporation and (3) if elected as a director of the Corporation, will comply with all applicable corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to directors and in effect during such person’s term in office as a director (and, if requested by any candidate for nomination, the Secretary of the Corporation shall provide to such candidate for nomination all such policies and guidelines then in effect).
(vii) The Board may also require any proposed candidate for nomination as a Director to furnish such other information as may reasonably be requested by the Board in writing prior to the meeting of stockholders at which such candidate’s nomination is to be acted upon in order for the Board to determine the eligibility of such candidate for nomination to be an independent director of the Corporation in accordance with the Corporation’s Corporate Governance Guidelines.
(viii) A candidate for nomination as a director shall further update and supplement the materials delivered pursuant to this Section 2.5, if necessary, so that the information provided or required to be provided pursuant to this Section 2.5 shall be true and correct as of the record date for stockholders entitled to vote at the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation (or any other office specified by the Corporation in any public announcement) not later than five (5) business days after the record date for stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).
(ix) In addition to the requirements of this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.
(x) No candidate shall be eligible for nomination as a director of the Corporation unless such candidate for nomination and the Nominating Person seeking to place such candidate’s name in nomination has complied with this Section 2.5, as applicable. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 2.5, and if he or she should so determine, he or she shall so declare such determination to the meeting, the defective nomination shall be disregarded and any ballots cast for the candidate in question (but in the case of any form of ballot listing other qualified nominees, only the ballots case for the nominee in question) shall be void and of no force or effect.
(xi) Notwithstanding anything in these Bylaws to the contrary, no candidate for nomination shall be eligible to be seated as a director of the Corporation unless nominated and elected in accordance with Section 2.4 and this Section 2.5 or Section 2.6 of these Bylaws.
2.6 | Proxy Access. |
(i) Subject to the provisions of this Section 2.6, if any Eligible Stockholder (as defined below) or group of up to 20 Eligible Stockholders submits to the Corporation a Proxy Access Notice (as defined below) that complies with this Section 2.6 and such Eligible Stockholder or group of Eligible Stockholders otherwise satisfies all the terms and conditions of this Section 2.6 (such Eligible Stockholder or group of Eligible
Stockholders, a “Nominating Stockholder”), the Corporation shall include in its proxy statement and on its form of proxy and ballot, as applicable (collectively, “proxy materials”), for any annual meeting of stockholders, in addition to any persons nominated for election by the Board or any committee thereof:
(a) the name of any person or persons nominated by such Nominating Stockholder for election to the Board at such annual meeting of stockholders who meets the requirements of this Section 2.6 (a “Nominee”);
(b) disclosure about the Nominee and the Nominating Stockholder required under the rules of the Commission or other applicable law to be included in the proxy materials;
(c) subject to the other applicable provisions of this Section 2.6, a written statement, not to exceed 500 words, that is not contrary to any of the Commission’s proxy rules, including Rule14a-9 under the Exchange Act (a “Supporting Statement”), included by the Nominating Stockholder in the Proxy Access Notice intended for inclusion in the proxy materials in support of the Nominee’s election to the Board; and
(d) any other information that the Corporation or the Board determines, in its discretion, to include in the proxy materials relating to the nomination of the Nominee, including, without limitation, any statement in opposition to the nomination and any of the information provided pursuant to this Section 2.6.
(ii)Maximum Number of Nominees.
(a) The Corporation shall not be required to include in the proxy materials for an annual meeting of stockholders more Nominees than that number of directors constituting twenty percent (20%) of the total number of directors of the Corporation on the last day on which a Proxy Access Notice may be submitted pursuant to this Section 2.6 (rounded down to the nearest whole number, but not less than two) (the “Maximum Number”). The Maximum Number for a particular annual meeting shall be reduced by: (1) the number of Nominees who are subsequently withdrawn and (2) the number of director candidates for which the Corporation shall have received notice that a stockholder intends to nominate as a candidate for director at the annual meeting of stockholders pursuant to Section 2.5(i)(b) of these Bylaws. In the event that one or more vacancies for any reason occurs on the Board after the deadline set forth in Section 2.6(iv) but before the date of the annual meeting of stockholders, and the Board resolves to reduce the size of the Board in connection therewith, the Maximum Number shall be calculated based on the number of directors as so reduced.
(b) Any Nominating Stockholder submitting more than one Nominee for inclusion in the Corporation’s proxy materials shall rank such Nominees based on the order that the Nominating Stockholder desires such Nominees to be selected for inclusion in the Corporation’s proxy materials in the event that the total number of Nominees submitted by Nominating Stockholders exceeds the Maximum Number. In the event that the number of Nominees submitted by Nominating Stockholders exceeds the Maximum Number, the highest ranking Nominee from each Nominating Stockholder will be included in the Corporation’s proxy materials until the Maximum Number is reached, going in order from largest to smallest of the number of shares of common stock of the Corporation owned by each Nominating Stockholder as disclosed in each Nominating Stockholder’s Proxy Access Notice. If the Maximum Number is not reached after the highest ranking Nominee of each Nominating Stockholder has been selected, this process will be repeated as many times as necessary until the Maximum Number is reached. If, after the deadline for submitting a Proxy Access Notice as set forth in Section 2.6(iv), a Nominating Stockholder ceases to satisfy the requirements of this Section 2.6 or withdraws its nomination or a Nominee ceases to satisfy the requirements of this Section 2.6 or becomes unwilling or unable to serve on the Board, whether before or after the mailing of definitive proxy materials, then the nomination shall be disregarded, and the Corporation: (1) shall not be required to include in its proxy materials the disregarded Nominee and (2) may otherwise communicate to its stockholders, including without limitation by amending or supplementing its proxy materials, that the Nominee will not be included as a Nominee in the proxy materials and the election of such Nominee will not be voted on at the annual meeting of stockholders.
(iii)Eligibility of Nominating Stockholder.
(a) An “Eligible Stockholder” is a person who has either (1) been a record holder of the shares of common stock used to satisfy the eligibility requirements in this Section 2.6(iii) continuously for the three-year period specified in Subsection (b) below or (2) provides to the Secretary of the Corporation, within the time period referred to in Section 2.6(iv), evidence of continuous ownership of such shares for such three-year period from one or more securities intermediaries in a form that satisfies the requirements as established by the Commission for a stockholder proposal under Rule14a-8 under the Exchange Act (or any successor rule).
(b) An Eligible Stockholder or group of up to 20 Eligible Stockholders may submit a nomination in accordance with this Section 2.6 only if the person or each member of the group, as applicable, has continuously owned at least the Minimum Number (as defined below) of shares of the Corporation’s outstanding common stock throughout the three-year period preceding and including the date of submission of the Proxy Access Notice, and continues to own at least the Minimum Number through the date of the annual meeting of stockholders. Two or more funds that are (1) under common management and investment control, (2) under common management and funded primarily by a single employer or (3) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended (two or more funds referred to under any of clause (1), (2) or (3), collectively a “Qualifying Fund”), shall be treated as one Eligible Stockholder. For the avoidance of doubt, in the event of a nomination by a group of Eligible Stockholders, any and all requirements and obligations for an individual Eligible Stockholder that are set forth in this Section 2.6, including the minimum holding period, shall apply to each member of such group;provided, however, that the Minimum Number shall apply to the ownership of the group in the aggregate. Should any stockholder withdraw from a group of Eligible Stockholders at any time prior to the annual meeting of stockholders, the group of Eligible Stockholders shall only be deemed to own the shares held by the remaining members of the group.
(c) The “Minimum Number” of shares of the Corporation’s common stock means three percent (3%) of the number of outstanding shares of common stock as of the most recent date for which such amount is given in any filing by the Corporation with the Commission prior to the submission of the Proxy Access Notice.
(d) For purposes of this Section 2.6, an Eligible Stockholder “owns” only those outstanding shares of the common stock of the Corporation as to which the Eligible Stockholder possesses both:
(1) | the full voting and investment rights pertaining to the shares; and |
| the full economic interest in (including the opportunity for profit and risk of |
Asprovided, that the number of 29 October 2017,shares calculated in accordance with clauses (1) and (2) shall not include any shares: (x) sold by such Eligible Stockholder or any of its affiliates in any transaction that has not been settled or closed, (y) borrowed by such Eligible Stockholder or any of its affiliates for any purpose or purchased by such Eligible Stockholder or any of its affiliates pursuant to an agreement to resell, or (z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such Eligible Stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares, cash or other property based on the estimated fair valuesnotional amount or value of outstanding shares of the 2017 Senior NotesCorporation, in any such case which instrument or agreement has, or is intended to have, or if exercised would have, the purpose or effect of: (i) reducing in any manner, to any extent or at any time in the future, such Eligible Stockholder’s or any of its affiliates’ full right to vote or direct the voting of any such shares, and/or (ii) hedging, offsetting, or altering to any degree, gain or loss arising from the full economic ownership of such shares by such Eligible Stockholder or any of its affiliates. An Eligible Stockholder “owns” shares held in the name of a nominee or other intermediary so long as the Eligible Stockholder retains the right to instruct how the
shares are voted with respect to the election of directors and possesses the Assumed Senior Notes was US$17,953 million. The fair valuefull economic interest in the shares. An Eligible Stockholder’s ownership of shares shall be deemed to continue during any period in which the Eligible Stockholder has delegated any voting power by means of a proxy, power of attorney, or other similar instrument or arrangement that is revocable at any time by the Eligible Stockholder. An Eligible Stockholder’s ownership of shares shall be deemed to continue during any period in which the Eligible Stockholder has loaned such shares;provided that the Eligible Stockholder has the power to recall such loaned shares on no more than five (5) business days’ notice and includes in the Proxy Access Notice an agreement that it will (1) promptly recall such loaned shares upon being notified that any of its Nominees will be included in the Corporation’s proxy materials pursuant to this Section 2.6 and (2) continue to hold such recalled shares (including the right to vote such shares) through the date of the 2017 Senior Notesannual meeting of stockholders. The terms “owned,” “owning” and other variations of the Assumed Senior Notes is classifiedword “own” shall have correlative meanings. Each Nominating Stockholder shall furnish any other information that may reasonably be required by the Board to verify such stockholder’s continuous ownership of at least the Minimum Number during the three-year period referred to above.
(e) No person may be in more than one group constituting a Nominating Stockholder, and if any person appears as Level 2a member of more than one group, it shall be deemed to be a member of the group that owns the greatest aggregate number of shares of the Corporation’s common stock as quoted prices from less active markets have been used.reflected in the Proxy Access Notice, and no shares may be attributed as owned by more than one person constituting a Nominating Stockholder under this Section 2.6.
|
Group | ||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||
Current | ||||||
Warranty (Note (a)) | 11 | 14 | ||||
Accrued rebates (Note (b)) | 124 | 317 | ||||
Restructuring liabilities (Note (c)) | 41 | 132 | ||||
Total | 176 | 463 | ||||
Non-Current | ||||||
Restructuring liabilities (Note (c)) | 4 | 19 | ||||
Accrued interest and penalties (Note (d)) | 132 | 102 | ||||
136 | 121 | |||||
|
The Group accrues for(iv) To nominate a Nominee, the estimated costsNominating Stockholder must, no earlier than one hundred fifty (150) calendar days and no later than one hundred twenty (120) calendar days before the date of product warrantiesthe Corporation’s proxy materials released to stockholders in connection with the preceding year’s annual meeting of stockholders, submit to the Secretary of the Corporation at the time revenue is recognised. Product warranty costs are estimated based upon the historical experience and specific identificationprincipal executive offices of the products requirements, which may fluctuate based on product mix. Additionally,Corporation all of the Group accrues for warranty costs associated with occasional or unanticipated product quality issues if a loss is probablefollowing information and can be reasonably estimated.documents (collectively, the “Proxy Access Notice”):
|
The Group accrues for 100% of potential rebates at the time of sale and does not apply a breakage factor. The Group reverses the accrual of unclaimed rebate amounts as specific rebate programs contractually end and when the Group believes unclaimed rebates are no longer subjected to payment and will not be paid. Thus, the reversal of unclaimed rebates may have a positive impact on the net revenue and net income in subsequent periods.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Movement in provision for accrued rebates is as follows:
Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Beginning of financial year | 317 | 26 | ||||||
Liabilities assumed in acquisitions | - | 359 | ||||||
Additional rebates given during the year | 244 | 461 | ||||||
Reversal of unclaimed rebates | (79) | (6) | ||||||
Payments | (358) | (523) | ||||||
End of financial year | 124 | 317 | ||||||
|
During financial years 2017 and 2016, the Group initiated a series of restructuring activities intended to realign its operations to improve overall efficiency and effectiveness. Provisions are made for employee termination costs and leases and other exit costs.
