D E C 2 0 1 5A P P E N D I X 4 DHALF-YEAR REPORT

Mil len ia Walk , S ingaporeDecember 2015

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COMPANY INFORMATION

Registered Office:A1 Richmond Road, Homebush West NSW 2140Ph: 02 9201 6111 Fax: 02 9201 6250

Share Registry:Boardroom Pty LimitedLevel 12, 225 George Street, Sydney NSW 2000Ph: 02 9290 9600

Auditors:Ernst & Young

Stock Exchange Listing:Harvey Norman Holdings Limited shares are quoted on the Australian Securities Exchange Limited (“ASX”)

Solicitors:Brown Wright Stein

Company Secretary: Mr Chris Mentis

Our brands provide ‘Solutions For The Home’ by offering the largest

range of trusted brands, products and services under one roof in 191

Harvey Norman, Domayne and Joyce Mayne franchised stores in

Australia and 86 company-operated stores across 7 overseas countries.

KEY DATES:

26 February 2016 Announcement of Half-Year Profit to 31 December 2015 Announcement of Interim 2016 Dividend

8 April 2016 Record date for Determining Entitlement to Interim 2016 Dividend

2 May 2016 Payment of Interim 2016 Dividend

31 August 2016 Announcement of Full Year Profit to 30 June 2016 Announcement of Final 2016 Dividend

HARVEY NORMAN HOLDINGS LIMITEDABN 54 003 237 545

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$262.01up 30.5% on PCP*

REPORTEDPROFIT BEFORE

TAX

$170.66up 22.7% on PCP*

PROFIT AFTER TAX & NON-

CONTROLLING INTERESTS (EXCLUDING

NET PROPERTY REVALUATION ADJUSTMENTS)

$185.51REPORTED

PROFIT AFTER TAX & NON-

CONTROLLING INTERESTS

$2.72bn

up 7.7% on PCP*

FRANCHISEE SALES

REVENUE

m

m

up 30.7% on PCP*

m

*PCP = previous corresponding period

CONTENTS Results for Announcement to the Market 04Directors’ Report 05Operating and Financial Review 05Statement of Financial Position 15 Income Statement 16 Statement of Comprehensive Income 17

Statement of Changes in Equity 18Statement of Cash Flows 20 Notes to the Financial Statements 21Other Information 39 Directors’ Declaration 40 Independent Auditor’s Report 41

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The Omni Channel Strategy, incorporating the

Harvey Norman integrated retail, franchise,

property and digital platforms, is robust and

the most viable format to effectively compete

in an evolving market. The digital and physical

stores and distribution channels provide a

significant competitive advantage for

Harvey Norman franchisees.

MOBILE &OTHER DEVICES

PHYSICALSTORES

MARKETING &SOCIAL MEDIA

ONLINESTORE

DISTRIBUTION& DELIVERYOPTIONS

HOMESERVICES

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Financial Highlights HY2015

Dec-14

HY2016

Dec-15

Movement

$

Movement

%

No. of franchised complexes in Australia1

195

191

No. of franchisees in Australia1

678

677

No. of company-operated stores

86

86

Franchisee headline sales revenue1

$2.53bn

$2.72bn

+$193.76m

+7.7%

Company-operated sales revenue

$839.33m

$911.98m

+$72.66m

+8.7%

Other revenues and other income items

$565.16m

$626.43m

+$61.27m

+10.8%

Earnings before interest, tax, depreciation,

impairment and amortisation (EBITDIA)

$261.17m

$333.39m

+$72.23m

+27.7%

Earnings before interest and tax (EBIT)

$218.21m

$276.65m

+$58.44m

+26.8%

Net property revaluation increment

$3.86m

$21.19m

+$17.33m

+448.6%

Reported profit before tax

$200.79m

$262.01m

+$61.23m

+30.5%

Profit before tax excluding impairment losses

$205.74m

$279.52m

+$73.78m

+35.9%

Profit before tax excluding net property

revaluation adjustments

$196.93m

$240.82m

+$43.90m

+22.3%

Profit after tax and non-controlling interests (NCI)

$141.98m

$185.51m

+$43.52m

+30.7%

Profit after tax and NCI excluding impairment losses

$145.45m

$197.76m

+$52.31m

36.0%

Profit after tax and NCI excluding net property

revaluation adjustments

$139.13m

$170.66m

+$31.53m

+22.7%

Net cash flows from operating activities

$136.21m

$141.77m

+$5.56m

+4.1%

Basic earnings per share

13.19c

16.70c

+3.51c

+26.6%

Dividends per share (fully-franked)

9.0c

13.0c

+4.0c

+44.4%

Special dividend per share (fully-franked)

14.0c

-

Net debt to equity ratio (%)

22.18%

22.29%

1 Sales made by franchisees in Australia do not form part of the financial results of the consolidated entity.

The information contained in the half year report is to be read in conjunction with the last annual report and any announcements to the market by Harvey Norman Holdings Limited during the period.

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The directors of Harvey Norman Holdings Limited (the “Company”) submit their report for the half-year ended 31

December 2015. Unless otherwise indicated, all directors (collectively termed “the Board”) held their position as a

director throughout the entire financial period and up to the date of this report.

Directors Gerald Harvey - Executive

Chairman Kay Lesley Page - Executive

Director and CEO

Chris Mentis B.Bus., FCA, FGIA,

Grad Dip App Fin - Executive Director, CFO & Company Secretary

John Evyn Slack-Smith -

Executive Director and COO David Matthew Ackery -

Executive Director Michael John Harvey B.Com. -

Non-Executive Director Christopher Herbert Brown

OAM, LL.M., FAICD, CTA - Non-Executive Director

Kenneth William Gunderson-

Briggs B.Bus., FCA, MAICD -Non-Executive Director (Independent)

Graham Charles Paton AM, B.Ec., FCPA, MAICD - Non-Executive Director (Independent)

Significant Changes in the

State of Affairs In the opinion of the directors, there

were no significant changes in the

state of affairs of the consolidated

entity that occurred during the half-year ended 31 December 2015.

Principal Activities The principal activities of the consolidated entity are that of an

integrated retail, franchise, property and

digital system including:

Franchisor;

Sale of furniture, bedding,

computers, communications,

consumer electrical products and lifestyle products in, New Zealand,

Singapore, Malaysia, Slovenia,

Croatia, Ireland and Northern

Ireland;

Property investment;

Lessor of premises to Harvey Norman franchisees and other third

parties;

Media placement; and

Provision of consumer finance and

other commercial advances.

Significant Events After Balance

Date There have been no circumstances arising since balance date which have

significantly affected or may significantly

affect:

the operations;

the results of those operations; or

the state of affairs of the entity or

consolidated entity in future financial years.

Dividends The directors recommend a fully franked interim dividend of 13.0 cents

per share. This interim dividend will be

paid on 2 May 2016 to shareholders

registered at 5:00pm on 8 April 2016.

No provision has been made in the

Statement of Financial Position for this

recommended interim dividend.

The Dividend Policy of the Company

is to pay such dividends as do not

compromise the capability of the

Company to execute strategic

objectives.

Corporate Governance The Company is committed to good

corporate governance and

disclosure. The Company has

substantially adopted the ASX

Corporate Governance Council's "Principles of Good Corporate

Governance and Best Practice

Recommendations" for the entire

period, unless otherwise stated.

The Operating and Financial Review in this report provides shareholders with an overview of the consolidated entity’s

results, financial position, dividends and the progress of key operational efficiencies for the first half of the 2016 financial

year. This OFR is not a full, comprehensive OFR that normally forms part of the Directors’ Report in the Annual Report.

Financial Analysis and Commentary: Net Profit Before Tax and Net Profit After Tax Profit Before Income Tax The directors are pleased to report a solid result for the December 2015 half year, primarily achieved through the strength of the underlying core business segments of franchising, offshore company-operated retailing and property

investment. The consolidated entity continues to be the leading retailer for the connected home, homemaker and

lifestyle. Sales in the lifestyle and homemaker categories have been supported by buoyant housing construction

activity and rising house prices which have, together with low interest rates, encouraged household consumption and

particularly, consumers to spend on their homes.

Profit before income tax increased 30.5%, or $61.23 million, to $262.01 million for the December 2015 half year, from $200.79 million in the previous corresponding half. Profit before income tax excluding impairment losses increased

35.9%, or $73.78 million, to $279.52 million for the current period, from $205.74 million in the prior period.

If the effects of the net property revaluation adjustments were excluded from profit before tax for the December 2015

half, the increase would have been 22.3%, or $43.90 million to $240.82 million, from $196.93 million in the previous half

year.

Net profit before tax was impacted by the following:

a $35.33 million, or 30.7%, increase in the profitability of the franchising operations segment to $150.42 million. This

was primarily due to a 10.2%, or $38.34 million, increase in franchise fees and a 26.5%, or $10.54 million, decrease

in tactical support to $29.16 million from $39.70 million in the prior period. Tactical support provided to

franchisees has declined in excess of 20% in each of the past three half years;

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Operating and Financial Review (OFR) (continued)

a $17.33 million increase in net property revaluation adjustments to $21.19 million recorded for the December

2015 half year up from $3.86 million in the prior period;

a $10.94 million turnaround in the result of the company-operated stores in Asia to a profit of $5.46 million for the

current half, from a loss of $5.48 million in the previous half year, achieved largely due to gross margin improvements from more effective inventory management assisted by the implementation of the new

information technology system in 2014;

a $7.96 million, or 30.8%, increase in the profitability of the company-operated stores in New Zealand driven by

robust sales and gross margin improvements, buoyed by favourable economic conditions and elevated

consumer confidence in New Zealand; and

a $4.89 million turnaround in the result of the company-operated stores in Ireland and Northern Ireland to a profit

of $0.82 million for the current period, its first profit since December 2007, up from a loss of $4.07 million in the

previous corresponding period. This was attributable to heightened levels of consumer confidence as the Irish

economy continues to recover, coupled with the achievement of record levels of market share in most

categories;

Offset by: the recognition of impairment losses of $17.51 million during the current period, of which $13.20 million relates to

the write-down of equity-accounted investments and loans advanced to several mining camp accommodation

joint ventures and $4.31 million relates to commercial loans in Australia, compared to $4.96 million in the prior

period;

a $4.17 million decrease in the contribution of the mining camp accommodation joint ventures to an equity-accounted loss of $3.00 million in the current period, from a $1.18 million profit in the prior half year; and

$1.79 million in equity-accounted start-up losses attributable to the 49.9% investment in Coomboona Holdings Pty

Limited, comprising dairy farm operations, pedigree breeding and a genetics division located in Coomboona,

Victoria.

