Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant  þ

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨    Preliminary Proxy Statement    ¨   

Confidential, for Use of the Commission Only

(as permitted by Rule 14a-6(e)(2))

þ    Definitive Proxy Statement      
¨    Definitive Additional Materials      
¨    Soliciting Material Pursuant to §240.14a-12      

AVAGO TECHNOLOGIES LIMITED

(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

 

þ No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies:

  

 

 

  (2) Aggregate number of securities to which transaction applies:

  

 

 

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

  

 

 

  (4) Proposed maximum aggregate value of transaction:

  

 

 

  (5) Total fee paid:

  

 

 

¨ Fee paid previously with preliminary materials.

 

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

 

  (1) Amount Previously Paid:

  

 

 

  (2) Form, Schedule or Registration Statement No.:

  

 

 

  (3) Filing Party:

  

 

 

  (4) Date Filed:

  

 


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LOGO

AVAGO TECHNOLOGIES LIMITED

(Incorporated in the Republic of Singapore)

(Company Registration Number 200510713C)

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

To Be Held on April 8, 2015

To our shareholders:

You are cordially invited to attend, and NOTICE IS HEREBY GIVEN of, the 2015 Annual General Meeting of Shareholders (the “2015 AGM”) of Avago Technologies Limited (“Avago” or “the Company”), which will be held at our subsidiary’s offices of located at 1320 Ridder Park Drive, San Jose, California 95131, U.S.A., at 11:00 a.m., Pacific Time, on Wednesday, April 8, 2015, for the following purposes:

As Ordinary Business

 

  1. To re-elect each of the following directors to the board of directors (the “Board”):

 

  (a) Mr. Hock E. Tan;

 

  (b) Mr. John T. Dickson;

 

  (c) Mr. James V. Diller;

 

  (d) Mr. Lewis C. Eggebrecht;

 

  (e) Mr. Bruno Guilmart;

 

  (f) Mr. Kenneth Y. Hao;

 

  (g) Ms. Justine F. Lien;

 

  (h) Mr. Donald Macleod; and

 

  (i) Mr. Peter J. Marks.

 

  2. To approve the re-appointment of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm and independent Singapore auditor for the fiscal year ending November 1, 2015, and to authorize the Audit Committee of the Board to fix PricewaterhouseCoopers LLP’s remuneration for services provided through our 2016 Annual General Meeting of Shareholders (the “2016 AGM”).

As Special Business

 

  3. To pass the following as an Ordinary Resolution:

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

(a) to:

 

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

 

  (ii)

make or grant offers, agreements, options or other instruments (including the grant of awards or options pursuant to our equity-based incentive plans and agreements in effect from time to time) that might or would require ordinary shares to be allotted and issued, whether such


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  allotment or issuance would occur during or after the expiration of this authority (including, but not limited to, the creation and issuance of warrants, rights, units, purchase contracts, debentures or other instruments (including debt instruments) convertible into ordinary shares),

at any time to and/or with such persons and upon such terms and conditions, for such purposes and for 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 Articles of Association; and

(b) to allot and issue ordinary shares in our capital pursuant to any offer, agreement, option or other agreement made, granted or authorized by our directors while this resolution 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 2016 AGM or the expiration of the period within which our 2016 AGM is required by law to be held.

 

  4. To pass the following resolution as an Ordinary Resolution:

RESOLVED THAT, pursuant to the provisions of Sections 76C and 76E of the Singapore Companies Act and also subject to the provisions of that Act and our Articles of Association:

(a) authority be, and hereby is, given to our Board to cause to be purchased or otherwise acquired issued ordinary shares in the capital of the Company, not exceeding in aggregate the number of issued ordinary shares representing 10% (or such other higher percentage as the Minister may by notification prescribe pursuant to the Singapore Companies Act) of the total number of ordinary shares in the capital of the Company outstanding as of (x) April 9, 2014 (the date of our last Annual General Meeting of Shareholders) or (y) the date of the passing of this resolution by shareholders, whichever is greater (unless the share capital of the Company has been reduced in accordance with sections 78C or 78I of the Singapore Companies Act, at any time during the (as defined below), in which event the total number of ordinary shares of the Company shall be taken to be the total number of issued ordinary shares of the Company as altered by such share capital reduction(s)), at such price or prices as may be determined by our Board from time to time, up to the maximum purchase price described in paragraph (c) below, by way of:

 

  (i) market purchases on the Nasdaq Global Select Market or any other stock exchange on which our ordinary shares may for the time being be listed and quoted; and/or

 

  (ii) off-market purchases (if effected other than on the Nasdaq Global Select Market or, as the case may be, any other stock exchange on which our ordinary shares may for the time being be listed and quoted) in accordance with any equal access scheme(s) as may be determined or formulated by our Board as they consider fit, which scheme(s) shall satisfy all the conditions prescribed by the Singapore Companies Act, and otherwise in accordance with all other laws as may for the time being be applicable, and the regulations and rules of the Nasdaq Global Select Market, or, as the case may be, any other stock exchange on which our ordinary shares may for the time being be listed and quoted;

(b) unless varied or revoked by our shareholders in a general meeting, the authority conferred on our Board pursuant to the mandate contained in paragraph (a) above may be exercised by our Board at any time and from time to time during the period (the “Relevant Period”) commencing from the date of the passing of this resolution by shareholders and expiring on the earlier of:

 

  (i) the date on which our 2016 AGM is held; or

 

  (ii) the date by which our 2016 AGM is required by law to be held;

(c) the maximum purchase price (excluding brokerage, commission, applicable goods and services tax and other related expenses) which may be paid for an ordinary share purchased or acquired by us pursuant to the mandate contained in paragraph (a) above, shall not exceed:

 

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  (i) in the case of a market purchase of ordinary shares, the highest independent bid per share or the last independent transaction price per share, whichever is higher, of our ordinary shares quoted or reported on the Nasdaq Global Select Market, or, as the case may be, any other stock exchange on which our ordinary shares may for the time being be listed and quoted, at the time the purchase is effected; and

 

  (ii) in the case of an off-market purchase pursuant to an equal access scheme, 150% of the Prior Day Close Price, and for the above purposes, the term “Prior Day Close Price” means the closing price per share of our ordinary shares as quoted on the Nasdaq Global Select Market, or, as the case may be, any other stock exchange on which our ordinary shares may, for the time being, be listed and quoted on the day immediately preceding the date of the making of the offer pursuant to the off-market purchase. The date of the making of the offer refers to the date on which we announce our intention to make an offer for the purchase or acquisition of our ordinary shares from holders of our ordinary shares, stating therein the purchase price (which shall not be more than the maximum purchase price calculated on the foregoing basis) for each ordinary share and the relevant terms of the equal access scheme for effecting the off-market purchase; and

(d) our directors and officers and/or any of them be and are hereby authorized to complete and do, or cause to be completed or done, all such acts and things (including executing such documents as may be required) as one or more of them may consider expedient or necessary to give effect to the transactions contemplated and/or authorized by this resolution.

 

  5. To pass the following as an Ordinary Resolution:

RESOLVED THAT, approval be and is hereby given for the Company to provide the following cash compensation to directors for service on the Board and its committees during the period from the day after the 2015 AGM through the date on which our 2016 AGM is held, and for each approximately 12-month period thereafter:

(a) annual cash compensation of $65,000 to each of our non-employee directors, other than the Chairperson of the Board, and cash compensation of $145,000 to the independent Chairperson of the Board;

(b) additional annual cash compensation of $25,000 to the Chairperson of the Audit Committee of the Board, provided that such person is an independent director;

(c) additional annual cash compensation of $15,000 to the Chairperson of the Compensation Committee of the Board, provided that such person is an independent director;

(d) additional annual cash compensation of $12,500 to the Chairperson of the Nominating and Corporate Governance Committee of the Board, provided that such person is an independent director;

(e) additional annual cash compensation of $10,000 to each of our independent directors in respect of each of the foregoing committees of the Board on which they serve, other than service as chairperson of any such committee of the Board; and

(f) appropriate pro rata cash compensation, based on the annual cash compensation set forth in (a) to (e) above, as applicable, to (i) any director who ceases to be a director, Chairperson of the Board or member or chairperson of any committee of the Board following the 2015 AGM and (ii) any new non-employee director who is appointed by the Board, any independent director who is appointed to the position of Chairperson of the Board or chairperson of any committee of the Board or any independent director who is appointed to serve on any committee of the Board, in each case, after the date of our 2015 AGM, for their services rendered as directors and/or committee members for any period less than 12 months.

 

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As Ordinary Business

 

  6. To transact any other business as may properly be transacted at the 2015 AGM.

Notes About the 2015 Annual General Meeting of Shareholders

Singapore Statutory Financial Statements. At the 2015 AGM, our shareholders will have the opportunity to discuss and ask questions regarding our Singapore audited accounts for the fiscal year ended November 2, 2014, together with the reports of the directors and auditors thereon, in compliance with the laws of Singapore. Shareholder approval of our Singapore audited accounts is not being sought by the proxy statement for the 2015 AGM (the “Proxy Statement”) and will not be sought at the 2015 AGM.

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

Eligibility to Vote at Annual General Meeting of Shareholders; Receipt of Notice. Our Board has fixed the close of business on February 11, 2015, as the record date for determining those shareholders who will be entitled to receive copies of this notice and accompanying Proxy Statement or the Notice of Availability of Proxy Materials. However, only registered shareholders or “shareholders of record” on April 8, 2015, will be entitled to vote at the 2015 AGM. If you have sold or transferred all of your ordinary shares of the Company, you should immediately forward this Proxy Statement and the accompanying proxy card to the purchaser or transferee, or to the bank, broker or agent through whom the sale was effected, for onward transmission to the purchaser or transferee. If you hold shares other than in registered form as a shareholder of record, and instead hold your shares as, or through, a participant in DTC, we understand that in order for your vote to be counted at the 2015 AGM, you must also have been a holder of shares as at, and with effect from, February 11, 2015, the date for determining shareholders entitled to receive notice of the 2015 AGM and related proxy materials.

Quorum. The attendance, in person or by proxy, of at least a majority of our outstanding ordinary shares at the 2015 AGM is required to constitute a quorum. Accordingly, it is important that your shares be represented at the 2015 AGM, either in person or by proxy.

Proxies. A shareholder of record, entitled to attend and vote at the 2015 AGM, is entitled to appoint a proxy 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. If not delivered in person at the 2015 AGM, a proxy card must be received by us c/o Proxy Services, c/o Computershare Investor Services, P.O. Box 43101, Providence, RI 02940-5067, not less than 48 hours before the time appointed for holding the 2015 AGM or within such other time as may be required by the Singapore Companies Act. A recent amendment to the Singapore Companies Act, once effective, will void any provision in a company’s articles which requires that proxy appointments to be received by a company more than 72 hours before the time appointed for holding the company’s general meeting of shareholders. It is not yet certain when this amendment will become effective. If the amendment becomes effective prior to our 2015 AGM, we will, if we are required to change the deadline, issue a press release announcing the new deadline for submitting proxy cards to the above address. A shareholder of record may revoke his or her proxy at any time prior to the time it is voted. Shareholders of record who are present at the meeting may revoke their proxies and vote in person or, if they prefer, may abstain from voting in person and allow their proxies to be voted.

 

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If you are a beneficial owner, 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.

Mandatory Disclosure Regarding Share Purchase Mandate Funds. Only funds legally available for purchasing or acquiring ordinary shares in accordance with our Articles of Association and applicable laws of Singapore will be used to repurchase our ordinary shares if Proposal 4 (renewal of our Share Purchase Mandate) is approved. In the event that we elect to purchase or acquire any of our ordinary shares, depending on the number of ordinary shares repurchased or acquired and then current market, business and other relevant conditions, we may use our internal sources of funds and/or external borrowings to finance any such purchases or acquisitions. The amount of funds required for us to purchase or acquire our issued ordinary shares, and the impact on our financial position will depend on the number of ordinary shares we purchase or acquire and the price at which we make such purchases. Our directors do not propose to exercise the Share Purchase Mandate in a manner and to such an extent that would materially affect our working capital requirements and those of our subsidiaries.

 

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

Shareholders to be held on April 8, 2015:

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

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

By Order of the Board,

 

LOGO

Hock E. Tan

Director, Chief Executive Officer and President

February 20, 2015

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

 

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AVAGO TECHNOLOGIES LIMITED

PROXY STATEMENT

FOR

2015 ANNUAL GENERAL MEETING OF SHAREHOLDERS

TABLE OF CONTENTS

 

     Page  

ELECTRONIC DELIVERY OF OUR SHAREHOLDER COMMUNICATIONS

     i   

INTERNET AVAILABILITY OF PROXY MATERIALS

     i   

VOTING RIGHTS AND SOLICITATION OF PROXIES

     1   

PROPOSAL 1:

  

ELECTION OF DIRECTORS

     4   

CORPORATE GOVERNANCE

     8   

DIRECTORS’ COMPENSATION

     15   

PROPOSAL 2:

  

APPROVAL OF THE RE-APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND INDEPENDENT SINGAPORE AUDITOR FOR FISCAL YEAR 2015 AND AUTHORIZATION OF THE AUDIT COMMITTEE TO FIX ITS REMUNERATION

    
19
  

PROPOSAL 3:

  

ORDINARY RESOLUTION TO AUTHORIZE ORDINARY SHARE ALLOTMENTS AND ISSUANCES

    
21
  

PROPOSAL 4:

  

ORDINARY RESOLUTION TO APPROVE THE SHARE PURCHASE MANDATE

     23   

PROPOSAL 5: 

  

ORDINARY RESOLUTION TO APPROVE NON-EMPLOYEE DIRECTORS’ CASH COMPENSATION

    
27
  

EXECUTIVE OFFICERS

     28   

COMPENSATION DISCUSSION AND ANALYSIS

     29   

EXECUTIVE COMPENSATION

     48   

EQUITY COMPENSATION PLAN INFORMATION

     56   

COMPENSATION COMMITTEE REPORT

     57   

AUDIT COMMITTEE REPORT

     58   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS

     59   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     63   

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     64   

HOUSEHOLDING OF PROXY MATERIALS

     64   

SHAREHOLDER PROPOSALS FOR THE 2016 ANNUAL GENERAL MEETING

     65   

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     65   

SINGAPORE STATUTORY FINANCIAL STATEMENTS

     66   

OTHER MATTERS

     67   

APPENDIX A: SINGAPORE STATUTORY FINANCIAL STATEMENTS

     A-1   

APPENDIX B: DRIVING DIRECTIONS

     B-1   


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ELECTRONIC DELIVERY OF OUR SHAREHOLDER COMMUNICATIONS

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

 

  1. If you are a registered holder (i.e., you hold your Avago ordinary shares in your own name through our transfer agent, Computershare Investor Services), visit: www-us.computershare.com/investor/ to enroll.

 

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

Your electronic delivery enrollment will be effective until you cancel it. If you have questions about electronic delivery, please call our Investor Relations department at +1 (408) 435-7400.

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 8, 2015:

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

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

 

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PROXY STATEMENT

for the

2015 ANNUAL GENERAL MEETING

of

SHAREHOLDERS

of

AVAGO TECHNOLOGIES LIMITED

To Be Held on Wednesday, April 8, 2015

11:00 a.m. (Pacific Time)

at our subsidiary’s offices located at

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

We are making this Proxy Statement available in connection with the solicitation by the board of directors of Avago (the “Board”) of proxies to be voted at the 2015 Annual General Meeting of Shareholders (the “2015 AGM”), or at any adjournments or postponements thereof, for the purposes set forth in the accompanying Notice of Annual General Meeting of Shareholders (the “Notice”). Unless the context otherwise requires, references in this Proxy Statement to “Avago,” “the Company,” “we,” “our,” “us” and similar terms are to Avago Technologies Limited.

Proxy Mailing. This Proxy Statement, the enclosed Proxy Card and the Notice were first made available on or about February 20, 2015 to shareholders of record as of February 11, 2015.

Costs of Solicitation. We will bear the cost of soliciting proxies. We intend to retain Georgeson Inc., an independent proxy solicitation firm, to assist us in soliciting proxies for an estimated fee of $11,500 plus reimbursement of reasonable expenses. We and/or our agents, including certain of our officers, directors and employees, may solicit proxies by mail, telephone, e-mail, fax or in person. No additional compensation will be paid to our officers, directors or regular employees for such services. We will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by them in sending proxy materials to and soliciting proxies from beneficial holders of our ordinary shares.

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

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

VOTING RIGHTS AND SOLICITATION OF PROXIES

The close of business on February 11, 2015, is the record date for shareholders entitled to notice of the 2015 AGM. All of our ordinary shares issued and outstanding on April 8, 2015 are entitled to be voted at the 2015 AGM, and shareholders of record on April 8, 2015 will have one vote for each ordinary share so held on the matters to be voted upon. As of February 11, 2014, we had 256,369,422 ordinary shares issued and outstanding.

Proxies. Ordinary shares represented by proxies in the accompanying form, which are properly executed and received by us in accordance with the instructions set forth in the Notice, will be voted by the individuals named therein—Hock E. Tan, Anthony E. Maslowski and Patricia H. McCall (together, the “Proxy Holders”)—at the 2015 AGM in accordance with the shareholders’ instructions set forth in the proxy. A proxy holder need not also be a shareholder.

 

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If you sign and return your proxy but do not indicate how your shares are to be voted, then shares represented by proxies will be voted by the Proxy Holders in accordance with our Board’s recommendations: FOR the election of our Board nominees named in Proposal 1; and FOR each of Proposals 2 to 5.

Management does not know of any matters to be presented at the 2015 AGM other than those set forth in this Proxy Statement and in the Notice accompanying this Proxy Statement, nor have we received notice of any matter by the deadline prescribed by Securities and Exchange Commission (“SEC”) Rule 14a-4(c). Without limiting our ability to apply the advance notice provisions in our Articles of Association with respect to the procedures that must be followed for a matter to be properly presented at an annual general meeting, if other matters should properly come before the 2015 AGM, the Proxy Holders will vote on such matters in accordance with their best judgment.

Any shareholder of record entitled to attend and vote at the 2015 AGM, has the right to revoke his or her proxy at any time prior to voting at the 2015 AGM by (i) submitting a subsequently dated proxy, which, if not delivered in person at the meeting, must be received by us c/o Proxy Services, c/o Computershare Investor Services, P.O. Box 43101, Providence, RI 02940-5067, no later than 48 hours before the appointed time of the meeting or within such other time as may be required by the Singapore Companies Act, or (ii) by attending the meeting and voting in person. A recent amendment to the Singapore Companies Act, once effective, will void any provision in a company’s articles which requires that proxy appointments to be received by a company more than 72 hours before the time appointed for holding the company’s general meeting of shareholders. It is not yet certain when this amendment will become effective. If the amendment becomes effective prior to our 2015 AGM, we will, if we are required to change the deadline, issue a press release announcing the new deadline for submitting proxy cards to the address above.

If you are an institution and hold your shares in an account with the Depositary Trust Company (“DTC”), vote your shares through DTC’s procedures. Your shares must be voted no less than 48 hours prior to the meeting (or within such other time as may be required by the Singapore Companies Act) or such longer period prior to the meeting as may be specified by DTC’s procedures. You may not vote your shares in person at the 2015 AGM unless you obtain a legal proxy from DTC.

If your ordinary shares are held in “street name” through a broker, bank, or other nominee, you have the right to instruct your broker, bank or other nominee on how to vote the shares in your account. Your broker, bank or nominee will send you a voting instruction form for you to use to direct how your shares should be voted. If you wish to change or revoke your voting instructions, you will need to contact your broker, bank or other nominee holding your ordinary shares and follow their instructions. You may not vote your shares in person at the 2015 AGM unless you obtain a legal proxy from the broker, bank or other nominee that holds your shares, giving you the right to vote the shares instead of the broker, bank or other nominee holding your shares. If your shares are held in the name of a broker, trust, bank or other nominee, in order to be admitted to the 2015 AGM you will also need to bring a letter or recent account statement from that broker, bank or other nominee that confirms that you are the beneficial owner of those shares, as well as a picture identification, such as a valid driver’s license or passport, for purposes of personal identification.

If you hold shares other than in registered form as a shareholder of record, and instead hold your shares as, or through, a participant in DTC, we understand that in order for your vote to be counted at the 2015 AGM, you must also have been a holder of shares as at, and with effect from, February 11, 2015, the date for determining shareholders entitled to receive notice of the 2015 AGM and related proxy materials. Shares held other than in registered form by a shareholder of record must be voted no less than 48 hours prior to the meeting (or within such other time as may be required by the Singapore Companies Act) or such longer period as may be specified by DTC’s, or DTC participants’, procedures. If you become a beneficial holder of shares after February 11, 2015 but before the meeting date and you wish to vote your shares, you must become a shareholder of record prior to

 

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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 shareholder of record.

Quorum. Representation at the 2015 AGM, in person or by proxy, of at least a majority of all issued and outstanding ordinary shares is required to constitute a quorum.

Abstentions and Broker Non-Votes. Abstentions and “broker non-votes” are considered present and entitled to vote at the 2015 AGM, for the purpose of determining whether a quorum is present. A “broker non-vote” occurs when a bank, broker or other nominee holding shares on behalf of a beneficial owner may not vote ordinary shares held by it because it (1) has not received voting instructions from the beneficial owner of those shares and (2) lacks discretionary voting power to vote those shares. Under our Articles of Association, for a proposal being voted on as an ordinary resolution, abstentions will have the same effect as a vote against the proposal. A broker non-vote is treated as not being entitled to vote on the relevant proposal and is not counted for purposes of determining whether a proposal has been approved.

If you are a beneficial owner, your bank, broker or other nominee is entitled to vote your shares on “routine” matters, even if it does not receive voting instructions from you. Routine matters include all of the proposals to be voted on at the 2015 AGM, other than Proposal 1 (election of directors) and Proposal 5 (directors’ cash compensation).

Required Vote. With respect to Proposal 1 (election of directors), nominees receiving the highest number of affirmative votes of the ordinary shares present in person or represented by proxy at the 2015 AGM and entitled to vote shall be elected, provided that such number of affirmative votes shall not be less than at least a majority of the ordinary shares held by the shareholders present in person or represented by proxy at the 2015 AGM and entitled to vote on the proposal.

The affirmative vote of shareholders holding at least a majority of the ordinary shares held by the shareholders present in person or represented by proxy at the 2015 AGM and entitled to vote on the proposal is required to approve the re-appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm and independent Singapore auditor pursuant to Proposal 2, to approve the ordinary resolutions contained in Proposal 3 (authorization of ordinary share allotments and issuances) , Proposal 4 (renewal of the share purchase mandate) and Proposal 5 (directors’ cash compensation).

Voting Procedures and Tabulation. We have appointed a representative of Computershare Trust Company, N.A. as the inspector of elections to act at the 2015 AGM and to make a written report thereof. Prior to the 2015 AGM, the inspector will sign an oath to perform his or her duties in an impartial manner and according to the best of his or her ability. The inspector will ascertain the number of ordinary shares outstanding and the voting power of each, determine the ordinary shares represented at the 2015 AGM and the validity of proxies and ballots, count all votes and ballots, and perform certain other duties. The determination of the inspector as to the validity of proxies will be final and binding.

 

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PROPOSAL 1:

ELECTION OF DIRECTORS

General

Pursuant to the Singapore Companies Act, Chapter 50 (the “Singapore Companies Act”) and our Articles of Association, our Board must have at least one director who is ordinarily resident in Singapore. Pursuant to our Articles of Association, our Board may consist of no more than 13 directors. Our Board currently consists of nine members and each of our directors is elected annually.

Director Nominees

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

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

The following table sets forth certain information concerning the nominees for directors of the Company as of February 17, 2015.

 

Hock E. Tan

Age 63

President, Chief

Executive Officer

Director since

March 2006

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

 

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John T. Dickson

Age 68

Director since

January 2012

   Mr. Dickson served as Executive Vice President and head of Operations of Alcatel-Lucent from May 2010 to January 2012. Mr. Dickson is the former President and Chief Executive Officer of Agere Systems, Inc., a position he held from August 2000 to October 2005. Prior to joining Agere, Mr. Dickson held positions as the Executive Vice President and Chief Executive Officer of Lucent’s Microelectronics and Communications Technologies Group, Vice President of AT&T Corporation’s integrated circuit business unit, and Chairman and Chief Executive Officer of SHOgraphics, Inc, as well as senior roles with ICL, plc, and Texas Instruments, Inc. Mr. Dickson also serves as a director of KLA-Tencor Corporation and of QLogic Corporation. Within the past five fiscal years, he has served on the board of directors of National Semiconductor Corporation (April 2006 to September 2010), Mettler-Toledo International Inc. (March 2001 to April 2009) and Freescale Semiconductor, Ltd (May 2012 to July 2013). Mr. Dickson’s qualifications to serve on our Board include his extensive experience in senior management and executive positions in the technology industry, both in Europe and the United States, and his experience as a director of other public and private companies.

James V. Diller

Age 79

Chairman of the Board

Director since

April 2006

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

Lewis C. Eggebrecht

Age 71

Director since April 2014

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

 

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Bruno Guilmart

Age 54

Director since

June 2013

   Mr. Guilmart has been President, Chief Executive Officer and a director of Kulicke & Soffa Industries, Inc. (“K&S”), since September 2010. Mr. Guilmart has also been a member of the board of the Singapore Economic Development Board since February 2014. Prior to joining K&S, Mr. Guilmart was President and Chief Executive Officer of Lattice Semiconductor from 2008 until 2010. From 2003 until 2007, he was President and Chief Executive Officer of Advanced Interconnect Technologies (“AIT”), a TPG-Newbridge company. Mr. Guilmart subsequently became Chief Executive Officer of Unisem Group BhD (“Unisem”) after AIT was acquired by Unisem in 2007, where he served until July 2008. Prior to Unisem/AIT, Mr. Guilmart was senior vice president of worldwide sales and marketing at Chartered Semiconductor Manufacturing. He also held senior management and engineering positions with Cadence Design Systems, Temic Semiconductors and Hewlett-Packard Company. Mr. Guilmart’s qualifications to serve on our Board include his extensive experience in senior management and executive positions in the semiconductor industry, both in the United States and overseas.

Kenneth Y. Hao

Age 46

Director since

September 2005

   Mr. Hao is a Managing Partner and Managing Director of Silver Lake Partners (“Silver Lake”). Prior to joining Silver Lake in 2000, Mr. Hao was an investment banker with Hambrecht & Quist for 10 years, most recently serving as a Managing Director in the Technology Investment Banking group. Mr. Hao previously served as a director of NetScout Systems, Inc. from November 2007 until September 2008. Mr. Hao has spent his career investing in and advising technology companies. Mr. Hao also serves on the board of directors of a number of private companies. Mr. Hao’s qualifications to serve on our Board include his depth of experience in financial and investment matters and his familiarity with a broad range of companies in technology industries.