Movement in provision for employee termination costs is as follows:
Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Beginning of financial year | 116 | 13 | ||||||
Liabilities assumed in acquisitions | - | 2 | ||||||
Restructuring charges | 86 | 445 | ||||||
Utilisation | (174) | (344) | ||||||
End of financial year | 28 | 116 | ||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Movement in provision for leases and other exit costs is as follows:
Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Beginning of financial year | 35 | 13 | ||||||
Liabilities assumed in acquisitions | - | 13 | ||||||
Restructuring charges | 43 | 37 | ||||||
Utilisation | (61) | (28) | ||||||
End of financial year | 17 | 35 | ||||||
|
During financial years 2017 and 2016, the Group accrued interest and penalties for various tax positions. Movement in accrued interest and penalties is as follows:
Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Beginning of financial year | 102 | 43 | ||||||
Liabilities assumed in acquisitions | - | 66 | ||||||
Charges during the year, net | 36 | 9 | ||||||
Settlements | (6) | (16) | ||||||
End of financial year | 132 | 102 | ||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income taxes relate(a) A Schedule 14N (or any successor form) relating to the same financial authority. The amounts, determined after appropriate offsetting, are shown onNominee, completed and filed with the balance sheetCommission by the Nominating Stockholder as follows:applicable, in accordance with the Commission’s rules;
Group | ||||||||||
2017 | 2016 | |||||||||
(US$ millions) | (US$ millions) | |||||||||
Deferred income tax assets | ||||||||||
- To be recovered within one year | - | - | ||||||||
- To be recovered after one year | 21 | 308 | ||||||||
21 | 308 | |||||||||
Deferred income tax liabilities | ||||||||||
- To be settled within one year | - | - | ||||||||
- To be settled after one year | 10,019 | 10,287 | ||||||||
10,019 | 10,287 | |||||||||
Deferred income taxes reflect(b) A written notice of the net effectsnomination of temporary differences betweensuch Nominee that includes the carrying amounts of assetsfollowing additional information, agreements, representations and liabilities for financial reporting purposes and their basis for income tax purposes andwarranties by the tax effects of net operating losses and tax credit carry forwards.Nominating Stockholder (including each group member):
The summary of deferred income tax assets (prior to offsetting of balances within the same tax jurisdiction) is as follows:
2017 | 2016 | |||||||||
(US$ millions) | (US$ millions) | |||||||||
Depreciation and amortisation | 8 | 15 | ||||||||
Inventory | 6 | 6 | ||||||||
Trade accounts | 22 | 6 | ||||||||
Employee benefits | 145 | 216 | ||||||||
Employee share awards | 180 | 90 | ||||||||
Net operating loss carryovers and credit carryovers | 909 | 770 | ||||||||
Other deferred income tax assets | 42 | 172 | ||||||||
Deferred income tax assets | 1,312 | 1,275 | ||||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
The summary of deferred income tax liabilities (prior to offsetting of balances within the same tax jurisdiction) is as follows:
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Depreciation and amortisation | 96 | 263 | ||||||
Other deferred income tax liabilities | 12 | 37 | ||||||
Foreign earnings not indefinitely reinvested | 11,202 | 10,954 | ||||||
Deferred income tax liabilities | 11,310 | 11,254 | ||||||
As of 29 October 2017, the Group had U.S. federal net operating loss carry forwards of US$575 million, U.S. state net operating loss carry forwards of US$3,067 million and other foreign net operating loss carry forwards of US$1,702 million. U.S. federal and state net operating loss carry forwards begin to expire in financial year 2018. The other foreign net operating losses expire in various financial years beginning 2018. As of 29 October 2017, the Group had US$1,494 million and US$1,212 million of U.S. federal and state research and development tax credits, respectively, which if not utilized, begin to expire in financial year 2018.
|
Issued share capital | Share capital | |||||||
(millions) | (US$ millions) | |||||||
Group and Company | ||||||||
2017 | ||||||||
Beginning of financial year | 398 | 18,462 | ||||||
Issuance of ordinary shares in connection with equity incentive plans | 10 | 257 | ||||||
Exchange of the Partnership REUs for ordinary shares | 1 | 86 | ||||||
End of financial year | 409 | 18,805 | ||||||
Issued share capital | Share capital | |||||||
(millions) | (US$ millions) | |||||||
Group and Company | ||||||||
2016 | ||||||||
Beginning of financial year | * | * | ||||||
Issuance of ordinary shares upon the acquisition of Broadcom Corporation | 112 | 15,438 | ||||||
Issuance of ordinary shares in connection with equity incentive plans | 10 | 295 | ||||||
Fair value of partially vested equity awards assumed in connection with the acquisition of Broadcom Corporation | - | 182 | ||||||
Effect of capital reorganisation | 276 | 2,547 | ||||||
End of financial year | 398 | 18,462 | ||||||
|
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
All issued ordinary shares are fully paid. There is no par value for these ordinary shares.
Prior to 1 February 2016, the acquisition date of BRCM (the “Acquisition Date”), the Group’s shareholders’ equity reflected Avago’s outstanding ordinary shares, all of which were publicly traded on the NASDAQ Global Select Market. As a result of the Broadcom Transaction (as described in Note 31), the Group’s ownership interest changed. Pursuant to the Avago Scheme, Broadcom issued 278 million ordinary shares to holders of Avago ordinary shares and issued 112 million ordinary shares to former BRCM shareholders pursuant to the Broadcom Merger. Consequently, the number of Broadcom ordinary shares outstanding increased from 278 million Avago ordinary shares on January 31, 2016 to 390 million Broadcom ordinary shares on February 1, 2016. Both Avago and BRCM became indirect subsidiaries of Broadcom and the Partnership, and Broadcom is the sole General Partner of the Partnership. As a result, the carrying amount of equity attributable to Broadcom was adjusted to reflect the change in the Group’s ownership interest of its subsidiaries. Additionally, Broadcom reflects anon-controlling interest in its shareholders’ equity, which represents the interest of the holders of the limited partners in the Partnership.
In connection with the Broadcom Merger, Broadcom also issued 23 millionnon-economic voting preference shares (the “Special Voting Shares”), which is equal to the number of issued Partnership REUs. The Special Voting Shares were issued to a voting trustee pursuant to a voting trust agreement dated February 1, 2016, among Broadcom, the Partnership and the voting trustee.
Share-based incentive awards are provided to employees and directors under the terms of various Broadcom equity incentive plans.
In July 2009, Broadcom’s Board of Directors adopted, and the shareholders approved, the Avago Technologies Limited 2009 Equity Incentive Award Plan, or the 2009 Plan, to authorise the grant of options, share appreciation rights, RSU awards, dividend equivalents, performance awards, and other share-based awards. A total of 20 million ordinary shares were initially reserved for issuance under the 2009 Plan, subject to annual increases starting in financial year 2012. The amount of the annual increase is 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. However, no more than 90 million ordinary shares may be issued upon the exercise of equity awards issued under the 2009 Plan. The 2009 Plan became effective on July 27, 2009.
As of 29 October 2017, 19 million ordinary shares remained available for issuance under the 2009 Plan.
In connection with the LSI acquisition, Broadcom assumed the LSI 2003 Equity Incentive Plan, (the “2003 Plan”), and outstanding unvested stock options and RSUs originally granted by LSI under the 2003 Plan that were held by continuing employees. At the time of the acquisition, these awards were converted to Avago share options and RSUs, with adjustments made to the exercise price of stock options and the number of shares subject to stock options and RSU awards so that the intrinsic value of each award was approximately the same immediately before and immediately after the adjustment.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
These unvested options and RSUs will vest in accordance with their original terms, generally vesting in equal annual instalments over a four-year period from the original grant date and expire seven years after the grant date. Under the 2003 Plan, Broadcom may grant to former employees of LSI and other employees who were not employees of Avago at the time of the acquisition restricted stock awards, RSUs, share options and share appreciation rights with an exercise price that is no less than the fair market value on the date of grant. No participant may be granted share options covering more than four million shares or more than an aggregate of one million shares of restricted stock and RSUs in any financial year. Equity awards granted under the 2003 Plan following the LSI acquisition are expected to be on similar terms and consistent with similar grants made pursuant to the 2009 Plan.
As of 29 October 2017, 4 million ordinary shares remained available for issuance under the 2003 Plan.
In connection with the Broadcom Merger, Broadcom assumed the 2012 Plan and outstanding unvested RSUs originally granted by BRCM under the 2012 Plan that were held by continuing employees. At the time of the acquisition, these awards were converted to Broadcom RSUs, with adjustments made to the number of shares subject to RSU awards so that the intrinsic value of each award was approximately the same immediately before and immediately after the adjustment. These unvested RSUs will vest in accordance with their original terms, generally vesting in equal quarterly instalments over a four-year period from the original grant date. Under the 2012 Plan, Broadcom may grant to former employees of BRCM and other employees who were not employees of Avago at the time of the acquisition restricted stock awards, RSUs, share options and share appreciation rights with an exercise price that is no less than the fair market value on the date of grant. No participant may be granted share options, restricted stock or RSUs, covering more than an aggregate of four million shares in any financial year. Equity awards granted under the 2012 Plan following the Broadcom Merger are expected to be on similar terms and consistent with similar grants made pursuant to the 2009 Plan.
As of 29 October 2017, 82 million ordinary shares remained available for issuance under the 2012 Plan. The number of shares available for issuance under the 2012 Plan is subject to an annual increase of 12 million shares.
The income tax benefits for share-based compensation expense were $273 million, $89 million and $130 million for financial years 2017, 2016 and 2015, respectively.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
The following table summarises the weighted-average assumptions utilised to calculate the fair value of market-based awards granted in the periods presented:
Market-Based Awards Financial Year | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Risk-free interest rate | 1.7% | 1.2% | 1.4% | |||||||||
Dividend yield | 1.8% | 1.3% | 1.2% | |||||||||
Volatility | 32.3% | 35.0% | 36.3% | |||||||||
Expected term (in years) | 4.00 | 3.80 | 4.40 |
The risk-free interest rate was derived from the average U.S. Treasury Strips rate during the period, which approximated the rate in effect at the time of grant.
The dividend yield was based on the historical and expected dividendpay-outs as of the respective award grant dates.
The expected volatility was based on Broadcom’s own historical share price volatility over the period commensurate with the expected life of the awards and the implied volatility from its own traded ordinary shares with a term of 180 days measured at a specific date.
|
RSU awards granted to employees under the 2009 Plan are generally time-based and vest over four years. An RSU is an equity award that is granted with an exercise price equal to zero and which represents the right to receive one of the Company’s ordinary shares immediately upon vesting. The Company also grants market-based RSUs with both a service condition and a market condition as part of its equity compensation programs under the 2009 Plan. During financial years 2017, 2016 and 2015, the Company granted market-based RSUs that vest over four years, subject to satisfaction of share price contingency conditions. During financial year 2017, the Company also granted market-based RSUs under which grantees may receive the number of shares ranging from 0% to 450% of the original grant at vesting based upon the total shareholder return (“TSR”), on the Company’s ordinary share as compared to the TSR of an index group of companies. The market-based RSUs generally vest over four years, subject to satisfaction of market conditions.
In connection with the Broadcom Merger, Broadcom assumed RSUs originally granted by BRCM. Share-based compensation expense reported in continuing operations in financial years 2017 and 2016 was $179 million and $222 million, respectively, related to the assumed BRCM RSUs. Broadcom have assumed an annualized forfeiture rate for RSUs of 5% in each of financial years 2017 and 2016 and 3% in financial year 2015. Broadcom will recognise additional expense if actual forfeitures are lower than estimated, and will recognise a benefit if actual forfeitures are higher than estimated.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
The expected term of market-based RSUs valued using Monte Carlo simulation techniques was commensurate with the awards’ contractual terms.
A summary of time- and market-based RSU activity is as follows:
Number of Outstanding | Weighted- Grant Date | ||||||||||
(millions) | (US$ millions) | ||||||||||
Balance as of 1 November 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 30 October 2016 | 17 | 130.71 | |||||||||
Granted | 8 | 199.33 | |||||||||
Vested | (5) | 126.81 | |||||||||
Forfeited | (2) | 142.78 | |||||||||
Balance as of 29 October 2017 | 18 | 163.42 | |||||||||
The aggregate fair value of time- and market-based RSUs that vested in financial years 2017, 2016 and 2015 was $1,172 million, $590 million and $179 million, respectively. As of 29 October 2017, the total unrecognised compensation cost related to unvested RSUs was $2,134 million, which is expected to be recognised over the remaining weighted-average service period of 3.0 years.
|
Options issued to employees under the 2009 Plan prior to March 2011 generally expire ten years following the date of grant. Since March 2011, options issued to employees under the 2009 Plan generally expire seven years after the date of grant. Options awarded tonon-employees under this plan generally expire after five years. Options issued to both employees andnon-employees under the 2009 Plan generally vest over a four-year period from the date of grant and are granted with an exercise price equal to the fair market value on the date of grant. Any share options cancelled or forfeited after 27 July 2009 under the equity incentive plans adopted prior to the 2009 Plan become available for issuance under the 2009 Plan.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
A summary of time- and market-based share option activity is as follows:
Number of outstanding | Weighted- average exercise price per | Weighted- remaining contractual life | Aggregate intrinsic value | ||||||||||||||||||||
(in millions) | (US$ millions) | (in years) | |||||||||||||||||||||
Balance as of 1 November 2015 | 21 | 47.92 | |||||||||||||||||||||
Exercised | (5) | 44.35 | 579 | ||||||||||||||||||||
Cancelled | (1) | 53.56 | |||||||||||||||||||||
Balance as of 30 October 2016 | 15 | 48.77 | |||||||||||||||||||||
Exercised | (4) | 45.48 | 682 | ||||||||||||||||||||
Cancelled | (1) | 66.08 | |||||||||||||||||||||
Balance as of 29 October 2017 | 10 | 49.54 | 2.85 | 2,112 | |||||||||||||||||||
Fully vested as of 29 October 2017 | 9 | 46.49 | 2.75 | 1,847 | |||||||||||||||||||
Fully vested and expected to vest as of 29 October 2017 | 10 | 49.54 | 2.85 | 2,112 |
As of 29 October 2017, the total unrecognised compensation cost related to unvested time- and market-based share options was $17 million, which is expected to be recognised over the remaining weighted-average service period of 0.7 years.
|
The Company maintains an ESPP, which provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions, based on asix-month look-back period, at a price equal to the lesser of 85% of the fair market value of the ordinary shares at either the beginning or ending of the relevant offering period. The ESPP will terminate on 27 July 2019 unless sooner terminated.
In financial years 2017, 2016 and 2015, under the ESPP, employees purchased 0.5 million, 0.4 million and 0.2 million ordinary shares for $78 million, $51 million and $15 million, respectively. As of 29 October 2017, the total unrecognized compensation cost related to the ESPP purchase rights was $12 million, which is expected to be recognised over the remaining four months of the current offering period under the ESPP.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Movement in retained profits for the Company is as follows:
Company | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Beginning of financial year | 2,077 | 2,240 | ||||||
Net profit | 1,736 | 553 | ||||||
Dividends paid (Note 25) | (1,653 | ) | (716 | ) | ||||
End of financial year | 2,160 | 2,077 | ||||||
|
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Ordinary dividends | ||||||||
Final dividend of US$1.02 (2015: US$0.44) per share(1-tier tax exempt) paid in respect of the previous financial year | 407 | 122 | ||||||
Interim dividends of US$3.06 (2016: US$1.50) per share(1-tier tax exempt) paid in respect of the current financial year | 1,246 | 594 | ||||||
1,653 | 716 | |||||||
At the meeting of the Board held on 4 December 2017, an interim dividend of US$1.75 per Broadcom ordinary share was declared. These financial statements do not reflect this dividend, which will be accounted for in shareholders’ equity as an appropriation of retained profits in the financial year ending 4 November 2018.
|
Contingent liabilities, excluding those relating to business combinations (Note 31), of which the probability of settlement is not remote at the balance sheet date, are as follows:
Group
As of 29 October 2017 and 30 October 2016, Broadcom had outstanding obligations relating to standby letters of credit of US$12 million. Standby letters of credit are financial guarantees provided to third parties for leases, customs, taxes and certain self-insured risks. If the guarantees are called, Broadcom must reimburse the provider of the guarantees. The fair values of the letters of credit approximate the contract amounts. The standby letters of credit are generally renewed annually.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Capital expenditures contracted for at the balance sheet date but not recognised in the financial statements are as follows:
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Property, plant and equipment | 123 | 312 | ||||||
|
The Group leases land, factories and warehouses fromnon-related parties undernon-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.
