Crown Resorts Ltd Annual Report 2011

Plain-text annual report

Crown Limited ANNUAL REPORT 2011 Australia’s Integrated Resort Company Crown Limited ABN 39 125 709 953 ANNUAL GENERAL MEETING Thursday 27 October, 11.00am River Room, Level 1, Crown Towers 8 Whiteman Street, Southbank, Melbourne FINANCIAL CALENDAR Record date for dividend . . . . . . 30 September 2011 Payment of ﬁ nal dividend . . . . . . 14 October 2011 Annual General Meeting . . . . . . . 27 October 2011 2012 interim results . . . . . . . . . . Second half of February 2012 We continue to build Australia’s leading integrated resorts, attracting visitors from around the globe. CONTENTS 1 8 10 12 16 Executive Chairman’s Letter Chief Executive Ofﬁ cer’s Report Portfolio of Integrated Resort Assets Crown Melbourne Burswood 20 Melco Crown Entertainment 22 Aspinall’s Club 39 43 22 Other Investments 52 23 Sustainability Report 31 Corporate Governance Statement 67 68 Nevada Information Statement Directors’ Statutory Report Remuneration Report Auditor’s Independence Declaration Independent Auditor’s Report 70 Directors’ Declaration 71 Financial Report 134 Shareholder Information 136 Additional Information 137 Corporate Information “ We look forward to working with governments and other stakeholders to build on Australia’s strengths as an attractive tourism destination.” EXECUTIVE CHAIRMAN’S LETTER Dear fellow shareholder, I have pleasure in presenting Crown Limited’s 2011 Annual Report. For the ﬁ nancial year ended June 2011, Crown announced a net proﬁ t of $335.9 million, an increase of 14.9 percent on last year, and a ﬁ nal dividend of 19 cents per share, franked to 50 percent. This brings the total dividend for the year to 37 cents per share. These results reﬂ ect a mixed performance from Crown’s Australian integrated resorts, but a pleasing contribution from Melco Crown Entertainment in Macau. For some years now we have shown our conﬁ dence in Australia, leading the way in investment in tourism infrastructure. Our current $2.3 billion capital expenditure program demonstrates our continued faith in the Australian economy, Australia’s appeal as a tourism destination for the Asian region and our ability to deliver integrated resorts of international quality. Our Australian casinos attract signiﬁ cant patronage from overseas, particularly from the Asian region. This market is becoming increasingly competitive as integrated resorts throughout Asia continue to receive support from their governments. We must remain focused on maintaining our global reputation for quality and service excellence. We look forward to continuing to work with governments at all levels and other stakeholders to build on Australia’s strengths as an attractive tourism destination. Crown has also announced its intention to conduct an on market share buy-back of up to 30 million of its ordinary shares. This number represents approximately 4 percent of Crown shares currently on issue. The buy-back is expected to be EPS accretive and is considered to be the most appropriate use of Crown’s balance sheet. In the year ahead, the primary focus will be on maximising the performance of Crown Melbourne and Burswood and managing the major capital expenditure programs currently underway at both properties. We will continue to work with Melco Crown Entertainment to further build the value of the business in Macau, a market in which Crown continues to have positive expectations. On behalf of the Board, I wish to thank the management and staff of Crown for their contribution in 2011. I would also like to thank you, all our shareholders, for your continued support. JAMES PACKER Executive Chairman Crown Limited Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 1 Hotels From premium luxury to creature comforts, Crown’s two Australian integrated resorts offer 2,300 guest rooms across ﬁ ve hotels. In 2011 the ﬁ ve hotels operated by Crown had approximately one million bookings for guests who stay at our properties each year. 2 Dining With a wide range of cafes, casual restaurants and ﬁ ne dining establishments across Crown Melbourne and Burswood, the discerning diner has a myriad of delicacies to choose from. In 2011 more than 14 million meals were served to customers of Crown across more than 90 restaurants and bars. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 3 Gaming From the exclusive atmosphere of Crown’s international VIP gaming salons to the excitement of the gaming ﬂ oor, Crown delivers an unparalleled gaming experience. 44 Events Whether hosting a glamorous gala ball, an international conference, a corporate event or an intimate celebration, Crown Melbourne’s and Burswood’s pre-eminent facilities will impress. Crown Limited Annual Report 2011 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company | Australia’s Integrated Resort Company 55 Entertainment Local and international guests alike are captivated by world-class entertainment from large capacity rock concerts to musicals, comedy shows, ballets and theatre. 6 Shopping Louis Vuitton, Versace, Burberry, Prada, Peter Alexander, Nine West, Guess and G-Star are just some of the designer names in the wide retail offering across Crown’s Australian integrated resorts. Crown’s collection of the world’s leading designers offers the ultimate shopping spree all under the one roof. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 7 Chief Executive Ofﬁ cer’s Report “ On completion of the capital expenditure program, Crown will have created the two premier integrated resorts in Australia, which will compete with the best in the Asian region.” Rowen Craigie Chief Executive Ofﬁ cer Crown Limited OVERVIEW Crown reported a normalised net proﬁ t after tax (NPAT) of $340.3 million for the 12 months ended 30 June 2011. Crown Melbourne and Burswood achieved normalised revenue growth of 5.3 percent and normalised EBITDA growth of 1.8 percent. Crown’s operating cash ﬂ ow was $451.0 million for the 12 months and net debt, excluding working capital cash, was $1,016.1 million at 30 June 2011. This capital expenditure is expected to further enhance Crown’s position as one of the leading operators of integrated resorts in the region. Crown expects the investment in the upgrade and expansion of its Australian integrated resorts will be earnings and value accretive for shareholders. Internationally, the results from our Macau joint venture, Melco Crown Entertainment, continue to improve and were the major contributor to the growth in NPAT for the group. Performance for the year ended 30 June 2011 ($m)1 AUSTRALIAN CASINOS Group revenue Expenditure EBITDA2 EBIT3 Normalised net proﬁ t after tax Reported net proﬁ t 1. Normalised, excluding signiﬁ cant items 2. Earnings before interest, tax, depreciation and amortisation 3. Earnings before interest and tax 2,445.1 (1,780.2) 664.9 469.3 340.3 335.9 Our $2.3 billion capital expenditure program that started in 2007 is on track for completion by the end of 2013. The program involves a range of projects across the two Australian properties. Some of the program has been completed, for example the construction of Crown Metropol and the upgrade of hotel facilities at Crown Towers. Important projects are ongoing, but are tracking well, such as the expansion and upgrade of the VIP facilities at both Crown Melbourne and Burswood, upgrade of hotel facilities at InterContinental Perth Burswood and expansion of the main gaming ﬂ oors at both properties. During the year we saw some evidence in areas of our Australian operations of a softening in consumer sentiment and both properties continue to be impacted by complex-wide renovations. Both Crown Melbourne and Burswood continued to feel the impact of competition from the two Singapore integrated resorts. Burswood’s results were particularly affected by a reduction in VIP program play as a result of that increased competition and the fact that its new VIP facilities are not yet complete. Crown Melbourne beneﬁ ted from the completion of some of the capital refurbishment projects at the property. Across the two properties, main ﬂ oor gaming revenue grew 5.6 percent and VIP program play was ﬂ at with revenue of $535.0 million. Non-gaming revenue grew by 10.6 percent, beneﬁ ting from Crown Metropol’s ﬁ rst full year of operation. Normalised EBITDA from Crown Melbourne was $505.7 million, up 6.5 percent on the prior comparable period (pcp). Reported EBITDA for the period was $511.1 million, down 5.5 percent, or $29.6 million, on the pcp. This reﬂ ected an above theoretical win rate of 1.37 percent, which generated a positive EBITDA variance of $5.4 million, compared to a positive EBITDA variance of $65.8 million in the pcp when the win rate was 1.66 percent. 8 Figure 1 (cid:42)(cid:89)(cid:86)(cid:94)(cid:85)(cid:3)(cid:52)(cid:76)(cid:83)(cid:73)(cid:86)(cid:92)(cid:89)(cid:85)(cid:76)(cid:3)(cid:53)(cid:86)(cid:89)(cid:84)(cid:72)(cid:83)(cid:80)(cid:90)(cid:76)(cid:75)(cid:3)(cid:57)(cid:76)(cid:93)(cid:76)(cid:85)(cid:92)(cid:76) (cid:72)(cid:85)(cid:75)(cid:3)(cid:44)(cid:41)(cid:48)(cid:59)(cid:43)(cid:40)(cid:3)(cid:55)(cid:76)(cid:89)(cid:77)(cid:86)(cid:89)(cid:84)(cid:72)(cid:85)(cid:74)(cid:76) Figure 2 (cid:41)(cid:92)(cid:89)(cid:90)(cid:94)(cid:86)(cid:86)(cid:75)(cid:3)(cid:53)(cid:86)(cid:89)(cid:84)(cid:72)(cid:83)(cid:80)(cid:90)(cid:76)(cid:75)(cid:3)(cid:57)(cid:76)(cid:93)(cid:76)(cid:85)(cid:92)(cid:76)(cid:3) (cid:72)(cid:85)(cid:75)(cid:3)(cid:44)(cid:41)(cid:48)(cid:59)(cid:43)(cid:40)(cid:3)(cid:55)(cid:76)(cid:89)(cid:77)(cid:86)(cid:89)(cid:84)(cid:72)(cid:85)(cid:74)(cid:76) (cid:29)(cid:23)(cid:23) (cid:28)(cid:23)(cid:23) (cid:27)(cid:23)(cid:23) (cid:26)(cid:23)(cid:23) (cid:25)(cid:23)(cid:23) (cid:24)(cid:23)(cid:23) (cid:23) M $ A D T I B E d e s i l a m r o N FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 1800 1500 1200 900 600 300 0 M $ e u n e v e R d e s i l a m r o N (cid:26)(cid:23)(cid:23) (cid:25)(cid:28)(cid:23) (cid:25)(cid:23)(cid:23) (cid:24)(cid:28)(cid:23) (cid:24)(cid:23)(cid:23) (cid:28)(cid:23) (cid:23) M $ A D T I B E d e s i l a m r o N FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 900 750 600 450 300 150 0 M $ e u n e v e R d e s i l a m r o N Normalised EBITDA before Crown Ownership Normalised EBITDA since change in Ownership Normalised Revenue Figures 1 and 2 show a time series of the normalised revenue and EBITDA at both Crown Melbourne and Burswood. A more detailed report on Crown Melbourne is provided later in this Annual Report. Normalised EBITDA from Burswood was $195.2 million, down 8.6 percent on the pcp, principally due to a decline in international VIP activity. Reported EBITDA for the period was $176.2 million, down 4.0 percent, or $7.3 million, on the pcp. This reﬂ ected a below theoretical win rate of 1.10 percent, which generated a negative EBITDA variance of $19.0 million, compared to a negative EBITDA variance of $30.1 million in the pcp when the win rate was 1.08 percent. A more detailed report on Burswood is provided later in this Annual Report. MELCO CROWN ENTERTAINMENT (MCE) MCE reported good progress during the ﬁ nancial year. Crown’s share of MCE’s reported result for the year was an equity accounted gain of $34.9 million. Crown’s share of MCE’s normalised result for the period was a gain of $19.2 million, after adjusting for Crown’s share of an above theoretical win rate and pre-opening expenses. This pleasing result is attributed to the continued improved operating performance at City of Dreams and signiﬁ cant improvement in Altira Macau. The Macau gaming market as a whole has exhibited strong growth during the period. In the six months to June 2011, gross gaming revenues were up 45 percent year-on-year. Additional information about MCE and Crown’s other international investments appears later in this Annual Report. OUTLOOK Crown remains cautious given the general softening in consumer sentiment and recognises the need to carefully manage the continuing disruption to its customers from the redevelopment and refurbishment programs at our Australian casinos. Recent VIP program play volumes have been more encouraging, although variable visitation from South East Asian VIP customers indicates that the impact of the two new integrated resorts in Singapore continues to be felt, particularly at Burswood. Our efforts will remain focused on enhancing Crown’s Australian operations. We are currently midway through our extensive capital expenditure program totalling $2.3 billion, of which approximately $800 million will be spent within the next three years. We will also continue to work closely with MCE to maintain the continued positive trend in the performance of MCE’s Macau businesses. I would like to sincerely thank the Board for its support and to thank all management and staff for their efforts in 2011. Rowen Craigie Chief Executive Ofﬁ cer Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 9 Portfolio of integrated resort assets CROWN OWNS AND OPERATES AUSTRALIA’S LEADING PREMIUM INTEGRATED RESORTS – CROWN ENTERTAINMENT COMPLEX IN MELBOURNE AND BURSWOOD ENTERTAINMENT COMPLEX IN PERTH. MELBOURNE – 100% OWNED (cid:129) Crown Melbourne operates 2,500 gaming machines and has approval to operate 500 table games. (cid:129) Crown Towers hotel comprises 480 guest rooms. (cid:129) Crown Promenade hotel comprises 465 guest rooms. (cid:129) Crown Metropol hotel comprises 658 guest rooms. (cid:129) Crown Conference Centre has 7,350 square metres of conference and meeting facilities over three ﬂ oors. (cid:129) Banqueting facilities include the Palladium’s 1,500 seat ballroom and the Palms’ 900 seat cabaret venue. (cid:129) More than 70 restaurants and bars reside in the complex, including many of Melbourne’s ﬁ nest. (cid:129) Internationally recognised designer boutiques and retail outlets. (cid:129) Entertainment facilities include a multi-screen cinema complex, a bowling alley and an interactive gaming auditorium. 10 PERTH – 100% OWNED MACAU – 33.4% INTEREST (cid:129) Burswood has approval to operate 2,000 gaming machines and 220 table games. (cid:129) InterContinental Perth Burswood hotel comprises more than 400 guest rooms. (cid:129) Holiday Inn Burswood hotel comprises 291 guest rooms. (cid:129) Large scale entertainment facilities including the 20,000 seat Burswood Dome and 2,300 seat Burswood Theatre. City of Dreams (cid:129) Melco Crown operates approximately 1,300 gaming machines and more than 400 table games. (cid:129) Crown Towers hotel comprises approximately 300 guest rooms. (cid:129) Hard Rock hotel comprises approximately 300 guest rooms. (cid:129) Grand Hyatt hotel comprises 800 guest rooms. (cid:129) More than 20 restaurants and bars. (cid:129) World-class conventions and events facilities. (cid:129) Wide range of retail brands. (cid:129) 22 restaurants and bars and a nightclub. (cid:129) Luxury day spa and retail outlets. (cid:129) Iconic and spectacular show – Franco Dragone’s ‘The House of Dancing Water’ in the Theatre of Dreams. (cid:129) Other key attractions include The Bubble audio visual experience and Club Cubic. Altira (cid:129) The casino and hotel features more than 220 table games and more than 200 guest rooms. Mocha Clubs (cid:129) A network of gaming lounges, operating approximately 1,600 gaming machines. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 11 Crown Melbourne CROWN MELBOURNE IS A KEY DRIVER OF TOURISM WITHIN AUSTRALIA, PARTICULARLY IN VICTORIA, ATTRACTING AROUND 18 MILLION VISITORS ANNUALLY. Clockwise from above: Bistro Guillaume Crown Melbourne Aerial view of Crown Melbourne Crown Melbourne gaming ﬂ oor Crown Melbourne Lagerﬁ eld 12 “ Signiﬁ cant progress has been made on the redevelopment of Crown Melbourne and the investment in growth capital expenditure is progressively delivering beneﬁ ts.” OVERVIEW Australia’s leading integrated resort, Crown Melbourne is a key driver of tourism within Australia, particularly in Victoria, attracting around 18 million visitors annually to its 500,000 square metre entertainment complex. The property features quality shopping and dining experiences, gaming options, live entertainment and 1,600 guest rooms ranging from six-star luxury to premium ﬁ ve-star and quality four-star accommodation across its three hotels. Crown Melbourne is the state’s largest single-site private sector employer with more than 6,500 employees. In the ﬁ nancial year, normalised revenue grew by 9.9 percent. The growth in revenue can be attributed to completion of some of the capital refurbishments projects at the property and Crown’s strategy to source new VIP Program Play customers from China. Crown Melbourne generated normalised EBITDA growth of 6.5 percent, despite refurbishment disruption, an increase in gaming machine tax agreed with the Victorian Government and a change in revenue mix as a result of growth in VIP program play, along with an increase in its associated costs. Main gaming ﬂ oor revenue grew 6.1 percent for the year to $930.7 million reﬂ ecting the completion of some of the capital refurbishments. Normalised VIP program play revenue increased by 15.1 percent to $418.2 million on record turnover of $31 billion. Non-gaming revenue grew 14.4 percent to $365.2 million, largely beneﬁ ting from Crown Metropol’s ﬁ rst full year of operation. CROWN MELBOURNE PROPERTY UPDATE Signiﬁ cant progress has been made on the redevelopment of Crown Melbourne. The Teak Room reopened in October 2010 followed by the completion of stage one of the extension and refurbishment of the Mahogany Room in December 2010. The remaining works on the Mahogany Room are on schedule and are expected to be completed by November 2011. Development of the Crown ‘West End’, a new gaming, restaurant, cafe, bar and entertainment precinct, is expected to be fully open by mid 2012. This new area will utilise some of the increase in table games granted to Crown Melbourne under the licence arrangements approved by the Victorian Parliament in 2009. Club 23, a sophisticated bar and lounge with private areas and a balcony overlooking the Yarra River and city skyline with a small number of high end gaming tables, including poker tables, is expected to be completed by November 2011. The addition of a number of premium restaurants and the development of luxury and lifestyle retail precincts have further boosted Crown Melbourne’s status as a leading integrated resort. The refurbished Crown Towers lobby and the porte cochere re-opened in June 2011. The ﬁ nal component of this work will be completed in the last quarter of 2011, at the same time as the new ground level Mahogany Room entry. The private salons on level 39 of Crown Towers opened in September 2010. An exclusive experience tailored to Crown Melbourne’s most valued guests, the level 39 salons house four large private gaming rooms and offer exceptional personalised service within an environment of quality design and craftsmanship, which ﬁ rmly positions Crown Melbourne as one of the world’s best VIP gaming facilities, at least the equal of any in the competitive Asian market. The capital expenditure program is expected to reinforce Crown Melbourne’s position as a world class integrated resort, providing signiﬁ cant beneﬁ ts to the Australian and Victorian tourism industries. The investment in growth capital expenditure is progressively delivering beneﬁ ts and is expected to be earnings and value accretive for shareholders. LOCAL GAMING AND SIGNATURE CLUB A signiﬁ cant investment in improving customer service commenced this year. Two thirds of Crown’s gaming machine product was refreshed, while the ﬁ rst full year of operation for the Ticket-In Ticket-Out system was successful, both adding to increased customer satisfaction. Furthermore, in the area of table games, a new focus on improved customer engagement and experience has been implemented. The Aussie Millions Poker Championship continues to be recognised as one of the top three poker events in the world, assuring Crown Melbourne’s place as the home of poker in Australasia. The event attracts a large contingent of international customers, with substantial interest from China this year. The Crown Signature Club loyalty program continues to attract new customers. The changes implemented over a number of years, including the amalgamation of all programs into one Signature Club and the offers of free parking and invitations to ‘money can’t buy’ experiences, have been well received. VIP PROGRAM PLAY Crown Melbourne achieved an all-time record of $31 billion in VIP program play turnover. While the impact of the two new integrated resorts in Singapore had an adverse impact, Crown’s strategy to source new customers from China helped grow the business. The new luxury private salons on level 39 have created a unique environment of exceptional quality, which is proving extremely popular with Crown Melbourne’s VIP guests. HOTELS, CONFERENCES AND RETAIL The three hotels at Crown Melbourne, Crown Towers, Crown Metropol and Crown Promenade are achieving approximately 700,000 bookings for guests who stay at Crown Melbourne hotels each year. The number of international guests staying at Crown Melbourne’s hotels continues to increase, with numbers from China growing signiﬁ cantly. This increase in hotel guests also has a major positive impact on the other facilities on offer at Crown. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 13 CROWN MELBOURNE CONTINUED Crown Metropol’s ﬁ rst full year of trading has produced good results, providing Crown Melbourne with signiﬁ cant growth in its market share. The addition of Crown Metropol has enabled Crown to attract domestic and international conventions and conferences, many of which can be accommodated across the three Crown Melbourne hotels. Crown Metropol was awarded the Commercial Architecture Award at the 2010 Australian Institute of Architects Awards and was also named in the 2011 Conde Nast Traveller Hot 100 List. Crown Towers continues to be the market leader in luxury hotel accommodation and was awarded the Nespresso Best Large Luxury Hotel at the 2010 Australian Gourmet Traveller Travel Awards. Crown Promenade consistently achieves the highest occupancy in its competitive set. The expanded Crown Conference Centre attracts a wide range of events, ranging from local meetings to major international conferences. The capacity to handle multiple large concurrent events provides signiﬁ cant additional visitation to the Crown complex. Progress on the retail master plan continues, with the key luxury and lifestyle precincts proceeding toward their desired tenant mix. The main ground ﬂ oor retail strip is undergoing an upgrade of the common areas as well as new and relocated restaurant tenancies. Further adding to the luxury offering, Omega and Bvlgari are set to join Crown retail in the near future. RESTAURANTS AND BARS Spice Temple and The Waiting Room, both operated by Neil Perry, opened in October 2010. The Atlantic restaurant and the new Bistro Guillaume opened in the second half of the ﬁ nancial year and are trading well. These establishments have received positive reviews since opening. The popular premium Chinese restaurant, Silks, closed temporarily post-Chinese New Year for refurbishments and reopened in July 2011 with an expanded menu including dishes from the Northern Chinese, Sichuan and Shanghai provinces. Lucky Chan completed its relocation in August 2011, moving to its new riverside location which seats 270 and includes three private dining areas and an outdoor seating area. Crown Melbourne again supported the Melbourne Food & Wine Festival this year with the ‘Stars of Spice’ event featuring world-leading chefs. Specialty dining experiences, particularly the wine-featured dinners, including the 10th annual Grange dinner, along with Crown Melbourne’s Seafood and Prawn Celebrations, proved to be a great success for a number of the premium and casual restaurants. Additionally, a range of partnered beverage promotions offered an array of ‘money can’t buy’ sporting and travel packages. Crown Melbourne’s restaurants continue to be recognised through industry-related awards. Rockpool Bar & Grill and Number 8 Restaurant and Wine Bar again both received ‘2 glasses’ in the Best of Award of Excellence in the 2011 Wine Spectator Awards and Spice Temple was awarded ‘1 glass’. Number 8 was also highly recommended and awarded ‘3 glasses’ in the Gourmet Traveller Wine Awards. From left: Lumia Sho Noodle Bar Crown Towers hotel suite Crown Metropol pool 14 Nobu Melbourne was awarded Best Asian Restaurant at the 2011 Victorian Restaurant and Catering Awards for Excellence, while Crown Melbourne’s Banqueting and Events team was also recognised, winning Caterer of the Year and Wedding Caterer of the Year. Crown Melbourne was also awarded the prestigious George Mure Memorial Professional Award for Crown’s Food and Beverage Training Team, and Crown College’s training restaurant, Culinarium, was a ﬁ nalist for the Best Training Restaurant. Five of Crown Melbourne’s premium restaurants were awarded Chef’s Hats in The Age Good Food Guide 2012. Rockpool Bar & Grill received Two Hats, while Neil Perry also received the Professional Excellence award. One Hat was bestowed on The Atlantic, Bistro Guillaume, Maze and Spice Temple, which also received Wine List of the Year. Rockpool Bar & Grill had signiﬁ cant success at the 2010 Gourmet Traveller Wine’s 2010 Australian Wine List of the Year Awards announced in August last year, winning Overall Winner of the 2010 Australia’s Wine List of the Year, Best Restaurant List, Best List in Victoria and The Judy Hirst Award, won by Sommelier David Lawler. Rockpool was inducted into the Hall of Fame at the 2011 Gourmet Traveller Wine’s 2011 awards held in August 2011. Crown’s restaurants and bars continue to focus on the responsible service of alcohol (RSA) to ensure all customers have a positive experience. Our key objective is to provide a safe and pleasant environment for all patrons and staff. Crown remains diligent in these areas and has increased the number of RSA ofﬁ cers on the ﬂ oor and has provided additional staff training. ENTERTAINMENT AND EVENTS The Palladium at Crown again hosted some of Australia’s most notable industry events this year including the annual TV Week Logie Awards, the Cricket Australia Allan Border Medal and the Australian Masters Golf Gala Dinner with special guest Tiger Woods. Crown Melbourne is also home to another great sporting tradition – the AFL Brownlow Medal. Post the end of the ﬁ nancial year, Crown and the AFL announced a new landmark deal that secures the Brownlow Medal in Melbourne at The Palladium for another six years. During the spring racing carnival, the Palladium was home to a number of Victoria Racing Club’s Spring Carnival events including the Oaks Club Ladies Lunch and the Call of the Card. In conjunction with the Victoria Racing Club and its ofﬁ cial partners, Crown Melbourne again hosted a ‘live site’ at Southbank during the Melbourne Cup Carnival. An estimated 80,000 people enjoyed live entertainment, big screen racing action, giveaways and the riverbank Carnival Bar. Crown has invested heavily in the conferencing market with the newly developed multi-million dollar Crown Conference Centre playing host to some of Australia’s leading businesses including the Intel Summit 2011, Tertiary Education Management Conferences, CIPSA Conference, Cook Medical Conferences, the AGES Annual Scientiﬁ c Meeting 2011, Telstra, NAB, Genesys Wealth, Intel, Foster’s, IATA and Steadfast. The Palms and Crown Melbourne’s nightclubs Fusion and Co. showcased guests such as The Potbelleez, Jessica Mauboy, Ricki-Lee Coulter, Zoe Badwi, Carmen Electra and Backstreet Boys. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 15 “ Burswood is well advanced in its $750 million capital expenditure program that will create a property that can successfully compete against the integrated resorts in the Asian region.” OVERVIEW Burswood is a major Western Australian tourist attraction, drawing more than seven million visitors each year. From a casino, quality hotels, world-class convention centre, 22 restaurants and bars, nightclub, 2,300 seat Lyric theatre, 20,000 seat capacity indoor stadium, day spa and retail outlets, Burswood offers much to its visitors. Burswood is well advanced in its $750 million capital expenditure program that will create a property that can successfully compete against the integrated resorts in the Asian region. Burswood is the state’s largest single-site private sector employer, with more than 4,300 employees. Burswood’s ﬁ nancial results were affected by a 32.3 percent reduction in normalised VIP program play revenue as a result of increased competition from the two new integrated resorts in Singapore and the impact of the complex-wide renovations which has seen reduced visitation. Normalised EBITDA for Burswood was down 8.6 percent on the pcp. Main gaming ﬂ oor revenue increased 4.4 percent to $413.8 million and non-gaming revenue increased 3.3 percent to $169.7 million for the year in an economic environment that continues to be challenging. Burswood THE OPENING OF NEW RESTAURANTS WILL ADD SIGNIFICANTLY TO THE FOOD AND BEVERAGE FACILITIES AT BURSWOOD. Clockwise from above: Nobu Perth Aerial view of Burswood Burswood gaming ﬂ oor Pearl Room 16 BURSWOOD PROPERTY UPDATE Signiﬁ cant progress has been made on the redevelopment of Burswood. Planning for the expansion of the Burswood gaming ﬂ oor to accommodate new gaming product (250 additional electronic gaming machines, 50 additional tables including the installation of fully automated table games) is in the ﬁ nal design stages. It is expected that the expansion will be completed mid-way through the 2013 ﬁ nancial year. A number of new restaurants were opened at the property including Neil Perry’s Rockpool Bar & Grill, 88 Noodle Bar, and most recently, the new Italian restaurant, Modo Mio. The Atrium Restaurant & Lobby Lounge at the InterContinental Perth Burswood also had a major refurbishment during the year. Initial customer response to these venues has been very positive. The new food court and the new Japanese restaurant, Nobu, both opened in the ﬁ rst quarter of the 2012 ﬁ nancial year and Bistro Guillaume by Guillaume Brahimi is set to open in June 2012. InterContinental Perth Burswood’s refurbishment program is on schedule. Renovations to the reception and foyer areas, along with room refurbishments on ﬁ ve of the levels, were completed during the year. The refurbishment of the balance of the rooms on the remaining ﬁ ve levels is due for completion in mid 2012. The construction of the sky gaming salons is in its ﬁ nal stages and they are expected to open in September 2011. The construction of a new Inﬁ nity Suite on level nine has commenced and is on schedule for completion by early 2012. Work on the luxury villas, resort pools and tropical gardens is progressing and is expected to be completed by December 2011. The capital expenditure undertaken in upgrading and expanding the Burswood resort will create a property that can successfully compete against the new integrated resorts in the Asian region, complete with new luxurious resort and pool facilities, as well as world-class entertainment, leisure, local gaming and premium player facilities. This investment will progressively deliver beneﬁ ts and is expected to be earnings and value enhancing for shareholders. LOCAL GAMING AND CLUB BURSWOOD A number of tailored local VIP events, along with the launch of several new games, were introduced in the gaming machine area and were well received by players. An increase in live entertainment and prize draws during peak periods further improved the atmosphere on the main gaming ﬂ oor, while enhanced off-peak initiatives encouraged increased patron visitation during weekdays. The launch of Burswood’s complex-wide loyalty program in October 2010 continued to drive membership growth with new Club Burswood memberships doubling year-on-year. The expanded loyalty program provides additional member beneﬁ ts. VIP PROGRAM PLAY When completed, the expanded VIP offering, including luxury villa accommodation and the sky gaming salons, will enhance Burswood’s position in the international market as a world-class integrated resort. These initiatives, coupled with the existing six private gaming salons and luxury yacht, will provide a signiﬁ cant point of difference for Burswood as one of the most customer-focused and luxurious international facilities in the world. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 17 BURSWOOD CONTINUED HOTELS RESTAURANTS AND BARS InterContinental Perth Burswood maintained its position as the leading luxury hotel in Perth despite the hotel, lobby and surrounding restaurants undergoing extensive refurbishment for a signiﬁ cant portion of the period. An agreement to acquire the Holiday Inn Hotel and to restructure the relationship with InterContinental Hotels Group was ﬁ nalised in July 2011. As a result of these transactions, Burswood will be entitled to a greater share of hotel proﬁ ts which will be value creating for Crown’s shareholders. Despite construction disruption, Burswood’s restaurants and bars produced year-on-year growth driven predominantly by the successful reopening of Atrium Restaurant and Lobby Lounge and the opening of 88 Noodle Bar on the main gaming ﬂ oor. The newly opened Modo Mio and Nobu Perth, which opened their doors in September 2011, will add signiﬁ cantly to the food and beverage facilities at Burswood. Established bars continued to trade successfully due to effective promotions, value meal offers and additional patronage driven through entertainment events held in the Burswood Theatre and Dome. Additionally, on the main gaming ﬂ oor, Carvers and Snax both traded well in their second year of operation. Burswood’s Carbon Sports Bar was inducted into the Australian Hotels Association Hall of Fame as Western Australia’s Best Sporting Entertainment Venue and was also recognised at a national level, winning the same category nationally. Burswood’s responsible service of alcohol initiatives were also rewarded with the Australian Hotels Association Responsible Service of Alcohol Award for Western Australia for the third consecutive year as well as making the Australian Hotels Association Hall of Fame. From left: (A)LURE Dining Room and Bar Modo Mio EVE Night Club Carbon Sports Bar 18 The Summer Marquee performed strongly through an extended season and a fourth Botanical Room opened, replacing the Swan Room. Major convention events at Burswood this year included Australian Primary Principals Association Conference, Rio Tinto Annual General Meeting, Western Australian Primary Principals Association Conference, Junior Recruit Re-Union, WASSRA Conference and the AMEC Conference. Signature events hosted at the Complex this year included White Collar Boxing, Real Estate Institute of Western Australia Ball and West Coast Eagles Club Champion Awards. Sponsorships and partnerships played a signiﬁ cant role in supporting local businesses and organisations including being host-sponsor of the Western Australian & Qantas Australian National Tourism Awards, host venue for the WA Fashion Awards in conjunction with the Perth Fashion Festival and naming rights sponsor of Burswood International Race Day as part of the Summer racing carnival with Perth Racing. ENTERTAINMENT AND EVENTS Burswood was presented with Western Australia’s Best Conference and Banquets award at the Australian Hotels Association Awards for Excellence. Both the Burswood Dome and Theatre hosted a range of major events during the ﬁ nancial year, with approximately 600,000 patrons in attendance across both venues. The Dome hosted top national and international artists including Kylie Minogue, Rihanna, Usher, Gorillaz and Linkin Park. Metallica set a record attendance for their two performances. The Theatre has enjoyed a record year with 188 performances. Mamma Mia continued its successful run alongside multiple performances by WA Ballet, West Side Story, Riverdance and Billy Connolly. Broadway musical WICKED launched in June 2011 with a record breaking number of ticket sales. Star Show package sales continued to be successful with several thousand dinner, accommodation and entertainment combinations sold via the onsite Contact Centre and Ticketek website. Burswood is recognised as one of Australia’s leading meetings and events venues and this year focused on strengthening the brand with redesigned collateral, competitive event pricing and promotion of Burswood Entertainment Complex as a one-stop destination for all event business. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 19 Melco Crown Entertainment “ The results from our Macau joint venture, Melco Crown Entertainment, continue to improve and were the major contributor to the growth in NPAT for the Group.” This pleasing result is attributed to the continued improved operating performance at City of Dreams and signiﬁ cant improvement in Altira Macau. The Macau gaming market as a whole has exhibited strong growth during the period. In the six months to June 2011, gross gaming revenues were up 45 percent year-on-year. In July 2011, MCE completed the acquisition of a 60 percent equity interest in Macau Studio City, a large scale integrated gaming, retail and entertainment resort project to be developed in Macau jointly by MCE and New Cotai Holdings, LLC. MCE will focus on delivering innovative attractions based on the “Studio City” concept. When complete, Macau Studio City will meaningfully increase MCE’s presence on Cotai. In August 2011, MCE announced that it had applied to the Stock Exchange of Hong Kong (SEHK) for a proposed dual listing of its shares and is evaluating a possible global offering of SEHK listed shares to local and international investors. The proposed dual listing, when completed, would put MCE on a par with its competitors and would provide it with additional sources of capital. The proposed dual listing is subject to a number of approvals, including SEHK approval and MCE board and shareholder approval, as well being subject to market conditions. MCE has a positive outlook on the Macau market. In particular, The House of Dancing Water show continues to generate incremental visitation, consistent with the objective of developing the highly proﬁ table premium mass market operations at City of Dreams. Clockwise from left: Gallery of Art, City of Dreams Grand Hyatt hotel City of Dreams Macau Club Cubic Cast of The House of Dancing Water City of Dreams Macau CROWN HELD A 33.4% EQUITY INTEREST IN MELCO CROWN AS AT JUNE 2011. OVERVIEW Crown held a 33.4 percent equity interest in Melco Crown Entertainment (MCE), a joint venture between Crown and Melco International Development Limited, as at 30 June 2011. MCE was listed on the NASDAQ in December 2006 and has two premium properties, City of Dreams and Altira Macau. The joint venture also operates Mocha Clubs. MCE reported good progress during the ﬁ nancial year. Crown’s share of MCE’s reported result for the year was an equity accounted gain of $34.9 million. Crown’s share of normalised result for the period was a gain of $19.2 million, after adjusting for Crown’s share of an above theoretical win rate and pre-opening expenses. 