Justine F. Lien

Age 52

Director since

June 2008

   Ms. Lien served as the Chief Financial Officer, Vice President of Finance, Treasurer, and Secretary of Integrated Circuit Systems, Inc., from May 1999 to September 2005 when ICS merged with Integrated Device Technologies, Inc., following which Ms. Lien retired. She joined ICS in 1993, holding titles including Director of Finance and Administration and Assistant Treasurer. Ms. Lien serves as a director and chairperson of the Audit Committee of SunEdison Semiconductor Limited, and served as a director of Techwell, Inc. from January 2006 until July 2010, where she also served as the chairperson of the audit committee. Ms. Lien holds a B.A. degree in accounting from Immaculata College and an M.T. degree in taxation from Villanova University. Ms. Lien’s qualifications to serve on our Board include her career in senior financial management positions with, and on the board of directors of, semiconductor companies, and her education and training as an accounting professional.

 

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Donald Macleod

Age 66

Director since

November 2007

   Mr. Macleod joined National Semiconductor Corporation in February 1978 and served as its President and Chief Executive Officer from November 2009 to September 2011, when National Semiconductor Corporation was acquired by Texas Instruments Incorporated. He served as National Semiconductor Corporation’s President and Chief Operating Officer from the beginning of 2005 until November 2009, and before that he held various other executive and senior management positions at the company including Executive Vice President and Chief Operating Officer and Executive Vice President, Finance and Chief Financial Officer. Mr. Macleod served as the Chairman of the board of directors of National Semiconductor Corporation from May 2010 to September 2011. Mr. Macleod serves as the Chairman of the board of directors of Intersil Corporation and also serves as a director of Knowles Corporation. Mr. Macleod also serves on the board of directors of a number of private companies and business organizations. Mr. Macleod’s qualifications to serve on our Board include his more than 30 years of experience in senior management and executive positions in the semiconductor industry, both in Europe and in the United States, and his accounting and finance qualifications and experience.

Peter J. Marks

Age 61

Director since

December 2013

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

Mr. Guilmart is our Singapore resident director. Due to the Singapore Companies Act requirement that we have at least one director who is ordinarily resident in Singapore in office at all times, in the event that Mr. Guilmart is not re-elected at the 2015 AGM, he will continue in office after the 2015 AGM as a member of our Board 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 2015 AGM, our intention would be to make a public announcement of such resignation and either leave such Board seat vacant or appoint a substitute nominee. If such Board seat were left vacant, this would reduce the number of director nominees to be elected at the 2015 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 2015 AGM to fill any such vacancy, it is intended that the shares represented by the proxy will be voted for such substitute nominee as may be designated by our Board.

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

Our Board recommends a vote FOR the election of each of the director nominees listed above to our Board.

 

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CORPORATE GOVERNANCE

Board of Directors

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

Our Board held a total of nine meetings during the fiscal year ended November 2, 2014 (“Fiscal Year 2014”). During Fiscal Year 2014, all directors attended at least 75% of the aggregate of the total number of meetings of our Board together with the total number of meetings held by 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 respective committee. Our non-employee directors and our independent directors meet at regularly scheduled executive sessions without management participation.

Our Board has adopted a policy that encourages each director to attend the annual general meetings of our shareholders, but attendance is not required. All of our directors attended our 2014 Annual General Meeting of Shareholders (“2014 AGM”).

Director Independence

Our Board has undertaken a review of the independence of each director and nominee for director and considered whether any 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 the Company and an entity where a director or nominee for director of the Company serves as a non-employee director and/or is the beneficial owner, directly or indirectly of less than 10% of such entity, or where a director or nominee for director of the Company serves on a non-employee advisory board of, or in a non-employee advisory capacity to, such an entity are presumed immaterial for the purposes of assessing a director’s independence.

In reviewing the directors’ independence, with respect to Mr. Hao our Board considered that investment funds affiliated with Silver Lake, where Mr. Hao is a Managing Partner and a Managing Director, together with investment funds affiliated with Kohlberg Kravis Roberts & Co. (i) beneficially owned approximately 9% of the Company’s shares prior to their sale in December 2012, and (ii) were party to a Shareholder Agreement and a Registration Rights Agreement with the Company until January 2013 when these agreements were terminated. In addition, our Board considered that two entities affiliated with Silver Lake purchased $1 billion aggregate principal amount of the Company’s 2.0% Convertible Senior Notes due 2021 (“Convertible Notes”), pursuant to a Note Purchase Agreement dated December 15, 2013, between the Company and an investment fund affiliated with Silver Lake, in connection with the acquisition by a subsidiary of the Company of LSI Corporation (“LSI”) on May 6, 2014, discussed in more detail under “Certain Relationships and Related Party Transactions” starting on page 63. With respect to Mr. Guilmart, our Board considered that (i) Mr. Guilmart is the President, Chief Executive Officer and a director of K&S, (ii) the Company occasionally makes purchases of equipment and related replacement parts and equipment servicing from K&S, in the ordinary course on an arms-length basis, that have been immaterial both in amount and significance and (iii) Mr. Guilmart owns less than 1% of the outstanding shares of K&S.

As a result of its review, our Board has determined that Messrs. Dickson, Diller, Eggebrecht, Guilmart, Hao, Macleod and Marks and Ms. Lien, representing eight of our nine director nominees, are currently “independent directors” as defined under the applicable rules and regulations of the SEC and the Nasdaq Stock Market.

 

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Director Retirement Age

Under Sections 153(2) and (6) of the Singapore Companies Act, the office of a director of a public company becomes vacant at the conclusion of the annual general meeting of shareholders first held after such director attains the age of 70 years, and any re-appointment of such director must be approved by our shareholders by ordinary resolution. A recent amendment to the Singapore Companies Act, once effective, will remove this age limitation. However, it is not yet certain when this amendment will become effective.

Directors With Significant Job Change

Our Board has adopted a policy that requires any director who retires from his or her present employment, or who materially changes his or her position, to submit an offer of resignation as a director to 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.

Board Leadership Structure and Role in Risk Management

Our Board believes that at the present time Avago 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 the Company and for the day-to-day leadership of the Company’s operations. The Chairman provides strong independent leadership to assist our Board in fulfilling its role of overseeing the management of Avago and its risk management practices, approves the agenda for meetings of our Board and presides over Board meetings and over the meetings of our non-management and 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 our Board.

Our Board is responsible for overseeing the management of risks facing the 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 the Company’s periodic enterprise-wide risk evaluations conducted by management. The Compensation Committee oversees management of risks relating to the Company’s compensation plans and programs for executives and employees in general. The Nominating and Corporate Governance Committee oversees management of risks associated with Board governance, director independence and conflicts of interest. Additional details regarding the responsibilities of each of these committees is discussed in more detail below, under the heading “Board Committees.” The committees report regularly to our Board on matters relating to the specific areas of risk the committees oversee. Members of management periodically report on the Company’s risk management policies and practices to the relevant Board committees and to the full Board.

Board Committees

Our Board has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The table below provides the current membership for each of the committees and the number of meetings held by each committee during Fiscal Year 2014.

 

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Director

   Audit
Committee
    Compensation
Committee
    Nominating
and Corporate
Governance
Committee
 

James V. Diller

       X        X (C) 

John T. Dickson

       X        X   

Lewis C. Eggebrecht(1)

       X     

Bruno Guilmart

         X   

Justine F. Lien

     X (C)        X   

Donald Macleod

     X        X (C)   

Peter J. Marks(2)

     X       

Number of meetings in Fiscal Year 2014

     10        6        4   

 

(C) Denotes the Chairperson of the committee.
(1) Mr. Eggebrecht joined our Board on April 9, 2014.
(2) Mr. Marks joined our Board on December 10, 2013.

The committee composition in the table gives effect to the following changes to the membership of the committees that became effective November 3, 2014, as a result of our Board’s annual review of Board committee composition:

 

   

Mr. Diller ceased to be a member of the Audit Committee and became an additional member of the Nominating and Corporate Governance Committee, and became Chairperson of the Nominating and Corporate Governance Committee in place of Mr. Dickson;

 

   

Mr. Marks joined the Audit Committee in place of Mr. Diller; and

 

   

Mr. Eggebrecht joined the Compensation Committee as an additional member of that committee.

The functions performed by these committees, which are set forth in more detail in their respective charters, are summarized below. The charters of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are available in the “Investors—Governance” section of our website (http://investors.avagotech.com/phoenix.zhtml?c=203541&p=irol-govHighlights). Shareholders may also request a copy in print from: Investor Relations, c/o Avago Technologies U.S. Inc., 350 West Trimble Road, Building 90, San Jose, CA 95131, U.S.A.

Audit Committee

The Audit Committee is currently comprised of Ms. Lien and Messrs. Macleod and Marks. The Audit Committee is responsible for assisting our Board with its oversight responsibilities regarding the following:

 

   

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

 

   

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

 

   

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

 

   

our compliance with legal and regulatory requirements; and

 

   

related party transactions.

The members of our Audit Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq Stock Market. Our Board has determined that Mr. Macleod is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of the Nasdaq Stock Market. Ms. Lien and Messrs. Macleod and Marks are independent directors as defined under the applicable rules and regulations of the SEC and the Nasdaq Stock Market. The Audit Committee operates under a written charter that satisfies the applicable standards of the SEC and the Nasdaq Stock Market.

 

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Compensation Committee

The Compensation Committee is currently comprised of Messrs. Macleod, Dickson, Diller and Eggebrecht. The Compensation Committee is responsible for determining our executives’ base compensation and incentive compensation, other than that of our Chief Executive Officer, including designing (in consultation with management or our Board) and recommending to our Board for approval and evaluating, our compensation plans, policies and programs, administering our stock option and other equity-based plans and approving the terms of equity-based grants pursuant to those plans. With effect from June 2014, our Chief Executive Officer’s compensation is determined by the full Board, with input and recommendations from the Compensation Committee. To the extent permitted by applicable law, the Company’s Memorandum and Articles of Association and the Nasdaq Stock Market, the Compensation Committee may delegate its responsibilities to a subcommittee. Messrs. Macleod, Dickson, Diller and Eggebrecht are independent directors as defined under the applicable rules and regulations of the SEC and the Nasdaq Stock Market. The Compensation Committee operates under a written charter that satisfies the applicable standards of the SEC and the Nasdaq Stock Market. For information on the processes and procedures followed by the Compensation Committee and the Board for the consideration and determination of executive compensation and the role of its compensation consultant and our Chief Executive Officer, see the “Compensation Discussion and Analysis” section beginning on page 29 of this Proxy Statement.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is currently comprised of Ms. Lien and Messrs. Diller, Dickson and Guilmart. The Nominating and Corporate Governance Committee is responsible for identifying qualified candidates to become directors, recommending to our Board candidates for all directorships, overseeing the annual evaluation of our Board and its committees and taking a leadership role in shaping the corporate governance of the Company. Ms. Lien and Messrs. Diller, Dickson and Guilmart are independent directors as defined under the applicable rules and regulations of the SEC and the Nasdaq Stock Market. The Nominating and Corporate Governance Committee operates under a written charter that satisfies the applicable standards of the SEC and the Nasdaq Stock Market.

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

When evaluating director candidates, the Nominating and Corporate Governance Committee seeks to ensure that our Board has the requisite skills, experience and expertise and that its members consist of persons with appropriately diverse and independent backgrounds. The Nominating and Corporate Governance Committee will consider all aspects of a candidate’s qualifications in the context of the needs of the Company, including: personal and professional integrity, ethics and values; experience and expertise as an officer in corporate management; experience in the Company’s industry and international business and familiarity with the Company; experience as a board member of another publicly traded company; practical and mature business judgment; the extent to which a candidate would fill a present need on our Board; and the other ongoing commitments and obligations of the candidate. However, the Nominating and Corporate Governance Committee does not have any minimum criteria for director candidates. Consideration of new director candidates will typically involve a series of internal discussions, review of information concerning candidates and interviews with selected candidates.

 

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Shareholder Communications With Our Board

Shareholders may communicate with our Board at the following address:

The Board of Directors

Avago Technologies Limited

c/o General Counsel

Avago Technologies U.S. Inc.

1320 Ridder Park Drive

San Jose, CA 95131

U.S.A.

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

Shareholder Nominations to Our Board of Directors

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

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

 

   

the candidate’s name and business address;

 

   

a resume or curriculum vitae describing the candidate’s qualifications, which clearly indicates that he or she has the necessary experiences, skills and qualifications to serve as a director;

 

   

a statement as to whether or not, during the past ten years, the candidate has been convicted in a criminal proceeding (excluding minor traffic violations) and, if so, the dates, the nature of the conviction, the name or other disposition of the case, and whether the individual has been involved in any other legal proceeding during the past ten years;

 

   

a statement from the candidate that he or she consents to serve on our Board if elected; and

 

   

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

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

 

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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 “Investors—Governance” section of our website (http://investors.avagotech.com/phoenix.zhtml?c=203541&p=irol-govHighlights) under “Code of Ethics and Business Conduct.” Shareholders may also request a copy in print from: Investor Relations, c/o Avago Technologies U.S. Inc., 350 West Trimble Road, Building 90, San Jose, CA 95131, U.S.A.

Corporate Governance Guidelines

Our Board is committed to using sound corporate governance practices to help fulfill our responsibilities to our shareholders. As such, our Board has adopted formal Corporate Governance Guidelines to clarify how it exercises its responsibilities and provide a framework within which it will conduct its business. A copy of the Corporate Governance Guidelines is available in the “Investors—Governance” section of our website (http://investors.avagotech.com/phoenix.zhtml?c=203541&p=irol-govHighlights) under “Corporate Governance Guidelines.” Shareholders may also request a copy in print from: Investor Relations, c/o Avago Technologies U.S. Inc., 350 West Trimble Road, Building 90, San Jose, CA 95131, U.S.A.

Compensation Committee Interlocks and Insider Participation

The current members of our Compensation Committee, Messrs. Macleod, Dickson, Diller and Eggebrecht are not, and have never been, officers or employees of the Company. During Fiscal Year 2014, none of our executive officers served on the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or our Compensation Committee.

Risk Assessment and Compensation Practices

Our management conducted its annual review of the Company’s compensation policies and practices for our employees, as they relate to our risk management, in January 2015, and reported their findings to the Compensation Committee. Management has concluded that our compensation policies and practices (described in more detail under “Compensation Discussion and Analysis” and “Executive Compensation” below) balance short and long-term goals and awards, as well as the mix of the cash and equity components. Based upon this review, we believe 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 the Company in the future.

This Proxy Statement, including the preceding paragraph, contains forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events. Forward-looking statements contained in this Proxy Statement should be considered in light of the many uncertainties that affect our business and specifically those factors discussed from time to time in our public reports filed with the SEC, such as those discussed under the heading, “Risk Factors,” in our Annual Report on Form 10-K for Fiscal Year 2014 (the “2014 Form 10-K”), and as may be updated in subsequent SEC filings.

Compensation Consultant

The Compensation Committee has retained Compensia, Inc. (“Compensia”) as its compensation consultant to advise the committee on executives’ and directors’ compensation. Compensia has not provided and does not provide any other services to the Company that are not at the direction of the Compensation Committee. The Compensation Committee has assessed the independence of Compensia pursuant to SEC rules and concluded that no conflict of interest exists that would prevent Compensia from serving as an independent consultant to the Compensation Committee.

 

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Director Share Ownership Guidelines

At the recommendation of the Compensation Committee, our Board implemented share ownership guidelines for non-employee directors, effective January 2011. The ownership guidelines encourage our non-employees directors to hold a minimum of 7,500 of our ordinary shares or such number of shares having a fair market value equal to three times the annual cash retainer paid to non-employee directors for service on our Board (which currently amount, to $180,000, or $195,000 if Proposal 5 is approved by shareholders), whichever is less. The guidelines encourage our non-employee directors to reach this goal within five years of the date our Board approved the guidelines or the date of their appointment or election to our Board, whichever is later, and to hold at least such minimum value in shares for as long as he or she serves on our Board. As of February 11, 2015, all of our directors had achieved the guideline level of share ownership, other than Messrs. Guilmart and Eggebrecht, each of whom joined our Board within the last two years.

 

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DIRECTORS’ COMPENSATION

Under the laws of Singapore, our shareholders must approve all cash compensation paid to our non-employee directors. We do not compensate our management directors for their service on our Board or any committee of our Board.

Non-Employee Directors’ Current Compensation

Our shareholders approved the current cash compensation arrangements for our non-employee directors (which are those directors not employed by us or any subsidiary) at our 2014 AGM. We currently pay the following annual cash compensation to our non-employee directors as follows, payable quarterly:

 

     Current Annual Fees  
     Non-Employee
Directors
    Independent
Non-Employee
Directors
 

Board membership (other than Chairperson of the Board)

   $ 60,000   $ 60,000

Chairperson of the Board

     —       $ 120,000

Committee membership (other than committee chairperson)

     —       $ 10,000   

Chairperson of the Audit Committee

     —       $ 25,000   

Chairperson of the Compensation Committee

     —       $ 15,000   

Chairperson of the Nominating and Corporate Governance Committee

     —       $ 12,500   

 

* Prior to the 2014 AGM, the annual cash compensation payable to directors (other than the Chairperson of the Board) for Board membership was $50,000, and the annual cash compensation payable to the Chairperson of the Board was $80,000.

Our non-employee directors also receive certain equity awards in consideration for their service on our Board, as set forth in more detail below. Non-employee directors are also reimbursed for travel and other out-of-pocket expenses related to their attendance at Board and committee meetings. Non-employee directors do not receive any non-equity incentive compensation, or participate in any pension plan or deferred compensation plan.

Our Board previously approved the following equity compensation for our non-employee directors, which was effective September 2013 to February 2015.

 

   

Upon appointment to our Board, each new non-employee director was entitled to receive an initial equity grant under the Company’s 2009 Equity Incentive Award Plan (the “2009 Plan”) with a notional target fair market value of $500,000 on the date of grant, comprised 50% of stock options and 50% of restricted share units (“RSUs”), with such awards vesting one-third annually over three years (an “Initial Award”), subject to the director’s continued service on our Board.

 

   

Commencing in the fourth year of service, each non-employee director was entitled to receive an annual equity grant under the 2009 Plan with a notional target fair market value of $170,000 on the date of grant, to be granted on the date of each Annual General Meeting of Shareholders occurring in and after the director’s fourth year of service, subject to the director’s re-election at such meeting (“Annual Award”). Non-employee directors could elect to receive an Annual Award either 100% in stock options or 50% in stock options and 50% in RSUs (a “Split Annual Award”). Annual Awards vest in full one year from the date of grant, subject to the director’s continued service on our Board.

To determine the number of shares to be awarded to a non-employee director pursuant to such grants, the notional target fair market value of the grant ($500,000 or $170,000 depending on whether it is an Initial Award or an Annual Award) was divided by the Black Scholes value of an option to purchase one ordinary share (calculated using the average of our per share closing market prices, as quoted on the Nasdaq Global Select

 

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Market, over the 30 calendar days immediately preceding the date of grant) (the “Notional Share Amount”). For Initial Awards and for Split Annual Awards, half of this Notional Share Amount represented the number of shares to be issued pursuant to options. The remaining half of the Notional Share Amount was then divided by three to determine the number of RSUs that will be granted. Due primarily to the fact that the ratio of the fair market value of an RSU to the Black Scholes value of an option share is not always three to one, the actual aggregate grant date fair market value of an Initial Award or a Split Annual Award may have been greater or less than the notional fair value of the award at the time of grant. For an Annual Award consisting solely of stock options, the Notional Share Amount represented the number of shares that will be issued pursuant to options.

In connection with the Compensation Committee’s review of our non-employee directors’ compensation program, discussed in more detail below, on the Compensation Committee’s recommendation, on February 2, 2015, the Board approved changes to the equity compensation of our directors, increasing the target fair market value of the Initial Awards and Annual Awards to $600,000 and $200,000, respectively, effective immediately. The Board also determined that non-employee directors should receive their Initial Award and their Annual Awards solely in the form of RSUs, calculated by dividing the applicable target fair market value of the award 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 date of grant.

The exercise price per share of a non-employee director’s options is equal to the fair market value of an ordinary share on the grant date, and a director’s options expire five years from the date of grant (or earlier if the optionee ceases to be a director). RSUs do not have an exercise price associated with them.

Non-Employee Directors’ Proposed Cash Compensation

In January 2015, the Compensation Committee, assisted by Compensia, the committee’s independent compensation consultant, conducted a review of our non-employee director compensation program. This review was conducted to ascertain whether our non-employee directors’ compensation was competitive with that of our peer group of companies following our acquisition of LSI, which group is discussed below under the heading “Compensation Discussion and Analysis”. The Compensation Committee reviewed, among other things, the current cash compensation of our non-employee directors, the total compensation of our non-employee Chairperson of the Board, the grant date fair value of equity awards previously made to non-employee directors. The Compensation Committee, with the assistance of Compensia, also took into consideration compensation trends for non-employee directors.

Based on Compensia’s review and analysis of the compensation practices of our peer group, the Compensation Committee determined that the Company’s non-employee director program delivered average total direct compensation at below the peer 25th percentile. In particular:

 

   

average cash compensation paid to our non-employee directors for service on our Board was below the 25th percentile of cash compensation paid to non-employee directors within the peer group;

 

   

average cash compensation for service as the Chairperson of the Board was below the 25th percentile within the peer group;

 

   

the grant date fair value of (i) the initial equity award made to our directors for service on our Board, on an annualized basis (because annual grants do not commence until the fourth year of service) compared to peer group annual awards, and (ii) the grant date fair value of the annual equity awards made to our directors, were each below the 25th percentile of similar equity awards made to non-employee directors within the peer group.

Based on Compensia’s analysis, and upon the recommendation of the Compensation Committee, in February 2015, our Board approved changes to our non-employee directors’ cash and equity compensation, subject to shareholders’ approval of changes to our non-employee directors’ cash compensation at the 2015 AGM, as required by Singapore law. As directors’ cash compensation runs from annual general meeting to

 

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annual general meeting, changes in directors’ cash compensation will take effect commencing on April 9, 2015, the day after our 2015 AGM, if they are approved by shareholders at that meeting. If Proposal 5 (directors’ cash compensation) is approved by shareholders, with effect from April 9, 2015 non-employee directors’ cash compensation for service on the Board and its committees would be as follows:

 

     Proposed Annual Fees  
     Non-Employee
Directors
    Independent
Non-Employee
Directors
 

Board membership (other than Chairperson of the Board)

   $ 65,000   $ 65,000

Chairperson of the Board

     —       $ 145,000

Committee membership (other than committee chairperson)

     —       $ 10,000

Chairperson of the Audit Committee

     —       $ 25,000

Chairperson of the Compensation Committee

     —       $ 15,000

Chairperson of the Nominating and Corporate Governance Committee

     —       $ 12,500

 

+

50th percentile of peer group.

* Unchanged

If shareholders do not approve Proposal 5, the directors’ cash compensation approved by shareholders at our 2014 AGM will remain in effect.

Directors’ Compensation for Fiscal Year 2014

The following table sets forth information regarding compensation earned by our non-employee directors during Fiscal Year 2014.

 

Name

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

John T. Dickson

   $ 77,500         —          —          —       $ 77,500   

James V. Diller

   $ 120,000       $ 108,760       $ 83,517       $ 177,000 (3)    $ 489,277   

Lewis C. Eggebrecht(4)

   $ 30,000       $ 319,846       $ 245,627         —       $ 595,473   

Bruno Guilmart

   $ 65,000         —          —          —       $ 65,000   

Kenneth Y. Hao

   $ 55,000       $ 108,760       $ 83,517       $ 56,500 (5)    $ 303,777   

Justine F. Lien

   $ 90,000       $ 108,760       $ 83,517         —       $ 282,277   

Donald Macleod

   $ 80,000       $ 108,760       $ 83,517         —       $ 272,277   

Peter J. Marks(6)

   $ 55,000       $ 364,645       $ 259,106         —       $ 678,751   

 

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(1) Columns represent the grant date fair value of RSU awards, or option awards, as applicable, granted in Fiscal Year 2014, determined in accordance with Accounting Standards Codification Topic Number 718 (“ASC 718”). The grant date fair value of RSU awards is based on the closing price of our ordinary shares on the date of grant. For a discussion of valuation assumptions used in the calculation of the grant date fair value of option awards, see Note 8 of Notes to Consolidated Financial Statements included in Part IV, Item 8 of our 2014 Form 10-K. Other than in the case of Messrs. Eggebrecht and Marks, the amounts shown represent the grant date fair values of an option to purchase 5,223 shares and 1,741 RSUs granted on April 9, 2014. With respect to Mr. Eggebrecht, the amounts shown represent the grant date fair values of an option to purchase 15,361 shares and 5,120 RSUs granted to Mr. Eggebrecht on April 9, 2014 in connection with his election to our Board. With respect to Mr. Marks, the amounts shown represent the grant date fair values of an option to purchase 23,474 shares and 7,825 RSUs granted to Mr. Marks on December 10, 2013 in connection with his appointment to our Board. The table below shows the aggregate number of ordinary shares underlying the stock options and RSUs held by our non-employee directors as of November 2, 2014:

 

Name

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

John T. Dickson

     2,124         19,116   

James V. Diller

     1,741         29,893   

Lewis C. Eggebrecht

     5,120         15,361   

Bruno Guilmart

     5,132         20,094   

Kenneth Y. Hao

     1,741         29,893   

Justine F. Lien

     1,741         15,077   

Donald Macleod

     1,741         5,223   

Peter J. Marks

     7,825         23,474   
(2) Represents dividends paid on shares received upon exercise of options previously granted to the director as compensation, as dividends were not factored into the grant date fair value for the options because they were granted prior to our adoption of ASC 718. These option awards were accounted for under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations and provided the required pro forma disclosures of SFAS No. 123, “Accounting for Stock-Based Compensation.”
(3) Shares on which dividends were paid are held by Mr. Diller as Trustee for the James & June Diller Trust UA dated 7/20/77, for the June P. Diller Annuity Trust—2010B dated May 10, 2010 and for the James V. Diller Annuity Trust—2010B dated May 10, 2010.
(4) Mr. Eggebrecht was elected to our Board on April 9, 2014.
(5) Pursuant to Mr. Hao’s arrangement with Silver Lake with respect to director compensation, dividends received by Mr. Hao on shares received by him from the exercise of certain options or the vesting of certain RSUs received as director compensation are required to be remitted to Silver Lake.
(6) Mr. Marks was appointed to our Board on December 10, 2013.