The future minimum lease payables undernon-cancellable operating leases contracted for at the balance sheet date but not recognised as liabilities, are as follows:
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Not later than one year | 119 | 144 | ||||||
Between one and five years | 205 | 246 | ||||||
Later than five years | 421 | 56 | ||||||
745 | 446 | |||||||
|
The Group’s activities expose it to a variety of financial risks, including market risk (including foreign currency risk, cash flow and fair value interest rate risk), credit risk, liquidity risk and capital risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise the potential adverse effects on the Group’s financial performance.
Financial risk management is carried out by the treasury management department (the “Group Treasury”) under policies approved by the Board. The Group Treasury identifies, evaluates and hedges financial risks through closeco-operation with the Group’s operating units.
|
|
The Group operates worldwide with entities in the Group regularly transacting in foreign currencies.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
|
Currency risk arises within entities in the Group when transactions are denominated in foreign currencies such as the Singapore Dollar (“SGD”), Israeli Shekel (“ILS”), Euros (“EUR”), Japanese Yen (“JPY”) and Indian Rupee (“INR”).
To manage the currency risk, the Group enters into foreign exchange forward contracts to manage financial exposures resulting from the changes in the exchange rates of these foreign currencies.
The Group’s currency exposure based on the information provided to key management is as follows:
SGD | ILS | EUR | JPY | INR | ||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||||||
2017 | ||||||||||||||||||||
Financial assets | ||||||||||||||||||||
Cash and cash equivalents | 3 | 4 | 29 | 21 | 18 | |||||||||||||||
Trade and other receivables | 3 | 1 | 10 | 2 | - | |||||||||||||||
6 | 5 | 39 | 23 | 18 | ||||||||||||||||
Financial liabilities | ||||||||||||||||||||
Other financial liabilities | (66 | ) | (10 | ) | (13 | ) | (3 | ) | (7 | ) | ||||||||||
Net assets | (60 | ) | (5 | ) | 26 | 20 | 11 | |||||||||||||
2016 | ||||||||||||||||||||
Financial assets | ||||||||||||||||||||
Cash and cash equivalents | 11 | 1 | 46 | 18 | 21 | |||||||||||||||
Trade and other receivables | - | - | 9 | 3 | - | |||||||||||||||
11 | 1 | 55 | 21 | 21 | ||||||||||||||||
Financial liabilities | ||||||||||||||||||||
Other financial liabilities | (7 | ) | (2 | ) | (5 | ) | (1 | ) | (5 | ) | ||||||||||
Net assets | 4 | (1 | ) | 50 | 20 | 16 | ||||||||||||||
The Company’s business operations are not exposed to significant foreign currency risks as it has no significant transactions denominated in foreign currencies.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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|
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If the SGD, ILS, EUR, JPY, INR change against the U.S. dollar by 5% in either of financial years 2017 or 2016, with all other variables, including tax rate being held constant, the effects arising from the net financial liability/asset that are exposed to currency risk will be as follows:
Increase/(Decrease) | ||||||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||||||
Profit after tax | Other comprehensive income | Profit after tax | Other comprehensive income | |||||||||||||||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | |||||||||||||||||||||||||||||
Group | ||||||||||||||||||||||||||||||||
SGD against USD | ||||||||||||||||||||||||||||||||
- Strengthened | 3 | 3 | - | - | ||||||||||||||||||||||||||||
- Weakened | (3 | ) | (3 | ) | - | - | ||||||||||||||||||||||||||
ILS against USD | ||||||||||||||||||||||||||||||||
- Strengthened | - | - | - | - | ||||||||||||||||||||||||||||
- Weakened | - | - | - | - | ||||||||||||||||||||||||||||
EUR against USD | ||||||||||||||||||||||||||||||||
- Strengthened | (1 | ) | (1 | ) | (3 | ) | (3 | ) | ||||||||||||||||||||||||
- Weakened | 1 | 1 | 3 | 3 | ||||||||||||||||||||||||||||
JPY against USD | ||||||||||||||||||||||||||||||||
- Strengthened | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||||||||||||||||
- Weakened | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||||||
INR against USD | ||||||||||||||||||||||||||||||||
- Strengthened | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||||||||||||||||
- Weakened | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||||||
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The Group has insignificant exposure to equity price risk.
|
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates.
The Group’s exposure to cash flow interest rate risk arises primarily from interest-bearing term loans and interest-bearing assets held. In connection with the completion of Broadcom Merger, the Group entered into the 2016 Credit Agreement, which provided for the 2016
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Term Loans at floating interest rates. The 2016 Term Loans were paid in full with proceeds from the issuance and sale of the fixed rate 2017 Senior Notes. The Group Treasury closely monitors market interest rates in order to reduce the exposures to the interest rate risk described above. Interest-bearing assets held consist of fixed income investments, money market funds and bank acceptances with an original maturity of three months or less.
The Group’s borrowings at variable rates on which effective hedges have not been entered into and interest-bearing assets held are denominated mainly in U.S. dollars. For financial year 2017, if the U.S. dollar interest rates had been higher/lower by 0.5% with all other variables including tax rate being held constant, the profit after tax would have been higher/lower by US$34.5 million as a result of higher/lower interest income on interest-bearing assets. For financial year 2016, if the U.S. dollar interest rates had been higher/lower by 0.5% with all other variables including tax rate being held constant, the profit after tax would have been lower/higher by US$63.7 million as a result of higher/lower interest expense on these borrowings.
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Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The major classes of financial assets of the Group and of the Company are bank deposits and trade receivables. For trade receivables, the Group adopts the policy of dealing only with customers of appropriate credit standing and history, and obtaining sufficient collateral or buying credit insurance where appropriate to mitigate credit risk. For other financial assets, the Group adopts the policy of dealing only with high credit quality counterparties.
Credit exposure to an individual counterparty is restricted by credit limits that are approved by the Chief Financial Officer based on ongoing credit evaluation. The counterparty’s payment pattern and credit exposure are continuously monitored at the entity level by the respective management and at the Group level by the Chief Financial Officer.
The Group sells its products primarily through its direct sales force, distributors and manufacturers’ representatives. One direct customer individually accounted for 17% and 18% of the Group’s net accounts receivable balance as at 29 October 2017 and 30 October 2016, respectively.
|
Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially companies with a good collection track record with the Group and Company.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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There is no other class of financial assets that is past due and/or impaired except for trade receivables.
The aging analysis of trade receivables past due but not impaired is as follows:
Group | ||||||||||
2017 | 2016 | |||||||||
(US$ millions) | (US$ millions) | |||||||||
Past due < 3 months | 237 | 147 | ||||||||
Past due 3 to 6 months | - | - | ||||||||
237 | 147 | |||||||||
The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment are as follows:
Group | ||||||||||
2017 | 2016 | |||||||||
(US$ millions) | (US$ millions) | |||||||||
Past due over 3 months | - | 10 | ||||||||
Less: Allowance for impairment | - | (10 | ) | |||||||
- | - | |||||||||
Beginning of financial year | 10 | 3 | ||||||||
Allowance increased | - | 11 | ||||||||
Allowance utilised | - | (4 | ) | |||||||
Write-back of AR | (10 | ) | - | |||||||
End of financial year | - | 10 | ||||||||
(C) | would qualify as a“non-employee director” for the purposes of Rule16b-3 under the Exchange Act (or any successor rule); |
(D) | would qualify as an “outside director” for the purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (or any successor provision); |
(E) | is not and has not been, within the past three (3) years, an officer, director, affiliate or representative of a competitor, as defined under Section 8 of the Clayton Antitrust Act of 1914, as amended, and if the Nominee has held any such position during this period, details thereof; and |
(F) | is not and has not been subject to any event specified in Rule 506(d)(1) of Regulation D (or any successor rule) under the Securities Act of 1933, as amended, or Item 401(f) under RegulationS-K (or any successor rule) under the Exchange Act; |
(6) | a representation and warranty that the Nominating Stockholder satisfies the eligibility requirements set forth in Section 2.6(iii), has provided evidence of ownership to the extent required by Section 2.6(iii)(a), and such evidence of ownership is true, complete and correct; |
(7) | a representation and warranty that the Nominating Stockholder intends to continue to satisfy the eligibility requirements described in Section 2.6(iii) through the date of the annual meeting of stockholders; |
(9) | a representation and warranty that the Nominating Stockholder has not and will not engage in or support, directly or indirectly, a “solicitation” within the meaning ofRule 14a-1(l) (without reference to the exception inSection 14a-1(l)(2)(iv)) (or any successor rules) with respect to the annual meeting of stockholders, other than a solicitation in support of the Nominee or any nominee of the Board; |
(10) | a representation and warranty that the Nominating Stockholder will not use any proxy card other than the Corporation’s proxy card in soliciting stockholders in connection with the election of a Nominee at the annual meeting of stockholders; |
(11) | if desired by the Nominating Stockholder, a Supporting Statement; |
(12) | in the case of a nomination by a group, the designation by all group members of one group member that is authorized to act on behalf of all group members with respect to matters relating to the nomination, including withdrawal of the nomination; |
(13) | in the case of any Eligible Stockholder that is a Qualifying Fund consisting of two or more funds, documentation demonstrating that the funds are eligible to be treated as a Qualifying Fund and that each such fund comprising the Qualifying Fund otherwise meets the requirements set forth in this Section 2.6; and |
Liquidity risk
(14) | a representation and warranty that the Nominating Stockholder has not nominated and will not nominate for election any individual as director at the annual meeting of stockholders other than its Nominee(s); |
(c) An executed agreement pursuant to which the Nominating Stockholder (including each group member) agrees:
(1) | to comply with all applicable laws, rules and regulations in connection with the nomination, solicitation and election; |
(2) | to file with the Commission any solicitation materials with the Corporation’s stockholders relating to any Nominee or one or more of the Corporation’s directors or director nominees, regardless of whether any such filing is required under any law, rule or regulation or whether any exemption from filing is available for such materials under any law, rule or regulation; |
(3) | to assume all liability stemming from any action, suit or proceeding concerning actual or alleged legal or regulatory violations arising out of any communication by the Nominating Stockholder with the Corporation, its stockholders or any other person in connection with the nomination or election of directors, including, without limitation, the Proxy Access Notice; |
(4) | to indemnify and hold harmless (jointly and severally with all other group members, in the case of a group member) the Corporation and each of its directors, officers and employees individually against any liability, loss, damages, expenses, demands, claims or other costs (including reasonable attorneys’ fees and disbursements of counsel) incurred in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any nomination submitted by the Nominating Stockholder (including, without limitation, relating to any breach or alleged breach of its obligations, agreements, representations or warranties) pursuant to this Section 2.6; and |
(5) | in the event that (x) any information included in the Proxy Access Notice, or any other communication by the Nominating Stockholder (including with respect to any group member) with the Corporation, its stockholders or any other person in connection with the nomination or election of directors ceases to be true and accurate in all material respects (or omits a material fact necessary to make the statements made not misleading), or (y) the Nominating Stockholder (including any group member) fails to continue to satisfy the eligibility requirements described in Section 2.6(iii), the Nominating Stockholder shall promptly (and in any event within 48 hours of discovering such misstatement, omission or failure) (i) in the case of clause (x) above, notify the Corporation and any other recipient of such communication of the misstatement or omission in such previously provided information and of the information that is required to correct the misstatement or omission, and (ii) in the case of clause (y) above, notify the Corporation why, and in what regard, the Nominating Stockholder fails to comply with the eligibility requirements described in Section 2.6(iii) (it being understood that providing any such notification referenced in clauses (i) and (ii) above shall not be deemed to cure any defect or limit the Corporation’s rights to omit a Nominee from its proxy materials as provided in this Section 2.6); and |
(d) An executed agreement by the Nominee:
(1) | providing the representations and information required of a nominee for election as a director of the Corporation in Section 2.5(vi) of these Bylaws, and such other information as the Corporation may reasonably request; and |
(2) | that the Nominee (x) consents to be named in the proxy materials as a nominee and, if elected, to serve on the Board and (y) has read and agrees to adhere to the Corporation’s Corporate Governance Guidelines and any other Corporation policies and guidelines applicable to directors generally. |
The Group’s short-terminformation and long-term liquidity requirements primarily arise from: documents required by this Section 2.6(iv) shall be: (a) provided with respect to and executed by each group member, in the case of information applicable to group members; and (b) provided with respect to the persons specified in Instruction 1 to Items 6(c) and 6(d) of Schedule 14N (or any successor item) if and to the extent applicable to a Nominating Stockholder or group member. The Proxy Access Notice shall be deemed submitted on the date on which all the information and documents referred to in this Section 2.6(iv) (other than such information and documents contemplated to be provided after the date the Proxy Access Notice is provided) have been delivered to or, if sent by mail, received by the Secretary of the Corporation. For the avoidance of doubt, in no event shall any adjournment or postponement of an annual meeting of stockholders or the public announcement thereof commence a new time period for the giving of a Proxy Access Notice pursuant to this Section 2.6.
(v)Exceptions and Clarifications.
