CONTENTS DIRECTORY HIGHLIGHTS 1 DIRECTORS: FINANCIAL SUMMARY 1 G. Harvey - Chairman CHAIRMAN’S REPORT 2 K.L. Page DIRECTORS’ REPORT 4 R.J. Skippen STATEMENT OF CORPORATE GOVERNANCE A.B. Brew PRACTICES 10 M.J. Harvey STATEMENT OF FINANCIAL POSITION 12 C.H. Brown STATEMENT OF FINANCIAL PERFORMANCE 14 I.J. Norman STATEMENT OF CASH FLOWS 15 J.E. Slack-Smith NOTES TO THE FINANCIAL STATEMENTS 17 S.P. Hauville DIRECTORS’ DECLARATION 75 INDEPENDENT AUDIT REPORT 76 COMPANY SECRETARY SHAREHOLDER INFORMATION 77 R.J. Skippen DIRECTORY OF “HARVEY NORMAN” SHOPPING COMPLEXES 78 REGISTERED OFFICE A1 Richmond Road Homebush West NSW 2140 Telephone: (02) 9201 6111 Facsimile: (02) 9201 6250 SHARE REGISTRY Registries Limited Level 2 28 Margaret Street SYDNEY BANKERS Australia & New Zealand Banking Group THE ANNUAL Limited GENERAL MEETING The Annual General Meeting of the Shareholders of Harvey Norman AUDITORS Holdings Limited will be held at Tattersalls, 181 Elizabeth Street, Ernst & Young Sydney on Tuesday 19 November 2002 at 11.00 am. (for full details and Proxy Form see separate document enclosed.) SOLICITORS Gillis Delaney Brown STOCK EXCHANGE LISTING Harvey Norman Holdings Limited shares are quoted on: - the Australian Stock Exchange; and - the New Zealand Stock Exchange. HARVEY NORMAN HOLDINGS LIMITED A.C.N 003 237 545 HIGHLIGHTS Consolidated profit from ordinary activities before income tax expense and outside equity interests for the 12 months to 30 June 2002 was $189.41 million, an increase of 16.3% on the previous year. Net profit attributable to members of the parent entity was $128.28 million, an increase of 22.0% on the previous year. Directors have recommended payment of a final dividend of 2.5¢, fully franked on each share. Basic earnings per share increased from 10.24 cents to 12.33 cents in respect of each share. Return on shareholders’ funds was 16.0%. FINANCIAL SUMMARY 12 MONTHS TO 30 JUNE 2002 CONSOLIDATED CONSOLIDATED 2002 2001 % $000 $000 Change Total Revenues * 1,160,203 683,976 69.6 Profit from Ordinary Activities before Income Tax Expense and Borrowing Costs * 213,334 186,119 14.6 Borrowing Costs * 23,924 23,156 3.3 Income Tax Expense relating to Ordinary Activities * 60,351 56,504 6.8 Net Profit Attributable to Members of the Parent Entity 128,277 105,156 22.0 Basic Earnings per share on issue at 30 June (cents) 12.33 10.24 20.4 Dividends per share (cents) 4.5 4.0 12.5 % Return on Shareholders’ Funds 16.0 17.7 (9.6) Contributed Equity at 30 June * 302,991 193,227 56.8 Net Tangible Assets per share at 30 June ($) 0.74 0.59 25.4 *Including outside equity interests. HARVEY NORMAN HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES – ANNUAL REPORT 2002 1 CHAIRMAN’S REPORT The consolidated profit from ordinary activities before income tax expense and outside equity interests was $189.41 million for the 12 months ended 30 June 2002 compared to $162.96 million for the prior year. Net profit attributable to members of the parent entity after income tax was $128.28 million, an increase of 22.0% on the previous year. Sales for the year to 30 June 2002 by Harvey Norman franchisees from the franchised “Harvey Norman” complexes, group stores in New Zealand and other trading operations (excluding Pertama Holdings Limited, Singapore and Rebel Sport Limited) totalled $2.77 billion (excluding GST) compared to $2.50 billion for the prior year. Sales for the months of July and August 2002 by Harvey Norman franchisees from the franchised “Harvey Norman” complexes, group stores in New Zealand and other trading operations (excluding Pertama Holdings Limited, Singapore and Rebel Sport Limited) totalled $487.8 million (excluding GST). Property During the year, the Directors have analysed and revalued the Group Property Portfolio resulting in an increase of $20.06 million in the asset revaluation reserve. The Group Property Portfolio at 30 June 2002 including joint venture property interests (consolidated with property held by Pertama Holdings Limited, Singapore and Rebel Sport Limited) was valued at $659.92 million compared to $548.24 million at 30 June 2001. The property portfolio excluding property held by Pertama Holdings Limited, Singapore and Rebel Sport Limited at 30 June 2002 was $654.49 million. Equity Total equity at 30 June 2002 (consolidated) was $875.89 million compared to $653.81 million at 30 June 2001 – an increase of $222.08 million (33.9%). Of the total equity of $875.89 million, an amount of $69.97 million (2001: $52.59 million) is attributable to outside equity interests. Dividend The recommended final dividend is 2.5¢ per share fully franked. The total dividend for the year will be 4.5¢ fully franked compared with 4.0¢ fully franked for the previous year. Expansion In the 12 months to 30 June 2002, new complexes have been opened as follows: NSW - Maclean, Homestarters – Warrawong, Leichhardt (Manchester), Warrawong (Domayne), Domayne