Wagering
Media and
International
Gaming
Keno
Concise Annual Report 2011
TabcorpisAustralia’s
leadingwagering,
media,gamingandKeno
operator,with:
Secure long term licences
Iconic Australian brands with market leading positions
Strong cash flows and earnings
Established relationships with industry partners
Responsible gambling leadership
Significantachievementsduring
theyear:
Demerged the Casinos business to form Echo Entertainment Group Limited
New 12-year Victorian Wagering and Betting Licence announced
Awarded the new 10-year Victorian Keno Licence
Expanded fixed odds betting in New South Wales
Launched Trackside in New South Wales
TABCORp hOlDINgS lIMITED ACN 063 780 709
At the front:
1 Financial performance
2 Chairman’s message
4 Chief Executive Officer’s message
6 Analysis of continuing businesses
8 Board of Directors
10 Executive Committee
12 Sustainability
Income statement
With the financials:
13 Corporate governance
23 Directors’ report
31 Remuneration report
50
51 Balance sheet
52 Cash flow statement
53 Statement of changes in equity
54 Notes to the concise financial statements
56 Directors’ declaration
57 Independent audit report
At the back:
58 Five year review
59 Shareholder information
IBC Online shareholder services
IBC Major announcements
BC Company directory
BC Key dates
Notice of meeting
The Annual General Meeting of
Tabcorp Holdings Limited will be held at
The Grand Ballroom, Sofitel Melbourne
on Collins, 25 Collins Street, Melbourne,
Victoria on Wednesday 26 October 2011
at 10am (Melbourne time).
Main cover picture: Melbourne Cup winning
jockey Corey Brown is co-host of “Off the Rails”
which screens Tuesdays 7pm on Sky Racing
World (source: www.sdpmedia.com.au).
FINANCIAl yEAR ENDED 30 JuNE 2011
Financial performance
Including from demerged Casinos business
From continuing businesses
■■ Reported net profit after tax (NpAT) of $534.8 million, up
■■ Earnings before interest and taxation (EBIT) of $562.5 million,
13.9% (includes one-off demerger impacts)
up 5.2%
■■ Normalised NpAT of $486.3 million, up 1.9% 1
■■ Revenues of $2,941.9 million, up 2.9%. Expenses well
■■ Normalised earnings per share 73.4 cents, down 6.4%,
controlled, up 2.0%
following capital raising 1
■■ Declared dividends totaling 43 cents per share fully franked,
including final dividend of 19 cents per share. Dividend pay
out ratio of 60.7% of normalised NpAT 1
■■ Revenue and earnings growth achieved across all businesses
■■ Strong balance sheet ratios maintained with gross debt to
EBITDA2 ratio of 1.4 times
■■ Income generated for the Victorian and New South Wales racing industries down 0.1% to $322.2 million and down 0.1% to
$236.0 million respectively and race field fees down 0.1% to $35.0 million
■■ Taxes on gambling paid including gaming levy of $1,432.2 million, up 3.4%
■■ Contribution to State community benefit funds in Australia of $91.5 million, up 4.2%
■■ Income taxes paid and payable of $229.0 million, up 34.1%
Trends from continuing businesses
3,000
2,750
2,500
2,250
2,000
Revenue
$ million
2,575
2,628
2,813
2,860
2,942
06/07
07/08
08/09
09/10
10/11
700
650
600
550
500
EBITDA2
$ million
584
605
639
649
687
06/07
07/08
08/09
09/10
10/11
1. Normalised earnings have been adjusted to the theoretical win rate of the VIp Rebate Business of the now-demerged Casinos division, and exclude one-off demerger related items
Following the demerger of the Casinos business, Tabcorp will no longer normalise earnings
2.
3.
Earnings before interest, tax, depreciation and amortisation
For periods before Fy09 comparatives adjusted to include Victorian licence amortisation
Group results (including from
demerged Casinos business)
4,500
4,000
3,500
3,000
525
500
475
450
425
100
75
50
25
0
100
75
50
25
0
Revenue
(normalised)1
$ million
3,918.7
3,951.0
4,126.7
4,232.0
4,381.8
06/07
07/08
08/09
09/10
10/11
Net profit after tax
(normalised and before non-recurring items)1,3
$ million
515.6
490.3
496.2
477.3
486.3
06/07
07/08
08/09
09/10
10/11
Dividends per share
Cents per share (fully franked)
94
94
65
55
43
06/07
07/08
08/09
09/10
10/11
Earnings per share
(normalised and before non-recurring items)1,3
Cents per share
98.2
93.4
88.7
78.4
73.4
06/07
07/08
08/09
09/10
10/11
CONCISE ANNuAl REpORT 2011
1
Chairman’s message
I am pleased to present this 2011 annual report, my first as Chairman of
Tabcorp.
A transformational year
In June 2011, the company successfully executed the demerger of Echo
Entertainment group limited which now operates the company’s
former Casinos business. Tabcorp continues to operate the company’s
Wagering, Media and International, gaming and Keno businesses.
The demerger created two independent and significant ASX-listed
companies able to pursue separately their investment programs and
growth prospects.
In March 2011 Tabcorp was awarded the new 10-year Victorian Keno
licence. The company also executed an important agreement with the
NSW racing industry and NSW government to introduce Tabcorp’s
animated racing game, Trackside, into TAB outlets and venues across
NSW and an expanded fixed odds offer into the NSW market.
The announcement in July 2011 that the Victorian government will
award the new 12-year Victorian Wagering and Betting licence to
Tabcorp has strengthened our position as Australia’s leading wagering
operator and provides a further opportunity for growth. The licence
will create value for Tabcorp shareholders and allows the company to
continue the strong and important relationship we have built over
the last 17 years with the racing industry in Victoria. Tabcorp currently
estimates the Victorian Wagering and Betting licence will generate
Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA)
of approximately $120 million in the first full financial year of operation.