(a) Notwithstanding anything to the contrary contained in this Section 2.6, (1) the Corporation may omit from its proxy materials any Nominee and any information concerning such Nominee (including a Nominating Stockholder’s Supporting Statement), (2) any nomination shall be disregarded, and (3) no vote on such Nominee will occur (notwithstanding that proxies in respect of such vote may have been received by the Corporation), and the Nominating Stockholder may not, after the last day on which a Proxy Access Notice would be timely, cure in any way any defect preventing the nomination of the Nominee, if:
(A) | the Nominating Stockholder or the designated lead group member, as applicable, or any qualified representative thereof, does not appear at the annual meeting of stockholders to present the nomination submitted pursuant to this Section 2.6 or the Nominating Stockholder withdraws its nomination prior to the annual meeting of stockholders; |
(B) | the Board determines that such Nominee’s nomination or election to the Board would result in the Corporation violating or failing to be in compliance with the Certificate of Incorporation, these Bylaws or any applicable law, rule or regulation to which the Corporation is subject, including any rules or regulations of any stock exchange on which the Corporation’s common stock is traded; or |
(C) | (x) the Nominating Stockholder fails to continue to satisfy the eligibility requirements described in Section 2.6(iii), (y) any of the representations and warranties made in the Proxy Access Notice cease to be true, complete and correct in all material respects (or omits to state a material fact necessary to make the statements made therein not misleading), (z) the Nominee becomes unwilling or unable to serve on the Board or (w) the Nominating Stockholder or the Nominee materially violates or breaches any of its agreements, representations or warranties in this Section 2.6. |
(b) Notwithstanding anything to the contrary contained in this Section 2.6, the Corporation may omit from its proxy materials, or may supplement or correct, any information, including all or any portion of the Supporting Statement included in the Proxy Access Notice, if: (1) such information is not true and correct in all material respects or omits a material statement necessary to make the statements therein not misleading; (2) such information directly or indirectly impugns the character, integrity or personal reputation of, or, without factual foundation, directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations with respect to, any person; or (3) the inclusion of such information in the proxy materials would otherwise violate the Commission’s proxy rules or any
other applicable law, rule or regulation. Once submitted with a Proxy Access Notice, a Supporting Statement may not be amended, supplemented or modified by the Nominee or Nominating Stockholder.
(c) For the avoidance of doubt, the Corporation may solicit against, and include in the proxy materials its own statement relating to, any Nominee.
(d) This Section 2.6 provides the exclusive method for a stockholder to include nominees for election to the Board in the Corporation’s proxy materials (including, without limitation, any proxy card or written ballot).
2.7 | Notice of Stockholders’ Meetings. |
Unless otherwise provided by law, the Certificate of Incorporation or these Bylaws, the notice of any meeting of stockholders shall be sent or otherwise given in accordance with either Section 2.8 or Section 8.1 of these Bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
2.8 | Manner of Giving Notice; Affidavit of Notice. |
Notice of any meeting of stockholders shall be deemed given:
(i) if mailed, when deposited in the U.S. mail, postage prepaid, directed to the stockholder at his or her address as it appears on the Corporation’s records; or
(ii) if electronically transmitted as provided in Section 8.1 of these Bylaws.
An affidavit of the Secretary or an Assistant Secretary of the Corporation or of the transfer agent or any other agent of the Corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
2.9 | Quorum. |
Unless otherwise provided by law, the Certificate of Incorporation or these Bylaws, the holders of a majority in voting power of the stock issued and outstanding and entitled to vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business acquisitions and investmentsat all meetings of the Group may makestockholders;provided, that in no event shall a quorum consist of less than a majority of the shares entitled to vote at any such meeting of the stockholders. If, however, a quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting or (ii) a majority in voting power of the stockholders entitled to vote at the meeting, present in person, or by remote communication, if applicable, or represented by proxy, shall have power to adjourn the meeting from time to time (ii) working capital requirements, (iii) research and development and capital expenditure needs, (iv) interim cash dividend payments by Broadcom (if and when declared byin the Board), (v) cash distributions bymanner provided in Section 2.10 of these Bylaws until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the Partnership (if and when declared by the Partnership’s general partner), (vi) interest and principal payments related to outstanding indebtedness, (vii) payment of income taxes, including taxes paidmeeting as a result of the intercompany transfer of intellectual property, and (viii) funding employee benefit plan obligations.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
originally noticed.
| Adjourned Meeting; Notice. |
When a meeting is adjourned to another time or place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and
vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At any adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting.
| Conduct of Business. |
Prudent liquidity risk management includes maintaining sufficient cashThe date and marketable securities,time of the availability of funding through an adequate amount of committed credit facilities (Note 20)opening and the ability to close out market positionsclosing of the polls for each matter upon which the stockholders will vote at a short notice. Atmeeting shall be announced at the balance sheet date, assets heldmeeting by the Groupperson presiding over the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chairperson of any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairperson, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairperson of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the Company for managing liquidity risk included cashsafety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and cash equivalentsconstituted proxies or such other Persons as disclosed in Note 12.
Management monitors rolling forecaststhe chairperson of the liquidity reserve (comprises cashmeeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and cash equivalents (Note 12))(v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairperson of the Group and the Company on the basismeeting, meetings of expected cash flow. This is generally carried out at Group levelstockholders shall not be required to be held in accordance with the practice and limit. In addition, the Group’s liquidity management policy involves projecting cash flows in U.S. dollar and considering the levelrules of liquid assets necessary to meet these, monitoring liquidity ratios and maintaining debt financing plans.
The table below analysesnon-derivative financial liabilities of the Group and the Company into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant.
Less than 1 year | Between 1 and 5 years | Over 5 years | ||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | ||||||||||
Group | ||||||||||||
At 2017 | ||||||||||||
Trade and other payables | 1,105 | - | - | |||||||||
Borrowings | 117 | 7,009 | 10,563 | |||||||||
At 2016 | ||||||||||||
Trade and other payables | 1,261 | - | - | |||||||||
Borrowings | 454 | 7,083 | 6,270 | |||||||||
Company | ||||||||||||
At 2017 | ||||||||||||
Trade and other payables | 180 | - | - | |||||||||
Borrowings | - | - | - | |||||||||
At 2016 | ||||||||||||
Trade and other payables | 155 | - | - | |||||||||
Borrowings | - | - | - | |||||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
parliamentary procedure.
| Voting. |
|
The Group’s objectives when managingExcept as may be otherwise provided in the Certificate of Incorporation, these Bylaws or the DGCL, each stockholder shall be entitled to one (1) vote for each share of capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve the desired capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell existing assets to reduce borrowings.
In financial year 2016, management monitored capital based on a leverage ratio as the Group was requiredstock held by the banks to maintain a leverage ratio of not exceeding 3.9 in line with the 2016 Credit Agreement. In financial year 2017, there are no such requirements.
The leverage ratio is calculated as total First Lien borrowings (“Consolidated total debt”) less cash and cash equivalent divided by adjusted earnings before income tax, depreciation and amortisation (“Adjusted EBITDA”).
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The Group was in compliance with all externally imposed capital requirements for financial year 2016. The Group is not subjected to any externally imposed capital requirements for financial year 2017.
The Company is not subjected to any externally imposed capital requirements for financial years 2017 and 2016.stockholder.
| Record Date for Stockholder Meetings and Other Purposes. |
The table below presents assetsIn order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and liabilities measured and carriedwhich record date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at fair value and classified by levelsuch meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the following fair value measurement hierarchy:
Level 1 — Level 1 inputs are quoted prices (unadjusted) in active marketsmeeting shall be the date for identical assetsmaking such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or liabilitiesto vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is first given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;provided, however, that the reporting entity hasBoard may fix a new record date for the abilityadjourned meeting, and in such case shall also fix as the record date for stockholders entitled to accessnotice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the measurement date.adjourned meeting.
Level 2 — Level 2 inputs are inputs
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other than quoted prices included within Level 1 that are observabledistribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of capital stock, or for the asset or liability, either directly or indirectly.purposes of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the asset or liability has a specified contractual term, a Level 2 input mustrecord date for determining stockholders for any such purpose shall be observable for substantiallyat the full termclose of business on the asset or liability.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Forday on which the financial year ended 29 October 2017
Board adopts the resolution relating thereto.
| Proxies. |
Each stockholder entitled to vote at a meeting of stockholders may authorize another Person or Persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A proxy may be in the form of a telegram, cablegram or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram or other means of electronic transmission was authorized by the stockholder.
| List of Stockholders Entitled to Vote. |
The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, that if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder entitled to vote and the number of shares registered in the name of each stockholder entitled to vote. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Corporation’s principal executive offices. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 2.15 or to vote in person or by proxy at any meeting of stockholders.
Level 3 — Level 3 inputs are unobservable inputs
2.16 | Inspectors of Election. |
Before any meeting of stockholders, the Corporation shall appoint an inspector or inspectors of election to act at the meeting or its adjournment and make a written report thereof. The Corporation may designate one or more Persons as alternate inspectors to replace any inspector who fails to act. If any Person appointed as inspector or any alternate fails to appear or fails or refuses to act, then the chairperson of the meeting shall appoint a Person to fill that vacancy.
Such inspectors shall:
(i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting and the validity of any proxies and ballots;
(ii) count all votes or ballots;
(iii) count and tabulate all votes;
(iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspector(s); and
(v) certify its or their determination of the number of shares represented at the meeting and its or their count of all votes and ballots.
Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspection with strict impartiality and according to the best of such inspector’s ability. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. The inspectors of election may appoint such Persons to assist them in performing their duties as they determine.
3.1 | Powers. |
Subject to the provisions of the DGCL and any limitations in the Certificate of Incorporation or these Bylaws related to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board.
3.2 | Number of Directors. |
The authorized number of directors constituting the Board shall be determined from time to time by one or more resolutions of the Board, provided the Board shall consist of at least one (1) member and not more than thirteen (13) members. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.
3.3 | Election, Qualification and Term of Office of Directors. |
Each director to be elected by the stockholders of the Corporation shall be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares represented and entitled to vote therefor at a meeting of the stockholders for the assetelection of directors at which a quorum is present (an “Election Meeting”);provided, however, that if the Board determines that the number of nominees exceeds the number of directors to be elected at such meeting (a “Contested Election”), and the Board has not rescinded such determination by the record date of the Election Meeting as initially announced, each of the directors to be elected at the Election Meeting shall be elected by the affirmative vote of a plurality of the votes cast by the shares represented and entitled to vote at such meeting with respect to the election of such director. For purposes of this Section 3.3, a “majority of votes cast” means that the number of votes cast “for” a candidate for director exceeds the number of votes cast “against” that director (with “abstentions” and “brokernon-votes” not counted as votes cast as either “for” or liability in which there is little, if“against” such director’s election). In an election other than a Contested Election, stockholders will be given the choice to cast votes “for” or “against” the election of directors or to “abstain” from such vote and shall
not have the ability to cast any market activityother vote with respect to such election of directors. In a Contested Election, stockholders will be given the choice to cast “for” or “withhold” votes for the assetelection of directors and shall not have the ability to cast any other vote with respect to such election of directors. In the event an Election Meeting involves the election of directors by separate votes by class or liabilityclasses or series, the determination as to whether an election constitutes a Contested Election shall be made on a class by class or series by series basis, as applicable.
If an incumbent director who is nominated for an election other than a Contested Election fails to receive a majority of the votes present and voting for such director’s reelection, such director shall tender his or her resignation to the Board. The Nominating and Corporate Governance Committee of the Board (or any future committee the equivalent thereof) will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the recommendation of such committee and will publicly disclose its decision within ninety (90) days from the date of the certification of the election results. A director who tenders his or her resignation may not participate in any meeting of the Board or any committee thereof until the Board has determined not to accept his or her resignation.
Except as provided in Section 3.4 of these Bylaws, each director, including a director elected to fill a vacancy or newly created directorship, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the Certificate of Incorporation or these Bylaws. The Certificate of Incorporation or these Bylaws may prescribe other qualifications for directors.
3.4 | Resignation, Removal and Vacancies. |
Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. The resignation shall take effect at the measurement date.
See Note 10 for disclosuretime specified therein or upon the happening of an event specified therein, and if no time or event is specified, at the time of its receipt. When one or more directors so resigns and the resignation is effective at a future date or upon the happening of an event to occur on a future date, a majority of the disposal group classifieddirectors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office asheld-for-sale that are measured provided in this section in the filling of other vacancies.
Except as otherwise provided by the DGCL or the Certificate of Incorporation, any director may be removed at fair value. See Note 7 for disclosureany time by the affirmative vote of the retirement plansholders of at least a majority of the voting power of the then-outstanding shares present and post-retirement Benefits that are measuredentitled to vote generally in the election of directors, voting together as a single class.
Unless otherwise provided in the Certificate of Incorporation or these Bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director appointed in accordance with the preceding sentence shall hold office for the remainder of the term to which the director is appointed and until such director’s successor shall have been elected and qualified. A vacancy in the Board shall be deemed to exist under these Bylaws in the case of the death, removal or resignation of any director, unless the size of the Board is reduced by the remaining directors.
3.5 | Place of Meetings; Meetings by Telephone. |
The Board may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all Persons participating in the meeting can hear each other, and such participation in a meeting pursuant to these Bylaws shall constitute presence in person at fair value.the meeting.
There were no other transfers between Levels 1, 2
3.6 | Regular Meetings. |
Regular meetings of the Board may be held without notice at such time and 3 during the year.
Management has assessed that the fair values of cash and cash equivalents, restricted cash andat such place as shall from time deposits, trade and notes receivables, financial assets included in other current assets, entrusted loans, trade and notes payables, financial liabilities included in other payables and accrued liabilities, short-term and current portion of interest-bearing loans and borrowings, interest payable and the current portion of long-term payables approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair values of financial instruments that are not traded in an active market (for example,over-the-counter derivatives) aretime be determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. The fair valuesthe Board.
3.7 | Special Meetings; Notice. |
Special meetings of the financial assetsBoard for any purpose or purposes may be called at any time by the Chair of the Board, the Chief Executive Officer, the President, the Secretary of the Corporation or a majority of the authorized number of directors constituting the Board.
Notice of the time and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:place of special meetings shall be:
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BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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The carrying amount of the different categories of financial instruments is as disclosed on the face of the balance sheet and in Note 13, Note 16, Note 19 and Note 20 to the financial statements, except for the following:
Group | Company | |||||||||||||||||||
2017 (US$ millions) | 2016 (US$ millions) | 2017 (US$ millions) | 2016 (US$ millions) | |||||||||||||||||
Loans and receivables | 14,229 | 5,631 | 196 | 95 | ||||||||||||||||
Financial liabilities at amortised cost | 18,653 | 14,903 | 180 | 155 | ||||||||||||||||
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In addition to the information disclosed elsewhere in the financial statements, the following transactions took place between the Group and related parties at terms agreed between the parties:
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Group | ||||||||
2017 (US$ millions) | 2016 (US$ millions) | |||||||
Sales of goods and/or services to - other related parties | 346 | 335 | ||||||
Purchase of inventory and other costs and expenses charged by other related parties | 145 | 81 | ||||||
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During financial years 2017 and 2016, in the ordinary course of business, the Group purchased from,facsimile or electronic mail; or sold to, several entities, for which one of our directors also serves or served as a director or entities that are otherwise affiliated with one of our directors.
