Edgar Filing: HOVNANIAN ENTERPRISES INC

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

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Filed by a Party other than the Registrant |_|

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|_| Preliminary Proxy Statement
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|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12

HOVNANIAN ENTERPRISES, INC.
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(Name of Registrant as Specified In Its Charter)

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

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[LOGO] H Honanian(SM) HOVNANIAN ENTERPRISES, INC.
Companies -------------------------------------------------------
10 HIGHWAY 35, P.O. BOX 500, RED BANK, NEW JERSEY 07701
|_| (732) 747-7800

February 2, 2001

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders
which will be held on Thursday, March 8, 2001, in the Boardroom of the American
Stock Exchange, 13th Floor, 86 Trinity Place, New York, New York. The meeting
will start promptly at 10:30 a.m.

It is important that your shares be represented and voted at the meeting.
Therefore, we urge you to complete, sign, date and return the enclosed proxy
card in the envelope provided for this purpose. Of course, if you attend the
meeting, you may still choose to vote your shares personally, even though you
have already returned a signed proxy. Important items to be acted upon at the
meeting include the election of directors and ratification of the selection of
independent accountants.

We sincerely hope you will be able to attend and participate in the
Company's 2001 Annual Meeting. We welcome the opportunity to meet with many of
you and give you a firsthand report on the progress of your Company.

Sincerely yours,

/s/ Kevork S. Hovnanian

KEVORK S. HOVNANIAN
Chairman of the Board

HOVNANIAN ENTERPRISES, INC.

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Notice of Annual Meeting of Shareholders
February 2, 2001

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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Hovnanian Enterprises, Inc. will be held on Thursday, March 8, 2001, in the
Boardroom of the American Stock Exchange, 13th Floor, 86 Trinity Place, New
York, New York at 10:30 a.m. for the following purposes:

1. The election of Directors of the Company for the ensuing year, to
serve until the next Annual Meeting of Shareholders of the Company and
until their respective successors may be elected and qualified.

2. The ratification of the selection of Ernst & Young LLP as
independent accountants to examine financial statements for the Company
for the year ended October 31, 2001.

3. The transaction of such other business as may properly come
before the meeting and any adjournment thereof.

Only shareholders of record at the close of business on January 17, 2001
are entitled to notice of and to vote at the meeting.

Accompanying this Notice of Annual Meeting of Shareholders is a proxy
statement, a form of proxy and the Company's Annual Report for the year ended
October 31, 2000.

All shareholders are urged to attend the meeting in person or by proxy.
Shareholders who do not expect to attend the meeting are requested to complete,
sign and date the enclosed proxy and return it promptly in the self-addressed
envelope provided.

By order of the Board of Directors,
PETER S. REINHART
Secretary

February 2, 2001

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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE
AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF
MAILED IN THE UNITED STATES.
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HOVNANIAN ENTERPRISES, INC.
10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701

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PROXY STATEMENT
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General

The accompanying proxy is solicited on behalf of the Board of Directors of
Hovnanian Enterprises, Inc. (the "Company") for use at the Annual Meeting of
Shareholders referred to in the foregoing notice and at any adjournment thereof.
It is expected that this Proxy Statement and the accompanying proxy will be
mailed commencing February 2, 2001 to each shareholder entitled to vote. The
Company's Annual Report for the year ended October 31, 2000 accompanies this
Proxy Statement.

Shares represented by properly executed proxies, if such proxies are
received in time and not revoked, will be voted in accordance with the
specifications thereon. If no specifications are made, the persons named in the
accompanying proxy will vote such proxy for the Board of Directors' slate of
Directors, for the ratification of selected independent accountants, and as
recommended by the Board of Directors unless contrary instructions are given.
Any person executing a proxy may revoke it at any time before it is exercised by
delivering written notice of revocation to the Secretary of the Company or by
voting in person at the meeting.

VOTING RIGHTS AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The record date for the determination of shareholders entitled to vote at
the meeting is the close of business on January 17, 2001. On January 17, 2001,
the voting securities of the Company outstanding consisted of 14,156,770 shares
of Class A Common Stock, each share entitling the holder thereof to one vote and
7,591,579 shares of Class B Common Stock, each share entitling the holder
thereof to ten votes.

Other than as set forth in the table below, there are no persons known to
the Company to own beneficially shares representing more than 5% of the
Company's Class A Common Stock or Class B Common Stock.

The following table sets forth as of January 17, 2001 the Class A Common
Stock and Class B Common Stock of the Company beneficially owned by each
Director and nominee for Director, by all Directors and officers of the Company
as a group (including the named individuals) and holders of more than 5%:

Class A Common Stock Class B Common Stock
------------------------ ------------------------
Amount and Amount and
Nature of Nature of
Directors, Nominees and Beneficial Percent Beneficial Percent
Holders of More Than 5% Ownership(1) of Class(2) Ownership(1) of Class(2)
----------------------- ------------ ----------- ------------ -----------

Kevork S. Hovnanian(3)(5) ........... 5,490,887 38.8% 5,843,837 77.0%
Ara K. Hovnanian(4) ................. 1,584,657 10.8% 1,121,596 14.6%
Paul W. Buchanan .................... 61,020 .4% 6,480 .1%
Geaton A. DeCesaris, Jr ............. -- -- -- --
Arthur M. Greenbaum ................. 11,834 .1% 1,500 --
Desmond P. McDonald ................. 12,084 .1% 3,750 .1%
Peter S. Reinhart ................... 61,419 .4% 4,950 .1%
John J. Robbins ..................... -- -- -- --
J. Larry Sorsby ..................... 92,660 .7% 11,340 .2%
Stephen D. Weinroth ................. 26,084 .2% 2,250 --
Dimension Fund Advisors Inc. (6) .... 1,025,384 7.2% --
All Directors and officers as a group
(12 persons) .................. 7,340,645 49.6% 6,995,703 90.7%

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Notes:

(1) The figures in the table in respect of Class A Common Stock do not include
the shares of Class B Common Stock beneficially owned by the specified
persons, which shares of Class B Common Stock are convertible at any time
on a share for share basis to Class A Common Stock. The figures in the
table represent beneficial ownership (including ownership of 619,240 Class
A Common Stock Options and 268,260 Class B Common Stock Options, currently
exercisable or exercisable within 60 days) and sole voting power and sole
investment power except as noted in notes (3), (4) and (5) below.