The achievements of the last year position Tabcorp to deliver sustained
performance over the next decade. Tabcorp is a competitive and well
capitalised business with great brands, a strong presence in retail and
online distribution, several long dated licences, and robust cash flows.
Financial highlights and dividend
Tabcorp reported Net profit After Tax (NpAT) of $534.8 million, up 13.9%,
for the year to 30 June 2011. This result includes a full year contribution
from the now demerged Echo Entertainment (Casinos) business.
Normalised NpAT was $486.3 million, up 1.9% on the prior period.
Normalised earnings per share were 73.4 cents, down 6.4% as a result
of the increase in the number of shares, following the capital raising
in October 2010. Normalised earnings are adjusted to the theoretical
win rate of the VIp Rebate Business of the Casinos division to provide a
better insight into the underlying performance of the business. Tabcorp
will not normalise earnings in future periods following the demerger of
Echo Entertainment (Casinos).
The earnings performance of each of Tabcorp’s continuing businesses
was strong in 2011, despite challenging consumer markets. Each of
the businesses has momentum and is well positioned and focused
on performing in markets where we have a depth of knowledge and
experience.
Tabcorp declared a fully franked final dividend of 19 cents per share
payable on 23 September 2011 to shareholders registered at 25 August
2011. This brings the full year dividend to 43 cents, constituting a payout
ratio of 60% of NpAT. The Board intends to target a payout ratio of 50%
of NpAT in Fy2012 and 80% of NpAT in Fy2013.
Capital management
Tabcorp’s capital position continues to be strong and the company is
well placed to fund investments including the transition to new licences
in 2012. The company’s gross Debt to EBITDA ratio stands at 1.4 times.
In October 2010, Tabcorp raised $428 million in new equity. Tabcorp
has also entered into an agreement to underwrite its Dividend
Reinvestment plan participation to 50% for the next two dividends.
In July 2011, Tabcorp’s investment grade credit rating of “BBB” was
confirmed with the outlook revised from negative to stable following
the Victorian government’s announcement that it will award the
company the new Victorian Wagering and Betting licence.
Board
Following the demerger of Echo Entertainment, Zygmunt Switkowski,
Jane hemstritch and I continue to serve as Non-Executive Directors
of Tabcorp. Justin Milne joined the Tabcorp Board as a Non-Executive
Director in August 2011 after receiving the necessary regulatory
approvals.
I would like to acknowledge the significant contributions to Tabcorp
of our former Chairman John Story and former Board members John
O’Neill and Brett paton. These gentlemen retired from Tabcorp as a
“
Tabcorp is a
competitive and
well capitalised
business with
great brands, a
strong presence
in retail and
online distribution,
several long dated
licences, and
robust cash flows.”
2
TABCORp hOlDINgS lIMITED
consequence of the demerger and are now Non-Executive Directors of
Echo Entertainment. I thank them for their commitment and support.
promotes fundraising and breast cancer awareness, and the Richmond
Football Club’s “Tigers in the Community Foundation”.
Elmer Funke Kupper, ceased as Tabcorp’s Managing Director and Chief
Executive Officer in June 2011 as a result of the demerger. Elmer led
Tabcorp to the point where the demerger became the logical course
for the company and subsequently separated the group into two
reinvigorated, substantial and successful businesses. On behalf of the
Board, I would like to acknowledge Elmer’s hard work, and leadership.
Elmer’s experience, knowledge of the market and relationships with
our industry partners are invaluable and he will be welcomed when he
rejoins Tabcorp as a Non-Executive Director in 2012.
Management and employees
In June 2011 following the demerger David Attenborough commenced as
the company’s Managing Director and Chief Executive Officer.
David leads a high-performing, talented group of more than 3,000
employees. Since commencing in the role he has shown enthusiasm,
commitment and discipline and I would like to thank him, his
management team and all Tabcorp employees for their efforts during
the year.
Our community
Tabcorp is proud of its acknowledged position as a leader in the
responsible delivery of betting and gambling products and we take this
responsibility very seriously.
The Dow Jones Sustainability Index once again recognised Tabcorp as
the overall global leader in the gambling industry and as a world leader
in the promotion of responsible gambling in its 2010 ratings.
Tabcorp is pleased to support the communities in which we operate.
In January 2011, the company donated $1 million to the Queensland
premier’s Flood Relief Appeal to provide assistance to the many people
affected by this tragedy.
Tabcorp’s businesses also partnered with many other community-based
organisations and initiatives. These included The great Chase which
links greyhound racing with disability services groups, the youth cancer
fundraising initiative “you Can”, the “go The pink Dog” campaign which
The future
Tabcorp is a successful, diversified business, offering its products
and services across multiple locations and distribution channels.
The company generates significant operating cash flows, with high
margins and earnings growth and has managed to do this despite the
challenging regulatory environment and increased competition.
The recent financial performance reflects our disciplined management,
focus on prudent investment and the quality of our assets.
Our strong customer brands are well placed to reach their substantial
potential in their respective markets. Coupled with the exciting
opportunities provided by the new Victorian Keno and Wagering and
Betting licences which commence in 2012, I am confident that Tabcorp
has the foundations for profitable growth.
Thank you for your continued support of Tabcorp.
Paula Dwyer
Chairman
16 August 2011
CONCISE ANNuAl REpORT 2011
3
Chief Executive Officer’s message
The 2011 financial year was a year of progressive change for Tabcorp,
culminating in the successful demerger of our Casinos business. The
company managed significant transformation, while driving operational
performance and profit growth.
Below, I briefly discuss the group’s financial performance, including the
now demerged Casinos business, before focusing on the earnings and
performance of Tabcorp’s continuing operations.