20 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 21 Aspinall’s Club The Aspinall’s Club is a high-end London casino. It is one of only ﬁ ve licensed casinos in London’s prime west end entertainment district. The acquisition of the Aspinall’s Club has enabled Crown to integrate the London operation more fully into its international VIP business while leveraging the sales and marketing capability of Crown’s international VIP organisation. Activity in the Club since Crown’s acquisition has been ahead of expectations, but at a low win rate. Aspinall’s Club London Other Investments Betfair Aspers Group Crown’s equity accounted share of Betfair’s loss was $2.5 million. The loss is primarily due to an increase in legal fees and product fees. Betfair has appealed to the High Court against the judgement of the Full Federal Court in its case against Racing NSW and Harness Racing NSW. Betfair’s appeal was heard by the High Court in August 2011 and a decision is expected late in 2011 or early 2012. Cannery During the year, Crown received the necessary regulatory approvals in Nevada and Pennsylvania and now holds a 24.5 percent equity share in Cannery Casino Resorts, LLC. The Aspers Group completed the sale of the Aspinall’s Club to Crown during the period. The sale has enabled the Aspers Group to reduce most of its external borrowings. During the year, the Aspers Group was successful in obtaining the licence for a new casino in Stratford, London, to be located within the new Westﬁ eld shopping complex, which is adjacent to the 2012 Olympic Games site. Work on the new casino is underway and it is expected to open in late 2011. Tabcorp Holdings Limited and Echo Entertainment Group Limited As at 30 June 2011, Crown held an economic interest in each of Tabcorp Holdings Limited and Echo Entertainment Group Limited equivalent to 4.9 percent of the issued shares of each company, by way of cash settled equity derivatives. The economic interest was acquired prior to the Tabcorp demerger. Crown has no current intention of increasing its interest in either company. 22 Sustainability Report – Our People CROWN PLACES SIGNIFICANT EMPHASIS ON ITS CONTINUING COMMITMENT TO ITS EMPLOYEES, THE LOCAL COMMUNITY AND ITS LEADERSHIP ROLE AS A SUSTAINABLE BUSINESS PRACTICE. (cid:44)(cid:84)(cid:87)(cid:83)(cid:86)(cid:96)(cid:84)(cid:76)(cid:85)(cid:91)(cid:3)(cid:47)(cid:76)(cid:72)(cid:75)(cid:74)(cid:86)(cid:92)(cid:85)(cid:91)(cid:3)(cid:45)(cid:64)(cid:23)(cid:30)(cid:3)(cid:182)(cid:3)(cid:45)(cid:64)(cid:24)(cid:24) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 13,112 13,199 13,817 12,650 11,587 2007 2008 2009 2010 2011 Burswood Contractors Tenancies Employees Crown Melbourne Contractors Tenancies Employees As the largest single-site private sector employer in both Victoria and Western Australia, Crown Limited’s focus on the training, development and retention of its people is of premium importance with Crown’s almost 11,000 employees completing more than 370,000 hours of job training annually. As a key signatory to the Australian Employment Covenant, which focuses on creating demand for Aboriginal employment, Crown Limited’s commitment to sustainable aboriginal employment continued to develop this year. Guided by dedicated employment coordinators, overall indigenous employee numbers have more than doubled over the past 12 months. Across Crown Melbourne and Burswood, 145 aboriginal employees have been engaged to work in a variety of roles, from food and beverage to security. Retention rates remain strong at more than 50 percent. Crown’s Indigenous Employment Program is seen as a best practice model by the Australian Employment Covenant and GenerationOne, whose aims are to end disparity between indigenous and non-indigenous Australians. In addition to this acknowledgement, Crown Limited’s achievements in this area were also recognised this year with a national Diversity@Work 2010 Award for Employment and Inclusion of Indigenous Australians. Recipient of the Victorian Government 2010 Employer of the Year Award Recipient of the Australian Government 2010 Employer of the Year Award Recipient of the Diversity@Work 2010 Award Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 23 S USTAINABILITY REPORT CONTINUED CROWN MELBOURNE BURSWOOD In 2010, Crown Melbourne was recognised for its commitment to innovation in training, winning Employer of the Year 2010 at the Victorian Training Awards, before going on to win Australian Employer of the Year 2010 at the Australian Training Awards. Underpinning this success was Crown’s Learning Pathways. This initiative is a major focus that has helped shift Crown Melbourne’s employment proposition from training to learning and from jobs to careers. Crown’s Learning Pathways include courses delivered from six training packages and 16 different qualiﬁ cation streams. More than 1,000 employees, representing more than 15 percent of the workforce, are obtaining an accredited qualiﬁ cation within the Australian Quality Training Framework (AQTF). In 2010, Crown Melbourne launched its third level program within its Learning Pathway Framework which is aligned to a Diploma of Management. As part of the disability employment program, Crown Melbourne, in partnership with WISE employment, placed 12 employees in various roles and traineeships across the business. Crown Melbourne continues its focus on the health and safety of its employees and visitors. During the year, WorkSafe Victoria conducted an extensive review of Crown’s Health, Safety and Workers’ Compensation management systems, which resulted in the extension of Crown’s self insurance status for a further four-year period. In addition, Crown Melbourne received endorsement from WorkSafe Victoria for its new three-year Health and Safety Compliance Program. This Program reviews Crown’s compliance with legislative, regulatory, self insurance and corporate governance requirements. This includes the scheduling, undertaking and reporting of audits, and the identiﬁ cation and implementation of corrective actions. 24 Burswood remains the largest single-site private employer in Western Australia with more than 4,300 employees. This year saw approximately 1,900 people recruited in a very competitive labour market. Burswood’s strong employer brand continues to attract the skilled and talented staff required to support the business. Burswood has continued to expand its training activities. The focus was on developing and improving the customer service capability of all employees and improving the management and leadership capability of frontline and senior managers. Burswood currently employs and trains 388 apprentices and trainees both under its own Registered Training Organisation and also in partnership with local TAFEs. The Leadership Development Program built on the success of its inaugural year with more than 40 staff graduating from the program and another 37 managers and supervisors currently participating. This program identiﬁ es developing leaders within the business and assists them in reaching their full potential over a 12-month training program. During the ﬁ nancial year, Burswood was successful in the Australian Hotels Association Branch Awards for Excellence in the category of Outstanding Achievement in Training and now qualiﬁ es for the National awards to be held later this year. From left: Crown Melbourne employees Burswood Employee of the Year Awards Sustainability Report – Responsible Gaming Initiatives that support responsible gaming continue to be of paramount importance to Crown. The establishment by the Crown Board of a Board Committee at the beginning of this ﬁ nancial year to oversee responsible gaming is testament to the commitment to responsible gaming practices. Chaired by Crown Director, Professor John Horvath, the Responsible Gaming Committee meets regularly to review and monitor Crown’s responsible gaming programs, recommending policies and procedures to enhance the effectiveness of those programs and promote awareness of responsible gaming issues. Across Crown Melbourne and Burswood, Crown’s continued commitment to responsible gaming practices is evident, with increased exposure and promotion of avenues for assistance to patrons who may be experiencing difﬁ culty with their gaming behaviours. Staff training and education at all levels is the cornerstone of Crown’s responsible gaming program. At both Crown Melbourne and Burswood, staff undergo training that begins during induction and continues throughout their career at Crown. All staff know the steps to take to ensure individuals are directed to the Responsible Gaming Support Centre, or to alert Responsible Gaming Liaison Ofﬁ cers. Staff are trained in identifying the observable signs that indicate a customer may be experiencing difﬁ culty with their gaming behaviour, and are instructed to make their manager aware of the situation. CROWN MELBOURNE An in-house facility that operates 24-hours a day, seven days a week, Crown Melbourne’s Responsible Gaming Support Centre is a world-ﬁ rst responsible gaming initiative. In operation since 2002, the Centre is the hub for all of Crown Melbourne’s Responsible Gaming Services including housing Crown’s Responsible Gaming Liaison Ofﬁ cers who provide services around the many responsible gaming initiatives and programs, including the Self-Exclusion Program. Access to on-site Responsible Gaming Psychologists and the availability of the Chaplaincy Support Service are other key initiatives offered. Leading the way in proactive responsible gaming services, Crown Melbourne has pioneered a number of initiatives including the Play Safe Limits program, a voluntary pre-commitment system that Crown Melbourne ﬁ rst implemented in 2003. The program allows gaming machine and fully automated table games customers to use their Crown Signature Club Cards to set daily individual spend and time limits, or a combination thereof. Information on Crown Melbourne’s responsible gaming programs is widely available to customers throughout the complex, on the gaming ﬂ oor and via the Responsible Gaming Support Centre, and this year saw the addition of information being available via the Crown Signature Club’s Voucher Issuance Kiosks, on gaming ﬂ oor posters, as well as on plasma screens located at the end of each bank of gaming machines. From left: Crown Melbourne participates in Responsible Gambling Awareness Week Some of the Responsible Gaming staff from Crown Melbourne Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 25 S USTAINABILITY REPORT CONTINUED Visibility of contact numbers for Crown Melbourne’s Responsible Gaming Support Centre and Gambler’s Help is also prominent, appearing on gaming machines, table games, near ATMs, brochures, Crown Signature Club information desks and in newsletters. Crown Melbourne’s Responsible Gambling Code of Conduct, which is printed in a number of languages, is also widely available to customers and other stakeholders. Crown Melbourne has established strong links with support services such as Gambler’s Help and relevant assistance programs, with regular interactions to ensure provision of appropriate assistance to customers seeking help. Crown Melbourne is represented on the Victorian Responsible Gambling Ministerial Advisory Council and on its working groups and committees. This ﬁ nancial year, Crown Melbourne has also been involved with the Monash and Melbourne Universities Problem Gambling Research and Treatment Centre Advisory Panel, as well as the planning for the National Association of Gambling Studies 2011 Conference. Crown Melbourne has participated in Responsible Gambling Awareness Week (RGAW), a state wide government, community and industry initiative, since its inception. This year, Crown Melbourne hosted an event, where Sue Stanley, an ambassador for RGAW and Crown Melbourne’s Chaplain, Father James Grant, spoke about the key themes for the week. Crown Melbourne’s involvement highlights the importance of the partnership between the gaming industry, state government and the community sector in promoting responsible gaming. BURSWOOD Stakeholder engagement has been a main focus for the Responsible Gaming team at Burswood and relationships have been expanded to include a wide range of community service organisations and industry partners. This in turn has raised awareness of responsible gaming and the services provided by Burswood to assist patrons who develop a problem with their gambling. Burswood’s Responsible Gambling Information Centre’s services are actively promoted to customers throughout the complex, with information readily available on Burswood’s responsible gaming programs including its Self Exclusion policy. Furthermore, Burswood continues to work closely and cooperatively with a number of agencies and organisations that offer counselling services at a customer’s request. These services are available 24 hours a day. In July 2010, Burswood introduced a voluntary pre-commitment scheme in conjunction with the issuing of player activity statements. Patrons who play Burswood’s gaming machines are able to set ﬁ nancial and time limits regarding their play. Additionally, patrons are able to obtain a statement that details their gaming activity. Burswood’s support for the Responsible Gambling Awareness Week, which is a collaborative partnership between the Gaming and Wagering Commission of Western Australia, TAB, Burswood, Lotterywest and Centrecare, is ongoing. Held in May this year, the 2011 Responsible Gambling Awareness Week ofﬁ cial opening was launched by the Minister for Racing and Gaming, the Honourable Terry Waldron MLA. The key theme to this year’s Awareness Week was ‘Gamble Aware – when does the fun stop for you?’ emphasising the need for balance and control. Staff engagement has also been a key focus for the period with updates in online training programs along with the introduction of the Responsible Service of Gaming Staff Champions Program. Burswood participates in Responsible Gambling Awareness Week 26 Sustainability Report – Community Crown assists in the growth and development of the local communities where Crown’s people live and work. Crown focuses on a variety of charitable causes, from individuals who suffer illness to established care agencies. Contributions this year were made in various forms, including sponsorship arrangements and resources such as staff time, use of facilities and various Crown packages that can be further used to raise monies for the charities. CROWN MELBOURNE Crown Melbourne responds and provides assistance, donations and support to a broad range of community needs. In January 2011, Crown Melbourne donated $500,000 to boost the 2011 Red Cross Victorian Floods Appeal, which continues to help many thousands of Victorians who are still suffering after the devastating ﬂ oods in January and February. Crown Melbourne also raised more than $72,000 for the Salvation Army Queensland Disaster Relief Appeal, including more than $36,000 raised by patrons via collection tins, that was matched dollar-for-dollar by Crown. For more than six years, Crown Melbourne has sponsored and hosted the My Room Ball. My Room was formed in 1993 by three families who had children undergoing chemotherapy and wanted to support the Oncology Unit at The Royal Children’s Hospital in Melbourne. Crown also sponsors and hosts Starry Starry Night, which this year raised more than $600,000 for The Alannah and Madeline Foundation. Crown Melbourne also supports Challenge’s Robert Allenby Gala Dinner and Diamonds are a Girl’s Best Friend Dinner for children living with cancer and other life-threatening blood disorders. Over the past ﬁ ve years, the KOALA Foundation (Kids Oncology And Leukaemia Action Foundation) has received more than $8.7 million from its annual fundraising event that brings together some of Australia’s most inﬂ uential people. Crown Melbourne hosts The Million Dollar Lunch and donates food, the venue, various prizes and rafﬂ e items, along with staff and management teams who work at the event for the beneﬁ t of the KOALA Foundation. Crown Melbourne is proud that staff volunteer their time and efforts each Christmas Day to help pack and distribute more than 250 hampers ﬁ lled with ingredients donated by Crown Melbourne as part of the Open Family Australia Christmas program. Crown partnered with a number of national charities in support of their annual gala balls and events including My Room Ball, Starry Starry Night, Ronald McDonald House Charity Ball, Diamonds Dinner, Lillian Frank’s Royal Children’s Hospital Fashion Luncheon and the high proﬁ le gala that is The Million Dollar Lunch at Crown. Crown Melbourne is also involved with The Shane Warne Foundation, which donates monies raised at events to charities that work with seriously ill and underprivileged Australian children. Crown Melbourne sponsors and hosts a number of the Foundation’s events including the Footy Finals Luncheon, the Boxing Day Breakfast and the Joe Hachem and Shane Warne Charity Poker Tournament. From left: Victorian Flood Appeal 2011 Crown Melbourne Million Dollar Lunch 2011 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 27 S USTAINABILITY REPORT CONTINUED BURSWOOD Working with more than 20 local charity groups, Burswood is able to help meet a range of needs across Western Australia. Burswood was involved as a major supporter of Channel Seven’s Telethon weekend in Perth this ﬁ nancial year, pledging a donation of $1 million to support child health causes in Western Australia. In February 2011, a gala fundraising dinner that marked the opening of Neil Perry’s Rockpool Bar & Grill raised $420,000 for the Starlight Children’s Foundation. Burswood’s Chief Executive Ofﬁ cer, Barry Felstead, joined 106 other Western Australian CEOs to once again sleep under the stars in Vinnies CEO Sleepout in support of homeless services, raising $47,091 for the cause. Burswood’s support also includes a number of local welfare-based agencies such as Foodbank Western Australia. On a daily basis chefs prepare soup for inclusion in food relief parcels for more than 600 charitable agencies and hundreds of schools. Since 1999, 100,000 litres of fresh soup, the equivalent to more than 455,000 meals, have been donated. In January 2011, Burswood responded to the devastation of the ﬂ oods in Queensland and Western Australia with a complex-wide initiative raising funds for The Salvation Army Flood Relief Appeal. A Flood Relief Concert at Burswood Theatre raised additional funds for the Queensland Premier’s Distress Relief Fund and the Lord Mayor’s Distress Relief Fund (WA). With more than 4,300 employees, Burswood’s staff play an important role in the community support program. Staff engagement activities during the period included The Salvation Army Easter Appeal, the annual Anglicare WA Winter Appeal and St Vincent de Paul Christmas Appeal. The Workplace Giving Program was relaunched supporting Anglicare WA, Ronald McDonald House Charities or United Way. Furthermore, a team of employees, family and friends participated in the annual Juvenile Diabetes Research Foundation Walk to Cure for the 10th year. Burswood has a long-term partnership with Ronald McDonald House in Perth, which celebrated its 20th anniversary this year. Staff teams participated in the ‘Make A Meal’ program donating time to prepare dinner for families. Burswood was also a proud sponsor of the 10th annual ‘Burswood Nick O’Hern Charity Golf Day,’ another fundraiser for Ronald McDonald House. An important long-term partnership exists with WA Police and Burswood works with them to promote safety in the community. Sponsorship is provided for the annual WA Police Ofﬁ cer of the Year Awards and for the Wall-to-Wall Charity Ride. Once again, Burswood partnered with a number of charities in support of their annual gala balls including Ronald McDonald Charity Ball, Boobalicious Ball, StyleAid, Amanda Young Foundation Ball and Youth Focus ‘Night of Nights’ Gala Ball. From left: Opposite page, from left: Burswood $1 million donation to support child health Crown Melbourne collects green waste for recycling Vinnies CEO Sleepout in support of homeless services Water saving initiatives in Crown Melbourne laundry 28 Sustainability Report – Environment Crown is expanding its environmental sustainability efforts by following the Global Reporting Initiative Guidelines in its sustainability reporting and by bringing operations in line with global environmental management standards. Crown’s vision is to play a leadership role in sustainable business practice in the gaming and entertainment industry. The ongoing implementation of remote monitoring of electricity, gas and water via meters installed throughout both Crown Melbourne and Burswood continues to assist in resource consumption monitoring and reporting. Respective business units receive monthly reports showing their individual consumption. Crown’s environmental initiatives put it in a strong position to comply with the Australian Government Climate Change Plan, Securing a Clean Energy Future, which aims to transition Australia to a low carbon, clean energy economy through initiatives in four key areas – carbon pricing, renewable energy, energy efﬁ ciency and land management. Crown Melbourne and Burswood once again joined thousands of organisations around the world in switching off all non-essential lighting during Earth Hour and also participated in World Environment Day. Ongoing staff communications and involvement helped increase staff awareness of Crown’s environmental initiatives this year. Staff participation in annual ‘B Green’ week was high, with competitions, surveys and environmental gifts on offer. As an internal communications tool, reminder stickers continue to be used to encourage staff to switch off lights, turn off computers and report leaking taps. Crown completed reporting actions for the Carbon Disclosure Project, which holds the largest database of primary corporate climate change information in the world. Crown also took part in the National Greenhouse and Energy Reporting System, the Energy Efﬁ ciency Opportunities program and the Water Efﬁ ciency Management Plan, which was initiated by the Western Australian State Government. CROWN MELBOURNE This year Crown Melbourne undertook a number of sustainability initiatives including joining the City of Melbourne’s 1200 Buildings Program aimed at reducing the city’s environmental impact by retroﬁ tting existing buildings. Additionally, an Environmental Management System that enables Crown Melbourne to monitor and manage its environmental impact was established. Crown Melbourne also established its Environmental Committee with representatives from each business unit. Energy Efﬁ ciency Crown Melbourne continued to reduce energy consumption this ﬁ nancial year through initiatives such as lighting upgrades, improvements to kitchen exhaust fans and car park ventilation, heating, ventilation and air conditioning optimisation and IT Hub cooling systems. This resulted in a CO2 abatement of more than 4,000 tonnes, the equivalent to powering 300 homes or removing 900 cars from the streets. Over the ﬁ nancial year, Crown upgraded more than 5,000 light ﬁ ttings resulting in more than one million kWh in energy savings per year. That is enough energy to power 100 Victorian homes, or the equivalent to removing 300 cars from the streets. Water Conservation Water reduction initiatives continued to be a focus for Crown Melbourne this year including saving water during ﬁ re sprinkler testing (in a joint initiative with South East Water) with more than four million litres of water saved per year. Crown Melbourne continues to conserve a signiﬁ cant amount of water after replacing approximately 5,500m2 of grass with artiﬁ cial turf since June 2009. Annual water savings have totalled almost three million litres per year, or the equivalent of one and a half Olympic sized swimming pools. Life Cycle Management In October 2010, Crown received the Excellence in Sustainability Award at the annual Restaurant & Catering Awards for Excellence on the back of its organics recycle program which turns organic waste into compost to be used in agricultural processes. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 29 S USTAINABILITY REPORT CONTINUED (cid:42)(cid:89)(cid:86)(cid:94)(cid:85)(cid:3)(cid:54)(cid:89)(cid:78)(cid:72)(cid:85)(cid:80)(cid:74)(cid:90)(cid:3)(cid:57)(cid:76)(cid:74)(cid:96)(cid:74)(cid:83)(cid:80)(cid:85)(cid:78)(cid:3)(cid:58)(cid:96)(cid:90)(cid:91)(cid:76)(cid:84)(cid:3)(cid:59)(cid:89)(cid:72)(cid:74)(cid:82)(cid:80)(cid:85)(cid:78) 140 120 100 d e t s o p m o C s c n a g r O i f o s e n n o T 80 60 40 20 0 30 (cid:31) (cid:23) (cid:3) (cid:83) (cid:92) (cid:49) (cid:31) (cid:23) (cid:3) (cid:78) (cid:92) (cid:40) (cid:31) (cid:23) (cid:3) (cid:87) (cid:76) (cid:58) (cid:31) (cid:23) (cid:3) (cid:91) (cid:74) (cid:54) (cid:31) (cid:23) (cid:3) (cid:93) (cid:86) (cid:53) (cid:31) (cid:23) (cid:3) (cid:74) (cid:76) (cid:43) (cid:32) (cid:23) (cid:3) (cid:85) (cid:72) (cid:49) (cid:32) (cid:23) (cid:3) (cid:73) (cid:76) (cid:45) (cid:32) (cid:23) (cid:3) (cid:89) (cid:72) (cid:52) (cid:32) (cid:23) (cid:3) (cid:89) (cid:87) (cid:40) (cid:32) (cid:23) (cid:3) (cid:96) (cid:72) (cid:52) (cid:32) (cid:23) (cid:3) (cid:85) (cid:92) (cid:49) (cid:32) (cid:23) (cid:3) (cid:83) (cid:92) (cid:49) (cid:32) (cid:23) (cid:3) (cid:78) (cid:92) (cid:40) (cid:32) (cid:23) (cid:3) (cid:87) (cid:76) (cid:58) (cid:32) (cid:23) (cid:3) (cid:91) (cid:74) (cid:54) (cid:32) (cid:23) (cid:3) (cid:93) (cid:86) (cid:53) (cid:32) (cid:23) (cid:3) (cid:74) (cid:76) (cid:43) (cid:23) (cid:24) (cid:3) (cid:85) (cid:72) (cid:49) (cid:23) (cid:24) (cid:3) (cid:73) (cid:76) (cid:45) (cid:23) (cid:24) (cid:3) (cid:89) (cid:72) (cid:52) (cid:23) (cid:24) (cid:3) (cid:89) (cid:87) (cid:40) (cid:23) (cid:24) (cid:3) (cid:96) (cid:72) (cid:52) (cid:23) (cid:24) (cid:3) (cid:85) (cid:92) (cid:49) (cid:23) (cid:24) (cid:3) (cid:83) (cid:92) (cid:49) (cid:23) (cid:24) (cid:3) (cid:78) (cid:92) (cid:40) (cid:23) (cid:24) (cid:3) (cid:87) (cid:76) (cid:58) (cid:23) (cid:24) (cid:3) (cid:91) (cid:74) (cid:54) (cid:23) (cid:24) (cid:3) (cid:93) (cid:86) (cid:53) (cid:23) (cid:24) (cid:3) (cid:74) (cid:76) (cid:43) (cid:24) (cid:24) (cid:3) (cid:85) (cid:72) (cid:49) (cid:24) (cid:24) (cid:3) (cid:73) (cid:76) (cid:45) (cid:24) (cid:24) (cid:3) (cid:89) (cid:72) (cid:52) (cid:24) (cid:24) (cid:3) (cid:89) (cid:87) (cid:40) (cid:24) (cid:24) (cid:3) (cid:96) (cid:72) (cid:52) (cid:24) (cid:24) (cid:3) (cid:85) (cid:92) (cid:49) In a bid to minimise the environmental impact of Crown’s ofﬁ ce paper, FSC (Forest Stewardship Council) and PEFC (Program for the Endorsement of Forest Certiﬁ cation) certiﬁ ed sustainable paper, which is Australian made, is now used in all ofﬁ ces. Crown Melbourne has successfully been re-certiﬁ ed under Sustainability Victoria’s Waste-Wise scheme for the fourth year in a row. Crown received Bronze certiﬁ cation and was awarded a Special Commendation for the ‘signiﬁ cant improvements in waste management observed in the last 12 months’. A green waste recycling system completed at Crown Melbourne this ﬁ nancial year collects and composts green waste generated from landscape activities across the complex to reuse on-site to assist in the growth of Crown’s extensive gardens. In a signiﬁ cant move to help reduce the environmental impact of product packaging, Crown Melbourne became a signatory to the Australian Packaging Covenant this year. The Covenant is a voluntary initiative by government and industry to reduce the environmental effects of packaging on the environment. Staff support and inclusion in sustainable activities continues to be important, and this year, in addition to supporting World Environment Day, Crown staff were given the opportunity to recycle their old mobile phones via Mobile Muster collection bins, with a tree being planted for each kilogram of phones recycled. BURSWOOD Burswood Entertainment Complex places high priority on environmental issues, working towards a sustainable environment through monitoring and measuring its performance and consumption. With a dedicated environmental committee representing the major business units across the company, the committee drives environmental initiatives for energy conservation, water conservation and waste management. Energy Efﬁ ciency As part of Burswood’s ongoing energy monitoring program, further energy saving initiatives were completed this year including the trial of LED lamps in various areas across the complex. Additionally, the installation of voltage reduction transformers resulted in a 24 percent reduction in kilowatts per hour (kWh) consumption. Water Conservation Burswood has historically had a strong focus on water conservation and this year received a ﬁ ve-star rating from the Water Corporation in the One-2-Five™ water management assessment. A number of water saving initiatives were identiﬁ ed and implemented including the installation of 2.5 litre tapware restrictors/aerators to hand basins. Life Cycle Management A complex-wide public recycling program, as well as an organic waste recycling program within Burswood’s kitchens, were a major focus in waste management this year. Through these initiatives, an estimated 12 tonnes of waste will be diverted from landﬁ ll every year – reducing CO2 emissions by 36 tonnes per annum. The following initiatives were implemented over the course of the year with funding applications lodged and grants received for each: (cid:129) Packaging Stewardship Forum public place recycling; and (cid:129) Strategic Waste Initiatives Scheme – which involves collection of all landscape green waste from all commercial kitchens which is then removed off-site, processed and returned to Burswood as mulch for the garden areas. By diverting an average of 13 tonnes of food per month, a total of more than 99 tonnes of carbon dioxide equivalents are likely to be saved. 2010 Waste-Wise Awards at the Melbourne Aquarium C o r p o r a t e G o v e r n a n c e S t a t e m e n t Corporate Governance Statement The Crown Limited Board is committed to the implementation and maintenance of good corporate governance practices. This Statement sets out the extent to which Crown Limited (Crown) has followed the best practice recommendations set by the ASX Corporate Governance Council (the Principles and Recommendations) during the twelve month period ending 30 June 2011. PRINCIPLE 1 LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT Functions reserved for the Board The Board is responsible for guiding and monitoring Crown on behalf of its shareholders. In addition, the Board (in conjunction with management) is responsible for identifying areas of signiﬁ cant business risk and ensuring arrangements are in place to adequately manage those risks. The Board has adopted a formal Board Charter which sets out a list of speciﬁ c functions which are reserved for the Board. Board appointments are made pursuant to formal terms of appointment. Functions delegated to senior executives Crown’s senior executives have responsibility for matters which are not speciﬁ cally reserved for the Board (such as the day-to-day management of the operations and administration of Crown). Process for evaluating performance of senior executives Crown has established processes for evaluating the performance of its senior executives. In summary, each senior executive is evaluated against the achievement of pre-agreed performance objectives. The evaluation process is conducted annually and is followed by the determination of appropriate remuneration of the relevant senior executive. Detailed information regarding Crown’s remuneration practices is provided in the Remuneration Report. An evaluation of senior executives took place following the end of the ﬁ nancial year and in accordance with the processes described in the Remuneration Report. Induction process for new executives Crown executives are required to undertake formal induction training through either the Crown Melbourne on-site accredited training facility – Crown College, or Burswood’s on-site training program. The program involves training about: • the history and development of the Crown and Burswood brands and businesses; • the main legal and regulatory obligations affecting the Crown businesses; • Crown’s responsible gaming policies and procedures; • Crown’s responsible service of alcohol policies and • the rights and obligations of Crown employees. As part of the induction program, executives are required to successfully complete a series of online training modules and to pass the associated assessment. More information A full copy of the Crown Board Charter is available at: www.crownlimited.com under the heading Corporate Governance – Charters. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 31 CO RPORATE GOVERNANCE STATEMENT CONTI NUED PRINCIPLE 2 STRUCTURE THE BOARD TO ADD VALUE Composition of the Board As at the date of this Statement, the Board comprises the following eleven Directors: • James D Packer Executive Chairman • John H Alexander BA Executive Deputy Chairman • Benjamin A Brazil BCom LLB Independent, Non-Executive Director • Christopher D Corrigan Independent, Non-Executive Director • Rowen B Craigie BEc (Hons) Chief Executive Ofﬁ cer and Managing Director • Rowena Danziger BA, TC, MACE Independent, Non-Executive Director • Geoffrey J Dixon Independent, Non-Executive Director • Professor John S Horvath AO, MB, BS (Syd), FRACP Independent, Non-Executive Director • Ashok Jacob MBA Non-independent, Non-Executive Director • Michael R Johnston BEc, CA Non-independent, Non-Executive Director • Harold C Mitchell AC Independent, Non-Executive Director Mr David L B Gyngell resigned on 25 November 2010. Mr Richard W Turner resigned on 1 May 2011. Information about each current Director’s qualiﬁ cations, experience and period in ofﬁ ce is set out in the Directors’ Statutory Report. The roles of Chair and Chief Executive Ofﬁ cer are exercised by separate persons. James Packer acts as Executive Chairman and Rowen Craigie as Chief Executive Ofﬁ cer and Managing Director. Relationships affecting independence The Crown Board is currently comprised of eleven Directors, six of whom are independent Directors. A majority of Directors are therefore independent. During the year, there were three Board changes (the appointment of Mr Mitchell and the resignations of Mr Gyngell and Mr Turner), however, the Board was at all times comprised of a majority of independent directors. The independence of Directors is assessed against a list of criteria and materiality thresholds. Those criteria have been formally enshrined in the Crown Board Charter. Each Director who is listed as an independent Director complies with the relevant criteria for independence set out in the Crown Board Charter. C o r p o r a t e G o v e r n a n c e S t a t e m e n t 32 C o r p o r a t e G o v e r n a n c e S t a t e m e n t Departure from Recommendation 2.2: The Principles and Recommendations recommend that the chair of the Board should be an independent Director. Crown’s Chairman is not an independent Director. The Board believes that the interests of shareholders are best served by a Chairman who is sanctioned by shareholders and who will act in the best interests of shareholders as a whole. As the Chairman has a signiﬁ cant relevant interest in Crown, he is well placed to act on behalf of shareholders and in their best interests. Procedure for selection and appointment of new Directors Where a new Director appointment is required, Crown adheres to procedures (Selection Procedure) including the following: • the experience and skills appropriate for an appointee, having regard to those of the existing Board members and likely changes to the Board are considered; • upon identifying a potential appointee, speciﬁ c consideration is given to that candidate’s: – competencies and qualiﬁ cations; – independence; – other directorships and time availability; and – the effect that their appointment would have on the overall balance and composition of the Board; and • ﬁ nally, all existing Board members must consent to the proposed appointment. The duties, responsibilities and powers of Crown’s Nomination and Remuneration Committee extend to reviewing the Selection procedure and making appropriate recommendations to the Board in relation to the Selection Procedure. The Committee is responsible for implementing the Selection Procedure and developing succession plans in order for the Board to maintain appropriate experience, expertise and diversity. The re-appointment procedures for incumbent Directors are as outlined in Crown’s Constitution. In summary, subject to the speciﬁ c matters described in the Constitution, an election of Directors must take place each year at which one third of Directors must retire. Any Director who has been in ofﬁ ce for three or more years and for three or more annual general meetings must also retire. Directors who retire are generally eligible for re-election. Process for evaluating performance of the Board, its Committees and its members A performance evaluation of the Board and of its Committees is undertaken annually, following completion of each ﬁ nancial year, by way of a questionnaire sent to each Board and Committee member. The questionnaire covers the role, composition, procedure and practices of the Board and its Committees. The individual responses to the questionnaire are conﬁ dential to each Board/Committee member, with questionnaire responses to be provided to the Chairman of the Nomination and Remuneration Committee for his consideration and provision of a report to the Board. An evaluation of the Board and its Committees took place following the end of the ﬁ nancial year and in accordance with the processes described above. Crown’s Nomination and Remuneration Committee also has delegated responsibility for reviewing Crown’s procedure for the evaluation of the performance of the Board, its Committees and its directors. Procedures for taking independent advice To enable Crown’s Board to fulﬁ l its role, each Director may obtain independent advice on relevant matters at Crown’s expense. In these circumstances, the Director must notify the Executive Chairman of the nature of the advice sought prior to obtaining that advice, so that the Executive Chairman can take steps to ensure that the party from whom advice is sought has no material conﬂ ict of interest with Crown. The Executive Chairman is also responsible for approving payment of invoices in relation to the external advice. In addition, each Board Committee has the full authority of the Board to: • communicate and consult with external and internal persons and organisations concerning matters delegated to the Committee; and • appoint independent experts to provide advice on matters delegated to the Committee. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 33 CO RPORATE GOVERNANCE STATEMENT CONTI NUED Crown Board Committees To assist in carrying out its responsibilities, the Crown Board has established the following Committees: Committees Current Members4 Meetings held during FY 2011 Audit & Corporate Governance Finance1 Investment2 Nomination and Remuneration3 Occupational Health, Safety & Environment Responsible Gaming Risk Management Benjamin Brazil (Chair) Rowena Danziger Michael Johnston Geoffrey Dixon (Chair) Benjamin Brazil Michael Johnston James Packer (Chair) John Alexander Rowen Craigie Ashok Jacob Geoffrey Dixon (Chair) Chris Corrigan Harold Mitchell Rowena Danziger (Chair) Rowen Craigie John Horvath Michael Johnston John Horvath (Chair) Rowen Craigie Rowena Danziger Geoffrey Dixon (Chair) Rowen Craigie Rowena Danziger 3 0 0 2 4 5 2 1. The Finance Committee did not meet this ﬁ nancial year, however there was one written resolution assented to by the Committee during ﬁ nancial year 2011. 2. The Investment Committee did not meet this ﬁ nancial year, however there were two written resolutions assented to by the Committee during ﬁ nancial year 2011. 