(2) Based upon the number of shares outstanding plus options for such
director, nominee or holder.

(3) Includes 167,812 shares of Class A Common Stock and 320,012 shares of
Class B Common Stock as to which Kevork S. Hovnanian has shared voting
power and shared investment power. Kevork S. Hovnanian's address is 10 Hwy
35, P.O. Box 500, Red Bank, New Jersey 07701.

(4) Includes 35,217 shares of Class A Common Stock and 89,667 shares of Class
B Common Stock as to which Ara K. Hovnanian has shared voting power and
shared investment power. Ara K. Hovnanian's address is 10 Hwy 35, P.O. Box
500, Red Bank, New Jersey 07701.

(5) Includes 2,829,413 shares of Class B Common Stock held by the Kevork S.
Hovnanian Family Limited Partnership, a Connecticut limited partnership
(the "Limited Partnership"), beneficial ownership of which is disclaimed
by Kevork S. Hovnanian. Kevork S. Hovnanian's wife, Sirwart Hovnanian, as
trustee of the Sirwart Hovnanian 1994 Marital Trust, is the Managing
General Partner of the Limited Partnership and as such has the sole power
to vote and dispose of the shares of Class B Common Stock held by the
Limited Partnership. Also includes 129,562 shares of Class A Common Stock
and 264,562 shares of Class B Common Stock held in trust for Mr.
Hovnanian's daughter over which Sirwart Hovnanian, as trustee, shares with
her daughter the power to dispose of and vote. In addition, includes
18,250 shares of Class A Common Stock and 55,450 shares of Class B Common
Stock held in trust for Mr. Hovnanian's grandchildren, over which Sirwart
Hovnanian, as trustee, has sole power to dispose of and vote and includes
20,000 shares of Class A Common Stock held in the name of Sirwart
Hovnanian over which she has sole power to dispose of and vote. Mr.
Hovnanian disclaims beneficial ownership of the shares described in the
preceding three sentences.

(6) Based solely upon information contained in a statement on Schedule 13G
filed with the Securities and Exchange Commission as of February 11, 2000.
Address: 1299 Ocean Ave., 11th Floor, Santa Monica, CA 90401.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors, persons who own more than ten
percent of a registered class of the Company's equity securities and certain
entities associated with the foregoing ("Reporting Persons") to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (the "SEC") and the American Stock Exchange (the "ASE").
These Reporting Persons are required by SEC regulation to furnish the Company
with copies of all Forms 3, 4 and 5 they file with the SEC and the ASE. Based
solely on the Company's review of the copies of such forms it has received, the
Company knows of no failure to file.

ELECTION OF DIRECTORS

The Company's By-laws provide that the Board of Directors shall consist of
no more than eleven Directors who shall be elected annually by the shareholders.
The Company's Certificate of Incorporation requires that, at any time when any
shares of Class B Common Stock are outstanding, one-third of the Directors shall
be independent. The following persons are proposed as Directors of the Company
to hold office until the next Annual Meeting of Shareholders and until their
respective successors have been duly elected and qualified. In the event that
any of the nominees for Directors should become unavailable, it is intended that
the shares represented by the proxies will be voted for such substitute nominees
as may be nominated by the Board of Directors, unless the number of Directors
constituting a full Board of Directors is reduced. The Company has no reason to
believe, however, that any of the nominees is, or will be, unavailable to serve
as a Director.

Year First
Became a
Name Age Company Affiliation Director
------ ---- --------------------- ----------
Kevork S. Hovnanian ....... 77 Chairman of the Board, and 1967
Director of the Company.
Ara K. Hovnanian .......... 43 President, Chief Executive 1981
Officer and Director
of the Company.
Paul W. Buchanan .......... 50 Senior Vice President-- 1982
Corporate Controller and
Director of the Company.
Geaton A. DeCesaris, Jr. .. 45 President of Homebuilding 2001
Operations and Chief
Operating Officer and
Director of the Company.
Arthur M. Greenbaum ....... 75 Director of the Company. 1992
Desmond P. McDonald ....... 73 Director of the Company. 1982
Peter S. Reinhart ......... 50 Senior Vice President and 1981
General Counsel/Secretary
and Director of the Company.
John J. Robbins ........... 61 Director of the Company 2001
J. Larry Sorsby ........... 45 Executive Vice President 1998
and Chief Financial Officer
and Director of the Company.
Stephen D. Weinroth ....... 62 Director of the Company. 1982

Mr. K. Hovnanian founded the predecessor of the Company in 1959 and has
served as Chairman of the Board since its initial incorporation in 1967. Mr. K.
Hovnanian was also Chief Executive Officer of the Company from 1967 to July
1997.

Mr. A. Hovnanian was appointed President in April 1988, after serving as
Executive Vice President from March 1983. He has also served as Chief Executive
Officer since July 1997. Mr. A. Hovnanian is the son of Mr. K. Hovnanian.

Mr. Buchanan has been Senior Vice President -- Corporate Controller since
May 1990.