Group performance overview, including demerged
Casinos business
Tabcorp holdings limited announced a reported Net profit After Tax
of $534.8 million, up 13.9%, for the year to 30 June 2011. Reported NpAT
reflects the actual win rate in the VIp Rebate Business of the Casinos
division and one-off demerger related items. Normalised NpAT was
$486.3 million, up 1.9%.
Group performance overview of Tabcorp’s
continuing operations
Tabcorp’s continuing businesses delivered Earnings Before Interest and
Taxes (EBIT) of $562.5 million for the year to 30 June 2011, up 5.2%. Each
of Tabcorp’s continuing businesses reported growth in revenues and
earnings. This was a pleasing outcome and is a tribute to the strength
of our brands and strategies, the contribution of our employees and the
support of our customers.
The revenue growth reflects the fact that our investments are being
made in the right areas and are resonating with our customers. The
company was also disciplined in controlling expenses, managing
expense growth to just 2.0%.
Wagering
EBIT $220.2 million, up 4.5%
The Wagering business performed well in challenging market
conditions. Turnover was up 2.8% and revenues increased 1.0%
compared to Fy10. Expenses were flat.
Tacorp’s investments and strategies delivered profitable growth in
the Wagering business, despite ongoing competition in key markets.
In the 2011 financial year, Tabcorp expanded its wagering coverage to
more than 83,000 races and continued to be an industry leader in new
technology. Mobile betting increased 397% driven by the introduction
of the TAB Sportsbet wagering App on ipads, iphones and Android smart
phones. Our TAB Sportsbet wagering iphone App was the first in the
world to offer tote betting.
Recent trends in the wagering market continued, with a substantial
increase in fixed odds and online wagering more than offsetting a
decline in totalisator revenues. Fixed odds revenues were one of the
stand-outs for the group, increasing 31.7% in 2011, aided by the expansion
of fixed odds racing betting in NSW.
The retail businesses in both NSW and Victoria delivered improved
results in the second half, despite challenges in the broader retail
market. The growth in the NSW retail business was driven by the
offering of fixed odds on racing and the successful roll-out of Trackside
in NSW. Trackside continues to yield healthy results, with revenues up
39.2% across NSW and Victoria.
The use of self-service technology in the TAB retail network continued
to grow, with 44.3% of retail turnover in Victoria and 19.2% of retail
turnover in NSW being channeled through Easy Bet Terminals. Tabcorp
continued to expand the roll-out of self-service technology in 2011, more
than 3,400 terminals are now deployed in TAB outlets across the two
states.
Total distributions to the Victorian racing industry were $322 million,
down 0.1%, and $236 million to the NSW racing industry, down 0.1%.
Race field fees are in addition to these racing industry distributions.
Race field fees were flat at approximately $35 million and are estimated
to increase to $38 million in Fy12.
2011 marked the 50th year since the formation of the Victorian TAB. The
Victorian TAB is an important part of our company’s heritage, which
we have operated since its privatisation in 1994. Naturally, we were
delighted with the Victorian government’s announcement to award the
new Victorian Wagering and Betting licence to Tabcorp, allowing us to
continue to be a major part of wagering and racing in that state.
Media and International
EBIT $52.8 million, up 2.7%
The company’s media and international operations increased revenues
by 9.3% to $179.3 million. Expenses grew 9.1%, largely attributable to the
expansion of Sky Racing to three channels.
“
Each of
Tabcorp’s
continuing
businesses
reported growth
in revenues
and earnings.”
4
TABCORp hOlDINgS lIMITED
Chief Executive Officer’s message
Tabcorp’s national and international racing broadcaster Sky Racing
signed key media rights agreements in Fy11 with Racing Queensland,
greyhound Racing Victoria, harness Racing NSW and Racing and
Wagering Western Australia.
The business continued to invest in digital media with the launch of the
new interactive Skyform, racing’s biggest online archive with more than
70,000 races per year. The multi-screen media centre gives customers
live racing streams 17 hours per day, 7 days per week. On average, more
than 1 million videos are viewed from the Sky Racing Media centre each
month.
Sky also executed a deal with international racing broadcaster ‘At The
Races’ which has led to the Sky Racing World thoroughbred channel
being exported to 14 million uK and Irish households.
Gaming
EBIT $241.4 million, up 7.1%
Revenues grew 3.9% and expenses were well controlled, declining 6.3%.
The momentum behind the business is best reflected in Tabcorp’s
market share gains, increasing from 52.9% in Fy10 to 53.9% in Fy11.
The company’s growing market share augurs well for Tabcorp’s
development of and investment in Tabcorp gaming Solutions (TgS).
under the new gaming structure in Victoria in 2012, it is anticipated that
TgS will be the leading gaming services provider, helping clubs and pubs
manage their gaming offer to patrons.
It is expected that Tabcorp gaming Solutions will contribute
approximately $45 million per annum in EBITDA from August 2012.
Keno
EBIT $48.8 million, up 4.7%
The Keno business delivered a solid result, with revenues up 7.9% on
the prior corresponding period to $169.6 million. Expenses were up
4.9%, driven by a targeted distribution expansion program in NSW
and Queensland to 2,739 distribution points, and further technology
upgrades. This included investment in the roll-out of self-service Keno
Touch terminals in NSW.
In the second half of the 2011 financial year Tabcorp was awarded
the new 10-year Victorian Keno licence. To secure the licence, which
commences in April 2012, Tabcorp made a one-off payment of $60
million. On full implementation, the Victorian Keno business is expected
to operate across approximately 1,000 venues and contribute EBITDA of
around $20 million per annum after the second full year of operation.
The EBITDA contribution from Keno in Fy11 was $60.6 million.
Our people
Following the demerger, Tabcorp’s more than 3,000 employees are
now operating under the ‘One Tabcorp. One Team’ banner. We have
restructured the company to more closely integrate the management of
our various businesses.
Our people have shown great commitment during a time of significant
change and I thank them for their support.
The way forward
Tabcorp has a strong, experienced management team and businesses
that are performing well and have momentum.