Net Profit After Tax and Non-Controlling Interests: Net profit after tax and non-controlling interests increased 30.7%, or $43.52 million, to $185.51 million for the half year

ended December 2015, from $141.98 million in the prior half year. Net profit after tax excluding impairment losses

increased 36.0%, or $52.31 million, to $197.76 million for the half year ended December 2015, from $145.45 million in the

prior half year.

If the effects of the net property revaluation adjustments were excluded from net profit after tax for the December 2015

half, the increase would have been 22.7%, or $31.53 million, to $170.66 million, from $139.13 million in the previous half.

The effective income tax rate for the half year ended 31 December 2015 was 28.60% compared to an effective income

tax rate of 29.23% in the prior half year.

Review and Results of Key Operating Segments

1) The Franchising Operations Segment The franchising operations segment increased 30.7%, or $35.33 million, to $150.42 million in the December 2015 half year

from $115.09 million in the prior half year. This solid result was primarily due to the strong underlying sales performance of

franchisees in Australia, particularly the growth in like-for-like sales.

Headline Australian franchisee sales revenue increased 7.7%, or $193.76 million, to $2.72 billion for the half year ended 31

December 2015 from $2.53 billion in the prior corresponding period. Like-for-like franchisee sales revenue increased 8.8%

to $2.71 billion for the December 2015 half year.

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Operating and Financial Review (OFR) (continued)

Franchisee sales growth continues to be positive with the second quarter of the 2016 financial year marking the 12th

consecutive quarter-on-quarter increase in Australian franchisee sales on a like-for-like basis since the March 2013

quarter. On a same store basis, franchisee sales growth for the first two quarters of the 2016 financial year has been

strong, with a 7.1% increase for the September 2015 quarter and a 10.3% in the December 2015 quarter.

The omni channel strategy, incorporating the Harvey Norman integrated retail, franchise and property platforms, is robust and remains the most flexible and adaptable format to effectively capitalise on changes in consumer demand

and emerging trends. This integrated operating model, supplemented by the momentum from the continued rollout of

the merchandise, inventory and supplier management system and the workforce productivity technology, has enabled

franchisees to strengthen and grow their market position in key product categories.

Strong employment growth and households’ confidence have fuelled household consumption growth. The

homemaker categories, namely furniture, bedding, whitegoods, small appliances and cooking, have dominated retail trends and Harvey Norman franchisees, being well-positioned, have been strong beneficiaries of these trends.

Solid activity in the housing sector, higher home prices, lower unemployment and low interest rates are all supportive of

continuing housing development and dwelling and retail spending. This is borne out in improving forward looking

indicators such as the number of new construction loan approvals and dwelling starts which, in NSW, the ACT and

Victoria, are above decade averages. Harvey Norman’s flexible property model and large store footprint enabling the stores to effectively showcase the extensive Homemaker product range, means the franchisees are well-positioned to

continue to thrive.

Connected lifestyle devices are evolving quickly and consumer adoption rates are high. The category is proving very

successful for Harvey Norman franchisees and it will be a key driver of growth in 2016 and beyond.

Franchisees have seen solid performance from technology and entertainment categories.

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Operating and Financial Review (OFR) (continued)

The 7.7% increase in headline Australian franchisee sales revenue, or the 8.8% increase on a like-for-like basis, has driven

an outstanding franchising operations segment result. The franchising operations segment delivered a 30.7%, or $35.33

million, increase to $150.42 million for the December 2015 half year up from $115.09 million in the previous half year.

The strong underlying performance of franchisees has resulted in a sharp decline in tactical support during the December 2015 half year by 26.5%, or $10.54 million, to $29.16 million from $39.70 million in the prior half year. Tactical

support provided to franchisees has decreased by at least 20% in each of the previous three half years. The strong result

of the franchising operations segment has validated the decision to tactically support the Harvey Norman brand during

periods of volatility and aggressive competition over the past few years.

Revenue from the franchising operations segment increased 7.8%, or $35.24 million, to $489.88 million in the December

2015 half year from $454.64 million in the prior half year. This was driven primarily by a rise in franchise fee income which increased 10.2%, or $38.34 million, to $413.11 million from $374.78 million in the prior half year.

The franchising operations margin increased to 5.53% in the December 2015 half year from 4.55% in the prior half year.

2) Property Segment: Retail Property and Property Developments for Resale

The ownership of high-quality, well-located complexes, with Harvey Norman, Domayne or Joyce Mayne franchisees as anchor tenants, delivers a steady and reliable income stream to the consolidated entity in the form of market-based

rents and outgoings.

The property portfolio remains strong and was valued at $2.37 billion at 31 December 2015. This represents 52% of the

consolidated entity’s total asset base as at 31 December 2015. The result before tax generated by the property

segments represents 29.3% of consolidated profit before tax for the half year ended 31 December 2015.

The property segment result increased 16.3%, or $10.75 million, to $76.80 million for the half year ended 31 December

2015, from $66.05 million in the prior half year. Rising revenue from rents and outgoings in the property segment overall,

partially offset the reduction in the profitability of property-related joint ventures. A net property revaluation increase of

$21.19 million for the December 2015 half year compared to a net increase of $3.86 million in the prior half underpinned

the improved result.

Total Property Segment Assets

HY Dec 2014

HY Dec 2015

Investment properties $1.920bn $1.986bn

Joint venture properties $27.64m $2.59m

Owned land & buildings in NZ,

Singapore, Slovenia & Australia

$364.04m $380.52m

Properties held for resale $2.87m -

Total Property

Segment Assets

$2.31bn

$2.37bn

Net Property Revaluation Adjustments

HY Dec

2014

HY Dec

2015

Recorded in the Income Statement: Total Australian net property revaluation

increment

$2.73m $20.63m

Plus: Overseas controlled entities:

- New Zealand - $0.56m

- Slovenia $1.13m -

Total net property revaluation increment in

the Income Statement

$3.86m

$21.19m

Recorded in Equity (Asset Revaluation Reserve):

- New Zealand $1.61m $2.24m

- Slovenia $0.25m -

- Singapore - $1.26m

Total net property revaluation adjustments recorded in Equity (ARR)

$1.86m

$3.50m

This table shows the composition of property

segment assets as at 31 December 2015

and 31 December 2014.

The investment property portfolio in Australia and properties

held in joint venture entities are subject to a review to fair

market value at each reporting period. At each reporting

period, one-sixth of the investment property portfolio is

independently valued with the remaining five-sixths reviewed

for fair value by Directors. The entire portfolio is independently valued every three years.

During the half year ended 31 December 2015, eighteen (18)

properties in Australia were independently valued,

representing 15% of the total number of investment properties

owned by the consolidated entity and 17% of the fair value of

all investment properties in Australia.

The balance of the portfolio was reviewed for comparability

resulting in the preparation of internal valuations for six (6)

additional sites. The valuation for the December 2015 half

year resulted in a net increase of $20.63 million in Australia and

an increase of $0.56 million in New Zealand.

The property segment result was negatively impacted by $10.24 million of losses, comprising an investment write-down of $7.24

million and equity-accounted trading losses of $3.00 million, relating to investments in non-core, property-related mining camp

accommodation joint ventures.

Falling commodity prices and the sharp slowdown in the mining sector over the past eighteen months have resulted in a drop

in the occupancy rates of the mining residential complexes and the demobilisation of several mining camps pending the

possible commencement of new projects currently out to tender. This has resulted in a decrease of $4.17 million in the contribution of the mining camp accommodation joint ventures to an equity-accounted trading loss of $3.00 million in the

current half, from a $1.18 million profit in the prior half year. The significant downturn in the mining sector resulted in an

impairment review of the equity-accounted investments held in mining camp accommodation joint ventures, resulting in a full

write-down of these investments totalling $7.24 million as at balance date.

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Operating and Financial Review (OFR) (continued)

3) The Company-Operated Retail Segments

The result before tax of the company-operated retail segment increased 108.8% to $42.06 million in the December 2015

half year, from $20.14 million in the prior half year. Improved operational performances in a number of international

markets; primarily New Zealand, Ireland, and Northern Ireland drove this result.

New Zealand

FX rate: NZD vs AUD down by 0.14% Sales revenue from the New Zealand company-operated stores increased by 6.4%, or $NZ26.28 million, to $NZ436.90 million in the December 2015 half year, from $NZ410.62 million in the prior half year. Translated into Australian dollars,

sales revenue increased 6.3%, or $23.42 million, to $397.94 million. This was partly due to a full six-month’s contribution

from the Napier store that opened in September 2014. Harvey Norman remains the market leader in New Zealand and

has grown market share in key product categories, positioning the New Zealand business to capitalise on any further

expansion in the market over the coming year. Sales of all key categories grew relative to the prior period, buoyed by

high consumer sentiment in response to solid macroeconomic conditions in New Zealand. The housing market in Auckland remains robust, fuelled by low interest rates and increased net migration, delivering a positive impact on sales.

The retail result in New Zealand increased 30.8%, or $7.96 million, to $33.78 million for the December 2015 half year, from

$25.82 million in the prior half year. Despite constant competitive pressures, the size, scale and strength of the brand in

New Zealand has seen gross margins increase throughout the current period. A continued and disciplined focus on

operating efficiencies and cost minimisation curtailed significant increases in total expenses.

Asia

FX rate: SGD vs AUD up 12.05% The Asian segment comprises 29 Harvey Norman stores in Singapore and Malaysia and the flagship, prestige furniture

offering of Space Furniture in Singapore. Sales revenue decreased 3.3%, or $S7.25 million, to $S214.38 million in the

December 2015 half year, from $S221.63 million in the prior half. Translated into Australian dollars, sales actually

increased 8.4%, or $16.40 million, to $211.92 million, from $195.52 million in the prior half year due to a 12.05%

appreciation in the Singapore dollar relative to the Australian dollar.

-3.60%

Breakdown of Owned

and Leased Sites

as at 31 December 2015

# of

owned

sites

# of

leased

sites

Total

Australia: Franchised

complexes

92 99 191

New Zealand 18 18 36

Slovenia 5 - 5

Croatia - 1 1

Ireland - 12 12

Northern Ireland - 3 3

Singapore & Malaysia - 29 29

Total 115 162 277

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Operating and Financial Review (OFR) (continued)

Despite the challenging retail environment in Singapore, gross margins improved through more effective management

assisted by the implementation of the new information technology system in 2014. The new 100,000 sq feet flagship

store in Millenia Walk opened in December 2015 replacing the existing 45,000 sq feet store. The Millenia Walk

homemaker superstore is unrivalled in Asia in store design and its premium product offering.