Outstanding balances arising from sale/purchase of goods and services, are unsecured and receivable/payable within 12 months from balance sheet date and are disclosed in Notes 13 and 19, respectively.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Key management personnel compensation is as follows:
Group | ||||||||
2017 | 2016 | |||||||
(US$ millions) | (US$ millions) | |||||||
Wages and salaries | 9 | 6 | ||||||
Employer’s contribution to defined contribution plans, including Central Provident Fund | * | * | ||||||
Termination benefits | - | * | ||||||
Share option expense | 129 | 50 | ||||||
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138 | 56 | |||||||
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Reportable Segments
The Group has four reportable segments: wired infrastructure, wireless communications, enterprise storage and industrial & others. These segments align with the Group’s principal target markets. The segments represent components for which separate financial information is available that is utilised on a regular basis by the CODM, as defined by authoritative guidance on segment reporting, in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics.
The CODM assesses the performance of each segment and allocates resources to those segments based on net revenue and operating results and does not evaluate operating segments using discrete asset information. Operating results by segment include items that are directly attributable to each segment. Operating results by segment also include shared expenses such as global operations, including manufacturing support, logistics and quality control, which are allocated primarily based on revenue, while facilities expenses are primarily allocated based on site-specific headcount.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Reportable Segments(continued)
The following tables present the Group’s net revenue and operating income/(loss) from operations by reportable segment (US$ millions):
Group | ||||||||
2017 | 2016 | |||||||
(US$ million) | (US$ million) | |||||||
Net revenue: | ||||||||
Wired infrastructure | 8,549 | 6,582 | ||||||
Wireless communications | 5,404 | 3,724 | ||||||
Enterprise storage | 2,799 | 2,291 | ||||||
Industrial and others | 884 | 643 | ||||||
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Total net revenue | 17,636 | 13,240 | ||||||
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Operating income/(loss): | ||||||||
Wired infrastructure | 3,853 | 2,664 | ||||||
Wireless communications | 2,155 | 1,282 | ||||||
Enterprise storage | 1,527 | 995 | ||||||
Industrial and others | 447 | 327 | ||||||
Unallocated expenses | (5,601 | ) | (5,677 | ) | ||||
Income/(Loss) from continuing operations | 2,381 | (409 | ) | |||||
Unallocated Expenses
Unallocated expenses include amortisation of acquisition-related intangible assets, share-based compensation expense, restructuring, impairment and disposal charges, acquisition-related costs, including charges related to inventorystep-up to fair value, litigation settlement charges and other costs, which are not used in evaluating the results of, or in allocating resources to, the Group’s segments. Acquisition-related costs also include transaction costs and any costs directly related to the acquisition and integration of acquired businesses.
Depreciation expense directly attributable to each reportable segment is included in operating results for each segment. However, the CODM does not evaluate depreciation expense by operating segment and, therefore, it is not separately presented. There was no inter-segment revenue. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The following tables present net revenue and long-lived asset information based on geographic region. Net revenue is based on the geographic location of the distributors, original equipment manufacturers
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Reportable Segments(continued)
Unallocated Expenses(continued)
or contract manufacturers who purchased Broadcom’s products, which may differ from the geographic location of the end customers. Long-lived assets include property, plant and equipment and are based on the physical location of the assets.
Group | ||||||||
2017 | 2016 | |||||||
(US$ million) | (US$ million) | |||||||
Net revenue: | ||||||||
China | 9,460 | 7,184 | ||||||
United States | 1,266 | 1,124 | ||||||
Singapore | 323 | 250 | ||||||
Other | 6,587 | 4,682 | ||||||
Total net revenue | 17,636 | 13,240 | ||||||
Long-lived assets: | ||||||||
United States | 1,822 | 1,917 | ||||||
Taiwan | 268 | 186 | ||||||
Singapore | 79 | 78 | ||||||
Other | 430 | 328 | ||||||
Total long-lived assets | 2,599 | 2,509 | ||||||
Significant Customer Information
The Group sells its products through its direct sales force and a select network distributors globally. One direct customer accounted for 17% and 18% of the Group’s net accounts receivable balance as at 29 October 2017 and 30 October 2016, respectively. During financial years 2017 and 2016, one direct customer represented 14% of the Group’s net revenue in each period. The majority of the revenue from this customer was included in the Group’s wired infrastructure and wireless communications segments. This customer is a contract manufacturer for a number of OEMs.
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On 1 February 2016, pursuant to an Agreement and Plan of Merger dated as of 28 May 2015 (the “Broadcom Agreement”), the Company, Avago, BRCM and certain other parties completed various transactions, under Singapore law between Avago and the Company (the “Avago Scheme”). Pursuant to the Avago Scheme, all issued ordinary shares of Avago were exchanged on aone-for-one basis for newly issued ordinary shares of the Company. Immediately following the consummation of the Avago
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Scheme, two subsidiaries of the Company 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 (the “Broadcom Transaction”), each of Avago and BRCM became indirect subsidiaries of the Company and the Partnership.
The Partnership is an exempted limited partnership formed under the laws of the Cayman Islands. The Company is the Partnership’s sole General Partner and currently owns a majority interest (by vote and value) in the Partnership represented by common partnership units (“Common Units”). The balance of the partnership units represents the Partnership REUs, the holders of which are referred to as the Limited Partners. As General Partner, the Company has the exclusive right, power and authority to manage, control, administer and operate the business and affairs and to make decisions regarding the undertaking and business of the Partnership in accordance with the Partnership’s amended and restated exempted limited partnership agreement, as amended from time to time, and applicable laws.
The Avago Scheme was accounted for in all periods as a capital reorganisation, as the transaction was premised on anon-substantive exchange in order to facilitate the acquisition of BRCM, resulting in the retention of the historical basis of accounting. Under this method of accounting, the Company and Avago were treated as if they had always been combined for accounting and financial reporting purposes. The accounting treatment under a capital reorganisation is described in further detail in Note 2.24.
The Broadcom Merger closed on 1 February 2016, pursuant to the terms of the Broadcom Agreement. The aggregate consideration for the Broadcom Merger, which consisted of both cash and equity consideration, was approximately US$28,758 million, net of cash acquired.
The cash portion of the Broadcom Merger was funded with the net proceeds from the issuance of the term loan facilities provided for under the 2016 Credit Agreement, as defined and discussed in further detail in Note 20 “Borrowings,” as well as cash on hand of the combined companies.
BRCM was a leader in semiconductor solutions for wired and wireless communications and provided a broad portfolio of highly-integratedsystem-on-a-chip solutions that seamlessly deliver voice, video, data and multimedia connectivity in the home, office and mobile environments. The Group acquired BRCM to position themselves as a global diversified leader in wired and wireless communication semiconductors and to deepen its broad portfolios, and to enable the Group to better address the evolving needs of customers across the wired and wireless end markets.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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The aggregate considerationdirected to each director at that director’s address, telephone number, facsimile number or electronic mail address, or other address for electronic transmission, as the Broadcom Merger, net of cash acquired, consisted of the following (US$ millions):
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The Company issued 112 million ordinary shares and the Partnership issued 23 million Partnership REUs, all of which are valued and presented in the above table, to former BRCM shareholders in the Broadcom Merger. Broadcom also assumed unvested RSUs originally granted by BRCM and converted them into 6 million of Broadcom RSUs. The portion of the fair value of partially vested assumed RSUs associated with prior service of BRCM employees represented a component of the total consideration,case may be, as presented above, and was valued basedshown on the Company’s ordinary share price asCorporation’s records.
If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or electronic mail, or (iii) sent by other means of the Acquisition Date.
The purchase price has been allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The fair value of identifiable intangible assets acquired was based on estimates and assumptions made by managementelectronic transmission, it shall be delivered or sent at least twenty-four (24) hours before the time of acquisition.the holding of the meeting. If the notice is sent by U.S. mail, it shall be deposited in the U.S. mail at least four (4) days before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive offices) nor the purpose of the meeting.
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BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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The allocationAt all meetings of the total purchase price, net of cash acquired, is as follows (US$ millions):
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Goodwill was primarily attributable to the assembled workforce, anticipated synergies and economies of scale expected from the operationsBoard, a majority of the combined company.authorized number of directors shall constitute a quorum for the transaction of business. The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved asvote of a resultmajority of the Broadcom Merger. Goodwilldirectors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these Bylaws. If a quorum is not deductiblepresent at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for tax purposes.
The assetsheld-for-sale represented those BRCM businesses that were not aligned with the Group’s strategic objectives. The sales of these businesses are discussed in Note 10 “Discontinued operations and disposal group classified asheld-for-sale”.meeting.
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The Group’s resultsUnless otherwise restricted by the Certificate of continuing operations for financial year 2016 include US$6,993 millionIncorporation or these Bylaws, any action required or permitted to be taken at any meeting of net revenue attributable to BRCM. It is impracticable to determine the effect on net lossBoard, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.
attributable to BRCM for financial year 2016 as the operations of BRCM were immediately integrated into Broadcom’s ongoing operations.Article IV - Committees
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Transaction costsThe Board may designate one (1) or more committees, each committee to consist of US$42 million incurred relatedone (1) or more of the directors of the Corporation. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the Broadcom Merger were included in selling, general and administrative expenseextent provided in the consolidated statementsresolution of operationsthe Board or in these Bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for financial year 2016.approval, or (ii) adopt, amend or repeal any bylaw of the Corporation.
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Identified intangible assetsEach committee shall keep regular minutes of its meetings and their respective useful lives are as follows:
Fair value | Weighted- average amortisation periods | |||||||
(US$ millions) | (in years) | |||||||
Developed technology | 9,010 | 6 | ||||||
Customer contracts and related relationships | 2,703 | 2 | ||||||
Order backlog | 750 | <1 | ||||||
Trade name | 350 | 17 | ||||||
Other | 45 | 16 | ||||||
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Total identified finite-lived intangible assets | 12,858 | |||||||
In-process research and development | 1,950 | N/A | ||||||
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Total identified intangible assets, net of assets | 14,808 | |||||||
Intangible assets included in assetsheld-for-sale | 320 | |||||||
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Identified intangible assets | 15,128 | |||||||
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Developed technology relates to products for wired and wireless communication applications. The developed technology was valued usingreport the multi-period excess earnings method under the income approach.
This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Customer contracts and related relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of BRCM. Customer contracts and related relationships were valued using thewith-and-without-method under the income approach. In this method, the fair value is measured by the difference between the present value of the cash flows with and without the existing customers in place over the period of time necessary to reacquire the customers. The economic useful life was determined based on historical customer turnover rates.
Order backlog represents business under existing contractual obligations as of the Acquisition Date. The fair value of backlog was determined using the multi-period excess earnings method under the income approach based on expected operating cash flows from future contractual revenue. The economic useful life was determined based on the expected life of the backlog and the cash flows over the forecast period.
Trade name relatessame to the “Broadcom” trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. This valuation method is based on the application of a royalty rate to forecasted revenue under the trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecasted periods.
The fair value of IPR&D was determined using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the IPR&D, less charges representing the contribution of other assets to those cash flows.
The amounts of purchased intangible assets recorded above represent the fair values of, and approximate the amounts a market participant would pay for, these intangible assets as of the Acquisition Date.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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The following table summarises the details of IPR&D by category as of the Acquisition Date:
Description | IPR&D | Percentage of completion at acquisition | Estimated cost to complete | Estimated release date | ||||||||||||
(US$ millions) | (US$ millions) | (financial year) | ||||||||||||||
Set-top box solutions | 90 | 56 | % | 90 | 2016 - 2017 | |||||||||||
Broadband carrier access solutions | 390 | 34 | % | 376 | 2016 - 2018 | |||||||||||
Carrier switch solutions | 270 | 51 | % | 255 | 2016 - 2019 | |||||||||||
Compute and connectivity solutions | 170 | 61 | % | 136 | 2016 - 2018 | |||||||||||
Physical layer product solutions | 190 | 51 | % | 71 | 2016 - 2019 | |||||||||||
Wireless connectivity combo solutions | 770 | 57 | % | 364 | 2016 - 2018 | |||||||||||
Touch controllers | 70 | 39 | % | 21 | 2016 - 2017 | |||||||||||
Total | 1,950 | |||||||||||||||
Discount rates of 14% and 16% were applied to the projected cash flows to reflect the risk related to these wired and wireless IPR&D projects, respectively. These discount rates represent a premium of 2% over the respective wired and wireless weighted-average cost of capital to reflect the higher risk and uncertainty of the cash flows for IPR&D relative to the overall businesses.
During financial year 2016, US$411 million of acquired IPR&D waswritten-off to restructuring, impairment and disposal charges, as those projects were not developed further. The majority of these abandoned IPR&D projects relates to wireless connectivity combo and broadband carrier access solutions.Board when required.