We will continue to develop the businesses through our investments
in new technology, self-service terminals, strengthening our retail
footprint, a new online wagering platform and expanding wagering
products into the retail network such as live betting and Trackside.
Tabcorp also looks forward to a successful launch of Victorian Keno in
April 2012 and a smooth transition to the new Victorian Wagering and
Betting licence in August 2012.
Our ongoing growth as a business will always have creating the best
possible customer experience top of mind, as well as working alongside
the racing industry and other stakeholders to share the benefits.
David Attenborough
Managing Director and
Chief Executive Officer
16 August 2011
5
Analysis of continuing businesses
Customers
Wagering
1,200,000
regular customers
National market share
43.3% (Tabcorp estimate)
Operations
■■ Network of agencies, hotels and clubs
and on-course totalisators in Victoria
and New South Wales
■■ Betting on sports and racing under the
TAB Sportsbet brand
■■ luxbet.com offering racing, sport and
novelty product bookmaking service by
telephone and online
■■ 1,969 employees
Products
■■ 2,603 TAB retail outlets
■■ On-course betting at 255 racecourses
■■ 310,000 customers betting through
internet, pay TV and phone
Media and
International
3,100,000 total Sky Racing
and Sky Sports Radio audience each week
Operations
■■ Broadcasting through Sky Racing
nationally and internationally
What happened during the year
■■ Strong growth in fixed odds offsetting
decline in totalisator revenues
■■ launched fixed odds racing in NSW retail
outlets in January 2011
■■ Three channels: Sky Racing 1, Sky Racing 2
■■ launched Trackside in NSW in January 2011
■■ Expansion in self service terminals, with
more than 3,400 terminals deployed
■■ Mobile betting grew 397% with more
than 265,000 downloads of the TAB
Sportsbet app
Key objectives for the year ahead
■■ prepare for the new Victorian Wagering
and Betting licence which the Victorian
government intends to award to Tabcorp
■■ Continue expanding fixed odds offering
■■ grow New South Wales loyalty program
■■ Deploy new on-line wagering platform
and Sky Racing World
■■ Sky Sports Radio network in
New South Wales
■■ 220 employees
Products
■■ Sky Racing available in 2.35 million
Australian homes
■■ Broadcasting to 5,100 Australian outlets
■■ Covering 82,000 races per annum
■■ Broadcasting Australian racing to
26 countries
What happened during the year
■■ Revenue growth from additional
channels and international co-mingling
■■ Concluded media rights arrangements
with Racing Queensland, harness Racing
NSW, greyhound Racing Victoria and WA
Thoroughbreds
■■ Commenced broadcasting Sky Racing
World into 14 million uK and Irish
households in June 2011
■■ launched online media centre with more
than 1 million videos viewed per month
on average
Key objectives for the year ahead
■■ Develop international pooling hub in Isle
of Man (premier gateway International
launched July 2011)
■■ Complete digital vision upgrade to
wagering venues
Summary financial performance of Wagering business
Summary financial performance of Media and International business
For the year ended 30 June
Revenue
Taxes, levies, commissions and fees
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
EBIT/Revenue
6
TABCORp hOlDINgS lIMITED
2011
$million
2010
$million
Change
%
1,569.1
(1,018.1)
(263.5)
287.5
(67.3)
220.2
14.0%
1,553.5
(1,015.7)
(263.5)
274.3
(63.6)
210.7
13.6%
1.0
0.2
0.0
4.8
5.8
4.5
0.4
For the year ended 30 June
Revenue
Taxes and operator commissions
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
EBIT/Revenue
2011
$million
2010
$million
Change
%
179.3
(11.1)
(108.4)
59.8
(7.0)
52.8
29.5%
164.0
(8.2)
(99.4)
56.4
(5.0)
51.4
31.3%
9.3
3.5
9.1
6.0
40.0
2.7
(1.8)
Gaming
Customers
1,200,000 EgM customers
Share of Victorian gaming market
53.9%
Operations
■■ Electronic gaming machines (EgMs)
in licensed hotels and clubs under the
Tabaret brand in Victoria
■■ Establishing Tabcorp gaming Solutions
to be the leading gaming services
provider to licensed venues under the
new Victorian gaming industry structure
commencing August 2012
■■ 136 employees
Products
■■ Tabaret in Victoria:
■● 133 hotels
■● 130 clubs
■● 13,303 EgMs (average)
■● 185,000 loyalty members
Keno
Customers
1,354,000
Operations
■■ Keno in licensed hotels and clubs in
New South Wales and Queensland
■■ Keno in Victorian licensed venues
through a joint venture arrangement
■■ 124 employees
Products
■■ Keno in 2,739 outlets in Queensland and
New South Wales:
■● 687 NSW hotels
■● 992 NSW clubs
■● 576 Qld hotels
■● 273 Qld clubs
■● 206 Qld TABs
■● 5 Casinos
What happened during the year
■■ Tabcorp awarded the new 10-year
Victorian Keno licence
■■ Completed roll out of 600 self service
Keno Touch terminals in NSW
■■ Expanded Keno into 687 New South
Wales hotels (up 102 from start of year)
■■ Number of tickets sold increased 7.1% to
96.5 million (in Queensland and NSW)
■■ Six Spot 10 jackpots occurred in
Queensland (five occurred in Fy10)
Key objectives for the year ahead
■■ Establish new Victorian keno business to
commence on 15 April 2012
■■ Target of 1,000 Victorian venues by Fy13
■■ Continue expansion of self service
terminals
What happened during the year
■■ Tabaret market share increased to record
level of 53.9% (up 1.0% from start of year)
■■ Tabcorp gaming Solutions has signed
up Victoria venues with in excess of
7,500 EgMs
Key objectives for the year ahead
■■ grow market share and maximise
returns from Tabaret
■■ Manage transition prior to Victorian
industry change in August 2012
■■ Expand Tabcorp gaming Solutions
business model in Victoria by
contracting more EgMs
Summary financial performance of Gaming business
Summary financial performance of Keno business
For the year ended 30 June
Revenue
Taxes, levies, commissions and fees
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
EBIT/Revenue
2011
$million
1,077.4
(761.1)
(36.7)
279.6
(38.2)
241.4
22.4%
2010
$million
1,037.1
(736.0)
(39.0)
262.1
(36.7)
225.4
21.7%
Change
%
3.9
3.4
(6.3)
6.7
4.1
7.1
0.7
For the year ended 30 June
Revenue
Taxes, levies, commissions and fees
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
EBIT/Revenue
2011
$million
2010
$million
Change
%
169.6
(74.8)
(34.2)
60.6
(11.8)
48.8
28.8%
157.2
(68.8)
(32.6)
55.8
(9.2)
46.6
29.6%
7.9
8.7
4.9
8.6
28.3
4.7
(0.8)
All information as at 30 June 2011, unless otherwise stated
CONCISE ANNuAl REpORT 2011
7
Board of Directors
Paula Dwyer
Chairman since June 2011 and Non Executive Director since August 2005
Bachelor of Commerce; Fellow of the Institute of Chartered Accountants in
Australia; Fellow of the Australian Institute of Company Directors (AICD);
Fellow of the Financial Services Institute of Australasia
paula Dwyer is a Director of Suncorp group limited, Foster’s group limited and
Astro Japan property group limited. She is also a Member of the Takeovers panel and
Deputy Chairman of the Baker IDI heart and Diabetes Institute.