 

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PROPOSAL 2:

APPROVAL OF THE RE-APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND INDEPENDENT SINGAPORE AUDITOR FOR FISCAL YEAR 2015 AND AUTHORIZATION OF THE AUDIT COMMITTEE TO FIX ITS REMUNERATION

PricewaterhouseCoopers LLP is our independent registered public accounting firm in the U.S. and audits our consolidated financial statements. During Fiscal Year 2014, PricewaterhouseCoopers LLP in Singapore was our independent Singapore auditor of our Singapore statutory financial statements. Pursuant to Section 205(2) and 205(4) of the Singapore Companies Act, any appointment after our Board’s initial appointment of our independent Singapore auditor, or its subsequent removal, requires the approval of our shareholders. The Audit Committee has approved, subject to shareholder approval, the re-appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm and the independent Singapore auditor for the fiscal year ending November 1, 2015 (“Fiscal Year 2015”). 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 service rendered through our 2016 Annual General Meeting of Shareholders (the “2016 AGM”). We expect a representative from PricewaterhouseCoopers LLP to be present at the 2015 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 aggregate fees charged to the Company for the services performed by our independent registered public accounting firm, PricewaterhouseCoopers LLP, relating to Fiscal Year 2014 and the fiscal year ended November 3, 2013 (“Fiscal Year 2013”).

 

     Fiscal  Year
2014
     Fiscal Year
2013
 
     ($ in thousands)  

Audit Fees

   $ 6,504       $ 3,016   

Audit-Related Fees

     204         194   

Tax Fees

     2,569         502   

All Other Fees

     596         4   
  

 

 

    

 

 

 

Total

   $ 9,873       $ 3,716   
  

 

 

    

 

 

 

Audit Fees consist of fees for professional services provided in connection with the audit of our annual consolidated financial statements, audit of internal control over financial reporting, the review of our quarterly consolidated financial statements, and audit services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years, such as statutory audits. The fees for Fiscal Year 2013 and Fiscal Year 2014 include fees related to business combination accounting for our recently closed acquisitions.

Audit-Related Fees consist of fees for assurance and related services by our independent registered public accounting firm that are reasonably related to the performance of the audit or review of our consolidated financial statements and not included in Audit Fees. In Fiscal Year 2013 and Fiscal Year 2014, these fees included fees related to providing certification audits to the Singapore Economic Development Board in connection with our tax incentive arrangements in Singapore and consultations relating to the Company’s business development activities.

 

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Tax Fees consist of fees incurred for various tax transfer pricing studies in Fiscal Year 2013 and Fiscal Year 2014, intellectual property restructuring consultation for a recently completed acquisition in Fiscal Year 2014, and research and development credit consultations and customs duty assistance in Fiscal Year 2013.

All Other Fees consist of fees for professional services rendered by our independent registered public accounting firm for permissible non-audit services. In Fiscal Year 2013 and Fiscal Year 2014, these fees consisted of a license for specialized accounting research software.

In considering the nature of the services provided by PricewaterhouseCoopers LLP, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with PricewaterhouseCoopers LLP 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 to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.

Except as stated above, there were no other fees billed by PricewaterhouseCoopers LLP for Fiscal Year 2013 and Fiscal Year 2014. The Audit Committee considers the provision of these services to be compatible with maintaining the independence of our independent registered public accounting firm.

Audit Committee Pre-Approval Policy

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

During Fiscal Year 2013 and Fiscal Year 2014, all services provided to us by PricewaterhouseCoopers LLP were approved by the Audit Committee pursuant to paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X.

Our Board recommends a vote FOR the approval of the re-appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm and independent Singapore auditor for Fiscal Year 2015 and authorization of the Audit Committee to fix its remuneration.

 

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PROPOSAL 3:

ORDINARY RESOLUTION TO AUTHORIZE ORDINARY SHARE ALLOTMENTS AND ISSUANCES

We are incorporated in the Republic of Singapore. Under the laws of Singapore, our directors may issue ordinary shares and make offers or agreements or grant options that might or would require the issuance of ordinary shares only with the prior approval of our shareholders. We are submitting this proposal to authorize our Board to allot and issue our ordinary 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 ordinary shares in connection with our equity compensation plans, possible future strategic transactions, or public and private offerings.

If this proposal is approved, the authorization would be effective from the date of the 2015 AGM and continue until the earlier of (i) the conclusion of the 2016 AGM or (ii) the expiration of the period within which the 2016 AGM is required by the laws of Singapore to be held. The 2016 AGM is required to be held no later than 15 months after the date of the 2015 AGM. 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 three months of the time in which to hold an annual general meeting of shareholders, which may be granted in the discretion of that Authority.

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

 

   

in connection with strategic transactions and acquisitions;

 

   

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

 

   

in connection with our equity compensation plans and arrangements.

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

We expect that we will continue to issue ordinary shares and grant options, RSUs and other 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 or agreements that would require the issuance of new ordinary shares in connection with (i) our equity compensation plans and arrangements, including any equity compensation plans and awards we have assumed or may assume as a result of any acquisitions we have made or may make and (ii) any conversion into ordinary shares of our outstanding Convertible Notes, issued in connection with the closing of our acquisition of LSI, we have no specific plans, agreements or commitments to issue any ordinary shares for which approval of this proposal is required. Nevertheless, our Board believes that it is advisable and in the best interests of our shareholders for our shareholders to provide this general authorization in order to avoid the delay and expense of obtaining shareholder approval at a later date, and to provide us with greater flexibility to pursue strategic transactions and acquisitions and raise additional capital through public and private offerings of our ordinary shares, as well as instruments convertible into our ordinary shares.

If this proposal is approved, our directors would be authorized to allot and issue, during the period described above, ordinary shares subject to our Articles of Association, applicable Singapore laws and the Nasdaq Stock Market rules. The issuance of a large number of ordinary shares (or instruments convertible into 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 ordinary shares (other than shares issuable on exercise or settlement of outstanding options, RSUs and other instruments convertible into or

 

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exercisable for ordinary shares or the like, which were previously granted when the previous shareholder approved share issue mandates were in force). If we are unable to rely upon equity as a component of compensation, we would have to review our compensation practices, and would likely have to substantially increase cash compensation to retain key personnel.

Our Board recommends a vote FOR the resolution to authorize ordinary share allotments and issuances.

 

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PROPOSAL 4:

ORDINARY RESOLUTION TO APPROVE THE SHARE PURCHASE MANDATE

Our purchases or acquisitions of our ordinary shares must be made in accordance with, and in the manner prescribed by, the Singapore Companies Act, the Nasdaq Stock Market rules and such other laws and regulations as may from time to time be applicable.

Singapore law requires us to obtain shareholder approval of a “general and unconditional share purchase mandate” if we wish to purchase or otherwise acquire our ordinary shares. We refer to this as the “Share Purchase Mandate” and it allows our directors to exercise their authority to purchase or otherwise acquire our outstanding ordinary shares on the terms of the Share Purchase Mandate.

Our shareholders approved a Share Purchase Mandate at our 2014 AGM; however, this Share Purchase Mandate will expire on the date of our 2015 AGM unless renewed. Accordingly, we are submitting this proposal to seek approval from our shareholders at the 2015 AGM to renew the Share Purchase Mandate. This share repurchase program does not obligate us to repurchase any specific number of shares and may be suspended or terminated at any time without prior notice. As of the date of this Proxy Statement, our Board has not authorized us to repurchase shares under the 2014 Share Purchase Mandate. During Fiscal Year 2014 we paid $12 million to repurchase 0.3 million of our ordinary shares, all of which were cancelled upon repurchase, pursuant to the Share Purchase Mandate approved by our shareholders at the 2013 Annual General Meeting of Shareholders.

If approved by our shareholders at the 2015 AGM, the authority conferred by the 2015 Share Purchase Mandate will, unless varied or revoked by our shareholders at a general meeting, continue in force from the date of such shareholder approval until the earlier of the date of our 2016 AGM or the date by which the 2016 AGM is required by law to be held (the “Relevant Period”). The 2016 AGM is required to be held no later than 15 months after the date of the 2015 AGM (which period may be extended for up to an additional three months upon application by the Company to, and the approval of, the Singapore Accounting and Corporate Regulatory Authority).

The authority and limitations placed on our share purchases or acquisitions under the proposed Share Purchase Mandate, if approved at the 2015 AGM, are summarized below:

Limit on Number of Ordinary Shares Allowed to be Purchased

During the period in which the renewed Share Purchase Mandate is effective, we may purchase or acquire that aggregate number of our ordinary shares which is equal to 10% of the total number of issued ordinary shares outstanding as of (a) April 9, 2014 (the date of our last annual general meeting of shareholders) or (b) the date of the passing of this resolution (expected to be April 8, 2015), whichever is greater (unless the share capital of the Company has been reduced in accordance with sections 78C or 78I of the Singapore Companies Act, at any time during the Relevant Period, in which event the total number of ordinary shares of the Company shall be taken to be the total number of issued ordinary shares of the Company as altered by such share capital reduction(s)). There were 251,227,014 of our ordinary shares outstanding as of April 9, 2014 and 256,369,422 of our ordinary shares outstanding as of February 11, 2015, the most recent practicable date.

Duration of Share Purchase Mandate

Purchases or acquisitions of ordinary shares may be made, at any time and from time to time, on and from the date of approval by shareholders of the renewed Share Purchase Mandate up to the earlier of:

 

   

the date on which our next Annual General Meeting of Shareholders is held or required by law to be held; or

 

   

the date on which the authority conferred by the Share Purchase Mandate is revoked or varied by our shareholders at a general meeting.

 

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Manner of Purchases or Acquisitions of Ordinary Shares

Purchases or acquisitions of ordinary shares may be made by way of:

 

   

market purchases on the Nasdaq Global Select Market or any other stock exchange on which our ordinary shares may for the time being be listed and quoted, through one or more duly licensed dealers appointed by us for that purpose; and/or

 

   

off-market purchases (if effected other than on the Nasdaq Global Select Market or, as the case may be, any other stock exchange on which our ordinary shares may for the time being be listed and quoted) in accordance with an equal access prescribed by Singapore law.

If we decide to purchase or acquire our ordinary shares in accordance with an equal access scheme, our directors may impose any terms and conditions on such purchases as they see fit and as are in our interests, so long as the terms are consistent with the Share Purchase Mandate, the regulations and rules of the Nasdaq Stock Market (or any other stock exchange on which our ordinary shares may then be listed and quoted), the Singapore Companies Act and other applicable laws. In addition, an equal access scheme must satisfy the following conditions:

 

   

offers for the purchase or acquisition of ordinary shares must be made to every person who holds ordinary shares to purchase or acquire the same percentage of their ordinary shares;

 

   

all of those persons must be given a reasonable opportunity to accept the offers made; and

 

   

the terms of all of the offers must be the same (except differences in consideration that result from offers relating to ordinary shares with (i) different accrued dividend entitlements, (ii) different amounts remaining unpaid and (iii) differences in the offers solely to ensure that each person is left with a whole number of ordinary shares).

Purchase Price

The purchase price (excluding brokerage commission, applicable goods and services tax and other related expenses of the purchase or acquisition) to be paid for an ordinary share will be determined by our directors. The maximum purchase price to be paid for the ordinary shares, as determined by our directors must not exceed:

 

   

in the case of a market purchase, the highest independent bid or the last independent transaction price, whichever is higher, of our ordinary shares quoted or reported on the Nasdaq Global Select Market or as the case may be, any other stock exchange on which our ordinary shares for the time being are listed or quoted, at the time the purchase is effected; and

 

   

in the case of an off-market purchase pursuant to an equal access scheme, 150% of the “Prior Day Close Price” of our ordinary shares, which means the closing price of an ordinary share as quoted on the Nasdaq Global Select Market or, as the case may be, any other stock exchange on which our ordinary shares may, for the time being, be listed and quoted on the day immediately preceding the date on which we announce our intention to make an offer for the purchase or acquisition of our ordinary shares from holders of our ordinary shares, stating therein the purchase price (which shall not be more than the maximum purchase price calculated on the foregoing basis) for each ordinary share and the relevant terms of the equal access scheme for effecting the off-market purchase.

Sources of Funds

Only funds legally available for purchasing or acquiring ordinary shares in accordance with our Articles of Association and applicable laws of Singapore shall be used. In the event that we elect to purchase or acquire any of our ordinary shares, depending on the number of ordinary shares repurchased or acquired and then current market, business and other relevant conditions, we may use our internal sources of funds and/or external

 

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borrowings to finance any such purchases or acquisitions. Our directors do not propose to exercise the Share Purchase Mandate in a manner and to such an extent that would materially affect our working capital requirements and those of our subsidiaries.

Under the Singapore Companies Act, any payment made in consideration of the purchase or acquisition of ordinary shares may be made out of our capital or profits. Acquisitions or purchases made out of capital or profits are permissible only so long as Avago is solvent. Currently, pursuant to Section 76F(4) of the Singapore Companies Act, a company is solvent if (a) it is able to pay its debts in full at the time of the payment made in consideration of the purchase or acquisition (or the acquisition of any right with respect to the purchase or acquisition) of ordinary shares and will be able to pay its debts as they fall due in the normal course of business during the 12-month period immediately following the date of such payment; and (b) the value of the company’s assets is not less than the value of its liabilities (including contingent liabilities) and will not, after giving effect to the proposed purchase or acquisition, become less than the value of its liabilities (including contingent liabilities). Recent amendments to the Singapore Companies Act, once effective, change the solvency test set out in Section 76(F)(4). Pursuant to Section 76(F)(4) as amended, a company is solvent if (a) there is no ground on which the company could be found to be unable to pay its debts; (b) if (i) it is intended to commence winding up of the company within the period of 12 months immediately after the date of the payment, the company will be able to pay its debts in full within the period of 12 months after the date of commencement of the winding up, or (ii) it is not intended so to commence winding up, the company will be able to pay its debts as they fall due during the period of 12 months immediately after the date of the payment; and (c) the value of the company’s assets is not less than the value of its liabilities (including contingent liabilities) and will not, after giving effect to the proposed purchase, acquisition, variation or release (as the case may be)become less than the value of its liabilities (including contingent liabilities). However, it is not yet certain when this amendment will become effective.

Status of Purchased or Acquired Ordinary Shares

The ordinary shares that we purchase or acquire will be deemed cancelled immediately on purchase or acquisition, and all rights and privileges attached to those ordinary shares will expire on cancellation. The total number of issued shares will be reduced by the number of ordinary shares purchased or acquired by us.

We will cancel and destroy certificates, if applicable, in respect of purchased or acquired ordinary shares as soon as reasonably practicable following settlement of any purchase or acquisition of ordinary shares.

Financial Effects

Our net tangible assets will be reduced by the purchase price of any ordinary shares purchased or acquired and cancelled. We do not anticipate that the purchase or acquisition of our ordinary shares in accordance with the 2014 Share Purchase Mandate would have a material impact on our consolidated results of operations, financial condition and cash flows.

The financial effects on us arising from purchases or acquisitions of ordinary shares which may be made pursuant to the Share Purchase Mandate will depend on, among other things, whether the ordinary shares are purchased or acquired out of our profits and/or capital, the number of ordinary shares purchased or acquired, and the price paid for the ordinary shares.

Under the Singapore Companies Act, purchases or acquisitions of ordinary shares by us may be made out of our profits and/or our capital. Where the consideration paid by us for the purchase or acquisition of ordinary shares is made out of our profits, such consideration (excluding brokerage, commission, goods and services tax and other related expenses) will correspondingly reduce the amount available for the distribution of cash dividends by us. Where the consideration that we pay for the purchase or acquisition of ordinary shares is made out of our capital, the amount available for the distribution of cash dividends by us will not be reduced.

 

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Rationale for the Share Purchase Mandate

We believe that renewal of the Share Purchase Mandate at the 2015 AGM will benefit our shareholders by providing our directors with appropriate flexibility to cause the repurchase of our ordinary shares if our directors believe that such repurchases would be in the best interests of our shareholders. Our decision to repurchase our ordinary shares from time to time will depend on our continuing assessment of then-current market conditions, our need to use available cash to finance our operations, acquisitions and other strategic transactions, the level of our debt, and the terms and availability of financing.

Take-Over Implications

If, as a result of our purchase or acquisition of our issued ordinary shares, a shareholder’s proportionate interest in our voting capital increases, such increase will be treated as an acquisition under The Singapore Code on Take-overs and Mergers, Appendix 2. If such increase results in a change of effective control, or, as a result of such increase, a shareholder or a group of shareholders acting in concert obtains or consolidates effective control of our company, such shareholder or group of shareholders acting in concert could become obliged to make a take-over offer for our company under Rule 14 of The Singapore Code on Take-overs and Mergers.

The circumstances under which shareholders (including directors or a group of shareholders acting together) will incur an obligation to make a take-over offer can be found under Rule 14 and Appendix 2 of the Singapore Code on Take-overs and Mergers. The effect of Appendix 2 is that, unless exempted, shareholders will incur an obligation to make a take-over offer under Rule 14 if, as a result of us purchasing or acquiring our issued ordinary shares, the voting rights of such shareholders (and parties acting in concert with them) would increase to 30% or more, or if such shareholders (and parties acting in concert with them) hold between 30% and 50% of our voting rights, the voting rights of such shareholders (and parties acting in concert with them) would increase by more than 1% in any period of six months. Shareholders who are in doubt as to their obligations, if any, to make a mandatory take-over offer under The Singapore Code on Take-overs and Mergers as a result of any share purchase by us should consult the Securities Industry Council of Singapore and/or their professional advisers at the earliest opportunity.

Our Board recommends a vote FOR the resolution to approve the Share Purchase Mandate.

 

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PROPOSAL 5:

ORDINARY RESOLUTION TO APPROVE NON-EMPLOYEE DIRECTORS’ CASH  COMPENSATION

Under the laws of Singapore, our shareholders must approve all cash compensation paid by us to our directors for services rendered in their capacity as directors. Accordingly, we are seeking shareholder approval to provide payment of the following cash compensation to our non-employee directors for service on the Board and its committees during the period of approximately 12 months from April 9, 2015, the day after our 2015 AGM, through the date on which our 2016 AGM is held, and for each approximately 12-month period thereafter, as follows:

 

   

annual cash compensation of $65,000 to each of our non-employee directors, other than the Chairperson of the Board, and cash compensation of $145,000 to the independent Chairperson of the Board;

 

   

additional annual cash compensation of $25,000 to the Chairperson of the Audit Committee, provided that such person is an independent director;

 

   

additional annual cash compensation of $15,000 to the Chairperson of the Compensation Committee, provided that such person is an independent director;

 

   

additional annual cash compensation of $12,500 to the Chairperson of the Nominating and Corporate Governance Committee, provided that such person is an independent director;

 

   

additional cash compensation of $10,000 to each of our independent directors in respect of each of the foregoing committees of the Board on which they serve, other than service as chairperson of any such committee of the Board; and

 

   

appropriate pro rata cash compensation, based on the annual cash compensation set forth above, as applicable, to (i) any director who ceases to be a director, Chairperson of the Board or member or chairperson of any committee of the Board following the 2015 AGM and (ii) any new non-employee director who is appointed by the Board, any independent director who is appointed to the position of Chairperson of the Board or chairperson of any such committee of the Board or any independent director who is appointed to serve on any such committee of the Board, in each case after the date of our 2015 AGM, for their services rendered as a director and/or committee member for any period less than 12 months.

The above reflects the changes to the cash compensation for non-employee directors’ service on the Board and for the Chairpersons of the Board recommended by the Compensation Committee, after consultation with Compensia, and approved by the Board, subject to shareholder approval thereof, as discussed under “Directors’ Compensation” on page 15. If shareholders do not approve this resolution, the directors’ cash compensation approved by shareholders at our 2014 AGM, which is presented under “Directors’ Compensation” on page 15, will remain in effect.

We believe that this authorization will benefit our shareholders by enabling us to attract and retain qualified individuals to serve as members of our Board and to continue to provide leadership for our company.

The Board recommends a vote FOR the resolution to approve the non-employee directors’, the Board Chairperson’s, the committee chairpersons’ and the committee members’ cash compensation.

 

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EXECUTIVE OFFICERS

Executive Officers

The following table sets forth certain information about our executive officers as of February 17, 2015.

 

Name

   Age     

Position

Hock E. Tan

     63       President, Chief Executive Officer and Director

Anthony E. Maslowski

     54       Chief Financial Officer

Bryan T. Ingram

     50       Senior Vice President and Chief Operating Officer

Boon Chye Ooi

     61       Senior Vice President, Global Operations

Patricia H. McCall

     60       Vice President and General Counsel

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

Anthony E. Maslowski has served as our Chief Financial Officer since September 2013 and served as our interim Chief Financial Officer since March 2013. Prior to that Mr. Maslowski served as our Vice President and Controller since 2008, having joined the Company in 2006 as Vice President of Internal Audit. Prior to joining the Company, Mr. Maslowski served as the Chief Financial Officer for Allegro Manufacturing Pte Ltd from 2002 to 2006 and prior to that, he held senior finance management positions at Lam Research Corporation and Hitachi Data Systems Corporation.

Bryan T. Ingram has served as our Senior Vice President and Chief Operating Officer since April 2013 and prior to that served as our Senior Vice President and General Manager, Wireless Semiconductor Division since November 2007 and as Vice President of that division since 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.

Boon Chye Ooi has served as our Senior Vice President, Global Operations since January 2009. From November 2003 until 2008, Mr. Ooi was at Xilinx, Inc., where he was responsible for all worldwide manufacturing operations, most recently as Senior Vice President of Worldwide Operations. Prior to Xilinx, Mr. Ooi spent 25 years at Intel Corporation, where he served in a variety of positions.

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

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

 

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Our Compensation Committee reviews and approves compensation for all our executive officers, except, with effect from June 2014, the compensation of our President and Chief Executive Officer, which is reviewed and approved by the full Board (other than our President and Chief Executive Officer), following recommendations from the Compensation Committee.

We have in place a compensation strategy for our executives which focuses on both individual and Company performance. Compensation of our executives is structured around the achievement of near-term corporate targets (fiscal year metrics) and longer-term business objectives and strategies. The Compensation Committee is responsible for evaluating and administering all of our compensation programs and practices to ensure that they properly compensate, reward and drive corporate performance while remaining competitive with comparable semiconductor companies operating in the same or similar markets. The Compensation Committee reviews and approves all compensation policies, including with respect to executive base salaries, bonuses and equity incentive compensation.

Our Named Executive Officers (“NEOs”) for Fiscal Year 2014 were Hock E. Tan, President and Chief Executive Officer, Anthony E. Maslowski, Chief Financial Officer, Bryan T. Ingram, Senior Vice President and Chief Operating Officer, Boon Chye Ooi, Senior Vice President, Global Operations, and Patricia H. McCall, Vice President and General Counsel.

In this Compensation Discussion and Analysis section, we discuss the material elements of our compensation programs and policies, including program objectives and reasons why we pay each element of our executives’ compensation. Following this discussion, you will find a series of tables containing more specific details about the compensation earned by, or awarded to, our NEOs. This discussion focuses principally on compensation and practices relating to the NEOs for our Fiscal Year 2014.

Alignment of Executive Compensation with Performance—Highlights

Under our CEO’s leadership, we have created long-term, sustained value for our shareholders. Between our initial public offering in August 2009 and the end of Fiscal Year 2014, our share price increased 475%.

Our executive compensation program is designed to have a significant portion of our executives’ compensation opportunity delivered in the form of equity-based compensation to tie our executives’ long-term interests to those of our shareholders.

 

   

During Fiscal Year 2014, our share price increased from $45.04 to $86.25 per share, reflecting strong price appreciation of 91%.

 

   

From the beginning of our fiscal year ended October 31, 2010 to the end of Fiscal Year 2014, our share price increased from $14.87 to $86.25 per share, reflecting strong price appreciation of approximately 480%.

 

   

Our share price increase has also resulted in total annualized shareholder returns, including the impact of dividends, (“TSR”) of 93% for one year and 44% for five years. The charts below reflect our TSR over a one, three and five year period compared to our peer group, before and after our LSI acquisition (assuming an October 31 fiscal year end for all periods).

 

LOGO LOGO LOGO

 

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We successfully completed our acquisition of LSI Corporation, which is the largest acquisition we have undertaken to date by a significant margin, our acquisition of PLX Technology, Inc. and the divestitures of non-core LSI businesses.

On May 6, 2014, we acquired LSI, a company that provides high-performance storage and networking semiconductors used in hard disk drives, solid state drives, communication systems, computer servers, storage systems and personal computers, for an aggregate purchase price of approximately $6.5 billion.

On August 12, 2014, we acquired PLX Technology, Inc. (“PLX”), a provider of PCI Express, or PCIe, silicon and software connectivity solutions, for approximately $308 million.

In September 2014, we sold LSI’s Flash Components Division and Accelerated Solutions Division, to Seagate Technology plc, for approximately $450 million, and in November 2014, sold LSI’s Axxia Networking Business and related assets, to Intel Corporation for approximately $650 million.

We delivered strong operating performance during Fiscal Year 2014. Our executive compensation programs are designed to reward superior company performance and provide consequences for underperformance.

 

   

Company Financial Performance. In Fiscal Year 2014:

 

   

Non-GAAP revenue increased $1,787 million or 70.9% over Fiscal Year 2013, primarily due to the acquisition of LSI and growth in our Wireless segment. Non-GAAP revenues increased $651 million, or 25.8% over Fiscal Year 2013, without the contribution from LSI and PLX, referred to as the “Acquired Businesses.” A reconciliation of these non-GAAP to GAAP revenue results may be found on page 39.

 

   

Non-GAAP income from operations increased $781 million or 105.5% over Fiscal Year 2013. Non-GAAP income from operations for Fiscal Year 2014, without the contribution from the Acquired Businesses, increased by $407 million or 55% over Fiscal Year 2013. A reconciliation of non-GAAP to GAAP income from operations results may be found on page 39.

 

   

The Company’s financial condition continues to be robust; we generated $766 million in free cash flow (cash flow from operations of $1,175 million less capital expenditures of $409 million) during Fiscal Year 2014, and ended Fiscal Year 2014 with $1,604 million in cash and cash equivalents. As at the end of 2014 we had an aggregate of $5.5 billion of debt outstanding, which was used to fund the LSI acquisition.

 

   

Cash Incentives Reflected Positive 2014 Company Performance. Payouts under our annual cash incentive bonus program are tied to pre-established operational and financial performance goals. Due to our strong overall financial results for Fiscal Year 2014, even without contribution from the Acquired Businesses, and as compared to Fiscal Year 2013, annual cash incentive payouts were above target:

 

   

Our corporate revenue and non-GAAP operating income for the year exceeded the maximum program performance metrics, which resulted in 150% attainment of our corporate revenue goal for Fiscal Year 2014 and 150% attainment of our corporate non-GAAP operating income target. Other than as discussed below, attainment of performance targets was determined without reference to the financial contributions from, or other effects of, the Acquired Businesses, as our performance goals were established prior to these acquisitions.

 

   

The majority of the divisional performance targets were met or exceeded, with only a few business units’ performance targets not being achieved.

 

   

Following the acquisitions of LSI and PLX, and the integration of their support and operational functions, it was not possible to assess attainment of certain divisional and functional metrics

 

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under the annual cash bonus program on a standalone Avago basis, per the Avago Performance Bonus Plan. As a result, attainment of divisional and functional metrics for Mr. Ooi and Ms. McCall were set at 100% of target.