Mr. DeCesaris was appointed President of Homebuilding Operations and Chief
Operating Officer in January 2001. From August 1988 to January 2001, he was
President, Chief Executive Officer and a Director of Washington Homes, Inc.
("WHI") and from April 1999 Chairman of the Board of WHI.

Mr. Greenbaum has been a senior partner of Greenbaum, Rowe, Smith, Ravin,
Davis & Himmel, a law firm since 1950. Mr. Greenbaum qualifies as an independent
Director as defined in the Company's Certificate of Incorporation.

Mr. McDonald was a Director of Midlantic Bank N.A. from 1976 to December,
1995, Executive Committee Chairman of Midlantic Bank N.A. from August 1992 to
December, 1995 and was President of Midlantic Bank N.A. from 1976 to June 1992.
He was also a Director of Midlantic Corporation to December, 1995 and was Vice
Chairman of Midlantic Corporation from June 1990 to July 1992. Mr. McDonald
qualifies as an independent Director as defined in the Company's Certificate of
Incorporation.

Mr. Reinhart has been Senior Vice President and General Counsel since
April 1985. He was elected Secretary of the Company in February 1997.

Mr. Robbins was a partner with Kenneth Leventhal & Company from 1973 to
1992 when he retired. Mr. Robbins was managing partner of the New York office
and an executive committee partner when he retired. He is also a trustee of
Keene Creditors Trust.

Mr. Sorsby was appointed Executive Vice President and Chief Financial
Officer of the Company in November, 2000 after serving as Senior Vice President,
Treasurer and Chief Financial Officer of the Company since February 1996.

Mr. Weinroth is Chairman of the Board of Core Laboratories N.V., a New
York Stock Exchange listed worldwide oil field services company. He is also a
senior partner in Andersen, Weinroth & Co., L.P. a merchant banking firm. He has
held such positions since 1994 and the beginning of 1996, respectively. From
1989 to the present, Mr. Weinroth has been Co-Chairman of the Board of Directors
and Chairman of the Investment Committee of First Brittania N.V., an
international mezzanine and equity fund. He is also a director of the Central
Asian-American Enterprise Fund, a development lender and investor in five
countries formerly in the Soviet Union; the Fund receives its capital from an
agency of the United States government. Mr. Weinroth qualifies as an independent
Director as defined in the Company's Certificate of Incorporation.

Meetings of Board of Directors

The members of the Audit Committee of the Board of Directors are Messrs.
McDonald, Weinroth and Reinhart. The Audit Committee is chaired by Mr. McDonald
and is responsible for reviewing and approving the scope of the annual audit
undertaken by the Company's independent accountants and meeting with them to
review the results of their work as well as their recommendations. The Audit
Committee has direct access to the Company's independent accountants and also
reviews the fees of independent accountants and recommends to the Board of
Directors the appointment of independent accountants.

The Internal Audit Manager for the Company reports directly to the Audit
Committee on, among other things, the Company's compliance with certain Company
procedures which are designed to enhance management's understanding of operating
issues and the

results of the Audit Department's approximately 50 audits annually of the
various aspects of the Company's business. The Audit Committee authorizes
staffing and compensation of the internal audit department. The Company's Chief
Accounting Officer reports directly to the Audit Committee on significant
accounting issues. During the year ended October 31, 2000 the Audit Committee
met twice and had numerous telephonic meetings with the Internal Audit Manager.

The Compensation Committee consists of Messrs. McDonald and Weinroth. The
Compensation Committee is currently chaired by Mr. Weinroth and is active in
reviewing salaries, bonuses and other forms of compensation for officers and key
employees of the Company, in establishing salaries and in other compensation and
personnel areas as the Board of Directors from time to time may request. For a
discussion of the criteria utilized and factors considered by the Compensation
Committee in reviewing and establishing executive compensation, see "Report of
the Compensation Committee" below. During the year ended October 31, 2000 the
Compensation Committee met twice.

The Company has no executive or nominating committees. Procedures for
nominating persons for election to the Board of Directors are contained in the
Company's Bylaws.

During the year ended October 31, 2000 the Board of Directors held four
regularly scheduled meetings and two telephonic meetings. In addition, the
directors considered Company matters and had numerous communications with the
Chairman of the Board of Directors and others wholly apart from the formal
meetings.

Director Compensation

Each director who is not an officer of the Company is paid $2,000 per
regularly scheduled meeting attended, $1,000 for each committee meeting attended
on a board meeting day, $2,000 for each committee meeting attended on a day
other than a board meeting day, $2,000 for special meetings attended and a
bonus. Members of the Audit Committee receive an additional $7,500 payable
semi-annual. From time to time, these directors are also granted stock options.
All directors are reimbursed for expenses related to their attendance at Board
of Directors and committee meetings. During the year ended October 31, 2000, Mr.
McDonald received $37,500, Mr. Greenbaum received $28,000 and Mr. Weinroth
received $37,500 including a bonus paid in January 2001. In addition, on January
11, 2000 these three directors were granted 5,000 stock options each at an
exercise price of $6.1875 (market price on the date of the grant). The options
vest 25% a year starting on the third anniversary date of the grant and
terminate January 10, 2010.

RATIFICATION OF THE SELECTION OF AND
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS

The selection of independent accountants to examine financial statements
of the Company made available or transmitted to shareholders and filed with the
Securities and Exchange Commission for the year ended October 31, 2001 is to be
submitted to the meeting for ratification. Ernst & Young LLP has been selected
by the Board of Directors of the Company to examine such financial statements.