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The fair valueMeetings and actions of trade accounts receivables is US$669 million. The gross contractual amount for trade accounts receivables due is $696 million, of which $10 million is expected tocommittees shall be uncollectible.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Group |
| Company | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | (US$ millions) | |||||||||||||||||
Composition: | ||||||||||||||||||||
Capital reserves | - | - | - | - | ||||||||||||||||
Share-based payment reserves | 1,700 | 779 | 1,618 | 697 | ||||||||||||||||
Accumulated other comprehensive loss | (106 | ) | (149 | ) | (73 | ) | (73 | ) | ||||||||||||
End of financial year | 1,594 | 630 | 1,545 | 624 | ||||||||||||||||
Movements | ||||||||||||||||||||
(i) Capital reserves(Note 2.24) | ||||||||||||||||||||
Beginning of financial year | - | 2,547 | - | 2,547 | ||||||||||||||||
Effects of capital reorganisation | - | (2,547 | ) | - | (2,547 | ) | ||||||||||||||
End of financial year | - | - | - | - | ||||||||||||||||
(ii) Share-based payment reserves | ||||||||||||||||||||
Beginning of financial year | 779 | - | 697 | - | ||||||||||||||||
Share-based compensation | 921 | 690 | 921 | 697 | ||||||||||||||||
Excesstax-benefits from share- based compensation | - | 89 | - | - | ||||||||||||||||
End of financial year | 1,700 | 779 | 1,618 | 697 | ||||||||||||||||
(iii) Accumulated other comprehensive loss | ||||||||||||||||||||
Beginning of financial year | (149 | ) | (73 | ) | (73 | ) | (73 | ) | ||||||||||||
Unrealised loss on defined benefit pension plans or post-retirement benefit plans | 42 | (80 | ) | - | - | |||||||||||||||
Reclassification of net loss | 1 | 4 | - | - | ||||||||||||||||
End of financial year | (106 | ) | (149 | ) | (73 | ) | (73 | ) | ||||||||||||
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On 17 November 2017, (“Brocade Acquisition Date”), pursuant to the Agreement and Plan of Merger,governed by, and among Broadcom, BRCM, Brocade Communications Systems, Inc. (“Brocade”),held and Bobcat Merger Sub, Inc., (“Merger Sub”), which BRCM subsequently assigned to LSI on 18 December 2016, Merger Sub merged with and into Brocade with Brocade as the surviving corporation (“Brocade Merger”). As a result of the Brocade Merger, and Brocade stockholders who did not perfect their appraisal rights with respect to the Brocade Merger received, in aggregate, approximately $5.3 billion in cash in exchange for all shares of Brocade common stock issued and outstanding immediately prior to the effective time of the Brocade Merger. The Group also paid $701 million to retire Brocade’s term loan. In addition, the Group assumed certain vested (to the extent notin-the-money) and all unvested Brocade stock options, RSUs, and performance stock units (“PSUs”), held by continuing employees and service providers. All vestedin-the-money Brocade stock options, after giving effect to any acceleration, and all other RSUs and PSUs were cashed out upon the Brocade Merger. As a result of the Brocade Merger, Brocade became an indirect subsidiary of the Partnership.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Brocade was a leading supplier of networking hardware, software and services, including FC SAN solutions and Internet Protocol Networking (“IP Networking”) solutions. The Group acquired Brocade to enhance its position as a leading provider of enterprise storage connectivity solutions and, with a broader portfolio for enterprise storage, to increase its ability to address the evolving needs of its OEM customers.
The aggregate consideration for the Brocade Merger consisted of the following:
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| ||||
| ||||
| ||||
| ||||
The Group financed the Brocade Merger with the net proceeds from the issuance of the October 2017 Senior Notes (Note 20), as well as cash on hand of the combined companies.
The Group is currently evaluating the purchase price allocation following the consummation of the Brocade Merger. It is not practicable to disclose the preliminary purchase price allocation or unaudited pro forma combined financial information for this transaction, given the short period of time between the acquisition date and the issuance of these consolidated financial statements.
|
Following the Brocade Merger, on 1 December 2017, the Group sold Brocade’s IP Networking business, including the Ruckus Wireless and ICX Switch businesses, to ARRIS International plc for cash consideration of $800 million, plus unvested assumed employee stock awards.
|
On 30 November 2017, the Group completed the sale of Brocade’s San Jose, California headquarters for $225 million.
|
On 6 November 2017, Broadcom announced a proposal to acquire Qualcomm Incorporated (“Qualcomm”) for $70 per share, consisting of $60 in cash and $10 in Broadcom ordinary shares. The Group stated that the proposal stands whether Qualcomm’s pending acquisition of NXP Semiconductors N.V. (“NXP”), is consummated on the then-disclosed terms of $110 per NXP share or is terminated. Including the assumption of net debt and giving effect to the pending NXP acquisition, the enterprise value of the proposed transaction is approximately $130 billion.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
On 13 November 2017, Qualcomm’s board of directors rejected the Group’s proposal. In response, the Group announced that Broadcom remained fully committed to pursuing the acquisition of Qualcomm and reiterated its proposal.
On 4 December 2017, the Group announced that Broadcom had provided notice to Qualcomm of its intent to nominate 11 candidates for election to the Qualcomm board of directors at Qualcomm’s 2018 annual meeting of stockholders.
On 11 December 2017, the Group filed preliminary proxy materials with the SEC in connection with its planned solicitation of proxies to elect 11 independent, highly qualified nominees to the Qualcomm board of directors at Qualcomm’s 2018 annual meeting of stockholders, which Qualcomm has announced will be held on March 6, 2018.
On 5 January 2018, the Group filed definitive proxy materials, which were subsequently amended on 8 January 2018, and commenced sending of proxy statements and accompanying blue proxy card or blue voting instructions form to stockholders of Qualcomm for the purpose of soliciting proxies to elect the 11 independent nominees to the Qualcomm board of Directors at Qualcomm’s 2018 annual meeting of stockholders, scheduled for 6 March 2018.
The Group has also filed a premerger notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with the U.S. Department of Justice and the Federal Trade Commission regarding its proposed acquisition of Qualcomm. No agreement has been reached with Qualcomm and there can be no assurance that any transaction will result from the proposal.
On 5 February 2018, Broadcom announced a best and final offer to acquire all of the outstanding shares of common stock of Qualcomm. The following terms of the offer were communicated by Broadcom:
Broadcom is prepared to acquire Qualcomm for an aggregate of $82.00 per Qualcomm share, consisting $60.00 and the remainder in Broadcom shares.
Broadcom is prepared to pay a ticking fee for an increase in cash consideration payable to Qualcomm stockholders if the transaction is not consummated by theone-year anniversary of entering into a definitive agreement.
Broadcom is prepared to pay to Qualcomm a significant reverse termination fee in an amount appropriate for a transaction of this size in the unlikely event Broadcom is unable to obtain required regulatory approvals.
Broadcom is willing to agree to regulatory efforts provision that is at least as favourable as the one Qualcomm provided to NXP.
Broadcom has fully negotiated commitment papers with its financing sources in an amount sufficient to fully fund the transaction.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
The Broadcom Board is prepared to invite Paul Jacobs and one other current Qualcomm director to join the combined company’s board upon completion of the transaction.
The offer is premised on the following conditions:
Either Qualcomm acquiring NXP on the currently disclosed terms of $110 per NXP shares or the transaction being terminated.
Qualcomm not delaying or adjourning its annual meeting past 6 March 2018.
|
On 2 November 2017, the Group announced its intention to initiate a process to change the ultimate parent company of the Broadcom corporate group from a Singapore company to a U.S. corporation. On 22 January 2018, the Board approved the entry by the Company into an Implementation Agreement (the “Implementation Agreement”), with a newly established Delaware corporation (also named Broadcom Limited and referred to herein as “Broadcom-Delaware”) relating to the restructuring of the Group.
The Implementation Agreement provides for a statutory procedure known as a Scheme of Arrangement (the “Scheme of Arrangement”) to be implemented by the Company and Broadcom-Delaware under Singapore law, subject to approval of the High Court of the Republic of Singapore (the “Singapore High Court”). Pursuant to the Scheme of Arrangement, all issued ordinary shares in the capital of the Company as of immediately prior to the effective time of the Scheme of Arrangement will be exchanged on aone-for-one basis for newly issued shares of common stock of Broadcom-Delaware, and the Company will become a subsidiary of Broadcom-Delaware.
In addition, there-domiciliation is subject to the approval of the Company’s shareholders. If the Group does not complete there-domiciliation within one year from the Brocade Acquisition Date, the Group agreed to initiate a process to separate and divest the Brocade FC SAN business. The Group expects to receive approvals by the Company’s shareholders and the Singapore High Court by the end of its financial second quarter ending 6 May 2018.
On 22 January 2018, the Group filed preliminary proxy materials with the SEC in connection with a Broadcom special shareholder meeting to approve the previously announcedre-domiciliation of the ultimate parent company of the Broadcom corporate group from a Singapore company to a Delaware corporation. There-domiciliation is expected to betax-free to Broadcom’s shareholders.
There-domiciliation is subject to the approval of the Company’s shareholders. If the Company does not complete there-domiciliation within one year from the Brocade Acquisition Date, the Group agreed to initiate a process to separate and divest the Brocade FC SAN business. The Group expects to receive approvals by the Company’s shareholders and the Singapore High Court by the end of its financial second quarter ending 6 May 2018.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
On 9 January 2018, the Group announced that two of the Company’s subsidiaries, BRCM and Broadcom Cayman Finance Limited, have commenced an exchange offer for any and all outstanding unregistered 2017 Senior Notes. The January 2017 Notes and the October 2017 Notes were originally issued on 19 January 2017 and 17 October 2017, respectively, in private placements exempt from the registration requirements of the Securities Act of 1933, as amended, in aggregate principal amounts of $13.55 billion and $4.0 billion, respectively. Holders of these notes may exchange them for an equal principal amount of new issues of 2.375% Senior Notes due 2020, 3.000% Senior Notes due 2022, 3.625% Senior Notes due 2024, 3.875% Senior Notes due 2027, 2.200% senior Notes due 2021, 2.650% Senior Notes due 2023, 3.125% Senior Notes due 2025 and 3.500% Senior Notes due 2028, respectively, pursuant to an effective registration statement on FormS-4 filed with the SEC. Terms of the new notes are substantially identical to those of the original notes, except that the transfer restrictions and registration rights relating to the original notes do not apply to the new notes.
|
On 22 December 2017, the Tax Cuts and Jobs Act (“2017 Tax Reform Act”) was enacted. The United States corporate income tax regime (including applicable statutory tax rates) changed significantly due to the enactment of the 2017 Tax Reform Act. There is significant uncertainty as to how the 2017 Tax Reform Act will be implemented from an accounting standpoint. However, following the Scheme of Arrangement, the Group expects the cash tax costs and overall effective cash tax rate of the Group (which the Group defines as cash tax costs as a percentage ofnon-US GAAP income before tax) to increase due to Broadcom-Delaware becoming the parent company of the Group. The Group presently expects that its overall effective cash tax rate following the Scheme of Arrangement will be in the range of9-11%. Due to the uncertainty described above, the Group does not believe it is practicable to reconcile the foregoing amount to the Group’s effective tax rate under US GAAP. There are also no further adjustments made to this set of FRS financial statements based on the foregoing.
The Group also expects to incur additional cash tax costs as a result of the 2017 Tax Reform Act that would apply irrespective of the Scheme of Arrangement. Based on initial analysis, the Group believes the 2017 Tax Reform Act will result in a mandatory deemed repatriation tax of between $1.6 billion and $2.6 billion on certain of the Group’snon-US earnings, without taking into account available deductions and credits. The amount and timing of instalment payments of this deemed repatriation tax depend, in part, on when the Scheme of Arrangement becomes effective. However, this tax liability will be payable over eight years, with the amount of payments more heavily weighted to the latter years of this period. The Group presently expects these instalment payments to start in its financial year 2019.
The Group’s preliminary estimates of the overall cash tax impact of the Scheme of Arrangement, as well as the amount and timing of instalment payments of the mandatory deemed repatriation tax under the 2017 Tax Reform Act, are expected to change as the Group continues to refine its analysis and as additional guidance becomes available, particularly with respect to the 2017 Tax Reform Act.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
There is no assurance that the final determination of the Group’s income tax liability will not be materially different than what is reflected in the Group’s income tax provisions and accruals and in the estimated ranges provide above. Significant judgment is required to determine the recognition and measurement of tax liabilities prescribed in the relevant accounting guidance for uncertainty in income taxes.
|
Below are the mandatory standards, amendments and interpretations to existing standards that have been published, and are relevant for the Group’s accounting periods beginning on or after 1 January 2017 and which the Group has not early adopted:
FRS 115 Revenue from contracts with customers (effective for annual periods beginning on or after 1 January 2018)
This is the converged standard on revenue recognition. It replaces FRS 11 Construction contracts, FRS 18 Revenue, and related interpretations. Revenue is recognised when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of and obtain the benefits from the good or service. The core principle of FRS 115 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenuetaken in accordance with, that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
FRS 115 also includes a cohesive set of disclosure requirements that will result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
FRS 115 Revenue from contracts with customers (effective for annual periods beginning on or after 1 January 2018) (continued)
Management is currently assessing the effects of applying the new standard on the Group’s financial statements and has identified the following areas that are likely to be affected:provisions of:
(i) |
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|
At this stage, the Group is not able to estimate the impact of the new rules on the Group’s financial statements. The Group will make more detailed assessment of the impact over the next twelve months.
FRS 109 Financial instruments (effective for annual periods beginning on or after 1 January 2018)
The complete version of FRS 109 replaces most of the guidance in FRS 39. FRS 109 retains the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through Other Comprehensive Income (OCI) and fair value through Profit or Loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI.
While the Group has yet to undertake a detailed assessment of the classification and measurement of financial assets, debt instruments currently classified asavailable-for-sale (AFS) financial assets would appear to satisfy the conditions for classification as at fair value through OCI and hence there will be no change to the accounting for these assets.
The other financial assets held by the Group include:
equity instruments currently classified as AFS for which fair value through OCI election is available;
equity investments currently measured at fair value through profit or loss which would likely to continue to be measured on the same basis under FRS 109; and
debt instruments classified asheld-to-maturity or loans and receivables and measured at amortised cost appear to meet the conditions for classification at amortised cost under FRS 109.
Accordingly, the Group does not expect the new guidance to have a significant impact on the classification of its financial assets.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
FRS 109 Financial instruments (effective for annual periods beginning on or after 1 January 2018) (continued)
For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in OCI, for liabilities designed at fair value through profit or loss. There will be no impact on the Group’s accounting for financial liabilities as the Group does not have any such liabilities.
FRS 109 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. While the Group is yet to undertake a detailed assessment, it would appear that the Group’s current hedge relationships would qualify as continuing hedges upon the adoption of FRS 109. Accordingly, the Group does not expect a significant impact on the accounting for its hedging relationships.
There is now a new expected credit losses model that replaces the incurred loss impairment model used in FRS 39. It applies to financial assets classified at amortised cost, debt instruments measured at fair value through OCI, contract assets under FRS 115 Revenue from contracts with customers, lease receivables, loan commitments and certain financial guarantee contracts. While the Group has not yet undertaken a detailed assessment of how its impairment provisions would be affected by the new model, it may result in an earlier recognition of credit losses.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard.
FRS 116 Leases (effective for annual periods beginning on or after 1 January 2019)
FRS 116 will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term andlow-value leases. The accounting for lessors will not change significantly.
The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group hasnon-cancellable operating lease commitments of US$745 million (Note 27(b)). However, the Group has yet to determine to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group’s profit and classification of cash flows.