Harvey Norman sales in Malaysia improved in local currency assisted by the new store that opened in Ioi City Mall in

October 2015. In general, market sentiment has been subdued in Malaysia since the implementation of the 6% Goods

and Services Tax (“GST”) in April 2015. Gross margins improved as a result of better inventory management.

The Asian retail segment recorded a profit of $5.46 million in the December 2015 half year, a turnaround of $10.94 million

from the loss of $5.48 million incurred in the prior half year.

Ireland & Northern Ireland

FX rate: EUR vs AUD up 5.51%; FX rate: GBP vs AUD up 16.13% Sales revenue from the company owned stores in Ireland increased 12.7%, or €11.19 million, to €99.16 million in the

December 2015 half year, from €87.97 million in the prior half year. Translated into Australian dollars, sales revenue

increased 18.9%, or $24.09 million, to $151.32 million due to a 16.13% appreciation in the GBP relative to the Australian

dollar during the period. This was due to improved performances across all product categories, particularly bedding

and electrical. The Irish business is now in its 5th year of sales growth, with double-digit sales growth in recent periods as

the Irish economy continues to recover and consumer confidence improves.

Sales revenue from the company operated stores in Northern Ireland increased 16.7%, or £0.49 million, to £3.41 million for

the December 2015 half year, from £2.92 million in the prior half year. Translated into Australian dollars, sales increased

35.5%, or $1.89 million, to $7.23 million. The new flagship furniture store at Balmoral Plaza, off Boucher Road in South

Belfast, opened in November 2015. The Boucher Road Harvey Norman Home Centre is over 60,000 sq feet of furniture,

homewares and bedding across two levels. This is a major repositioning and upgrading of the Harvey Norman brand in

Northern Ireland and will be the premier furniture destination in the country.

The Ireland and Northern Ireland segment recorded a profit of $0.82 million for the December 2015 half year, its first

profit since December 2007, and is now in its 7th consecutive year of loss reduction. This represents a turnaround of $4.89

million from the loss of $4.07 million that was incurred in the prior half year.

Slovenia and Croatia

FX rate: EUR vs AUD up 5.51% Sales revenue from the company-operated stores in Slovenia and Croatia decreased 0.5%, or €0.18 million, relative to

the prior half year. Sales in Slovenia decreased by €0.92 million while sales in Croatia increased by €0.74 million.

Generally, consumer confidence in the Euro Zone is low, however Harvey Norman was able to maintain, and in some

cases grow, market share in the region. Translated into Australian dollars, sales actually increased 5.0%, or $2.55 million, due to a 5.51% appreciation of the Euro relative to the Australian dollar.

The retail result in Slovenia and Croatia decreased by 10.5%, or €0.15 million, to €1.29 million, relative to €1.44 million for

the prior half year. Translated into Australian dollars, the result was $1.97 million for the December 2015 half year

compared to $2.09 million for the previous half.

Other Non-Franchised Retail

The non-franchised retail segment consists primarily of the retail trading operations in Australia which are controlled by the consolidated entity and does not include the operations of any Harvey Norman franchisee. Total revenue for the

other non-franchised retail segment increased 10.2%, or $8.10 million, to $87.79 million for the December 2015 half year

from $79.69 million in the prior half year.

The result for the non-franchised retail segment decreased by $1.75 million to $0.03 million for the December 2015 half

year, from $1.78 million in the prior half year.

Other Segment

This segment primarily relates to credit facilities provided to related and other unrelated parties and other unallocated

income and expense items. For the December 2015 half year, the Other segment includes the consolidated entity’s

49.9% investment in Coomboona Holdings Pty Limited, comprising dairy farm operations and a pedigree breeding and

genetics division in Northern Victoria. The investment offers targeted exposure to the demand for quality agricultural

produce forecast to result from increasing urbanisation, particularly in Asia. The transaction amounts to $34 million, including an investment of $25 million and a commitment to advance approximately $9 million, and is consistent with

the consolidated entity’s investment portfolio mandate to seek growth opportunities and to capitalise on market trends.

The Other segment was negatively impacted by the impairment loss of $5.96 million relating to loans advanced to

several mining camp accommodation joint ventures and the equity-accounted start-up losses relating to the

Coomboona dairy joint venture of $1.79 million.

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Operating and Financial Review (OFR) (continued)

Review of the Financial Position of the Consolidated Entity

Harvey Norman’s balance sheet remains strong, anchored by

tangible property assets and a solid working capital position. Net assets have more than doubled from $1.29 billion at 31 December

2004 to $2.65 billion as at 31 December 2015. The value of net

assets increased 4.1%, or $105.15 million, to $2.65 billion at 31

December 2015, from $2.54 billion as at 31 December 2014.

Total assets increased 5.1%, or $220.49 million, to $4.58 billion at 31

December 2015, from $4.36 billion in the prior half year. This increase was largely due to increases of: 12.0%, or $152.41 million in trade

and other receivables; 3.4%, or $66.10 million in investment property

assets; and 5.1%, or $17.75 million in inventories.

Trade and other receivable assets increased from the prior period

mainly due to an increase in aggregate working capital advances

to franchisees, consistent with the growth in franchisee sales revenue in the September 2015 and December 2015 quarters, and a rise in trade debtors of company-operated stores.

Tangible property assets, consisting of investment properties, owned land and buildings, joint venture properties and

properties for resale comprises 52% of the total asset base. Tangible property assets increased 2.4%, or $54.66 million to

$2.37 billion as at 31 December 2015 due to net increases in the fair market value of Australian investment properties,

new store openings in overseas markets as well as renovations and refurbishments of existing sites in Australia.

Total liabilities increased by 6.3%, or $115.34 million from the previous half year. The increase was largely due to an

increase in trade and other payables of $69.79 million and a rise in interest-bearing liabilities of $13.70 million over the

prior half year.

The overall debt levels of the consolidated entity remain low, resulting in a low net debt to equity ratio of 22.29% as at 31

December 2015.

Net cash flows from operating activities increased 4.1% to $141.77 million for the December 2015 half year, from $136.21

million in the prior half year. The stronger cash inflows received from higher franchise fee income, lower tactical support

payments and higher sales from company-operated stores were offset by increased working capital advances to

franchisees. Higher franchisee working capital requirements resulted from an increase of franchisee stock holdings in

response to increased demand, particularly in the December 2015 quarter for the buoyant Christmas trading period.

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Operating and Financial Review (OFR) (continued)

Capital Management Policy The consolidated entity’s capital management policy objectives are to: create long-term sustainable value for

shareholders; maintain optimal returns to shareholders and benefits to other stakeholders; source the lowest cost

available capital; and, prevent the adverse outcomes that can result from short-term decision making.

The Capital Management Policy stipulates a debt-to-equity target for the consolidated entity of less than 50%.

The capital structure of the consolidated entity consists of: debt, which includes borrowings disclosed in Notes 18 and 21

of this report; Interest-Bearing Loans and Borrowings; cash and cash equivalents; and, equity attributable to equity

holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in Notes 24, 27 and 25

respectively.

The consolidated entity’s borrowings consist primarily of bank debt provided by a syndicate of four banks (three of which are members of the “Big 4” Australian Banks) trading in Australia. Concentration risk is minimised by staggering

facility renewals and utilising a range of maturities over 1, 3 and 5 years. Interest rate risk is mitigated with interest rate

swaps.

Operational Efficiencies

During the period, the phased rollout of the merchandise, inventory and supplier management system and the workforce productivity technology system continued.

The number of suppliers being replenished via the merchandise, inventory and supplier management system has

increased significantly. The majority of larger categories and suppliers of franchisees are to be completed during the

early part of the 2017 financial year.

The workforce productivity technology was rolled out to all franchised complexes in October 2015. Each franchisee now has access to information and tools to optimise how they recruit, roster and manage their staff. Optimised rostering

is to be completed by 31 May 2016. Optimised rostering technology will enable each franchisee to analyse traffic

counting information and generate staff rosters, manage their payroll expense and, overall, provide more effective

customer service.

The workforce productivity technology will be deployed to all company-operated stores in New Zealand towards the

end of the 2016 calendar year.

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Geographic Spread

This diagram displays the geographic spread of the Harvey Norman (“HN”), Domayne (“DM”) and Joyce Mayne (“JM”)

franchised complexes in the Australian market and the Harvey Norman company-operated stores in New Zealand,

Ireland, Northern Ireland, Singapore, Malaysia, Slovenia and Croatia as at 31 December 2015.

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A member firm of Ernst & Young Global Limited

Liability limited by a scheme approved under Professional Standards Legislation

Auditor Independence

The directors received the following declaration from the auditors of Harvey Norman Holdings Limited

Auditor’s Independence Declaration to the Directors of Harvey Norman Holdings Limited As lead auditor for the review of Harvey Norman Holdings Limited for the half-year ended 31 December 2015, I declare to the best of my knowledge and

belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and b) no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Harvey Norman Holdings Limited and the entities it controlled during the financial period.

Ernst & Young

Katrina Zdrilic

Partner, Sydney

26 February 2016

This report has been made in accordance with a resolution of directors.