 

   

These factors resulted in cash incentive payouts ranging between 125% and 150% of target for the NEOs under our annual cash incentive bonus program. The aggregate amount paid to our NEOs under our annual cash incentive bonus program increased to $3.9 million in Fiscal Year 2014 from $2.5 million in Fiscal Year 2013.

 

   

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

 

   

Other than for Mr. Tan, base salaries for our NEOs were increased by 5% or less in Fiscal Year 2014. Mr. Tan received a base salary increase of 10.0%, after reviewing competitive market data and in light of the significant increase in the size of the Company, its operations and revenues, and the resulting increase in Mr. Tan’s responsibilities as a result of the completion of the LSI acquisition. Non-GAAP net revenues for the Company were $4,307 million for Fiscal Year 2014 (which includes contributions from the LSI and PLX businesses from the date of their respective acquisitions), compared to $2,520 million for Fiscal Year 2013. Prior to the LSI and PLX acquisitions, we had approximately 4,500 employees. Following the closing of the LSI acquisition, we had approximately 9,700 employees immediately, and as of the end of Fiscal Year 2014, we had approximately 8,400 employees.

 

   

Target annual cash bonus percentages for Fiscal Year 2014 were set at the same levels as in Fiscal Year 2013 for all of our NEOs.

 

   

Equity as a Key Component of Compensation:

 

   

Annual Equity Awards. In Fiscal Year 2014, we continued with our program of annual equity awards for all of our employees, including executives. We also continued our policy of granting our executives a mix of performance-based option awards and service-vesting RSUs (other than with respect to Mr. Tan). The performance criteria for these options are based on sustained increases in the Company’s share price, in order to more closely align our executives’ interests with those of our shareholders. Mr. Tan did not receive a regular annual equity award in Fiscal Year 2014, in light of the special performance-based retention equity award he received in Fiscal Year 2013, discussed below. For our NEOs, other than Mr. Tan, approximately 52% of the value of their annual Fiscal Year 2014 equity grants was in the form of performance-based options and approximately 48% of the value of their annual grants was in the form of service-vesting RSUs. With the exception of the special, performance-based retention equity award made to Mr. Tan discussed below, the performance-based option awards are not exercisable until the date on which the average of the closing prices of the Company’s ordinary shares, over a ten consecutive trading day period, is equal to or greater than 120% of the exercise price of the option.

 

   

Performance-Based Retention Award to our CEO. In Fiscal Year 2013, we approved a special, performance-based retention equity award for Mr. Tan, the Company’s President and Chief Executive Officer, consisting of the grant of two performance-based options to acquire an aggregate of 2,500,000 ordinary shares of the Company, each of which vest over a four-period, but which may only be exercised if five increasing share-price targets, each relating to 20% of the shares subject to the applicable option, are met. The grant of the first option was effective on September 13, 2013 (in Fiscal Year 2013) and covers 1,750,000 ordinary shares. The grant of the second option was effective on January 2, 2014 and covers 750,000 ordinary shares. Based on the closing share price of $38.99 on the date the award was approved, attainment of the lowest price contingency would represent an increase in the Company’s share price of approximately 28%, and attainment of the highest price contingency would represent an increase in the Company’s share

 

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price of approximately 92%. These price targets were intended to be difficult to attain, and to depend on Mr. Tan’s ability to successfully grow the Company to achieve the corresponding significant, sustained increases in the Company’s share price needed to meet the performance requirements of the award. We believe that this award strongly incentivizes our President and Chief Executive Officer to act in the interests of shareholders over the long-term by working to increase the price of our shares.

Return of Capital to our Shareholders.

Our strong balance sheet in Fiscal Year 2014 enabled us to return an aggregate of approximately $284 million in cash dividends to our shareholders during the fiscal year. We have increased our quarterly dividend every quarter since the initiation of our cash dividend in December 2010.

Shareholder Advisory Vote on Executive Compensation and Shareholder Outreach

At our 2014 AGM, we submitted our executive compensation program to a non-binding, advisory vote of our shareholders. Prior to our 2014 AGM, we engaged in a broad shareholder outreach program to discuss our compensation philosophy and goals, including that our executives’ compensation be linked to both Company and individual performance. These discussions were led by our Compensation Committee Chairman, Donald Macleod, and in some cases also included our Chief Financial Officer, Anthony E. Maslowski. During this period, we met with shareholders, including with institutional investors, representing over 40% of our outstanding shares.

At our 2014 AGM, shareholders representing 65.1% of the shares represented in person or by proxy at the meeting and entitled to vote on the matter voted in favor of our executive compensation program. The Compensation Committee reviewed the result of the shareholders’ advisory vote on executive compensation. In light of the approval by a more than a majority of our shareholders of the compensation programs described in our 2014 proxy statement, the Compensation Committee did not implement changes to our executive compensation programs as a result of the shareholders’ advisory vote. However, in light of the fact that certain of our large institutional shareholders did not vote in favor of our executive compensation programs, we held additional meetings with our largest shareholders to further understand their concerns.

The Compensation Committee will take into account shareholder feedback it received through the shareholder outreach conducted following last year’s Say on Pay vote in any future amendments to our equity plans that we propose to our shareholders.

At our 2011 AGM, our shareholders voted, in a non-binding advisory vote, in favor of having a non-binding shareholder vote on executive compensation once every three years. Our next non-binding advisory vote on the compensation of our NEOs, and on the frequency of such vote, will occur at our 2017 Annual General Meeting of Shareholders.

Objectives and Philosophy of Our Executive Compensation Program

Our compensation program for executives is designed to achieve the following:

 

   

attract and retain qualified, experienced and talented executives, in a highly competitive market for executive talent;

 

   

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

 

   

encourage executives to focus on the achievement of corporate and financial performance goals and metrics by aligning the incentive reward program to the achievement of both functional/divisional goals and corporate goals; and

 

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retain executives and align their interests with those of our shareholders by tying a significant portion of each executive’s compensation to returns realizable by our shareholders. A significant portion of total compensation paid to our executives is in the form of equity grants that vest over their years of service and may be subject to attainment of pre-established performance-based objectives.

Equity grants are a long-term retention tool for key executives intended to reflect the value we place on their contribution to our Company. Equity grants to our executives currently consist of options to acquire ordinary shares and/or RSUs. When allocating equity or, in the case of Mr. Tan, recommending an equity allocation, the Compensation Committee looks at each executive’s level of experience and expertise and overall value to our Company, as well as how much vested and unvested equity an executive holds. In Fiscal Year 2014, we continued our annual equity award program for our employees, with executives typically receiving a combination of performance-based options, with performance criteria based on sustained increases in the Company’s share price, in order to more closely align our executives interests with those our of shareholders, and service-vesting RSUs.

Our Compensation Committee has adopted a compensation philosophy that is intended to keep total cash compensation (base salary plus cash incentive opportunity) of our executives competitive with compensation for similarly situated executives both at other companies within our peer group and at companies included in the market salary surveys it reviews. Generally, where the Committee believes that the positions in the market match our internal roles, we view total cash compensation (including incentive cash compensation) as competitive when it is within approximately the 25th-75th percentiles, dependent on the area of responsibility relative to product development, sales, or support functions. The Compensation Committee believes that total cash compensation within this range of the market provides us a competitive position for attracting and retaining executives. However, our Compensation Committee bases its compensation decisions on the needs of the Company and an executive’s level of expertise, experience and marketability and will make exceptions to the above philosophy when it determines it is necessary to attract or retain an executive with the experience and skills desirable for a particular position, to provide additional incentive to an executive to achieve the Company’s goals or to maintain internal parity among executives with similar levels of responsibilities. As a result, target and actual total cash compensation paid to an executive may be outside of these reference points.

Approach for Determining Form and Amount of Compensation

Market Data

When reviewing compensation against market practices, the Compensation Committee uses industry-based market compensation survey data, which we refer to as “market salary surveys”, from the following data sources:

 

   

Radford Global Technology Survey;

 

   

Radford Global Sales Survey; and

 

   

Mercer High Tech Salary Survey (Asia).

The peer group companies the Compensation Committee used in January 2014 as a point of reference for reviewing and setting executive compensation, which we refer to as our “Pre-Acquisition Peer Group”, and those that participated in the market salary surveys, were:

 

   

Altera Corporation;

 

   

Analog Devices, Inc.;

 

   

Atmel Corporation;

 

   

Fairchild Semiconductor International, Inc.;

 

   

Freescale Semiconductor, Ltd.;

 

   

Linear Technology Corporation;

 

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LSI Corporation;

 

   

Marvell Technology Group Ltd.;

 

   

Maxim Integrated Products, Inc.;

 

   

Microchip Technology Incorporated;

 

   

NVIDIA Corporation;

 

   

ON Semiconductor Corporation;

 

   

Skyworks Solutions, Inc.; and

 

   

Xilinx, Inc.

In January 2014, our Compensation Committee reviewed our peer group companies’ appropriateness. The selection criteria for the peer group are companies in the semiconductor industry, with similar business focus, comparability across annual revenue (generally 0.5 to 2.0 times that of the Company) and market capitalization (generally 0.1 to 1.1 times that of the Company). Other than as discussed below with respect to our CEO’s compensation, the peer group used for our market comparisons for 2014 was the same as the peer group used for 2013. Relative to the Pre-Acquisition Peer Group our revenues for the four quarters proceeding February 2014 ranked at the 65th percentile and our market capitalization as of February 2014 ranked at the 96th percentile. The Compensation Committee also reviewed peer group performance data on a one and three year basis, as set forth in the table below, which shows where we ranked among the 15 companies in our peer group (including us) based on our Fiscal Year 2013 and the most recently ended fiscal year for the 14 other companies in the Pre-Acquisition Peer Group.

 

One-Year Performance

   2014 Percentile Rank  

Revenue growth

     85th   

Total shareholder return

     92nd   

Three-Year Performance

   2014 Percentile Rank  

Revenue growth

     77th   

Total shareholder return

     100th   

While the Compensation Committee reviews benchmark compensation data for, and compensation practices at, peer companies to inform its decision-making process, it does not set compensation components to meet specific benchmarks. The Compensation Committee uses peer-group data and market salary surveys as points of reference so that it can set total compensation levels that it believes are reasonably competitive, but also believes that a mechanical benchmarking approach can result in compensation that is unrelated to the value delivered by our executives. In addition, peer group data and market salary surveys do not always contain data for positions and responsibilities exactly comparable to those of our executives, and different survey data can be inconsistent. While compensation levels may differ among executives on competitive factors, and the role, responsibilities and performance of each specific executive, there are not material differences in the compensation philosophies, objectives or policies for our executives, including NEOs.

Individual Executive Compensation Data

In addition to market compensation survey data, the Compensation Committee considers the following information for each executive when determining his or her compensation: (i) the targeted value of base pay, annual cash incentive bonus target, equity grants and other benefits; and (ii) the accumulated value of unvested “in-the-money” outstanding equity grants. This information helps the Compensation Committee to understand the total compensation being delivered to executives and the long-term retentive elements in place for executives.

 

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Internal Pay Equity

We do not maintain a formal policy regarding internal pay parity, but it may be considered as a factor in determining compensation.

Our President and Chief Executive Officer is compensated at a higher level than other executives because he has a significantly higher level of responsibility, accountability and experience. In June 2014, Mr. Tan’s base salary was set at $880,000. Mr. Tan also receives more of his pay in the form of long-term incentive compensation, rather than annual cash compensation, as compared to the compensation of the other NEOs. Given Mr. Tan’s responsibility for overall Company performance, the Board believes that compensating him at a higher level than 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 aligns his incentives with interests of our shareholders.

We believe the Fiscal Year 2014 target total direct compensation for the NEOs, other than Mr. Tan, in relation to the compensation targeted for Mr. Tan, and to one another, was reasonable and appropriate given each executive’s responsibilities and Fiscal Year 2014 performance. For Fiscal Year 2014, the differences in pay among our NEOs relative to each other and Mr. Tan are based on internal parity between executives, based on their contributions to the Company, market differences for the particular job, job responsibilities and scope, professional experience and adjustments for individual performance.

Compensation Consultant

The Compensation Committee retains Compensia as its compensation consultant. As the independent consultant to the Committee, Compensia prepares the assessment of executive compensation based on market data, including data from our peer group companies. Compensia has not provided, and does not provide, any other services to the Company that are not at the direction of the Compensation Committee.

Components of Our Executive Compensation Program

The components of our executive compensation program are:

 

   

annual base salary;

 

   

annual (fiscal year) cash incentive program;

 

   

equity incentive compensation (grants of options to purchase ordinary shares and RSUs, including performance-based equity awards);

 

   

perquisites; and

 

   

severance and change-in-control benefits.

Annual Cash Compensation

Base Salary

Our Compensation Committee believes that a competitive base salary is a necessary element of any compensation program designed to attract, engage and retain key executives. Base salaries provide fixed, baseline compensation and are set at levels that are intended to reflect internal parity between executives of similar levels of responsibility and to be within a competitive range with similar positions at our peer group companies. The base salaries of all our executives are reviewed annually by the Compensation Committee against positions of similar size and scope in our peer group companies.

Annual adjustments to an executive’s base salary take into account:

 

  (i) economic and business conditions and outlook;

 

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  (ii) individual performance throughout the prior fiscal year (based on the achievement of divisional goals used in the annual cash incentive bonus plan, fiscal responsibility and senior leadership ability);

 

  (iii) the actual pay rate of our executives as compared to market pay rates from the market salary surveys; and

 

  (iv) internal parity, where applicable.

Our Compensation Committee reviews and considers many factors in determining individual performance for the purposes of adjusting base salaries including such measures as unit or division performance against budget, achievement of unit or division sales goals, new product introductions and corporate strategy implementation. The process for considering internal parity where applicable involves comparing executives in peer roles to ensure that base salaries are comparable based on function, scope and responsibilities of the role and taking into account the executive’s experience, technical knowledge and expertise.

The Compensation Committee conducts the annual salary review process for executives in the middle of the fiscal year, with changes to salaries becoming effective in July. In March 2014, the Compensation Committee undertook a market review of executive compensation (other than Mr. Tan), using market survey data for 2013 prepared by Compensia. In July 2014, all NEOs’ base salaries, other than Mr. Tan’s, were increased by 5% or less (in local currency), over their respective prior year’s salary in each case based on the Compensation Committee’s assessment of the market survey data, and in light of the NEOs’ experience, performance at the Company and total direct compensation being awarded to each executive. The following table sets forth the base salaries during Fiscal Year 2014 of the NEOs (other than Mr. Tan) and relevant comparative data:

 

Name

   Base Salary
(USD) As at
July 1, 2013
     2013 Base Salary As
a Percentile of Base
Salaries at Comparator
Companies(1)
   Base Salary
(USD) Effective
July 1, 2014
     2014 Base Salary As
a Percentile of Base
Salaries at Comparator
Companies(1)

Anthony E. Maslowski(2)

   $ 390,000       <25th Percentile    $ 409,500       <25th Percentile

Bryan T. Ingram

   $ 500,000       65th Percentile    $ 525,000       60th Percentile

Boon Chye Ooi(3)

   $ 567,700       70th Percentile    $ 595,269       80th Percentile

Patricia H. McCall

   $ 378,525       50th Percentile    $ 397,451       60th Percentile

 

(1) Based on market survey data for 2013 (the most recent period then available) prepared by Compensia, which includes a blend of data from the market salary surveys and the data relating to the Pre-Acquisition Group Companies.
(2)

Mr. Maslowski’s base salary is below the 25th percentile, given his more recent appointment as Chief Financial Officer in September 2013.

(3) Mr. Ooi’s cash compensation is paid in Singapore Dollars. Mr. Ooi’s base salary was increased from S$716,040 to S$744,682. For the purposes of this table, salary amounts paid to Mr. Ooi in Singapore Dollars were converted to U.S. Dollars using the Accounting Rate for June 2013 (1.2613 Singapore Dollars to the U.S. Dollar) and May 2014 (1.251 Singapore Dollars to the U.S. Dollar), as applicable. The “Accounting Rate” for any month is the exchange ratio of the number of Singapore Dollars to one U.S. Dollar for the last business day of the preceding fiscal month, as reported by Bloomberg L.P.

During its review of Mr. Tan’s base salary in June 2014, the Compensation Committee reviewed and considered market data that included data for companies of a comparable size and revenue to the assumed size and projected revenue of the Company following the closing of the LSI acquisition, referred to as the “Post-Acquisition Peer Group”, and considered the additional responsibilities that Mr. Tan would assume as a result of the acquisition, when recommending Mr. Tan’s salary increase to the Board. This comparison group of companies included six companies (Analog Devices, Inc., Freescale Semiconductor, Ltd., Marvell Technology Group Ltd., Maxim Integrated Products Inc., NVIDIA Corporation, and Xilinx Inc.) from the Pre-Acquisition Peer Group referenced above and ten new companies (Advance Micro Devices, Inc., Agilent Technologies, Inc., Broadcom Corporation, Juniper Networks, Inc., KLA-Tencor Corporation, Lam Research Corporation, Micron Technology, Inc., Motorola Solutions, Inc., NetApp, Inc., and SanDisk Corporation). The Post-Acquisition Peer

 

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Group is intended to be used as the comparator group of companies for our NEOs’ 2015 fiscal year compensation review. The median revenue for this group of companies was $4.6 billion for the four calendar quarters ended March 2014 compared to $2.4 billion for the peer group referenced above and the median market capitalization for this group was $11.6 billion as of May 2014 compared to $7.7 billion for the peer group referenced above. Based on the assumed combined revenue of Avago and LSI for the preceding four quarters, Avago would have ranked above the 100th percentile all of the companies in the Pre-Acquisition Peer Group based on revenue, and at the 96th percentile of that group in terms of market capitalization. By comparison, Avago would have ranked 55th percentile of the Post-Acquisition Peer Group based on revenue and at the 64th percentile of that group in terms of market capitalization. Following the review of Mr. Tan’s base salary as compared to the Post-Acquisition Peer Group, the Board approved a 10% increase in Mr. Tan’s base salary, following input and recommendations from the Compensation Committee.

 

Name

   Base Salary
(USD) As at
July 1, 2013
     2013 Base Salary As
a Percentile of Base
Salaries at Pre-Acquisition
Group
Companies(1)
   Base Salary
(USD) Effective
July 1, 2014
   2014 Base Salary As
a Percentile of Base
Salaries at Post-Acquisition
Peer

Group Companies(1)

Hock E. Tan

   $ 800,000       50th Percentile    $880,000    35th Percentile

Our Chief Executive Officer may recommend increasing the base salary of an executive at any time throughout the course of the year if a change in the scope of the executive’s role and responsibilities warrants an increase. In limited circumstances, our Chief Executive Officer may propose that an executive’s base salary be adjusted in response to a competitive threat or competitive labor market conditions. The Compensation Committee approves any salary adjustments that are made during the fiscal year for executives (other than for Mr. Tan, which are approved by our Board, with input and recommendations from the Compensation Committee).

Annual Cash Incentive Program

The Compensation Committee also believes that a significant portion of an executive’s total compensation should be dependent upon the Company’s performance. We maintain a performance-based annual cash incentive bonus plan for all of our executives and one for all other employees. The plans are reviewed and approved on an annual basis by our Compensation Committee. Company goals and business metrics are also reviewed and approved by the Compensation Committee. Our performance-based annual cash incentive plan for executives is designed to encourage and motivate the Chief Executive Officer and Chief Operating Officer to achieve corporate level goals and other executives to achieve both corporate level and functional/divisional level goals, thereby positively contributing to the growth and performance of the Company. The structure of the plan for Fiscal Year 2014 was the same as for Fiscal Year 2013. The plan included a target bonus amount expressed as a percentage of base salary for each NEO, which could be achieved by meeting corporate and divisional or functional goals, and could be increased or decreased based on individual performance. The formula used to calculate an executive’s performance-based bonus under the plan is as follows:

 

Bonus

Amount

  =  

Bonus Target

Percentage

  x  

Annual Bonus

Eligible Earnings

(base salary paid

during the fiscal

year)

  x  

Group Performance

Factor

(may range from

50% - 150%)

  x  

Individual

Performance Factor

(may range from 50% - 150%)

 

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If an executive’s role changes during the course of the fiscal year, such that the applicable performance metrics are also changed, such executive’s performance-based bonus under the plan is calculated on a pro-rata basis using the relevant metrics for the periods served in each capacity during the fiscal year.

All bonuses paid under the plan are paid to the NEOs in cash, with the exception of the Chief Executive Officer in certain circumstances. In the event the Board assigns the Chief Executive Officer an Individual Performance Factor (discussed in more detail below) greater than 100%, the Board may elect to pay the difference between the dollar amount of the Chief Executive Officer’s actual bonus amount and the dollar amount of the Chief Executive Officer’s bonus calculated using a performance factor of 100% in the form of an equity award under the Avago Technologies Limited 2009 Equity Incentive Award Plan (the “2009 Plan”). The type and terms of any such equity award would be determined by the Board. The Compensation Committee believes that this feature allows it to further incentivize our Chief Executive Officer to focus on the mid- to long-term performance of the Company and to further provide for value creation for the Company’s shareholders.

Bonus Target as a Percentage of Base Salary

Bonus targets are expressed as a percent of base salary. The Compensation Committee reviews competitive market data from the market salary surveys for our peer group companies as a point of reference in determining each executive’s bonus target. In addition, the Compensation Committee sets bonus targets based on each executive’s experience in his or her role with our Company and the level of responsibility held by each executive, which the Compensation Committee believes directly correlates to his or her ability to influence corporate results. The NEOs’ respective target rates of participation for Fiscal Year 2014 were the same as in Fiscal Year 2013. Each NEO’s target bonus amount can be calculated by multiplying his or her target bonus percentage, disclosed in the table entitled “Summary Bonus Table” below, by his or her base salary.

Group Performance

Group performance for each executive, other than our Chief Executive Officer and our Chief Operating Officer, consists of corporate performance and division/function performance, with each component equally weighted at 50%. Division/function performance metrics may include, among other things, metrics for direct expenses incurred by the division or function for which an NEO is responsible. Our Chief Executive Officer’s and our Chief Operating Officer’s group performance is measured solely using corporate performance since our Chief Executive Officer has overall responsibility for our Company and our Chief Operating Officer has responsibility for all operational aspects of the Company. A performance goal must be achieved at the minimum level of performance before it is taken into account in calculating an executive’s bonus amount. Achieving the minimum level of performance for a particular goal (other than direct expenses) results in 50% attainment while achieving the maximum level of performance results in 150% attainment for such goal, with performance between these levels resulting in an attainment percentage based on linear interpolation. For direct expense performance targets only, achieving the minimum level of performance will result in 80% attainment while achieving the maximum level of performance will result in 120% attainment for such component, with performance between these levels resulting in attainment percentages based on linear interpolation.

The corporate goals for Fiscal Year 2014 were revenue growth as compared to Fiscal Year 2013 and non-GAAP income from operations. Each goal carried an equal weighting of 50% of corporate performance component. The target for revenue growth for Fiscal Year 2014 was 15%, and the maximum attainment level was 20%, as compared to Fiscal Year 2013, and the target for non-GAAP income from operations for Fiscal Year 2014, excluding the effects of provisions or accruals for anticipated payouts under the annual cash incentive bonus plan (which would have the effect of reducing non-GAAP income from operations), was $936 million, and the maximum attainment level was $1,011 million. The goals were set by the Compensation Committee, with input from management and were designed to be difficult to attain and to require substantial effort by management to achieve. In determining whether performance goals were met in respect of Fiscal Year 2014, the calculations of revenue growth and non-GAAP income from operations excluded the effects of the acquisitions

 

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of LSI and PLX, which were completed in Fiscal Year 2014, but which were not included when the performance targets for the year were set. The table below shows the revenue growth and non-GAAP income from operations excluding the effects of the acquisitions of LSI and PLX.

 

($ in millions)

   Company
Fiscal
Year
2013
    Company
Fiscal
Year
2014
    Contribution
from LSI
to Company
Fiscal Year
2014
     Contribution
from
PLX to
Company
Fiscal Year
2014
     Adjusted
Company
Fiscal Year
2014(1)
    Increase in
Adjusted
Company
Fiscal Year
2014(1)
Compared
to Company
Fiscal Year
2013
 

Revenue

   $ 2,520      $ 4,307 (2)    $ 1,112       $ 24       $ 3,171 (2)    $ 651         25.8%   

Non-GAAP Income from Operations

   $ 740 (3)    $ 1,521      $ 372       $ 2       $ 1,147      $ 407         55.0%   

 

(1) “Adjusted Company Fiscal Year 2014 Results” exclude contribution from LSI and PLX.
(2) Non-GAAP revenue, which is calculated from our consolidated audited financial statements in our 2014 Form 10-K by adding to our $4,269 million of GAAP revenue $38 million in LSI intellectual property licensing revenue, not included in GAAP revenue as a result of the effects of purchase accounting for the LSI acquisition.
(3) “Adjusted Company Fiscal Year 2013 Results” exclude contributions from Javelin and CyOptics.

Non-GAAP income from operations of $1,521 million for Fiscal Year 2014 is calculated from our consolidated audited financial statements in our 2014 Form 10-K by adding to our $438 million GAAP income from operations: $38 million related to the acquisition-related purchase accounting revenue adjustment, $210 million related to the purchase accounting effect on inventory, $446 million related to the amortization of acquisition-related intangibles ($249 million reported as amortization of intangible assets as part of cost of products sold and $197 million reported in amortization of intangible assets as part of operating expenses), $153 million related to share-based compensation expense ($18 million reported as part of cost of products sold and $135 million reported as part of operating expenses), $162 million related to restructuring charges ($22 million reported as part of cost of products sold and $140 million reported as part of operating expenses), and $74 million in acquisition-related costs ($7 million reported as part of cost of products sold and $67 million reported as part of operating expenses). In determining whether performance goals under the plan have been met, the effects of provisions or accruals during the year for anticipated payouts under the annual cash incentive bonus plan are also excluded from non-GAAP income from operations. The table below shows the adjusted non-GAAP income from operations excluding these provisions or accrual.

 

($ in millions)

   Company
Fiscal
Year
2013
     Adjusted
Company
Fiscal Year
2014
    Provisions
or Accruals
for
Anticipated
Payouts
Under
Annual
Cash
Incentive
Bonus
Plans
     Adjusted
Company
Fiscal Year
2014
Excluding
Provisions
or Accruals
    Increase in
Adjusted
Company Fiscal
Year 2014
Excluding
Provisions or
Accruals
Compared to
Company Fiscal
Year 2013
 

Revenue

   $ 2,520       $ 3,171 (1)      —         $ 3,171 (1)    $ 651         25.8%   

Non-GAAP Income from Operations

   $ 740       $ 1,147      $ 78       $ 1,225      $ 485         65.5%   

 

(1) Adjusted non-GAAP revenue

In November 2014, the Compensation Committee preliminarily assessed that we achieved Fiscal Year 2014 adjusted revenue growth of 25.8%, which was above the maximum specified level of performance, resulting in 150% attainment of this goal. The Compensation Committee also preliminarily determined that we achieved

 

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adjusted non-GAAP income from operations for Fiscal Year 2014 of $1,225 million, which was above the maximum specified level of performance, resulting in 150% attainment of this goal. The Board determined final adjusted non-GAAP income from operations was $1,225 million, instead of $1,147 million.