Some of the commitments may be covered by the exception for short-term andlow-value leases and some commitments may relate to arrangements that will not qualify as leases under FRS 116.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
The Group had the following significant subsidiaries as at 29 October 2017 and 30 October 2016:
Equity holding | ||||||||||
2017 | 2016 | |||||||||
Name of companies | Country of incorporation | % | % | |||||||
Agere Systems LLC^ | Delaware (U.S.A.) | 95 | 95 | |||||||
AT Luxembourg S.a r.l.^ | Luxembourg | 95 | 95 | |||||||
Avago Technologies Cayman Holdings Ltd^ | Cayman Islands | 95 | 95 | |||||||
Avago Technologies Cayman Ltd.^ | Cayman Islands | 95 | 95 | |||||||
Avago Technologies Finance Pte. Ltd.^ | Singapore | 95 | 95 | |||||||
Avago Technologies General IP (Singapore) Pte. Ltd.^ | Singapore | 95 | 95 | |||||||
Avago Technologies Holdings B.V.^ | Netherlands | 95 | 95 | |||||||
Avago Technologies International Sales Pte. Limited^ | Singapore | 95 | 95 | |||||||
Avago Technologies Manufacturing (Singapore) Pte. Ltd.^ | Singapore | 95 | 95 | |||||||
Avago Technologies U.S. Inc.^ | Delaware (U.S.A.) | 95 | 95 | |||||||
Avago Technologies Wireless (U.S.A.) Manufacturing LLC^ | Delaware (U.S.A.) | 95 | 95 | |||||||
BC Luxembourg S.a r.l.^ | Luxembourg | 95 | 95 | |||||||
Broadcom Asia Distribution Pte. Ltd.^ | Singapore | 95 | 95 | |||||||
Broadcom Bermuda LP^ | Bermuda | 95 | 95 | |||||||
Broadcom Cayman Finance Limited^ | Cayman Islands | 95 | 95 | |||||||
Broadcom Cayman L.P.† | Cayman Islands | 95 | 95 | |||||||
Broadcom Cayman Limited^ | Cayman Islands | 95 | 95 | |||||||
Broadcom Communications Bermuda Limited^ | Bermuda | 95 | 95 | |||||||
Broadcom Communications Netherlands B.V.^ | Netherlands | 95 | 95 | |||||||
Broadcom Corporation^ | California (U.S.A.) | 95 | 95 | |||||||
Broadcom Distribution Unlimited Company^ | Ireland | 95 | 95 | |||||||
Broadcom International Limited^ | Cayman Islands | 95 | 95 | |||||||
Broadcom International LLC^ | Delaware (U.S.A.) | 95 | 95 | |||||||
Broadcom International Pte. Ltd.^ | Singapore | 95 | 95 | |||||||
Broadcom Europe Limited^ | England | 95 | 95 | |||||||
Broadcom Netherlands B.V.^ | Netherlands | 95 | 95 | |||||||
Broadcom Products Unlimited Company^ | Ireland | 95 | 95 | |||||||
Broadcom Singapore Pte Ltd.^ | Singapore | 95 | 95 | |||||||
Broadcom Technologies Bermuda Unlimited^ | Bermuda | 95 | 95 | |||||||
Broadcom UK Ltd.^ | Delaware (U.S.A.) | 95 | 95 | |||||||
CMK LLC^ | Delaware (U.S.A.) | 95 | 95 |
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
Equity holding | ||||||||||
2017 | 2016 | |||||||||
Name of companies | Country of incorporation | % | % | |||||||
Cyoptics, Inc.^ | Delaware (U.S.A.) | 95 | 95 | |||||||
Emulex Corporation^ | California (U.S.A.) | 95 | 95 | |||||||
Global Locate, Inc.^ | Delaware (U.S.A.) | 95 | 95 | |||||||
LSI Corporation^ | Delaware (U.S.A.) | 95 | 95 | |||||||
LSI Logic HK Holdings^ | Cayman Islands | 95 | 95 | |||||||
LSI Storage Ireland Limited^ | Ireland | 95 | 95 | |||||||
LSI Technology (Singapore) Pte. Ltd.^ | Singapore | 95 | 95 | |||||||
Netlogic I LLC^ | Delaware (U.S.A.) | 95 | 95 | |||||||
O.C. Property Company, LLC^ | Delaware (U.S.A.) | 95 | 95 | |||||||
Serverworks Corporation^ | Delaware (U.S.A.) | 95 | 95 | |||||||
ServerWorks International Ltd.^ | Cayman Islands | 95 | 95 | |||||||
Teknovus, Inc.^ | California (U.S.A.) | 95 | 95 | |||||||
Silicon Manufacturing Partners Pte Ltd.* | Singapore | 49 | 49 |
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As part of the Company’s listing requirement on the NASDAQ Global Select Market, the consolidated financial statements of Broadcom Limited for financial year 2017 were prepared in conformity with previous GAAP for the purpose of filing with the SEC. An Annual Report on Form10-K containing the consolidated financial statements of Broadcom Limited for financial year 2017 was filed with the SEC on 21 December 2017. There are differences in certain aspects between the consolidated financial statements filed with the SEC and those consolidated financial statements prepared in accordance with FRS. The following disclosures shows the reconciliation to FRS for the Group’s consolidated balance sheet and total comprehensive income that were prepared under previous GAAP.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
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Explanatory Note | 29 October 2017 reported under previous GAAP | Reconciliation to FRS | 29 October 2017 reported under FRS | |||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | 11,204 | - | 11,204 | |||||||||||||
Trade receivables, net | 2,448 | - | 2,448 | |||||||||||||
Inventories | 1,447 | - | 1,447 | |||||||||||||
Other current assets | A1 | 724 | (13) | 711 | ||||||||||||
15,823 | (13) | 15,810 | ||||||||||||||
Assets of disposal group | A1 | - | 13 | 13 | ||||||||||||
15,823 | - | 15,823 | ||||||||||||||
Non-current assets | ||||||||||||||||
Property, plant and | 2,599 | - | 2,599 | |||||||||||||
Goodwill | 24,706 | - | 24,706 | |||||||||||||
Intangible assets, net | 10,832 | - | 10,832 | |||||||||||||
Other long-term assets | A2 | 458 | (21) | 437 | ||||||||||||
Deferred income tax assets | A2 | - | 21 | 21 | ||||||||||||
38,595 | - | 38,595 | ||||||||||||||
Total assets | 54,418 | - | 54,418 | |||||||||||||
LIABILITIES | ||||||||||||||||
Current liabilities | ||||||||||||||||
Trade payables | 1,105 | - | 1,105 | |||||||||||||
Current income tax liabilities | A2 | - | 981 | 981 | ||||||||||||
Borrowings – Current portion | 117 | - | 117 | |||||||||||||
Employee compensation and | 626 | - | 626 | |||||||||||||
Other current liabilities and | A2 | 681 | (102) | 579 | ||||||||||||
2,529 | 879 | 3,408 | ||||||||||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
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Explanatory Note | 29 October 2017 reported under previous GAAP | Reconciliation to FRS | 29 October 2017 reported under FRS | |||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||||
Non-current liabilities | ||||||||||||||||
Borrowings – Long-term debt | 17,431 | - | 17,431 | |||||||||||||
Deferred income tax liabilities | A2 | - | 10,019 | 10,019 | ||||||||||||
Pension and post-retirement | A4 | 112 | 17 | 129 | ||||||||||||
Other long-term liabilities | A2 | 11,160 | (10,898) | 262 | ||||||||||||
28,703 | (862) | 27,841 | ||||||||||||||
Total liabilities | 31,232 | 17 | 31,249 | |||||||||||||
NET ASSETS | 23,186 | (17) | 23,169 | |||||||||||||
EQUITY | ||||||||||||||||
Capital and reserves | ||||||||||||||||
Share capital | A3 | 20,505 | (1,700) | 18,805 | ||||||||||||
Other reserves | A3, A4 | - | 1,594 | 1,594 | ||||||||||||
Accumulated deficit | A4 | (129) | (2) | (131) | ||||||||||||
Accumulated other | A3 | (91) | 91 | - | ||||||||||||
20,285 | (17) | 20,268 | ||||||||||||||
Non-controlling interests | 2,901 | - | 2,901 | |||||||||||||
Total equity | 23,186 | (17) | 23,169 | |||||||||||||
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BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
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(ii) |
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(iii) |
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The Group has changed the presentation of certain amounts under “Share Capital” to reflect FRS 1 requirement to disclose the ordinary class of share capital and other reserves in equity which is described in detail in Note 32.
US$1,700 million of “Share Capital” under the previous GAAP are reclassified to be presented as “Other reserves” in the balance sheet presented as at 29 October 2017.
US$91 million of “Accumulated other comprehensive loss” under the previous GAAP are reclassified to be presented as “Other reserves” in the balance sheet presented as at 29 October 2017.
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
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|
The Post-Employment Benefit plan consists of the US Group Life plan and the Avago Retiree Medical plan. The US Group Life plan is funded by the Agere Systems Inc. Post-retirement Life Insurance Benefit Trust. As the United States’ Internal Revenue Service’s rules effectively prohibit a reversion of any excess assets in the Trust back to the Company, adjustments are made to the respective balances relating to the Group Life plan to recognise an irrevocable surplus under FRS 19. FRS 19 limits the amount of net pension liabilities that can be recognised on the balance sheet whereas the previous GAAP does not have such limitations. The effect of this adjustment on the pension and post-retirement benefit obligations is US$2 million in the consolidated balance sheet presented as at 29 October 2017 and US$2 million on selling, general and administrative expenses in the statement of comprehensive income for the financial year ended 29 October 2017. The cumulative effect of this adjustment on the equity of the Group amounted to US$17 million as at 29 October 2017.
|
Explanatory | 2017 reported under previous GAAP | Reconciliation to FRS | 2017 reported under FRS | |||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||
Sales | 17,636 | - | 17,636 | |||||||||||
Cost of sales | B, B1 | (6,593) | (2,534) | (9,127) | ||||||||||
Purchase accounting effect on inventory | B, B1 | (4) | 4 | - | ||||||||||
Amortisation of acquisition-related intangible assets | B, B1 | (2,511) | 2,511 | - | ||||||||||
Restructuring charges | B, B1 | (19) | 19 | - | ||||||||||
|
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Gross margin | 8,509 | - | 8,509 |
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
|
|
Explanatory | 2017 reported under previous GAAP | Reconciliation to FRS | 2017 reported under FRS | |||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||
Other income, net | 62 | - | 62 | |||||||||||
- Research and development | (3,292) | - | (3,292) | |||||||||||
- Selling, general and administrative | A4 | (787) | (2) | (789) | ||||||||||
- Amortisation of acquisition-related intangible assets | B, B2 | (1,764) | 1,764 | - | ||||||||||
- Restructuring, impairment and disposal charges | B, B2 | (161) | 161 | - | ||||||||||
- Litigation settlements | B, B2 | (122) | 122 | |||||||||||
- Other expenses | B, B2 | - | (2,047) | (2,047) | ||||||||||
|
| |||||||||||||
Operating profit | 2,445 | (2) | 2,443 | |||||||||||
Interest expense | B, B3 | (454) | 454 | - | ||||||||||
Loss on extinguishment of debt | B, B3 | (166) | 166 | - | ||||||||||
Finance costs | B, B3 | - | (620) | (620) | ||||||||||
|
| |||||||||||||
Profit before income taxes | 1,825 | (2) | 1,823 | |||||||||||
Income tax expense | (35) | - | (35) | |||||||||||
|
| |||||||||||||
Profit from continuing operations | 1,790 | (2) | 1,788 | |||||||||||
Loss from discontinued operations | (6) | - | (6) | |||||||||||
|
| |||||||||||||
Total profit | 1,784 | (2) | 1,782 | |||||||||||
|
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BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Explanatory Note | 2017 reported under previous GAAP | Reconciliation to FRS | 2017 reported under FRS | |||||||||||||
(US$ millions) | (US$ millions) | (US$ millions) | ||||||||||||||
Other comprehensive income: | ||||||||||||||||
Items that may be reclassified subsequently to profit or loss: | ||||||||||||||||
Unrealised profit on defined benefit pension plans and post-retirement benefit plans | 42 | - | 42 | |||||||||||||
Reclassification of net income | 1 | - | 1 | |||||||||||||
Other comprehensive profit, net of tax | 43 | - | 43 | |||||||||||||
Total comprehensive profit | 1,827 | (2) | 1,825 | |||||||||||||
Profit attributable to: | ||||||||||||||||
Equity holders of the Company | 1,692 | (2) | 1,690 | |||||||||||||
Non-controlling interests | 92 | - | 92 | |||||||||||||
1,784 | (2) | 1,782 | ||||||||||||||
Total comprehensive profit attributable to: | ||||||||||||||||
Equity holders of the Company | 1,735 | (2) | 1,733 | |||||||||||||
Non-controlling interests | 92 | - | 92 | |||||||||||||
1,827 | (2) | 1,825 | ||||||||||||||
BROADCOM LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 29 October 2017
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Underwith such changes in the previous GAAP, expensescontext of those Bylaws as are presented in a multiple-step format. Under FRS,necessary to substitute the Group has reclassified expenses into their functional groups. Expenses based on nature are disclosed in Note 5committee and its members for the Board and its members.However:
(i) regular meetings of committees may be held without notice at such time and at such place as shall from time to time be determined by the applicable committee, or otherwise by either resolution of the Board or resolution of the applicable committee;
(ii) special meetings of committees may also be called by resolution of the Board or the chairperson of the applicable committee; and
(iii) the Board may adopt rules for the governance of any committee to override the provisions that would otherwise apply to the committee pursuant to this FRS financial statements. The following explanatory notes reconcileSection 4.3,provided that such rules do not violate the difference between expenses reported under FRS to those reported underprovisions of the previous GAAP.Certificate of Incorporation or applicable law.
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CostThe officers of sales amounting to US$9,127 million for the Corporation shall include a president and a secretary. The Corporation may also have, at the discretion of the Board, an executive chair of the Board, a chief executive officer, a chief financial year ended 29 October 2017 under FRS representsofficer, a treasurer, one (1) or more vice presidents, one (1) or more assistant vice presidents, one (1) or more assistant treasurers, one (1) or more assistant secretaries, and any such other officers as may be appointed in accordance with the aggregated line items underprovisions of these Bylaws. Any number of offices may be held by the previous GAAP of “Cost of products sold”, ‘Purchase accounting effect on inventory”, “Amortisation of acquisition-related intangible assets” and “Restructuring charges” in their respective financial years.same person.
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Other expenses amounting to US$2,047 million forThe Board shall appoint the financial year ended 29 October 2017 under FRS representofficers of the aggregated line items underCorporation, except such officers as may be appointed in accordance with the previous GAAPprovisions of “AmortisationSection 5.3 of acquisition-related intangible assets”, “Restructuring, impairment and disposal charges” and “Litigation settlements” in their respective financial years.these Bylaws.