G. HARVEY K.L. PAGE

Chairman Chief Executive Officer

Sydney Sydney 26 February 2016 26 February 2016

Ernst & Young 680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au

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CO N S O L I D A T E D

NOTE December

2015

June

2015

December

2014

$000 $000 $000

Current Assets

Cash and cash equivalents 28(a) 35,815 185,840 48,403

Trade and other receivables 7 1,351,915 1,142,551 1,208,789

Other financial assets 8 26,501 26,148 21,917

Inventories 9 368,231 298,381 350,481

Other assets 10 37,130 23,072 40,867

Intangible assets 11 343 476 370

Total current assets 1,819,935 1,676,468 1,670,827

Non-Current Assets

Trade and other receivables 12 75,030 71,815 65,743

Investments accounted for using equity method 29 25,801 21,425 27,641

Other financial assets 13 17,570 16,570 18,309

Property, plant and equipment 14 572,890 552,603 573,416

Investment properties 15 1,986,379 1,935,936 1,920,283

Intangible assets 16 83,853 83,727 84,747

Total non-current assets 2,761,523 2,682,076 2,690,139

Total Assets 4,581,458 4,358,544 4,360,966

Current Liabilities

Trade and other payables 17 994,954 813,474 928,212

Interest–bearing loans and borrowings 18 430,656 408,438 371,055

Income tax payable 31,463 34,807 27,921

Other liabilities 19 3,901 2,870 2,085

Provisions 20 24,161 23,490 24,564

Total current liabilities 1,485,135 1,283,079 1,353,837

Non-Current Liabilities

Trade and other payables 3,050 - -

Interest-bearing loans and borrowings 21 200,000 290,000 245,903

Provisions 22 13,434 12,249 10,430

Deferred income tax liabilities 214,700 198,728 193,945

Other liabilities 23 18,166 17,628 15,029

Total non-current liabilities 449,350 518,605 465,307

Total Liabilities 1,934,485 1,801,684 1,819,144

NET ASSETS 2,646,973 2,556,860 2,541,822

Equity

Contributed equity 24 382,611 380,328 380,328

Reserves 27 136,682 113,290 123,918

Retained profits 25 2,106,720 2,043,463 2,017,306

Parent entity interests 2,626,013 2,537,081 2,521,552

Non-controlling interests 26 20,960 19,779 20,270

TOTAL EQUITY 2,646,973 2,556,860 2,541,822

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CO N S O L I D A T E D

NOTE December

2015

December

2014

$000 $000

Sales revenue 3 911,984 839,327

Cost of sales (629,569) (593,194)

Gross profit

282,415

246,133

Revenues and other income items 3 626,427 565,162

Distribution expenses (8,332) (9,430)

Marketing expenses (203,065) (196,483)

Occupancy expenses 4 (116,107) (115,140)

Administrative expenses 4 (233,056) (218,907)

Other expenses from ordinary activities (71,967) (60,114)

Finance costs 4 (14,637) (17,419)

Share of net profit of joint venture entities 29 336 6,986

Profit before income tax

262,014

200,788

Income tax expense

5

(74,942)

(58,681)

Profit after tax

187,072

142,107

Attributable to:

Owners of the parent 185,507 141,984

Non-controlling interests 1,565 123

187,072

142,107

Earnings Per Share:

Basic earnings per share (cents per share) 6 16.70 cents 13.19 cents

Diluted earnings per share (cents per share) 6 16.67 cents 13.17 cents

Dividends per share (cents per share) 25 13.0 cents 9.0 cents

Special dividend per share (cents per share) 25 - 14.0 cents

The above Income Statement should be read in conjunction with the accompanying notes.

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CO N S O L I D A T E D

December

2015

December

2014

$000 $000

Profit for the period 187,072 142,107

Other comprehensive income to be reclassified to profit or loss in subsequent periods (net of tax):

Foreign currency translation 17,664 17,214

Net fair value gains on available-for-sale investments (148) 1,757

Net movement on cash flow hedges 2,692 2,182

Income tax effect on net movement on cash flow hedges (789) (655)

Other comprehensive income not to be reclassified to profit or loss in subsequent periods (net of tax):

Fair value revaluation of land and buildings 5,417 2,559

Income tax effect on fair value revaluation of land and buildings (1,530) (700)

Other comprehensive income for the period (net of tax)

23,306

22,357

Total comprehensive income for the period (net of tax)

210,378

164,464

Total comprehensive income attributable to:

- Owners of the parent 208,821 163,028

- Non-controlling interests 1,557 1,436

210,378

164,464

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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Attributable to Equity Holders of the Parent

Contributed

Equity

Retained Profits

Asset

Revaluation Reserve

Foreign

Currency Translation

Reserve

Available for

Sale Reserve

Cash Flow

Hedge Reserve

Employee

Equity Benefits

Reserve

Acquisition

Reserve

Non-

controlling Interests

TOTAL

EQUITY

$000 $000 $000 $000 $000 $000 $000 $000 $000 $000

At 1 July 2015

380,328

2,043,463

102,244

18,529

8,581

(2,817)

8,804

(22,051)

19,779

2,556,860

Other comprehensive income:

Revaluation of land and buildings - - 3,499 - - - - - 388 3,887

Reverse expired or realised cash

flow hedge reserves

-

-

-

-

-

62

-

-

-

62

Currency translation differences - - - 18,060 - - - - (396) 17,664

Fair value of interest rate swaps - - - - - 1,871 - - - 1,871

Fair value of forward foreign

exchange contracts

-

-

-

-

-

(30)

-

-

-

(30)

Fair value of available for sale

financial assets

-

-

-

-

(148)

-

-

-

-

(148)

Other comprehensive income

-

-

3,499

18,060

(148)

1,903

-

-

(8)

23,306

Profit for the period - 185,507 - - - - - - 1,565 187,072

Total comprehensive income for the period

-

185,507

3,499

18,060

(148)

1,903

-

-

1,557

210,378

Cost of share based payments - - - - - - 78 - - 78

Shares issued 2,283 - - - - - - - - 2,283

Dividends paid - (122,250) - - - - - - (33) (122,283)

Distribution to members - - - - - - - - (343) (343)

At 31 December 2015

382,611

2,106,720

105,743

36,589

8,433

(914)

8,882

(22,051)

20,960

2,646,973 F

or p

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nal u

se o

nly

Attributable to Equity Holders of the Parent

Contributed

Equity

Retained

Profits

Asset

Revaluation Reserve

Foreign

Currency Translation

Reserve

Available for

Sale Reserve

Cash Flow

Hedge Reserve

Employee

Equity Benefits Reserve

Acquisition

Reserve

Non-

controlling Interests

TOTAL

EQUITY

$000 $000 $000 $000 $000 $000 $000 $000 $000 $000

At 1 July 2014

259,610

2,109,032

91,184

23,846

7,279

(6,110)

8,587

(22,051)

19,729

2,491,106

Other comprehensive income:

Revaluation of land and buildings - - 1,859 - - - - - - 1,859 Reverse expired or realised cash

flow hedge reserves

-

-

-

-

-

13

-

-

-

13

Currency translation differences - - - 15,901 - - - - 1,313 17,214 Fair value of interest rate swaps - - - - - 1,506 - - - 1,506 Fair value of forward foreign

exchange contracts

-

-

-

-

-

8

-

-

-

8

Fair value of available for sale

financial assets

-

-

-

-

1,757

-

-

-

-

1,757

Other comprehensive income

-

-

1,859

15,901

1,757

1,527

-

-

1,313

22,357

Profit for the period - 141,984 - - - - - - 123 142,107 Total comprehensive income

for the period

-

141,984

1,859

15,901

1,757

1,527

-

-

1,436

164,464

Cost of share based payments - - - - - - 139 - - 139 Shares issued pursuant to

Renounceable Rights Offer

120,718

-

-

-

-

-

-

-

-

120,718 Dividends paid - (233,710) - - - - - - (29) (233,739) Distribution to members - - - - - - - - (866) (866)

At 31 December 2014

380,328

2,017,306

93,043

39,747

9,036

(4,583)

8,726

(22,051)

20,270

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CO N S O L I D A T E D

NOTE December

2015

December

2014 $000 $000

Cash Flows from Operating Activities

Inflows/(Outflows) Net receipts from franchisees 452,834 406,596

Receipts from customers 950,245 869,276

Payments to suppliers and employees (1,163,973) (1,061,647)

Distributions received from joint ventures 5,055 6,767

GST paid (25,203) (19,385)

Interest received 3,854 4,329

Interest and other costs of finance paid (14,766) (17,851)

Income taxes paid (67,514) (52,733)

Dividends received 1,239 862

Net Cash Flows From Operating Activities

28(b)

141,771

136,214

Cash Flows from Investing Activities

Payments for purchases of property, plant and equipment and intangible assets

(38,830)

(32,760)

Payments for purchase of investment properties (31,877) (8,666)

Proceeds from sale of property, plant and equipment and

properties held for resale

8,305

6,588

Payments for purchase of units in unit trusts (56) (362)

Payments for purchase of equity accounted investments (25,009) (1)

Payments for purchase of listed securities (146) (80)

Proceeds from insurance claim - 10,515

Loans granted to related parties (17,438) (4,574)

Loans granted to other entities (1,590) (1,547)

Net Cash Flows Used In Investing Activities

(106,641)

(30,887)

Cash Flows from Financing Activities

Proceeds from Renounceable Rights Offer - 120,718

Proceeds from shares issued 2,283 -

Repayment of Syndicated Facility Agreement (50,000) (102,000)

Dividends paid (122,250) (84,986)

Special dividend paid - (148,724)

(Repayments to) / proceeds from related parties (16,562) 12,318

Proceeds from other borrowings 6,249 5,519

Net Cash Flows Used In Financing Activities

(180,280)

(197,155)

Net Decrease in Cash and Cash Equivalents (145,150) (91,828)

Cash and Cash Equivalents at Beginning of the Period 153,220 115,172

Cash and Cash Equivalents at End of the Period

28(a)

8,070

23,344

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1. Statement of Significant Accounting Policies

(a) Corporate Information The financial report of Harvey Norman Holdings Limited for the half-year ended 31 December 2015 was authorised for

issue in accordance with a resolution of the directors on 26 February 2016. Harvey Norman Holdings Limited (the “Company”) is a company limited by shares incorporated in Australia whose shares are publicly traded on the

Australian stock exchange.

(b) Basis of Preparation The half-year financial report does not include all notes of the type normally included within the annual financial report

and therefore cannot be expected to provide as full an understanding of the financial performance, financial position

and financing and investing activities of the consolidated entity as the full financial report.

The half-year financial report should be read in conjunction with the Annual Financial Report of Harvey Norman

Holdings Limited as at 30 June 2015.

It is also recommended that the half-year financial report be considered together with any public announcements

made by Harvey Norman Holdings Limited and its controlled entities during the half-year ended 31 December 2015 in

accordance with the continuous disclosure obligations arising under the Corporations Act 2001. The half-year consolidated financial report is a general-purpose financial report, which has been prepared in

accordance with the requirements of the Corporations Act 2001 and Accounting Standard AASB 134 “Interim Financial

Reporting”. The financial report has been prepared on a historical cost basis, except for investment properties, land

and buildings, derivative financial instruments, listed shares held for trading and available-for-sale investments, which

have been measured at fair value. The carrying values of recognised assets and liabilities that are hedged items in fair

value hedges, and are otherwise carried at cost, are adjusted to record changes in the fair values attributable to the

risks that are being hedged. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000)

unless otherwise stated under the option available to the consolidated entity under ASIC Class Order 98/0100. The

consolidated entity is an entity to which the class order applies.

(c) Statement of Compliance These consolidated financial statements have been prepared using the same accounting policies as used in the Annual Financial Report for the year ended 30 June 2015, except for the adoption of new and amended standards mandatory

for annual periods beginning on or after 1 July 2015. The adoption of the amending standards did not have a

significant impact on the consolidated entity.