The Compensation Committee determines an executive’s division/functional performance percentage based on the achievement of goals by the division/function overseen by the executive. The Compensation Committee sets divisional/functional goals and their weightings annually, based on its assessment of the business requirements of the particular division/function to which the goals relate and the relative importance of the goals to the division/function. Each of the divisional goals, and its respective weighting, for our NEOs is described in the “Summary Bonus Table” below. Each divisional/function goal is set by the Compensation Committee to be difficult to attain and to require substantial effort on behalf of the division and the executive in charge of the division or function to achieve. In December 2014, the Compensation Committee determined that divisional/functional goals had been achieved at the levels set forth in the “Summary Bonus Table” below. Following the acquisitions of LSI and PLX, and the integration of their support and operational functions, it was not possible to assess attainment of certain divisional and functional metrics under the annual cash bonus program on a standalone Avago basis, per the Avago Performance Bonus Plan. As a result, attainment of divisional and functional metrics for Mr. Ooi and Ms. McCall were set at 100% or target.

Individual Performance

Individual performance is applied as a multiplier to the bonus amount calculated based on group performance. Individual performance is approved by the Compensation Committee based on recommendations from the Chief Executive Officer for each executive other than the Chief Executive Officer. In determining individual performance, the Compensation Committee considers the requirements of the executive’s position including the achievement of the divisional goals set forth in the Summary Bonus Table below, fiscal responsibility as determined by the Compensation Committee with input from the Chief Executive Officer, the executive’s senior leadership capability, and how each of these factors impacts the overall performance of the executive’s division and/or function. Based on their respective levels of performance and individual contribution, the Compensation Committee assigns each executive an individual performance multiplier of between 50% and 150%. Executives, who consistently meet or exceed the requirements of the position, as determined by the Compensation Committee, will receive a bonus multiplier of between 100% and 150%. Executives who meet some, but not all, of the requirements of the position or for whom the Compensation Committee believes that improvement is needed will receive a bonus multiplier of between 50% and less than 100%. The Compensation Committee may adjust our executives’ individual performance multiplier upwards or downwards in its sole discretion, based on any criteria it determines appropriate.

Fiscal Year 2014 was a year of substantial transition and change due to the Company’s acquisitions of LSI and PLX. This prompted significant and dynamic changes in the responsibilities of our NEOs during the year, which made it difficult for our Chief Executive Officer, and, in turn, the Compensation Committee, to assess and determine an appropriate individual performance factor for each NEO. Given this uncertainty but the strong financial and operational performance of the Company during Fiscal Year 2014, including the successful completion of the LSI and PLX transactions, the Compensation Committee, following recommendations by the Chief Executive Officer (other than with respect to himself), set the individual performance factor for each NEO (other than the Chief Executive Officer) at 100%, which would result in no change (positive or negative) to the bonus amounts. Similarly, the Board, with input from the Compensation Committee, set Mr. Tan’s individual performance multiplier at 100%. NEOs’ individual performance factors are evaluated annually, and will vary from year to year.

Discretionary Bonuses

Each year, our Compensation Committee may supplement the performance-based cash incentive plan awards earned by our NEOs with discretionary bonuses which are awarded based on our Chief Executive

 

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Officer’s recommendations, other than with respect to himself, and the Compensation Committee’s assessment of individual contributions. In Fiscal Year 2014, no discretionary bonuses were awarded to our NEOs.

Summary Bonus Table

With respect to each NEO, corporate and divisional/functional goals for Fiscal Year 2014 were set and achieved, and bonuses were paid under our annual cash incentive bonus plan, as follows:

 

Name

   Bonus
Target as a
Percentage
of Bonus
Eligible
Earnings
   

Fiscal Year 2014 Bonus Metric (weighting)

   Fiscal
Year
2014
Bonus Metric
Achievement
    Fiscal Year 2014
Payout
in Dollars
and as a
Percentage of
Bonus Eligible
Earnings
 

Hock E. Tan

     150   Revenue Growth (50%)      150  

President and Chief Executive Officer

     Non-GAAP Operating Profit (50%)      150  
    

Total Weighted Fiscal Year

2014 Attainment

     150 %    $ 1,855,385         (225.0 %) 

Anthony E. Maslowski

     75   Revenue Growth (50%)      150  

Chief Financial Officer

     Non-GAAP Operating Profit (50%)      150  
    

Total Weighted Fiscal Year

2014 Attainment

     150 %    $ 445,500         (112.5 %) 

Bryan T. Ingram

     100   Revenue Growth (50%)      150  

Senior Vice President and Chief Operating Officer

     Non-GAAP Operating Profit (50%)      150  
    

Total Weighted Fiscal Year

2014 Attainment

     150 %    $ 761,539         (150.0 %) 

Boon Chye Ooi

     75   Revenue Growth (25%)      150  

Senior Vice President, Global Operations

     Non-GAAP Operating Profit (25%)      150  
     Avago Gross Margin % (25%)      100  
     Direct Expenses (25%)      100  
    

Total Weighted Fiscal Year

2014 Attainment

     125 %    $ 532,938         (93.8 %) 

Patricia H. McCall

     60   Revenue Growth (25%)      150  

Vice President,

General Counsel

     Non-GAAP Operating Profit (25%)      150  
     Direct Expenses (50%)      100  
    

Total Weighted Fiscal Year

2014 Attainment

     125 %    $ 288,261         (75.0 %) 

Equity Incentive Compensation

Our Compensation Committee believes that long-term, sustainable growth and performance are best facilitated through a culture of executive stock ownership that encourages long-term investment and engagement by our executive management. The aim is also to align executive performance and behaviors to create a culture conducive to shareholder investment.

Our Compensation Committee approves all equity awards granted to executive officers, other than the CEO whose equity awards are approved by the full Board (other than the CEO). The size of initial and subsequent grants for executives takes into account past equity grants, the executive’s position and level, other compensation and the value the executive brings to the Company based on their 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 compared to the executive’s base salary. The

 

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philosophy behind equity awards is to provide the executive with a strong incentive to remain with, and build value in, the Company over an extended period of time. Equity awards to executives may be proposed by our Chief Executive Officer from time to time, and any grants are made by the Compensation Committee.

We have an annual equity award program for employees, including executives. Annual equity awards are typically made in March of each year. Annual awards to executives vest over four years with 25% vesting annually. Performance-based options granted to executives are also subject to shares price contingencies that must be met before the award is exercisable. During Fiscal Year 2014, equity awards for the NEOs, other than Mr. Tan, consisted of a combination of performance-based options and service-based RSUs, to balance long-term retention of executives, by providing an element of certainty of value from service-based RSUs, with motivating the executives to improve performance and increase the Company’s share price over the long term, through the option awards. Options and RSUs are typically issued in a ratio of three option shares to one RSU, in order to emphasize the performance aspect of the equity awards. These performance-based options have a term of seven years and vest over four years, with 25% vesting annually, assuming the executive’s continued service with the Company through the vesting dates. However, these options are not exercisable until the date on which the average of the closing prices of the Company’s ordinary shares (as reported on the Nasdaq), over a defined historical trading period equals or exceeds a price threshold higher than the exercise price of the option, set at the time of the grant of the options. As a result, the executive is not able to realize any value from the option award unless there is a significant increase in the Company’s overall share price over a sustained period. This structure provides executives with stronger incentives to improve the Company’s performance and maximize the value of the Company’s shares, which more closely aligns their interests with those of shareholders generally.

Changes in Equity Incentive Compensation Policies

In December 2014, the Compensation Committee, with advice and input from Compensia, decided that starting in Fiscal Year 2015, equity awards to our NEOs would consist entirely of RSUs, with 50% of the RSUs awarded being performance-based RSUs and 50% being service-vesting RSUs.

2014 Equity Grants

In March 2014, the Compensation Committee awarded equity grants to all of the NEOs, except Mr. Tan, as follows:

 

Name

   Performance-Based
Options
(Number of Shares)
     RSUs
(Number of Shares)
 

Bryan T. Ingram

     240,000         80,000   

Anthony E. Maslowski

     50,000         16,667   

Boon Chye Ooi

     50,000         16,667   

Patricia H. McCall

     36,000         12,000   

The performance-based option awards made in Fiscal Year 2014 vest at the rate of 25% per year but are not exercisable until the date on which the average of the closing prices of the Company’s ordinary shares (as reported on the Nasdaq), over a ten consecutive trading day period is equal to or greater than 120% of the exercise price of the option. This performance-based condition for these options was met on August 22, 2014. In determining the size of the awards, the Compensation Committee considered the fair market value of the unvested equity already held by each executive compared to the executive’s base salary, as well as market data for our peer group companies, and the performance of the Company. In addition, the Compensation Committee considered the importance of retaining Mr. Ingram in his role as Chief Operations Officer of the Company.

On January 2, 2014, Mr. Tan received the second part of his special, long-term compensation and retention equity award, which was approved in September 2013, as discussed in more detail below. In January 2014, the

 

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Compensation Committee also amended the vesting schedule for an outstanding performance option held by Mr. Ooi. The option, originally granted in 2009, vested 20% per year over five years, based on the achievement of specified financial targets for each such year. If the performance criteria for a particular year were not met, under the terms of the option, the relevant tranche of the option would vest two years following the date on which it would have vested had the performance target been met. The Compensation Committee changed the vesting of the last tranche of the option (representing shares) so that in such circumstances it would vest one year (instead of two years) after the date on which it would otherwise have vested. The change was made to recognize Mr. Ooi’s achievements during Fiscal Year 2013, notwithstanding the fact that the Fiscal Year 2013 performance criteria for vesting of the option had not been met.

Fiscal Year 2013 Performance-Based Retention Award to President and Chief Executive Officer.

Terms of the Award

On September 13, 2013, the Board, following the recommendation of the Compensation Committee, approved a special, long-term compensation and retention equity award to Mr. Tan consisting of performance-based options to acquire an aggregate of 2,500,000 ordinary shares of the Company. The award was made under the 2009 Plan and consists of:

 

  (i) an option to acquire 1,750,000 shares with an effective grant date of September 13, 2013 and an exercise price of $38.99 per share, which was the closing price per Share, as reported by the Nasdaq on that date (“Option #1”), and

 

  (ii) an option to acquire 750,000 shares with an effective grant date of January 2, 2014, and a strike price of $52.65 per share, which was the closing price per Share, as reported on the Nasdaq on January 2, 2014 (“Option #2” and together with Option #1, the “Options”).

The Options vest in four equal installments over a four-year period from their respective dates of grant, assuming Mr. Tan’s continued service to the Company; however, the Options will only become exercisable as to any tranche thereof, if the relevant Price Contingency for such tranche is or has been achieved. The Options have a term of seven years from their respective dates of grant.

The “Price Contingency” for each tranche of the Options set forth in the table below means the date on which the average of the closing prices per Share, as reported on the Nasdaq, over a 30 consecutive trading-day period (the “30-Day Average Price”) is equal to or greater than the relevant price set forth in the table below:

 

30-Day Average Price (U.S.$)

   Option #1:
Number of Option Shares
Subject to the Price
Contingency
     Option #2:
Number of Option Shares
Subject to the Price
Contingency
 

$50.00

     350,000         150,000   

$56.75

     350,000         150,000   

$62.50

     350,000         150,000   

$68.75

     350,000         150,000   

$75.00

     350,000         150,000   
  

 

 

    

 

 

 
     1,750,000         750,000   

The satisfaction of a particular Price Contingency with respect to an Option also satisfies all other Price Contingencies for the Options having a lower 30-Day Average Price. If any Price Contingency is not satisfied prior to the expiration, termination or cancellation of an option pursuant to its terms, both the relevant vested tranche as to which such Price Contingency relates and all unvested tranches of such option shall thereupon expire, terminate or be cancelled.

 

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In the event of the closing of a Change in Control (as defined in the 2009 Plan) in which the effective price per share paid by the acquirer meets or exceeds a 30-Day Average Price related to a particular Price Contingency tranche of the Options, the Price Contingency relating to each tranche of the Options having a lower 30-Day Average Price shall be deemed met, and the Options shall become exercisable as to such tranche, in each case, irrespective of whether such price is maintained for 30 consecutive trading days. Unless the Options are assumed by the acquirer in a Change of Control transaction, the Options become fully vested immediately prior to the closing of such transaction, but shall remain subject to the requirement that the Options only become exercisable as to those tranches of the Options for which the relevant Price Contingencies are or have been achieved. Any tranches of the Options for which the relevant Price Contingencies have not been met as of the closing of such Change in Control transaction in which the Options are not assumed by the acquirer shall terminate upon such closing.

Rationale for, and Structuring of, the Award

In determining whether to make the award, and how to structure the award, the Compensation Committee consulted extensively with, and was advised by, Compensia, the Compensation Committee’s external, independent compensation consultant. The Compensation Committee and the Board reviewed and weighed heavily Mr. Tan’s contributions to the Company to date, and the successful performance of the Company while Mr. Tan has been its President and Chief Executive Officer, and the resulting, substantial increase in the Company’s share price in the four years since its IPO in August 2009. The Board believed that it was in the best interests of the Company to ensure Mr. Tan remained as President and Chief Executive Officer of the Company and that he is incentivized to continue to improve Company performance going forward. The Board also believed that this award was essential to ensuring Mr. Tan remained with the Company. As of September 13, 2013, the grant date of Option #1, the Company’s Share price had increased over 160% from its IPO price, and as of November 2, 2014, the end of Fiscal Year 2014, the Company’s Share price had increased to $86.25, or 475%, from its IPO price. Net revenue increased from $1,484 million in Fiscal Year 2009 to $2,520 million in Fiscal Year 2013 and $4,307 million in Fiscal Year 2014.

In designing the award, in consultation with and upon the advice of Compensia, the Compensation Committee focused on ensuring that the award aligned with and reinforced the Company’s pay-for-performance philosophy, while also emphasizing substantial, sustainable shareholder value creation. Therefore, the Board after consultation with and upon the recommendation of the Compensation Committee, decided to adopt a tiered performance-based award structure, based on the objective, quantifiable metric of the Company’s share price. The tiered, performance-based nature of the award is intended to incentivize Mr. Tan to lead the Company to sustained, superior financial and operational performance, continuing the performance Mr. Tan has accomplished since he joined the Company. The Options vest over a four-year period from their respective effective grant dates and only become exercisable if the Company’s shares trade for sustained periods at increasing prices between $50.00 and $75.00 per share. This means that Mr. Tan could not realize any value from the Options unless and until the relevant Price Contingencies had been met. The price targets provided for in the award were intended to be difficult to attain, and the realizable value of this award were dependent on Mr. Tan’s ability to successfully grow the Company over time and achieve the corresponding significant, sustained increases in the Company’s share price needed to meet the performance requirements of the award. At the time of approval, the Board believed strongly that the structure of this award reinforced and more closely aligns Mr. Tan’s interests with those of our shareholders, and strongly incentivizes Mr. Tan to act in the interests of shareholders generally over the long term. The Board also believes that the potential gains Mr. Tan may realize with this award are reasonable based on the aggregate overall increase in the amount of Company shareholder wealth that will need to be achieved for Mr. Tan to actually realize such gains.

Based on the closing share price of $38.99, as quoted on the Nasdaq on September 13, 2013, the date the award was approved, attainment of the lowest Price Contingency of $50.00 would represent an increase in the Company’s share price of approximately 28%, and attainment of the highest Price Contingency of $75.00 would represent an increase in the Company’s share price of approximately 92%. As of November 2, 2014, the

 

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Company’s share price was $86.25, an increase of 121% from the date on which the award was approved. As a result of the performance of the Company since the approval of this award, including the significant strategic acquisitions of LSI and PLX and the related non-core business divestitures that have occurred since then, as of September 5, 2014, all of the Price Contingencies relating to the Options have been met. As a result, the Options are now subject only to the vesting requirements thereof and may be exercised by Mr. Tan once vested.

Shareholder Outreach

In 2013, in connection with awarding Mr. Tan this retention equity award, the Compensation Committee, through its Chairman, engaged in outreach to shareholders who, at the time, collectively owned approximately 61% of our then outstanding shares. Of those contacted, shareholders owning approximately 56% of our then outstanding shares took the opportunity to engage in discussion with the Chairman of our Compensation Committee. The reason most often cited by those investors who declined our invitation for extended discussions was that they had no outstanding concerns or questions about the award. The award and its design were viewed positively by those shareholders with whom we had discussions. The most commonly cited reason for this was that the award is strongly performance-based and Mr. Tan benefits from the award only when the Company’s share price exceeds each of the significantly higher price contingencies provided for in the award. This was viewed as strongly aligning Mr. Tan’s incentives with those of shareholders generally.

NEO Share Ownership Guidelines

In August 2012, the Committee approved the following share ownership guidelines for NEOs, based on market and peer group data and upon consultation with, and advice from Compensia: (i) the Chief Executive Officer should hold a minimum of 70,000 of our ordinary shares or ordinary shares having a fair market value equal to three times the Chief Executive Officer’s annual base salary, whichever is less, and (ii) each other NEO should hold a minimum of 15,000 of our ordinary shares or ordinary shares having a fair market value equal to one times such NEO’s annual base salary, whichever is less.

NEOs are expected to reach this goal within five years of the date on which the guidelines were adopted or the date on which they become a NEO, whichever is later, and to hold at least such minimum value in ordinary shares for so long as he or she is a NEO. Shares held in a trust or other estate-planning vehicle established by a NEO, which continue to be beneficially owned by such NEO under SEC rules, count toward the NEO achieving the applicable guideline level of share ownership. Outstanding vested option awards held by a NEO 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 unvested equity awards do not count toward achieving the applicable guideline. As of February 11, 2015, all of our NEOs had achieved the guideline level of share ownership.

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

Employee Stock Purchase Plan

Executives employed by our participating subsidiaries, including our NEOs, may also participate in our Employee Share Purchase Plan (“ESPP”). The ESPP provides eligible employees with the opportunity to acquire ordinary shares of the Company through periodic payroll deductions, at a 15% discounted price, based on a six-month look-back period. The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986. The ESPP requires participants to hold shares for a minimum of six months after any purchase date, unless they cease to be eligible to participate in the ESPP in which case the shares become freely tradable, subject to our applicable securities laws and our insider trading policy.

 

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Termination-Based Compensation

Separation compensation is determined by Company policy and any specific arrangements detailed in the executive’s employment agreement. Severance payments are typically comprised of a cash payment in lieu of salary, bonuses and/or coverage of health benefits for a limited period of time and, in some cases, option and RSU vesting acceleration. Our Compensation Committee, or the Board for our President and Chief Executive Officer, must approve any exceptions to severance payments including any additional cash payments and any variance from the Executive Plan regarding the treatment of options. Executives who are terminated from Avago are required to sign a general release of all claims against Avago to receive any severance benefits.

Each of our NEOs is eligible for severance benefits under his or her respective employment agreement or severance benefits agreement with Avago. The Compensation Committee provides termination benefits to our NEOs based on its review of severance practices at our peer group companies and as the result of arms’ length negotiations at the time our executives enter into employment with us, at the time they are requested to take on additional responsibilities or from time to time if deemed necessary or desirable to achieve parity with other NEOs. The level of benefits varies from executive to executive based on the level of responsibility of the executive and accommodations made through arms’ length negotiations.

The table below sets forth the severance benefits payable to each NEO under his or her severance benefit agreement in effect as of the end of Fiscal Year 2014, upon a termination of employment without cause or for good reason or in the event of death or disability, in each case, apart from a change in control. Each executive must provide a full release of claims in order to be eligible for his or her full severance payment.

 

Name

   Continued
Base Salary
     Bonus(1)     Health Benefits
Continuation
Coverage
 

Hock E. Tan

     12 months         100     —    

Anthony E. Maslowski

     9 months         50     6 months   

Bryan T. Ingram

     9 months         50     6 months   

Boon Chye Ooi

     6 months         50     6 months   

Patricia H. McCall

     9 months         50     6 months   

 

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

The table below sets forth the severance benefits payable to each NEO under his or her severance benefit agreement in effect as of end of Fiscal Year 2014, upon a termination of employment without cause or for good reason or in the event of death or disability, in each case, within 12 months following a change in control involving the sale of all or substantially all of the assets of the Company (or in the case of Mr. Tan, three months before or 12 months following such a change in control). Vesting of equity held by our NEOs will only accelerate following such a change in control if there is a qualifying termination of employment, as described above, which is commonly referred to as a “double trigger.” Each executive must provide a full release of claims in order to be eligible for his or her full severance payment.

 

Name

   Continued
Base Salary
     Bonus(1)     Health Benefits
Continuation
Coverage
 

Hock E. Tan

     24 months         200     —    

Anthony E. Maslowski

     12 months         100     12 months   

Bryan T. Ingram

     12 months         100     12 months   

Boon Chye Ooi

     12 months         100     12 months   

Patricia H. McCall

     12 months         100     12 months   

 

(1)

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

 

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In addition, upon a qualifying termination of an NEO’s employment in connection with a change of control, the NEO will receive full acceleration of all outstanding time-vesting equity and equity-linked awards, and acceleration of outstanding performance-based equity and equity-linked awards to the extent (i) the effective price per share paid by the acquirer meets or exceeds any share price contingency applicable to any share-price performance awards, and (ii) other performance goals have been deemed satisfied, in the discretion of the Board, based on Company performance through the date of the change in control, for all other types of performance-based awards.

For more detailed descriptions of the benefits provided to our NEOs upon a termination of employment, please see “Executive Compensation—Severance and Change of Control Agreements with Named Executive Officers” below.

Other Compensation

U.S.-based executives may also participate in the Avago Technologies U.S. Inc. Deferred Compensation Plan. For a description of the Deferred Compensation Plan, see footnote 1 of the 2014 Non-Qualified Deferred Compensation Table.

The Compensation Committee approves providing perquisites to our executives on a case-by-case and limited basis. The Compensation Committee will provide a perquisite to an NEO when it is necessary to attract or retain the executive officer. In Fiscal Year 2014, the following NEOs received perquisites:

 

Name

 

Perquisites

Hock E. Tan, President and Chief Executive Officer

  Reimbursement for travel to his residence in Pennsylvania.
Boon Chye Ooi, Senior Vice President, Global Operations   Reimbursement of tax preparation service fees and annual home leave travel expenses.

Tax and Accounting Considerations

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

Hedging and Pledging Prohibitions

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

 

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information about compensation earned by our NEOs during Fiscal Year 2014, Fiscal Year 2013 and Fiscal Year 2012. Our NEOs consist of our Chief Executive Officer, our Chief Financial Officer, and each of our three other most highly compensated executive officers serving at the end of Fiscal Year 2014.

 

Name and Principal

Position(s)

  Fiscal
Year
    Salary
($)
    Bonus
($)
    Stock
Awards
($)(1)
    Option
Awards
($)(2)
    Non-Equity
Incentive Plan
Compensation
($)(3)
    All Other
Compensation
($)
    Total
($)
 

Hock E. Tan

    2014        827,692        —          —         14,483,625        1,855,385        35,894 (4)      17,202,596   

President and Chief
Executive Officer

    2013        781,731        —         2,493,405        27,531,000        1,025,000        35,993        31,867,129   
    2012        716,346        —         —         —         —         36,694        753,040   

Anthony E. Maslowski

    2014        396,750        —         1,033,687        1,115,625        445,500        16,749 (5)      3,008,311   

Senior Vice President and
Chief Financial Officer

    2013        330,825        50,000        1,886,500        2,050,875        177,794        65,426        4,561,420   

Bryan T. Ingram

    2014        508,654        —         4,961,600        5,355,000        761,539        15,600 (6)      11,602,393   

Chief Operating Officer

    2013        475,769        —         945,345        1,066,800        506,527        15,000        3,009,441   
    2012        406,539        60,000        —         —         188,997        15,000        670,536   

Boon Chye Ooi

    2014        568,467 (7)      —         1,033,687        1,144,347        532,938        17,636 (8)      3,297,075   

Senior Vice President,
Global Operations

    2013        554,298        —         354,500        400,050        475,199        16,105        1,800,152   
    2012        554,547        —         1,177,024        1,448,839        192,151        9,504        3,382,065   

Patricia H. McCall

    2014        385,076        —         744,240        803,250        288,261        15,854 (9)      2,236,681   

Vice President,

General Counsel

    2013        373,672        —         212,700        240,030        219,965        15,600        1,061,967   
    2012        353,433        —         588,512        724,419        127,163        15,600        1,809,127   

 

(1) Represents the grant date fair value of RSU, determined in accordance with ASC 718. The amounts in this column do not reflect compensation actually received by the NEO or the actual value that will be recognized by the NEO. For a discussion of valuation assumptions used in the calculations, see Note 8 to the Consolidated Financial Statements included in Part IV, Item 8 of our 2014 Form 10-K.
(2) Represents the grant date fair value of options granted, determined in accordance with ASC 718. The amounts shown for 2014 and 2013 consist of grant date fair value of performance-based option awards. The single performance measure that determines the number of options to be earned for the performance-based option awards is our stock price, which is a market condition as defined under Financial Accounting Standards Board principles regarding the measurement of stock-based compensation (ASC 718). Since these awards do not have performance conditions as defined under ASC 718, such awards have no maximum grant date fair values that differ from the fair values presented in the table above. For Mr. Ooi, the amount for 2014 in this column also includes the incremental fair value resulting from an amendment to a previously granted option, which is discussed in more detail in footnote 6 to table appearing under the heading “Grant of Plan-Based Awards in Fiscal Year 2014” below. The amounts in this column do not reflect compensation actually received by the NEO or the actual value that will be recognized by the NEO. For a discussion of valuation assumptions used in the calculations, see Note 8 to the Consolidated Financial Statements included in Part IV, Item 8 of our 2014 Form 10-K.
(3) Represents amounts paid for each applicable fiscal year under our annual cash incentive program for executive employees. Please see the plan description in “Compensation Discussion and Analysis—Annual Cash Compensation—Annual Cash Incentive Program” above.
(4) Represents $20,294 in expense reimbursements for travel to Mr. Tan’s residence in Pennsylvania and a $15,600 401(k) employer matching contribution.
(5) Represents a $16,749 401(k) employer matching contribution processed in January 2014 for October through December for Mr. Maslowski.
(6) Represents 401(k) employer matching contribution.
(7) For the purposes of this table, salary amount and incentive paid to Mr. Ooi in Singapore Dollars were converted for Fiscal Year 2014 to U.S. Dollars using the Accounting Rate for October 2014, the last month of our fiscal year. The Accounting Rate for October 2014 was 1.2751 Singapore Dollars to the U.S. Dollar as reported by Bloomberg L.P.
(8) Represents $13,301 in reimbursement for annual home leave travel expenses and $4,335 in reimbursement of tax preparation service fees. The annual home leave travel expenses of 43,510 Malaysian Ringgits were converted to U.S. Dollars using the Accounting Rate for October 2014 of 3.2712 Malaysian Ringgits to the U.S. Dollar, as reported by Bloomberg L.P.
(9) Represents a $15,600 401(k) employer matching contribution and a $254 credit for not enrolling in a medical plan.