Ms Dwyer had an executive career in finance holding senior positions in
investment management, investment banking and chartered accounting with
Ord Minnett (now Jp Morgan) and pricewaterhouseCoopers.
Ms Dwyer was formerly a director of healthscope limited, David Jones limited
and is a former member of the Victorian Casino and gaming Authority and of
the Victorian gaming Commission from 1993 to 1995.
Ms Dwyer is Chairman of the Victorian Joint Venture Management Committee and
Chairman of the Tabcorp Nomination Committee. She is a member of the Tabcorp
Audit, Risk and Compliance Committee and Tabcorp Remuneration Committee.
David Attenborough
Managing Director and Chief Executive Officer since June 2011
Bachelor of Science; Masters of Business Administration (Honours)
David Attenborough joined Tabcorp in April 2010 as Managing Director -
Wagering. he became Managing Director and Chief Executive Officer when
Tabcorp’s demerger of Echo Entertainment group limited was completed in
June 2011.
Mr Attenborough was previously the Chief Executive Officer (South Africa)
of phumelela gaming and leisure limited, the leading wagering operator
in South Africa. his previous experience also includes the development
of casino, bookmaking and gaming opportunities for British bookmaking
company ladbrokes (formerly part of the hilton group plc).
Jane Hemstritch
Non Executive Director since November 2008
Bachelor of Science (First Class Honors); Fellow of the Institute of Chartered
Accountants in Australia; Fellow of the Institute of Chartered Accountants in
England and Wales; Fellow of AICD; Member of Chief Executive Women Inc.
Jane hemstritch is a Director of the Commonwealth Bank of Australia and
Santos limited. She is also a Director of the Victorian Opera Company, Deputy
Chairman of The global Foundation, a Member of the Research and policy
Council for the Committee for Economic Development of Australia, and a
Member of the Council of the National library of Australia.
Mrs hemstritch was Managing Director - Asia pacific for Accenture limited
where she was a member of Accenture’s global executive leadership
team and headed up its business portfolio in Asia pacific spanning twelve
countries.
Mrs hemstritch is Chairman of the Tabcorp Audit, Risk and Compliance
Committee. She is also a member of the Tabcorp Nomination Committee.
8
TABCORp hOlDINgS lIMITED
Justin Milne
Non Executive Director since August 2011
Bachelor of Arts; Member of AICD
Justin Milne is a Director of Basketball Australia limited and Commissioner of
the National Basketball league. he is also Chairman of pieNETWORKS limited, a
Director of Quickflix limited, a Board Member of the Sydney Children’s hospital
Advisory Network and Chairman of the Sydney Children’s hospital Foundation
Building Appeal.
Mr Milne had an executive career in telecommunications, marketing and media.
From 2002 to 2010 he was group Managing Director of Telstra’s broadband and
media businesses, and headed up Telstra’s Bigpond New Media businesses in China.
he is also a former Chief Executive Officer of OzEmail and the Microsoft Network.
Mr Milne is a member of the Tabcorp Audit, Risk and Compliance Committee and
Tabcorp Nomination Committee.
Zygmunt Switkowski
Non Executive Director since October 2006
Bachelor of Science (Honors); PhD (Nuclear Physics); Fellow of AICD
Zygmunt Switkowski is a Director of Suncorp group limited, Oil Search
limited and lynas Corporation limited. he is also Chancellor of the Royal
Melbourne Institute of Technology and Chairman of Opera Australia. he is a
former Director of healthscope limited and is the immediate past Chairman
of the Australian Nuclear Science and Technology Organisation.
Dr Switkowski was the Chief Executive Officer and Managing Director
of Telstra Corporation limited from 1999 to 2005, and is a former Chief
Executive Officer of Optus Communications. he worked for Kodak
(Australasia) for 18 years, serving as the Chairman and Managing Director
from 1992 to 1996.
Dr Switkowski is Chairman of the Tabcorp Remuneration Committee. he is
also a member of the Tabcorp Audit, Risk and Compliance Committee and
Tabcorp Nomination Committee.