3. The Nomination and Remuneration Committee was restructured in June 2011. Its mandate was extended to speciﬁ cally include delegated authority to deal with remuneration arrangements for executive directors and relevant senior management including the level of remuneration and relevant contractual terms. In June 2011, Mr Mitchell replaced Mr Packer as a member of the Committee. As a result, the Committee is now comprised solely of independent, non-executive directors. In addition to its two formal meetings, there was also one written resolution assented to by the Committee during ﬁ nancial year 2011. 4. During the year, Mr Brazil replaced Mr Turner as Chair of the Audit & Corporate Governance Committee and as a member of the Finance Committee, as noted above, Mr Mitchell replaced Mr Packer as a member of the Nomination and Remuneration Committee and Professor Horvath was appointed to the Occupational Health, Safety & Environment Committee. Each Committee has adopted a formal Charter that outlines its duties and responsibilities. More information A full copy of each of Crown’s Committee Charters is available at: www.crownlimited.com under the heading Corporate Governance – Charters. A description of the procedure for selection, appointment and re-election of Directors is available on the Crown website at: www.crownlimited.com under the heading Corporate Governance – Policies. C o r p o r a t e G o v e r n a n c e S t a t e m e n t 34 C o r p o r a t e G o v e r n a n c e S t a t e m e n t PRINCIPLE 3 PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING Codes of conduct Crown has established separate Codes of Conduct that outline the standard of ethical behaviour that is expected of its Directors and of its employees at all times. The Code of Conduct for Employees is a detailed statement of the: • practices required by employees to maintain conﬁ dence in Crown’s integrity; • legal obligations of employees and the reasonable expectations of their stakeholders; and • responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Policy concerning diversity Crown has established a policy concerning diversity and disclosed its policy on its website. The policy includes requirements for the Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them. In accordance with the Policy, Crown has established measurable objectives for achieving gender diversity and will assess the objectives and Crown’s progress in achieving those objectives annually, and will report the results of those objectives. The ﬁ rst report will be provided in the 2012 Annual Report. Crown will also report annually the proportion of women employees in the Crown Limited group, women in senior executive positions and women on the Board. The ﬁ rst report will be provided in the 2012 Annual Report. Crown’s Audit and Corporate Governance Committee has been delegated responsibility for developing and monitoring the application of Crown’s Diversity Policy. Policy concerning trading in company securities Crown has adopted a formal Securities Trading Policy which details Crown’s policy concerning trading in Crown shares by Directors, senior executives and employees. The Securities Trading Policy: • includes a requirement that employees do not buy and sell Crown shares within a 12 month period (ie that they do not short trade); • establishes formal “trading windows” during which Crown employees can and cannot trade in Crown shares; • includes restrictions and clearance procedures as to when trading can and cannot occur; • sets out Crown’s policy on entering into transactions in associated products which limit economic risk; and • summarises the application of the insider trading provisions of the Corporations Act and the consequences of contravention thereof. A copy of the Securities Trading Policy has been given to Australian Securities Exchange and released to the market. More information Full copies of Crown’s Code of Conduct for Directors and Code of Conduct for Employees are available at: www.crownlimited.com under the heading Corporate Governance – Codes. A full copy of Crown’s Diversity Policy is available at: www.crownlimited.com under the heading Corporate Governance – Policies. A full copy of Crown’s Securities Trading Policy is available at: www.crownlimited.com under the heading Corporate Governance – Policies. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 35 CO RPORATE GOVERNANCE STATEMENT CONTI NUED C o r p o r a t e G o v e r n a n c e S t a t e m e n t PRINCIPLE 4 SAFEGUARD INTEGRITY IN FINANCIAL REPORTING Crown Audit & Corporate Governance Committee and Charter As indicated above, Crown has established a formal Audit & Corporate Governance Committee to review the integrity of Crown’s ﬁ nancial reporting and to oversee the independence of Crown’s external auditors. The current members of the Audit & Corporate Governance Committee are Ben Brazil (Chair), Rowena Danziger and Michael Johnston. All members of the Committee are Non-Executive Directors and a majority of those Committee members are independent Directors. The Chairman of the Audit & Corporate Governance Committee, Mr Ben Brazil is an independent Director who has extensive ﬁ nancial qualiﬁ cations and experience. He holds a Bachelor of Commerce degree and holds a senior role at Macquarie Bank in the Corporate and Asset Finance Group. Further information about each Committee member’s qualiﬁ cations and experience is set out in the Directors’ Statutory Report. The Audit & Corporate Governance Committee has adopted a formal Charter that outlines its duties and responsibilities. The Charter includes information on the procedures for selection and appointment of the external auditor of Crown and for the rotation of external audit engagement partners. More information A full copy of Crown’s Audit & Corporate Governance Committee Charter is available at: www.crownlimited.com under the heading Corporate Governance – Charters. PRINCIPLE 5 MAKE TIMELY AND BALANCED DISCLOSURE Policy to ensure compliance with ASX Listing Rule disclosure requirements Crown has a formal Continuous Disclosure Policy in place which is designed to ensure compliance with ASX Listing Rule requirements. The Policy details processes for: • ensuring material information is communicated to Crown’s Chief Executive Ofﬁ cer, its General Counsel and Company Secretary or a member of the Audit & Corporate Governance Committee; • the assessment of information and for the disclosure of material information to the market; and • the broader publication of material information to Crown’s shareholders and the media. More information A full copy of Crown’s Continuous Disclosure Policy is available at: www.crownlimited.com under the heading Corporate Governance – Policies. 36 PRINCIPLE 6 RESPECT THE RIGHTS OF SHAREHOLDERS Promotion of effective communication with shareholders Crown has a Communications Policy which seeks to promote effective communication with its shareholders. The Policy explains how information concerning Crown will be communicated to shareholders. The communication channels include: • Crown’s Annual Report; • disclosures made to the ASX; and • Notices of Meeting and other Explanatory Memoranda. Crown has a dedicated corporate website which includes copies of all communications and other company information. Advance notiﬁ cation of results announcements is made via Crown’s website. C o r p o r a t e G o v e r n a n c e S t a t e m e n t More information A full copy of Crown’s Communication Policy is available at: www.crownlimited.com under the heading Corporate Governance – Policies. PRINCIPLE 7 RECOGNISE AND MANAGE RISK Policy for the oversight and management of material business risks Crown has established policies for the oversight and management of material business risks and has adopted a formal Risk Management Policy. Risk management is an integral part of the industry in which Crown operates. Design and implementation of risk management and internal control systems As required by the Board, Crown’s management have devised and implemented risk management systems appropriate to Crown. Management is charged with monitoring the effectiveness of risk management systems and is required to report to the Board via the Risk Management Committee. The Board convened Risk Management Committee administers Crown’s Risk Management Policy. The Policy sets out procedures which are designed to identify, assess, monitor and manage risk at each of Crown’s controlled businesses and requires that the results of those procedures are reported to the Crown Board. A formal Risk Management Plan has been developed using the model outlined in AS/NZS ISO 31000:2009 Risk Management – Principles and Guidelines. The Plan identiﬁ es speciﬁ c Head Ofﬁ ce risks in light of major risks identiﬁ ed at an operational level and provides the framework for the reporting and monitoring of material risks across the Crown group. The Board has received, and will continue to receive, periodic reports through the Risk Management Committee, summarising the results of risk management initiatives at Crown. Chief Executive Ofﬁ cer and Chief Financial Ofﬁ cer assurances The Crown Board has received assurance from the Chief Executive Ofﬁ cer and the Chief Financial Ofﬁ cer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to ﬁ nancial reporting risks. More information A full copy of Crown’s Risk Management Committee Charter is available at: www.crownlimited.com under the heading Corporate Governance – Charters. A full copy of Crown’s Risk Management Policy is available at: www.crownlimited.com under the heading Corporate Governance – Policies. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 37 CO RPORATE GOVERNANCE STATEMENT CONTI NUED C o r p o r a t e G o v e r n a n c e S t a t e m e n t PRINCIPLE 8 REMUNERATE FAIRLY AND RESPONSIBLY Remuneration of Board members and Senior Executives Crown has established a formal Nomination and Remuneration Committee. The role of the Nomination and Remuneration Committee includes the review and recommendation of appropriate Directors’ Fees to be paid to non-executive Directors. During the year, the role of this Committee was extended to include consideration of remuneration policies to be applied to executives, including any equity-based remuneration plan that may be considered, subject to shareholder approval (where required). Following the end of the ﬁ nancial year, the Committee has reviewed and approved: • the remuneration for senior executives which will apply during the ﬁ nancial year ending 30 June 2012; and • the short term bonus payments made to senior executives referable to the ﬁ nancial year ending 30 June 2011. The Nomination and Remuneration Committee was also actively involved in the development of the 2010 Crown LTI which is described in detail in the Remuneration Report. The current members of the Nomination and Remuneration Committee are Geoffrey Dixon (Chair), Chris Corrigan and Harold Mitchell who are each independent, non-executive Directors. Information about each Committee member’s qualiﬁ cations and experience is set out in the Directors’ Statutory Report. The Nomination and Remuneration Committee has adopted a formal Charter that outlines its duties and responsibilities. A summary of current remuneration arrangements is set out more fully in the Remuneration Report. The objective of Crown’s remuneration policy is to ensure that: • senior executives are motivated to pursue the long-term growth and success of Crown; and • there is a clear relationship between senior executives’ performance and remuneration. Policy on entering into transactions in associated products which limit economic risk Directors and employees of the Crown group who hold Crown shares under the Executive Share Plan are not permitted to hedge or create derivative arrangements in respect of their Executive Share Plan shares or any of their interests in any of those shares. The rules of the 2010 Crown LTI speciﬁ cally provide that a participant must not grant or enter into any Security Interest in or over any Crown shares that may be acquired under the Plan (Participant Shares) or otherwise deal with any Participant Shares or interest in them until the relevant Participant Shares are transferred from the Trustee to the participant in accordance with the Plan rules. Security Interests are deﬁ ned to extend to any mortgage, charge, pledge or lien or other encumbrance of any nature, and includes any derivative relating to or involving a Participant Share. Any Security Interest, disposal or dealing made by a participant in contravention of the Plan rules will not be recognised by Crown. More information A full copy of Crown’s Nomination and Remuneration Committee Charter is available at: www.crownlimited.com under the heading Corporate Governance – Charters. A full copy of Crown’s Remuneration Policy is available at: www.crownlimited.com under the heading Corporate Governance – Policies. 38 N e v a d a I n f o r m a t i o n S t a t e m e n t Nevada Information Statement The gaming industry in Nevada is highly regulated and Crown Limited (Crown) must maintain relevant licences to continue its investments in entities with gaming operations in Nevada. Each of the casinos in which Crown has an interest is subject to extensive regulation under the laws, rules and regulations of the jurisdiction where it is located. These laws, rules and regulations generally concern the responsibility, ﬁ nancial stability and character of the owners, managers, and persons with ﬁ nancial interest in gaming operations. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. Crown is registered as a publicly traded corporation in the state of Nevada. One of the conditions of that registration requires Crown to summarise relevant Nevada gaming law requirements in this Report. Crown Entertainment Complex in Melbourne and Burswood Entertainment Complex in Perth are regulated in a similar manner by the Victorian Commission for Gambling Regulation and the Western Australian Department of Racing Gaming and Liquor, respectively. We are not, however, required to summarise the regulations speciﬁ c to Victoria and Western Australia in this Report. NEVADA GOVERNMENT REGULATION The ownership and operation of casino gaming facilities in Nevada are subject to the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the Nevada Act) and various local regulations. Gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission (the Nevada Commission), the Nevada State Gaming Control Board (the Nevada Board) and various county and city licensing agencies (the local authorities). The Nevada Commission, the Nevada Board and the local authorities are collectively referred to as the “Nevada Gaming Authorities”. The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy that are concerned with, among other things: • the prevention of unsavoury or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; • the establishment and maintenance of responsible accounting practices; • the maintenance of effective controls over the ﬁ nancial practices of licensees, including the establishment of minimum procedures for internal ﬁ scal affairs and the safeguarding of assets and revenues; • providing reliable record keeping and requiring the ﬁ ling of periodic reports with the Nevada Gaming Authorities; • the prevention of cheating and fraudulent practices; and • providing a source of state and local revenues through taxation and licensing fees. Each of the entities in which Crown holds an investment and which currently operate casinos in Nevada (the casino licensees) is required to be licensed by the Nevada Gaming Authorities. Certain of Crown’s subsidiaries in the Cannery ownership chain have also been licensed or found suitable as shareholders, members or general partners, as relevant, of the casino licensees. The casino licensees and the foregoing subsidiaries are collectively referred to as the “licensed subsidiaries”. REGISTRATION AS A PUBLICLY TRADED CORPORATION Crown is required to be registered by the Nevada Commission as a publicly traded corporation and, as such, is required periodically to submit detailed ﬁ nancial and operating reports to the Nevada Commission and to furnish any other information that the Nevada Commission may require. No person may become a shareholder or member of, or receive any percentage of proﬁ ts from the licensed subsidiaries without ﬁ rst obtaining licences and approvals from the Nevada Gaming Authorities. Additionally, local authorities have taken the position that they have the authority to approve all persons owning or controlling the shares of any corporation controlling a gaming licensee. Crown and the licensed subsidiaries have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licences required in order to engage in gaming activities in Nevada. SUITABILITY OF INDIVIDUALS Power to investigate The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, Crown or any of the licensed subsidiaries to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 39 NE VADA INFORMATION STATEMENT CO NTINUED Ofﬁ cers, Directors and certain key employees of the licensed subsidiaries must ﬁ le applications with the Nevada Gaming Authorities and may be required to be licensed by the Nevada Gaming Authorities. Crown’s ofﬁ cers, Directors and key employees who are actively and directly involved in the gaming activities of the licenced subsidiaries may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing or a ﬁ nding of suitability for any cause they deem reasonable. A ﬁ nding of suitability is comparable to licensing and both require submission of detailed personal and ﬁ nancial information followed by a thorough investigation. The applicant for licensing or a ﬁ nding of suitability or the gaming licensee by which the applicant is employed or for whom the applicant serves must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a ﬁ nding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. N e v a d a I n f o r m a t i o n S t a t e m e n t Consequences of ﬁ nding of unsuitability If the Nevada Gaming Authorities were to ﬁ nd an ofﬁ cer, Director or key employee unsuitable for licensing or to continue having a relationship with Crown or the licensed subsidiaries, such company or companies would have to sever all relationships with that person. In addition, the Nevada Commission may require Crown or the licensed subsidiaries to terminate the employment of any person who refuses to ﬁ le appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada. Reporting requirements Crown and the licensed subsidiaries are required to submit detailed ﬁ nancial and operating reports to the Nevada Commission. Substantially all of Crown and the licensed subsidiaries’ material loans, leases, sales of securities and similar ﬁ nancing transactions must be reported to or approved by the Nevada Commission. CONSEQUENCES OF VIOLATION OF THE NEVADA ACT If the Nevada Commission determined that Crown or a licensed subsidiary violated the Nevada Act, it could limit, condition, suspend or revoke, subject to compliance with certain statutory and regulatory procedures, Crown’s Nevada gaming licences and those of Crown’s licenced subsidiaries. In addition, Crown and the licensed subsidiaries and the persons involved could be subject to substantial ﬁ nes for each separate violation of the Nevada Act at the discretion of the Nevada Commission. CERTAIN BENEFICIAL HOLDERS OF SHARES REQUIRED TO BE LICENSED Generally Any beneﬁ cial holder of Crown’s voting securities, regardless of the number of shares owned, may be required to ﬁ le an application, be investigated and have his or her suitability as a beneﬁ cial holder of the voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Act requires any person who acquires more than 5% of any class of Crown’s voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneﬁ cial owners of more than 10% of any class of Crown’s voting securities apply to the Nevada Commission for a ﬁ nding of suitability within thirty days after the Chairman of the Nevada Board mails a written notice requiring such ﬁ ling. Institutional investors Under certain circumstances, an “institutional investor” as deﬁ ned in the Nevada Act, who acquires more than 10% but not more than 25% of any class of Crown’s voting securities, may apply to the Nevada Commission for a waiver of such ﬁ nding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor will be deemed to hold voting securities for investment purposes if it acquires and holds the voting securities in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of Crown’s Board of Directors, any change in Crown’s Constitution, management, policies or operations or any of Crown’s gaming afﬁ liates or any other action that the Nevada Commission ﬁ nds to be inconsistent with holding Crown’s voting securities for investment purposes only. 40 Activities that are deemed to be consistent with holding voting securities for investment purposes only include: • voting on all matters voted on by shareholders; • making ﬁ nancial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and • such other activities as the Nevada Commission may determine to be consistent with such investment intent. Corporations and trusts If the beneﬁ cial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and ﬁ nancial information including a list of beneﬁ cial owners. The applicant is required to pay all costs of investigation. Consequences of ﬁ nding of unsuitability Any person who fails or refuses to apply for a ﬁ nding of suitability or a licence within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board may be found unsuitable. The same restrictions apply to a nominee if the nominee, after request, fails to identify the beneﬁ cial owner. Any shareholder found unsuitable and who holds, directly or indirectly, any beneﬁ cial ownership of Crown’s shares beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offence in Nevada. Crown will be subject to disciplinary action if, after Crown receives notice that a person is unsuitable to be a shareholder or to have any other relationship with Crown or a licensed subsidiary, Crown or any of the licensed subsidiaries: • pays that person any dividend or interest upon any of Crown’s voting securities; • allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; • pays remuneration in any form to that person for services rendered or otherwise; or • fails to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities including, if necessary, the immediate purchase of the voting securities for cash at fair market value. N e v a d a I n f o r m a t i o n S t a t e m e n t CERTAIN DEBT HOLDERS REQUIRED TO BE LICENCED The Nevada Commission may, in its discretion, require the holder of any of Crown’s debt securities to ﬁ le an application, be investigated and be found suitable to hold the debt security. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, Crown can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: • pays to the unsuitable person any dividend, interest or any distribution whatsoever; • recognises any voting right by such unsuitable person in connection with such securities; • pays the unsuitable person remuneration in any form; or • makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction. MAINTENANCE OF SHARE REGISTER Crown is required to maintain a current share register in Nevada that may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneﬁ cial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for ﬁ nding the record holder unsuitable. Crown is also required to render maximum assistance in determining the identity of the beneﬁ cial owner. The Nevada Commission has the power to require Crown’s holding statements or share certiﬁ cates bear a legend indicating that such securities are subject to the Nevada Act. To date, however, the Nevada Commission has not imposed such a requirement on Crown. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 41 NE VADA INFORMATION STATEMENT CO NTINUED N e v a d a I n f o r m a t i o n S t a t e m e n t ACTIONS REQUIRING PRIOR APPROVAL OF THE NEVADA COMMISSION Public offerings to fund Nevada gambling activities Crown may not make a public offering of any securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or ﬁ nance gaming facilities in Nevada or to retire or extend obligations incurred for those purposes or for similar purposes. An approval, if given, does not constitute a ﬁ nding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities. Any representation to the contrary is unlawful. Transactions effecting a change in control Changes in control of Crown through merger, consolidation, share or asset acquisitions, management or consulting agreements or any act or conduct by a person whereby he or she obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a registered corporation must satisfy the Nevada Board and the Nevada Commission concerning a variety of stringent standards prior to assuming control of the registered corporation. The Nevada Commission may also require controlling shareholders, ofﬁ cers, Directors and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction. Share buy-backs and other arrangements Approvals are, in certain circumstances, required from the Nevada Commission before Crown can make exceptional repurchases of voting securities above the current market price and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalisation proposed by a registered corporation’s Board of Directors in response to a tender offer made directly to the registered corporation’s shareholders for the purpose of acquiring control of that corporation. INVESTIGATION AND MONITORING OF “FOREIGN GAMING OPERATIONS” Because Crown is involved in gaming ventures outside of Nevada, Crown is required to deposit with the Nevada Board and thereafter maintain a revolving fund in the amount of US$10,000 to pay the expenses of investigation by the Nevada Board of Crown’s participation in such gaming. The Nevada Board refers to any of Crown’s operations outside of Nevada as “foreign gaming operations”. The revolving fund is subject to increase or decrease at the discretion of the Nevada Commission. Crown is also required to comply with certain reporting requirements imposed by the Nevada Act. Crown would be subject to disciplinary action by the Nevada Commission if Crown: • knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation; • fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations; • engages in any activity or enters into any association that is unsuitable because it poses an unreasonable threat to the control of gaming in Nevada, reﬂects or tends to reﬂect discredit or disrepute upon the State of Nevada or gaming in Nevada or is contrary to the gaming policies of Nevada; • engages in any activity or enters into any association that interferes with the ability of the State of Nevada to collect gaming taxes and fees; or • employs, contracts with or associates with any person in the foreign gaming operation who has been denied a license or a ﬁ nding of suitability in Nevada on the ground of personal unsuitability or who has been found guilty of cheating at gambling. 42 D i r e c t o r s ’ S t a t u t o r y R e p o r t Directors’ Statutory Report COMPANY INFORMATION Review of operations A review of operations of the Crown Limited (Crown) group for the ﬁ nancial year ended 30 June 2011 and the results of those operations is detailed on pages 8 to 30. The principal activity of the entities within the Crown group is gaming and entertainment. Signiﬁ cant changes in state of affairs Some of the signiﬁ cant changes in the state of affairs of the consolidated group since 1 July 2010 include: • On 19 July 2010, it was announced that the Burswood Entertainment Complex had received in-principle support from the Government of Western Australia to expand the existing casino complex in order to accommodate an increase in gaming product. On the basis of obtaining the approval, Burswood commenced additional investment of $350 million over 36 months to enhance and expand its VIP gaming and accommodation facilities, expand its local gaming capacity, establish new restaurants and bars, upgrade the Intercontinental Perth Hotel and to acquire a luxury motor yacht for international investors. • On 11 May 2011, a series of acquisitions and additional capital expenditure projects were announced including: – the acquisition of the Holiday Inn hotel building and associated assets in Perth for approximately $79 million; – the acquisition of the Aspinall’s Club from the Aspers Group (a 50:50 joint venture between Crown and the Aspinall family) for a price of £36 million (approximately $53 million); – an additional investment of approximately $65 million in the further development of Level 1, West End Casino at Crown Melbourne; – the development of a new bar and lounge to be known as “Club 23” to be located on Level 3, Crown Towers at an expected project cost of $11 million; – an additional investment of approximately $73 million on the further expansion of the main gaming ﬂ oor at Burswood; and – the upgrading of VIP facilities in Burswood including the construction of a new inﬁ nity suite at a cost of approximately $7 million. • During the year Crown acquired an economic interest in each of Tabcorp Holdings Limited and Echo Entertainment Group Limited equivalent to 4.9% of the issued shares of each company by way of cash settled equity derivatives. Signiﬁ cant events after Balance Date Subsequent to 30 June 2011, the Directors of Crown announced a ﬁ nal dividend on ordinary shares in respect of the year ending 30 June 2011. The total amount of the dividend is $144.1 million, which represents 19 cents per share. The ﬁ nal dividend will be 50% franked. None of the unfranked component of the dividend will be conduit foreign income. The dividend has not been provided for in the 30 June 2011 ﬁ nancial statements. As noted above, on 11 May 2011, Crown announced the acquisition of the Holiday Inn hotel building and associated assets in Perth together with the termination of Burswood’s partnership with the Intercontinental Hotel Group (IHG) pursuant to which both the Holiday Inn hotel and the Intercontinental Hotel at Burswood were operated. The cost of these transactions was approximately $79 million. Settlement of the transactions occurred on 1 July 2011 and Burswood now operates both the Holiday Inn Burswood hotel and the Intercontinental Burswood hotel under a licence agreement with IHG. On 26 August 2011, Crown announced its intention to conduct an on market share buy-back of up to 30 million of its ordinary shares. This number represents approximately 4% of Crown shares on issue at 30 June 2011. Likely developments Other than the developments described in this Report and the accompanying review of operations, the Directors are of the opinion that no other matter or circumstance will signiﬁ cantly affect the operations and expected results for the Crown group. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 43 DI RECTORS’ STATU TORY REPO RT CO NTINUED D i r e c t o r s ’ S t a t u t o r y R e p o r t Environmental regulation The National Greenhouse and Energy Reporting Act 2007 (the NGER Act) established a mandatory reporting system for corporate greenhouse gas emissions and energy production and consumption. Crown is required to report emissions under the NGER Act. Relevant reports have been submitted during the year. Key features of the NGER Act are: • reporting of greenhouse gas emissions, energy consumption and production by large corporations; • corporate level public disclosure of greenhouse gas emissions and energy information; and • to provide consistent and comparable data for decision making. Crown is also subject to the Energy Efﬁ ciency Opportunities Act 2006 which encourages large energy-using businesses to improve their energy efﬁ ciency. It does this by requiring businesses to identify, evaluate and report publicly on cost effective energy savings opportunities. Crown submits reports in line with the required reporting schedule. At a state level, Crown Melbourne is subject to the Victorian Government’s Environment & Resource Efﬁ ciency Plans (EREP), which requires all large commercial and industrial facilities to prepare a plan identifying actions to reduce energy and water use and waste generation. Under the Western Australian Water By-laws legislation, Burswood Limited (Burswood) is required to complete annual water management assessments and submit water efﬁ ciency management plans. In July this year, the Government announced the details of a proposed carbon price mechanism. The Clean Energy legislative package is proposed to commence on 1 July 2012. Crown is monitoring the process of the legislative package and will assess the impact of the scheme on Crown’s businesses once the detail has been ﬁ nalised. The Crown group is not otherwise subject to any particular or signiﬁ cant environmental regulation under Australian law. Environmental issues are, however, important to Crown and it has taken a number of initiatives in this regard. A description of those initiatives is set out in the Sustainability section of this Report. Dividends and distributions Interim Dividend: Crown paid an interim dividend of 18 cents per ordinary share on 15 April 2011. The dividend was 60% franked. None of the unfranked component was conduit foreign income. Final Dividend: The Directors of Crown have announced a ﬁ nal dividend of 19 cents per ordinary share to shareholders registered as at 30 September 2011. The ﬁ nal divided will be 50% franked. None of the unfranked component of the dividend will be conduit foreign income. In summary: Interim Dividend paid Final Dividend payable Total Dividend per share 18 cents per share 19 cents per share 37 cents per share Crown paid shareholders a ﬁ nal dividend in respect of the 2010 ﬁ nancial year of $144.1 million. $’000 $136,511 $144,095 $280,606 44 D i r e c t o r s ’ S t a t u t o r y R e p o r t DIRECTORS AND OFFICERS Director details Set out below are the names of each person who has been a Director of Crown during or since year end and the period for which they have been a Director. There are eleven current Directors. Name Date Appointed Date Ceased James Douglas Packer John Henry Alexander Benjamin Alexander Brazil Christopher Darcy Corrigan Rowen Bruce Craigie Rowena Danziger Geoffrey James Dixon David Liam Barr Gyngell John Stephen Horvath Ashok Jacob Michael Roy Johnston Harold Charles Mitchell Richard Wallace Turner 6 July 2007 6 July 2007 26 June 2009 6 July 2007 31 May 2007 6 July 2007 6 July 2007 13 September 2010 9 September 2010 6 July 2007 6 July 2007 10 February 2011 6 July 2007 – – – – – – – 25 November 2010 – – – 1 May 2011 At Crown’s 2010 Annual General Meeting, Mr James Packer, Mrs Rowena Danziger and Mr Ashok Jacob stood for re-election as Directors. Each was re-elected as a Director at that time. The details of each Director’s qualiﬁ cations and experience as at the date of this Report are set out below. Details of all directorships of other Australian listed companies held in the three years before the end of the ﬁ nancial year have been included. James D Packer, Executive Chairman Mr Packer is the Executive Chairman of Consolidated Press Holdings Limited (CPH), a family company. CPH is a 43.79% shareholder in Crown and is a 50% shareholder in ASX listed Consolidated Media Holdings Limited (CMH), owner of interests in FOXTEL and FOX SPORTS. Mr Packer is Deputy Chairman of CMH, and is a director of various companies including Crown Melbourne Limited (appointed 22 July 1999), Burswood Limited (appointed 3 September 2004) and Melco Crown Entertainment Limited (appointed 8 March 2005). Mr Packer is the Chair of the Crown Investment Committee. Directorships of other Australian listed companies held during the last three years: • Challenger Financial Services Group Limited: from 6 November 2003 to 8 September 2009 • Consolidated Media Holdings Limited1: from 28 April 1992 to current • SEEK Limited: from 31 October 2003 to 26 August 2009 • Sunland Group Limited: from 20 July 2006 to 13 August 2009 • Ten Network Holdings Limited: from 13 December 2010 to 2 March 2011 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 45 DI RECTORS’ STATU TORY REPO RT CO NTINUED John Alexander BA, Executive Deputy Chairman D i r e c t o r s ’ S t a t u t o r y R e p o r t Mr Alexander is the Executive Deputy Chairman of Crown Limited, Executive Chairman of Consolidated Media Holdings Limited and is also a director of a number of companies, including Crown Melbourne Limited, Burswood Limited, Aspers Holdings (Jersey) Limited, FOXTEL Management Pty Limited, Premier Media Group Pty Limited (FOX SPORTS) and SEEKAsia Limited. Prior to 2007, Mr Alexander was the Chief Executive Ofﬁ cer and Managing Director of Publishing and Broadcasting Limited (PBL) from 2004, the Chief Executive of ACP Magazines Limited from 1999 and PBL’s group media division comprising ACP Magazines Limited and the Nine Network from 2002. Prior to joining the PBL Group, Mr Alexander was the Editor-in-Chief, Publisher & Editor of The Sydney Morning Herald and Editor-in-Chief of The Australian Financial Review. Mr Alexander is a member of the Crown Investment Committee. Directorships of other Australian listed companies held during the last three years: • Consolidated Media Holdings Limited1: from 16 December 1999 to current • SEEK Limited: from 17 April 2009 to 26 August 2009 Benjamin A Brazil BCom LLB, Independent, Non-Executive Director Mr Brazil is an Executive Director of Macquarie Group Limited, within its Corporate Asset Finance Division. He originally commenced employment at Macquarie in 1994 and has operated across a range of geographies and business lines during the course of his career. He holds a Bachelor of Commerce and a Bachelor of Laws from the University of Queensland. Mr Brazil is the Chairman of the Crown Audit and Corporate Governance Committee and a member of the Crown Finance Committee. Christopher D Corrigan, Independent, Non-Executive Director Mr Corrigan was Managing Director of Patrick Corporation Limited, Australia’s largest stevedore company with interests in rail transportation and aviation from March 1990 to May 2006. Prior to that, Mr Corrigan had a career with Bankers Trust spanning 20 years, including periods as Managing Director of Bankers Trust in Australia and for the Asia-Paciﬁ c region. Mr Corrigan sponsored the formation of a development capital business of $220 million known as Jamison Equity in 1990, which became a wholly owned subsidiary, in December 1996, of the then publicly listed company Patrick Corporation Limited. In September 2011, Mr Corrigan became the Chairman of Qube Logistics Holdings Limited. Mr Corrigan is a member of the Crown Nomination and Remuneration Committee. Directorships of other Australian listed companies held during the last three years: • Consolidated Media Holdings Limited1: from 8 March 2006 to current • Qube Logistics Holdings Limited: from 23 March 2011 to current • Webster Limited: from 30 November 2007 to 9 July 2010 Rowen B Craigie BEc (Hons), Chief Executive Ofﬁ cer and Managing Director Mr Craigie is also Chief Executive Ofﬁ cer and a director of Crown Melbourne Limited, and a director of Burswood Limited, Melco Crown Entertainment Limited and Aspers Holdings (Jersey) Limited. Mr Craigie previously served from 2007 to 2008 as the Chief Executive Ofﬁ cer, PBL Gaming and from 2002 to 2007 as the Chief Executive Ofﬁ cer of Crown Melbourne Limited. Mr Craigie joined Crown Melbourne Limited in 1993 and was appointed as the Executive General Manager of its Gaming Machines department in 1996 and was promoted to Chief Operating Ofﬁ cer in 2000. Prior to joining Crown Melbourne Limited, Mr Craigie was the Group General Manager for Gaming at the TAB in Victoria from 1990 to 1993 and held senior economic policy positions in Treasury and the Department of Industry in Victoria from 1984 to 1990. Mr Craigie is a member of Crown’s Investment, Occupational, Health Safety & Environment, Risk Management and Responsible Gaming Committees. Directorships of other Australian listed companies held during the last three years: • Consolidated Media Holdings Limited1: from 9 January 2002 to 8 April 2009 46 Rowena Danziger BA, TC, MACE, Independent, Non-Executive Director Mrs Danziger’s professional experience spans over 30 years in various Australian and American educational institutions. Mrs Danziger was the Headmistress at Ascham School in Sydney from 1973 to 2003. She is currently Chairperson of The Foundation of the Art Gallery of NSW. Mrs Danziger is also a Director of Consolidated Media Holdings Limited and Crown Melbourne Limited and is Chair of the Crown Limited Occupational Health, Safety & Environment Committee and a member of the Crown Audit & Corporate Governance, Risk Management and Responsible Gaming Committees. Directorships of other Australian listed companies held during the last three years: • Consolidated Media Holdings Limited1: 17 September 1997 to current Geoffrey J Dixon, Independent, Non-Executive Director Mr Dixon was Managing Director and Chief Executive Ofﬁ cer of Qantas Airways Limited from 2001 to 2008. He joined Qantas in 1994 and was also Chief Commercial Ofﬁ cer and, for two years, Deputy Chief Executive. He has also worked in the media, mining and government sectors. Mr Dixon is currently Chairman of the Australian Government’s major tourism marketing organisation, Tourism Australia, and Chairman of the Garvan Medical Research Foundation and Queensland Events. He sits on the boards of publicly listed companies Consolidated Media Holdings Limited and Facilitate Digital Holdings Limited. He is on the boards of Voyages Indigenous Tourism Australia, the Museum of Contemporary Art and the Great Barrier Reef Foundation, and is an Ambassador for the Australian Indigenous Education Foundation. Mr Dixon is the Chairman of the Crown Finance, Nomination and Remuneration and Risk Management Committees. D i r e c t o r s ’ S t a t u t o r y R e p o r t Directorships of other Australian listed companies held during the last three years: • Qantas Airways Limited: from 1 August 2000 to 28 November 2008 • Consolidated Media Holdings Limited1: from 31 May 2006 to current • Facilitate Digital Holdings Limited: from 9 July 2009 to current • Jetset Travelworld Limited: from 17 July 2008 to 15 September 2008 Professor John S Horvath AO, MB, BS (Syd), FRACP, Independent, Non-Executive Director Professor John Horvath was the Australian Government Chief Medical Ofﬁ cer from 2003-2009. He is currently continuing to advise the Department of Health & Ageing and the School of Medicine, University of Sydney, and holds the position of Honorary Professor of Medicine. Professor Horvath is currently a member of Council of the NHMRC and Chairman of the Healthcare Committee. He is a Fellow of the Royal Australasian College of Physicians and is a distinguished practitioner, researcher and teacher. Professor Horvath sits on the Board of the Garvan Research Foundation, the Centenary Institute of Medical Research and is a member of the Advisory Board to the World Health Organisation Inﬂuenza Collaborating Centre. Professor Horvath was previously Clinical Professor of Medicine at University of Sydney. He is also known as a leader in a range of medical training and workforce organisations. He is also a former President of the Australian Medical Council and the NSW Medical Board. Professor Horvath is the Chair of the Crown Responsible Gaming Committee and a member of the Crown Occupational Health, Safety & Environment Committee. Ashok Jacob MBA, Non-independent, Non-Executive Director Mr Ashok Jacob is a non-executive director of Crown (appointed 6 July 2007) as well as a non-executive director of Consolidated Media Holdings Limited (CMH). (Mr Jacob had previously been a non-executive director of CMH from 9 November 1998 to 8 April 2009). Mr Jacob is the Chairman of Ellerston Capital (appointed 6 August 2004). Mr Jacob was the CEO of Consolidated Press Holdings Limited (CPH) from 2006 to 2011 and previously the Joint CEO from 1998 to 2006. Mr Jacob is a director of CPH (appointed 25 November 1998) and a director of MRF Limited (appointed 26 October 1998). Mr Jacob holds a Master of Business Administration from the Wharton School, University of Pennsylvania and a Bachelor of Science from the University of Bangalore. Mr Jacob is a member of the Crown Investment Committee. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 47 DI RECTORS’ STATU TORY REPO RT CO NTINUED D i r e c t o r s ’ S t a t u t o r y R e p o r t Directorships of other Australian listed companies held during the last three years: • Consolidated Media Holdings Limited1: from 9 November 1998 to 8 April 2009, reappointed on 10 September 2009 to current • Challenger Financial Services Group Limited: from 6 November 2003 to 8 September 2009 Michael R Johnston BEc, CA, Non-independent, Non-Executive Director Mr Johnston is the Finance Director of Consolidated Press Holdings Limited (CPH), having previously been an advisor to the CPH Group for 17 years. As Finance Director, Mr Johnston oversees a large number of operational businesses within the CPH Group and its controlled associates. Mr Johnston was also the Chief Financial Ofﬁ cer of Ellerston Capital (a subsidiary of CPH) until 30 June 2008. He is an alternate Director of Consolidated Media Holdings Limited. Prior to his appointment with the CPH Group, Mr Johnston was a senior partner in the Australian member ﬁ rm of Ernst & Young. Mr Johnston was also on the Board of Partners of Ernst & Young, Australia. Mr Johnston holds a Bachelor of Economics degree from Sydney University and is an Associate of the Institute of Chartered Accountants of Australia. Mr Johnston is a member of the Crown Audit & Corporate Governance, Finance, and Occupational Health, Safety and Environment Committees. Directorships of other Australian listed companies held during the last three years: • Consolidated Media Holdings Limited1: from 16 December 2005 to 8 April 2009 (from 8 April 2009, alternate director to Mr James Packer and Mr Guy Jalland; from 10 September 2009 to current, alternate director to Mr Ashok Jacob) • Challenger Financial Services Group Limited: from 24 February 2006 to 8 September 2009 (alternate director to Mr James Packer and Mr Ashok Jacob) • Living and Leisure Australia Group: from 23 August 2011 to current Harold C Mitchell AC, Independent, Non-Executive Director Harold Mitchell is the founder of Mitchell and Partners, Executive Chairman of the Mitchell Communication Group and Executive Director of Aegis plc. Since he started Mitchell and Partners in 1976, the company has evolved to become the largest media and communications group in Australia today, with a growing presence in New Zealand and across the Asia-Paciﬁ c region. In December 2000, he launched the Harold Mitchell Foundation which distributes funds between health and the arts. He has been Chairman of the National Gallery Australia, President of the Melbourne International Festival of Arts, President of the Museums Board of Victorian and a Board Member of the Opera Australia Council. Mr Mitchell holds a large number of community roles including Chairman of CARE Australia, Chairman of the Melbourne Symphony Orchestra, Chairman of ThoroughVision, Chairman and Majority Owner of the Melbourne Rebels Rugby Union team, Chairman of TVS, University of Western Sydney’s television service for Greater Sydney, Chairman of Art Exhibitions Australia, Vice President of Tennis Australia and a Director of the Deakin Foundation. Mr Mitchell was appointed Companion of the Order of Australia in 2010 for eminent service to the community through leadership and philanthropic endeavours in the ﬁ elds of art, health and education and as a supporter of humanitarian aid in Timor-Leste and Indigenous communities. Mr Mitchell is a member of the Crown Nomination and Remuneration Committee. Directorships of other Australian listed companies held during the last three years: • Mitchell Communication Group Limited – From 10 March 2000 to 24 November 2010 (removed from ASX) Notes: 1. Consolidated Media Holdings Limited (previously Publishing and Broadcasting Limited, ASX Code: PBL). 48 Company secretary details Michael J Neilson BA, LLB Mr Neilson is Crown’s General Counsel and joint Company Secretary. Prior to his appointment with Crown, he was General Counsel for Crown Melbourne Limited, a position he held from 2004 to 2007. Prior to joining the Crown group, Mr Neilson spent 10 years in a commercial legal practice in Melbourne before joining the Lend Lease Group in Sydney in 1997 as General Counsel for Lend Lease Property Management. In 1998, he was appointed General Counsel and Company Secretary of General Property Trust, the position he held until joining Crown Melbourne Limited in 2004. Mr Neilson is also a member of the School Council of Camberwell Grammar School. Mary Manos BCom, LLB (Hons), GAICD Ms Manos was appointed joint Company Secretary in April 2008. She commenced employment with the Crown Group in October 2007 just prior to implementation of the PBL Scheme and the Demerger Scheme. Prior to joining Crown, Ms Manos was a Senior Associate in a Melbourne law ﬁ rm, specialising in mergers and acquisitions and corporate law. Ms Manos is a Graduate of the Australian Institute of Company Directors. D i r e c t o r s ’ S t a t u t o r y R e p o r t Other ofﬁ cer details In addition to the above, Crown’s principal ofﬁ cers include: • Kenneth M Barton Chief Financial Ofﬁ cer • W Todd Nisbet Executive Vice President, Strategy and Development • Barry J Felstead Chief Executive Ofﬁ cer, Burswood Limited • Greg F Hawkins Deputy Chief Executive, Crown Melbourne Limited Relevant interests of Directors Details of relevant interests of current Directors in Crown shares as at 30 June 2011 were as follows: Director John Alexander Rowen Craigie Rowena Danziger Harold Mitchell James Packer Notes: Total number of ordinary shares1 506,047 2,341,1022 30,896 114,887 326,129,2443 1. For more information on relevant interests of current Directors, please see the Remuneration Report and the key management personnel disclosures set out in the Notes to the Financial Statements. 2. Mr Craigie’s holding was entirely comprised of Crown Employee Share Plan shares. 3. On 1 September 2011, Mr Packer notiﬁ ed Crown and the ASX that Cairnton Holdings Limited, an entity controlled by Mr Packer, acquired 6 million ordinary shares. Accordingly, as at the date of this Report, Mr Packer has a relevant interest in a total of 332,129,244 ordinary shares. None of Crown’s Directors is party to any contract which would give that Director the right to call for the delivery of shares in Crown. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 49 DI RECTORS’ STATU TORY REPO RT CO NTINUED Board and Committee meetings Set out below are details of the number of Board meetings and Committee meetings held by Crown during the 2011 ﬁ nancial year together with each Director’s attendance details. Audit & Corporate Governance Committee Nomination and Remuneration Committee Board Occupational Health, Safety & Environment Committee Risk Management Committee Responsible Gaming Committee Meetings Meetings Meetings Meetings Meetings Meetings Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended D i r e c t o r s ’ S t a t u t o r y R e p o r t 2 2 2 2 2 2 J D Packer J H Alexander B A Brazil C D Corrigan R B Craigie R Danziger G J Dixon D L B Gyngell1 J S Horvath2 A P Jacob M R Johnston H C Mitchell3 R W Turner4 7 7 7 7 7 7 7 1 6 7 7 3 5 7 7 7 6 7 7 7 1 6 7 6 3 5 3 3 3 3 3 3 1. Appointed 13 September 2010 and resigned 25 November 2010. 2. Appointed 9 September 2010. 3. Appointed 10 February 2011. 4. Resigned 1 May 2011. 2 2 2 2 2 2 5 5 5 4 5 5 4 4 3 4 4 4 3 4 The Corporate Governance Statement includes details on Committee structure and membership during the year. Under Crown’s Constitution, its Board and Committee Charters, documents containing written resolutions assented to by Directors are to be taken as a minute of a meeting of Directors or of a Committee (as the case may be). There was one written resolution assented to by the Board this ﬁ nancial year. There were also two written resolutions assented to by the Investment Committee, one by the Nomination and Remuneration Committee and one by the Finance Committee. The Finance Committee and the Investment Committee did not formally meet this ﬁ nancial year. SHARES AND OPTIONS Crown has not granted any options over unissued shares. There are no unissued shares or interests under option. No shares or interests have been issued during or since year end as a result of option exercise. INDEMNITY AND INSURANCE OF OFFICERS AND AUDITORS Director and ofﬁ cer indemnities Crown indemniﬁ es certain persons as detailed in its Constitution in accordance with the terms of the Crown Constitution. Directors’ and ofﬁ cers’ Insurance During the year Crown has paid insurance premiums to insure ofﬁ cers of the Crown group against certain liabilities. The insurance contract prohibits disclosure of the nature of the insurance cover and the amount of the insurance payable. 50 AUDITOR INFORMATION Auditor details Ernst & Young has been appointed Crown’s auditor. Mr Brett Kallio is the Ernst & Young partner responsible for the audit of Crown’s accounts. True and fair information There is no additional true and fair information included in the ﬁ nancial report. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 28 of the Financial Report. The Directors are satisﬁ ed that the non-audit services are compatible with the general standard of independence for auditors imposed by the Corporations Act. The Board considers that the nature and scope of the services provided do not affect auditor independence. Rounding The amounts contained in the ﬁ nancial statements have been rounded off to the nearest thousand dollars (where rounding is applicable) under the option available to Crown under ASIC Class Order 98/0100. Crown is an entity to which the Class Order applies. D i r e c t o r s ’ S t a t u t o r y R e p o r t Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 51 Remuneration Report INTRODUCTION Content of the Report This Remuneration Report for the year ended 30 June 2011, outlines the Director and executive remuneration arrangements of Crown in accordance with the requirements of the Corporations Act (Cth) 2001 and its Regulations. For the purposes of this report, key management personnel (KMP) of the Crown group are deﬁ ned as those persons having authority and responsibility for planning, directing and controlling the major activities of the Crown group, directly or indirectly, including any Director (whether executive or otherwise) of the parent company. For further details of KMP, refer to note 30 of the Financial Report. The disclosures in the Remuneration Report have been audited. Persons to whom Report applies The remuneration disclosures in this Report cover the following persons: Non-Executive Directors • Benjamin A Brazil • Christopher D Corrigan • Rowena Danziger • Geoffrey J Dixon • David L Gyngell (appointed 13 September 2010 and resigned 25 November 2010) • John S Horvath (appointed 9 September 2010) • Ashok Jacob • Michael R Johnston • Harold C Mitchell (appointed 10 February 2011) • Richard W Turner (resigned 1 May 2011) Executive Directors • James D Packer (Executive Chairman) • John H Alexander (Executive Deputy Chairman) • Rowen B Craigie (Managing Director and Chief Executive Ofﬁ cer) Other company executives and key management personnel • Kenneth M Barton (Chief Financial Ofﬁ cer) • David G Courtney (Chief Executive Ofﬁ cer, Crown Melbourne Limited until 8 October 2010) • Barry J Felstead (Chief Executive Ofﬁ cer, Burswood Limited) • Greg F Hawkins (Deputy Chief Executive Ofﬁ cer, Crown Melbourne Limited from 6 December 2010) • W Todd Nisbet (Executive Vice President – Strategy and Development from 9 August 2010) In this Report the group of persons comprised of the Executive Directors and the other company executives and key management personnel (listed above) are referred to as “Senior Executives”. As shareholders are aware, Crown acquired the majority of its gaming assets in December 2007 via two schemes of arrangement between the then Publishing and Broadcasting Limited (PBL) (now Consolidated Media Holdings Limited (CMH)), Crown and their respective shareholders. Remaining references in this report to the PBL Scheme and the Demerger Scheme are references to those schemes. The disclosure document which detailed the terms of the Schemes (the PBL Scheme Booklet) remains available for viewing on the Crown website. R e m u n e r a t i o n R e p o r t 52 R e m u n e r a t i o n R e p o r t OVERVIEW OF REMUNERATION POLICY Philosophy The performance of the Crown group is dependent upon the quality of its Directors, senior executives and employees. Crown seeks to attract, retain and motivate skilled Directors and senior executives of the highest calibre. Crown’s remuneration philosophy is to ensure that remuneration packages properly reﬂect a person’s duties and responsibilities, that remuneration is appropriate and competitive both internally and as against comparable companies and that there is a direct link between remuneration and performance. Crown has differing remuneration structures in place for Non-Executive Directors and senior executives. Non-Executive Directors The process for determining remuneration of the Non-Executive Directors has the objective of ensuring maximum beneﬁt for Crown by the retention of a high quality Board. The Nomination and Remuneration Committee bears the responsibility of determining the appropriate remuneration for Non-Executive Directors. Non-Executive Directors’ fees are reviewed periodically by the Nomination and Remuneration Committee with reference taken to the fees paid to the Non-Executive Directors of comparable companies. The Nomination and Remuneration Committee is subject to the direction and control of the Board. In forming a view of the appropriate level of Board fees to be paid to Non-Executive Directors, the Committee may also elect to receive advice from independent remuneration consultants, if necessary. Details regarding the composition of the Committee and its main objectives are outlined in the Corporate Governance Statement. During the year, the Nomination and Remuneration Committee was restructured so that it is now comprised solely of Non-Executive independent directors. No performance based fees are paid to Non-Executive Directors. Non-Executive Directors are not entitled to participate in Crown’s long term incentive plan (described more fully below) and were not entitled to participate in Crown’s Executive Share Plan. Non-Executive Directors are not provided with retirement beneﬁts other than statutory superannuation at the rate prescribed under the Superannuation Guarantee legislation. Senior Executives The remuneration structure incorporates a mix of ﬁxed and performance based remuneration. The following section provides an overview of the relevant elements of executive remuneration. The summary tables provided later in this Report indicate which elements apply to each Senior Executive. DETAILS OF SENIOR EXECUTIVE REMUNERATION STRUCTURE Fixed remuneration The objective of ﬁxed remuneration is to provide a base level of remuneration which is appropriate to the Senior Executive’s responsibilities, the geographic location of the Senior Executive and competitive standing in the appropriate market. Fixed remuneration is therefore determined with reference to available market data, the scope and any unique aspects of an individual’s role and having regard to the qualiﬁcations and experience of the individual. From time to time, Crown seeks a range of specialist advice to establish the competitive remuneration for its Senior Executives. Fixed remuneration typically includes base salary and superannuation at the rate prescribed under the Superannuation Guarantee legislation, mobile telephone costs, complimentary privileges at Crown Melbourne and Burswood and may include, at the election of the Senior Executive, other beneﬁts such as a motor vehicle, additional contribution to superannuation, car parking and staff gym membership, aggregated with associated fringe beneﬁts tax to represent the total employment cost (TEC) of the relevant Senior Executive to Crown. Fixed remuneration for the Senior Executives (except the Chief Executive Ofﬁcer and Managing Director) is reviewed annually by the Chief Executive Ofﬁcer and Managing Director and the Executive Chairman of Crown and is approved by the Nomination and Remuneration Committee. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 53 REMU NERATION R EPORT CONTINUED R e m u n e r a t i o n R e p o r t The review process measures the achievement by the Senior Executives of their Key Performance Objectives (KPOs) established at the beginning of the ﬁnancial year (see further below), the performance of Crown and the business in which the Senior Executive is employed, relevant comparative remuneration in the market and relevant external advice. Fixed remuneration for the Chief Executive Ofﬁcer and Managing Director is reviewed by the Executive Chairman and approved annually following consideration by the Nomination and Remuneration Committee of his or her performance against his or her annual KPOs. Any payments relating to redundancy or retirement are as speciﬁed in each relevant Senior Executive’s contract of employment. For summaries of Senior Executive contracts of employment, see page 61. Performance based remuneration The performance based components of remuneration for Senior Executives seek to align the rewards attainable by Senior Executives with the achievement of particular annual and long term objectives of Crown and the creation of shareholder value over the short and long term. The performance based components which applied to the Senior Executives during the year are as follows: • Short Term Incentives (STI); • Long Term Incentives (the Crown LTI); and • an Executive Share Plan (ESP). Short Term Incentives (STI) The remuneration of the Senior Executives is linked to Crown’s short term annual performance through a cash-based STI. Individuals may be paid an STI following an assessment of the performance of the Crown group in the previous year and the performance of the individual against agreed annual KPOs. Senior Executives have a potential or target STI, which is subject to the Crown group’s performance and the achievement of the Senior Executive’s KPOs established at the beginning of each ﬁnancial year. A key focus is on the achievement of the Crown group’s annual business plan and budget. Financial performance objectives (including performance against budgeted normalised EBITDA1 and/or net proﬁ t after tax) have been chosen as Crown considers they are the best way to align performance outcomes with shareholder value. Appropriate non-ﬁnancial performance objectives (such as strategic goals, operational efﬁciencies and people development) are also included in a Senior Executive’s KPOs where they are within that Senior Executive’s sphere of inﬂuence and are relevant to the Senior Executive’s area of work. These metrics are aligned with the achievement of Crown’s business plan. The performance of each Senior Executive against the ﬁnancial and non-ﬁnancial KPOs is reviewed on an annual basis. Whether KPOs have been achieved is determined by the Chief Executive Ofﬁcer and Managing Director having regard to the operational performance of the business or function in which the Senior Executive is involved and the Chief Executive Ofﬁcer and Managing Director’s assessment of the attainment of the individual’s KPOs. The Chief Executive Ofﬁcer and Managing Director and Executive Chairman review performance based remuneration entitlements and recommend the STI payments, subject to ﬁnal approval by the Nomination and Remuneration Committee. The Chief Executive Ofﬁcer and Managing Director’s eligibility for an STI is reviewed by the Executive Chairman and determined by the Nomination and Remuneration Committee on behalf of the Board. 2010 Crown LTI (Crown LTI) The Crown LTI was designed as a successor long term incentive to the Gaming LTI (which ceased on 30 June 2010 and was described in previous Reports) and is designed to be paid to participating Senior Executives partly in cash and partly in Crown shares. The Crown LTI has been made available to selected senior executives with effect from 1 July 2010. The Crown LTI rewards relevant senior executives for achieving certain earnings per share targets over the four year period from 1 July 2010 to 30 June 2014. 1 In this Report, the term “normalised EBITDA” represents EBITDA which has been adjusted to exclude the impact of any variance from theoretical win rate on VIP program play and the impact of signiﬁcant items (where applicable). 54 Each relevant senior executive will be eligible to receive a bonus under the Crown LTI. The bonus will vest in tranches at the end of each ﬁ nancial year from FY11 to FY14 if adjusted Crown group earnings per share, calculated as normalised net proﬁ t after tax (excluding the contribution made by Melco Crown Entertainment Limited) divided by the weighted average number of Crown shares on issue (EPS) meets the relevant EPS target. Speciﬁ cally, the bonus will vest in the following proportions: 15% if the FY11 EPS target is met; 20% if the FY12 EPS target is met; 25% if the FY13 EPS target is met; and 40% if the FY14 EPS target is met. In each ﬁ nancial year from FY11 to FY13, if Crown meets its EPS target in that ﬁ nancial year, the cash proceeds of the vested cash bonus will then be used by Crown to purchase Crown shares on market which will be held on trust for the senior executive. R e m u n e r a t i o n R e p o r t In FY14, if Crown meets its EPS target in that ﬁ nancial year, each senior executive will receive their bonus in cash. If Crown does not reach its EPS target in FY11, FY12 or FY13 then a bonus for that year will not vest. However, if on a cumulative basis, the EPS targets over all four years are met, then at the end of FY14, any previously “unvested” bonuses will vest and be paid to the relevant senior executive in cash. After the end of FY14, Crown will: • transfer any Crown shares held in trust on behalf of a senior executive to that senior executive; and • pay any cash component which may then be payable. If a senior executive’s employment with Crown ceases, then the senior executive would not be entitled to any part of his or her Crown LTI bonus, except for where the senior executive’s employment has been terminated by Crown without cause, in which case the senior executive will be entitled to any vested bonus (in the form of shares held on trust). Shares may only be transferred to a senior executive if that transfer does not constitute an unlawful termination beneﬁ t. Shares which cannot be transferred at the date of termination will only transfer to the senior executive after the end of FY14, in accordance with the terms of the Crown LTI. In the case of Mr Craigie, Mr Barton and Mr Nisbet, part of the bonus to which they are eligible (the MCE Contribution Bonus) is dependent on Melco Crown Entertainment Limited (MCE) achieving certain “Contribution” targets. MCE Contribution is deﬁ ned as Crown’s percentage interest in MCE from time to time, multiplied by the normalised net proﬁ t after tax of MCE in respect of each ﬁ nancial year from FY11 to FY14. The MCE Contribution Bonus is independent of the portion of the bonus which is referrable to meeting the nominated earnings per share targets (EPS Bonus). Accordingly, Mr Craigie, Mr Barton and Mr Nisbet may achieve some or all of their entitlement to the MCE Contribution Bonus without achieving any part of the EPS Bonus and the converse also applies. Of the senior executives named in this Report, ﬁ ve participate in the Crown LTI. Details of potential Crown LTI cash bonuses are as follows: Senior Executive Rowen Craigie Barry Felstead Greg Hawkins* Ken Barton Todd Nisbet Maximum Value over four year period 30 June 2011 (15%) 30 June 2012 (20%) 30 June 2013 (25%) 30 June 2014 (40%) $12,300,000 $1,845,000 $2,460,000 $3,075,000 $3,600,000 $3,000,000 $4,500,000 $5,250,000 $540,000 $271,500 $675,000 $787,500 $720,000 $642,000 $900,000 $1,050,000 $900,000 $802,500 $1,125,000 $1,312,500 $4,920,000 $1,440,000 $1,284,000 $1,800,000 $2,100,000 * Mr Hawkins’ commencement date with Crown Melbourne Limited was 6 December 2010. Accordingly, his ﬁ rst year entitlement to an EPS Bonus has been reduced on a pro-rata basis to approximately seven months of participation in the Crown LTI. Had Mr Hawkins been a participant from 1 July 2010, his Maximum Value over the four year period would have been $3,210,000. The entitlements for 30 June 2012, 30 June 2013 and 30 June 2014 have been determined by reference to that Maximum value. On account of the pro rata reduction, the total possible EPS Bonus which Mr Hawkins may achieve is $3,000,000. In FY11, Crown did not meet the relevant EPS target and accordingly, EPS Bonuses for FY11 have not vested. The MCE Contribution targets for FY11 were, however, achieved. Accordingly, an entitlement to 15% of their potential MCE Contribution Bonus for each of Mr Craigie, Mr Barton and Mr Nisbet has vested. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 55 REMU NERATION R EPORT CONTINUED Set out below are the vested bonus amounts for the above participants in respect of FY11: R e m u n e r a t i o n R e p o r t Senior Executive Rowen Craigie Barry Felstead Greg Hawkins Ken Barton Todd Nisbet Maximum Value over four year period Vested in relation to the ﬁ nancial year ended 30 June 2011 $12,300,000 $3,600,000 $3,000,000 $4,500,000 $5,250,000 $270,000 Nil Nil $75,000 $135,000 In accordance with the rules of the Crown LTI, the vested component of the cash bonus will be applied by Crown to fund the purchase of Crown shares on market, which are to be held on trust for each of Mr Craigie, Mr Barton and Mr Nisbet until the end of FY14. Executive Share Plan (ESP) During the year, certain Crown executives participated in an ESP which was approved by the PBL Shareholders at the 1994 Annual General Meeting. The key features of the ESP are as follows: • Crown Directors determine the number of Crown shares to be issued under the ESP; • the total number of shares which can be issued under the ESP is limited to 2% of the issued capital of Crown; • the price payable for each Crown share issued under the ESP is the weighted average share market price over the ﬁve business days up to and including the date that the offer of Crown shares is accepted; • on completion of each year of service after the issue date, and subject to the performance hurdle summarised below, 25% of a participating executive’s Crown shares are released from restrictions on transfer, with the loan repayable in year ﬁve (Expiry Date); • subscription moneys for shares are funded by a loan from Crown that is fully repayable after ﬁve years, or earlier, upon cessation of employment of the executive; • if a participating executive sells Crown shares which are no longer subject to transfer restrictions before the Expiry Date, the executive must pay the issue price for each Crown share towards repayment of the relevant portion of the loan; • loan funds provided by Crown to acquire shares are provided on a limited recourse basis; and • interest payable on the loan funds is equal to dividends received on the relevant Crown shares from time to time. Crown ESP shares are subject to a performance condition, requiring a 7% compound annual growth in the Crown share price in order that the relevant portion of shares vest and be released from restrictions under the ESP. If a share price hurdle is not exceeded, that 25% share parcel remains restricted until the hurdle is exceeded in a subsequent anniversary. If the hurdle is ultimately not exceeded, the shares will be transferred back to Crown. Determination that hurdles have been achieved will be provided to the Chief Executive Ofﬁcer and Managing Director by the Company Secretary. Only executives of Crown can participate in the ESP. Mr James Packer does not participate. There have been no issues of shares under the ESP since 2007 and there were no new issues of Crown ESP shares made in the 2011 ﬁnancial year. No new ESP shares will be issued in the future. None of the executives met their share price performance hurdles during the 2011 ﬁnancial year. The consequence of this is that no issued ESP Shares were released from limitations under the Plan Rules. The ESP is now in run off mode. As at 30 June 2011, a total of 4,952,807 ESP shares were on issue, representing 0.65% of Crown’s capital. 56 R e m u n e r a t i o n R e p o r t The Senior Executives who at 30 June 2011 had ESP shares for which loans were still outstanding, or had repaid loans during the year, are as follows: Issue Price (Per Share)1 Number of Crown ESP Shares Issued Released from Limitations During the year %2 Crown ESP Loan Loan Outstanding Number of ESP Shares for which Loan still outstanding Shares sold During Year Senior Executive Issue Date Rowen Craigie 30-Oct-06 $10.35 409,694 $4,242,000 30-Oct-06 $11.42 585,276 $6,682,500 23-Nov-07 $12.15 292,638 $3,556,875 NIL NIL NIL $4,242,000 $6,682,500 $3,556,875 409,694 585,276 292,638 23-Nov-07 $12.29 1,053,494 $12,946,500 NIL $12,946,500 1,053,494 David Courtney3 23-Feb-06 $10.35 204,847 $2,121,000 30-Aug-06 $11.42 263,374 $3,007,125 06-Mar-07 $12.15 175,581 $2,134,125 Barry Felstead4 30-Aug-06 $11.42 117,055 $1,336,500 06-Mar-07 $12.15 117,055 $1,422,750 NIL NIL NIL NIL NIL $2,121,000 $3,007,125 $2,134,125 $1,336,500 $1,422,750 204,847 263,374 175,581 117,055 117,055 NIL NIL NIL NIL NIL NIL NIL NIL NIL Loan Expiry Date 30-Oct-11 30-Oct-11 23-Nov-12 23-Nov-12 23-Feb-11 30-Aug-11 06-Mar-11 30-Aug-11 06-Mar-12 Notes: 1. The fair value per Crown ESP share for each allotment date under the ESP is as follows: 23 February 2006: $1.92; 30 August 2006: $2.51; 6 March 2007: $3.72; 21 June 2007: $3.77. Shares allotted to Mr Craigie on 23 February 2006 and 30 August 2006 were issued on 30 October 2006, following receipt of shareholder approval. Shares allotted to Mr Craigie on 6 March 2007 and 21 June 2007 were issued on 23 November 2007, following the receipt of shareholder approval. 2. None of the executives met their share price performance hurdles during FY11. The consequence of this is that no ESP Shares were released from limitations under the Plan Rules. These ESP Shares remained subject to the limitations under the Plan Rules. 3. The ﬁ ve year anniversary of the issue date of two tranches of shares held by Mr Courtney occurred during or since year end. Loans referrable to those shares have been recalled by Crown. The shares are in the process of being divested and the proceeds will be applied to satisfy outstanding loans owed by Mr Courtney to Crown on a limited recourse basis. 4. The ﬁ ve year anniversary of the issue date of one tranche of shares held by Mr Felstead occurred after year end. Loans referrable to those shares have been recalled by Crown. The shares are in the process of being divested and the proceeds will be applied to satisfy outstanding loans owed by Mr Felstead to Crown on a limited recourse basis. Relationship between policy and performance As detailed above, various elements of Crown’s remuneration policy are linked to company performance, either by requiring the achievement of a predetermined earnings per share target or level of normalised EBITDA. In summary: • An STI may be payable if Crown achieves its budgeted ﬁ nancial objectives and where an individual achieves his or her annual KPOs, assessed using a combination of ﬁ nancial and non-ﬁ nancial measures; • The Crown LTI may be payable where Crown achieves predetermined adjusted earnings per share targets in ﬁ nancial years 2011, 2012, 2013 and 2014; • A component of the Crown LTI may be payable to key senior executives involved in managing the performance of Melco Crown Entertainment Limited (MCE), where MCE has achieved predetermined contribution targets; and • The terms of the ESP include share price performance hurdles. This year, normalised EBITDA generated by Crown Melbourne and Burswood, Crown’s wholly owned Australian casinos, grew by 1.8%. The compound average normalised EBITDA growth for Crown Melbourne and Burswood for the ﬁ ve year period commencing from ﬁ nancial year 2006 through to ﬁ nancial year 2011 was 6.0%. Crown was admitted to the ofﬁ cial list of the ASX on 3 December 2007. Accordingly, the table below sets out information about movements in shareholder wealth for the years ended 30 June 2008, 30 June 2009, 30 June 2010 and 30 June 2011. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 57 REMU NERATION R EPORT CONTINUED R e m u n e r a t i o n R e p o r t Share price at start of period Share price at end of period Full year dividend Basic/diluted earnings per share5 Notes: Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010 Year Ended 30 June 2011 NA1 $9.29 54 cents2 54.58 cps $9.29 $7.27 37 cents3 33.74 cps $7.27 $7.77 37 cents3 38.54 cps $7.77 $8.93 37 cents4 44.29 cps 1. As Crown was admitted to the ofﬁ cial list of the ASX on 3 December 2007, there is no trading data for 1 July 2007. 2. Franked to 40% with unfranked component made up of conduit foreign income. 3. Franked to 60% with none of the unfranked component comprising conduit foreign income. 4. Interim dividend franked to 60% and ﬁ nal dividend franked to 50% with none of the unfranked components comprising conduit foreign income. 5. Excluding the effect of discontinued operations and speciﬁ c items. Policy on entering into transactions in associated products which limit economic risk Crown’s policy prohibits Directors and Senior Executives entering into transactions in associated products which limit economic risk. This is described in the Corporate Governance Statement. REMUNERATION DETAILS FOR NON-EXECUTIVE DIRECTORS AND SENIOR EXECUTIVES Non-Executive Directors Non-Executive Directors are entitled to a base fee of $100,000 per annum for acting as a Director of Crown. Non-Executive Directors acting on the Board of Crown Melbourne Limited are entitled to receive a further fee of $60,000 per annum. Non-Executive Directors of Crown are entitled to additional fees if they act as either chair or a member of an active Committee (the Audit & Corporate Governance Committee, the Occupational Health, Safety & Environment Committee, the Nomination and Remuneration Committee or the Risk Management Committee): • $20,000 per annum for acting as Chair of an active Board Committee; or • $10,000 per annum for acting as a member of an active Board Committee. All Directors are entitled to complimentary privileges at Crown Melbourne and Burswood facilities. In accordance with Crown’s constitution, Non-Executive Directors’ fees are currently determined within an aggregate Non-Executive Directors’ fee cap of $1,000,000 per annum. Crown’s shareholders will be asked to consider increasing the fee cap to $1,300,000 per annum at the 2011 Annual General Meeting. Further details of the proposed increase are set out in the 2011 Notice of Annual General Meeting. Set out below is a table showing Non Executive Director remuneration for ﬁ nancial years 2011 and 2010. 