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet

effective have not been adopted by the consolidated entity for the half-year reporting period ended 31 December 2015.

During the half-year ended 31 December 2015, certain comparatives have been restated in the Statement of Financial

Position for consistency with policies adopted in the current period, which are not material for disclosure purposes.

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2.

Operating Segments

December 2015 $000

Operating Segment Revenue: 31 December 2015

Sales to Customers

Outside the

Consolidated

Entity

Other Revenues from

Outside the

Consolidated

Entity

Segment Revenue

FRANCHISING OPERATIONS

1,447

488,428

489,875

Retail – New Zealand 397,938 6,444 404,382

Retail – Asia 211,921 2,661 214,582

Retail – Slovenia & Croatia 53,681 615 54,296

Retail – Ireland & Northern Ireland 158,553 2,040 160,593

Other Non-Franchised Retail 85,629 2,156 87,785

TOTAL RETAIL

907,722

13,916

921,638

Retail Property 65 124,411 124,476

Property Developments for Resale 2,750 9,900 12,650

TOTAL PROPERTY

2,815

134,311

137,126

Equity Investments - 2,005 2,005

Other - 8,672 8,672

Inter-company eliminations - (20,905) (20,905)

Total Segment Revenue

911,984

626,427

1,538,411

December 2014 $000

Operating Segment Revenue: 31 December 2014

Sales to Customers

Outside the

Consolidated

Entity

Other Revenues from

Outside the

Consolidated

Entity

Segment Revenue

FRANCHISING OPERATIONS

1,662

452,973

454,635

Retail – New Zealand 374,516 5,714 380,230

Retail – Asia 195,524 1,509 197,033

Retail – Slovenia & Croatia 51,134 730 51,864

Retail – Ireland & Northern Ireland 132,572 1,485 134,057

Other Non-Franchised Retail 78,288 1,398 79,686

TOTAL RETAIL

832,034

10,836

842,870

Retail Property 58 113,481 113,539

Property Developments for Resale 5,573 123 5,696

TOTAL PROPERTY

5,631

113,604

119,235

Equity Investments - 862 862

Other - 7,590 7,590

Inter-company eliminations - (20,703) (20,703)

Total Segment Revenue

839,327

565,162

1,404,489

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2.

Operating Segments (continued)

December 2015 $000

Operating Segment Result: 31 December 2015

Segment Result Before Interest,

Taxation,

Depreciation,

Impairment &

Amortisation

Interest Expense

Depreciation Expense

Impairment & Amortisation

Expense

Segment Result

Before

Tax

FRANCHISING OPERATIONS

175,090

(3,331)

(14,368)

(6,974)

150,417

Retail – New Zealand 37,659 (1) (3,801) (78) 33,779

Retail – Asia 8,849 (33) (2,884) (476) 5,456 Retail – Slovenia & Croatia 3,216 (244) (922) (77) 1,973

Retail – Ireland & Northern Ireland 3,789 (1,203) (1,763) - 823

Other Non-Franchised Retail 5,887 (849) (659) (4,354) 25

TOTAL RETAIL

59,400

(2,330)

(10,029)

(4,985)

42,056

Retail Property 87,659 (8,231) (4,585) (7,389) 67,454

Property Developments for Resale 9,460 (112) - - 9,348

TOTAL PROPERTY

97,119

(8,343)

(4,585)

(7,389)

76,802

Equity Investments 1,971 (97) - - 1,874

Other 76 (799) (2,447) (5,965) (9,135)

Inter-company eliminations (263) 263 - - -

Total Segment Result Before Tax

333,393

(14,637)

(31,429)

(25,313)

262,014

December 2014 $000

Operating Segment Result: 31 December 2014

Segment Result Before Interest,

Taxation,

Depreciation,

Impairment &

Amortisation

Interest Expense

Depreciation Expense

Impairment & Amortisation

Expense

Segment Result

Before

Tax

FRANCHISING OPERATIONS

140,517

(4,526)

(16,050)

(4,855)

115,086

Retail – New Zealand 29,967 - (4,090) (54) 25,823

Retail – Asia (2,414) (94) (2,555) (418) (5,481) Retail – Slovenia & Croatia 3,292 (258) (882) (66) 2,086

Retail – Ireland & Northern Ireland (1,290) (1,370) (1,409) - (4,069)

Other Non-Franchised Retail 8,453 (953) (720) (5,002) 1,778

TOTAL RETAIL

38,008

(2,675)

(9,656)

(5,540)

20,137

Retail Property 80,967 (9,857) (4,344) (152) 66,614

Property Developments for Resale (522) (40) - - (562)

TOTAL PROPERTY

80,445

(9,897)

(4,344)

(152)

66,052

Equity Investments 684 (103) - - 581

Other 1,844 (550) (2,362) - (1,068)

Inter-company eliminations (332) 332 - - -

Total Segment Result Before Tax

261,166

(17,419)

(32,412)

(10,547)

200,788

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2.

Operating Segments (continued)

The consolidated entity operates predominantly in ten (10) operating segments:

Operating Segment Description of Segment

Franchising Operations

Consists of the franchising operations of the consolidated entity (other than company-

operated retailing and property).

Retail – New Zealand

Consists of the wholly-owned operations of the consolidated entity in the retail trading

operations in New Zealand under the Harvey Norman brand name.

Retail – Asia

Consists of the controlling interest of the consolidated entity in the retail trading operations in

Singapore and Malaysia under the Harvey Norman and Space brands.

Retail – Slovenia & Croatia

Consists of the wholly-owned operations of the consolidated entity in the retail trading operations in Slovenia and Croatia under the Harvey Norman brand name.

Retail – Ireland &

Northern Ireland

Consists of the wholly-owned operations of the consolidated entity in the retail trading

operations in Ireland and Northern Ireland under the Harvey Norman brand name.

Other Non-Franchised Retail

Consists of the other retail trading operations in Australia which are controlled by the

consolidated entity and do not include any operations of Harvey Norman, Domayne and

Joyce Mayne franchisees.

Retail Property

Consists of land and buildings for each retail site that is fully operational or is ready and able to be tenanted. The revenue and results of this segment consists of rental income, outgoings

recovered and the net property revaluation increments and/or decrements recognised in

the Income Statement for each site that is owned by the consolidated entity which is fully

operational (or ready for operations) as at balance date. This segment includes the equity-

accounted investment and trading results of mining camp accommodation joint ventures.

Property Developments

for Resale

Consists of land and buildings acquired by the consolidated entity, to be developed, or

currently under development, for the sole purpose of resale at a profit.

Equity Investments

This segment refers to the trading of, and investment in, listed securities.

Other

This segment primarily relates to credit facilities provided to related and unrelated parties,

other unallocated income and expense items and the new joint venture investment in

Coomboona Holdings Pty Limited.

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3. Revenues

Sales revenue:

Revenue from the sale of products 911,984 839,327

Revenues and other income items:

Gross revenue from franchisees:

- Franchise fees 413,113 374,775

- Rent 114,950 115,345

- Interest 11,100 10,819

Total revenue received from franchisees

539,163

500,939

Gross revenue from other unrelated parties:

- Rent received from external tenants 37,639 35,583

- Interest received from financial institutions and other parties 3,854 4,330

- Dividends received 1,434 862

Total revenue from other unrelated parties

42,927

40,775

Other Income Items:

- Net property revaluation increment on Australian investment properties 20,627 2,732

- Property revaluation adjustment for overseas controlled entity 565 1,131

- Net profit on the revaluation of equity investments to fair value 571 -

- Net foreign exchange gains 922 29

- Other revenue 21,652 19,556

Total other income items

44,337

23,448

Total revenues and other income items

626,427

565,162

4. Expenses and Losses

Tactical support:

Tactical support provided to franchisees 29,162 39,699

Employee benefits expense:

- Wages and salaries 117,854 111,480

- Workers’ compensation costs 521 605

- Superannuation contributions expense 6,477 5,923

- Payroll tax expense 4,876 4,530

- Share-based payments expense 79 140

- Other employee benefits expense 3,945 3,499

Total employee benefits expense

133,752

126,177

CO N S O L I D A T E D

December 2015

$000

December 2014

$000

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4. Expenses and Losses (continued)

Minimum lease payments 83,336 79,427

Finance costs:

Interest paid or payable:

- Loans from directors and director-related entities 1,120 1,121

- Bank interest paid to financial institutions 12,950 15,677

- Other 567 621

Total finance costs

14,637

17,419

Depreciation, amortisation and impairment:

Depreciation of:

- Buildings 4,230 3,990

- Plant and equipment 27,199 28,422

Amortisation of:

- Computer software 7,652 5,431

- Software licences 152 150

Impairment of goodwill (included in administrative expenses line in the Income Statement)

-

11

Impairment of non-trade debts receivable from related parties (a) (included in other expenses line in the Income Statement)

10,274

4,955

Impairment of equity-accounted investments (b) (included in other expenses line in the Income Statement)

7,235

-

Total depreciation, amortisation and impairment

56,742

42,959

(a) As at 31 December 2015, non-trade debts receivable with a carrying value of $83.08 million (Dec 2014: $63.74

million) were impaired and a provision for impairment of receivables of $10.27 million (Dec 2014: $4.96 million) was

recognised in the Income Statement during the current period. The non-trade debts receivable relate to several

mining camp accommodation joint ventures and other commercial loans in Australia.

(b)

The significant downturn in the mining sector resulted in an impairment review of the equity-accounted

investments held in mining camp accommodation joint ventures. This impairment review resulted in a full write-down of these investments totalling $7.24 million as at 31 December 2015.