The Company has been advised that a representative of Ernst & Young LLP
will attend the Annual Meeting to respond to appropriate questions and will be
afforded the opportunity to make a statement if the representative so desires.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizes the compensation paid or accrued by the
Company for the chief executive officer and the other four most highly
compensated executives during the years ended October 31, 2000, 1999 and 1998.
Long-Term Compensation

----------------------------------
------------------------ Awards
Annual Compensation ----------------------------------
------------------------ Number of
Other Securities All
Year Annual Restricted Underlying Other
or Compen- Stock Options/ LTIP Compen-
Name and Principal Position Period Salary Bonus(1) sation(2) Awards(3) SARs(4) Payouts sation(5)
------------------------------ ------- ---------- ----------- --------- ---------- ----------- --------- -----------

Kevork S. Hovnanian ..................... 2000 $869,986 $1,206,000 -- $0 0 N/A $ 12,901
Chairman of the Board, 1999 $831,299 $ 720,000 -- $0 0 N/A $ 12,313
and Director of the Company 1998 $800,232 $ 668,800 -- $0 0 N/A $ 9,973

Ara K. Hovnanian ........................ 2000 $809,480 $ 904,500 -- $361,800 125,000 N/A $106,537
President, Chief Executive 1999 $771,827 $ 627,321 -- $172,800 75,000 N/A $ 60,118
Officer and Director 1998 $756,107 $ 668,800 -- $0 75,000 N/A $ 10,345
of the Company

J. Larry Sorsby ......................... 2000 $260,369 $ 181,449 -- $72,580 20,000 N/A $ 32,182
Executive Vice President 1999 $221,317 $ 156,992 -- $47,098 20,000 N/A $ 22,060
and Chief Financial Officer 1998 $232,277 $ 179,113 -- $0 20,000 N/A $ 17,601
and Director of the Company

Peter S. Reinhart ....................... 2000 $186,451 $ 73,405 -- $29,362 10,000 N/A $ 22,025
Senior Vice President/ 1999 $177,115 $ 76,800 -- $23,040 0 N/A $ 16,279
General Counsel and 1998 $176,738 $ 86,240 -- $0 10,000 N/A $ 13,965
Director of the Company

William L. Carpitella ................... 2000 $193,654 $ 72,932 -- $29,172 10,000 N/A $ 7,506
Senior Vice President 1999 $168,077 $ 57,120 -- $17,136 8,000 N/A $ 5,626
Organizational Development 1998 $163,846 $ 60,000 -- $0 0 N/A $ 1,139

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Notes:

(1) Includes awards not paid until after year end.

(2) Includes perquisites and other personal benefits unless the aggregate
amount is less than either $50,000 or 10% of the total of annual salary
and bonus reported for the named executive officer.

(3) Represents the right to receive Class A Common Stock after vesting 25% a
year for four years. Any Executive with 20 years of service or who reaches
the age of 58 vests immediately.

(4) The Company does not have a stock appreciation right ("SAR") program.

(5) Includes accruals under the Company's savings and investment retirement
plan (the "Retirement Plan"), deferred compensation plan (the "Deferred
Plan") and term life insurance premiums for each of the named executive
officers for the year ended October 31, 2000 as follows:

Retirement Deferred Term
Plan Plan Insurance Total
------------ ---------- ----------- ----------
K. Hovnanian ............... $12,600 $ 0 $301 $ 12,901
A. Hovnanian ............... $12,600 $93,336 $601 $106,537
Sorsby ..................... $12,600 $19,115 $467 $ 32,182
Reinhart ................... $12,600 $ 9,051 $374 $ 22,025
Carpitella ................. $ 5,530 $ 1,602 $374 $ 7,506

Option Grants in Last Fiscal Year

The following table provides information on option grants in fiscal 2000
to the named executive officers.

Individual Grants Potential
----------------------------------------------- Realized Value at
% of Total Assumed Annual
Number of Options Exercise Rates of Stock Price
Securities Granted to or Base Appreciation
Underlying Employees Price for Option Term(1)
Options in Fiscal Per Expiration ------------------------------
Name Granted 1999 Share Date 5% 10%
------- ----------- --------- --------- ----------- ------------ --------------

Kevork S. Hovnanian .......................... 0 N/A N/A N/A N/A N/A
Ara K. Hovnanian ............................. 125,000 29.1% $5.75 3/13/10 $452,018 $1,145,502
J. Larry Sorsby .............................. 20,000 4.7% $5.94 3/21/10 $ 74,713 $ 189,337
Peter S. Reinhart ............................ 10,000 2.3% $6.56 8/28/10 $ 41,255 $ 104,550
William L. Carpitella ........................ 10,000 2.3% $5.88 3/01/10 $ 36,948 $ 93,632

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Note:

(1) The potential realizable value is reported net of the option exercise
price, but before income taxes associated with exercise. These amounts
represent assumed annual compounded rates of appreciation of 5% and 10%
only from the date of grant to the end of the option. Actual gains, if
any, on stock option exercises are dependent on the future performance of
the Company's Class A Common Stock, overall stock market conditions, and
the optionee's continued employment through the vesting period. The
amounts reflected in this table may not necessarily be achieved.

Aggregated Option Exercises During the Year Ended
October 31, 2000 and Option Values at October 31, 2000

The following table provides information on option exercises during the
year ended October 31, 2000 by the named executive officers and the value of
such officers' unexercised options at October 31, 2000.

Securities Underlying
Number of Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired October 31, 2000(1) October 31, 2000(1)
On Value ------------------- -------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------- --------- --------- ------------ -------------- ------------ --------------

Kevork S. Hovnanian .................... 0 $0 None None N/A N/A
Ara K. Hovnanian ....................... 0 $0 645,000 275,000 $578,711 $281,250
J. Larry Sorsby ........................ 0 $0 96,000 60,000 $ 88,375 $ 26,250
Peter S. Reinhart ...................... 0 $0 64,000 20,000 $ 80,063 $ 6,875
William L. Carpitella .................. 0 $0 None 18,000 N/A $ 13,750

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Note:

(1) The closing price of the Class A Common Stock on the last trading day of
October, 2000 on the American Stock Exchange was $7.25.