58 Remuneration Table – Non-Executive Directors Short Term Beneﬁ ts Financial Year Salary & Fees Non Monetary Other Post- employment Beneﬁ t – Superannuation Long Term Incentives Cash Based Equity Based Termina- tion Beneﬁ ts Ben Brazil 1 Non-executive director Christopher Corrigan Non-executive director Rowena Danziger 2, 4 Non-executive director Geoffrey Dixon Non-executive director David Gyngell 3 Non-executive director John Horvath 2, 4 Non-executive director Ashok Jacob 5 Non-executive director Michael Johnston 5 Non-executive director David Lowy Non-executive director Harold Mitchell 6 Non-executive director Richard Turner 2, 7 Non-executive director 2011 TOTALS 2010 TOTALS Notes: 2011 2010 2011 2010 2011 2010 2011 2010 2011 103,333 100,000 110,000 101,667 208,107 200,000 140,000 123,333 21,970 2011 151,288 2011 2010 2011 2010 2011 2010 2011 2011 2010 – – – – – 100,000 2,237 150,000 180,000 886,935 805,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 9,300 9,000 9,900 9,150 – – – 4,777 1,977 13,616 – – – – – 9,000 40,000 – – 74,793 31,927 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – R e m u n e r a t i o n R e p o r t Total 112,633 109,000 119,900 110,817 208,107 200,000 140,000 128,110 23,947 164,904 – – – – – 109,000 42,237 150,000 180,000 961,728 836,927 1. Mr Brazil replaced Mr Turner as the Chair of the Audit & Corporate Governance Committee with effect from 1 May 2011. Mr Brazil’s fees therefore include two months worth of fees in respect of his role as Chair of the Audit & Corporate Governance Committee. 2. Mrs Danziger, Mr Turner and Professor Horvath each received Directors’ fees at a rate of $60,000 per annum for their participation on the Crown Melbourne Limited Board. As Mr Turner ceased being a director on 1 May 2011, his fees include 10 months worth of Directors’ fees for his role on the Board of Crown Melbourne Limited. Professor Horvath was appointed to the Board of Crown Melbourne Limited in September 2010 so his fees also include approximately 10 months worth of Directors’ fees for his role on the Board of Crown Melbourne Limited. 3. Mr Gyngell resigned as a director on 25 November 2010. His fees are representative of the period commencing 13 September 2010 through to 25 November 2010. 4. An additional Board Committee, the Responsible Gaming Committee, was established during FY11. Further detail regarding the mandate of that Committee and its members is provided in the Corporate Governance Statement. Fees for Mrs Danziger and Professor Horvath include approximately 10 months service on the Responsible Gaming Committee in their capacities as a member and the Chair (respectively) of that Committee. 5. Neither Mr Jacob nor Mr Johnston receives remuneration for their services to Crown. 6. Mr Mitchell was appointed on 10 February 2011. 7. Mr Turner resigned on 1 May 2011. Senior Executives Senior Executives are employed under service agreements with Crown or a business of the Crown group. Common features to these service agreements include (unless noted otherwise): • an annual review of the executive’s ﬁ xed remuneration, with any increases requiring approval of the Chief Executive Ofﬁ cer and Managing Director and the Nomination and Remuneration Committee and dependent on Crown’s ﬁ nancial performance, the individual’s KPO performance and market changes; • competitive performance based incentive payments annually and in the long term, dependent upon Crown achieving its objectives and the Senior Executive achieving his or her KPOs; • Crown may ask the executive to act as a Director of a member or associate of the Crown group for no additional remuneration; • a prohibition from gambling at any property within the Crown group during the term of employment and for three months following termination and a requirement that the executive maintains licences required and issued by relevant regulatory authorities (such as the Victorian Commission for Gambling Regulation and the Western Australian Gaming and Wagering Commission); Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 59 REMU NERATION R EPORT CONTINUED R e m u n e r a t i o n R e p o r t • where post-employment restraints apply, a restraint covering, amongst other things, competitive activities to those of the Crown group. Restraint periods vary and have been noted in each instance; • where an employment agreement is terminated by Crown, notice may be given in writing or payment may be made (wholly or partly) in lieu of notice; • all contracts may be terminated without notice by Crown for serious misconduct; and • all Senior Executives are entitled to complimentary privileges at Crown Melbourne and Burswood facilities. Speciﬁ c details of each Senior Executive’s contract of employment which applied during the ﬁ nancial year ending 30 June 2011 are summarised in the tables on the following pages. Where a Senior Executive has had more than one contract of employment during the year, or where a new contract of employment has been entered into post year end, this has been noted in those tables. The following is a list of those Senior Executives who have entered into revised contracts of employment at or post year end together with a summary of the key differences between their old and new contracts of employment. The summaries should be read in conjunction with the Remuneration Policy described earlier. The table summarising the FY11 remuneration for Senior Executives follows the contract summaries. Summary of New or Amended Contracts of Employment Senior Executive Rowen B Craigie Date of new or amended contract of employment New contract of employment entered into with a commencement date of 15 September 2011. Barry J Felstead New contract of employment entered into with a commencement date of 24 June 2011. Key changes from previous contract The term of Mr Craigie’s contract has been extended and will now expire on 30 November 2015. Mr Craigie’s post employment restraint will apply for periods of up to 24 months. Subject to the receipt of shareholder approval, Mr Craigie will be entitled to receive a severance payment equal to 24 months’ ﬁ xed remuneration in the event of early termination of his employment by Crown. The imposition of Mr Craigie’s post employment restraint is conditional upon receipt of this severance payment. Mr Craigie has been invited to participate in the Crown LTI. The details of his participation are set out above. Mr Felstead’s new contract of employment has no ﬁ xed term and may be terminated by Mr Felstead on 6 months’ notice or by Crown on 12 months’ notice. Mr Felstead’s post employment restraint will apply for periods of up to 12 months. Mr Felstead has been invited to participate in the Crown LTI. The details of his participation are set out above. W Todd Nisbet Extension of contract entered into on 30 August 2011. The term of Mr Nisbet’s contract has been extended and will now expire 30 November 2014. All other terms remain unchanged. 60 Summary of Contracts of Employment Applicable During the Year Ended 30 June 2011 Current Position James D Packer Executive Chairman Fixed Remuneration Base salary: Nil. The Executive Chairman, Mr Packer does not receive any remuneration for his services to Crown. Mr Packer acts as a Director of Melco Crown Entertainment Ltd, a company in which Crown has a signiﬁ cant investment. Mr Packer does not receive a fee from Crown for these services. John H Alexander Executive Deputy Chairman (commenced 1 December 2007): Mr Alexander currently has a ﬁ ve year employment agreement with Crown Limited which is due to expire in December 2012. $1,484,801 per annum (increasing annually by CPI)2. R e m u n e r a t i o n R e p o r t Superannuation Compulsory Superannuation Guarantee Contributions up to the maximum contribution base, equating to $15,199 per annum. Non-monetary beneﬁ ts and other: Complimentary privileges at Crown Melbourne and Burswood facilities. Complimentary privileges at Crown Melbourne and Burswood facilities and superannuation. Performance based remuneration Not applicable Not applicable 2011 Percentage breakdown of remuneration Not applicable Fixed remuneration1 100% STI 0% LTI 0% Post employment beneﬁ ts Not applicable Nil Post-employment restraint Not applicable Termination By Senior Executive: By Crown: Termination beneﬁ ts Payments made prior to commencement Directors’ Fees Other Not applicable Not applicable Not applicable Not applicable Nil Nil Crown may impose a restraint for the ﬁ ve year term of Mr Alexander’s employment agreement up to 30 November 2012. 12 months’ notice. 12 months’ notice without cause; one month’s notice for performance issues; three months’ notice due to incapacity. Nil Nil Nil Nil 1. Includes voluntary and compulsory superannuation. 2. Mr Alexander’s CPI review in the 2008-2011 ﬁ nancial years has been deferred with his consent. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 61 REMU NERATION R EPORT CONTINUED R e m u n e r a t i o n R e p o r t Current Position Fixed Remuneration Base salary: Superannuation Non-monetary beneﬁ ts and other: Performance based remuneration STI: LTI: Rowen B Craigie Kenneth M Barton Chief Executive Ofﬁ cer and Managing Director (commenced 1 December 2007): During FY11, Mr Craigie had a ﬁ ve year employment agreement with Crown Limited which was due to expire in December 2012. Mr Craigie entered into a new contract of employment on 15 September 2011. Chief Financial Ofﬁ cer, Crown Limited (commenced 9 March 2010): Mr Barton’s employment contract with Crown Limited commenced on 9 March 2010 and expires in March 2015. $2,984,801 per annum. $1,234,801 per annum. Compulsory Superannuation Guarantee Contributions up to the maximum contribution base, equating to $15,199 per annum. Compulsory Superannuation Guarantee Contributions up to the maximum contribution base, equating to $15,199 per annum. Complimentary privileges at Crown Melbourne and Burswood facilities, mobile telephone and salary sacriﬁ ce arrangements for motor vehicle and superannuation. Discretionary up to a maximum of $2,000,000 of which up to a maximum of $1,000,000 is assessed by the Executive Chairman based on the achievement of personal KPOs. A further $1,000,000 may be paid at the discretion of the Crown Board if Crown’s performance substantially exceeds that set out in Crown’s business plan and represents an exemplary outcome. Participation in the Gaming LTI until F10 when that LTI ceased. The Gaming LTI was described in detail in previous Reports. Complimentary privileges at Crown Melbourne and Burswood facilities, mobile telephone and salary sacriﬁ ce arrangements for motor vehicle and superannuation. Until Mr Barton relocates to Melbourne, Crown will meet the weekly travel costs of his Melbourne/Sydney commuting and will provide hotel accommodation while in Melbourne. Mr Barton’s annual target STI is $500,000 and payment depends on meeting agreed personal KPOs. The STI may, at the discretion of the Nomination and Remuneration Committee, be increased to a maximum of $750,000 if Mr Barton exceeds his KPOs and Crown also achieves its performance objectives. Mr Barton has been invited to participate in the Crown LTI. Subject to achieving internal earnings per share targets in FY11, FY12, FY13 and FY14, Mr Barton is eligible to receive up to $4,500,000 (15% for FY11, 20% for FY12, 25% for FY13 and 40% for FY14). See further page 55. 2011 Percentage breakdown of remuneration Fixed remuneration1 39% STI 8% LTI 53% Fixed remuneration1 46% STI 14% LTI 40% Post employment beneﬁ ts Nil Post-employment restraint Crown may impose a restraint for various periods up to 36 months. Depending on the circumstances, Mr Craigie may be entitled to an additional payment in consideration for the restraint. Mr Craigie may also be paid an amount equivalent to his monthly ﬁ xed remuneration for any period during which a restraint applies. Nil Nil. Termination By Senior Executive: 12 months’ notice. 6 months’ notice. By Crown: Termination beneﬁ ts Payments made prior to commencement Directors’ Fees Other 12 months’ notice without cause; one month’s notice for performance issues (following least three months’ notice to improve); three months’ notice for incapacity. 6 months’ notice without cause; one month’s notice for performance issues (following least 3 months’ notice to improve); 3 months’ notice for incapacity. Nil Nil Nil Nil A $400,000 sign on payment in 2010 less applicable taxes in order to compensate Mr Barton for unvested incentives forfeited on cessation of employment with his previous employer. Nil A summary of the terms of the 2010 Crown LTI to which Mr Craigie is a member is set out on page 54. A summary of the terms of the 2010 Crown LTI to which Mr Barton is a member is set out on page 54. 1. Includes voluntary and compulsory superannuation. 62 Current Position Fixed Remuneration Base salary: Superannuation Non-monetary beneﬁ ts and other: David G Courtney Barry J Felstead Chief Executive Ofﬁ cer, Crown Melbourne Limited (from 6 March 2007 to 8 October 2010): Mr Courtney’s employment contract with Crown Melbourne commenced on 6 March 2007 and was due to expire on 5 March 2012. Chief Executive Ofﬁ cer, Burswood Limited (from 6 March 2007): During FY11, Mr Felstead had an employment contract with Burswood which commenced on 6 March 2007 and was due to expire on 5 March 2012. Mr Felstead entered into a new contract of employment on 24 June 2011. $1,344,801 per annum. $984,801 per annum. Compulsory Superannuation Guarantee Contributions up to the maximum contribution base, equating to $15,199 per annum. Compulsory Superannuation Guarantee Contributions up to the maximum contribution base, equating to $15,199 per annum. Complimentary privileges at Crown Melbourne and Burswood facilities, mobile telephone and salary sacriﬁ ce arrangements for motor vehicle and superannuation. Complimentary privileges at Crown Melbourne and Burswood facilities, mobile telephone and salary sacriﬁ ce arrangements for motor vehicle and superannuation. Mr Felstead is entitled to one annual economy airfare between Perth and Melbourne for himself and his family. R e m u n e r a t i o n R e p o r t Performance based remuneration STI: LTI: Discretionary STI based on the performance of Crown Limited and the achievement of personal KPOs. Mr Courtney’s annual target STI is 40% of his TEC. Discretionary STI based on the performance of Crown and the achievement of personal KPOs. Mr Felstead’s annual target STI is 40% of his TEC. Participation in the Gaming LTI until F10 when that LTI ceased. The Gaming LTI was described in detail in previous Reports. Participation in the Gaming LTI until F10 when that LTI ceased. The Gaming LTI was described in detail in previous Reports. 2011 Percentage breakdown of remuneration Fixed remuneration1 97% STI 1% LTI 2% Fixed remuneration1 42% STI 17% LTI 41% Post employment beneﬁ ts Nil Nil Post-employment restraint Crown may impose various restraint periods up to a period of 36 months post employment. Depending on the circumstances, Mr Courtney may be entitled to an additional payment in consideration for the restraint. Mr Courtney may also be paid an amount equivalent to his monthly ﬁ xed remuneration for any period during which a restraint applies. Crown may impose various restraint periods up to a period of 36 months post employment. Depending on the circumstances, Mr Felstead may be entitled to an additional payment in consideration for the restraint. Mr Felstead may also be paid an amount equivalent to his monthly ﬁ xed remuneration for any period during which a restraint applies. Termination By Senior Executive: 12 months’ notice. 12 months’ notice. By Crown: Termination beneﬁ ts 12 months’ notice without cause; one month’s notice for performance issues; three months’ notice due to incapacity. 12 months’ notice without cause; one month’s notice for performance issues; three months’ notice due to incapacity. 24 months ﬁ xed remuneration upon cessation of employment – see further the disclosures accompanying the Senior Executive remuneration table below. Nil Nil Nil A summary of the terms of the 2010 Crown LTI to which Mr Felstead is a member is set out on page 54. Payments made prior to commencement Directors’ Fees Other Nil Nil 1. Includes voluntary and compulsory superannuation. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 63 REMU NERATION R EPORT CONTINUED R e m u n e r a t i o n R e p o r t Current Position Fixed Remuneration Base salary: Superannuation Non-monetary beneﬁ ts and other: Greg F Hawkins W. Todd Nisbet Deputy Chief Executive Ofﬁ cer, Crown Melbourne Limited (from 6 December 2010): Mr Hawkins’ employment contract with Crown Melbourne commenced on 6 December 2010 and will expire in accordance with its terms. Executive Vice President – Strategy and Development, Crown Limited (from 9 August 2010): Mr Nisbet’s employment contract with Crown Limited commenced on 9 August 2010 and was due to expire in August 2013. Mr Nisbet’s contract of employment was extended on 30 August 2011. $884,801 per annum. $1,500,000 per annum. Compulsory Superannuation Guarantee Contributions up to the maximum contribution base, equating to $15,199 per annum. Compulsory Superannuation Guarantee Contributions up to the maximum contribution base, equating to $15,199 per annum. Complimentary privileges at Crown Melbourne and Burswood facilities, mobile telephone and salary sacriﬁ ce arrangements for motor vehicle and superannuation. Mr Hawkins was previously employed by Crown Melbourne Limited to act in a Chief Executive Role on a secondment basis at Crown’s investment properties in Macau. Under that contract of employment, upon his return to Australia, Mr Hawkins was entitled reasonable relocation expenses for Mr Hawkins and his family. The value of that beneﬁ t has been included in the Senior Executive remuneration table. Complimentary privileges at Crown Melbourne and Burswood facilities, mobile telephone and salary sacriﬁ ce arrangements for motor vehicle and superannuation. Mr Nisbet is entitled to Relocation Beneﬁ ts to assist with the relocation of him and his family from Nevada, USA to Melbourne. During Mr Nisbet’s employment with Crown, he will also be entitled to additional customary expatriate beneﬁ ts for himself and his family. Upon cessation of employment Mr Nisbet will be entitled to relocation beneﬁ ts for him and his family to Las Vegas. Performance based remuneration STI: LTI: Discretionary STI based on the performance of Crown Limited and the achievement of personal KPOs. Mr Hawkins’ annual target STI is 40% of his TEC. Discretionary STI based on the performance of Crown and the achievement of personal KPOs. Mr Nisbet’s annual target STI is 50% of his base salary. Mr Hawkins has been invited to participate in the Crown LTI. Subject to achieving internal earnings per share targets in FY11, FY12, FY13 and FY14, Mr Hawkins is eligible to receive up to $3,000,000 (8.5% for FY11, 20% for FY12, 25% for FY13 and 40% for FY14). See further page 55. Mr Nisbet has been invited to participate in the Crown LTI. Subject to achieving internal earnings per share targets in FY11, FY12, FY13 and FY14, Mr Nisbet is eligible to receive up to $5,250,000 (15% for FY11, 20% for FY12, 25% for FY13 and 40% for FY14). See further page 55. 2011 Percentage breakdown of remuneration Fixed remuneration1 45% STI 0% LTI 55% Fixed remuneration1 45% STI 20% LTI 35% Post employment beneﬁ ts Nil Nil Po st-employment restraint Crown may impose various restraint periods up to a period of up to 12 months post employment. Crown may impose various restraint periods up to a period of up to 12 months post employment. Termination By Senior Executive: 6 months’ notice. 6 months’ notice. By Crown: Termination beneﬁ ts Payments made prior to commencement Directors’ Fees Other 12 months’ notice without cause; one month’s notice for performance issues; three months’ notice due to incapacity. 12 months’ notice without cause; one month’s notice for performance issues; three months’ notice due to incapacity. Nil Nil Nil Nil Nil Nil A summary of the terms of the 2010 Crown LTI to which Mr Hawkins is a member is set out on page 54. A summary of the terms of the 2010 Crown LTI to which Mr Nisbet is a member is set out on page 54. 1. Includes voluntary and compulsory superannuation. 64 R e m u n e r a t i o n R e p o r t Remuneration table for Senior Executives The structure of senior executive remuneration has been described in detail in this Report, both generically and speciﬁ cally in relation to each named Senior Executive. In addition, a table summarising all remuneration to be attributed to each Senior Executive for the ﬁ nancial years ending 30 June 2011 and 30 June 2010 is set out below. Accounting Standards are prescriptive in relation to the required presentation of remuneration tables. Accordingly, as an aid to understanding, the following additional information should be read in conjunction with the table set out below. Fixed Remuneration None of Messrs Alexander, Craigie or Barton received an increase to their ﬁ xed remuneration in ﬁ nancial year 2011 as compared with ﬁ nancial year 2010. For the same period, Mr Courtney received an increase to his ﬁ xed remuneration of 3.4% and Mr Felstead received a more substantial increase of 36% in recognition that his remuneration had previously been unreﬂ ective of his status as a Chief Executive Ofﬁ cer of a major business unit. As noted in the table below, Mr Courtney subsequently ceased performing the role of Chief Executive Ofﬁ cer of Crown Melbourne on 8 October 2010. Messrs Nisbet and Hawkins commenced new roles with the Group in ﬁ nancial year 2011, which has resulted in them being included in this Report as Senior Executives. Each of Mr Nisbet and Mr Hawkins were required to relocate with their families to Melbourne, Australia to take up their respective roles. In Mr Nisbet’s case, he relocated from Las Vegas in the USA and, in Mr Hawkins’ case, he relocated from Macau. Crown met the once off costs associated with Mr Nisbet’s and Mr Hawkins’ respective relocations and these have been reported as part of their ﬁ xed remuneration. Going forward, Mr Nisbet will also be entitled to additional customary beneﬁ ts relating to his relocation as described in the summary of his employment contract. Short Term Incentives (STI) As the Group ﬁ nancial results were mixed but a number of non ﬁ nancial KPOs were met, the award of STI bonuses in relation to ﬁ nancial year 2011 was also mixed and depended largely on the achievement of individual KPOs of the relevant Senior Executive. Long Term Incentives (LTI) As summarised earlier, relevant Senior Executives may be eligible to participate in one or both of Crown’s existing long term incentives, the Executive Share Plan (ESP) and the Crown LTI. The ESP continues in operation but is in run off mode. Effectively, all ESP shares are “out of the money” and are of no practical value to Senior Executives. Accounting Standards, however, require a value to be placed on these shares and they are therefore included in the remuneration table. Similarly, in accordance with relevant accounting standards, the Crown LTI is included in the remuneration for each Senior Executive on the basis that it is considered more likely than not at the date of this ﬁ nancial report that the performance condition and service condition will occur evenly over the life of the Crown LTI, notwithstanding that the beneﬁ ts will vest for the Senior Executives at a different rate. Accordingly, 25% of the total Crown LTI bonus for which each Senior Executive is potentially eligible will be included in the remuneration table for each of the four active years of the plan, regardless of whether a bonus has vested or not. As explained earlier, the ﬁ rst tranche of the Crown LTI represents only 15% of the total Crown LTI bonus for which each Senior Executive is eligible. The earnings per share hurdle for this ﬁ rst hurdle of the Crown LTI for ﬁ nancial year 2011 was not met, but the MCE Contribution hurdle was met, resulting in 15% of the MCE Contribution portion of the Crown LTI for eligible Senior Executives vesting. Detail of the actual sums vested to relevant Senior Executives has been provided earlier. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 65 REMU NERATION R EPORT CONTINUED R e m u n e r a t i o n R e p o r t James Packer Executive Chairman John Alexander Executive Deputy Chairman Ken Barton1 Chief Financial Ofﬁ cer Rowen Craigie Chief Executive Ofﬁ cer & Managing Director David Courtney 2 Barry Felstead Chief Executive Ofﬁ cer Burswood Limited Greg Hawkins 3 Deputy Chief Executive Ofﬁ cer Crown Melbourne Limited Todd Nisbet 4 Executive Vice President – Strategy & Development Rob Turner 5 2011 TOTALS 2010 TOTALS Notes: Short Term Beneﬁ ts Financial Year Salary & Fees Non Monetary Other STI % of max STI Post- employment Beneﬁ ts – Super- annuation6 Long Term Incentives Equity Based – Crown LTI8 Cash Based Equity Based – ESP7 Termina- tion Beneﬁ ts 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 – – 1,484,801 1,485,539 – – – – 1,234,801 44,220 – – – – – – – – – 400,000 384,987 15,726 400,000 130,000 – – – – 80% 84% 60% – – – – – 10,856 2,984,801 2,985,539 1,335,000 1,290,000 984,801 720,539 522,836 – 600,000 – 1,000,000 100% – – – – 74,521 526,000 400,000 400,000 50% 100% 100% 135% – – – – – – – – – 1,125,000 – – – – – – – – – 3,075,000 1,035,275 Total – – – – – 1,500,000 – 1,500,000 – 2,819,220 – 937,944 7,710,275 1,666,667 – 1,503,585 – 7,170,252 – – 110,161 3,790,845 5,335,527 750,000 323,230 – 900,000 68,211 333,333 147,750 – 2,914,230 – 2,368,211 – 1,626,939 – – 15,199 14,461 15,199 7,231 15,199 14,461 25,000 25,000 15,199 14,461 – 87,320 – – 11,400 – 750,000 – – 1,371,556 2011 1,346,587 – 326,053 750,000 100% 15,199 – 1,312,500 – – 3,750,339 2011 2010 – 737,206 9,893,627 7,603,810 – – – – – – 44,220 26,582 413,373 2,224,521 400,000 2,056,000 – – – – – 14,461 112,395 – – – – – – – – 149,818 1,435,000 2,336,485 7,162,500 1,213,647 3,790,845 24,855,128 90,075 2,750,000 – 2,124,383 1,435,000 16,485,850 1. Mr Barton commenced in his role as Chief Financial Ofﬁ cer on 9 March 2010. Mr Barton’s contract included provision for a $400,000 sign on payment less applicable taxes in order to compensate Mr Barton for unvested incentives forfeited on cessation of employment with his previous employer. Mr Barton received a total STI payment of $530,000 which, in accordance with his contract of employment relates to performance for both the 2010 and 2011 ﬁ nancial years on a pro-rata basis. The STI has therefore been split over the two years in the above table. 2. Mr Courtney ceased performing the role of Chief Executive Ofﬁ cer of Crown Melbourne Limited on 8 October 2010. In accordance with the terms of his Employment Agreement, Mr Courtney will remain an employee of the Crown Group until 8 October 2011 (representing a 12 month notice period) at which time he will be paid a severance payment in accordance with his Employment Agreement which includes an entitlement to a payment of 24 months ﬁ xed remuneration upon cessation of employment. Those amounts have been accrued for in the 2011 ﬁ nancial year and are therefore included in the above table under the heading of Termination Beneﬁ ts. Mr Courtney’s STI represents 50% of his maximum target STI on a pro rata basis over the period 1 July 2010 to 8 October 2010 when he ceased performing the role of Chief Executive Ofﬁ cer of Crown Melbourne Limited. 3. Mr Hawkins commenced in his role as Deputy Chief Executive Ofﬁ cer on 6 December 2010. Mr Hawkins will be eligible for an STI payment in the 2012 ﬁ nancial year which will be referable to the period of service commencing from 6 December 2010. Refer to the summary of Mr Hawkins’ contract of employment for a description of the other one off short term relocation entitlements to which Mr Hawkins was entitled upon his return to Australia from Macau. 4. Mr Nisbet commenced in his role as Executive Vice President – Strategy and Development on 9 August 2010. Refer to the summary of Mr Nisbet’s contract of employment for a description of the other short term entitlements to which Mr Nisbet is entitled. 5. Mr Turner ceased employment with Crown on 31 May 2010. Remuneration disclosures were made in respect of the 11 month period ending 31 May 2010. The $1,435,000 termination payment to Mr Turner represented an $820,000 payment in lieu of 12 months notice and a $615,000 agreed severance payment. 6. Long service leave accrued balances have increased during the ﬁ nancial year ended 30 June 2011 for the following Senior Executives: Mr Alexander $24,983, Mr Barton, $20,820, Mr Craigie, $49,967, Mr Courtney $22,655, Mr Felstead $16,667, Mr Hawkins $14,824, Mr Nisbet $22,540. 7. AASB 2 “Share-Based Payment” requires an entity to recognise the effects of modiﬁ cations that increase the total fair value of the share-based payment arrangement or are otherwise beneﬁ cial to the employee. As the modiﬁ cation to the ESP post Demerger reduced the total fair value of the share-based payment arrangement, Crown continued to account for the services rendered as consideration for the equity instruments granted as if the modiﬁ cation had not occurred. The allocation of the expenses for Equity Based payments to the Senior Executives made following the PBL Scheme and the Demerger Scheme was consistent with the split of the PBL ESP Loan as between CMH and Crown Limited (25 percent/75 percent). 8. The Crown LTI has been included in total remuneration on the basis that it is considered more likely than not at the date of this ﬁ nancial report that the performance condition and service condition will occur evenly over the life of the Crown LTI, notwithstanding that the beneﬁ ts will vest for the Senior Executives at a different rate. Signed in accordance with a resolution of the Directors. J D Packer Director Melbourne, 16th day of September, 2011 R B Craigie Director 66 A u d i t o r ’ s I n d e p e n d e n c e D e c a r a t i o n l Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 67 I n d e p e n d e n t A u d i t o r ’ s R e p o r t 68 I n d e p e n d e n t A u d i t o r ’ s R e p o r t Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 69 D i r e c t o r s ’ l D e c a r a t i o n Directors’ Declaration In accordance with a resolution of the Directors, we declare as follows: In the opinion of the directors: 1. the ﬁ nancial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the consolidated entity’s ﬁ nancial position as at 30 June 2011 and of its performance for the year ended on that date; and (b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; 2. the ﬁ nancial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1 of the Financial Report; and 3. 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. 4. 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 ﬁ nancial year ending 30 June 2011. 5. as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identiﬁ ed in note 32 of the Financial Report will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee. On behalf of the Board J D Packer Director R B Craigie Director Melbourne, 16th day of September, 2011 70 Financial Report CONTENTS 72 Income Statement 75 Cash Flow Statement 73 Statement of Comprehensive Income 74 Statement of Financial Position 76 Statement of Changes in Equity 77 Notes to the Financial Statements Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 71 FIN AN CIAL REPORT 2011 CONT INU ED Income Statement For the year ended 30 June 2011 I n c o m e S t a t e m e n t Continuing Operations Revenues Other income Expenses Note 2011 $’000 2010 $’000 3 3 3 2,409,241 2,342,248 403 10,455 (1,959,351) (1,811,811) Share of proﬁ ts / (losses) of associates and joint venture entities 2,10 32,366 (69,457) Proﬁ t before income tax and ﬁ nance costs Finance costs Proﬁ t before income tax Income tax expense Net proﬁ t after tax 482,659 471,435 3 (75,545) (84,126) 407,114 387,309 2,5 (71,259) (95,016) 335,855 292,293 The above Income Statement should be read in conjunction with the accompanying notes. Earnings per share (EPS) Basic EPS Diluted EPS EPS calculation is based on the weighted average number of shares on issue throughout the period Dividends per share Current year ﬁ nal dividend proposed Current year interim dividend paid 2011 Cents per share 2010 Cents per share Note 29 29 4 4 44.29 44.29 38.54 38.54 19.00 18.00 19.00 18.00 72 Statement of Comprehensive Income For the year ended 30 June 2011 Net proﬁ t after tax Other Comprehensive Income Foreign currency translation (1) Movement in cashﬂ ow hedge reserve Unrealised gain / (loss) on investments in associates Other comprehensive income / (loss) for the period, net of income tax Total comprehensive income / (loss) for the period Note 2011 $’000 2010 $’000 335,855 292,293 21 21 21 (205,916) (19,230) 500 (63,781) 30,680 (4,061) (224,646) (37,162) 111,209 255,131 S t a t e m e n t o f C o m p r e h e n s v e i I n c o m e (1) The movement in the foreign currency translation reserve is largely attributable to foreign exchange movements relating to Crown’s equity accounted investment in Melco Crown. The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 73 FIN AN CIAL REPORT 2011 CONT INU ED Statement of Financial Position At 30 June 2011 Current Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Other ﬁ nancial assets Total current assets Non-current assets Receivables Other ﬁ nancial assets Investments Investments in associates Property, plant and equipment Licences Other intangible assets Deferred tax assets Other assets Total non-current assets Total assets Current Liabilities Trade and other payables Interest-bearing loans and borrowings Income tax payable Provisions Other ﬁ nancial liabilities Total current liabilities Non-current liabilities Other payables Interest-bearing loans and borrowings Deferred tax liabilities Provisions Other ﬁ nancial liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity Note 2011 $’000 2010 $’000 24 183,699 196,395 6 7 8 6 8 9 10 11 12 13 5 15 16 17 18 19 16 17 5 18 19 20 21 21 123,756 147,252 18,070 17,122 7,775 16,328 12,197 1,971 350,422 374,143 131,477 128,158 24,051 6,045 98,658 106,634 851,721 1,029,669 2,514,905 2,320,459 664,455 651,926 213,030 175,370 108,731 111,081 66,325 65,636 4,673,353 4,594,978 5,023,775 4,969,121 237,889 292,283 19,752 135,236 39,025 33,117 102,917 113,320 2,276 – 401,859 573,956 – 67 1,049,707 712,758 209,925 207,098 27,699 74,225 15,337 40,600 1,361,556 975,860 1,763,415 1,549,816 3,260,360 3,419,305 645,475 638,690 225,788 448,751 2,389,097 2,331,864 3,260,360 3,419,305 The above Statement of Financial Position should be read in conjunction with the accompanying notes. S t a t e m e n t o f F n a n c a i i l P o s i t i o n 74 Cash Flow Statement For the year ended 30 June 2011 Cash ﬂ ows from operating activities Receipts from customers Payments to suppliers and employees Dividends received Interest received Borrowing costs Income tax paid l C a s h F o w S t a t e m e n t Note 2011 $’000 2010 $’000 2,438,649 2,325,096 (1,833,769) (1,660,736) 19 5,377 26 7,301 (86,002) (89,773) (73,305) (114,457) Net cash ﬂ ows from/(used in) operating activities 24b 450,969 467,457 Cash ﬂ ows from investing activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Payment in respect of licences Payment for purchases of equity investments Payment for the acquisition of controlled entities Purchase of investments Net proceeds from sale of equity investments Loans to associated entities Repayment of loans from associated entities Other (net) Net cash ﬂ ows from/(used in) investing activities Cash ﬂ ows from ﬁ nancing activities Proceeds from borrowings Repayment of borrowings Dividends paid ESP proceeds received Net cash ﬂ ows from/(used in) ﬁ nancing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the ﬁ nancial year Effect of exchange rate changes on cash (1) 22 (351,537) (356,270) 454 13,809 (20,000) (15,106) (55,134) – – (51,188) 28,051 (2,686) – – – (20,584) 84,671 (4,000) – (3,177) (467,146) (285,551) 660,341 250,000 (384,600) (450,000) (278,622) (278,417) 6,785 3,904 2,893 (475,524) (12,273) (293,618) 196,395 515,498 (423) (25,485) Cash and cash equivalents at the end of the ﬁ nancial year 24a 183,699 196,395 (1) Prior period represents foreign exchange movements in USD cash offset by an equivalent movement in USD borrowings. The above Cash Flow Statement should be read in conjunction with the accompanying notes. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 75 FIN AN CIAL REPORT 2011 CONT INU ED Statement of Changes in Equity For the year ended 30 June 2011 Ordinary Retained Earnings $’000 Shares $’000 Net Unrealised Foreign Gains Translation Reserve $’000 Currency Cashﬂ ow Employee Beneﬁ ts Reserve $’000 Hedge Reserve $’000 Reserve $’000 Total Equity $’000 Year ended 30 June 2011 Balance at 1 July 2010 638,690 2,331,864 628,532 (157,888) (33,220) 11,327 3,419,305 Proﬁ t for the period Other comprehensive income Total comprehensive income for the period – – 335,855 – – – – 500 (205,916) (19,230) – – 335,855 (224,646) – 335,855 500 (205,916) (19,230) – 111,209 Dividends paid ESP proceeds received Share based payments expense – (278,622) 6,785 – – – – – – – – – – – – – – 1,683 (278,622) 6,785 1,683 Balance at 30 June 2011 645,475 2,389,097 629,032 (363,804) (52,450) 13,010 3,260,360 Year ended 30 June 2010 Balance at 1 July 2009 634,364 2,317,988 632,593 (94,107) (63,900) 9,392 3,436,330 Proﬁ t for the period Other comprehensive income Total comprehensive income for the period – – 292,293 – – – – (4,061) (63,781) 30,680 – – 292,293 (37,162) – 292,293 (4,061) (63,781) 30,680 – 255,131 Dividends paid ESP proceeds received Transfers Share based payments expense – (278,417) 2,893 1,433 – – – – – – – – – – – – – – – – – – (1,433) (278,417) 2,893 – 3,368 3,368 Balance at 30 June 2010 638,690 2,331,864 628,532 (157,888) (33,220) 11,327 3,419,305 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. S t a t e m e n t o f C h a n g e s i n E q u i t y 76 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Notes to the Financial Statements For the year ended 30 June 2011 1. Summary of Signiﬁ cant Accounting Policies (a) Basis of preparation This ﬁ nancial report is a general-purpose ﬁ nancial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authorative pronouncements of the Australian Accounting Standards Board. The ﬁ nancial report has also been prepared on a historical cost basis, except for derivative ﬁ nancial instruments and investments that have been measured at fair value and investments in associates accounted for using the equity method. The ﬁ nancial 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 Company under ASIC Class Order 98/100. The Company is an entity to which the class order applies. The ﬁ nancial report of Crown Limited and its controlled entities for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the directors on 15 September 2011 subject to ﬁ nal approval by a sub committee. (b) Statement of compliance The ﬁ nancial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The Group has adopted the following accounting standards, which became applicable from 1 July 2010: – AASB 2009-5 – Further Amendments Australian Accounting Standards arising from the Annual Improvements Project – AASB 124 – Related Party Disclosures – AASB 9 – Financial Instruments The adoption of these standards did not have a material effect on the ﬁ nancial position or performance of the Group during the period. The Group has early adopted AASB 9 Financial Instruments, with effect from 31 December 2010. The standard changes the way in which the Group’s investments and their performance are presented. Adoption of this standard has no impact on the way in which the Group’s investments are measured, and hence has no impact on net assets during the period. Previously the Group was required to classify investments as ‘available-for-sale ﬁ nancial assets’ under AASB 139 Financial Instruments: Recognition and Measurement, where unrealised gains and losses were taken to the revaluation reserve through the Statement of Changes in Equity and reported as other comprehensive income. Realised gains or losses from the sale of the investment were transferred from the revaluation reserve to the Income Statement. Where there was objective evidence of impairment of an investment, and impairment charge was booked in the Income Statement, even where no loss had been realised. Under the new standard, the Group’s investments in equities that were held as at 31 December 2010 have been classiﬁ ed as fair value through Income Statement and both realised and unrealised gains and losses are accounted for through the Income Statement. Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the reporting period ending 30 June 2011. These are outlined in the table below. Reference Title AASB 124 Related Party Disclosures Application date of standard (1) 1 January 2011 Impact on Group financial report The revised AASB 124 simpliﬁ es the deﬁ nition of a related party, clarifying its intended meaning and eliminating inconsistencies from the deﬁ nition. The amendment will not have an impact on the Group. Application date for Group (1) 1 July 2011 (1) Designates the beginning of the applicable annual reporting period unless otherwise stated. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 77 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 1. Summary of Signiﬁ cant Accounting Policies continued t o t h e F n a n c a i i l S t a t e m e n t s Application date of standard (1) 1 January 2011 Reference Title AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13] AASB 10 Consolidated Financial Statements 1 January 2013 AASB 11 Joint Arrangements 1 January 2013 AASB 12 Disclosure of Interests in Other Entities 1 January 2013 AASB 13 Fair Value Measurement 1 January 2013 Application date for Group (1) 1 July 2011 1 July 2013 1 July 2013 1 July 2013 1 July 2013 Impact on Group financial report The Group will be required to present an analysis of other comprehensive income for each component of equity, either in the Statement of Changes in Equity or in the notes to the ﬁ nancial statements. Provides guidance to illustrate how to apply disclosure principles in AASB 134 for signiﬁ cant events and transactions. This standard may result in additional or changes in disclosure. AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated ﬁ nancial statements and SIC-12 Consolidation – Special Purpose Entities. After initial evaluation, Crown does not expect any impact on the Group. AASB 11 replaces AASB 131 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities – Non-monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to deﬁ ne joint control, and therefore the determination of whether joint control exists may change. In addition AASB 11 removes the option to account for jointly-controlled entities using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. After initial evaluation, Crown does not expect any impact on the Group. AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests. This standard may result in additional or changes in disclosure. AASB 13 establishes a single source of guidance under IFRS for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under IFRS when fair value is required or permitted by IFRS. Application of this deﬁ nition may result in different fair values being determined for the relevant assets. (1) Designates the beginning of the applicable annual reporting period unless otherwise stated. 78 1. Summary of Signiﬁ cant Accounting Share-based payment transactions N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Policies continued (c) Basis of consolidation The consolidated ﬁ nancial statements are those of the consolidated entity, comprising Crown Limited (the parent entity) and all entities that Crown Limited controlled from time to time during the year and at reporting date. Information from the ﬁ nancial statements of subsidiaries is included from the date the parent entity obtains control until such time as control ceases. Where there is loss of control of a subsidiary, the consolidated ﬁ nancial statements include the results for the part of the reporting period during which the parent entity has control. Subsidiary acquisitions are accounted for using the acquisition method of accounting. The ﬁ nancial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All inter-company balances and transactions, including unrealised proﬁ ts arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. The accounting policies adopted have been applied consistently throughout the two reporting periods. (d) Signiﬁ cant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a signiﬁ cant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Impairment of goodwill and casino licences with indeﬁ nite useful lives The Group determines whether goodwill and casino licences with indeﬁ nite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash-generating units to which the goodwill and casino licences with indeﬁ nite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and casino licences with indeﬁ nite useful lives are discussed in note 14. Fair value of investments In accordance with accounting standards the Group uses the Level Three method in estimating the fair value of ﬁ nancial assets. Accordingly, the fair value is estimated using inputs for the asset that are not based on observable market data. The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined with the assistance of an external valuer, using the assumptions detailed in note 26. Doubtful debts An allowance for doubtful debts is recognised when there is objective evidence that an individual trade debt is impaired. Signiﬁ cant Items Management determines signiﬁ cant items based on the nature, size and generally accepted accounting principles. (e) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for ﬁ nancial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: (cid:129) where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁ t nor taxable proﬁ t or loss; or (cid:129) when taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable proﬁ t will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised except: (cid:129) when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁ t not taxable proﬁ t or loss; or Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 79 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 1. Summary of Signiﬁ cant Accounting (g) Foreign currency translation Policies continued (e) Income tax continued (cid:129) when the deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable proﬁ t will be available against which the temporary differences can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufﬁ cient taxable proﬁ t will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not the Income Statement. (f) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: (cid:129) where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; (cid:129) Gaming revenues, due to the GST being offset against casino taxes; and (cid:129) receivables and payables are stated with the amount of GST included. Both the functional and presentation currency of Crown Limited and its Australian subsidiaries is Australian dollars. Each foreign entity in the Group determines its own functional currency and items included in the ﬁ nancial statements of each foreign entity are measured using that functional currency, which is translated to the presentation currency. Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. As at the reporting date the assets and liabilities of overseas subsidiaries are translated into the presentation currency of Crown Limited at the rate of exchange ruling at the reporting date and the proﬁ t or loss is translated at the weighted average exchange rates for the period. The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the Income Statement. (h) Cash and cash equivalents Cash and cash equivalents in the Statement of Financial Position comprises of cash at bank and on hand, and short term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insigniﬁ cant risk of changes in future value. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as deﬁ ned above, net of outstanding bank overdrafts. Cash ﬂ ows are included in the Cash Flow Statement on a gross basis and the GST component of cash ﬂ ows arising from investing and ﬁ nancing activities, which is recoverable from, or payable to, the taxation authority are classiﬁ ed as operating cash ﬂ ows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (i) Trade and other receivables Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when there is objective evidence that the full amount may not be collected. Bad debts are written off when identiﬁ ed. Receivables from associates and other related parties are carried at amortised cost less an allowance for impairment. Interest, when charged is taken up as income on an accrual basis. t o t h e F n a n c a i i l S t a t e m e n t s 80 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 1. Summary of Signiﬁ cant Accounting Policies continued (j) Inventories Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: (cid:129) Gaming inventories which include food, beverages and other consumables are costed on a weighted average basis; and (cid:129) Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. (k) Investments in associates The ﬁ nancial statements of the associates are used by the Group to apply the equity method. Where associates apply different accounting policies to the Group, adjustments are made upon application of the equity method. Investments in associates are carried in the Statement of Financial Position at cost plus post-acquisition changes in the Group’s share of net assets of the associates, less any impairment in value. The Income Statement reﬂ ects the Group’s share of the results of operations of the associates. Where there has been a change recognised directly in the associates’ equity, the Group recognises its share of any changes and discloses this, when applicable in the Statement of Comprehensive Income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long term receivables and loans, the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the associate. (l) Investments and other ﬁ nancial assets Financial assets are classiﬁ ed based on: (i) the objective of the entity’s business model for managing the ﬁ nancial assets; and (ii) the characteristics of the contractual cash ﬂ ow. The classiﬁ cation depends on the purpose for which the ﬁ nancial assets were acquired. Management determines the classiﬁ cation of its ﬁ nancial assets at initial recognition. An irrevocable election is made by instrument to determine if the instrument is measured at fair value either through Other Comprehensive Income (OCI) or the Income Statement. When ﬁ nancial assets are recognised initially, they are measured at fair value, plus, in the case of assets at fair value through OCI, directly attributable transaction costs. The best evidence of fair value is quoted prices in an active market. The fair value of the investments and other ﬁ nancial assets that do not have a price quoted in an active market have been estimated using valuation techniques based on assumptions that are not supported by observable market prices or rates. The fair value is reassessed each reporting period. If the fair value through Income Statement approach is adopted, increments and decrements on the fair value of the ﬁ nancial asset at each reporting date are recognised through the Income Statement. If the fair value through OCI approach is adopted, increments and decrements on the fair value are recognised in OCI, without recycling of gains and losses between Income Statement and OCI, even on disposal of the investment. Dividends in respect of these investments that are a return on investment are recognised in the Income Statement. (m) Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation and amortisation is calculated on a straight-line basis over the estimated useful life of the asset as follows: (cid:129) Freehold buildings – 40 to 75 years; (cid:129) Leasehold improvements – lease term; and (cid:129) Plant and equipment – 2 to 15 years. The asset’s residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each ﬁ nancial year end. Impairment The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inﬂ ows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash ﬂ ows are discounted to their present value using a post-tax discount rate that reﬂ ects current market assessments of the time value of money and the risks speciﬁ c to the asset. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 81 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 1. Summary of Signiﬁ cant Accounting Policies continued (m) Property, plant and equipment continued Derecognition An item of property, plant and equipment is derecognised upon disposal or when no future economic beneﬁ ts are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Income Statement in the period the item is derecognised. (n) Intangible assets Licences Licences are carried at cost less any accumulated amortisation and any accumulated impairment losses. The directors regularly assess the carrying value of casino licences so as to ensure they are not carried at a value greater than their recoverable amount. The casino licence premiums are carried at cost of acquisition. The Crown Melbourne licence is being amortised on a straight-line basis over the remaining life of the licence from the time PBL acquired Crown Melbourne, being 34 years. The Burswood licence is perpetual and, as such, no amortisation is charged. The Burswood licence is subject to an annual impairment assessment. Goodwill Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identiﬁ able assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised. As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to beneﬁ t from the combination’s synergies. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of the cash generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained. Other intangible assets Acquired both separately and from a business combination. Intangible assets acquired separately are capitalised at cost and from a business combination are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. The useful lives of these intangible assets are assessed to be either ﬁ nite or indeﬁ nite. Where amortisation is charged on assets with ﬁ nite lives, this expense is taken to the Income Statement. Intangible assets created within the business are not capitalised and expenditure is charged against proﬁ ts in the period in which the expenditure is incurred. Intangible assets are tested for impairment where an indicator of impairment exists, and annually in the case of intangible assets with indeﬁ nite lives, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Income Statement when the net asset is derecognised. (o) Recoverable amount of assets At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁ able cash ﬂ ows that are largely independent of the cash ﬂ ows from other assets or groups of assets (cash-generating units). In assessing value in use, the estimated future cash ﬂ ows are discounted to their present value using a post-tax discount rate that reﬂ ects current market assessments of the time value of money and the risks speciﬁ c to the asset. N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 82 1. Summary of Signiﬁ cant Accounting (s) Employee beneﬁ ts N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Policies continued (p) Trade and other payables Trade and other payables are brought to account for amounts payable in relation to goods received and services rendered, whether or not billed to the Group at reporting date. The Group operates in a number of diverse markets, and accordingly the terms of trade vary by business. (q) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Borrowings are classiﬁ ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Borrowing costs Borrowing costs directly associated with qualifying assets are capitalised, including any other associated costs directly attributable to the borrowing. The capitalisation rate to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s outstanding borrowings during the year, in this case 7.6%. All other borrowing costs are expensed in the period they are incurred. (r) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) to make a future sacriﬁ ce of economic beneﬁ ts to other entities as a result of past transactions or other events, it is probable that a future sacriﬁ ce of economic beneﬁ t will be required and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset. The expense relating to any provision is presented in the Income Statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reﬂ ects the risks speciﬁ c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a ﬁ nance cost. A provision for dividends is not recognised as a liability unless the dividends are declared, or publicly recommended on or before the reporting date. Provision is made for employee beneﬁ ts accumulated as a result of employees rendering services up to reporting date including related on-costs. The beneﬁ ts include wages and salaries, incentives, compensated absences and other beneﬁ ts, which are charged against proﬁ ts in their respective expense categories when services are provided or beneﬁ ts vest with the employee. The provision for employee beneﬁ ts is measured at the remuneration rates expected to be paid when the liability is settled. Beneﬁ ts expected to be settled after twelve months from the reporting date are measured at the present value of the estimated future cash outﬂ ows to be made in respect of services provided by employees up to the reporting date. The liability for long service leave is recognised in the provision for employee beneﬁ ts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outﬂ ows. (t) Share-based payment transactions Equity settled transactions The Group provides beneﬁ ts to senior executives in the form of share-based payments, whereby executives render services in exchange for shares or rights over shares (equity-settled transactions). The plan in place to provide these beneﬁ ts is the Executive Share Plan (ESP). The cost of these equity-settled transactions with executives is measured by reference to the fair value of the equity instruments at the date which they are granted. The fair value is determined by an external valuer using the Monte Carlo model, further details of which are given in note 26. In valuing equity-settled transactions, only conditions linked to the price of the shares of Crown Limited are taken into account, further details of which are given in note 26. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulﬁ lled, ending on the date on which the relevant executives become fully entitled to the award (the vesting period). Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 83 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 1. Summary of Signiﬁ cant Accounting (i) Fair value hedges Policies continued (t) Share-based payment transactions continued The cumulative expense recognised for equity-settled transactions at each reporting date until vesting dates reﬂ ects: (i) the extent to which the vesting period has expired; and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The charge to the Income Statement for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity. (u) Leases Finance leases, which transfer to the Group substantially all the risks and beneﬁ ts incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the ﬁ nance charges and reduction of the leased liability so as to achieve a constant rate of interest on the remaining balance of the liability. Operating lease payments are recognised as an expense in the Income Statement on a straight-line basis over the lease term. (v) Derecognition of ﬁ nancial instruments The derecognition of a ﬁ nancial instrument takes place when the Group no longer controls the contractual rights that comprise the ﬁ nancial instrument, which is normally the case when the instrument is sold, or all the cash ﬂ ows attributable to the instrument are passed through to an independent third party. (w) Derivative ﬁ nancial instruments and hedging Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash ﬂ ow hedges, are taken directly to proﬁ t or loss for the year. The fair value of forward exchange contracts are calculated by reference to current forward exchange rates for contracts with similar maturity proﬁ les. The fair values of interest rate swaps are determined by reference to market values for similar instruments. Hedges that meet the strict criteria for hedge accounting are accounted for as follows: Fair value hedges are hedges of the Group’s exposure to changes in the fair value of a recognised asset or liability or an unrecognised ﬁ rm commitment, or an identiﬁ ed portion of such an asset, liability or ﬁ rm commitment that is attributable to a particular risk and could affect proﬁ t or loss. For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged and the derivative is remeasured to fair value. Gains and losses from both are taken to proﬁ t or loss. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Any adjustment to the carrying amount of a hedged ﬁ nancial instrument for which the effective interest method is used is amortised to proﬁ t or loss. Amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. (ii) Cash ﬂ ow hedges Cash ﬂ ow hedges are hedges of the Group’s exposure to variability in cash ﬂ ows that is attributable to a particular risk associated with a recognised asset or liability that is a ﬁ rm commitment and that could affect proﬁ t or loss. The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in the Income Statement. Amounts taken to equity are transferred out of equity and included in the measurement of the hedged transaction (ﬁ nance costs or inventory purchases) when the forecast transaction occurs. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked (due to it being ineffective), amounts previously recognised in equity remain in equity until the forecast transaction occurs. (x) Impairment of ﬁ nancial assets The Group assesses at each reporting date whether a ﬁ nancial asset or group of ﬁ nancial assets is impaired. (i) Financial assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash ﬂ ows (excluding future credit losses that have not been incurred) discounted at the ﬁ nancial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognised in the Income Statement. t o t h e F n a n c a i i l S t a t e m e n t s 84 1. Summary of Signiﬁ cant Accounting Sale of goods N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Policies continued (x) Impairment of ﬁ nancial assets continued (i) Financial assets carried at amortised cost continued The Group ﬁ rst assesses whether objective evidence of impairment exists individually for ﬁ nancial assets that are individually signiﬁ cant, and individually or collectively for ﬁ nancial assets that are not individually signiﬁ cant. If it is determined that no objective evidence of impairment exists for an individually assessed ﬁ nancial asset, whether signiﬁ cant or not, the asset is included in a group of ﬁ nancial assets with similar credit risk characteristics and that group of ﬁ nancial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the Income Statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. (ii) Financial assets carried at cost If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value (because its fair value cannot be reliably measured), or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated cash ﬂ ows, discounted at the current market rate of return for a similar ﬁ nancial asset. (y) Contributed equity Ordinary shares are classiﬁ ed as equity. Issued capital is recognised at the fair value of the consideration received, less transaction costs. (z) Revenue Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic beneﬁ ts will ﬂ ow to the Group and the revenue can be reliably measured. The following speciﬁ c recognition criteria must also be met before revenue is recognised: Revenue is recognised when the signiﬁ cant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer. Rendering of services Revenue is recognised when control of the right to be compensated for the services and the stage of completion can be reliably measured. Casino revenues are the net of gaming wins and losses. Interest Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the ﬁ nancial instrument) to the net carrying amount of the ﬁ nancial asset. Dividends Revenue is recognised when the shareholders’ right to receive the payment is established. (aa) Earnings per share (EPS) Basic EPS is calculated as net proﬁ t after tax, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted EPS is calculated as net proﬁ t after tax, adjusted for: (cid:129) costs of servicing equity (other than dividends); (cid:129) the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and (cid:129) other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 85 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 1. Summary of Signiﬁ cant Accounting Policies continued (ab) Segment Information The Group’s operating segments have been determined based on internal management reporting structure and the nature of the products provided by the Group. They reﬂ ect the business level at which ﬁ nancial information is provided to management for decision making regarding resource allocation and performance assessment. The segment information presented is consistent with internal management reporting. The Group has three operating segments being Crown Melbourne, Burswood and Aspinall’s Club. (ac) Business Combinations Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the acquiree. Acquisition-related costs are expensed as incurred. When the Group acquires a business, it assesses the ﬁ nancial assets and liabilities assumed for appropriate classiﬁ cation and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through proﬁ t or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139 either in proﬁ t or loss or as a change to other comprehensive income. If the contingent consideration is classiﬁ ed as equity, it should not be remeasured until it is ﬁ nally settled within equity. N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 86 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 2. Segment Information 30 June 2011 Normalised Result(1) Crown Melbourne Burswood $’000 $’000 Note Aspinall’s Club $’000 Unall -ocated $’000 Crown Group $’000 Adjust -ment (1) $’000 Actual Crown Group $’000 Operating revenue Main ﬂ oor gaming VIP program play Non Gaming Intersegment 930,657 413,770 – – 1,344,427 – 1,344,427 418,236 116,772 30,583 – 565,591 (44,219) 521,372 365,179 169,728 145 19 535,071 (194) – – 535,071 (194) Operating revenue 1,714,072 700,270 30,728 19 2,444,895 (44,219) 2,400,676 Interest revenue 3 8,968 – 8,968 Total revenue Segment result 1,714,072 700,270 30,728 19 2,453,863 (44,219) 2,409,644(2) Gaming taxes & commissions (503,406) (157,044) (21,469) – (681,919) 16,251 (665,668) Operating expenses (704,955) (348,073) (5,339) (39,906) (1,098,273) – (1,098,273) Intersegment Earnings before interest, tax, depreciation and amortisation “EBITDA” 505,711 195,153 3,920 (39,887) 664,897 (27,968) 636,929 194 – 194 Depreciation and amortisation 3 (155,238) (37,437) (308) (2,620) (195,603) – (195,603) Earnings before interest and tax “EBIT” 350,473 157,716 3,612 (42,507) 469,294 (27,968) 441,326 Equity accounted share of associates’ net proﬁ t/(loss) Net interest income/(expense) Income tax beneﬁ t/(expense) 16,640 15,726 32,366 (66,578) – (66,578) (79,074) 7,815 (71,259) Proﬁ t/(loss) after tax 350,473 157,716 3,612 (42,507) 340,282 (4,427) 335,855 Capital expenditure 231,054 125,657 26 8 356,745 Investments in associates 10 – – – 851,721 851,721 – – 356,745 851,721 (1) Normalised results have been adjusted to exclude the impact of any variance from theoretical win rate on VIP program play (at Crown Melbourne, Burswood, Aspinall’s Club and Melco Crown) and pre-opening costs in respect of City of Dreams. The theoretical win rate is the expected hold percentage on VIP program play over time. Accordingly, the normalised result gives rise to adjustments to VIP program play revenue, gaming taxes, income tax expense and equity accounted share of associates’ result. (2) Total revenue of $2,409.6 million includes $0.4 million of proﬁ t on disposal of non-current assets, which is not included in revenue in the Income Statement. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 87 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 2. Segment Information continued 30 June 2010 Normalised Result(1) Crown Melbourne Burswood $’000 $’000 Note Unall -ocated $’000 Crown Group $’000 Adjust -ment (1) $’000 Actual Crown Group $’000 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Operating revenue Main ﬂ oor gaming 876,810 396,157 – 1,272,967 – 1,272,967 VIP commission program play 363,511 172,491 – 536,002 49,303 585,305 Non Gaming Intersegment 319,184 164,262 27 483,473 (142) – – 483,473 (142) Operating revenue 1,559,505 732,910 27 2,292,300 49,303 2,341,603 Interest revenue Total revenue Segment result 3 11,100 – 11,100 1,559,505 732,910 27 2,303,400 49,303 2,352,703(2) Gaming taxes and commissions (439,523) (197,588) – (637,111) (13,626) (650,737) Operating expenses Intersegment (645,117) (321,696) (31,285) (998,098) 142 – – (998,098) 142 Earnings before interest, tax, depreciation and amortisation “EBITDA” 474,865 213,626 (31,258) 657,233 35,677 692,910 Depreciation and amortisation 3 (125,716) (34,762) (2,640) (163,118) – (163,118) Earnings before interest and tax “EBIT” 349,149 178,864 (33,898) 494,115 35,677 529,792 Equity accounted share of associates’ net proﬁ t/(loss) Net interest income/(expense) Income tax beneﬁ t/(expense) (48,409) (21,048) (69,457) (73,026) – (73,026) (84,313) (10,703) (95,016) Proﬁ t/(loss) after tax 349,149 178,864 (33,898) 288,367 3,926 292,293 Capital expenditure 271,286 62,003 36 333,325 – 333,325 Investments in associates 10 – – 1,029,669 1,029,669 – 1,029,669 (1) Normalised results have been adjusted to exclude the impact of any variance from theoretical win rate on VIP program play (at Crown Melbourne, Burswood and Melco Crown) and pre-opening costs in respect of City of Dreams. The theoretical win rate is the expected hold percentage on VIP program play over time. Accordingly, the normalised result gives rise to adjustments to VIP program play revenue, gaming taxes, income tax expense and equity accounted share of associates’ result. (2) Total revenue of $2,352.7 million includes $10.5 million of proﬁ t on disposal of non-current assets, which is not included in revenue in the Income Statement. 88 3. Revenue and Expenses N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Proﬁ t before income tax expense includes the following revenues and expenses: (a) Revenue from continuing operations Revenue from services Revenue from sale of goods Interest Dividends Other operating revenue (b) Other income from continuing operations Proﬁ t on disposal of non-current assets (c) Expenses from continuing operations Cost of sales Gaming activities Other ordinary activities Depreciation of non-current assets (included in expenses above) Buildings Plant and equipment Amortisation of non-current assets (included in expenses above) Casino licence fee and management agreement Other assets Total depreciation and amortisation expense 2011 $’000 2010 $’000 2,063,289 2,016,601 315,947 295,533 8,968 11,100 19 27 21,018 18,987 2,409,241 2,342,248 403 10,455 119,623 115,327 1,797,202 1,662,559 42,526 33,925 1,959,351 1,811,811 54,757 120,810 49,164 94,973 175,567 144,137 14,417 5,619 20,036 14,417 4,564 18,981 195,603 163,118 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 89 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 3. Revenue and Expenses continued 2011 $’000 2010 $’000 86,440 (10,895) 75,545 86,925 (2,799) 84,126 11,210 5,262 6,753 5,449 41,872 38,979 628,921 571,534 1,683 (7,775) 2,885 3,368 – (2,375) t o t h e F n a n c a i i (d) Other income and expense disclosures l S t a t e m e n t s Finance costs expensed: Debt facilities Capitalised interest Bad and doubtful debts – trade debtors Rentals – operating leases Superannuation expense Other employee beneﬁ ts expense Executive share plan expenses Net (gain)/loss on total return swaps Net foreign currency (gains)/losses 90 4. Dividends Paid and Announced N o t e s t o t h e F n a n c a i i l S t a t e m e n t s (a) Dividends declared and paid during the ﬁ nancial year Prior year ﬁ nal dividend (paid 15 October 2010) Paid at 19 cents (2009: 19 cents) per share franked at 60% (2009: 60% franked) at the Australian tax rate of 30% (2009: 30%) Current year interim dividend (paid 15 April 2011) Paid at 18 cents (2010: 18 cents) per share franked at 60% (2010: 60% franked) at the Australian tax rate of 30% (2010: 30%) Total dividends appropriated (b) Dividends announced and not recognised as a liability Current year ﬁ nal dividend (expected to be paid 14 October 2011) Announced at 19 cents (2010: 19 cents) per share and franked at 50% (2010: 60%) at the Australian tax rate of 30% (2010: 30%) 2011 $’000 2010 $’000 144,095 144,095 136,511 136,511 280,606 280,606 144,095 144,095 (c) Franking credits The tax rate at which the ﬁ nal dividend will be franked is 30% (2010: 30%). The franking account disclosures have been calculated using the franking rate applicable at 30 June 2011. The amount of franking credits available for the subsequent ﬁ nancial year: Franking account balance as at the end of the ﬁ nancial year at 30% (2010: 30%) 24,612 46,189 Franking credits that will arise from the payment of income taxes payable as at the end of the ﬁ nancial year Franking debits that will arise from the refund of income taxes receivable as at the end of the ﬁ nancial year Total franking credits The amount of franking credits available for future reporting periods: Impact on the franking account of dividends announced before the ﬁ nancial report was authorised for issue but not recognised as a distribution to equity holders during the ﬁ nancial year Total franking credits available for future reporting periods 16,846 19,199 (7,975) – 33,483 65,388 (30,877) 2,606 (37,054) 28,334 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 91 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 5. Income Tax (a) Income tax expense The prima facie tax expense, using tax rates applicable in the country of operation, on proﬁ t differs from income tax provided in the ﬁ nancial statements as follows: Proﬁ t before income tax Prima facie income tax expense on proﬁ t at the Australian rate of 30% (2010: 30%) Tax effect of: Non deductible depreciation and amortisation Share of associates’ net losses/(proﬁ ts) Differences in foreign tax rates Non assessable income sheltered by capital losses Other non assessable income Other items – net Deferred income tax on temporary differences Income tax (over)/under provided in prior years Income tax expense Income tax expense comprises: Current expense Deferred expense Adjustments for current income tax of prior periods (b) Deferred income taxes Deferred income tax assets Deferred income tax liabilities Acquisitions Net deferred income tax assets/(liabilities) 2011 $’000 2010 $’000 407,114 387,309 122,134 116,192 2,247 (9,710) (30,335) (14) – 2,201 4,779 (20,043) 71,259 2,247 20,837 (24,928) (3,065) (5,002) (14,524) 988 2,271 95,016 86,523 91,757 4,779 (20,043) 71,259 988 2,271 95,016 108,731 111,081 209,527 207,098 398 – (101,194) (96,017) t o t h e F n a n c a i i l S t a t e m e n t s 92 5. Income Tax continued N o t e s t o t h e F n a n c a i i l S t a t e m e n t s (c) Deferred income tax assets and liabilities at the end of the ﬁ nancial year The balance comprises temporary differences attributable to: Doubtful debt provision Employee beneﬁ ts provision Revenue losses carried forward Other receivables Other provisions Investments Prepaid casino tax Licences and intangibles Land and buildings Property, plant & equipment Other Net deferred income tax assets/(liabilities) (d) Movements in deferred income tax assets and liabilities during the ﬁ nancial year Carrying amount at the beginning of the year Charged/(credited) to the income statement Acquisitions Carrying amount at the end of the year (e) Tax losses not brought to account, as the realisation of the beneﬁ ts represented by these balances is not considered to be probable The Group has tax losses arising in Australia that are available indeﬁ nitely for offset against future capital gains. Capital gains tax – no expiry date Total tax losses not brought to account Potential tax beneﬁ t at respective tax rates (f) Unrecognised temporary differences 2011 $’000 2010 $’000 9,060 24,647 7,422 38,905 19,133 7,712 22,258 12,305 41,580 18,840 – (639) (18,870) (20,379) (117,351) (123,053) (71,593) (69,958) 6,770 683 9,975 5,342 (101,194) (96,017) (96,017) (95,029) (4,779) (398) (988) – (101,194) (96,017) 801,389 913,557 801,389 913,557 240,417 274,067 At 30 June 2011, there is no recognised or unrecognised deferred income tax liability (2010: $nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, associates or joint ventures, as the Group has no liability for additional taxation should such amounts be remitted. (g) Tax consolidation Crown Limited and its 100% owned Australian resident subsidiaries have formed a tax consolidated group with effect from 1 July 2007. Crown Limited is the head entity of the tax consolidated group. Members of the group have entered into a tax sharing arrangement with Crown Limited in order to allocate income tax expense between Crown Limited and the wholly owned subsidiaries. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date the possibility of default is remote. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 93 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 5. Income Tax continued (h) Tax effect accounting by members of the tax consolidated group Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current and deferred taxes to members of the tax consolidated group in accordance with their taxable income for the period. The allocation of taxes under the tax funding agreement is recognised as an increase / decrease in the subsidiaries inter-company accounts with the tax consolidated group head company, Crown Limited. 6. Trade and Other Receivables Current Trade receivables Provision for doubtful debts (a) Loans to associated entities Other receivables 2011 $’000 2010 $’000 122,776 140,884 (30,704) (26,897) 92,072 113,987 426 31,258 31,684 13 33,252 33,265 123,756 147,252 (a) Allowance for Doubtful Debts Trade debtors are non-interest bearing and are generally 30 day terms. An allowance for doubtful debts is recognised when there is objective evidence that an individual trade debt is impaired. Movements in the allowance for doubtful debts Allowance for doubtful debts at the beginning of the year Net doubtful debt expense (1) Amounts written off (1) Amounts are included in other expenses. 