 

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Grant of Plan-Based Awards in Fiscal Year 2014

The following table sets forth information regarding grants of incentive awards during Fiscal Year 2014 to each of our NEOs.

 

Name

  Approval
Date(1)
    Grant
Date(1)
    Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards(2)
    Estimated Future
Payouts Under
Equity Incentive Plan
Awards
    All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)(3)
    All Other
Option
Awards:
Number of
Securities
Underlying
(#)
  Exercise
or Base
Price of
Option
Awards
($/Sh)
    Grant Date
Fair Value of
Stock and
Option
Awards
($)(4)
 
      Threshold
($)
    Target
($)(2)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
         

Hock E. Tan

        154,615        1,236,923        2,783,077                 
    9/13/2013        1/2/2014              150,000        750,000        750,000            52.65        14,483,625 (5) 

Anthony E. Maslowski

        37,125        297,000        668,250                 
    3/4/2014        3/11/2014                50,000              62.02        1,115,625 (6) 
    3/4/2014        3/11/2014             —              16,667            1,033,687   

Bryan T. Ingram

        63,462        507,692        1,142,308                 
    3/4/2014        3/11/2014                240,000              62.02        5,355,000 (6) 
    3/4/2014        3/11/2014             —              80,000            4,961,600   

Boon Chye Ooi

        26,372        421,949        901,917                 
    3/4/2014        3/11/2014                50,000              62.02        1,115,625 (6) 
    1/21/2014        1/21/2014                    35,000          8.12        28,722 (7) 
    3/4/2014        3/11/2014             —              16,667            1,033,687   

Patricia H. McCall

        14,413        230,609        466,983                 
    3/4/2014        3/11/2014                36,000              62.02        803,250 (6) 
    3/4/2014        3/11/2014             —              12,000            744,240   

 

(1) The approval date represents the date on which the award was approved by the Compensation Committee or the Board, as applicable. The grant date is the date on which the award became effective.
(2) Represents estimated potential payouts under our 2014 Avago Performance Bonus Plan for Executives. The threshold amount for each of Mr. Tan, Mr. Ingram and Mr. Maslowski is 12.5% of his target bonus amount, calculated based on the achievement of a single corporate goal at 50% of the target for such goal and using the minimum individual performance multiplier of 50% target. The threshold amount for Mr. Ooi and Ms. McCall is 6.25% of target, calculated based on the achievement of a single corporate or divisional goal at 25% of the target for such goal and using the minimum individual performance multiplier of 50% target. The maximum bonus payable is 225% of target for Mr. Tan, Mr. Ingram and Mr. Maslowski, which assumes maximum (150%) performance for each corporate goal and uses the individual performance multiplier set at 150%. The maximum bonus payable is 213.8% of target for Mr. Ooi, which assumes maximum (150%) performance for each corporate and divisional goal (except Direct Expenses which has a maximum of 120%) and uses the individual performance multiplier set at 150%. The maximum bonus payable is 203% for Ms. McCall, which assumes maximum (150%) performance for each corporate goal and (120%) for Direct Expenses functional goal and uses the individual performance multiplier set at 150%.

Mr. Tan’s target bonus for Fiscal Year 2014 was 150% of his base salary. Mr. Ingram’s target was 100% of his base salary. Mr. Maslowski’s and Mr. Ooi’s target bonus was 75% of his base salaries and Ms. McCall’s target bonus was 60% of her base salary.

(3) The awards shown in this column are restricted share unit awards granted under our 2009 Equity Incentive Plan. These awards vest at the rate of 25% a year, subject to the executive remaining employed by Avago.
(4) Represents the grant date fair value of the equity awards, as determined in accordance with ASC 718. For a discussion of the valuation assumptions used in the calculations, see Note 8 to the Consolidated Financial Statements included in Part II, Item 8 of our 2014 Form 10-K.
(5) Represents a performance-based option award to Mr. Tan which vests over a four-period, but which may only be exercised if various, increasing share-price contingencies, each relating to 20% of the shares subject to the option, are met. The share price contingencies range from $50.00 per share to $75.00 per share. In order to be exercisable, the average of the closing price per share of the Company, over 30 consecutive trading days must equal or exceed the relevant price contingency. The per share price contingencies for this award were met on the following dates: $50.00 on January 13, 2014, $56.75 on February 27, 2014, $62.50 on April 2, 2014. $68.75 on June 11, 2014, and $75.00 on September 5, 2014.
(6) Represent performance-based option awards that vest at the rate of 25% of the shares subject thereto on each anniversary of the grant date subject to the executive’s continued employment with Avago. The performance-based options are not exercisable until they vest and the date on which the average of the closing prices of the Company’s ordinary shares (as reported on the Nasdaq), over a ten consecutive trading day period is equal to or greater than 120% of the exercise price of the option. The performance-based condition for the options granted effective March 11, 2014 was met on August 22, 2014.

 

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(7) On January 21, 2014, the Compensation Committee amended this option, which was originally granted in 2009. The grant date fair value shown is the incremental fair value, calculated in accordance with ASC Topic 718, resulting from the amendment. Under its pre-amendment terms this option would have vested based upon achieving specified financial targets, in each case, at a rate of 20% per year over five years on each anniversary of the grant date. Any tranche of the option that would have vested because the performance targets for a particular year were not met would, under the terms of the option, have vested two years after the date such tranche of such option could first have vested had the performance targets for such tranche been achieved. The relevant financial targets for Fiscal Year 2013 were not met with regard to this option. The 2014 amendment changed the vesting of this option so that the remaining tranche will vest one year after the date such tranche could first have vested had the performance targets for such tranche been achieved. The change was made to recognize Mr. Ooi’s achievements during Fiscal Year 2013, notwithstanding that the performance targets for Fiscal Year 2013 had not been met. This award was granted under the Equity Incentive Plan For Executive Employees of Avago Technologies Limited and Subsidiaries.

 

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Outstanding Equity Awards at 2014 Fiscal Year-End

The following table sets forth information about stock options and stock awards outstanding on November 2, 2014, the last day of Fiscal Year 2014, held by each of our NEOs.

 

    Option Awards     Restricted Share Unit
Awards
 

Name

  Vesting
Reference 
Date
    Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
(#)
Un-exercisable(1)
    Equity
Incentive
Plan

Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares or
Units of Stock
That Have
Not Vested
(#)(1)
    Market Value
of
Shares or Units
of Stock that
Have Not
Vested
($)(2)
 

Hock E. Tan

    8/5/2009        300,000        —         —          15.00        8/4/2019        —         —    
    3/8/2011        300,000        300,000 (3)      —          32.39        3/7/2018        100,000 (7)      8,625,000   
    11/26/2012                  12,500 (7)      1,078,125   
    3/12/2013        43,750        131,250 (4)      —          35.45        3/11/2020        43,749 (8)      3,773,351   
    9/13/2013        437,500        1,312,500 (5)      —          38.99        9/12/2020        —         —    
    1/2/2014        —         750,000 (5)      —          52.65        1/1/2021        —         —    

Anthony E. Maslowski

    3/6/2012        —         25,000 (3)      —          35.31        3/5/2019        8,334 (7)      718,808   
    3/12/2013        15,000        45,000 (4)      —          35.45        3/11/2020        15,000 (8)      1,293,750   
    9/11/2013        22,500        67,500 (4)      —          39.25        9/10/2020        22,500 (8)      1,940,625   
    3/11/2014        —         50,000 (4)      —          62.02        3/10/2021        16,667 (8)      1,437,529   

Bryan T. Ingram

    11/1/2007        17,917        —         —          10.22        10/31/2017        —         —    
    3/8/2011        —         75,000 (3)      —          32.39        3/7/2018        25,000 (7)      2,156,250   
    3/12/2013        —         60,000 (4)      —          35.45        3/11/2020        20,000 (8)      1,725,000   
    3/11/2014        —         240,000 (4)      —          62.02        3/10/2021        80,000 (8)      6,900,000   

Boon Chye Ooi

    1/15/2009        —         35,000 (6)      —          8.12        1/14/2019        —         —    
    3/6/2012        —         100,000 (3)      —          35.31        3/5/2019        33,334 (7)      2,875,058   
    3/12/2013        —         22,500 (4)      —          35.45        3/11/2020        7,500 (8)      646,875   
    3/11/2014        —         50,000 (4)      —          62.02        3/10/2021        16,667 (8)      1,437,529   

Patricia H. McCall

    6/5/2007        40,000        —         —          10.22        6/4/2017        —         —    
    2/22/2008        10,000        —         —          10.22        2/21/2018        —         —    
    2/22/2008        10,000        —         —          10.22        2/21/2018        —         —    
    3/3/2009        50,000        —         —          10.00        3/2/2019        —         —    
    8/5/2009        50,000        —         —          15.00        8/4/2019        —         —    
    3/6/2012        —         50,000 (3)      —          35.31        3/5/2019        16,667 (7)      1,437,529   
    3/12/2013        4,500        13,500 (4)      —          35.45        3/11/2020        4,500 (8)      388,125   
    3/11/2014        —         36,000 (4)      —          62.02        3/10/2021        12,000 (8)      1,035,000   

 

(1) The awards shown in this column are awards granted under our 2009 Plan.
(2) The amounts shown in this column represent the number of shares that have not vested multiplied by $86.25, the closing price of an Avago share on October 31, 2014, the last trading day of Fiscal Year 2014.
(3) This option vests at the rate of 50% of the shares subject thereto on each of the third and fourth anniversaries of the grant date, subject to the executive’s continued employment with the Company.
(4) This performance share option vests at the rate of 25% the shares subject thereto on each anniversary of the grant date, subject to the executive’s continued employment with the Company. This performance share option is not exercisable until the date on which the average of the closing prices of the Company’s ordinary shares, over a ten consecutive trading day period is equal to or greater than 120% of the exercise price of the option. The exercisability condition for this option has been met.
(5) This performance share option vests at the rate of 25% the shares subject thereto on each anniversary of the grant date, subject to the executive’s continued employment with the Company. This performance share option will only become exercisable as to any tranche of 20% of the shares covered by the option if the price target applicable to that target is met. In order for a price target to be met, the average of the closing prices of the Company’s ordinary shares, over a thirty consecutive trading day period must be equal to or greater than the price target. The price targets range from $50.00 per share to $75.00 per share. All price targets for this option has been met.
(6)

This option was amended by the Compensation Committee on January 21, 2014. Under its pre-amendment terms of this option would have vested based upon achieving specified annual financial targets at a rate of 20% per year over five

 

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  years on each anniversary of the grant date. Any tranche of the option that would not have vested because the performance targets for a particular year were not met would, under the terms of the option, have vested two years after the date such tranche of such option could first have vested had the performance targets for such tranche been achieved. The relevant financial targets for Fiscal Year 2013 were not met with regard to this option. The 2014 amendment changed the vesting of this option so that the remaining tranche will vest one year after the date such tranche could first have vested had the performance targets for such tranche been achieved. The change was made to recognize Mr. Ooi’s achievements during Fiscal Year 2013, notwithstanding that the performance targets for Fiscal Year 2013 had not been met.
(7) These RSUs vest in two equal installments of 50%, each on approximately the third and fourth anniversaries of the grant date, subject to the executive’s continued employment with the Company.
(8) These RSUs vest in four equal, annual installments of 25% each, commencing on approximately the first anniversary of the grant date, subject to the executive’s continued employment with the Company.

Option Exercises and Stock Vested in Fiscal Year 2014

The following table shows information regarding the exercise of options to purchase our ordinary shares and the vesting of RSUs during Fiscal Year 2014. Option award value is calculated by subtracting the aggregate exercise price of the options exercised from the aggregate market value of the ordinary shares acquired on the date of exercise. Stock award value realized is calculated by multiplying the number of shares shown in the table by the closing price of our shares, as reported on the Nasdaq, on the date the RSUs vested. Value Realized on Exercise and Value Realized on Vesting represent long-term gain over many years of service by the executive and we do not consider it as part of an executive’s Fiscal Year 2014 compensation.

 

     Option Awards      Stock Awards  

Name

   Number of
Shares
Acquired on
Exercise
(#)
     Value
Realized
on
Exercise
($)
     Number of
Shares
Acquired on
Vesting
(#)
     Value
Realized
on
Vesting
($)
 

Hock E. Tan

     240,000         18,088,680         114,584         7,106,500   

Anthony E. Maslowski

     33,000         1,499,591         15,834         1,274,326   

Bryan T. Ingram

     107,000         3,434,759         31,667         1,963,987   

Boon Chye Ooi

     42,500         3,160,614         2,500         155,050   

Patricia H. McCall

     10,000         653,900         1,500         93,030   

 

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2014 Non-Qualified Deferred Compensation

The following table sets forth information regarding contributions and earnings under the Avago Technologies U.S. Inc. Deferred Compensation Plan during Fiscal Year 2014.

 

Name

   Executive
Contributions
in Fiscal Year
2014
($)(1)
     Registrant
Contributions
in Fiscal Year
2014
($)(1)
     Aggregate
Earnings
in Fiscal
Year 2014
($)(2)
     Aggregate
Withdrawals /
Distribution
($)
     Aggregate
Balance at
November 2,
2014
($)
 

Anthony E. Maslowski

     73,200         —           57,300         —           1,055,384   

Bryan T. Ingram

     —          —           1,930         —           22,575   

Patricia H. McCall

     211,984         —           100,389         —           865,562   

 

(1) The Avago Technologies U.S. Inc. Deferred Compensation Plan is a non-qualified plan under the Internal Revenue Code and is exempt from the reporting and fiduciary requirements of ERISA. The Plan is designed to allow the participants to defer a specified percentage of their base salary, commissions and/or bonuses in a manner similar to the way in which the Avago Technologies U.S. Inc. 401(k) plan operates, but without regard to the maximum deferral limitations imposed on 401(k) plans by the Internal Revenue Code. In addition, the Company may make discretionary contributions to participant accounts. As required by applicable law, participation in the Deferred Compensation Plan is limited to a group of our employees who have an annual base salary plus targeted commissions of at least $175,000. Amounts deferred by each participant pursuant to the Deferred Compensation Plan are held in a “rabbi” trust. The trust protects the assets from the effects of a change in management control or takeover, but not against insolvency or bankruptcy of the company. Amounts deferred by each participant under the Deferred Compensation Plan are periodically adjusted for earnings and/or losses at a rate that is equal to one or more of the measurement funds elected by a participant. Currently, the measurement funds consist of the following: Fidelity Retirement US Treasury Money Market Fund, T. Rowe Price Short Term Bond Fund, PIMCO Total Return Fund Institutional Class, Mainstay ICAP Equity Fund-Class I, Spartan 500 Index- Institutional Class, Fidelity Contra Fund-Class K, Nuveen Winslow Large-Cap Growth Fund Class I, Fidelity Low-Priced Stock Fund-Class K, Wells Fargo Advantage Discovery Fund Class Institutional Class, Goldman Sachs Small Cap Value Fund Institutional, Templeton Foreign Fund Advisor Class, Vanguard Total International Stock Index Fund Signal Shares, Fidelity Freedom Index Income Fund Class W, Fidelity Freedom Index 2000 Fund Class W, Fidelity Freedom Index 2005 Fund Class W, Fidelity Freedom Index 2010 Fund-Class W, Fidelity Freedom Index 2015 Fund-Class W, Fidelity Freedom Index Fund 2020-Class W, Fidelity Freedom Index 2025 Fund-Class W, Fidelity Freedom Index 2030 Fund-Class W, Fidelity Freedom Index 2035 Fund-Class W, Fidelity Freedom Index 2040 Fund-Class W, Fidelity Freedom Index 2045 Fund-Class W and Fidelity Freedom Index 2050 Fund-Class W, Fidelity Freedom Index 2055 Fund-Class W. Distributions are made in accordance with elections filed by participants at the time of their initial deferrals and distributions occur in a lump sum upon death or total disability and in a lump sum or installments upon a participant’s choice of in-service or separation of service. Distributions are also made in the event of a change in control of our Company.
(2) Amounts reflected are not included in the Fiscal Year 2014 “Summary Compensation Table” because the earnings are not “above-market.” These amounts include dividends, interest and change in market value.

 

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Severance and Change of Control Agreements with Named Executive Officers

In January 2014, the Compensation Committee approved new severance benefit agreements for each of the NEOs. These agreements replaced the previous severance benefit and change in control arrangements in place for the NEOs, except for Mr. Maslowski, who did not previously have any such arrangements with the Company.

The severance benefit agreement provides each NEO with severance 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” (as defined in the severance benefit agreement), provided that the NEO timely executes a general release of all claims against us. If such a termination of employment takes place within 12 months following (or in the case of Mr. Tan, within three months prior or 12 months following) a “Change in Control”, as defined in the severance benefit agreement, the Company must provide the NEO with:

 

   

12 months (24 months for Mr. Tan) of continued salary payments following the NEO’s separation from us;

 

   

an amount equal to 100% (200% for Mr. Tan) of the lesser of the NEO’s prior year’s bonus or target bonus;

 

   

full acceleration of all outstanding time-vesting equity and equity-linked awards, and acceleration of performance-based equity and equity-linked awards (i) to the extent the effective price per share paid by the acquirer meets or exceeds any share price contingency applicable to any share-price performance awards, and (ii) to the extent other performance goals have been deemed satisfied, in the discretion of the Board, based on Company performance through the date of the Change in Control, for all other types of performance-based awards; and

 

   

except for Mr. Tan, the payment of continued health insurance premiums for the NEO and any covered dependents for up to 12 months.

If the NEO’s termination of employment takes place other than in connection with a Change in Control, the NEO is entitled to:

 

   

nine months (12 months for Mr. Tan and six months for Mr. Ooi) of continued salary payments following the NEO’s separation from the Company;

 

   

an amount equal to the lesser of 50% (100% for Mr. Tan) of the NEO’s prior year’s bonus or target bonus; and

 

   

except for Mr. Tan, the payment of continued health insurance premiums for the NEO and any covered dependents for up to six months.

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

 

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Potential Severance Payments and Benefits Upon Certain Terminations

The following table reflects the potential payments and benefits to which the NEOs would be entitled under their agreements in effect as of November 2, 2014, in the event of a termination of employment without cause, because of death or disability or a resignation with good reason taking place not in connection with a Change in Control. The amounts presented in the table assume a termination date of November 2, 2014 and that all eligibility requirements contemplated by the NEO’s respective agreements or our Company’s policies and practices, as applicable, were met.

 

Name

   Cash
Severance
Base
Salary ($)
     Cash
Severance
Bonus ($)
     Health
Benefits
Continuation
Coverage ($)(1)
     Total ($)  

Hock E. Tan

     880,000         1,320,000         —          2,200,000   

Anthony E. Maslowski

     307,125         153,563         8,567         469,255   

Bryan T. Ingram

     393,750         262,500         12,881         669,131   

Boon Chye Ooi(2)

     292,009         219,007         1,757         512,773   

Patricia H. McCall

     298,088         119,235         —          417,323   

 

(1) Represents the cost of Company-subsidized continued benefits, based on our current costs to provide such coverage.
(2) All amounts paid to Mr. Ooi upon any termination will be paid in Singapore Dollars, converted from U.S. Dollars, where applicable, using the Accounting Rate for the month in which such termination occurs.

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

The following table reflects the potential payments and benefits to which the NEOs would be entitled under their severance and benefit agreements in effect as of the end of Fiscal Year 2014 or our Company’s policies and practices as described under “Termination-Based Compensation” above in the event of a termination of employment without cause, because of death or disability or a resignation for good reason taking place within twelve months following a change in control (or in the case of Mr. Tan three months before or 12 months following a change in control). The amounts presented in the table assume a termination date of November 2, 2014 and that all eligibility requirements contemplated by the NEO’s respective agreements and our Company’s policies and practices, as applicable, were met.

 

Name

  Cash
Severance
Base Salary ($)
    Cash
Severance
Bonus ($)
    Health
Benefits
Continuation
Coverage ($)(1)
    Value of Option
Acceleration ($)(2)
    Value of RSU
Acceleration ($)
    Total ($)  

Hock E. Tan

    1,760,000        2,640,000        —         110,054,250        13,476,476        127,930,726   

Anthony E. Maslowski

    409,500        307,125        17,134        7,943,500        5,390,711        14,067,970   

Bryan T. Ingram

    525,000        525,000        25,762        12,902,700        10,781,250        24,759,712   

Boon Chye Ooi(3)

    584,018        438,014        3,514        10,183,050        4,959,461        16,168,057   

Patricia H. McCall

    397,451        238,471        —         4,105,080        2,860,654        7,601,656   

 

(1) Represents the cost of Company-subsidized continued benefits based on our current costs to provide such coverage.
(2) The amounts in this column represent, for each stock option that would be accelerated, the number of shares that would be accelerated multiplied by the difference between $86.25, the closing price per ordinary share on October 31, 2014, the last trading day of Fiscal Year 2014, and the exercise price of the option. As of such date, all price contingencies contained in performance-based options held by NEOs had been met. As a result, all performance-based options would be accelerated in the event of a qualifying termination following a change in control.
(3) All amounts paid to Mr. Ooi upon any termination will be paid in Singapore Dollars, converted from U.S. Dollars, where applicable, using the Accounting Rate for the month in which such termination occurs.

 

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EQUITY COMPENSATION PLAN INFORMATION

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

We have two equity compensation plans that have not been approved by our shareholders: the LSI Corporation 2003 Equity Incentive Plan, as amended (the “LSI 2003 Plan”) and the Sandforce, Inc. 2007 Stock Plan (the “Sandforce Plan” and, together with the LSI 2003 Plan, the “LSI Plans”), which we assumed in connection with our acquisition of LSI.

The following table sets forth the number and weighted-average exercise price of ordinary shares to be issued upon exercise of outstanding options, warrants and rights, and the number of securities remaining available for future issuance under all of our equity compensation plans, at November 2, 2014.

 

Plan Category

   Number of Ordinary
Shares to be Issued upon
Exercise of Outstanding
Options, Warrants and
Rights
(a)
    Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)(1)
     Number of Ordinary
Shares Remaining Available
for Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(c)
 

Equity compensation plans approved by shareholders

     26,855,077 (2)    $ 40.97         15,021,041 (3) 

Equity compensation plans not approved by shareholders

     6,499,785 (4)    $ 68.11         4,552,928 (5) 

Total

     33,354,862      $ 44.97         19,573,969 (3) 

 

(1) Shares issuable upon vesting of RSUs have been excluded from the calculation of the weighted average exercise price because they have no exercise price associated with them.
(2) Represents 24,943,631 shares subject to outstanding options and 1,911,446 shares that may be issued upon vesting of outstanding RSUs, in each case pursuant to equity awards issued under the 2009 Plan and the Prior Plans.
(3) Includes 9,004,207 shares available for issuance under the ESPP. The 2009 Plan has an evergreen formula pursuant to which the aggregate number of shares available for issuance under the 2009 Plan increases on the first day each fiscal year by the least of (a) 6,000,000 shares, (b) 3% of the ordinary shares outstanding on the last day of the immediately preceding fiscal year and (c) such smaller number of shares as determined by our Board. In accordance with this formula, on November 3, 2014 (the first day of our Fiscal Year 2015), the number of shares available for future issuance under the 2009 Plan increased by 6,000,000, which is not reflected in the table. The ESPP also incorporates an evergreen formula pursuant to which the aggregate number of shares available for issuance under the ESPP will increase on the first day each fiscal year by the least of (a) 2 million shares, (b) 1% of the ordinary shares outstanding on the last day of the immediately preceding fiscal year and (c) such smaller number of shares as determined by our Board. The Board determined not to increase the number of shares available for issuance under the ESPP for Fiscal Year 2015.
(4) Represents 4,321,126 shares subject to options and 2,178,659 shares that may be issued upon vesting of RSUs, all of which were awarded under the LSI Plans.
(5) Represents shares available, under the LSI 2003 Plan, of these 4,552,928 shares, 3,435,030 may be used for RSU awards under the LSI 2003 Plan.

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee is responsible for determining executive base compensation and incentive compensation and approving the terms of equity grants pursuant to our equity incentive plans. Prior to June 2014, the Compensation Committee has the full authority to determine and approve the compensation of our Chief Executive Officer in light of relevant corporate performance goals and objectives. With effect from June 2014, our Chief Executive Officer’s compensation is determined by the full Board, with input and recommendations from the Compensation Committee.

This report, filed in accordance with Item 407(e)(5) of Regulation S-K, should be read in conjunction with the other information relating to executive compensation, which is contained elsewhere in this Proxy Statement and is not repeated here.

In this context, the Compensation Committee hereby reports as follows:

 

  1. The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K.

 

  2. Based upon such review and the related discussions referenced above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement for its 2015 Annual General Meeting of Shareholders.

Submitted by the Compensation Committee of the Board of Directors:

Donald Macleod, Chairperson

John T. Dickson

James V. Diller

Lewis C. Eggebrecht(1)

 

(1) Mr. Eggebrecht joined the Compensation Committee effective November 3, 2014, the first day of our Fiscal Year 2015.

 

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AUDIT COMMITTEE REPORT

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

related party transactions.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the Company’s financial statements for Fiscal Year 2014 with the Company’s management and PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm. In addition, the Audit Committee has discussed with PricewaterhouseCoopers LLP, with and without management present, the Company’s internal control over financial reporting and overall quality of the Company’s financial reporting. The Audit Committee also discussed with PricewaterhouseCoopers LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee also received the written disclosures and the letter from PricewaterhouseCoopers LLP required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed the independence of PricewaterhouseCoopers LLP with that firm. The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the Company’s independent registered public accounting firm. All audit and non-audit services performed by our independent registered public accounting firm during Fiscal Year 2014 were pre-approved by the Audit Committee in accordance with established procedures.

Based on the Audit Committee’s review and discussions noted above, as well as such other matters deemed relevant and appropriate by the Audit Committee, the Audit Committee recommended to the Board that the audited financial statements for Fiscal Year 2014 be included in the Company’s Annual Report on Form 10-K for Fiscal Year 2014, for filing with the SEC.

The Audit Committee and the Board of Directors have approved, subject to shareholder approval, the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm and independent Singapore auditor for Fiscal Year 2015.

Submitted by the Audit Committee of the Board of Directors:

Justine F. Lien, Chairperson

Donald Macleod

Peter J. Marks(1)

 

(1) Mr. Marks joined the Audit Committee effective November 3, 2014, the first day of our Fiscal Year 2015.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information about the beneficial ownership of our ordinary shares at February 11, 2015 for:

 

   

each named executive officer;

 

   

each of our directors;

 

   

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

 

   

all of our executive officers and directors as a group.

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

Ordinary shares subject to options that are currently exercisable or exercisable within 60 days of February 11, 2015 and RSUs that vest within 60 days of February 11, 2015 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 256,369,422 ordinary shares outstanding as of February 11, 2015.