5. Income Tax

Income tax recognised in the Income Statement:

The major components of income tax expense are:

Current income tax:

Current income tax charge 64,773 56,840

Adjustments in respect of current income tax of previous years 38 (794)

Support payments provided to Harvey Norman Holdings (Ireland) Limited as

agreed under the terms of an Advance Pricing Arrangement with the

Australian Taxation Office dated 6 February 2012

-

(791) Deferred income tax:

Relating to the origination and reversal of temporary differences 10,131 3,426

Total income tax expense reported in the Income Statement

74,942

58,681

CO N S O L I D A T E D

December

2015

December

2014

$000 $000

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CO N S O L I D A T E D

December

2015

December

2014 $000 $000

6. Earnings Per Share

Basic earnings per share (cents per share) 16.70 cents 13.19 cents

Diluted earnings per share (cents per share) 16.67 cents 13.17 cents

The following reflects the income and share data used in the calculations

of basic and diluted earnings per share:

Profit after tax 187,072 142,107

(Profit)/loss after tax attributable to non-controlling interests (1,565) (123)

Profit after tax attributable to owners of the parent

185,507

141,984

N U M B E R O F SH A R E S

December 2015

December 2014

Weighted average number of ordinary shares used in

calculating basic earnings per share (a):

1,111,103,780

1,076,740,903

Effect of dilutive securities (b):

- Share Options 1,440,212 1,224,630

Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share

1,112,543,992

1,077,965,533

(a) Weighted Average number of Ordinary Shares The weighted average number of ordinary shares used in calculating basic earnings per share is inclusive of the

new shares totalling 756,000 ordinary shares in the company issued on 1 September 2015 pursuant to the options

issued under the Executive Option Plan granted on 29 November 2010, weighted on a pro-rata basis from issue date to 31 December 2015.

(b) Effect of Dilutive Securities

On 29 November 2010, the consolidated entity issued 3,000,000 unlisted options to certain executive directors (the

“First Tranche”). These options are capable of exercise from 1 January 2014 to 30 June 2016 at an exercise price of

$3.02 per option. The options were valued at grant date at $0.87 each utilising the assumptions underlying the

Black-Scholes methodology. In prior periods, the consolidated entity announced that a total of 1,866,000 options

over 1,866,000 shares in respect of the First Tranche had lapsed and will never be exercisable by the participants.

On 1 September 2015, a total of 756,000 options over 756,000 shares in respect of the First Tranche were exercised reducing the unexercised portion to 378,000 options.

On 29 November 2011, the consolidated entity issued 3,000,000 unlisted options to certain executive directors (the

“Second Tranche”). These options are capable of exercise from 1 January 2015 to 30 June 2017 at an exercise

price of $2.03 per option. The options were valued at grant date at $0.51 each utilising the assumptions underlying

the Black-Scholes methodology. On 29 November 2012, the consolidated entity announced that a total of

2,250,000 options over 2,250,000 shares in respect of the Second Tranche had lapsed and will never be exercisable by the participants.

On 29 November 2012, the consolidated entity issued 3,000,000 unlisted options to certain executive directors (the

“Third Tranche”). These options are capable of exercise from 1 January 2016 to 30 June 2018 at an exercise price

of $1.83 per option. The options were valued at grant date at $0.282 each utilising the assumptions underlying the

Black-Scholes methodology. On 14 November 2013, the consolidated entity announced that a total of 1,299,000 options over 1,299,000 shares in respect of the Third Tranche had lapsed and will never be exercisable by the

participants.

Options issued pursuant to the First, Second and Third Tranches have been included in the calculation of diluted

earnings per share as their exercise prices were less than the average market price of an ordinary share for the half

year ended 31 December 2015. The unexercised options of the First, Second and Third Tranches are considered to

be dilutive as their conversion to ordinary shares would decrease the net profit per share.

There have been no other conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary

shares since the reporting date.

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CO N S O L I D A T E D

December 2015

$000

June 2015 $000

December 2014

$000

7. Trade and Other Receivables (Current)

Trade debtors 1,322,759 1,107,653 1,176,169

Consumer finance loans 2,085 2,049 2,027

Provision for doubtful debts (1,004) (875) (976)

Trade debtors and consumer finance loans, net

1,323,840

1,108,827

1,177,220

Amounts receivable in respect of finance leases 9,469 10,797 11,099 Provision for doubtful debts (5,897) (5,897) (5,897)

Finance leases, net

3,572

4,900

5,202

Non-trade debts receivable from:

- Related parties (including joint ventures and joint venture

partners)

18,627

23,673

21,048

- Unrelated parties 6,992 6,479 6,284

- Provision for doubtful debts (1,116) (1,328) (965)

Non-trade debts receivable, net

24,503

28,824

26,367

Total trade and other receivables (current)

1,351,915

1,142,551

1,208,789

8. Other Financial Assets (Current)

Listed shares held for trading at fair value 25,151 24,734 20,546 Derivatives receivable - 64 21

Other current financial assets 1,350 1,350 1,350

Total other financial assets (current)

26,501

26,148

21,917

9. Inventories (Current)

Finished goods at cost 372,900 301,062 353,817

Provision for obsolescence (4,669) (5,563) (6,205)

Finished goods at cost, net

368,231

295,499

347,612

Finished goods at net realisable value

-

2,882

2,869

Total current inventories at the lower of cost and net realisable value

368,231

298,381

350,481

10. Other Assets (Current)

Prepayments 30,291 13,841 29,161

Other current assets 6,839 9,231 11,706

Total other assets (current)

37,130

23,072

40,867

11. Intangible Assets (Current)

Net licence property 343 476 370 For

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CO N S O L I D A T E D

December 2015

June 2015

December 2014

$000 $000 $000

12. Trade and Other Receivables (Non-Current)

Trade debtors 313 304 317

Consumer finance loans 436 429 424

Provision for doubtful debts (4) (4) (4)

Trade debtors and consumer finance loans, net

745

729

737

Amounts receivable in respect of finance leases

1,261

1,348

1,460

Non-trade debts receivable from:

- Related parties (including joint ventures and joint venture partners)

82,110

68,712

62,859

- Provision for doubtful debts (16,143) (4,955) (4,955)

- Unrelated parties 7,057 5,981 5,642

Non-trade debts receivable, net

73,024

69,738

63,546

Total trade and other receivables (non-current)

75,030

71,815

65,743

13. Other Financial Assets (Non-Current)

Listed shares held for trading at fair value 2,650 2,350 2,700 Listed shares held as available for sale 14,125 13,481 14,904

Units in unit trusts 215 216 206

Other non-current financial assets 580 523 499

Total other financial assets (non-current)

17,570

16,570

18,309

14. Property, Plant and Equipment (Non-Current)

Land and buildings: Land at fair value 159,184 148,734 139,219

Buildings at fair value 221,335 209,983 224,820

Net land and buildings at fair value

380,519

358,717

364,039

Plant and equipment:

At cost 767,354 751,037 774,481 Accumulated depreciation (577,505) (558,486) (567,006)

Net plant and equipment

189,849

192,551

207,475

Lease make good asset:

At cost 5,469 5,093 5,646

Accumulated depreciation (2,947) (3,758) (3,744)

Net lease make good asset

2,522

1,335

1,902

Total plant and equipment

192,371

193,886

209,377

Total property, plant and equipment:

Land and buildings at fair value 380,519 358,717 364,039

Plant and equipment at cost 772,823 756,130 780,127

Total property, plant and equipment

1,153,342

1,114,847

1,144,166

Accumulated depreciation and amortisation (580,452) (562,244) (570,750)

Total written down amount 572,890 552,603 573,416

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CO N S O L I D A T E D

December 2015

June 2015

December 2014

$000 $000 $000

15. Investment Properties

Opening balance, at fair value 1,935,936 1,903,504 1,903,504

Net additions, disposals and transfers 29,251 24,828 14,047

Net increase from fair value adjustments 21,192 7,604 2,732

Closing balance, at fair value

1,986,379

1,935,936

1,920,283

Investment Properties

Each investment property is valued at fair value. Each investment property is the subject of a lease or licence in

favour of independent third parties, including Harvey Norman, Domayne and Joyce Mayne franchisees

(“Franchisees”). Franchisees occupy properties pursuant to a licence for an initial term of 30 days, thereafter

terminable at will. The fair value in respect of each investment property has been calculated using the

capitalisation method of valuation, against current market rental value, and having regard to, in respect of each property:

the highest and best use

quality of construction

age and condition of improvements

recent market sales data in respect of comparable properties

current market rental value, being the amount that could be exchanged between knowledgeable, willing

parties in an arm’s length transaction tenure of franchisees and external tenants

adaptive reuse of buildings

the specific circumstances of the property not included in any of the above points

non-reliance on turnover rent

The investment property portfolio in Australia and properties held in joint venture entities are subject to a semi-annual review to fair market value at each reporting period. At each reporting period, one-sixth of the portfolio is

independently valued with the remaining five-sixths reviewed for fair value by Directors. The whole portfolio is

independently valued every three years.

The consolidated entity obtained independent valuations in respect of eighteen (18) properties during the half

year ended 31 December 2015. Based on the results of the independent valuations, a further six (6) properties

were identified by management for further review by management. The six (6) properties had been similarly affected by the same factors or characteristics of the properties which had been independently valued,

particularly in relation to yields and market rentals. The capitalisation method of valuation was used for all

valuations. A discounted cash flow valuation was undertaken in respect of all properties for means of

comparison. There were no material differences between the capitalisation method result and the discounted

cash flow method result.

CO N S O L I D A T E D

December

2015

June

2015

December

2014

$000 $000 $000

16. Intangible Assets (Non-Current)

Other intangible assets 264 - 5 Net software licences 4,338 4,120 4,401

Computer software:

- At cost 164,857 157,600 151,071

- Accumulated amortisation and impairment (85,606) (77,993) (70,730)

Net computer software

79,251

79,607

80,341

Net intangible assets (non-current)

83,853

83,727

84,747

17. Trade and Other Payables (Current)

Trade creditors 848,336 682,666 788,327

Accruals 62,453 43,808 58,344

Other creditors 84,165 87,000 81,541

Total trade and other payables (current)

994,954

813,474

928,212

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CO N S O L I D A T E D

December 2015

June 2015

December 2014

$000 $000 $000

18. Interest-Bearing Loans and Borrowings (Current)

Secured:

Non trade amounts owing to:

- Bank overdraft 27,745 32,620 25,059

- Commercial bills payable 9,750 9,750 9,750

- Syndicated Facility Agreement (a) 210,000 170,000 170,000 - Other short-term borrowings (b) 108,060 101,808 100,085

- Lease liabilities 118 139 42

Unsecured:

Derivatives payable 1,513 4,104 913

Non trade amounts owing to:

- Directors 64,527 78,972 55,914

- Other related parties 8,838 10,956 9,247 - Other unrelated parties 105 89 45

Total interest-bearing loans and borrowings (current)

430,656

408,438

371,055

(a) Syndicated Facility Agreement On 2 December 2009, the Company, a subsidiary of the Company (“Borrower”) and certain other subsidiaries of

the Company (“Guarantors”) entered into a Syndicated Facility Agreement with certain banks (“Financiers” and each a “Financier”). On 26 November 2015, the Amending Deed (No. 3) to the Syndicated Facility Agreement

was executed with the effect of extending the first $170 million of Tranche A of the Facility to 4 December 2016

(previous expiry date was 28 November 2015), while leaving the remaining $200 million of Tranche A at the expiry

date of 28 November 2017.