CONCISE ANNuAl REpORT 2011
9
Executive Committee
David Attenborough
Managing Director and Chief Executive Officer
David joined Tabcorp in April 2010 as Managing Director - Wagering. he
became Managing Director and Chief Executive Officer following Tabcorp’s
demerger in June 2011.
he has an extensive background in totalisator and fixed-odds betting, racing
and broadcasting. he was previously the Chief Executive Officer
(South Africa) of phumelela gaming and leisure limited, the leading
wagering operator in South Africa. his previous experience includes the
development of casino, bookmaking and gaming opportunities for British
bookmaking company ladbrokes (formerly part of the hilton group plc).
David holds a Bachelor of Science and a Masters of Business Administration
(honours).
Damien Johnston
Chief Financial Officer
Damien joined Tabcorp in September 2003. he was Tabcorp’s Deputy Chief
Financial Officer, being responsible for Tabcorp’s Corporate Finance function
including Treasury and Investor Relations, and became Chief Financial Officer
upon implementation of the Tabcorp demerger in
June 2011.
he previously had a 21 year career with Bhp Billiton with key finance roles
in both Australia and Asia. These included both operational finance and
corporate roles.
Damien holds a Bachelor of Commerce and is a member of CpA Australia.
Merryl Dooley
Executive General Manager - Human Resources
Merryl commenced with Tabcorp in October 1990 and has held numerous
positions across a range of discipline areas including human resources,
training and development, communications and sales. She became
Executive general Manager - human Resources in June 2011 following the
implementation of the Tabcorp demerger.
Merryl holds a Masters of Business Administration (Executive) and a
Bachelor of Arts.
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TABCORp hOlDINgS lIMITED
Doug Freeman
Executive General Manager - Strategy and Business Development
Since joining Tabcorp in June 2005, Doug has held several senior finance
and strategy roles within Tabcorp’s wagering and media businesses. he
commenced his current role following Tabcorp’s demerger in June 2011.
he previously held senior finance and general management roles in
medium to large multinational organisations in the service and
Mohan Jesudason
Managing Director - Gaming and Group Marketing
manufacturing industries, including george Weston Foods limited, Optus
group, and Alexander & Alexander group.
Doug holds a Bachelor of Commerce and is a member of Institute of
Chartered Accountants.
Mohan commenced at Tabcorp in August 2003 as Managing Director -
gaming. Following Tabcorp’s demerger in June 2011, his role expanded
to also include group Marketing.
Before joining Tabcorp, Mohan held key senior management roles with
Telecom New Zealand, National Mutual Australia and New Zealand, and
the State Bank of Victoria.
Mohan holds a Bachelor of Economics, a graduate Diploma in Accounting and
is an Associate of the Australian Insurance Institute.
Kerry Willcock
Executive General Manager - Corporate, Legal and Regulatory
Kerry joined Tabcorp in February 2005. She has extensive commercial,
legal, litigation and government relations experience having worked
with Allens Arthur Robinson, Clayton utz and with the Australian postal
Corporation, where she held the position of general Counsel.
Kerry holds a Bachelor of Arts and a Bachelor of laws and is a qualified
mediator and member of the Mediation panel of the law Institute of
Victoria.
She is also a member of the Australian Corporate lawyers Association
(AClA) general Counsel group.
CONCISE ANNuAl REpORT 2011
11
Sustainability
The Tabcorp group is committed to responsibly and efficiently delivering its products and services
for the benefit of all stakeholders. We work closely with stakeholders to maintain a successful
industry which is socially, economically and environmentally sustainable.
Tabcorp’s ongoing commitment to corporate social responsibility resulted in Tabcorp being
assessed in the inaugural FTSE4good ESg (environmental, social and governance) Ratings as
the best company in the global travel and leisure sector and again recognised by the Dow Jones
Sustainability Index as the global leader in the gambling industry.
Responsible gambling
Responsible gambling practices are embedded in Tabcorp’s operations. We take proactive
steps to minimise the potential harm that gambling can cause for some individuals.
Tabcorp has responsible gambling codes of practice in place for its wagering, gaming and
Keno businesses, which are tailored to specific customer needs and comply with relevant
regulatory requirements.
All Tabcorp staff and agents in our retail network receive responsible gambling training upon
employment and refresher training at least once a year. Training includes information on how
to recognise situations where customers or employees may require support for their gambling
behaviour. Tabcorp manages a self exclusion program, has an employee assistance program and
supports gambling counselling services to assist customers and employees. Training is supported
by a responsible gambling communications program which includes regular newsletters,
brochures and posters in the workplace and in venues where relevant.
Tabcorp promotes responsible gambling behaviour amongst employees and has an Employee
gambling policy which prohibits employees from gambling while on duty (subject to a small
number of work related exceptions), and restricts gambling while off duty.
In the past year, Tabcorp has again supported Responsible gambling Awareness Week
activities in Victoria, New South Wales and Queensland.
For further information refer to page 19 of the Corporate governance statement and the
Responsible gambling section of Tabcorp’s website at www.tabcorp.com.au which contains
the Tabcorp group’s responsible gambling codes.
Community
Tabcorp’s employees and businesses contributed approximately $3 million in benefits to local
communities and charitable organisations during the financial year ended 30 June 2011. This
included a $1 million donation to the Queensland premier’s Flood Relief Appeal, following
devastating floods in Queensland. Tabcorp’s Queensland-based employees, including those from
its now demerged casinos business, also contributed their time and expertise, and the casinos
business provided casino and hotel facilities and services during the floods.
The Tabcorp “ROAR” program, which represents a partnership with the Tigers in the Community
Foundation, is in its second year, providing opportunities for Tabcorp and its employees to assist in
12
TABCORp hOlDINgS lIMITED
delivering local community programs to support disadvantaged people in inner Melbourne. This year,
employees have assisted in the provision of after school activities for disadvantaged children.
In addition, the Tabcorp group contributed a total of $91.5 million (including from former casinos
businesses) to State community benefit funds in Victoria, New South Wales and Queensland
which help deliver many community facilities and services, such as roads, health facilities and
other community infrastructure projects.