Ten-Year Option Repricings

For the year ended October 31, 2000, there was no adjustment or amendment
to the exercise price of the stock options previously awarded.

Report of the Compensation Committee

The Compensation Committee is charged with the responsibility of
determining the cash and other incentive compensation, if any, to be paid to the
Company's executive officers and key employees. The amount and nature of the
compensation received by the

Company's executives during the year ended October 31, 2000 was determined in
accordance with the compensation program and policies described below.

The executive compensation program is designed to attract, retain and
reward highly qualified executives while maintaining a strong and direct link
between executive pay, the Company's financial performance and total shareholder
return. The executive compensation program contains three major components: base
salaries, annual bonuses and stock options. In establishing the three major
components for each executive, the Compensation Committee reviews, as part of
its criteria, the compensation received by other executives in the homebuilding
industry.

Base Salary

The Compensation Committee believes that, due to the Company's success in
its principal markets, other companies seeking proven executives may view
members of the Company's highly experienced executive team as potential targets.
The base salaries paid to the Company's executive officers during the year ended
October 31, 2000 generally were believed to be necessary to retain their
services.

Base salaries, including that of Mr. K. Hovnanian, the Company's Chairman
of the Board, are reviewed annually and are adjusted based on the performance of
the executive, any increased responsibilities assumed by the executive, average
salary increases or decreases in the industry and the going rate for similar
positions at comparable companies. Mr. A. Hovnanian set the year ended October
31, 2000 base salaries of the Company's executive officers. Each executive
officer's base salary, including the base salary of Mr. K. Hovnanian, was
reviewed in accordance with the above criteria by the members of the
Compensation Committee and thereafter approved.

Annual Bonus Program

The Company maintains an annual bonus program under which executive
officers and other key management employees have the opportunity to earn cash
bonuses. The annual bonus program is intended to motivate and reward executives
for the achievement of individual performance objectives and for the attainment
by the Company of strategic and financial performance goals, including levels of
return on equity.

Under the Senior Executive Short-Term Incentive Plan for Mr. K. Hovnanian,
Chairman of the Board and Mr. A. Hovnanian, President and Chief Executive
Officer, a fixed amount bonus is paid based on the Company's Return on Equity
("ROE"). All other executive officers participate in a plan based on ROE but
instead of receiving a fixed amount, they receive a percentage of their base
salary. As the Company's ROE reaches higher targeted levels, the bonus
percentage of salary increases.

The Company's annual bonus program is designed to be cost and tax
effective. In accordance with section 162(m) of the Code, the bonus plan for
executives receiving compensation in excess of $1,000,000 was approved by
shareholders at the April 15, 1997 and March 16, 2000 Annual Meetings of
Shareholders and reflects the Compensation Committee's policies of maximizing
corporate tax deductions, wherever feasible.

Stock Incentive Plan

The Stock Incentive Plan established by the Board of Directors is intended
to align the interests of the Company's executives and shareholders in the
enhancement of shareholder value. The ultimate value received by option holders
is directly tied to increases in the Company's stock price and, therefore, stock
options serve to closely link the interests of management and shareholders and
motivate executives to make decisions that will serve to increase the long-term
total return to shareholders. Additionally, grants under the Stock Incentive
Plan include vesting and termination provisions which the Compensation Committee
believes will encourage option holders to remain employees of the Company.

The Stock Incentive Plan is administered by the Compensation Committee.
See "Option Grants in Last Fiscal Year" above. No member of the Compensation
Committee, while a member, is eligible to participate in the Stock Incentive
Plan.

COMPENSATION COMMITTEE

Stephen D. Weinroth
Desmond P. McDonald

Report of the Audit Committee

The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors and is governed by its Charter as set forth in
Exhibit A, hereto, which was adopted in March of 2000. Management has the
primary responsibility for the financial statements and the reporting process
including the systems of internal controls. In fulfilling its oversight
responsibilities the committee reviewed the audited financial statements in the
Annual Report with management, including a discussion of the quality, not just
the acceptability, of the accounting principles, the reasonableness of
significant judgements, and the clarity of disclosures in the financial
statements.

The committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles:

o the overall scope and plans for their respective audits,

o their judgements as to the quality, not just the acceptability, of
the Company's accounting principles,

o their independence from management and the Company including matters
in the written disclosures and the letter from the independent
accountants required by the Independence Standards Board No. 1,

o and such other matters as are required to be discussed with the
committee under generally accepted auditing standards.

Messrs. McDonald and Weinroth are independent audit committee members
based on discussions with the Company's independent auditors and their
disclosures as required by the Independence Standards Board, Standard No. 1.
They are also independent in accordance with the listing standards of the
American Stock Exchange. Mr. Reinhart is an Executive Officer of the Company,
and as such, is not independent. Having Mr. Reinhart

on the committee is in the best interest of the Company because he can provide
day-to-day supervision to the internal audit staff, he is readily available to
address issues with management, and provides independent members insight into
audit and financial matters.

The audit committee, as part of its Charter, reviews quarterly with
management the Company's financial statements prior to filing with the
Securities and Exchange Commission and discusses with the independent auditors
matters required to be discussed by Statement on Auditing Standards No. 61. In
addition, the committee in reliance on the reviews and discussions referred to
above, has recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended October 31, 2000.

AUDIT COMMITTEE

Desmond P. McDonald
Stephen D. Weinroth
Peter S. Reinhart

Fees Paid to Principal Accountant

Audit Fees

We were billed a total of $304,500 by Ernst & Young LLP for services
rendered in connection with the audit of our financial statements for the fiscal
year ended October 31, 2000 and the reviews of the interim financial statements.