2011 $’000 (26,897) (11,210) 7,403 2010 $’000 (28,206) (6,753) 8,062 (30,704) (26,897) t o t h e F n a n c a i i l S t a t e m e n t s 94 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 6. Trade and Other Receivables continued (a) Allowance for Doubtful Debts continued Ageing analysis of trade debtors 2011 – consolidated Current Past due not impaired Considered impaired 2010 – consolidated Current Past due not impaired Considered impaired Non-current Loans to associated entities (1) Other receivables (1) Loan terms are outlined in note 31. 7. Inventories Current Finished goods (at cost) 0-30 days $’000 > 30 days $’000 Total $’000 25,873 – 130 – 66,199 30,574 25,873 66,199 30,704 26,003 96,773 122,776 90,097 – 667 – 23,890 26,230 90,097 23,890 26,897 90,764 50,120 140,884 2011 $’000 2010 $’000 120,399 114,076 11,078 14,082 131,477 128,158 2011 $’000 2010 $’000 18,070 16,328 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 95 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 8. Other Financial Assets Current Receivable on forward exchange contracts Receivable on interest rate swap Receivable on total return swaps Non-current Receivable on forward exchange contracts 2011 $’000 2010 $’000 – – 7,775 7,775 24,051 24,051 1,335 636 – 1,971 6,045 6,045 Details of the Group’s exposure to interest rate risk and foreign currency changes are provided in note 35. 9. Investments At fair value Shares – unlisted (Australia) Shares – unlisted (North America) 2011 $’000 2010 $’000 37,633 61,025 37,132 69,502 98,658 106,634 Investments consist of shares, and therefore has no ﬁ xed maturity date or coupon rate. The fair value of the unlisted investments have been estimated using valuation techniques based on assumptions that are not supported by observable market prices or rates. Management believes that the estimated fair values resulting from the valuation techniques and recorded in the Statement of Financial Position and the related changes in fair value recorded in the Income Statement are reasonable and the most appropriate at the reporting date. Based on the valuation techniques performed, there has been no fair value movement during the year (2010: $nil). t o t h e F n a n c a i i l S t a t e m e n t s 96 10. Investments in Associates Investment details: Associated entities – unlisted shares Associated entities – listed shares Total investments in associates Fair value of listed investments: Melco Crown Entertainment Ltd (1) 2011 $’000 2010 $’000 N o t e s t o t h e F n a n c a i i 3,669 6,158 848,052 1,023,511 851,721 1,029,669 l S t a t e m e n t s 2,129,988 792,247 2,129,988 792,247 (1) Reﬂ ects Melco Crown share price at balance date, converted to Australian dollars. In accordance with Crown’s accounting policies, recoverable amount is the greater of fair value less costs to sell and value in use. The Melco Crown carrying amount does not exceed its recoverable amount. Investments in Associates Reporting Date Principal Activity Country of Incorporation or Residence %Interest 30 June 2011 30 June 2010 Melco Crown Entertainment Ltd 31 Dec (2) Resort/Casino and gaming machine operator Macau Betfair Australasia Pty Ltd 30 April (2) Betting exchange Aspers Holdings (Jersey) Ltd 30 June Casino and gaming machine operator Australia U.K. (2) The Group uses 30 June results to equity account for the investments. Share of associates’ revenue and proﬁ ts/(losses) Share of associates’: Revenue Operating proﬁ t/(loss) before income tax Income tax beneﬁ t/(expense) Share of associates’ net proﬁ t/(loss) after income tax 33.4 50.0 50.0 33.4 50.0 50.0 2011 $’000 2010 $’000 1,523,293 779,378 31,681 685 (72,039) 2,582 32,366 (69,457) Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 97 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 10. Investments in Associates continued Carrying amount of investments in associates Balance at the beginning of the ﬁ nancial year Carrying amount of investments in associates acquired during the year Share of associates’ net proﬁ t/(loss) for the year Gain / (loss) on issue of shares by associate Foreign exchange movements Carrying amount of investment in associates at the end of the ﬁ nancial year Represented by: (cid:129) Melco Crown (cid:129) Betfair The consolidated entity’s share of the assets and liabilities of associates in aggregate Current assets Non-current assets Current liabilities Non-current liabilities Net assets Retained proﬁ ts/(accumulated losses) of the consolidated entity attributable to associates Balance at the beginning of the ﬁ nancial year Share of associates’ net proﬁ ts/(losses) Balance at the end of the ﬁ nancial year 2011 $’000 2010 $’000 1,029,669 1,095,150 15,106 32,366 – 63,565 (69,457) (4,389) (225,420) (55,200) 851,721 1,029,669 848,052 1,023,511 3,669 6,158 851,721 1,029,669 402,997 403,607 1,372,854 2,370,148 (164,696) (1,021,821) (775,949) (997,264) 835,206 754,670 (270,740) (201,283) 32,366 (69,457) (238,374) (270,740) The investment in Aspers Holdings (Jersey) Ltd was previously written down to $nil and Crown has therefore discontinued recognising its share of further losses. The Group’s share of unrecognised losses as at 30 June 2011 for Aspers Group is $6.4 million (2010: $5.4 million). Impairment Testing Based on detailed impairment testing performed, there has been no impairment charge during the year (2010: $nil). For the purposes of impairment testing, management estimated the present value of the future cash ﬂ ows expected to be generated from operations and the proceeds from ultimate disposal. These calculations use cash ﬂ ow projections based on past performance and expectations for the future using a ﬁ ve year cash ﬂ ow period. The implied terminal growth rate beyond the ﬁ ve year period does not exceed the forecasted long term inﬂ ation rates of up to 4.3%. Post-tax discount rates of between 9% and 11% were used in the impairment review calculations. Any reasonable possible change in key assumptions used would not cause the carrying amount of the investments to exceed their recoverable amounts. t o t h e F n a n c a i i l S t a t e m e n t s 98 11. Property, Plant and Equipment N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Freehold land and buildings $’000 Buildings on leasehold Plant & land equipment $’000 $’000 Construction work in Total property, plant and progress equipment equipment $’000 Leased plant & $’000 $’000 Year ended 30 June 2011 At 1 July 2010, net of accumulated depreciation and impairment Additions Disposals Depreciation expense Acquisition of subsidiary Exchange differences Reclassiﬁ cation/ transfer At 30 June 2011, net of accumulated depreciation and impairment At 1 July 2010 966,556 675,132 535,942 142,829 – 2,320,459 1,120 34,043 165,483 156,099 – – (92) (22,376) (32,381) (120,810) – – 9,156 4,497 (198) (95) – – – – (39,287) – 161,609 (122,322) – – – – – – 356,745 (92) (175,567) 13,653 (293) – 906,013 685,752 746,534 176,606 – 2,514,905 Cost (gross carrying amount) 1,137,453 1,046,742 1,409,420 142,829 10,679 3,747,123 Accumulated depreciation and impairment Net carrying amount At 30 June 2011 (170,897) (371,610) (873,478) – (10,679) (1,426,664) 966,556 675,132 535,942 142,829 – 2,320,459 Cost (gross carrying amount) 1,103,774 1,098,679 1,729,766 176,606 10,679 4,119,504 Accumulated depreciation and impairment Net carrying amount (197,761) (412,927) (983,232) – (10,679) (1,604,599) 906,013 685,752 746,534 176,606 – 2,514,905 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 99 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 11. Property, Plant and Equipment continued t o t h e F n a n c a i i l S t a t e m e n t s Year ended 30 June 2010 At 1 July 2009, net of accumulated depreciation and impairment Additions Disposals Depreciation expense Reclassiﬁ cation/ transfer At 30 June 2010, net of accumulated depreciation and impairment At 1 July 2009 Freehold land and buildings $’000 Buildings on leasehold Plant & land equipment $’000 $’000 Construction work in Total property, plant and progress equipment equipment $’000 Leased plant & $’000 $’000 685,363 677,503 499,468 272,296 – 2,134,630 1,535 29,954 39,632 262,204 (3,283) – (76) (16,839) (32,325) (94,973) – – 299,780 – 91,891 (391,671) – – – – 333,325 (3,359) (144,137) – 966,556 675,132 535,942 142,829 – 2,320,459 Cost (gross carrying amount) 839,644 1,018,705 1,290,588 272,296 10,679 3,431,912 Accumulated depreciation and impairment Net carrying amount At 30 June 2010 (154,281) (341,202) (791,120) – (10,679) (1,297,282) 685,363 677,503 499,468 272,296 – 2,134,630 Cost (gross carrying amount) 1,137,453 1,046,742 1,409,420 142,829 10,679 3,747,123 Accumulated depreciation and impairment Net carrying amount (170,897) (371,610) (873,478) – (10,679) (1,426,664) 966,556 675,132 535,942 142,829 – 2,320,459 100 12. Licences N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Year ended 30 June 2011 At 1 July 2010, net of accumulated amortisation and impairment Additions Amortisation expense At 30 June 2011, net of accumulated amortisation and impairment At 1 July 2010 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount At 30 June 2011 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount Year ended 30 June 2010 At 1 July 2009, net of accumulated amortisation and impairment Amortisation expense At 30 June 2010, net of accumulated amortisation and impairment At 1 July 2009 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount (1) Purchased as part of a business combination. Casino Licence(1) $’000 651,926 20,000 (7,471) 664,455 774,899 (122,973) 651,926 794,899 (130,444) 664,455 659,397 (7,471) 651,926 774,899 (115,502) 659,397 The casino licence premiums are carried at cost and amortised on a straight line basis over their useful lives. The Crown Melbourne licence is being amortised over 34 years. The Burswood licence is perpetual and no amortisation is charged. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 101 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 13. Other Intangible Assets Casino Management Goodwill(1) Agreement(1) $’000 $’000 Other $’000 Total $’000 11,892 45,853 (1,227) 162,570 908 175,370 – – – – (20) 45,853 (1,227) (6,966) – (6,946) 56,518 155,624 888 213,030 11,892 – 245,279 (82,709) 11,892 162,570 1,025 258,196 (117) 908 (82,826) 175,370 56,518 – 245,279 (89,655) 56,518 155,624 1,025 302,822 (137) 888 (89,792) 213,030 Year ended 30 June 2010 At 1 July 2010, net of accumulated amortisation and impairment Business acquisitions Exchange differences Amortisation expense At 30 June 2011, net of accumulated amortisation and impairment At 1 July 2010 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount At 30 June 2011 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount Year ended 30 June 2010 At 1 July 2009, net of accumulated amortisation and impairment 11,892 169,516 – (6,946) 928 (20) 182,336 (6,966) Amortisation expense At 30 June 2010, net of accumulated amortisation and impairment At 1 July 2009 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount (1) Purchased as part of a business combination. 11,892 162,570 908 175,370 11,892 – 11,892 245,279 (75,763) 169,516 1,025 258,196 (97) 928 (75,860) 182,336 Goodwill is considered to have an indeﬁ nite life and is tested annually for impairment (see note 14). The useful life of the Crown Melbourne casino management agreement is 34 years, and is amortised on a straight line basis. t o t h e F n a n c a i i l S t a t e m e n t s 102 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 14. Impairment Testing of Intangible Assets Impairment tests for intangible assets Intangible assets deemed to have indeﬁ nite lives are allocated to the Group’s cash generating units (CGU’s) identiﬁ ed according to business segment. The recoverable amount of a CGU is determined based on fair value less costs to sell. Fair value less costs to sell is calculated using a discounted cash ﬂ ow methodology covering a speciﬁ ed period, with an appropriate residual value at the end of that period, for each segment. The methodology utilises cash ﬂ ow forecasts that are based primarily on business plans presented to and approved by the Board. The implied terminal growth rate beyond the ﬁ ve year period does not exceed the forecasted long term Australian inﬂ ation rate of 2.8%. The following describes each key assumption on which management has based its cash ﬂ ow projections to undertake impairment testing of goodwill and casino licences. (a) Cash ﬂ ow forecasts Cash ﬂ ow forecasts are based on past performance and expectations for the future using a ﬁ ve year cash ﬂ ow period. (b) Residual value Residual value is calculated using a perpetuity growth formula based on the cash ﬂ ow forecast using a weighted average cost of capital (after tax) and forecast growth rate. (c) Forecast growth rates Forecast growth rates are based on past performance and management’s expectations for future performance in each segment. (d) Discount rates A weighted average cost of capital (after tax) of between 9% and 11% was used by the Group in impairment testing, risk adjusted where applicable. 15. Other Assets Non-current Prepaid casino tax at cost Accumulated amortisation Other prepayments 2011 $’000 2010 $’000 100,800 100,800 (37,899) 62,901 (35,164) 65,636 3,424 – 66,325 65,636 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 103 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 16. Trade and Other Payables Current – unsecured Trade and other payables Deferred Income Non-current – unsecured Other 17. Interest-Bearing Loans and Borrowings Current – unsecured Bank Loans – unsecured Capital Markets Debt – unsecured Derivatives Non-current – unsecured Bank Loans – unsecured Capital Markets Debt – unsecured Fair Value Disclosures 2011 $’000 2010 $’000 237,207 291,273 682 1,010 237,889 292,283 – – 67 67 2011 $’000 2010 $’000 19,752 20,000 – – 114,600 636 19,752 135,236 688,401 300,000 361,306 412,758 1,049,707 712,758 Details of the fair value disclosures of the Group’s interest bearing liabilities are set out in note 35. Financial Risk Management Information about the Group’s exposure to interest rate and foreign currency changes is provided in note 35. t o t h e F n a n c a i i l S t a t e m e n t s 104 17. Interest-Bearing Loans and Borrowings continued Financing and Credit Facilities Unsecured credit facilities are provided as part of the overall debt funding structure of the Crown Group as follows: Facility Type Bank Facilities Facility Amount $’000 Drawn Letters of Amount Credit Issued $’000 $’000 Available $’000 Expiry Dates Bilateral Multi Option Facility (1) 70,000 20,000 17,728 32,272 October 2011 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Syndicated Revolving Facility 750,000 – Syndicated Revolving and Term Loan Facility 600,000 505,000 64,642 58,401 GBP Bilateral Facilities Letter of Credit Facility – – – 750,000 2015 – 2016 95,000 June 2013 6,241 December 2012 185,000 – 185,000 – June 2021 Australian Dollar Bilateral Facilities 200,000 125,000 – 75,000 July 2013 1,869,642 708,401 202,728 958,513 Debt Capital Markets Euro Medium Term Note US Private Placement 174,634 174,634 186,672 186,672 361,306 361,306 – – – July 2036 2015 – 2020 – – – Total at 30 June 2011 2,230,948 1,069,707 202,728 958,513 Total at 30 June 2010 2,356,022 847,358 222,471 1,286,193 (1) The $20.0 million Bilateral Multi Option Facility has been drawn on a discounted basis. The discounted amount ($19.8 million) is disclosed as an interest bearing loan in the Statement of Financial Position. The bank facilities are provided on an unsecured basis by domestic and international banks. The debt capital markets drawn amounts represent unsecured notes issued to international debt investors. Crown is able to make advances and issue letters of credit under the letter of credit facility, syndicated facilities and the bilateral facilities which are multi option in nature. Each of the above mentioned facilities is supported by a Group guarantee from Crown and certain of its subsidiaries and impose various afﬁ rmative covenants on Crown, including compliance with certain ﬁ nancial ratios and negative covenants, including restrictions on encumbrances, and customary events of default, including a payment default, breach of covenants, cross-default and insolvency events. During the current and prior year, there were no defaults or breaches on any of the loans or borrowings. Refer to note 24(b) for a summary of Crown’s overdraft facilities. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 105 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 18. Provisions Employee Entitlements $’000 Other $’000 Total $’000 107,633 21,024 128,657 79,703 (72,113) 5,932 (11,563) 85,635 (83,676) 115,223 15,393 130,616 91,888 23,335 11,029 102,917 4,364 27,699 115,223 15,393 130,616 98,296 9,337 15,024 113,320 6,000 15,337 107,633 21,024 128,657 2011 $’000 2010 $’000 2,276 2,276 10,970 63,255 74,225 – – 17,100 23,500 40,600 t o t h e F n a n c a i i l S t a t e m e n t s At 1 July 2010 Arising during the year Utilised during the year At 30 June 2011 Current 2011 Non-current 2011 At 30 June 2011 Current 2010 Non-current 2010 At 30 June 2010 19. Other Financial Liabilities Current Payables on forward exchange contracts Non-current Payables on interest rate swaps Payables on cross currency swaps Other ﬁ nancial liabilities are outlined in note 35. 106 20. Contributed Equity N o t e s Issued share capital Ordinary shares fully paid Movements in issued share capital Carrying amount at the beginning of the ﬁ nancial year ESP proceeds Transfer from employee equity beneﬁ ts reserve Carrying amount at the end of the ﬁ nancial year Issued share capital Ordinary shares fully paid Movements in issued share capital Balance at the beginning of the ﬁ nancial year Shares issued Balance at the end of the ﬁ nancial year Terms and Conditions of Contributed Equity 2011 $’000 2010 $’000 t o t h e F n a n c a i i 645,475 638,690 638,690 634,364 6,785 – 2,893 1,433 645,475 638,690 l S t a t e m e n t s 2011 No. 2010 No. 758,394,185 758,394,185 758,394,185 758,394,185 – – 758,394,185 758,394,185 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding-up of the Company in proportion to the number of shares held. The voting rights attaching to ordinary shares provide that each ordinary shareholder present in person or by proxy or attorney or being a corporation present by representative at a meeting shall have: (a) on a show of hands, one vote only; (b) on a poll, one vote for every fully paid ordinary share held. Capital Management When managing capital, the Group’s objective is to maintain optimal returns to shareholders and beneﬁ ts for other stakeholders. The Group also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. During 2011, the Group paid dividends of $280.6 million. The Group’s dividend policy going forward is to pay the higher of 37 cents per share or 65% of normalised full year NPAT (excluding proﬁ ts from associates), subject to the Group’s ﬁ nancial position. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 107 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 21. Reserves and Retained Earnings Foreign currency translation reserve Employee equity beneﬁ ts reserve Net unrealised gains reserve Cash ﬂ ow hedge reserve Foreign Currency Translation Reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the ﬁ nancial statements of foreign operations. Balance at the beginning of the ﬁ nancial year Net exchange difference on translation of foreign operations Balance at the end of the ﬁ nancial year Employee Equity Beneﬁ ts Reserve The employee equity beneﬁ ts reserve is used to record share based remuneration obligations to executives in relation to ordinary shares. Balance at the beginning of the ﬁ nancial year Charged to the income statement Transfer to contributed equity Balance at the end of the ﬁ nancial year Net Unrealised Gains Reserve The net unrealised gains reserve records the movement from changes in investments and associates equity. Balance at the beginning of the ﬁ nancial year Change in net unrealised gains reserve Balance at the end of the ﬁ nancial year Cash Flow Hedge Reserve The cash ﬂ ow hedge reserve records the portion of the gain or loss on a hedging instrument in a cash ﬂ ow hedge that is determined to be an effective hedge. Balance at the beginning of the ﬁ nancial year Movement in interest rate swaps Movement in cross currency swaps Movement in forward exchange contracts Transfer to statement of ﬁ nancial position / statement of comprehensive income Balance at the end of the ﬁ nancial year 2011 $’000 2010 $’000 (363,804) (157,888) 13,010 11,327 629,032 628,532 (52,450) (33,220) 225,788 448,751 (157,888) (205,916) (94,107) (63,781) (363,804) (157,888) 11,327 1,683 – 9,392 3,368 (1,433) 13,010 11,327 628,532 632,593 500 (4,061) 629,032 628,532 (33,220) (63,900) 6,130 1,200 (39,755) 14,800 14,395 – 7,380 7,300 (52,450) (33,220) t o t h e F n a n c a i i l S t a t e m e n t s 108 21. Reserves and Retained Earnings continued N o t e s Retained Earnings Balance at the beginning of the ﬁ nancial year Net proﬁ t after tax Total available for appropriation Dividends provided for or paid Balance at the end of the ﬁ nancial year 2011 $’000 2010 $’000 t o t h e F n a n c a i i 2,331,864 2,317,988 335,855 292,293 2,667,719 2,610,281 (278,622) (278,417) 2,389,097 2,331,864 l S t a t e m e n t s Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 109 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 22. Business Combinations Acquisition of Aspinall’s Club Limited (ACL) On 6 May 2011, Crown Limited acquired ACL (the owner and operator of the Aspinall’s Club in London) from the Aspers Group (a 50:50 joint venture between Crown and the Aspinall family). The consideration transferred was $58.9 million (£38.1 million). The transaction resulted in Crown Limited owning 100% of the shares in ACL. N o t e s t o t h e F n a n c a i i l S t a t e m e n t s The initial accounting for the business combination requires the identiﬁ cation of fair values to be assigned to ACL’s identiﬁ able assets, liabilities and contingent liabilities. Due to the acquisition occurring close to the reporting date, the fair values assigned to ACL’s assets are provisional. Therefore the initial accounting for the business combination is provisional. In accordance with Australian Accounting Standards, Crown Limited will recognise any adjustments to these provisional values as a result of completing the initial accounting within 12 months of the acquisition date. Based on the provisional fair values, ACL’s net assets at the date of acquisition were $13.8 million, resulting in $45.2 million of goodwill. Key factors contributing to the $45.2 million of provisional goodwill are the synergies existing within the acquired business. The acquisition of ACL will enable Crown Limited to integrate the London operation more fully into its international VIP business and leverage the sales and marketing capability of Crown Limited’s international VIP organisation. None of the goodwill recognised is expected to be deductible for income tax purposes. The provisional fair value of the identiﬁ able assets and liabilities of ACL as at the date of acquisition were: Consolidated fair value at acquisition date $’000 3,807 1,095 238 1,799 13,653 20,592 6,416 407 6,823 13,769 45,172 58,941 58,941 (3,807) 55,134 Cash and cash equivalents Trade and other receivables Inventories Prepayments Property, plant and equipment Trade and other payables Deferred tax liabilities Provisional fair value of identiﬁ able net assets Goodwill arising on acquisition Consideration transferred for acquisition of identiﬁ able net assets Net Cash Flow – Acquisition of subsidiary Cash Paid Cash Acquired Net Cash Flow – Acquisition of subsidiary 110 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 23. Expenditure Commitments (a) Capital expenditure commitments Estimated capital expenditure contracted for at balance date, but not provided for: Payable within one year Payable after one year but not more than ﬁ ve years 2011 $’000 2010 $’000 325,630 191,137 64,494 88,743 390,124 279,880 At 30 June 2011, the Group has capital expenditure commitments principally relating to funding various projects at Burswood and Crown Melbourne. (b) Non-cancellable operating lease commitments Payable within one year Payable after one year but not more than ﬁ ve years Payable more than ﬁ ve years 2011 $’000 1,924 2,475 16,959 21,358 2010 $’000 1,036 2,356 1,004 4,396 The Group has entered into non-cancellable operating leases. The leases vary in contract period depending on the asset involved but generally have an average lease term of approximately 12 years (2010: 4 years). The increase in the average lease term reﬂ ects the inclusion of Aspinall’s Club’s operating leases at the end of the current period. Operating leases include telecommunications rental agreements and leases on assets including motor vehicles, land and buildings and items of plant and equipment. Renewal terms are included in certain contracts, whereby renewal is at the option of the speciﬁ c entity that holds the lease. On renewal, the terms of the leases are usually renegotiated. There are no restrictions placed upon the lessee by entering into these leases. In addition, in 1993 Crown Melbourne entered into a ninety-nine year lease agreement for the site upon which Crown Melbourne Entertainment complex is located. For years one to forty inclusive the annual rent payable by the parent entity is one dollar per annum. For years forty-one to ninety-nine inclusive the annual rent payable will be the then current market rent for the site. The aggregate lease expenditure contracted for at balance date but not provided for which is disclosed in this report does not include an estimate for the rent payable for years forty-one to ninety-nine inclusive due to the uncertainty of these amounts. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 111 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 24. Cash Flow Statement Reconciliation (a) Cash balance represents: (cid:129) cash on hand and at bank (cid:129) deposits at call 2011 $’000 2010 $’000 165,919 178,395 17,780 18,000 183,699 196,395 The above closing cash balances includes $130.3 million (2010: $126.7 million) of cash on the company’s premises and cash held in bank accounts (including deposits on call) needed to run the day to day operations of the businesses. (b) Reconciliation of the proﬁ t/(loss) after tax to the net cash ﬂ ows from operating activities Proﬁ t after tax Depreciation and amortisation: (cid:129) property, plant and equipment (cid:129) intangibles (Proﬁ t)/loss on sale of property, plant and equipment Unrealised foreign exchange loss Share of associates’ net (proﬁ t) / loss Executive Share Plan expense Net (gain)/loss on total return swaps Changes in assets and liabilities: (Increase)/decrease in trade and other receivables Increase/(decrease) in doubtful debts (Increase)/decrease in inventories (Increase)/decrease in prepayments (Increase)/decrease in deferred income tax asset (Increase)/decrease in other assets (Decrease)/increase in payables (Decrease)/increase in current income tax liability (Decrease)/increase in provisions (Decrease)/increase in deferred income tax liability Net cash ﬂ ows from operating activities 2011 $’000 2010 $’000 335,855 292,293 175,567 144,137 20,036 (403) 4,015 18,981 (10,455) 169 (32,366) 69,457 1,683 (7,775) 3,368 – (10,137) (40,768) 8,417 (1,504) (6,550) 2,350 5 (1,254) (2,826) 139 29,057 (4,503) (51,229) 33,172 5,908 288 6,809 (4,025) (31,417) (28,068) 450,969 467,457 Bank Overdraft Facilities The consolidated entity has bank overdraft facilities available as follows: Bank ANZ Banking Group Limited Citibank NA There were no drawn down amounts at 30 June 2011. 2011 2010 A$20 million A$10 million US$10 million US$10 million t o t h e F n a n c a i i l S t a t e m e n t s 112 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 25. Events After the Reporting Period Subsequent to 30 June 2011, the directors of Crown announced a ﬁ nal dividend on ordinary shares in respect of the year ending 30 June 2011. The total amount of the dividend is $144.1 million, which represents a dividend of 19 cents per share franked at 50%. The dividend has not been provided for in the 30 June 2011 ﬁ nancial statements. On 11 May 2011, Crown announced the acquisition of the Holiday Inn hotel building and associated assets in Perth together with the termination of Burswood’s partnership with the Intercontinental Hotel Group (IHG) pursuant to which both the Holiday Inn hotel and the Intercontinental Hotel at Burswood were operated. The cost of these transactions was approximately $79 million. Settlement of the transactions occurred on 1 July 2011 and Burswood now operates both the Holiday Inn Burswood hotel and the Intercontinental Burswood hotel under a licence agreement with IHG. On 26 August 2011, Crown announced its intention to conduct an on market share buy-back of up to 30,000,000 of its ordinary shares. This number represents approximately 4% of Crown shares on issue at balance date. 26. Executive Share Plan Crown operates an Executive Share Plan (ESP) which was approved at the 1994 PBL Annual General Meeting. No ESP shares were issued to executives in the current ﬁ nancial year. Crown ESP shares are subject to a performance condition, requiring a 7% compound annual growth in the Crown share price in order for the relevant portion of shares to vest and be released from restrictions under the ESP. At 30 June 2011, 25 ESP participants held 4,952,807 Crown ESP shares or 0.65% percent of Crown’s issued capital. Shares at the beginning of the ﬁ nancial year Forfeited Shares on issue at the end of the ﬁ nancial year Loans to executives at the beginning of the ﬁ nancial year Loans repaid and satisﬁ ed during the year Loans to executives at year end Methodology 2011 No. 2010 No. 5,748,815 6,073,815 (796,008) (325,000) 4,952,807 5,748,815 $66,559,688 $70,258,313 ($8,833,613) ($3,698,625) $57,726,075 $66,559,688 In accordance with Australian Accounting Standards the ESP shares are accounted for as share based payments (see note 1(t)) and as such the loan values are not recorded in Crown’s Statement of Financial Position until they become due. The value that forms the basis was established at the time each ESP share was granted. As ESP shares were issued prior to the demerger the valuation was performed using assumptions relevant to PBL before demerger. External valuers have used a Monte Carlo simulation model combined with a Black Scholes option pricing model to value the ESP this year. The value per share granted for each allotment incorporates the share price growth performance conditions. The Monte Carlo simulation is a technique used to simulate future TSRs. The assumptions that underpin Black Scholes are used in a Monte Carlo simulation. The key assumptions are: (cid:129) Share price movement conforms to a lognormal distribution; (cid:129) Market efﬁ ciency; and (cid:129) Risk neutral valuation. Using an estimate of the future standard deviation (volatility) of returns and the risk neutral valuation assumption (allowing the use of the risk free interest rate), the share price return distribution of a company at a future date is estimated. The Monte Carlo simulation technique simulates possible share price returns conforming to that distribution. At each simulation, the share price is also simulated, meaning an equity instrument can be valued at that date. The share price simulated at one vesting date is used to simulate the share price at the next vesting date. If the target was not met at the earlier date, the unvested portion is carried to the next vesting date in the simulation. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 113 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 26. Executive Share Plan continued Non transferability of the plans During the period from grant date to vesting, executives cannot sell their plan rights. However, no adjustment is made to the fair values for this, as non-transferability is due to the executive having not yet earned the right to the plan (through the provision of their services), rather than a restriction on the underlying value of the plan rights. After vesting, the holders have until expiry to “exercise” the plan. Since the plan rights are not transferable, liquidity can only be obtained by exercising the plan rights and selling the underlying shares. In the case of the ESP, given the seniority of the holders and the beneﬁ t of the limited recourse feature, it is assumed the ESP will be held until expiry. Dilution When an investor exercises an exchange traded option, there is no change in either the company’s assets or the number of shares outstanding. However, when a company issued option is exercised, the number of shares outstanding will increase and the underlying assets of the company will be increased by the amount of the exercise proceeds. Any dilution of the share price of Crown which might arise on the issue of new shares following exercise of the ESP would be immaterial, given the number of existing shares on issue. Accordingly, no adjustment to the value of the ESP has been made for potential dilution. Other assumptions applied by external valuer (cid:129) PBL’s share price was the loan amount per share as advised by Crown to the external valuer at the grant date for the ESP; (cid:129) The risk free rate is the yield on an Australian Government Bond with a life similar to the expected life at the valuation date; (cid:129) Expected volatility was based on PBL’s historical share price movement preceding the valuation date and the implied volatility on exchanged traded options; and (cid:129) The dividend yield was calculated based on the consensus broker EPS forecast divided by PBL’s share price. New Long Term Incentive Plan (Crown LTI) Crown has now established a new LTI. The Crown LTI was designed as a successor long term incentive to the Employee Share Plan which is in run off mode. The Crown LTI has been made available to selected senior executives with effect from 1 July 2010. The Crown LTI rewards relevant senior executives for achieving certain earnings per share targets over the four year period from 1 July 2010 to 30 June 2014. Further detail regarding the operation of the Crown LTI and the Senior Executives (or KMPs) who participate in the Crown LTI can be found in the Remuneration Report. 27. Contingent Liabilities and Related Matters (a) The Group has made guarantees in relation to commitments of certain of its associated entities (b) The Group has made certain guarantees regarding contractual, performance and other commitments Total unsecured contingent liabilities 2011 $’000 2010 $’000 – 22,371 17,728 17,728 15,100 37,471 The probability of having to meet these contingent liabilities is unlikely, and therefore it is not practicable to disclose an indication of the uncertainties relating to each amount or the timing of any outﬂ ows. Legal Actions Entities within the group are defendants from time to time in legal proceedings arising from the conduct of their business. The group does not consider that the outcome of any proceedings ongoing at balance date, either individually or in aggregate, is likely to have a material effect on its ﬁ nancial position. Where appropriate, provisions have been made. N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 114 28. Auditors’ Remuneration N o t e s Amounts received, or due and receivable, by Ernst & Young (Australia) for: 2011 $’000 2010 $’000 t o t h e F n a n c a i i Auditing the accounts Taxation services: (cid:129) Pre demerger matters (cid:129) Current matters Other services: (cid:129) Assurance related Amounts received, or due and receivable, by other member ﬁ rms of Ernst & Young International for: Auditing the accounts Other services: (cid:129) Taxation services (cid:129) Consulting services Amounts received, or due and receivable, by non Ernst & Young audit ﬁ rms for: Auditing services 29. Earnings Per Share (EPS) 817 833 1,546 1,936 1,254 1,523 l S t a t e m e n t s – 24 30 23 321 44 537 – 4,694 4,194 71 271 2011 $’000 2010 $’000 The following reﬂ ects the income and share data used in the calculations of basic and diluted EPS: Net proﬁ t / (loss) after tax used in calculating basic and diluted EPS 335,855 292,293 Weighted average number of ordinary shares used in calculating basic and diluted EPS (‘000) 758,394 758,394 There are no transactions involving ordinary shares or potential ordinary shares that would signiﬁ cantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these ﬁ nancial statements. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 115 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 30. Key Management Personnel Disclosures (a) Details of key management personnel (i) Directors James D Packer Executive Chairman John H Alexander Executive Deputy Chairman Benjamin A Brazil Non Executive Director Christopher D Corrigan Non Executive Director Rowen B Craigie Chief Executive Ofﬁ cer and Managing Director Rowena Danziger Non Executive Director Geoffrey J Dixon Non Executive Director David L B Gyngell Non Executive Director (appointed 13 September 2010, resigned 25 November 2010) John S Horvath Non Executive Director (appointed 9 September 2010) Ashok Jacob Non Executive Director Michael R Johnston Non Executive Director Harold C Mitchell Non Executive Director (appointed 10 February 2011) Richard W Turner Non Executive Director (resigned 1 May 2011) (ii) Executives Kenneth M Barton Chief Financial Ofﬁ cer – Crown Limited David G Courtney Chief Executive Ofﬁ cer – Crown Melbourne Limited (until 8 October 2010) Barry J Felstead Chief Executive Ofﬁ cer – Burswood Limited Greg Hawkins Deputy Chief Executive Ofﬁ cer – Crown Melbourne Limited (from 6 December 2010) W Todd Nisbet Executive Vice President – Strategy and Development (from 9 August 2010) (b) Remuneration of key management personnel Total remuneration for key management personnel for the Group and Parent Entity during the ﬁ nancial year are set out below: Remuneration by category Short term beneﬁ ts Post employment beneﬁ ts Termination beneﬁ ts Long term incentives Further details are contained in the Remuneration Report. 2011 $ 2010 $ 12,575,741 10,086,392 112,395 90,075 3,790,845 1,435,000 8,376,147 4,874,383 24,855,128 16,485,850 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 116 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 30. Key Management Personnel Disclosures continued (c) Shareholdings of key management personnel Ordinary shares held in Crown (directly and indirectly) 30 June 2011 Directors (including directors who left the Board during the year) Balance 1 July 2010 Issued under Executive Share Plan Other Net Change Balance 30 June 2011 303,505,290 – 22,623,954 326,129,244 506,047 2,341,102 30,896 – 19,373 – – – 506,047 2,341,102 30,896 114,887 114,887 – 19,373 – – – – Balance 1 July 2010 Issued under Executive Share Plan Other Net Change Balance 30 June 2011 700,377 234,110 – – (56,575) 643,802 – 234,110 James D Packer (1) John H Alexander Rowen B Craigie (2) Rowena Danziger Harold C Mitchell (3) Richard W Turner (4) Executives David G Courtney (1) Barry J Felstead (2) (1) Change is a result of an on market trade. (2) All of these shares are ESP shares. (3) Appointed 10 February 2011. (4) Resigned 1 May 2011. The Company does not have any options on issue. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 117 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 30. Key Management Personnel Disclosures continued (c) Shareholdings of key management personnel continued Ordinary shares held in Crown (directly and indirectly) 30 June 2010 Directors (including directors who left the Board during the year) Balance 1 July 2009 Issued under Executive Share Plan Other Net Change Balance 30 June 2010 280,753,465 607,680 2,341,102 30,896 137,250 29,373 – – – – – – 22,751,825 303,505,290 (101,633) 506,047 – – – 2,341,102 30,896 137,250 (10,000) 19,373 Balance 1 July 2009 Issued under Executive Share Plan Other Net Change Balance 30 June 2010 264,383 700,377 234,110 – – – (1,010) 263,373 – – 700,377 234,110 James D Packer (1) John H Alexander (2) Rowen B Craigie (3) Rowena Danziger David H Lowy (4) Richard W Turner (1) Executives Robert F E Turner (1) David G Courtney Barry J Felstead (3) (1) Change is a result of an on market trade. (2) Change is a result of an off market trade. (3) All of these shares are ESP shares. (4) Resigned 22 June 2010. The Company does not have any options on issue. N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 118 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 31. Related Party Disclosures (a) Parent entity Crown Limited is the ultimate parent entity of the Group. (b) Controlled entities, associates and joint ventures Interests in signiﬁ cant controlled entities are set out in note 32. Investments in associates and joint ventures are set out in note 10. (c) Entity with signiﬁ cant inﬂ uence over the Group At balance date Consolidated Press Holdings Group (“CPH”), a group related to Mr James Packer, holds 43.00% (2010: 40.02%) of the Company’s fully paid ordinary shares. (d) Director related entities Consolidated Media Holdings (“CMH”) is an entity classiﬁ ed as a related party due to Crown and CMH having a number of common directors. (e) Key management personnel Disclosures relating to key management personnel are set out in note 30, and in the Remuneration Report. (f) Terms and conditions of transactions with related parties Sales to and purchases from related parties are made in arms length transactions both at normal market prices and on normal commercial terms, unless otherwise stated. (g) Transactions with related parties The continuing operations have had the following transactions with related parties: (i) Director related entities and entities with signiﬁ cant inﬂ uence over the Group CPH provided corporate secretarial and administrative services to Crown and its controlled entities of $0.2 million during the year (2010: $0.2 million). In addition CPH paid costs on behalf of Crown to third parties totalling $1.3 million during the year (2010: $0.5 million). At 30 June 2011 there were no amounts owing to CPH (2010: $nil). Crown and its controlled entities provided CPH with hotel and banqueting services of $39,000 during the year (2010: $32,000). Crown and CMH jointly engaged certain legal and other advisers in relation to certain matters arising prior to the PBL demerger. Costs of these advisers are shared in a manner consistent with Section 14 of the PBL Scheme Booklet, generally Crown – 75% and CMH – 25%. Similarly, payments in relation to liabilities arising from activities prior to the PBL demerger were shared on the same basis. At 30 June 2011 $0.1 million (2010: $0.1 million) was owing to CMH in relation to pre-demerger matters. (ii) Associates Crown acquired additional equity in Melco Crown from Melco Crown SPV Limited for an amount of $15.1 million (2010: $nil). Interest charged on loans previously advanced to Melco Crown was $0.1 million for the year (2010: $0.1 million). Crown provided Melco Crown IT and related services of $0.6 million (2010: $0.7 million) at cost during the year. Amounts receivable from Melco Crown at 30 June 2011 in relation to all charges made were $0.1 million (2010: $0.5 million). Melco Crown provided $40,000 (2010: $6,000) in Hotel and other services to Crown during the year. In addition Melco Crown paid costs of $0.1 million (2010: $0.1 million) on behalf of Crown during the year which has subsequently been reimbursed in full. Crown provided additional loans of $51.2 million (2010: $nil) to Aspers Holdings (Jersey) Ltd during the year. Aspers made loan repayments of $28.1 million (2010: $nil) to Crown during the year. Interest charged on loans advanced to Aspers was $5.8 million for the year (2010: $0.7 million). In addition Aspers paid costs of $20,000 (2010: $1.2 million) on behalf of Crown during the year. At 30 June 2011 there were no amounts owing to Aspers (2010: $nil). Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 119 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 31. Related Party Disclosures continued (g) Transactions with related parties continued (ii) Associates continued Crown paid costs of $0.3 million (2010: $0.3 million) on behalf of Gateway during the year which has subsequently been reimbursed as at 30 June 2011. Gateway did not pay any costs on behalf of Crown during the year (2010: $48,000). At 30 June 2011 there were no amounts owing to Gateway (2010: $nil). Crown made no further loans to Betfair during the year (2010: $4.0 million). The loan balance with Betfair at 30 June 2011 was $11.7 million (2010: $11.7 million). No interest is payable on the loan. Crown provided Betfair Hotel and Banqueting services of $40,000 (2010: $28,000) during the year. For the year ended 30 June 2011, the Group has not made any allowance for doubtful debts relating to amounts owed by related parties as there have been no default of payment terms and conditions (2010: $nil). An impairment assessment is undertaken each ﬁ nancial year by examining the ﬁ nancial position of the related party and the market in which the related party operates to determine whether there is objective evidence that a related party receivable is impaired. When such objective evidence exists, the Group recognises an allowance for the impairment loss. During the ﬁ nancial year Crown has assessed there is no impairment to related party receivables. N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 120 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 32. Investment in Controlled Entities The consolidated ﬁ nancial statements include the ﬁ nancial statements of Crown Limited and its controlled entities. Signiﬁ cant controlled entities and those included in a class order with the parent entity are: Place of Incorporation /Residence Footnote 2011 2010 Crown Limited Artra Pty Ltd Aspinall’s Club Limited Burswood Limited Burswood Nominees Ltd Burswood Resort (Management) Ltd Crown Asia Investments Limited Crown Capital Golf Pty Ltd Crown Cyprus Limited Crown CCR Group Holdings One Pty Ltd Crown CCR Group Holdings Two Pty Ltd Crown CCR Group Holdings General Partnership Crown CCR Group Investments One LLC Crown CCR Group Investments Two LLC Crown CCR Holdings LLC Crown CPS Holdings Pty Ltd Crown Entertainment Group Holdings Pty Ltd Crown Gateway Luxembourg Sarl Crown Group Finance Limited Crown Group Securities Ltd Crown Management Holdings Pty Ltd Crown Management Pty Ltd Crown Melbourne Limited Crown North America Holdings One Pty Ltd Crown North America Investments LLC Crown Overseas Investments Pty Ltd Crown Services (US) LLC Crown UK Investments Ltd Crown (Western Australia) Pty Ltd Flienn Pty Ltd Jade West Entertainment Pty Ltd Jemtex Pty Ltd Nine Television (Netherlands Antilles) Pty Ltd PBL (CI) Finance Limited Pennwin Pty Ltd Publishing and Broadcasting (Finance) Ltd Publishing and Broadcasting International Holdings Ltd Renga Pty Ltd A A A A A A A A A A A A A A A A A A A Australia Australia United Kingdom Australia Australia Australia Australia Australia Australia Australia Australia USA USA USA USA Australia Australia Luxembourg Australia Australia Australia Australia Australia Australia USA Australia USA United Kingdom Australia Australia Australia Australia Australia Cayman Islands Australia Australia Bahamas Australia A A A A A A A A A A A A A Beneﬁ cial Interest Held by the Consolidated Entity(1) 2011 % 2010 % Parent Entity 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 100 100 100 100 100 100 100 100 100 (1) The proportion of ownership interest is equal to the proportion of voting power held. A These controlled entities have entered into a deed of cross guarantee with the parent entity under ASIC Class Order 98/1418 – the “Closed Group” (refer note 33). Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 121 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 33. Deed of Cross Guarantee Certain controlled entities of Crown Limited, as detailed in note 32, are parties to a Deed of Cross Guarantee under which each company guarantees the debts of the others. By entering into the deed, pursuant to ASIC Class Order 98/1418, certain controlled entities of Crown have been granted relief from the Corporations Act 2001 requirements for preparation, audit and publication of accounts. The consolidated income statement and balance sheet of the entities which are members of the “Closed Group” are detailed below. Consolidated income statement Proﬁ t / (loss) before income tax Income tax (expense) / beneﬁ t Net proﬁ t / (loss) after income tax Retained earnings / (accumulated losses) at the beginning of the ﬁ nancial year Retained earnings of entities entering Closed Group Dividends provided for or paid Retained earnings / (accumulated losses) at the end of the ﬁ nancial year Closed Group 2011 $’000 2010 $’000 1,205,637 (311,533) (45,514) 55,437 1,160,123 (256,096) (2,286,505) (1,751,991) 1,182,822 – (278,622) (278,418) (222,182) (2,286,505) t o t h e F n a n c a i i l S t a t e m e n t s 122 33. Deed of Cross Guarantee continued N o t e s Consolidated balance sheet Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Non-current assets Receivables Other ﬁ nancial assets Investment in associates Property, plant and equipment Licences Other intangible assets Deferred tax assets Other assets Total non-current assets Total assets Current liabilities Trade and other payables Interest-bearing loans and borrowings Income tax payable Provisions Other ﬁ nancial liabilities Total current liabilities Non-current liabilities Interest-bearing loans and borrowings Deferred tax liability Provisions Other ﬁ nancial liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity Closed Group 2011 $’000 2010 $’000 t o t h e F n a n c a i i 167,574 114,614 122,562 54,963 17,834 18,798 2,840 9,102 326,768 181,519 l S t a t e m e n t s 1,259,496 2,053,674 2,390,577 10,044,040 851,721 6,158 2,501,567 609,328 555,426 420,426 169,165 95,824 62,901 11,892 68,938 – 7,886,677 13,214,456 8,213,445 13,395,975 221,204 95,244 19,752 135,236 38,997 100,154 2,276 33,727 50,031 – 382,383 314,238 2,657,007 5,210,800 138,864 27,699 74,225 11,317 9,654 42,696 2,897,795 5,274,467 3,280,178 5,588,705 4,933,267 7,807,270 5,447,104 9,680,318 (291,655) 413,457 (222,182) (2,286,505) 4,933,267 7,807,270 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 123 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 34. Parent Entity Disclosures Results of the parent entity Proﬁ t after tax for the period Other comprehensive income/(loss) Total comprehensive income for the period Financial position of the parent entity Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Total equity of the parent entity comprising of: Issued capital Employee equity beneﬁ ts reserve Accumulated losses Total equity Contingent liabilities Crown Limited 2011 $’000 2010 $’000 280,287 278,328 – – 280,287 278,328 1 – 9,482,802 9,335,949 9,482,803 9,335,949 39,073 33,727 2,451,880 2,320,504 2,490,953 2,354,231 10,125,916 10,119,131 13,010 11,327 (3,147,076) (3,148,740) 6,991,850 6,981,718 There are no contingent liabilities for the parent entity at 30 June 2011 (2010: $nil). Capital expenditure The parent entity does not have any capital expenditure commitments for the acquisition of property, plant and equipment contracted but not provided for at 30 June 2011 (2010: $nil). Parent entity guarantees in respect of debts of its subsidiaries The parent entity has entered into a deed of cross guarantee with the effect that the Company guarantees debts in respect of its subsidiaries. Further details of the deed of cross guarantee and the subsidiaries subject to the deed, are set out in notes 32 and 33. t o t h e F n a n c a i i l S t a t e m e n t s 124 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 35. Financial R isk Management Objectives and Policies The Group’s principle ﬁ nancial instruments comprise receivables, payables, bank loans and capital market debt, investments, cash and short term deposits and derivatives. The Group’s business activities expose it to the following risks; market risks (interest rate and foreign exchange), credit risk and liquidity risk. For each of these risks, the Group considers the counterparties, geographical area, currency and markets as applicable to determine whether there are concentrations of risk. Other than as described in this note, the Treasury Group is satisﬁ ed that there are no material concentrations of risk. The Group has policies in place to manage different types of risks to which it is exposed. Policies include monitoring the level of interest rate and foreign exchange risk and assessments of market forecasts for interest rates and foreign exchange rates. Ageing analysis of and monitoring of exposures to counterparties are undertaken to manage credit risk. Liquidity risk is monitored through the employment of rolling cash ﬂ ow forecasts. Financial risk management is carried out by the Treasury Group under policies approved by the Board of Directors. The Treasury Group identiﬁ es, evaluates and hedges ﬁ nancial risks in accordance with approved polices. The Board are informed on a regular basis of Treasury’s risk management activities. (a) Market Risk (i) Interest rate risk – cash ﬂ ow The Group’s exposure to market interest rates relates primarily to the Group’s cash and cash equivalents and long term debt obligations as outlined in note 17. At balance date, the Group had the following mix of ﬁ nancial assets and liabilities exposed to variable interest rates that are not designated as cash ﬂ ow hedges. Financial assets AUD cash on hand and at bank AUD deposits at call GBP cash on hand and at bank USD cash on hand and at bank Total ﬁ nancial assets Financial liabilities AUD bank loans GBP bank loans Total ﬁ nancial liabilities Net exposure 2011 $’000 2010 $’000 42,402 17,780 10,980 17 78,321 18,000 – 167 71,179 96,488 349,756 20,000 58,401 408,157 (336,978) – 20,000 76,488 As at balance date, the Group maintained ﬂ oating rate borrowings of $408.2 million (2010: $20.0 million) that were not hedged by interest rate swaps. The associated interest rate risk is partially mitigated by total ﬁ nancial assets of $71.2 million (2010: $96.5 million). Under the bank loans, for AUD facilities, the Group pays the Bank Bill Swap rate (BBSW) plus a margin of between 150 and 220 basis points, whilst for GBP facilities, the Group pays LIBOR plus a margin of 220 basis points. Of the AUD cash on hand and at bank $42.4 million is interest bearing and is invested at approximately BBSW. Deposits at call of $17.8 million are invested at approximately BBSW. The Group maintains cash and cash equivalents on hand of $112.5 million for operational purposes and is non interest bearing (2010: $99.9 million). As at balance date, the Group maintained no ﬂ oating rate borrowings in USD (2010: $nil) and had minimal cash and cash equivalents (2010: $0.2 million). As at balance date, the Group maintained ﬂ oating rate borrowings of $58.4 million in GBP (2010: $nil) and had cash and cash equivalents of $11.0 million (2010: $nil) invested at the UK daily cash rate. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 125 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 35. Financial R isk Management Objectives and Policies continued t o t h e F n a n c a i i l S t a t e m e n t s (a) Market Risk continued (i) Interest rate risk – cash ﬂ ow continued Group Sensitivity As a result of an increase of 150 basis points in AUD, GBP and USD interest rates, the Group’s post-tax-proﬁ t for the year would have decreased by $3.6 million. As a result of a decrease of 150 basis points in AUD interest rates, a decrease of 25 basis points in USD interest rates and a decrease of 50 basis points in GBP interest rates, the Group’s post-tax-proﬁ t for the year would have increased by $3.2 million. The Group, where appropriate, uses interest rate swaps to manage the risk of adverse movements in interest rates for its long term ﬂ oating rate borrowings which are subject to variable rates. The Group uses cross-currency interest rate swaps to manage the risk of adverse movements in interest rates for its long term foreign currency denominated borrowings which are subject to variable rates. As at balance date the notional principal amounts and period of expiry of the interest rate swap contracts were as follows: Cash ﬂ ow hedge Maturity 1 – 5 years Maturity over 5 years Closing Balance 2011 $’000 2010 $’000 300,000 300,000 174,634 174,634 474,634 474,634 Under the interest swap contracts maturing June 2013, the Group has the right to receive ﬂ oating rate (i.e. BBSW) quarterly and pay ﬁ xed rate of 6.99% quarterly. The terms of the swap contracts are matched directly against the appropriate loan and interest expense and as such are highly effective. The fair value of the swap at balance date was negative $11.0 million (2010: negative $17.1 million). Under the cross currency swap contract (maturing July 2036), the Group has the right to receive USD interest at a ﬁ xed rate of 4.76% (2010: 4.76%) semi-annually and pay AUD interest at ﬁ xed rate of 7.05% (2010: 7.05%) quarterly. The term of the cross currency swap contract are matched directly against the appropriate loan and interest expense and as such is highly effective. The fair value of the swap at balance date was negative $63.3 million (2010: negative $23.5 million). (ii) Interest rate risk – fair value Where appropriate, the Group enters into ﬁ xed rate debt to mitigate exposure to interest rate risk. As the Group holds ﬁ xed rate debt there is a risk that the fair value of ﬁ nancial instruments will ﬂ uctuate because of market movements in interest rates. The level of ﬁ xed rate debt at balance date was $661.3 million (2010: $652.7 million). As at balance date the Group had no interest rate swaps in place to hedge ﬁ xed rate debt issuances. Fair value hedge Maturity under 1 year Maturity 1 – 5 years Maturity over 5 years Closing Balance 126 2011 $’000 2010 $’000 – – – – 114,600 – – 114,600 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 35. Financial R isk Management Objectives and Policies continued (a) Market Risk continued (iii) Foreign exchange risk As a result of operations in the United Kingdom, the Group’s Statement of Financial Position and Income Statement can be affected by movements in the AUD/GBP exchange rate. The Group also has currency exposure as a result of capital expenditure and investments/sales in currencies other than the Group’s functional currency. Treasury, on behalf of the operating units, uses forward exchange contracts to minimise the currency exposure on any signiﬁ cant receivables or payables as is deemed appropriate. All forward exchange contracts must be in the same currency as the ﬁ rm commitment and the Group negotiates the terms of the hedges to exactly match the underlying commitment to maximise hedge effectiveness. As at balance date, the Group had hedged 100% of its foreign currency receivables and payables that are ﬁ rm commitments. As at balance date, the Group had the following foreign exchange exposures that were not designated as cash ﬂ ow hedges: USD Exposure Financial assets Cash and cash equivalents Total ﬁ nancial assets Financial liabilities US Private Placement Total ﬁ nancial liabilities Net exposure GBP Exposure Financial assets Cash and cash equivalents Trade and other receivables Loans to associates Total ﬁ nancial assets Financial liabilities Trade and other payables GBP Bilateral Facility Total ﬁ nancial liabilities Net exposure 2011 $’000 2010 $’000 17 17 167 167 186,672 238,124 186,672 238,124 (186,655) (237,957) 2011 $’000 2010 $’000 15,289 1,727 49,237 66,253 8,216 58,401 66,617 – – 28,592 28,592 – – – (364) 28,592 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 127 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 N o t e s 35. Financial R isk Management Objectives and Policies continued (a) Market Risk continued (iii) Foreign exchange risk continued Group sensitivity – USD Based on the ﬁ nancial instruments held at balance date, the sensitivity to fair value movements through equity as a result of the AUD strengthening or weakening by 10¢ against the USD would be $15.9 million higher or $19.2 million lower (2010: $25.3 million higher or $32.2 million lower). The sensitivity to fair value movements through proﬁ t and loss as a result of the AUD strengthening or weakening by 10¢ against the USD would not be material as at balance date (2010: not material). Group sensitivity – GBP The sensitivity to fair value movements through proﬁ t and loss as a result of the AUD strengthening or weakening by 5¢ against the GBP would not be material as at balance date (2010 $1.8 million lower or $2.1 million higher). The sensitivity to fair value movements through equity as a result of the AUD strengthening or weakening by 5¢ against the GBP would not be material as at balance date (2010: not material). Foreign Exchange Contracts The Group uses derivative instruments such as forward exchange contracts to manage the currency risks arising from the Group’s operations and its sources of ﬁ nance. Derivatives are exclusively used for hedging purposes and not as trading or other speculative instruments. These derivatives qualify for hedge accounting and are based on limits set by the Board. Cash ﬂ ow hedges At balance date details of outstanding contracts denominated in AUD was: Buy USD/Sell AUD Maturity under 1 year Maturity 1– 5 years Buy AUD/Sell USD Maturity under 1 year Maturity 1– 5 years Notional Amounts Average Rate 2011 $’000 2010 $’000 2011 2010 20,128 19,958 0.9290 0.8912 – – – – – – – – 91,754 86,467 0.6992 0.7419 The change in fair value of cash ﬂ ow hedges as at balance date was positive $21.8 million (2010: positive $7.4 million). The forward exchange contracts are considered to be highly effective hedges as they are matched against known and committed receivables and payments and any gain or loss on the hedged risk is taken directly to equity. t o t h e F n a n c a i i l S t a t e m e n t s 128 35. Financial R isk Management Objectives and Policies continued (b) Price Risk (i) Equity Securities Price Risk The Group is exposed to equity securities price risk. Equity securities price risk arises from investments held by the Group and classiﬁ ed on the balance sheet as investments. N o t e s t o t h e F n a n c a i i Shares – unlisted Net exposure Group sensitivity l S t a t e m e n t s 2011 $’000 98,658 98,658 2010 $’000 106,634 106,634 The Group’s sensitivity to equity securities price risk has been estimated using valuation techniques based on the fair value of securities held. The sensitivity to fair value movements through equity or proﬁ t and loss as a result of movement in value of the securities was not material as at balance date. (ii) Commodity Price Risk Neither the Group nor the parent entity is exposed to commodity price risk. (iii) Total Return Swaps Price Risk During the year, the Group entered into a series of cash settled total return swap contracts. The Group entered into these swaps for the purpose of gaining exposure to Tabcorp and Echo. These swaps are marked-to-market each period as these swaps do not qualify for hedge accounting. As such, all unrealised gains and losses related to those swaps are recorded directly to the Income Statement and are classiﬁ ed as other income/(expense). The current swaps are contracted to settle in 2011. Total return swap derivative asset Net fair value Group sensitivity 2011 $’000 7,775 7,775 2010 $’000 – – The sensitivity to movement in fair value of the total return swaps on the after-tax proﬁ t and loss of the Group as a result of the strengthening of the Tabcorp and Echo shares price by 10% would be an increase of $17.4 million. The sensitivity to movement in fair value of the total return swaps on the after-tax proﬁ t and loss of the Group as a result of the weakening of the Tabcorp and Echo share price by 10% would be a reduction of $17.4 million. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 129 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 35. Financial R isk Management Objectives and Policies continued (c) Credit Risk Credit risk arises from the ﬁ nancial assets of the Group, which comprise cash and cash equivalents, trade and other receivables and derivative instruments. The Group’s exposure to credit risk arises from the potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is outlined under each applicable note. The Group does not hold any credit derivatives or collateral to offset its credit exposure. All investment and ﬁ nancial instruments activity is with approved counterparties with investment grade ratings and is in accordance with approved policies. There are no signiﬁ cant concentrations of credit risk within the Group and the aggregate value of transactions is spread amongst a number of ﬁ nancial institutions to minimise the risk of default of counterparties. Credit risk in trade receivables is managed in the following ways: (i) The provision of credit is covered by a risk assessment process for all customers. (ii) Concentrations of credit risk are minimised by undertaking transactions with a large number of customers. (iii) The provision of cheque-cashing facilities for gaming patrons is subject to detailed policies and procedures designed to minimise any potential loss, including the taking up of bank opinions and the use of a central credit agency which collates information from major casinos around the world. (d) Liquidity Risk It is the Group’s objective to maintain a balance between continuity of funding and ﬂ exibility through the use of cash reserves, committed bank lines and capital markets debt in order to meet its ﬁ nancial commitments in a timely manner. At balance date 1.8% or $20 million of the Group’s debt will mature in less than 12 months (2010: 15.9%). As at balance date the Group had $958 million in undrawn committed bank lines. Maturity analysis of ﬁ nancial assets and liabilities The table below analyses the Group’s contractual undiscounted cash ﬂ ows of ﬁ nancial assets and ﬁ nancial liabilities, net and gross settled derivative ﬁ nancial instruments into relevant maturity groupings based on the remaining period at balance date to the contractual maturity date. N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 130 35. Financial R isk Management Objectives and Policies continued (d) Liquidity Risk continued 1 year or less 1 to 5 years more than 5 years Total 2011 $’000 2010 $’000 2011 $’000 2010 $’000 2011 $’000 2010 $’000 2011 $’000 2010 $’000 Financial assets Cash and cash equivalents 183,699 196,395 – – Receivables – trade 123,330 147,239 11,078 14,082 – – – – 183,699 196,395 134,408 161,321 Receivables – associates 426 13 71,575 73,784 48,824 40,292 120,825 114,089 Total return swap contracts 7,775 – – – Forward exchange contracts receivable 17,453 21,177 91,754 82,913 Interest rate swaps receivable – 720 – – – – – – 7,775 – – – 109,207 104,090 – 720 Cross currency interest rate swaps receivable 5,787 7,382 23,148 29,528 115,740 155,022 144,675 191,932 Total ﬁ nancial assets 338,470 372,926 197,555 200,307 164,564 195,314 700,589 768,547 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s Financial liabilities Trade and other payables 237,889 292,283 Capital markets Bank loans Forward exchange contracts payable – 114,600 – – 67 – – 237,889 292,350 – 361,306 412,758 361,306 527,358 19,752 20,000 688,401 300,000 20,128 19,958 59,875 76,378 – – – – 708,153 320,000 – – 80,003 96,336 11,765 18,667 Interest rate swaps payable 5,882 6,222 5,883 12,445 Cross currency interest rate swaps payable 12,312 12,312 49,248 49,248 246,240 258,552 307,800 320,112 Total ﬁ nancial liabilities 295,963 465,375 803,407 438,138 607,546 671,310 1,706,916 1,574,823 Net maturity 42,507 (92,449) (605,852) (237,831) (442,982) (475,996) (1,006,327) (806,276) (e) Fair value of Financial Instruments The fair value of the Group’s ﬁ nancial assets and ﬁ nancial liabilities approximates the carrying value as at balance date. Fair value The Group uses various methods in estimating the fair value of a ﬁ nancial instrument. The methods comprise: Level One – the fair value is calculated using quoted prices in active markets; Level Two – the fair value is estimated using inputs other than quoted prices included in Level One that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and Level Three – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. The fair value of the ﬁ nancial instruments as well as the methods used to estimate the fair value are summarised in the table below. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 131 FIN AN CIAL REPORT 2011 CONT INU ED Notes to the Financial Statements continued For the year ended 30 June 2011 35. Financial R isk Management Objectives and Policies continued (e) Fair Value of Financial Instruments continued Valuation Technique Quoted market price Level One $’000 Observable Non market observable Level Three $’000 inputs Level Two $’000 Total $’000 Year ended 30 June 2011 Financial Assets Derivative Instruments Receivable on total return swaps Receivable on forward exchange contracts Investments Shares – unlisted (Australia) Shares – unlisted (North America) Financial Liabilities Derivative Instruments Payables on interest rate swaps Payables on cross currency swaps Payables on forward exchange contracts Year ended 30 June 2010 Financial Assets Derivative Instruments Receivable on forward exchange contracts Receivable on interest rate swap Investments Shares – unlisted (Australia) Shares – unlisted (North America) Financial Liabilities Derivative Instruments Payables on interest rate swaps Payables on cross currency swaps Payables on forward exchange contracts – – – – – – – – – – – – – – – – – – 7,775 24,051 – – 7,775 24,051 – – 37,633 61,025 37,633 61,025 31,826 98,658 130,484 10,970 63,255 2,276 76,501 7,380 636 – – – – – – 10,970 63,255 2,276 76,501 7,380 636 – – 37,132 69,502 37,132 69,502 8,016 106,634 114,650 17,100 23,500 – 40,600 – – – – 17,100 23,500 – 40,600 There have been no transfers during the ﬁ nancial year ended 30 June 2011. N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 132 N o t e s t o t h e F n a n c a i i l S t a t e m e n t s 35. Financial R isk Management Objectives and Policies continued (e) Fair Value of Financial Instruments continued Reconciliation of Level Three fair value movements: Opening Balance Other Comprehensive Income Purchases Closing Balance 2011 $’000 2010 $’000 106,634 86,313 (7,976) (263) – 20,584 98,658 106,634 Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 133 FIN AN CIAL REPORT 2011 CONT INU ED FIN AN CIAL REPORT 2011 CONT INU ED Shareholder Information Substantial shareholders as at 9 September 2011: The following information is extracted from substantial shareholder notices received by Crown. Shareholder Consolidated Press Holdings Limited1 Perpetual Limited Janus Capital Management LLC Number of % of Issued Capital ordinary Shares 326,129,244 62,245,378 45,500,033 43.00 8.25 5.99 1 On 26, 29 and 30 August 2011, Cairnton Holdings Limited, an entity associated with Consolidated Press Holdings Limited, acquired 6 million ordinary shares. A change to Substantial Shareholder Notice was not received in respect of this acquisition representing less than 1% of the total number of ordinary shares on issue. As at the date of this Report, the relevant interest of Consolidated Press Holdings Limited in ordinary shares is 43.79%. Holders of each class of securities Crown only has ordinary shares on issue. The total number of ordinary shares on issue is 758,394,185 held by 47,403 shareholders. Voting rights of ordinary shares Crown’s Constitution sets out the information in relation to the voting rights attached to shares. In summary, at a general meeting on a show of hands, every member present has one vote; and on a poll, every member present has: (a) one vote for each fully paid share held by the member and in respect of which the member is entitled to vote; and (b) a fraction of a vote for each partly paid share held by the member and in respect of which the member is entitled to vote, equivalent to the proportion which the amount paid on the share bears to the total amount paid and payable on the share. Distribution of shareholders as at 9 September 2011: Size of Holdings 1 – 1,000 1,001 – 5000 5,001 – 10,000 10,001 – 100,000 100,001+ Total Holding less than a marketable parcel Number of % of Issued Capital Shareholders 31,330 14,287 1,160 530 96 47,403 3,361 1.65 3.93 1.05 1.55 91.82 100.00 S h a r e h o d e r l I n f o r m a t i o n 134 The 20 largest shareholders as at 9 September 2011: Name Bareage Pty Limited Consolidated Press Holdings Limited HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Limited National Nominees Limited RBC Dexia Investor Services Australia Nominees Pty Limited Citicorp Nominees Pty Limited Cogent Nominees Pty Limited Samenic Limited JP Morgan Nominees Australia Limited UBS Nominees Pty Ltd AMP Life Limited Cairnton Holdings Limited Win Television Nsw Pty Limited Citicorp Nominees Pty Limited RBC Dexia Investor Services Australia Nominees Pty Limited Mr Rowen Bruce Craigie1 Cogent Nominees Pty Limited Consolidated Press Investments Pty Ltd Argo Investments Limited Total Others 1 Mr Craigie’s holding is entirely comprised of Crown ESP shares. Details of unquoted equity securities S h a r e h o d e r l I n f o r m a t i o n No. of Shares % of Issued Capital 158,486,104 153,863,935 106,937,058 61,638,296 58,182,307 25,777,553 22,242,449 14,743,417 10,188,370 8,346,015 7,832,744 6,358,158 6,000,000 5,528,845 3,910,225 3,305,439 2,341,102 2,217,072 2,069,387 2,054,184 20.90 20.29 14.10 8.13 7.67 3.40 2.93 1.94 1.34 1.10 1.03 0.84 0.79 0.73 0.52 0.44 0.31 0.29 0.27 0.27 662,022,660 96,371,525 87.29 12.71 Crown has 3,142,202 shares on issue which are currently unquoted. These shares are held by participants in the Executive Share Plan (as described more fully in the Remuneration Report) and represent shares which are yet to be released from restriction in accordance with the terms of the Plan. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 135 FIN AN CIAL REPORT 2011 CONT INU ED FIN AN CIAL REPORT 2011 CONT INU ED Additional Information Shareholder enquiries A d d i t i o n a l I n f o r m a t i o n Shareholders may access their details by visiting the Share Registry’s website at www.investorcentre.com. For security reasons, shareholders need to enter their Security holder Reference Number (SRN) or Holding Identiﬁ cation Number (HIN) and postcode to access personal information. Security holding information may be updated online. Alternatively, download the relevant forms and have the completed forms mailed to the Share Registry. Shareholders with queries about their shareholdings should contact the Share Registry, Computershare Investor Services, on telephone number 1300 659 795, or if calling from outside Australia (61 3) 9415 4000 or by fax (61 3) 9473 2500. Electronic shareholder communications Receiving shareholder communications electronically, instead of by post enables you to: (cid:129) Receive important shareholder and company information faster (cid:129) Reduce your impact on the environment (cid:129) Securely store important shareholder documents online, reducing clutter in your home or ofﬁ ce (cid:129) Access all documents conveniently 24/7 Shareholders who wish to receive email alerts informing them of Annual Report, Notice of Meeting, Issuer Holding Statements, Payment Advices and other company related information on Crown’s website, www.crownlimited.com, may either contact the Share Registry or lodge such instructions online at the Share Registry’s website at www.investorcentre.com. Change of address Issuer sponsored shareholders should notify the Share Registry immediately in writing or by telephone upon any change in their address quoting their SRN. Changes in addresses for broker sponsored holders should be directed to the sponsoring brokers with the appropriate HIN. Direct payment to shareholders’ accounts Dividends may be paid directly to any bank, building society or credit union account in Australia. Payments are electronically credited on the dividend date with advisory conﬁ rmation containing payment details mailed to shareholders. Shareholders who wish to have their dividends paid directly to their account may advise the Share Registry in writing or may update their payment instructions online on www.investorcentre.com prior to the dividend record date. Tax File Numbers Crown is obliged to deduct tax at the top marginal rate plus Medicare levy from unfranked or partially franked dividends paid to Australian resident shareholders who have not supplied their Tax File Number (TFN) or exemption details. If you wish to provide your TFN or exemption details, please contact the Share Registry. Consolidation of multiple holdings If you have multiple holdings which you wish to consolidate, please advise the Share Registry in writing. If your holdings are broker sponsored, please contact the sponsoring broker directly. Crown website Crown has a dedicated corporate website, www.crownlimited.com which includes Crown’s Annual Report, disclosures made to the ASX and Notices of Meeting and other Explanatory Memoranda. Investment Warning All information provided in the Annual Report is provided as of the date stated or otherwise as at the date of the Report. The Annual Report has not taken into account any particular investor’s investment objectives or other circumstances. Investors are encouraged to make an independent assessment of Crown or seek independent professional advice. 136 C o r p o r a t e I n f o r m a t i o n Corporate Information Directors (cid:129) James D Packer Executive Chairman (cid:129) John H Alexander BA Executive Deputy Chairman (cid:129) Rowen B Craigie BEc (Hons) Chief Executive Ofﬁ cer and Managing Director (cid:129) Benjamin Brazil BCom, LLB (cid:129) Christopher D Corrigan (cid:129) Rowena Danziger BA, TC, MACE (cid:129) Geoffrey J Dixon (cid:129) John S Horvath AO, MB, BS (Syd), FRACP (cid:129) Ashok Jacob MBA (cid:129) Michael R Johnston BEc, CA (cid:129) Harold C Mitchell AC Company Secretaries (cid:129) Michael J Neilson BA, LLB (cid:129) Mary Manos BCom, LLB (Hons), GAICD Crown’s registered ofﬁ ce and principal corporate ofﬁ ce Level 3 Crown Towers 8 Whiteman Street Southbank VIC 3006 Australia Phone: (61 3) 9292 8824 Share Registry Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Phone: 1300 659 795 (within Australia) (61 3) 9415 4000 (outside Australia) Fax: (61 3) 9473 2500 Website: www.computershare.com.au Stock Exchange Listing Crown’s ordinary shares are listed on the Australian Stock Exchange under the code “CWN”. The home exchange is Melbourne. Website Visit our website www.crownlimited.com for media releases and ﬁ nancial information Auditor Ernst & Young Banker Australia and New Zealand Banking Group Limited FSC logo to be stripped in by printer DESIGN: COLLIER & ASSOCIATES THE STRATEGIC DESIGN COMPANY #15874 This report is printed on Monza Satin produced with 55% recycled ﬁ bre (25% post consumer and 30% pre consumer) and FSC Certiﬁ ed pulp, which ensures that all virgin pulp is derived from well-managed forests, and is manufactured by an ISO 14001 certiﬁ ed mill. Monza Recycled is an FSC Mixed Source Certiﬁ ed Paper. Crown Limited Annual Report 2011 | Australia’s Integrated Resort Company 137 crownlimited.com

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