The aggregate value of the Syndicated Facility Agreement remained at $610 million. The utilised amount of the

Syndicated Facility Agreement as at 31 December 2015 was $410 million, $210 million of which was classified as current interest-bearing loans and borrowings and $200 million as the non-current portion. This Facility is secured

by:

(a) a fixed and floating charge granted by the Company and each of the Guarantors in favour of a security

trustee for the Financiers; and

(b) real estate mortgages granted by certain Guarantors in favour of the security trustee for the Financiers over

various real properties owned by those Guarantors.

Under the terms of the Syndicated Facility Agreement, the Facility is repayable:

(a) as to $170 million, on 4 December 2016 ($170 million utilised at 31 December 2015);

(b) as to $200 million, on 4 December 2017 ($200 million utilised at 31 December 2015);

(c) as to $240 million, on 22 December 2016 ($40 million utilised at 31 December 2015);

(d) otherwise on demand by or on behalf of the Financiers upon the occurrence of any one of a number of

events (each a “Relevant Event”), including events which are not within the control of the Company, the Borrower or the Guarantors. Each of the following is a Relevant Event:

(i) an event occurs which has or is reasonably likely to have a material adverse effect on the business,

operation, property, condition (financial or otherwise) or prospects of the Borrower or the Company

and the subsidiaries of the Company;

(ii) if any change in law or other event makes it illegal or impractical for a Financier to perform its

obligations under the Syndicated Facility Agreement or fund or maintain the amount committed by

that Financier to the provision of the Increased Facility ("Commitment"), the Financier may by notice to the Borrower, require the Borrower to repay the secured moneys in respect of the Commitment of

that Financier, in full on the date which is forty (40) business days after the date of that notice.

(b) Other Short-Term Borrowings Of the total other short-term borrowings of $108.06 million:

a total of $50.60 million is secured by the securities given pursuant to the Syndicated Facility Agreement.

The facilities are utilised in Slovenia and Croatia and have a maturity date of 2 December 2016.

a total of $38.73 million is secured by the securities given pursuant to the Syndicated Facility Agreement. The facility is utilised in Singapore and has a maturity date of 30 November 2016.

a total of $17.33 million relates to a revolving credit facility with ANZ in Singapore. This facility is subject to

periodic review and otherwise repayable on demand. The revolving credit facility is secured by the

securities given pursuant to the Syndicated Facility Agreement.

a total of $0.80 million relates to a revolving credit facility with AmBank (M) Berhad in Malaysia which is

subject to periodic review and otherwise repayable on demand. The Company has granted a guarantee to AmBank (M) Berhad in Malaysia in respect of the obligations of Space Furniture Collection Sdn Bhd.

A total of $0.60 million relates to a revolving credit facility with ANZ in Australia which is subject to periodic

review and otherwise repayable on demand. The Company has granted a guarantee to ANZ in respect of

the obligations of the Lighting Partners Australia partnership.

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18. Interest-Bearing Loans and Borrowings (Current) (continued)

The Company has not received notice of the occurrence of any Relevant Event from any Financier.

During the current and prior half years, there were no defaults or breaches on any of the interest-bearing loans

and borrowings referred to in this note and in Note 21 Interest-Bearing Loans and Borrowings (Non-Current).

CO N S O L I D A T E D

December 2015

June 2015

December 2014

$000 $000 $000

19. Other Liabilities (Current)

Lease incentives 2,556 2,025 2,073

Unearned revenue 1,345 845 12

Total other liabilities (current)

3,901

2,870

2,085

20. Provisions (Current)

Employee entitlements 19,727 18,636 19,184 Lease make good 1,961 2,161 3,322

Deferred lease expenses 1,086 983 931

Onerous lease costs 618 750 499

Other 769 960 628

Total provisions (current)

24,161

23,490

24,564

21. Interest-Bearing Loans and Borrowings (Non-Current)

Secured:

Non trade amounts owing to:

- Syndicated Facility Agreement (Refer to Note 18(a)) 200,000 290,000 240,000

- Lease liabilities - - 118

Unsecured:

Derivatives payable - - 5,785

Total interest-bearing loans and borrowings (non-current)

200,000

290,000

245,903

22. Provisions (Non-Current)

Employee entitlements 5,168 4,295 3,355

Lease make good 3,525 2,948 2,349

Deferred lease expenses 4,741 5,006 4,726

Total provisions (non-current)

13,434

12,249

10,430

23. Other Liabilities (Non-Current)

Lease incentives 15,944 14,238 15,029

Unearned revenue 2,222 3,390 -

Total other liabilities (non-current)

18,166

17,628

15,029

24. Contributed Equity Ordinary shares 382,611 380,328 380,328

Total contributed equity

382,611

380,328

380,328

Number of

Shares

Number of

Shares

Number of

Shares

Number of ordinary shares issued and fully paid 1,111,359,911 1,110,603,911 1,110,603,911

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24. Contributed Equity (continued)

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

December

2015

Number

December

2015

$000

Movements in ordinary shares on issue At 1 July 2015 1,110,603,911 380,328

Issue of shares under executive share option plan 756,000 2,283

At 31 December 2015

1,111,359,911

382,611

CO N S O L I D A T E D

December

2015

June

2015

December

2014

$000 $000 $000

25.

Retained Profits and Dividends

Movements in retained earnings were as follows:

Opening balance 2,043,463 2,109,032 2,109,032

Profit for the period 185,507 268,095 141,984 Dividends paid (122,250) (333,664) (233,710)

Closing balance

2,106,720

2,043,463

2,017,306

Dividends declared and paid:

Dividends on ordinary shares: Final fully-franked dividend for 2015: 11.0 cents (2014: 8.0 cents) 122,250 84,986 84,986

Special fully-franked dividend pursuant to Renounceable Rights

Offer in December 2014: 14.0 cents

-

148,724

148,724

Interim fully-franked dividend for 2015: 9.0 cents (2014: 6.0 cents ) 99,954 -

Total dividends paid

122,250

333,664

233,710

The final dividend of $122.25 million, fully-franked, for the year ended 30 June 2015 was paid on 1 December 2015.

The special dividend of $148.72 million, fully-franked, pursuant to the Renounceable Rights Offer was paid on 30

December 2014.

The interim dividend of 13.0 cents per share, totalling $144.48 million fully-franked, for the year ended 30 June 2016

will be paid on 2 May 2016.

Franking credit balance The amount of franking credits available for the subsequent financial periods are:

- franking account balance as at the end of the financial

period at 30%

611,405

607,620

618,377

- franking credits that will arise from the payment of income

tax payable as at the end of the financial period

26,924

29,182

25,077

- franking credits that will be utilised in the payment of proposed dividend

(61,919)

(52,357)

(42,838)

The amount of franking credits available for

future reporting periods

576,410

584,445

600,616

26.

Non-Controlling Interests

Interest in:

- Ordinary shares 2,591 2,591 2,591

- Reserves 13,432 13,440 12,996

- Retained earnings 4,937 3,748 4,683

Total non-controlling interests

20,960

19,779

20,270

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Nature and purpose of reserves: (a) Asset revaluation reserve This reserve is used to record increases in the fair value of “owner occupied” land and buildings and decreases to the

extent that such decreases relate to an increase of the same asset previously recognised in equity.

(b) Foreign currency translation reserve This reserve is used to record exchange differences arising from the translation of the financial statements of foreign

subsidiaries.

(c) Available for sale reserve This reserve is used to record fair value changes on available-for-sale investments.

(d) Cash flow hedge reserve This reserve is used to record the portion of the gain or loss on a hedging instrument in a cash flow hedge that is

determined to be an effective hedge.

(e) Employee equity benefits reserve This reserve is used to record the value of equity benefits provided to employees and directors as part of their

remuneration.

(f) Acquisition reserve This reserve is used to record the consideration paid in excess of carrying value of non-controlling interests.

27. Reserves

CONSOLIDATED $000 Asset

revaluation reserve

Foreign

currency translation

reserve

Available for

sale reserve

Cash flow

hedge reserve

Employee

equity benefits

reserve

Acquisition

reserve

Total

At 1 July 2014 91,184 23,846 7,279 (6,110) 8,587 (22,051) 102,735

Revaluation of land and buildings 2,559 - - - - - 2,559 Tax effect of revaluation of land

and buildings

(700)

-

-

-

-

-

(700)

Unrealised gains on available-

for-sale investments

-

-

1,757

-

-

-

1,757

Net gain on interest rate swaps - - - 2,152 - - 2,152

Tax effect of net gain on swaps - - - (646) - - (646)

Reverse expired or realised cash flow hedge reserves

-

-

-

13

-

-

13

Net gain on forward foreign

exchange contracts

-

-

-

12

-

-

12

Tax effect of net gain on forward

foreign exchange contracts

-

-

-

(4)

-

-

(4)

Currency translation differences - 15,901 - - - - 15,901 Share based payment - - - - 139 - 139

At 31 December 2014

93,043

39,747

9,036

(4,583)

8,726

(22,051)

123,918

At 1 July 2015 102,244 18,529 8,581 (2,817) 8,804 (22,051) 113,290

Revaluation of land and buildings 5,029 - - - - - 5,029

Tax effect of revaluation of land

and buildings

(1,530)

-

-

-

-

-

(1,530) Unrealised loss on available-

for-sale investments

-

-

(148)

-

-

-

(148)

Net gain on interest rate swap - - - 2,673 - - 2,673

Tax effect of net gain on swap - - - (802) - - (802)

Reverse expired or realised

cash flow hedge reserves

-

-

-

62

-

-

62

Net loss on forward foreign exchange contracts

-

-

-

(43)

-

-

(43)

Tax effect of net loss on forward

foreign exchange contracts

-

-

-

13

-

-

13

Currency translation differences - 18,060 - - - - 18,060

Share based payment - - - - 78 - 78

At 31 December 2015

105,743

36,589

8,433

(914)

8,882

(22,051)

136,682

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C O N S O L I D A T E D

December 2015

June 2015

December 2014

$000 $000 $000

28.