 

      Shares Beneficially Owned(1)

Name and Address of Beneficial Owner

   Number of Shares    Percent

5% Shareholders:

     

Capital World Investors(2)

   30,463,213    11.9%

333 South Hope Street

     

Los Angeles, CA 90071

     

JPMorgan Chase & Co.(3)

   21,431,210      8.4%

270 Park Avenue

     

New York, NY 10017

     

Investment entities affiliated with Silver Lake(4)

   20,850,499      8.1%

Ugland House, P.O. Box 309

     

South Church Street

     

Georgetown

     

Grand Cayman, Cayman Islands

     

Capital Research Global Investors(5)

   20,626,252      8.0%

333 South Hope Street

     

Los Angeles, CA 90071

     

The Growth Fund of America, Inc.(6)

   17,407,082      6.8%

333 South Hope Street

     

Los Angeles, CA 90071

     

The Vanguard Group, Inc.(7)

   16,226,067      6.3%

100 Vanguard Blvd.

     

Malvern, Pennsylvania 19355

     

BlackRock, Inc.(8)

   13,962,820      5.4%

55 East 52nd Street

     

New York, NY 10022

     

 

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Table of Contents
      Shares Beneficially Owned(1)  

Name and Address of Beneficial Owner

   Number of Shares      Percent  

Named Executive Officers, Directors and Nominees:

     

Hock E. Tan(9)

     1,785,608         *   

Anthony E. Maslowski(10)

     91,320         *   

Bryan T. Ingram(11)

     224,584         *   

Boon Chye Ooi(12)

     131,424         *   

Patricia H. McCall(13)

     219,410         *   

John T. Dickson(14)

     27,488         *   

James V. Diller(15)

     154,919         *   

Lewis C. Eggebrecht(16)

     8,326         *   

Bruno Guilmart (17)

     6,063         *   

Kenneth Y. Hao(18)

     20,940,356         7.6

Justine F. Lien(19)

     20,103         *   

Donald Macleod(20)

     55,187         *   

Peter J. Marks(21)

     10,432         *   

All 13 executive officers, directors and nominees as a group(22)

     23,675,220         8.5

 

* Represents beneficial ownership of less than 1%.
(1) Shares shown in the table above include shares 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) Number of shares based solely on information reported by Capital World Investors on the Schedule 13G/A filed with the SEC on February 13, 2015, reporting ownership as of December 31, 2014. 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 11, 2015.
(3) Number of shares based solely on information reported by JPMorgan Chase & Co. on the Schedule 13G/A filed with the SEC on January 13, 2015, reporting ownership as of December 31, 2014. According to such Schedule 13G/A, JPMorgan Chase & Co. has sole voting power over 19,586,873 of these shares, sole dispositive power over 21,134,853 of these shares, shared voting power over 212,166 of these shares and shared dispositive power over 296,357 of these shares. Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 11, 2015.
(4) Shares shown in the table includes (i) 20,453,360 shares issuable upon the conversion of the $980,953,000 principal amount of the Company’s 2% Convertible Senior Notes due 2021 (the “Convertible Notes”) held by SLP Argo I Ltd. (“Argo I”) and (ii) 397,139 shares issuable upon the conversion of the $19,047,000 principal amount of the Convertible Notes held by SLP Argo II Ltd. (“Argo I” and together with Argo II, the “Silver Lake Entities”). The number of shares issuable upon conversion is based on the conversion rate in effect as at February 11, 2015, which is 20.8505 shares per $1,000 principal amount of the Convertible Notes.

Silver Lake Partners IV Cayman (AIV II), L.P. (or the “Main Fund”) is the sole shareholder of Argo I. Silver Lake Technology Investors IV Cayman, L.P. (or the “Side Fund”) is the sole shareholder of Argo II. Silver Lake Technology Associates IV Cayman, L.P. (or the “Lower GP”) is general partner of each of the Main Fund and the Side Fund. Silver Lake (Offshore) AIV GP IV, Ltd. (or the “Upper GP”) is the general partner of the Lower GP. Michael Bingle, James Davidson, Sahil Desai, Mark Gillett, Kenneth Hao, Yolande Jun, Karen King, Gregory Mondre, Joseph Osnoss, Andrew Schader and Andrew Wagner are directors of the Upper GP. Each of them, and each of the Main Fund, the Side Fund, the Lower GP and the Upper GP, disclaims beneficial ownership of the Convertible Notes held by Argo I and Argo II and of the shares issuable upon conversion of the Convertible Notes, except to the extent of their respective pecuniary interest therein.

(5) Number of shares based solely on information reported by Capital Research Global Investors on the Schedule 13G/A filed with the SEC on February 13, 2015, reporting ownership as of December 31, 2014. 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 11, 2015.

 

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(6) Number of shares based solely on information reported by The Growth Fund of America, Inc. on the Schedule 13G/A filed with the SEC on February 13, 2015, reporting beneficial ownership as of December 31, 2014. According to such Schedule 13G/A, The Growth Fund of America, Inc., which is advised by Capital Research and Management Company, has sole voting power over these shares and disclaims dispositive power over such shares. These shares may also be reflected in the Schedule 13G/A filed with the SEC by Capital World Investors (see footnote (2) above) and/or the Schedule 13G/A filed with the SEC by Capital Research Global Investors (see footnote (5) above). Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 11, 2015.
(7) Number of shares based solely on information reported by The Vanguard Group, Inc. on the Schedule 13G filed with the SEC on February 10, 2015, reporting beneficial ownership of shares as of December 31, 2014. According to such Schedule 13G, The Vanguard Group, Inc. has sole voting power over 438,104 of these shares, sole dispositive power over 15,813,224 of these shares and shared dispositive power over 412,843 of these shares. Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 11, 2015.
(8) Number of shares based solely on information reported by BlackRock, Inc. on the Schedule 13G filed with the SEC on February 3, 2015, reporting beneficial ownerships of shares as of December 31, 2014. According to such Schedule 13G, BlackRock, Inc. has sole voting power over 11,931,135 of these shares and sole dispositive power over all of these shares. Ownership percentage assumes the shareowner continued to own the number of shares reflected in the table above on February 11, 2015.
(9) Shares shown in the table above include 1,612,500 shares that Mr. Tan has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options and 114,583 shares that he has the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs.
(10) Shares shown in the table above consists of (i) 67,500 shares that Mr. Maslowski has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options, (ii) 13,334 shares that he has the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs and (iii) 10,486 shares held by Mr. Maslowski as Trustee for the Anthony E. Maslowski Trust dated May 20, 2011.
(11) Shares shown in the table above consist of 172,917 shares that Mr. Ingram has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options and 51,667 shares that he has the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs.
(12) Shares shown in the table above include 105,000 shares that Mr. Ooi has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options and 23,334 shares that he has the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs.
(13) Shares shown in the table above include 203,000 shares that Ms. McCall has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options and 12,834 shares that she has the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs.
(14) Shares shown in the table above includes 19,116 shares that Mr. Dickson has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options, and 2,124 shares held by Mr. Dickson as Trustee for the Dickson Family Trust U/A Dated 10/24/2006.
(15) Shares shown in the table above include (i) 29,745 shares held by Mr. Diller as Trustee for the June P. Diller Annuity Trust—2010B Dated May 10, 2010, (ii) 90,255 shares held by the James & June Diller Trust UA dated 7/20/77, (iii) 29,893 shares that Mr. Diller has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options and (iv) 1,741 shares that he has the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs.
(16) Shares shown in the table above consist of (i) 1,500 shares held by the Lewis & Rebecca Eggebrecht Trust UA dated 6/21/97, (ii) 5,120 shares that Mr. Eggebrecht has the right to acquire within 60 days after February 11 2015 upon the exercise of share options and (iii) 1,706 shares that he has the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs.
(17) Shares shown in the table above include 4,697 shares that Mr. Guilmart has the right to acquire within 60 days after February 11, 2015 upon the exercise of share.
(18)

As disclosed in footnote (4) above, Mr. Hao is a director of Silver Lake (Offshore) AIV GP IV, Ltd. Amounts disclosed for Mr. Hao include shares beneficially owned by the Silver Lake Entities. Mr. Hao disclaims beneficial ownership of any shares beneficially owned by the Silver Lake Entities, except to the

 

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  extent of his pecuniary interest therein. Shares shown in the table next to Mr. Hao’s name also include (i) 50,000 shares acquired by Mr. Hao upon the exercise of a share option, (ii) 8,223 shares acquired by him upon the vesting of RSUs granted to him, (iii) 29,893 shares that he has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options, and (iv) 1,741 shares upon the vesting of RSUs within 60 days after February 11, 2015.

Pursuant to Mr. Hao’s arrangement with Silver Lake with respect to director compensation in the form of securities received by him in his capacity as a representative of Silver Lake, he is required to remit the proceeds from the sale of such securities to Silver Lake. Accordingly, Mr. Hao disclaims beneficial ownership of the shares described above, except for 3,285 shares, which are held by his family trust, and 9,854 shares that he has the right to acquire upon the exercise of a vested share option.

(19) Shares shown in the table above include 15,077 shares that Ms. Lien has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options and 1,741 shares that she has the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs.
(20) Shares shown in the table above include 5,223 shares that Mr. Macleod has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options and 1,741 shares that he has the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs.
(21) Shares shown in the table above include 7,824 shares that Mr. Marks has the right to acquire within 60 days after February 11, 2015 upon the exercise of share options.
(22) Shares shown in the table above include (i) 2,277,760 shares that directors and executive officers have the right to acquire within 60 days after February 11, 2015 upon the exercise of share options (ii) 224,422 shares that directors and executive officers have the right to acquire within 60 days after February 11, 2015 upon the vesting of RSUs, and (iii) 20,850,499 shares that the Silver Lake Entities have the right to acquire upon conversion of the Convertible Notes. As disclosed in footnote (4) above, Mr. Hao is a director of Silver Lake (Offshore) AIV GP IV, Ltd.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Related Party Transactions

Other than compensation and other arrangements described above under “Director Compensation,” “Executive Compensation” and as set forth below, since November 2, 2013, there was not, nor is there currently planned, any transaction or series of similar transactions to which we were or will be a party in which:

 

   

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

 

   

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

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

Procedures for Approval of Related Party Transactions

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

Issuance of Convertible Notes to SLP Fund

In connection with our acquisition of LSI (“Merger”), on December 15, 2013, the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) to sell to Silver Lake Partners IV, L.P., an investment fund affiliated with Silver Lake (“SLP Fund”) $1 billion aggregate principal amount of its Convertible Notes, with Deutsche Bank AG, Singapore Branch, as Lead Manager. SLP Fund’s rights and obligations under the Purchase Agreement were subsequently assigned to two other entities affiliated with Silver Lake. Mr. Hao is a Managing Partner and Managing Director of Silver Lake Partners. The private placement was completed on May 6, 2014. The proceeds from the issuance of the Convertible Notes were used to fund a portion of the LSI acquisition consideration.

The Convertible Notes bear interest at a rate of 2.0% per annum, payable semiannually in cash. The initial conversion rate for the Convertible Notes was 20.8160 shares of the Company’s ordinary shares, and cash in lieu of fractional ordinary shares, per $1,000 principal amount of Convertible Notes, which was equivalent to an initial conversion price of approximately $48.04 per ordinary share. The conversion rate is subject to adjustment from time to time upon the occurrence of certain events (including adjustments for quarterly cash dividends paid on the Company’s ordinary shares to the extent they exceed $0.27 per share). As a result of quarterly dividends that have been paid on our ordinary shares after the date of issuance of the Convertible Note, as at February 1, 2014, the conversion rate has been cumulatively adjusted to 20.8505 ordinary shares per $1,000 principal amount of the Convertible Notes, which is equivalent to a conversion price of approximately $47.96 per ordinary share. Holders may surrender their Convertible Notes for conversion at any time prior to the close of business on the business day immediately preceding the maturity date for the Convertible Notes.

 

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As of November 2, 2014, $1 billion in aggregate principal amount of the Convertible Notes was outstanding. No interest was due or payable on the Convertible Notes during Fiscal Year 2014.

The Company and SLP Fund also entered into a Registration Rights Agreement pursuant to which holders have certain registration rights with respect to the Convertible Notes and the ordinary shares of the Company issuable upon conversion of the Convertible Notes.

The issuance of the Convertible Notes by the Company to SLP Fund, and the terms thereof, and entry by the Company into the Note Purchase Agreement, Indenture, Registration Rights Agreement and all other agreements relating to the issuance of the Convertible Notes by the Company to SLP Fund were reviewed and approved by our Board.

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 the Company’s directors also serves or served as a director of that entity. During Fiscal Year 2014 these entities were KLA-Tencor Corporation and QLogic Corporation, on whose boards John T. Dickson serves as a director, and SMART Modular Technologies (Global Holdings), Inc., a private company on whose board Kenneth Y. Hao serves as a director. In addition, from time to time the Company has made purchases of equipment and related replacement parts and equipment servicing, in the ordinary course on an arms’ length basis, from K&S, of which Bruno Guilmart serves as the President and Chief Executive Officer. These purchases have been immaterial in both amount and significance. The Audit Committee has pre-approved, on a prospective basis, arms’ length transactions (excluding the provision of professional services) between the Company and K&S of less than $120,000 individually or in the aggregate in any fiscal year of the Company.

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

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

Based solely on our review of the copies of such reports received by us or written representations from certain Reporting Persons that no Forms 3, 4 or 5 were required, we believe that during Fiscal Year 2014, all Reporting Persons complied with all applicable filing requirements.

HOUSEHOLDING OF PROXY MATERIALS

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy materials and our 2014 Form 10-K may have been sent to multiple shareholders in your household, unless we have received contrary instructions from one or more shareholders in your household. We will promptly deliver a separate copy of either document to you if you request one by writing or calling as follows: c/o Avago Technologies U.S. Inc., Attn: Investor Relations, 350 W. Trimble Road, Building 90, San Jose, California 95131, U.S.A., Telephone: +1 (408) 435-7400. If you want to receive separate copies of our proxy materials or annual reports in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address and phone number.

 

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SHAREHOLDER PROPOSALS FOR THE 2016 ANNUAL GENERAL MEETING

Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”), some shareholder proposals may be eligible for inclusion in our 2016 proxy statement. Any such shareholder proposals must be submitted, along with proof of ownership of our ordinary shares in accordance with Rule 14a-8(b)(2), to us at 1320 Ridder Park Drive, San Jose, CA 95131, U.S.A., Attention: General Counsel. We must receive all submissions no later than October 23, 2015. We strongly encourage any shareholder interested in submitting a proposal to contact our General Counsel in advance of this deadline to discuss the proposal, and shareholders may want to consult knowledgeable counsel with regard to the detailed requirements of applicable securities laws. Submitting a shareholder proposal does not guarantee that we will include it in our proxy statement. Our Board will review any shareholder proposals. These shareholder proposals may be included in our proxy statement for the 2016 AGM so long as they are provided to us on a timely basis and satisfy the other conditions set forth in applicable rules and regulations promulgated by the SEC. Shareholder proposals are also subject to the 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 2016 AGM unless notice of such proposal is received by the applicable deadlines prescribed by the Singapore Companies Act.

In addition, under Section 183 of the Singapore Companies Act, only registered shareholders representing not less than 5% of the total voting rights or registered shareholders representing not fewer than 100 registered shareholders having an average paid up sum of at least $500 Singapore Dollars each may, at their expense, request that we include and give notice of their proposal for the 2016 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 2016 AGM in the case of a request requiring notice of a resolution, or at least one week prior to the date of the 2016 AGM in the case of any other request.

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

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

We incorporate by reference the following sections of our Annual Report on Form 10-K for Fiscal Year 2014:

 

   

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

 

   

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

 

   

Item 8, “Financial Statements and Supplementary Data.”

The information contained under the captions “Compensation Committee Report” and “Audit Committee Report” in this Proxy Statement shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor

 

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shall such information be incorporated by reference into any filings under the U.S. Securities Act of 1933, as amended, or under the Exchange Act, or be subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing.

SINGAPORE STATUTORY FINANCIAL STATEMENTS

Our Singapore audited accounts, prepared in conformity with the provisions of the laws of Singapore, and the accompanying directors report (together, the “Singapore Statutory Financial Statements”) and the auditors’ reports thereon are required under Singapore law to be provided to shareholders for discussion (but not approval) at the 2015 AGM, and have therefore been provided as Appendix A to this Proxy Statement solely to satisfy this requirement. Neither the Singapore Statutory Financial Statements nor the auditors’ report thereon shall be deemed to be “soliciting material” or to be “filed” with the U.S. Securities and Exchange Commission, nor shall such information be incorporated by reference into any filings under the U.S. Securities Act of 1933, as amended, or under the Exchange Act, or be subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing.

 

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OTHER MATTERS

Our management does not know of any matters to be presented at the 2015 AGM other than those set forth herein and in the Notice accompanying this Proxy Statement. If any other matters are properly presented for a vote, the enclosed proxy confers discretionary authority to the individuals named as proxies to vote the shares represented by proxy, as to those matters.

Accompanying this Proxy Statement is our 2014 Form 10-K. Copies of this Proxy Statement and 2014 Form 10-K, as filed with the SEC, are also available free of charge on our website at www.avagotech.com or you can request a copy free of charge by calling Investor Relations at +1 (408) 435-7400 or toll-free at (855) 591-5745 (within the United States).

Upon request, we will furnish without charge to each person to whom this Proxy Statement is delivered a copy of any exhibit listed in our 2014 Form 10-K. You may request a copy of this information, at no cost, by writing or telephoning us at:

Avago Technologies Limited

Attn: Investor Relations

c/o Avago Technologies U.S. Inc.

350 West Trimble Road, Building 90

San Jose, California 95131 U.S.A.

Telephone: (855) 591-5745 (toll-free within the United States) or +1 (408) 435-7400

Email: investor.relations@avagotech.com

To ensure timely delivery of any materials requested prior to the date of the 2015 AGM, you should request such materials no later than March 25, 2015.

By Order of the Board,

 

LOGO

Hock E. Tan

Director, Chief Executive Officer and President

February 20, 2015

San Jose, California

 

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APPENDIX A

SINGAPORE STATUTORY FINANCIAL STATEMENTS

AVAGO TECHNOLOGIES LIMITED

(Incorporated in Singapore)

ANNUAL REPORT

For the financial year ended November 2, 2014

INDEX

 

     Page  

Directors’ Report

     A-2   

Statement by Directors

     A-22   

Independent Auditor’s Report

     A-23   

Consolidated Statements of Operations

     A-24   

Consolidated Statements of Comprehensive Income

     A-25   

Balance Sheets

     A-26   

Consolidated Statements of Shareholders’ Equity

     A-27   

Consolidated Statements of Cash Flows

     A-28   

Notes to the Financial Statements

     A-29   

 

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AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT

For the financial year ended November 2, 2014

The directors present their report to the members together with the audited consolidated financial statements of Avago Technologies Limited and its subsidiaries (“we” or the “Group”) for the financial year ended November 2, 2014 and the balance sheet of Avago Technologies Limited (the “Company”) as of November 2, 2014.

Directors

The directors of the Company in office at the date of this report are as follows:

James V. Diller

John T. Dickson

Lewis C. Eggebrecht (elected on April 9, 2014)

Bruno Guilmart

Kenneth Y. Hao

Justine F. Lien

Donald Macleod

Peter J. Marks

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”.

 

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AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

Directors’ Interests in Shares or Debentures

 

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

 

     Holdings in which director is
deemed to have an Interest
 
      As of
November 2,
2014
    As of
November 4,
2013
or date of
appointment if
later
 

Avago Technologies Limited

    

(No. of Ordinary Shares)

    

James V. Diller

     123,285 (1)      180,000   

John T. Dickson

     6,248 (2)      4,124   

Lewis C. Eggebrecht

     1,500 (3)      —     

Bruno Guilmart

     1,366 (4)      —     

Kenneth Y. Hao

     58,223 (5)      54,938   

Justine F. Lien

     3,285 (4)      —     

Donald Macleod

     48,223 (4)      44,938   

Hock E. Tan

     58,525 (4)      —     

Avago Technologies Limited

    

(Share Options, RSUs* and Convertible Securities)

    

James V. Diller

     31,634 (6)      27,955   

John T. Dickson

     21,240 (7)      23,364   

Lewis C. Eggebrecht

     20,481        —     

Bruno Guilmart

     25,226 (8)      30,792   

Kenneth Y. Hao

     20,859,534 (9)      27,955   

Justine F. Lien

     16,818 (10)      13,139   

Donald Macleod

     6,964        27,955   

Peter J. Marks

     31,299 (11)      —     

Hock E. Tan

     3,731,249 (12)      3,335,833   

 

  * Restricted Share Units
  (1) Represents (i) 3,285 shares that were acquired by Mr. Diller upon the vesting of RSUs, which are held in electronic form in the name of Cede & Co. as nominee for The Depositary Trust Company (“DTC”), and (ii) 120,000 shares held in family trusts of which Mr. Diller is a trustee.
  (2) Represents (i) 4,248 shares that were acquired by Mr. Dickson upon the vesting of RSUs and (ii) 2,000 shares held in family trusts of which Mr. Dickson is a trustee. All shares are held in electronic form in the name of Cede & Co. as nominee for DTC.
  (3) Represents shares held in a family trust of which Mr. Eggebrecht is a trustee.
  (4) Represents shares that were acquired by the director upon the exercise of options and/or the vesting of RSUs, all of which are held in electronic form in the name of Cede & Co. as nominee for DTC.
  (5)

Represents shares that were acquired by Mr. Hao upon the exercise of options and the vesting of RSUs, all of which are held in electronic form in the name of Cede & Co. as nominee for DTC.

 

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AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

  Pursuant to Mr. Hao’s arrangement with Silver Lake with respect to director compensation, upon the sale of shares received by him from the exercise of options or the vesting of RSUs, the proceeds of such sale are expected to be remitted to Silver Lake. Accordingly, Mr. Hao disclaims beneficial ownership of such shares, except for 3,285 shares, which are held in a family trust of which Mr. Hao is a trustee.
  (6) Mr. Diller has the right to acquire 24,670 of these shares within 60 days after November 2, 2014 upon the exercise of vested share options.
  (7) Mr. Dickson has the right to acquire 12,743 of these shares within 60 days after November 2, 2014 upon the exercise of vested share options.
  (8) Mr. Guilmart has the right to acquire 4,697 of these shares within 60 days after November 2, 2014 upon the exercise of vested share options.
  (9)   (i) Includes (x) 20,431,191 shares issuable upon the conversion of the $980,953,000 principal amount of the Company’s 2% Convertible Senior Notes due 2021 (the “Convertible Notes”) held by SLP Argo I Ltd. (“Argo I”) and (y) 396,709 shares issuable upon the conversion of the $19,047,000 principal amount of the Convertible Notes held by SLP Argo II Ltd. (“Argo II” and together with Argo I, the “Silver Lake Entities”). The Silver Lake Entities are affiliates of Silver Lake Partners, of which Mr. Hao is a Managing Partner and Managing Director. The number of shares issuable upon conversion of the Convertible Notes is based on the conversion rate in effect as at November 2, 2014, which was 20.8279 shares per $1,000 principal amount of the Convertible Notes. Silver Lake Partners IV Cayman (AIV II), L.P. (or the “Main Fund”) is the sole shareholder of Argo I. Silver Lake Technology Investors IV Cayman, L.P. (or the “Side Fund”) is the sole shareholder of Argo II. Silver Lake Technology Associates IV Cayman, L.P. (or the “Lower GP”) is general partner of each of the Main Fund and the Side Fund. Silver Lake (Offshore) AIV GP IV, Ltd. (or the “Upper GP”) is the general partner of the Lower GP. Michael Bingle, James Davidson, Sahil Desai, Mark Gillett, Kenneth Hao, Yolande Jun, Karen King, Gregory Mondre, Joseph Osnoss, Andrew Schader and Andrew Wagner are directors of the Upper GP. Each of them, and each of the Main Fund, the Side Fund, the Lower GP and the Upper GP, disclaims beneficial ownership of the Convertible Notes held by Argo I and Argo II and of the shares issuable upon conversion of the Convertible Notes, except to the extent of their respective pecuniary interest therein. Mr. Hao disclaims beneficial ownership of any shares beneficially owned by the Silver Lake Entities, except to the extent of his pecuniary interest therein.
  (ii) Also includes 31,634 share options and RSUs held by Mr. Hao. Mr. Hao has the right to acquire 24,670 of these shares within 60 days after November 2, 2014 upon the exercise of vested share options. Pursuant to Mr. Hao’s arrangement with Silver Lake with respect to director compensation in the form of securities received by him in his capacity as a representative of Silver Lake, he is required to remit the proceeds from the sale of such securities to Silver Lake. Accordingly, Mr. Hao disclaims beneficial ownership of these shares, except for 9,854 shares that he has the right to acquire upon the exercise of a vested share option.
  (10) Ms. Lien has the right to acquire 9,854 of these shares within 60 days after November 2, 2014 upon the exercise of vested share options.
  (11) Mr. Marks has the right to acquire 10,432 of these shares within 60 days after November 2, 2014 upon the exercise of vested share options.
  (12) Mr. Tan has the right to acquire 1,081,250 of these shares within 60 days after November 2, 2014 upon the exercise of vested share options.