Financial Information Systems Design and Implementation Fees

There were no fees billed by Ernst & Young LLP for services rendered in
connection with financial information systems design and implementation during
the fiscal year ended October 31, 2000.

All Other Fees

All other fees billed for services rendered by Ernst & Young LLP other
than those above were $341,770.

Principal Accountant Independence

The Audit Committee has determined that the provision of all non-audit
services performed by the principal accountant were compatible with maintaining
their independence.

Compensation Committee Interlocks and Insider Participation

Mr. Weinroth is Chairman of the Compensation Committee which also includes
Mr. McDonald. Both Messrs. McDonald and Weinroth are non-employee directors and
were never officers or employees of the Company. See "CERTAIN TRANSACTIONS" for
information concerning Mr. Greenbaum's business relationship with the Company.

Performance Graph

The following graph compares on a cumulative basis the yearly percentage
change over the five year period ending October 31, 2000 in (i) the total
shareholder return on the Class A Common Stock of the Company with (ii) the
total return on the Standard & Poor's 500 Index and with (iii) the total
shareholder return on the peer group of sixteen companies. Such yearly
percentage change has been measured by dividing (i) the sum of (a) the amount of
dividends for the measurement period, assuming dividend reinvestment, and (b)
the price per share at the end of the measurement period less the price per
share at the beginning of the measurement period, by (ii) the price per share at
the beginning of the measurement period. The price of each unit has been set at
$100 on October 31, 1995 for the preparation of the graphs. The peer group index
is composed of the following companies: Centex Corporation, D R Horton, Inc.,
Engle Homes, Inc., Kaufman & Broad Home Corporation, Lennar Corporation, Orleans
Homebuilders, Inc., Presley Companies, Pulte Corporation, Rottlund, Inc., Ryland
Group, Inc., Schuler Homes, Inc., Standard Pacific Corporation, Sundance Homes,
Inc., Toll Brothers, Inc., Washington Homes, Inc., and Zaring National
Corporation.

Note: The stock price performance shown on the following graph is not
necessarily indicative of future price performance.

Comparison of Five-Year Cumulative Total Return of Hovnanian Enterprises, Inc.,
the S&P 500 Index and a Peer Group Index (October 31)

[The following table was represented as a line graph in the printed material.]

HOVNANIAN ENTERPRISES PEER GROUP INDEX S&P 500 INDEX
--------------------- ---------------- -------------

10/95 100 100 100
10/96 84.21 90.21 124.1
10/97 104.39 147.52 163.95
10/98 119.3 157.02 200
10/99 89.47 124.81 251.35
10/00 101.75 203.05 266.66

CERTAIN TRANSACTIONS

The Company's Board of Directors has adopted a general policy providing
that it will not make loans to officers or directors of the Company or their
relatives at an interest rate less than the interest rate at the date of the
loan on six month U.S. Treasury Bills, that the aggregate of such loans will not
exceed $3,000,000 at any one time, and that such loans will be made only with
the approval of the members of the Company's Board of Directors who have no
interest in the transaction. At October 31, 2000, there were two loans under
this policy to Mr. K. Hovnanian, Chairman of the Board amounting to $3,000 and
Mr. A. Hovnanian, President, Chief Executive Officer and a Director of the
Company amounting to $3,124,000, both for personal matters, at an interest rate
equal to the six month U.S. Treasury Bill. Due to an oversight the loan exceeded
$3,000,000 at October 31, 2000. On November 9, 2000 a $250,000 payment was
received which reduced the loans to within authorized limits.

The Company provides property management services to various limited
partnerships including one limited partnership in which Mr. A. Hovnanian is
general partner, and members of his family and certain officers and directors of
the Company are limited partners. At October 31, 2000, no amounts were due the
Company by these partnerships.

Mr. Arthur Greenbaum is a senior partner of Greenbaum, Rowe, Smith, Ravin,
Davis & Himmel, a law firm retained by the Company during the year ended October
31, 2000.

GENERAL

The expense of this solicitation is to be borne by the Company. The
Company may also reimburse persons holding shares in their names or in the names
of their nominees for their expenses in sending proxies and proxy material to
their principals.

Unless otherwise directed, the persons named in the accompanying form of
proxy intend to vote all proxies received by them in favor of the election of
nominees to the Board of Directors of the Company named herein and in favor of
the ratification of selected independent accountants. All proxies will be voted
asEspecified.

Each share of Class A Common Stock entitles the holder thereof to one vote
and each share of Class B Common Stock entitles the holder thereof to ten votes.
Votes of Class A Common Stock and Class B Common Stock will be counted together
without regard to class and will be certified by the Inspectors of Election, who
are employees of the Company. Notwithstanding the foregoing, the Company's
Certificate of Incorporation provides that each share of Class B Common Stock
held, to the extent of the Company's knowledge, in nominee name by a
stockbroker, bank or otherwise will be entitled to only one vote per share
unless the Company is satisfied that such shares have been held, since the date
of issuance, for the benefit or account of the same beneficial owner of such
shares or any permitted transferee. Beneficial owners of shares of Class B
Common Stock held in nominee name wishing to cast ten votes for each share of
such stock must (i) obtain from their nominee a proxy card designed for
beneficial owners of Class B Common Stock, (ii) complete the certification on
such card and (iii) execute the card and return it to their nominee. The Company
has also supplied nominee holders of Class B Common Stock with specially
designed proxy cards to accommodate the voting of the Class B Common Stock.