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Finance costs amountingThe Board may appoint, or empower the Chief Executive Officer or, in the absence of a chief executive officer, the President, to US$620 millionappoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the financial year ended 29 October 2017 under FRS represent the aggregated line items under the previous GAAP of “Interest expense” and “Loss on extinguishment of debt” in their respective financial years.Board may from time to time determine.
Removal and Resignation of |
These financial statements were authorised for issueSubject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.
5.5 | Vacancies in Offices. |
Any vacancy occurring in any office of the Corporation shall be filled by the Board or as provided in Section 5.2.
5.6 | Representation of Shares of Other Corporations and Entities. |
The Chair of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, the Secretary or Assistant Secretary of the Corporation, or any other person authorized by the Board, the Chief Executive Officer, the President or a Vice President, is authorized to vote, represent and exercise on behalf of the Corporation all rights incident to any and all shares of any other corporation or corporations or other entity or entities standing in the name of the Corporation. The authority granted herein may be exercised either by such person directly or by any other Person authorized to do so by proxy or power of attorney duly executed by such Person having the authority.
5.7 | Authority and Duties of Officers. |
All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be provided herein or designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.
A stock ledger consisting of one or more records in which the names of all of the Corporation’s stockholders of record, the address and number of shares registered in the name of each such stockholder, and all issuances and transfers of stock of the corporation are recorded in accordance with Section 224 of the DGCL shall be administered by or on behalf of the Corporation. Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device, or method, or one or more electronic networks or databases (including one or more distributed electronic networks or databases),provided that the records so kept can be converted into clearly legible paper form within a reasonable time and, with respect to the stock ledger, that the records so kept (i) can be used to prepare the list of stockholders specified in Sections 219 and 220 of the DGCL, (ii) record the information specified in Sections 156, 159, 217(a) and 218 of the DGCL, and (iii) record transfers of stock as governed by Article 8 of the Uniform Commercial Code.
7.1 | Execution of Corporate Contracts and Instruments. |
The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
7.2 | Stock Certificates. |
The shares of the Corporation shall not be represented by certificates but shall be uncertificated and represented by book-entry notations in the books of the Corporation,provided that the Board by resolution may provide that some or all of the shares of any class or series of stock of the Corporation shall be represented by certificates. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by, any two officers authorized to sign stock certificates representing the number of shares registered in certificate form. The Chair of the Board, the President, Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Corporation shall be specifically authorized to sign stock certificates. Any or all of the signatures on the certificate may be a facsimile or electronic signature. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.
7.3 | Lost Certificates. |
The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner
of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
7.4 | Shares Without Certificates |
Unless the Board determines that all of the shares of any class or series of stock of the Corporation shall be represented by certificates, the Corporation shall adopt a system of issuance, recordation and transfer of its shares of stock by electronic or other means not involving the issuance of certificates, provided the use of such system by the Corporation is permitted in accordance with applicable law.
7.5 | Construction; Definitions. |
Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural and the plural number includes the singular.
7.6 | Dividends. |
The Board, subject to any restrictions contained in either (i) the DGCL or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.
The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.
7.7 | Fiscal Year. |
The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors of Broadcom Limited on 9 February 2018.and may be changed by the Board.
7.8 | Seal. |
The Corporation may, but shall not be required to, adopt a corporate seal, which, if adopted by the Board, may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
7.9 | Transfer of Stock. |
Shares of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate Person or Persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the Persons from and to whom it was transferred.
7.10 | Stock Transfer Agreements. |
The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes or series of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
7.11 | Registered Stockholders. |
The Corporation:
(i) shall be entitled to recognize the exclusive right of a Person registered on its books as the owner of shares to receive dividends and to vote as such owner; and
(ii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.
7.12 | Waiver of Notice. |
Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver, signed by the Person entitled to notice, or a waiver by electronic transmission by the Person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a Person at a meeting shall constitute a waiver of notice of such meeting, except when the Person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these Bylaws.
DIRECTIONS TO BROADCOM LIMITED
2018 ANNUAL GENERAL MEETING
Our offices located at
1320 Ridder Park Drive, San Jose, California
Coming North onUS-880:Article VIII - Notice by Electronic Transmission
Notice by Electronic Transmission. |
Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the Certificate of Incorporation or these Bylaws, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if:
(i) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices given by the Corporation in accordance with such consent; and
(ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other Person responsible for the giving of notice.
However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Any notice given pursuant to the preceding paragraph shall be deemed given:
(i) | if by facsimile telecommunication, when directed to a number at which the |
(ii) | if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; |
if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and |
if by any other form of electronic transmission, when directed to the |
An affidavit of the Secretary or an Assistant Secretary of the Corporation or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
8.2 | Definition of Electronic Transmission. |
An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, including the use of, or participation in, one or more electronic networks or databases (including one or more distributed electronic networks or databases), that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
Coming South onUS-101:Article IX - Indemnification
Indemnification of Directors and Officers. |
Coming South onThe Corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, except for liability (i) for any breach of a director’s loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL (relating to the liability of directors for unlawful payment of a dividend or an unlawful stock purchase or redemption) or (iv) for any transaction from which the director derived an improper personal benefit, any director or officer of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she, or a Person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise orI-880:non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees, judgments, fines ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred by such Person in connection with any such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 9.4, the Corporation shall be required to indemnify a Person in connection with a Proceeding initiated by such Person only if the Proceeding was authorized in the specific case by the Board.
Indemnification of Others. |
The Corporation shall have the power to indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any employee or agent of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding by reason of the fact that he or she, or a Person for whom he or she is the legal representative, is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise ornon-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such Person in connection with any such Proceeding, if such Person acted in good faith and in a manner such Person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such Person’s conduct was unlawful.
Prepayment of Expenses. |
The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by any officer or director of the Corporation, and may pay the expenses incurred by any employee or agent of the Corporation, in defending any Proceeding in advance of its final disposition;provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Person to repay all amounts advanced if it should be ultimately determined that the Person is not entitled to be indemnified under this Article IX or otherwise.
9.4 | Determination; Claim. |
If a claim for indemnification (following the final disposition of such Proceeding) under this Article IX is not paid in full within sixty (60) days, or a claim for advancement of expenses under this Article IX is not paid in full within thirty (30) days, after a written claim therefor has been received by the Corporation the claimant may thereafter (but not before) file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.
9.5 | Non-Exclusivity of Rights. |
The rights conferred on any Person by this Article IX shall not be exclusive of any other rights which such Person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
9.6 | Insurance. |
The Corporation may purchase and maintain insurance on behalf of any Person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust enterprise ornon-profit entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.
9.7 | Other Indemnification. |
The Corporation’s obligation, if any, to indemnify or advance expenses to any Person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise ornon-profit entity shall be reduced by any amount such Person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise ornon-profit enterprise.
9.8 | Continuation of Indemnification. |
The rights to indemnification and to prepayment of expenses provided by, or granted pursuant to, this Article IX shall continue notwithstanding that the Person has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, heirs, executors, administrators, legatees and distributees of such Person.
9.9 | Amendment or Repeal; Interpretation. |
The provisions of this Article IX shall constitute a contract between the Corporation, on the one hand, and, on the other hand, each individual who serves or has served as a director or officer of the Corporation (whether before or after the adoption of these Bylaws), in consideration of such Person’s performance of such services, and pursuant to this Article IX the Corporation intends to be legally bound to each such current or former director or officer of the Corporation. With respect to current and former directors and officers of the Corporation, the rights conferred under this Article IX are present contractual rights and such rights are fully vested, and shall be deemed to have vested fully, immediately upon adoption of theses Bylaws. With respect to any directors or officers of the Corporation who commence service following adoption of these Bylaws, the rights conferred under this provision shall be present contractual rights and such rights shall fully vest, and be deemed to have vested fully, immediately upon such director or officer commencing service as a director or officer of the Corporation. Any repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection (i) hereunder of any Person in respect of any act or omission occurring prior to the time of such repeal or modification or (ii) under any agreement providing for indemnification or advancement of expenses to an officer or director of the Corporation in effect prior to the time of such repeal or modification.
Any reference to an officer of the Corporation in this Article IX shall be deemed to refer exclusively to the executive chair of the Board, a chief executive officer, a chief financial officer, a treasurer appointed pursuant to Article V of these Bylaws, and to any vice president, assistant secretary, assistant treasurer, or other officer of the Corporation appointed by (x) the Board pursuant to Article V of these Bylaws or (y) an officer to whom the Board has delegated the power to appoint officers pursuant to Article V of these Bylaws, and any reference to an officer of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be deemed to refer exclusively to an officer appointed by the Board (or equivalent governing body) of such other entity pursuant to the Certificate of Incorporation and Bylaws (or equivalent organizational documents) of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The fact that any person who is or was an employee of the Corporation or an employee of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise has been given or has used the title of “vice president” or any other title that could be construed to suggest or imply that such person is or may be an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall not result in such person being constituted as, or being deemed to be, an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for purposes of this Article IX.
The Board is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation or waive the observance of any bylaw (either generally or in a particular instance, and either retroactively or prospectively). Any adoption, amendment or repeal of the Bylaws of the Corporation or waiver of the observance of any bylaw by the Board shall require the approval of a majority of the authorized number of directors. The stockholders also shall have power to adopt, amend or repeal the Bylaws of the Corporation or waive the observance of any bylaw (either generally or in a particular instance, and either retrospectively or prospectively);provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least a majority of the voting power of all the then-outstanding shares of voting stock of the Corporation with the power to vote at an election of directors, voting together as a single class.
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (iii) any action arising pursuant to any provision of the DGCL or the Certificate of Incorporation or these Bylaws (as either may be amended from time to time) or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine. If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (a) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (b) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
Broadcom Limited
Certificate of Amendment and Restatement of Bylaws
The undersigned hereby certifies that he is the duly elected, qualified and acting [Title] of Broadcom Limited, a Delaware corporation (the “Corporation”), and that the foregoing Amended and Restated Bylaws were approved on, 2018, effective as of, 2018 by the Corporation’s board of directors.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand thisday of, 2018.
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Name: |
Annual Meeting Proxy Card
MMMMMMMMMMMM MMMMMMMMMMMMMMM C123456789 IMPORTANT SPECIAL MEETING INFORMATION 000004 000000000.000000 ext 000000000.000000 ext ENDORSEMENT LINE SACKPACK 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 MMMMMMMMM ADD 5 ADD 6 Using a black ink pen, mark your votes with an X as shown in X this example. Please do not write outside the designated areas. Special Meeting Proxy Card q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
[REVERSE SIDE]
q A Proposal — The board of directors of Broadcom Limited, a public company limited by shares incorporated under the laws of the + Republic of Singapore (“Broadcom”), unanimously recommends a vote “FOR” eachthe approval of Proposal 1. For Against Abstain 1. To approve the scheme of arrangement under Singapore law among Broadcom, the shareholders of Broadcom and Broadcom Limited, a Delaware corporation, subject to approval of the director nominees (Proposal Nos. 1(a) through 1(j))High Court of the Republic of Singapore, as set forth in Broadcom’s notice of, and “FOR” Proposals No. 2, 3proxy statement relating to, its Special Meeting. In their discretion, the Proxies, and 4.either of them acting alone, are authorized to vote on such other business as may properly come before the meeting and any adjournment or postponement of the meeting. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMMM1UPX 3628461 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 02QXDE
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Important Notice Regarding the Internet Availability of Proxy Materials for the 2018 Annual General Meeting of Shareholders:
Special Meeting: The notice and proxy statement and annual report to shareholders are available at http://investors.broadcom.com/phoenix.zhtml?c=203541&p=proxy.
If you would like to reduce the costs incurred by Broadcom in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via email or the Internet. To sign up for electronic delivery, please contact Broadcom’s transfer agent, Computershare Investor Services at1-877-373-6374 within the U.S., U.S. Territories and Canada, or at+1-781-575-3100 +1-781-575-3100 outside the U.S., U.S. Territories and Canada.
q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE.
q Proxy — BROADCOM LIMITED
(Incorporated + (Incorporated in the Republic of Singapore)
(Company (Company Registration Number 201505572G)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, being a member of Broadcom Limited (“Broadcom”Broadcom”), hereby appoints Hock E. Tan Thomas H. Krause, Jr. and Mark D. Brazeal,James V. Diller, or eacheither of them acting alone, with full powers of substitution, as proxies (the “Proxies”“Proxies”) of the undersigned and hereby authorizes the Proxies to represent and to vote, as designated on the reverse side, all of the ordinary shares or Special Voting Sharesnon-economic voting preference shares of Broadcom owned by the undersigned entitled to vote at the 2018 Annual GeneralSpecial Meeting of Shareholders of Broadcom to be held at 11:8:00 a.m. Pacific Time on April 4,March 23, 2018, at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A., and at any adjournment or postponement thereof.
This Proxy Card, when properly executed and returned in a timely manner, will be voted at the 2018 Annual GeneralSpecial Meeting of Shareholders and any adjournment or postponement thereof in the manner described herein. If no contrary indication is made, this Proxy Card will be voted “FOR” eachthe approval of the Board nominees (Proposal Nos. 1(a) through 1(j)) and “FOR” Proposals No. 2, 3 and 4,Proposal 1, and in accordance with the judgment of the persons named as Proxies herein on any other matters that may properly be put before the 2018 Annual General Meeting of Shareholders.
Special Meeting. The undersigned hereby acknowledges receipt of the Notice of the 2018 Annual GeneralSpecial Meeting of Shareholders and the accompanying proxy statement.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THIS PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, TO ARRIVE NO LATER THAN 9:00AM8:00 A.M. PACIFIC TIME ON APRIL 2,MARCH 22, 2018.
B Non-Voting Items Change of Address — Please print your new address below. Meeting Attendance Mark the box to the right if you plan to attend the Special Meeting. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below This Proxy Card must be signed exactly as your name appears hereon. If more than one name appears, all persons so designated should sign. Attorneys, executors, administrators, trustees and guardians should indicate their capacities. If the signatory is a corporation, please print full corporate name and indicate capacity of duly authorized officer executing on behalf of the corporation. If the signatory is a partnership, please print full partnership name and indicate capacity of duly authorized person executing on behalf of the partnership.
Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS PROXY CARD IS VALID ONLY WHEN SIGNEDCARD. +