Bathroom Design VIC - Watergardens SA - Mt Gambier, Munno Para QLD - Bundall (Domayne) NEW ZEALAND - Dunedin, Palmerston North, New Plymouth 2 HARVEY NORMAN HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES – ANNUAL REPORT 2002 Since the end of this financial year new complexes have been opened at: NSW - Auburn (extension) QLD - Fortitude Valley (Harvey Norman/Domayne) SLOVENIA - Ljubljana New complexes to be opened in the next 12 months: NSW - Caringbah (Domayne), Moss Vale (replacement), Nowra (Homemart), Mudgee (replacement), Caringbah Commercial (replacement) ACT - Fyshwick (Domayne) VIC - Horsham, Hoppers Crossing, Knox City (replacement) TAS - Launceston (replacement) QLD - Loganholme WA - Armadale, Busselton (replacement) NEW ZEALAND - Hastings (to open 7 October 2002), Mt Maunganui, Hamilton, Invercargill, Whangarei, Wellington City The Company intends to continue to pursue a strategy of steady expansion. I would like to thank my fellow Directors, Harvey Norman employees, franchisees and their staff for their continuing efforts and loyalty. G HARVEY CHAIRMAN HARVEY NORMAN HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES – ANNUAL REPORT 2002 3 DIRECTORS’ REPORT DIRECTORS The names and details of the directors in office during or since the end of the financial year and until the date of this report are as follows: Gerald Harvey - Chairman Mr. G. Harvey, aged 63, was the co-founder of Harvey Norman in 1982 with Mr. I. Norman. Mr. G. Harvey has overall executive responsibility for the relationship between the company and Harvey Norman franchisees, and the property investments of the company. Kay Lesley Page - Managing Director Miss Katie Page, aged 45, joined Harvey Norman in 1983. Miss Page was appointed a director of Harvey Norman Holdings Limited in 1987 when the company first became a listed public company. Miss Page became Managing Director in February 1999. John Skippen - Finance Director and Company Secretary Mr. Skippen, aged 54, is a chartered accountant who was a principal in a city based accounting practice for 15 years. During his career he has acquired a vast knowledge in all aspects of finance and administration, including mergers and acquisitions, business restructuring and property based transactions. Mr. Skippen became a director of the company in September 1994. Mr. Skippen is a member of the Audit and Finance Committee. Arthur Bayly Brew - Director Mr. Brew, aged 52, joined the company in 1983. He is responsible for the security and shopfitting operations of the group. Mr. Brew was appointed a director in September 1994. Mr. Brew is a member of the Audit and Finance Committee. John Evyn Slack-Smith - Director Mr Slack-Smith, aged 33, was a Harvey Norman franchisee between 1993 and 1999. Mr Slack-Smith was appointed as General Manager, Computers and Communications on 1 July 1999 and became a director on 5 February 2001. Mr Slack-Smith is a member of the Audit and Finance Committee. Stephen Patrick Hauville - Director Mr Hauville, aged 45, has had extensive experience as a Harvey Norman franchisee and retailer. Mr Hauville was appointed as General Manager, Electrical on 20 November 2000 and became a director on 5 February 2001. Mr Hauville is a member of the Audit and Finance Committee. Michael John Harvey - Non-Executive Director Mr. M. Harvey, aged 37, joined Harvey Norman in 1987, having completed a Bachelor of Commerce degree. Mr. M. Harvey gained extensive experience as a Harvey Norman franchisee from 1989 to 1994. Mr. M. Harvey became a director of the company in 1993 and was appointed Managing Director in July 1994. Mr. M. Harvey ceased to be an Executive Director on 30 June 1998. Mr. M. Harvey is a member of the Audit and Finance Committee. Christopher Herbert Brown - Non-Executive Director Mr. Brown, aged 52, holds the degree of Master of Laws from the Sydney University. Mr. Brown is the senior partner in Gillis Delaney Brown, Lawyers. Gillis Delaney Brown has acted as lawyers for the Harvey Norman group since 1982. Mr. Brown was appointed a director in 1987, when the company became a listed public company. Mr. Brown is Chairman of the Audit and Finance Committee. Ian John Norman - Non-Executive Director Mr. Norman, aged 63, was co-founder of Harvey Norman with Mr. Gerald Harvey in 1982. Unless otherwise indicated, all directors held their position as a director throughout the entire financial year and up to the date of this report. 4 HARVEY NORMAN HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES – ANNUAL REPORT 2002 DIRECTORS’ MEETINGS The number of meetings of the Board of directors and of its Board committee during the year were: Board or Committee Number of Meetings Full Board 14 Audit & Finance 5 The attendances of directors at meetings of the Board and its committee were: Board of Directors Audit and Finance G. Harvey 13 (14) - K.L. 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