In accordance with the Company's Certificate of Incorporation, shares of Class B
Common Stock held in nominee name will be entitled to ten votes per share only
if the beneficial owner proxy card or the nominee proxy card relating to such
shares is properly completed and received by EquiServe, the Company's transfer
agent, not less than 3 nor more than 20 business days prior to March 8, 2001.
Completed proxy cards should be sent to P.O. Box 9379, Boston, Massachusetts
02205-9956, Attention: Proxy Department.

All items to be acted upon at this Annual Meeting of Shareholders will be
determined by a majority of the votes cast. Mr. K. Hovnanian and certain members
of his family have informed the Company that they intend to vote in favor of all
proposals submitted on behalf of the Company. Because of the voting power of Mr.
K. Hovnanian and such members of his family, all of the foregoing proposals are
assured passage.

Management does not intend to present any business at the meeting other
than that set forth in the accompanying Notice of Annual Meeting of
Shareholders, and it has no information that others will do so. If other matters
requiring the vote of the shareholders properly come before the meeting and any
adjournments thereof, it is the intention of the persons named in the
accompanying form of proxy to vote the proxies held by them in accordance with
their judgment on such matters.

SHAREHOLDER PROPOSALS FOR THE
2002 ANNUAL MEETING

Shareholder proposals for inclusion in the proxy materials related to the
2002 Annual Meeting of Shareholders must be received by the Company no later
than November 30, 2001. To be properly brought before the Annual Meeting, any
proposal must be received 45 days prior to the 2002 Annual Meeting.

By Order of the Board of Directors
HOVNANIAN ENTERPRISES, INC.

Red Bank, New Jersey
February 2, 2001

Exhibit A

HOVNANIAN ENTERPRISES, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER

I. ORGANIZATION

The Charter governs the operations of the Audit Committee, a standing committee
of the Board of Directors of Hovnanian Enterprises, Inc. (the "Board"). The
Audit Committee shall review and reassess the adequacy of the Charter at least
annually and recommend proposed changes to the Board for approval. The Audit
Committee shall be composed of at least three Directors who are independent of
the management of the Company and are free of any relationship that, in the
opinion of the Board, would interfere with their exercise of independent
judgment as a committee member. Each committee member must be financially
literate, and at least one member shall have accounting or financial management
expertise.

The audit committee shall hold at least two regularly scheduled meetings each
year and as many additional special meetings as may be necessary to carry out
its responsibilities.

II. STATEMENT OF POLICY

The Audit Committee was established to assist the Board in fulfilling its
oversight responsibility to the shareholders, the investment community and
others relating to the Company's financial statements and financial reporting
process, its accounting systems and internal controls, the independent audit and
periodic reviews of the Company's financial statements and compliance with laws
and policies established by management and the Board. In so doing, the Audit
Committee shall endeavor to facilitate open communication between the Directors,
the independent auditors and financial management of the Company.

III. RESPONSIBILITIES

The primary responsibility of the Audit Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of its
activities to the Board. It is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditor or
to assure compliance with laws and regulations. The Audit Committee may assist
in helping to resolve such disagreements, if any. In carrying out its
responsibilities, the Audit Committee will:

1. Obtain a clear understanding with management and the independent
auditors that the independent auditors are ultimately accountable to
the Board and the Audit

A-1

Committee, as representatives of the Company's shareholders, for
their performance in conducting the annual audit and periodic
reviews of the financial statements. The Committee shall have the
ultimate authority to evaluate and, where appropriate, replace the
independent auditors, with the approval of the Board.

2. Review and recommend to the Directors the independent auditors to be
selected to audit the annual financial statements of the Company,
subject to approval by the Shareholders. On an annual basis, discuss
with the auditors their independence from management and the Company
and review the written disclosures required of the auditors by the
Independence Standards Board.

3. Meet with the independent auditors and financial management of the
Company to review the scope and estimated costs of the proposed
audit for the current year and the audit procedures to be utilized,
and at the conclusion thereof review such audit, including any
comments or recommendations of the independent auditors.

4. Review with the financial management of the Company and the
independent auditors the 10-Q prior to its filing or prior to the
release of earnings, including a discussion with the independent
auditors of the matters required to be discussed by SAS No. 61. The
Chairperson of the Audit Committee may represent the Audit Committee
for purposes of this review.

5. Review and discuss with management and the independent auditors the
Company's annual financial statements, including evaluations of the
quality of accounting principles and disclosures and the
reasonableness of significant estimates, as required by SAS No. 61.
Review any changes in accounting principles. Recommend to the Board
the inclusion of such financial statements in the annual report to
the shareholders and the Form 10-K.

6. Cause to be prepared such reports relating to the Audit Committee as
may be required to be included in the Company's proxy statements by
the rules of the Securities and Exchange Commission (the "SEC").

7. Monitor submission to the American Stock Exchange of such written
affirmations regarding the Audit Committee as may be required by the
rules of the American Stock Exchange.

8. Review with the independent auditors and financial statements the
adequacy and effectiveness of the accounting and financial controls
of the Company, and review any material recommendations for the
improvement of such internal control procedures or particular areas
where new or more detailed controls or procedures are desirable.
Review as necessary with the Company's General Counsel any legal
matters or compliance issues that may have a material impact on the
financial statements.

9. Provide sufficient opportunity for the independent auditors to meet
with the Audit

A-2

Committee without members of management present. Among the items to
be discussed in these meetings are the independent auditor's
evaluation of the Company's financial, accounting, and auditing
personnel, and the cooperation that the independent auditors
received during the course of the audit. The Audit Committee shall
also meet privately with management of the Company as necessary to
review the performance of the independent auditors.

10. Consult with the Chairman of the Board, or the Chief Executive
Officer, or the Board regarding the investigation of any matter
brought to its attention within the scope of its duties. If
necessary, the Committee is empowered to retain legal counsel or
other persons having special competence to assist the Committee in
fulfilling its responsibilities. The Audit Committee expects the
full cooperation of all employees and consultants of the Company.