Employees
To achieve the organisation’s goals and strategies, Tabcorp’s talent sustainability strategy focuses
on attracting, retaining and developing quality people and supporting high performing teams.
To enable employees to meet their potential and the organisation’s aspirations, Tabcorp provides
growth opportunities through leadership experiences, training, secondments, rotations, projects,
promotions and other personal and professional development opportunities.
Employees who deliver superior performance within the workplace and demonstrate the Tabcorp
values/behaviours of integrity, teamwork, customer, performance and innovation are recognised
and rewarded through the “Shine” program.
Tabcorp’s Code of Conduct sets the ethical and behavioural standards expected from all
employees and is founded on Tabcorp’s values. Refer to page 18 of the Corporate governance
statement for further information.
Occupational health and safety committees throughout the Tabcorp group and the Board Audit,
Risk and Compliance Committee oversee the effectiveness of systems, policies and programs to
minimise workplace risks and promote safe and healthy workplaces.
Environment
As a consequence of the demerger, the Tabcorp group’s environmental footprint has reduced
significantly. The Company’s former casinos business represented the most significant
environmental obligations for the Tabcorp group, accounting for approximately 80% of the
group’s energy consumption and almost all its water consumption. Despite these changes, the
Tabcorp group continues to be committed to operating as efficiently as possible to minimise its
impact on the environment. Refer to page 28 in the Directors’ Report for information regarding
the Tabcorp group’s environmental regulation and performance during the financial year ended
30 June 2011.
Corporate governance
Tabcorp again received the highest rating for corporate
governance out of all global gambling companies in the
2010 Dow Jones Sustainability Index assessment.
1. Tabcorp’s approach to corporate governance
Tabcorp’s Board of Directors and management strongly
support the principles of good corporate governance,
and are committed to building on the group’s strong
reputation for integrity. This is particularly important
given the highly regulated industry in which the Tabcorp
group operates, and is essential for increasing our
opportunities to win and retain gambling licences, and for
the long term sustainability of our businesses.
The group’s corporate governance practices are reviewed
regularly and will continue to be developed and refined to
meet the needs of the group and taking account of best
practice.
In developing the appropriate corporate governance
practices, the group takes into account all applicable
legislation and recognised standards, which include, but
are not limited to:
■■ Corporations Act 2001 (Cth) (Corporations Act);
■■ Australian Securities Exchange (ASX) Listing Rules;
■■ State legislation governing the licences issued to
the Tabcorp group to conduct gambling and related
activities; and
■■ Australian Standard AS 8000 – good governance
principles.
This corporate governance statement outlines the Tabcorp
group’s main corporate governance practices and policies
in place throughout the financial year and at the date of
this report.
■ This corporate governance statement and other related
information is available from the corporate governance
section of Tabcorp’s website at www.tabcorp.com.au/
about_governance.aspx.
2. ASX Corporate Governance Principles
The Tabcorp group adopts the “Corporate Governance
Principles and Recommendations, 2nd edition” which was
published by the ASX Corporate governance Council
(ASX CgC) in August 2007 and as amended. The group
complies with these principles and recommendations and
has processes in place to maintain ongoing compliance.
Statements in this corporate governance section have been
referenced to the applicable ASX CgC Recommendation and
are indicated by the symbol .
■ The ASX CgC “Corporate Governance Principles and
Recommendations, 2nd edition” are available from the
ASX website at www.asx.com.au/about/corporate_
governance.
3. Composition of the Board
At the date of this report, the Tabcorp Board consisted of
four independent Non Executive Directors, including the
Chairman, and the Managing Director and Chief Executive
Officer. In addition, it is expected that former Managing
Director and Chief Executive Officer, Elmer Funke
Kupper, will rejoin the Board as a Non Executive Director
approximately six months after ceasing his executive
role. Refer to section 5 for the assessment of Director
independence.
Each of the Board’s committees is composed exclusively of
independent Non Executive Directors.
Details of the Directors, their qualifications and experience
are included in the Directors’ Report and pages 8 and 9.
Tabcorp’s Constitution requires that the number of
Directors (not including alternate Directors) shall not
exceed twelve, nor be less than three. A Director, other
than any Managing Director, may not hold office for a
continuous period in excess of three years or past the
third annual general meeting following the Director’s
last election or re-election to the Board, whichever is the
longer, without submitting for re-election. The Board has
the power to appoint any person as a Director, either to fill
a casual vacancy or as an addition to the Board, subject
to receiving all necessary regulatory and government
Ministerial approvals, but that person must stand for
election at the following annual general meeting.
The appointment and removal of the Managing Director
and Chief Executive Officer is a matter for the Board as a
whole, in association with the recommendations of the
Nomination Committee.
■ ■Tabcorp’s Constitution is available from the
Corporate governance section of Tabcorp’s website
at www.tabcorp.com.au/about_governance.aspx.
■ The terms of reference for each of the Board
Committees are available from the Corporate
governance section of Tabcorp’s website at
www.tabcorp.com.au/about_governance.aspx.
■ ASX CgC’s Recommendations 1.1, 2.1, 2.2, 2.3, 2.4, 2.6, 4.2, 4.4
4. Responsibilities and functions of the Board
and management
The Board has agreed the responsibilities and functions of
the Board as a whole, and those of Directors, the Chairman
and the Managing Director and Chief Executive Officer.
The Board’s role includes:
■■ Reviewing and approving the strategies, budgets and
business plans prepared by management;
■■ Assuring itself of the effectiveness of arrangements for
the governance of the Tabcorp group including:
■● The quality of the executive team;
■● The appropriateness of organisational arrangements
and structure; and
■● The adequacy of internal controls, policies,
procedures and processes;
■■ Overseeing performance against targets and
objectives; and
CONCISE ANNuAl REpORT 2011
13
Corporate governance (continued)
■■ Overseeing reporting to shareholders and other
stakeholders on the strategic direction, governance and
performance of the Tabcorp group.