 

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AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

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

The following table shows for the financial year ended November 2, 2014, certain information regarding options 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
granted as
at end of

financial
year
    % of Total
equity awards
outstanding
as of end of
financial year
     Exercise
or  base
price

per share
     Expiration
date
 
                  U.S.$         

James V. Diller

     7,186        0.03         31.49         03/29/2016   
     7,630        0.03         37.41         04/03/2017   
     9,854        0.04         35.38         04/09/2018   
     5,223 (1)(3)      0.02         62.47         04/08/2019   

John T. Dickson

     19,116        0.07         33.94         01/17/2017   

Lewis C. Eggebrecht

     15,361 (1)(2)      0.06         62.47         04/08/2019   

Bruno Guilmart

     20,094 (2)      0.07         37.00         06/04/2018   

Kenneth Y. Hao

     7,186        0.03         31.49         03/29/2016   
     7,630        0.03         37.41         04/03/2017   
     9,854        0.04         35.38         04/09/2018   
     5,223 (1)(3)      0.02         62.47         04/08/2019   

Justine F. Lien

     9,854        0.04         35.38         04/09/2018   
     5,223 (1)(3)      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)(2)      0.09         46.60         12/09/2018   

Hock E. Tan

     300,000        1.12         15.00         08/04/2019   
     600,000        2.23         32.39         03/07/2018   
     175,000 (4)      0.65         35.45         03/11/2020   
     1,750,000 (5)      6.51         38.99         09/12/2020   
     750,000 (1)(5)      2.79         52.65         01/01/2021   

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

Name

   Number of
securities

underlying RSUs
granted
    % of Total
equity  awards
outstanding as
at end of

financial year
     Vesting
date
 

James V. Diller

     1,741 (1)      0.01         04/09/2015   

John T. Dickson

     2,124        0.01         01/18/2015   

Lewis C. Eggebrecht

     1,706 (1)      0.01         04/09/2015   
     1,707 (1)      0.01         04/09/2016   
     1,707 (1)      0.01         04/09/2017   

Bruno Guilmart

     2,566        0.01         06/05/2015   
     2,566        0.01         06/05/2016   

Kenneth Y. Hao

     1,741 (1)      0.01         04/09/2015   

Justine F. Lien

     1,741 (1)      0.01         04/09/2015   

Donald Macleod

     1,741 (1)      0.01         04/09/2015   

Peter J. Mark

     2,608 (1)      0.01         12/10/2014   
     2,608 (1)      0.01         12/10/2015   
     2,609 (1)      0.01         12/10/2016   

Hock E. Tan

     100,000        0.37         03/10/2015   
     6,250        0.02         12/08/2015   
     6,250        0.02         12/06/2016   
     14,583        0.05         03/10/2015   
     14,583        0.05         03/08/2016   
     14,583        0.05         03/07/2017   

 

(1) Granted during the financial year ended November 2, 2014.
(2) Option vests one-third annually over three years, subject to the director’s continued service with the Company.
(3) Option vests in full one year from the date of grant, subject to the director’s continued service with the Company.
(4) Share price performance option. The option vests over four years, with 25% vesting on each anniversary of the date of grant, subject to Mr. Tan’s continued employment with the Group; however, the option is not exercisable until the date on which the average of the closing prices of the Company’s ordinary shares (as reported on the Nasdaq), over a 10 consecutive trading day period is equal to or greater than 120% of the exercise price of the option. This performance-based condition for the option was met on October 3, 2013.
(5) Share price performance option. The option vests over four years, with 25% vesting on each anniversary of the date of grant, subject to Mr. Tan’s continued employment with the Group; however, the option will only become exercisable as to any tranche thereof if the relevant Price Contingency for such tranche is or has been achieved. The “Price Contingency” for each tranche of the option shall mean the date on which the average of the closing prices of the Company’s ordinary shares (as reported on the Nasdaq) over a 30 consecutive trading-day period (the “30-Day Average Price”) is equal to or greater than the following: 350,000 shares become exercisable at a 30-Day Average Price of $50.00 per share, 350,000 shares become exercisable at a 30-Day Average Price of $56.75 per share, 350,000 shares become exercisable at a 30-Day Average Price of $62.50 per share, 350,000 shares become exercisable at a 30-Day Average Price of $68.75 per share and 350,000 shares become exercisable at 30-Day Average Price of $75.00 per share. The satisfaction of a particular Price Contingency with respect to the option shall also constitute satisfaction of all other Price Contingencies for the option having a lower 30-Day Average Price. The per share price contingencies for this award were met on the following dates: $50.00 on January 13, 2014, $56.75 on February 27, 2014, $62.30 on April 2, 2014. $68.75 on June 11, 2014, and $75.00 on September 5, 2014.

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

Directors’ Contractual Benefits

Since the end of the previous financial year, no director has received or become entitled to receive a material benefit by reason of a contract made by the Company or its subsidiaries with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest, except for compensation paid by the Company to the director for services as a director and as disclosed in Note 11 of the accompanying financial statements and in this report, and except that Mr. Tan has an employment relationship with the Group, and has received remuneration in that capacity.

In addition, as disclosed in Note 11 of the accompanying financial statements, on May 6, 2014, the Company acquired LSI Corporation, a U.S. public company (“LSI”), by a wholly-owned subsidiary of the Company, for a purchase price of $6.5 billion. The Company funded the transaction with the proceeds from the issuance of $1 billion in aggregate principal amount of Convertible Notes pursuant to a Note Purchase Agreement with an entity affiliated with Silver Lake Partners,, proceeds from $4.6 billion in term loans borrowed under the Company’s 2014 Credit Agreement (as disclosed in Note 7 of the accompanying financial statements), as well as cash on hand of the Group. Mr. Hao is a Managing Partner and a Managing Director of Silver Lake Partners.

Equity Awards

Summary of Equity Plans

The Company previously adopted the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries (the “Executive Plan”) and the Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries (the “Senior Management Plan”) and together with the Executive Plan, the “Pre-IPO Equity Incentive Plans”), which authorized the grant of options and share purchase rights covering up to 30 million ordinary shares of the Company.

Under the Pre-IPO Equity Incentive Plans, awards generally expire ten years following the date of grant unless granted to a non-employee, in which case the awards generally expire five years following the date of grant and were granted at a price equal to the fair market value at the time of the grant. Since the initial public offering of the Company’s ordinary shares on August 6, 2009 (the “IPO”) in the United States, the Company has ceased making grants under the Pre-IPO Equity Incentive Plans.

In July 2009, the Company’s Board of Directors (the “Board”) adopted, and the Company’s shareholders approved, the Avago Technologies Limited 2009 Equity Incentive Award Plan (the “2009 Plan” and together with the Pre-IPO Equity Incentive Plans, the “Equity Incentive Plans”), to authorize the grant of options, share appreciation rights, restricted share units (“RSUs”), dividend equivalents, performance awards, and other share-based awards. 20 million ordinary shares were initially reserved for issuance under the 2009 Plan, subject to automatic 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. On November 4, 2013 (the first day of the financial year ended November 2, 2014), the number of shares available for issuance under the 2009 Plan increased by 6,000,000 shares pursuant to this annual increase provision.

Options issued to employees under the 2009 Plan prior to March 2011 generally expire ten years following the date of grant. With effect from March 2011, options issued to employees under the 2009 Plan generally expire seven years after the date of grant. Options awarded to non-employees under this plan generally expire after five years.

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

Options issued to 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 under the Pre-IPO Equity Incentive Plans after July 27, 2009 become available for issuance under the 2009 Plan. The Company also grants RSUs as part of its equity compensation programs under the 2009 Plan. 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 our ordinary shares immediately upon vesting. RSU awards granted to employees are generally time-based and vest over four years.

In July 2009, the Company’s board of directors adopted, and the Company’s shareholders approved the Avago Technologies Employee Share Purchase Plan (this plan, as amended, the “ESPP”) to allow eligible employees of the Company and its participating subsidiaries to purchase ordinary shares at semi-annual intervals, with their accumulated payroll deductions, at a discounted price, based on a six-month look-back period. 8 million ordinary shares were initially reserved for issuance under the ESPP, subject to annual increases starting in financial year 2012. The amount of the annual increase is equal to the least of (a) 2 million shares, (b) 1% 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. On October 29, 2012, the first day of the Company’s financial year ended November 3, 2013, the number of available shares increased by 2 million shares in accordance with the terms set forth in the ESPP. The Board determined not to increase the number of shares available for issuance under the ESPP for the financial year ended November 2, 2014. During the financial year ended November 2, 2014, 0.2 million ordinary shares were purchased and issued pursuant to the ESPP.

In connection with the LSI acquisition, we assumed the LSI 2003 Equity Incentive Plan (the “2003 Plan”) and outstanding unvested stock options and RSUs that were held by continuing LSI employees, which were predominately granted under the 2003 Plan. At the time of the acquisition, these awards were converted to Avago stock 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. Under the 2003 Plan, we may grant equity awards to former employees of LSI and other employees who were not employees of the Company or its subsidiaries at the time of the acquisition. As of May 6, 2014, the date of the LSI acquisition, 7.6 million ordinary shares were reserved for issuance under the 2003 Plan, of which 3 million ordinary share were available for restricted share and/or RSU awards.

The assumed unvested stock options and RSUs will vest in accordance with their original terms, generally vesting in equal annual installments over a four-year period from the date of grant, and expiring seven years, from the original grant date.

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. Options issued under the 2003 Plan are granted with an exercise price equal to the fair market value on the date of grant.

Executive Plan

Amended and Restated Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries

The Board initially adopted and the Company’s shareholders initially approved the Executive Plan effective December 1, 2005. The Executive Plan, was amended and restated by the Board in April 2006 and January 2007 and was approved by the Company’s shareholders in April 2007. The Executive Plan was also amended and restated by the Board in February 2008.

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

Types of Awards

The Executive Plan provided for the grant of non-qualified options and share purchase rights to employees, consultants and other persons having a unique relationship with the Company or its subsidiaries.

Share Reserve

The Company had reserved an aggregate of 30 million ordinary shares for issuance under the Executive Plan and the Senior Management Plan. However, following the IPO no additional awards may be made under these plans.

Administration

The Compensation Committee of the Board (the “Compensation Committee”) administers the Executive Plan. The Compensation Committee has the authority to select the employees to whom options and/or share purchase rights were granted under the Executive Plan, the number of shares subject to those options or share purchase rights, and the terms and conditions of the options and share purchase rights. In addition, the Compensation Committee has the authority to construe and interpret the Executive Plan and to adopt rules for the administration, interpretation and application of the Executive Plan that are consistent with the terms of the Executive Plan.

Amendment and Termination

The Executive Plan may be amended or modified by the Compensation Committee, and may be terminated by the Board.

Exercise

The exercise price of options and share purchase rights granted under the Executive Plan must typically be paid for in cash.

Certain Events

Under the Executive Plan, the Compensation Committee may, in its sole discretion, provide that options granted under the plan cannot be exercised after the consummation of the merger or consolidation of the Company into another corporation, the exchange of all or substantially all of the assets of the Company for the securities of another corporation, the acquisition by another corporation of 80% or more of the Company’s then outstanding voting shares or the recapitalization, reclassification, liquidation or dissolution of the Company, or other adjustment or event which results in the Company’s ordinary shares being exchanged for or converted into cash, securities or other property, in which case the Compensation Committee may further provide that the options will become fully vested and exercisable prior to the completion of the change of control. The Compensation Committee may also provide that options remaining exercisable after such an event may only be exercised for the consideration received by shareholders in such event, or its cash equivalent. The Company shall in its discretion appropriately and equitably adjust the exercise price of an option in the event of a spin off or other substantial distribution of the Company’s assets.

The Board initially adopted and the Company’s shareholders initially approved the Senior Management Plan effective December 2005. The Senior Management Plan was adopted and restated by the Board in April 2006 and approved by the Company’s shareholders in April 2007. The Senior Management Plan was also amended and restated by the Board in February 2008 and amended in July 2009 and March 2011.

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

Types of Awards

The Senior Management Plan provides for the grant of non-qualified options and share purchase rights to employees, consultants, other persons having a unique relationship with the Company or its subsidiaries and non-employee members of the Board.

Share Reserve

The Company had reserved an aggregate of 30 million ordinary shares for issuance under the Senior Management Plan and the Executive Plan. However, following the IPO no additional awards may be made under these plans.

Administration

The Compensation Committee administers the Senior Management Plan. The Compensation Committee has the authority to select the employees to whom options and/or share purchase rights will be granted under the Senior Management Plan, the number of shares to be subject to those options or share purchase rights, and the terms and conditions of the options and share purchase rights. In addition, the Compensation Committee has the authority to construe and interpret the Senior Management Plan and to adopt rules for the administration, interpretation and application of the Senior Management Plan that are consistent with the terms of the Senior Management Plan.

Amendment and Termination

The Senior Management Plan may be amended or modified by the Compensation Committee, and may be terminated by the Board.

Exercise

The exercise price of options and share purchase rights granted under the Senior Management Plan must typically be paid for in cash.

Certain Events

Under the Senior Management Plan, the Compensation Committee may, in its sole discretion, provide that options granted under the plan cannot be exercised after the consummation of the merger or consolidation of the Company into another corporation, the exchange of all or substantially all of the assets of the Company for the securities of another corporation, the acquisition by another corporation of 80 or more of the Company’s then outstanding voting shares or the recapitalization, reclassification, liquidation or dissolution of the Company, or other adjustment or event which results in the Company’s ordinary shares being exchanged for or converted into cash, securities or other property, in which case the Compensation Committee may further provide that the options will become fully vested and exercisable prior to the completion of the change of control. The Compensation Committee may also provide that options remaining exercisable after such an event may only be exercised for the consideration received by shareholders in such event, or its cash equivalent. The Company shall in its discretion appropriately and equitably adjust the exercise price of an option in the event of a spin off or other substantial distribution of the Company’s assets.

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

2009 Plan

Avago Technologies Limited 2009 Equity Incentive Award Plan

The Board adopted and the Company’s shareholders approved the 2009 Plan in July 2009.

Share Reserve

Under the 2009 Plan, 20 million ordinary shares were initially reserved for issuance pursuant to a variety of share-based compensation awards, including options, share appreciation rights, or SARs, restricted share awards, restricted share unit awards, deferred share awards, dividend equivalent awards, performance share awards, performance share unit awards, share payment awards, performance-based awards and other share-based awards plus the number of ordinary shares subject to options outstanding under the Executive Plan the Senior Management Plan, as of the effective date of the 2009 Plan that are forfeited in the future under such plans. The number of shares reserved for issuance under the 2009 Plan will automatically increase on the first day of each financial year beginning in 2012 and ending in 2019, by an amount equal to the least of (i) 6 million shares, (ii) 3% of the ordinary shares outstanding (on an as converted basis) on the last day of the immediately preceding financial year and (iii) such smaller number of ordinary shares as determined by the Board; provided, however, no more than 90 million ordinary shares may be issued upon the exercise of incentive stock options. On November 4, 2013 (the first day of the financial year ended November 2, 2014), the number of shares available for issuance under the 2009 Plan increased by 6 million shares pursuant to this annual increase provision.

The following provisions affect the share reserve under the 2009 Plan:

 

   

to the extent that an award terminates, expires or lapses for any reason, any shares subject to the award at such time will be available for future grants under the 2009 Plan;

 

   

to the extent shares are tendered or withheld to satisfy the grant, exercise price or tax withholding obligation with respect to any award under the 2009 Plan, such tendered or withheld shares will be available for future grants under the 2009 Plan;

 

   

to the extent any restricted shares are forfeited by the holder, such shares will be available for future grants under the 2009 Plan;

 

   

the payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2009 Plan; and

 

   

to the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any of its subsidiaries will not be counted against the shares available for issuance under the 2009 Plan.

Initially, there was no limit on the number of shares that may be covered by share-based awards or the maximum aggregate dollar amount subject to cash-based performance awards granted to any individual during any calendar year. However, after a limited transition period, no individual may be granted share-based awards under the 2009 Plan covering more than 2 million shares or more than $3 million in cash in any calendar year. This limited transition period expired on April 10, 2013, the date of the first meeting of the Company’s shareholders at which members of the Board are to be elected that occurs after the close of the third calendar year following the calendar year in which the Company’s IPO occurred.

Administration

The Compensation Committee administers the 2009 Plan. Subject to the terms and conditions of the 2009 Plan, the Compensation Committee has the exclusive authority to select the persons to whom awards are to be

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2009 Plan. The Compensation Committee is also authorized to adopt, amend or rescind rules relating to administration of the 2009 Plan. The Board may at any time remove the Compensation Committee as the administrator and re-vest in itself the authority to administer the 2009 Plan. The full Board administers the 2009 Plan with respect to awards to non-employee directors.

Eligibility

Options, share appreciation rights (“SARs”), restricted shares and all other share-based and cash-based awards under the 2009 Plan may be granted to individuals who are then the Company’s officers, employees or consultants or are the officers, employees or consultants of certain of the Company’s subsidiaries. Such awards also may be granted to directors of the Company. Only employees may be granted incentive stock options (“ISOs”).

Awards

The 2009 Plan provides that the administrator may grant or issue options, SARs, restricted shares, RSUs, deferred shares, dividend equivalents, performance awards, share payments and other share-based and cash-based awards, or any combination thereof. Each award is set forth in a separate agreement with the person receiving the award and indicates the type, terms and conditions of the award.

 

   

Nonqualified Options. NQOs provide for the right to purchase ordinary shares at a specified price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NQOs may be granted for any term specified by the administrator, but may not exceed ten years.

 

   

Incentive Stock Options. ISOs are stock options designated as such and intended to comply with the provisions of Section 422 of the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of an ordinary share on the date of grant, may only be granted to employees, and must not be exercisable after a period of ten years measured from the date of grant. To the extent ISOs having an aggregate exercise price in an amount greater than $100,000 become exercisable by an individual in any calendar year, the options in excess of $100,000 will be treated as NQOs. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of the Company’s shares, the 2009 Plan provides that the exercise price must be at least 110% of the fair market value of an ordinary share on the date of grant and the ISO must not be exercisable after a period of five years measured from the date of grant.

 

   

Restricted Shares may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted shares, typically, may be forfeited for no consideration if the conditions or restrictions on vesting are not met. In general, restricted shares may not be sold, or otherwise transferred, until restrictions are removed or expire. Purchasers of restricted shares, unlike recipients of options, generally will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse.

 

   

Restricted Share Units. RSUs may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

 

performance criteria established by the administrator. Like restricted shares, RSUs may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted shares, shares underlying RSUs will not be issued until the RSUs have vested, and recipients of RSUs generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

 

   

Deferred Share Awards represent the right to receive ordinary shares on a future date. Deferred shares may not be sold or otherwise hypothecated or transferred until issued. Deferred shares will not be issued until the deferred share award has vested, and recipients of deferred shares generally will have no voting or dividend rights prior to the time when the vesting conditions are satisfied and the shares are issued. Deferred share awards generally will be forfeited, and the underlying shares will not be issued, if the applicable vesting conditions and other restrictions are not met.

 

   

Share Appreciation Rights. SARs may be granted in connection with options or other awards, or separately. SARs granted in connection with options or other awards typically will provide for payments to the holder based upon increases in the price of ordinary shares over a set exercise price. The exercise price of any SAR granted under the 2009 Plan must be at least 100% of the fair market value of an ordinary share on the date of grant. Except as required by Section 162(m) of the Code with respect to a SAR intended to qualify as performance-based compensation as described in Section 162(m) of the Code, there are no restrictions specified in the 2009 Plan on the exercise of SARs or the amount of gain realizable therefrom, although restrictions may be imposed by the administrator in the SAR agreements. SARs under the 2009 Plan will be settled in cash or ordinary shares, or in a combination of both, at the election of the administrator.

 

   

Dividend Equivalents represent the value of the dividends, if any, per share paid by us, calculated with reference to the number of shares covered by the options, SARs or other awards held by the participant. Dividend equivalents may be settled in cash or shares and at such times as determined by the Compensation Committee or the Board, as applicable.

 

   

Performance Awards may be granted by the administrator on an individual or group basis. Generally, these awards will be based upon specific performance targets and may be paid in cash or in ordinary shares or in a combination of both. Performance awards may include “phantom” share awards that provide for payments based upon the value of ordinary shares. Performance awards may also include bonuses that may be granted by the administrator on an individual or group basis and which may be payable in cash or in ordinary shares or in a combination of both.

 

   

Share Payments may be authorized by the administrator in the form of ordinary shares or an option or other right to purchase ordinary shares as part of a deferred compensation arrangement in lieu of all or any part of compensation, including bonuses, that would otherwise be payable in cash to the employee, consultant or non-employee director.

Change in Control

In the event of a change in control where the acquirer does not assume or replace awards granted under the 2009 Plan, awards issued under the 2009 Plan will be subject to accelerated vesting such that 100% of such award will become vested and exercisable or payable, as applicable. In addition, the administrator will also have complete discretion to structure one or more awards under the 2009 Plan to provide that such awards will become vested and exercisable or payable on an accelerated basis in the event such awards are assumed or replaced with equivalent awards but the individual’s service with us or the acquiring entity is subsequently terminated within a designated period following the change in control event. The administrator may also make appropriate adjustments to awards under the 2009 Plan and is authorized to provide for the acceleration, cash-out,

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

termination, assumption, substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions. Under the 2009 Plan, a change in control is generally defined as:

 

   

the transfer or exchange in a single or series of related transactions by the Company’s shareholders of more than 50% of the Company’s voting shares to a person or group;

 

   

a change in the composition of the Board over a two-year period such that fifty percent or more of the members of the Board were elected through one or more contested elections;

 

   

a merger, consolidation, reorganization or business combination in which the Company is involved, directly or indirectly, other than a merger, consolidation, reorganization or business combination which results in the Company’s outstanding voting securities immediately before the transaction continuing to represent a majority of the voting power of the acquiring company’s outstanding voting securities and after which no person or group beneficially owns 50% or more of the outstanding voting securities of the surviving entity immediately after the transaction;

 

   

the sale, exchange, or transfer of all or substantially all of the Company’s assets; or

 

   

shareholder approval of the Company’s liquidation or dissolution.

Non-Employee Director Awards

The 2009 Plan permits the Board to grant awards to the Company’s non-employee directors pursuant to a written non-discretionary formula established by the plan administrator.

Adjustments of Awards

In the event of any share dividend, share split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization, distribution of the Company’s assets to shareholders (other than normal cash dividends) or any other corporate event affecting the number of the Company’s outstanding ordinary shares or the price of the Company’s ordinary shares that would require adjustments to the 2009 Plan or any awards under the 2009 Plan in order to prevent the dilution or enlargement of the potential benefits intended to be made available thereunder, the committee will make appropriate, proportionate adjustments to:

 

   

the aggregate number and type of shares subject to the 2009 Plan and any other plan terms denominated in shares;

 

   

the terms and conditions of outstanding awards (including, without limitation, any applicable performance targets or criteria with respect to such awards); and

 

   

the grant or exercise price per share of any outstanding awards under the 2009 Plan.

Amendment and Termination

The Board or the Compensation Committee (with the Board’s approval) may terminate, amend, or modify the 2009 Plan at any time and from time to time. However, the Company must generally obtain shareholder approval:

 

   

to increase the number of shares available under the 2009 Plan (other than in connection with certain corporate events, as described above);

 

   

to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule).

 

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Table of Contents

AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

Options may be amended to reduce the per share exercise price below the per share exercise price of such option on the grant date without shareholder approval.

Expiration Date

The 2009 Plan will expire on, and no option or other award may be granted pursuant to the 2009 Plan after ten years following the effective date of the 2009 Plan. Any award that is outstanding on the expiration date of the 2009 Plan will remain in force according to the terms of the 2009 Plan and the applicable award agreement.

ESPP

Avago Technologies Limited Employee Share Purchase Plan

The Board initially adopted the ESPP on July 27, 2009, and the Company’s shareholders approved, the ESPP on July 31, 2009. The ESPP was amended and restated by the Compensation Committee on June 2, 2010.

Share Reserve

8 million ordinary shares were initially reserved for issuance under the ESPP. The number of ordinary shares reserved for issuance under the ESPP will automatically increase on the first day of each financial year, beginning in 2012, by an amount equal to the least of: (i) 1% of the outstanding ordinary shares outstanding on such date, (ii) 2 million ordinary shares or (iii) a lesser amount determined by the Board. On October 29, 2012 (the first day of the financial year ended November 3, 2013), the number of shares available for issuance under the ESPP increased by 2 million shares pursuant to this annual increase provision. The Board determined not to increase the number of shares available for issuance under the ESPP for the financial year ended November 2, 2014. The maximum aggregate number of ordinary shares which may be issued over the term of the ESPP is 24 million shares. In addition, no participant in the ESPP may be issued or transferred more than $25,000 in fair market value of ordinary shares pursuant to awards under the ESPP per offering period and/or per calendar year.

Offering Periods

The ESPP is administered using a series of successive offering periods. Unless otherwise determined by the Compensation Committee, each offering period will have a duration of six months. The initial offering period under the ESPP commenced on September 15, 2010.

Eligible Employees

The Company’s employees, and any employees of the Company’s subsidiaries that the Compensation Committee designates as participating in the ESPP, who are scheduled to work more than 20 hours per week for more than five calendar months per year who are employed as such five trading days prior to the start of an offering period may join an offering period on the start date of that period.

Payroll Deductions

A participant may contribute from 1% to 10% of his or her eligible compensation through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. The purchase price per share will be equal to 85% of the fair market value per share of the Company’s ordinary shares the first trading date of an offering period in which a participant is enrolled or, if lower, 85% of the fair market value per share on the semi-annual purchase date. Semi-annual purchase dates will occur on the last trading day of each offering period. However, not more than 2,500 shares may be purchased in

 

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AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

total by any participant during any offering period. The Compensation Committee has the authority to change these limitations for any subsequent offering period.

Change in Control

Should the Company be acquired by merger or sale of substantially all of its assets or more than 50% of its voting securities, then all outstanding purchase rights may either be assumed by the acquirer or, if not assumed, will be exercised at an early purchase date prior to the effective date of the acquisition. The purchase price in effect for each participant will be equal to 85% of the fair market value per share of the Company’s ordinary shares on the first trading date of the offering period in which the participant is enrolled at the time the acquisition occurs or, if lower, 85% of the fair market value per share on the purchase date prior to the acquisition.

Other Plan Provisions

Employees may not transfer shares for six months after the date of purchase, unless they cease to be an eligible employee, in which case the shares may be sold at any time thereafter.

Amendment and Termination

The Board or the Compensation Committee may at any time amend, suspend or discontinue the ESPP. However, certain amendments may require shareholder approval.

Expiration Date

The ESPP will terminate no later than ten years after the date the Board initially approved it.

2003 Plan

LSI 2003 Equity Incentive Plan

In connection with the LSI acquisition, the Company assumed the 2003 Plan and outstanding unvested options and RSUs held by continuing LSI employees, which were predominately granted under the 2003 Plan.

Share Reserve

As of May 6, 2014, the date of the LSI acquisition, 7.6 million ordinary shares were reserved for issuance under the 2003 Plan, of which 3 million ordinary shares were available for restricted share and/or RSU awards.

The following provisions affect the share reserve under the 2003 Plan:

 

   

to the extent that an award terminates, expires or lapses for any reason, any shares subject to the award at such time will be available for future grants under the 2003 Plan;

 

   

to the extent shares are tendered or withheld to satisfy the grant, exercise price or tax withholding obligation with respect to any award under the 2003 Plan, such tendered or withheld shares will not be available for future grants under the 2003 Plan; and

 

   

to the extent any restricted shares are forfeited by the holder, such shares will be available for future grants under the 2003 Plan.

 

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AVAGO TECHNOLOGIES LIMITED

DIRECTORS’ REPORT—(Continued)

For the financial year ended November 2, 2014

 

Administration

The Compensation Committee administers the 2003 Plan. Subject to the terms and conditions of the 2003 Plan, the Compensation Committee has the exclusive authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2003 Plan. The Compensation Committee is also authorized to adopt, amend or rescind rules relating to administration of the 2003 Plan. The Board may at any time remove the Compensation Committee as the administrator and re-vest in itself the authority to administer the 2003 Plan.

Eligibility

Options, SARs, restricted shares and RSUs under the 2003 Plan may be granted to individuals who are former employees of LSI and other employees who were not employees of the Company or its subsidiaries at the time of the LSI acquisition.

Awards

The 2003 Plan provides that the administrator may grant or issue options, SARs, restricted shares, and RSUs. Each award is set forth in a separate agreement with the person receiving the award and indicates the type, terms and conditions of the award.

 

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