11. Submit the minutes of all meetings of the Audit Committee to, or
discuss the matters discussed at each committee meeting with, the
Board.

A-3

Proxy Card

DETACH HERE

PROXY

HOVNANIAN ENTERPRISES, INC.

Nominee Holder of Class B Common Stock

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara K.
Hovnanian and Desmond P. McDonald, and each of them, his true and lawful agents
and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of HOVNANIAN ENTERPRISES, INC.
to be held in the Boardroom of the American Stock Exchange, 13th Floor, 86
Trinity Place, New York, New York, at 10:30 A.M. on March 8, 2001, and at any
adjournments thereof, upon the matters set forth in the notice of meeting and
Proxy Statement dated February 2, 2001 and upon all other matters properly
coming before said meeting.

----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
----------- -----------

DETACH HERE

|X| Please mark
votes as in
this example

This proxy when properly executed will be voted (1) for the election of the
nominees of the Board of Directors; (2) for the ratification of the selection of
Ernst & Young LLP as independent accountants; and (3) on any other matters in
accordance with the discretion of the named attorneys and agents, if no
instructions to the contrary are indicated in Items (1), (2) and (3).

1. Election of Directors.

Nominees: (01) K. Hovnanian, (02) A. Hovnanian, (03) P. Buchanan, (4) G.
DeCesaris, Jr., (05) A. Greenbaum, (06) D. McDonald, (07) P. Reinhart,
(08) J. Robbins, (9) J. Sorsby, (10) S. Weinroth

FOR WITHHELD
|_| |_|

|_| ______________________________________________________________________
For all nominees except as noted above

2. Ratification of the selection of Ernst & Young LLP as independent
accountants for the year ended October 31, 2001.

FOR AGAINST ABSTAIN
|_| |_| |_|

3. In their discretion, upon other matters as may properly come before the
meeting.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|

Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer.

Signature:____________________________________ Date:____________________________

DETACH HERE

PROXY

HOVNANIAN ENTERPRISES, INC.

Class B Common Stock

This Proxy is Solicited on Behalf of the Board of Directors

----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
----------- -----------

DETACH HERE

|X| Please mark
votes as in
this example

1. Election of Directors.

Nominees: (01) K. Hovnanian, (02) A. Hovnanian, (03) P. Buchanan, (4) G.
DeCesaris, Jr., (05) A. Greenbaum, (06) D. McDonald, (07) P. Reinhart,
(08) J. Robbins, (9) J. Sorsby, (10) S. Weinroth

FOR WITHHELD
|_| |_|

|_| ______________________________________________________________________
For all nominees except as noted above

2. Ratification of the selection of Ernst & Young LLP as independent
accountants for the year ended October 31, 2001.

FOR AGAINST ABSTAIN
|_| |_| |_|

3. In their discretion, upon other matters as may properly come before the
meeting.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|

Signature:____________________________________ Date:____________________________

DETACH HERE

PROXY

HOVNANIAN ENTERPRISES, INC.

Class A Common Stock

This Proxy is Solicited on Behalf of the Board of Directors

----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
----------- -----------

DETACH HERE

|X| Please mark
votes as in
this example

1. Election of Directors.

Nominees: (01) K. Hovnanian, (02) A. Hovnanian, (03) P. Buchanan, (4) G.
DeCesaris, Jr., (05) A. Greenbaum, (06) D. McDonald, (07) P. Reinhart,
(08) J. Robbins, (9) J. Sorsby, (10) S. Weinroth

FOR WITHHELD
|_| |_|

|_| ______________________________________________________________________
For all nominees except as noted above

2. Ratification of the selection of Ernst & Young LLP as independent
accountants for the year ended October 31, 2001.

FOR AGAINST ABSTAIN
|_| |_| |_|

3. In their discretion, upon other matters as may properly come before the
meeting.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|

Signature:____________________________________ Date:____________________________

DETACH HERE

PROXY

HOVNANIAN ENTERPRISES, INC.

Beneficial Owner of Class B Common Stock

This Proxy is Solicited on Behalf of the Board of Directors

By signing on the reverse hereof, the undersigned certifies that (A) with
respect to __________ of the shares represented by this proxy, the undersigned
has been the beneficial owner of such shares since the date of their issuance or
is a Permitted Transferee (as defined in paragraph 4(A) of Article FOURTH of the
Company's Certificate of Incorporation) of any such beneficial owner and (B)
with respect to the remaining ________________ shares represented by this proxy,
the undersigned has not been the beneficial owner of such shares since the date
of their issuance nor is the undersigned a Permitted Transferee of any such
beneficial owner.

If no certification is made, it will be deemed that all shares of Class B Common
Stock represented by this proxy have not been held, since the date of issuance,
for the benefit or account of the same beneficial owner of such shares or any
Permitted Transferee.

----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
----------- -----------

DETACH HERE

|X| Please mark
votes as in
this example

1. Election of Directors.

Nominees: (01) K. Hovnanian, (02) A. Hovnanian, (03) P. Buchanan, (4) G.
DeCesaris, Jr., (05) A. Greenbaum, (06) D. McDonald, (07) P. Reinhart,
(08) J. Robbins, (9) J. Sorsby, (10) S. Weinroth

FOR WITHHELD
|_| |_|

|_| ______________________________________________________________________
For all nominees except as noted above

2. Ratification of the selection of Ernst & Young LLP as independent
accountants for the year ended October 31, 2001.

FOR AGAINST ABSTAIN
|_| |_| |_|

3. In their discretion, upon other matters as may properly come before the
meeting.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|

Signature:____________________________________ Date:____________________________