Cash and Cash Equivalents

(a)

Reconciliation to Cash Flow Statement

Cash and cash equivalents comprise the following

at end of the period:

Cash at bank and on hand 25,540 169,694 44,271 Short term money market deposits 10,275 16,146 4,132

35,815 185,840 48,403 Bank overdraft (Note 18) (27,745) (32,620) (25,059)

Cash and cash equivalents at end of the period 8,070 153,220 23,344

C O N S O L I D A T E D

December 2015

December 2014

$000 $000

(b) Reconciliation of profit after income tax to net operating cash flows:

Profit after tax

187,072

142,107

Adjustments for: Net foreign exchange gains (922) (29)

Bad and doubtful debts 1,118 693

Share of net profit from joint venture entities (336) (6,986)

Depreciation of property, plant and equipment 31,429 32,412

Amortisation 7,804 5,581

Impairment of goodwill - 11

Impairment of non-trade debts receivable 10,274 - Impairment of equity-accounted investments 7,235 -

Revaluation of investment properties and properties held under joint ventures (20,627) (2,732)

Property revaluation adjustment for overseas controlled entities (565) (1,131)

Deferred lease expenses (208) (26)

Provision for onerous leases 323 20

Executive remuneration expenses 1,721 2,232 (Gain) / loss on disposal and revaluation of property, plant and equipment, and

listed securities

(612)

2,307

Movements in provisions (860) 4,169

Changes in assets and liabilities:

(Increase)/decrease in assets:

Receivables (204,663) (154,736)

Inventory (68,955) (54,711)

Other current assets (14,058) (17,857)

Increase/(decrease) in liabilities:

Payables and other current liabilities 209,946 181,111

Income tax payable (3,345) 3,779

Net cash from operating activities 141,771 136,214

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CONSOL IDATED CONSOL IDATED

29.

Investments Accounted for

Using Equity Method

Investment Share of pre tax profit

December

2015

June

2015

December

2015

December

2014

$000 $000 $000 $000

Total joint venture entities accounted for using

equity method

25,801

21,425

336

6,986

Name and Principal Activities Ownership Interest Contribution to Pre Tax Profit / (Loss)

December 2015

December 2014

December 2015

December 2014

% % $000 $000

Noarlunga (Shopping complex) 50% 50% 777 717

Perth City West (Shopping complex) 50% 50% 1,968 2,412

Warrawong King St (a) (Shopping complex) 62.5% 62.5% 532 714

Byron Bay (Residential/convention development) 50% 50% (359) (362)

Byron Bay – 2 (Resort operations) 50% 50% 356 627

Dubbo (Shopping complex) 50% 50% 326 359

Bundaberg (Land held for investment)

50% 50% (2) (2)

Gepps Cross (Shopping complex)

50% 50% 1,529 1,346

QCV (b) (Miners residential complex) 50% 50% (2,998) 1,175

Coomboona Dairy (c) (Dairy farming)

49.9% - (1,793) -

336 6,986

(a) This joint venture has not been consolidated as the consolidated entity does not have control over operating

and financing decisions and all joint venture parties participate equally in decision making.

(b) A number of wholly-owned subsidiaries of Harvey Norman Holdings Limited (“HNHL”) have entered into joint

ventures with an unrelated party to provide mining camp accommodation. The respective joint ventures have

been granted finance facilities as follows:

(i) a finance facility from ANZ for the amount of $10.30 million plus interest and costs, with a maturity date of

15 December 2016. HNHL has granted a joint and several guarantee to ANZ in respect of this facility.

(ii) finance facilities from Network Consumer Finance Pty Limited (“NCF”), a wholly-owned subsidiary of HNHL, for the amount of $30.65 million plus interest and costs, subject to bi-annual review.

(c) In September 2015, the consolidated entity acquired, through a wholly-owned subsidiary, 49.9% of Coomboona

Holdings Pty Limited comprising dairy farm operations and a pedigree breeding and genetics division in Northern

Victoria. The investment offers targeted exposure to the demand for quality agricultural produce forecast to

result from increasing urbanisation, particularly in Asia. The transaction amounts to $34 million, including an investment of $25 million and a commitment to advance approximately $9 million, and is consistent with the

consolidated entity’s investment portfolio mandate to seek growth opportunities and to capitalise on market

trends. The consolidated entity incurred a $1.79 million equity-accounted loss in respect of this new joint venture.

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30. Financial Instruments

Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the

consolidated entity as at 31 December 2015:

Loans and

receivables

Available-for-

sale

Fair value

profit

or loss

Fair value other

comprehensive

income

$000 $000 $000 $000

Current Financial Assets:

Trade and other receivables (Note 7) 1,351,915 - - -

Other financial assets (Note 8) - - 26,501 -

Total current financial assets

1,351,915

-

26,501

-

Non-Current Financial Assets:

Trade and other receivables (Note 12) 75,030 - - -

Other financial assets (Note 13) - 14,125 3,445 -

Total non-current financial assets

75,030

14,125

3,445

-

Total Financial Assets

1,426,945

14,125

29,946

-

Current Financial Liabilities:

Trade and other payables (Note 17) 994,954 - - -

Interest-bearing loans and borrowings (Note 18) 429,143 - 250 1,263

Total current financial liabilities

1,424,097

-

250

1,263

Non-Current Financial Liabilities:

Interest-bearing loans and borrowings (Note 21) 200,000 - - -

Total non-current financial liabilities

200,000

-

-

-

Total Financial Liabilities

1,624,097

-

250

1,263

(a) Fair Value of Financial Instruments Fair value hierarchy

The fair value of financial assets and financial liabilities are determined as follows:

The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices.

The fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in

accordance with generally accepted pricing models based on discounted cash flow analysis using prices from

observable current market transactions.

The fair value of current trade receivables and payables is assessed to equal carrying value due to the short-term

nature of the assets. The fair value of interest-bearing loans and borrowings approximates their carrying amounts.

The fair value of derivative instruments are calculated using quoted prices. Where such prices are not available, use is made of discounted cash flow analysis using the applicable yield curve for the duration of the instruments

for non-option derivatives and option pricing models for option derivatives.

All financial instruments for which fair value is recognised or disclosed are categorised within the fair

value hierarchy, described as follows, based on the lowest level input that is significant to the fair value

measurement as a whole:

Level 1 — Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities Level 2 — Valuation techniques (for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable)

Level 3 — Valuation techniques (for which the lowest level input that is significant to the fair value measurement is

unobservable)

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30. Financial Instruments (continued)

For financial instruments that are recognised at fair value on a recurring basis, the consolidated entity determines

whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based

on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

As at 31 December 2015, the consolidated entity held the following classes of financial instruments measured at

fair value:

Level 1 Level 2 Level 3 Total

$000 $000 $000 $000

Financial Assets Listed investments 41,926 - - 41,926

Foreign exchange contracts - - - -

Total Financial Assets

41,926

-

-

41,926

Financial Liabilities

Interest rate swaps - 1,263 - 1,263 Foreign exchange contracts - 250 - 250

Total Financial Liabilities

-

1,513

-

1,513

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Non-Cash Financing and Investing Activities

Details of financing and investing transactions which have had a

material effect on consolidated assets and liabilities but did not involve cash flows are as follows.

N/A

CONSOLIDATED

December

2015

December

2014

Net Tangible Assets Per Security

Net tangible asset backing per ordinary security

2.48

2.37

Business Combinations Having Material Effect

Name of business combination N/A N/A

Consolidated profit/(loss) after tax of the business combination since

the date in the current period on which control was acquired

N/A

N/A

Date from which such profit has been calculated N/A N/A

Profit/(loss) after tax of the controlled business combination for the

whole of the previous corresponding period

N/A

N/A

Loss of Control of Entities Having Material Effect

Name of entity (or group of entities) N/A N/A

Consolidated profit/(loss) from discontinued operations after tax of the

controlled entity (or group of entities) for the current period to the date

of loss of control

N/A

N/A

Date from which such profit/(loss) has been calculated N/A N/A

Profit/(loss) from discontinued operations after tax of the controlled

entity (or group of entities) while controlled during the whole of the

previous corresponding period

N/A

N/A

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’

In accordance with a resolution of the directors of Harvey Norman Holdings Limited, we state that:

In the opinion of the directors:

(a) the financial statements, notes and the additional disclosures included in the Directors’ Report of the

consolidated entity are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and of

its performance for the half-year ended on that date; and

(ii) complying with Accounting Standards and the Corporations Regulations 2001;

(b) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when

they become due and payable.

This declaration has been made after receiving the declarations required to be made to the directors in accordance

with section 295A of the Corporations Act 2001 for the half-year ended 31 December 2015.

On behalf of the Board.

G. HARVEY K.L. PAGE

Chairman Director / Chief Executive Officer

Sydney Sydney 26 February 2016 26 February 2016

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A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation 41

Ernst & Young680 George StreetSydney NSW 2000 AustraliaGPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555Fax: +61 2 9248 5959ey.com/au

To the members of Harvey Norman Holdings Limited

Report on the Half-Year Financial ReportWe have reviewed the accompanying half-year financial report of Harvey Norman Holdings Limited whichcomprises the statement of financial position as at 31 December 2015, income statement, statement ofcomprehensive income, statement of changes in equity and statement of cash flows for the half-yearended on that date, notes comprising a statement of significant accounting policies and other explanatoryinformation, and the directors’ declaration of the consolidated entity comprising the company and theentities it controlled at the half-year end or from time to time during the half-year.

Directors’ Responsibility for the Half-Year Financial ReportThe directors of the company are responsible for the preparation of the half-year financial report that givesa true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001and for such internal controls as the directors determine are necessary to enable the preparation of thehalf-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express a conclusion on the half-year financial report based on our review. Weconducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review ofa Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on thebasis of the procedures described, we have become aware of any matter that makes us believe that thefinancial report is not in accordance with the Corporations Act 2001 including: giving a true and fair viewof the consolidated entity’s financial position as at 31 December 2015 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reportingand the Corporations Regulations 2001. As the auditor of Harvey Norman Holdings Limited and theentities it controlled during the half-year, ASRE 2410 requires that we comply with the ethicalrequirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other review procedures. A review issubstantially less in scope than an audit conducted in accordance with Australian Auditing Standards andconsequently does not enable us to obtain assurance that we would become aware of all significant mattersthat might be identified in an audit. Accordingly, we do not express an audit opinion.

IndependenceIn conducting our review, we have complied with the independence requirements of the Corporations Act2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copyof which is included in the Directors’ Report.

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42

ConclusionBased on our review, which is not an audit, we have not become aware of any matter that makes us believethat the half-year financial report of Harvey Norman Holdings Limited is not in accordance with theCorporations Act 2001, including:

a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015and of its performance for the half-year ended on that date; and

b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the CorporationsRegulations 2001.

Ernst & Young

Katrina ZdrilicPartnerSydney26 February 2016

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