To assist the Board with carrying out its responsibilities
and functions, certain powers have been delegated to
management, including the authority to undertake
transactions and incur expenditure on behalf of the
Tabcorp group up to specified thresholds. These are
referred to in Tabcorp’s Delegated Authorities and
Approval limits (‘DAAl’) group policy, which has been
agreed by the Board and management. The policy includes
the financial and non-financial matters that the Board has
delegated to management, the capital and operational
expenditure approval limits applicable to each level of
management, and specific key responsibilities within each
division of the Tabcorp group.
Management provides relevant information to the Board
in a concise and timely manner to enable the Board
to make informed decisions and effectively discharge
their duties. The Board regularly monitors the flow of
information it receives from management, and Directors
may request additional information where necessary.
■ A summary of the responsibilities and functions of the
Board, Directors, the Chairman and Managing Director
and Chief Executive Officer matters are available from
the Corporate governance section of Tabcorp’s website
at www.tabcorp.com.au/about_governance.aspx.
■ ASX CgC’s Recommendation 1.1, 2.3
5. Director independence
Directors are required to be meticulous in their disclosure
of any material contract or relationship, including
relevant interests of family companies and spouses and
involvement with other companies or professional firms.
Directors are required to adhere strictly to the constraints
on their participation and voting in relation to matters in
which they may have an interest, in accordance with the
Corporations Act and policies of the Tabcorp group.
A register of Directors’ material interests is maintained
and is regularly sent to every Director. Where Directors
14
TABCORp hOlDINgS lIMITED
are involved with other companies or professional firms,
which from time to time have dealings with the Tabcorp
group, all such dealings are at arms length and on normal
commercial terms.
Details of offices held by Directors with other organisations
are set out on pages 8 to 9.
The Board periodically assesses the independence of each
Director. For this purpose, an independent Director is a
Non Executive Director whom the Board considers to be
independent of management and free of any business or
other relationship that could materially interfere with the
exercise of their unfettered and independent judgment.
All of the Non Executive Directors of Tabcorp throughout
the financial year and at the date of this report have been
determined to be independent Directors. In reaching
that determination, the Board has taken into account (in
addition to the matters set out above):
■■ The specific disclosures made by each Director as
referred to above;
■■ That no Director is, or is associated directly with, a
substantial shareholder of Tabcorp;
■■ That no Director has ever been employed in any other
capacity by Tabcorp or any of its subsidiaries;
■■ That no Director personally carries on any role for the
Tabcorp group other than as a Director of Tabcorp;
■■ There are no related party dealings referable to a
Director which are material and require disclosure
under accounting standards; and
■■ That no Director is, or is associated with, a supplier,
professional adviser, consultant to or customer of the
Tabcorp group which is material for the purposes of
the ASX CgC corporate governance recommendations,
given that any fees paid by Tabcorp to any such
associate were less than 1% of annual earnings for
both Tabcorp and the respective associate, and that
any remuneration received by a Director from any such
associate was not impacted in any way by the fees paid
by Tabcorp except as follows;
paula Dwyer is considered by the Board as
independent despite fees of $66,935 paid by
Tabcorp to Back page lead pty ltd of which
Ms Dwyer’s spouse is a director and has an
ownership interest. The fees exceeded the 1%
threshold of annual earnings for Back page lead
pty ltd during the year, however all arrangements
between Tabcorp and Back page lead pty ltd were
at arms length and on normal commercial terms
and Ms Dwyer did not participate in any decisions
in respect of these arrangements. The Board is
satisfied that these circumstances did not affect
the independence of paula Dwyer.
It is expected that Elmer Funke Kupper, Tabcorp’s former
Managing Director and Chief Executive Officer, will return
as an additional Non Executive Director approximately
six months after ceasing his executive role. The Board
considers that Mr Funke Kupper’s experience, knowledge
of the market and relationships with industry partners will
add considerable value to Board deliberations.
Tabcorp does not consider that term of service on the
Board should be considered as a factor affecting a
Director’s independence and the ability to act in the best
interests of the Tabcorp group.
The Board also has procedures in place to ensure it
operates independently of management. For example, at
every Board meeting, the Non Executive Directors meet
together in the absence of executive Directors and other
executives of the Tabcorp group. Where appropriate,
executives are also excluded from Board discussions that
relate to specific management issues, such as executive
remuneration.
■ ASX CgC’s Recommendations 2.1, 2.2, 2.3, 2.6
6. Other directorships
Directors are required continually to evaluate the number
of Boards on which they serve to ensure that they can give
the time and attention required to fulfil their duties and
responsibilities. Directors are required to seek approval
from the Chairman prior to accepting an invitation to
become a Director of any corporation, and in the case of
the Chairman, seek approval from the Chairman of the
Audit, Risk and Compliance Committee.
the Audit Committee with the Risk and Compliance
Committee, and to cease the Technology Committee.
The key responsibilities of the Audit, Risk and Compliance
Committee are as follows:
Details of the directorships for each Director are available
on pages 8 and 9.
■ ASX CgC’s Recommendations 2.1, 2.2, 2.4, 2.5
7. Board and Committee meetings
The Board and its Committees meet regularly to discuss
matters relevant to the Tabcorp group. Additional
meetings may be scheduled to address specific matters.
Any Director with a material personal interest in a matter
being considered by the Board must not be present when the
matter is being considered and may not vote on the matter,
unless all other Directors present resolve otherwise.
The Company Secretary is responsible for coordinating
and distributing materials for Board meetings,
shareholder meetings and Board Committee meetings.
The appointment and removal of the Company Secretary
is a matter for discussion by the Board as a whole, and all
Directors have access to the Company Secretary.
Directors are required to attend all Board meetings,
shareholder meetings and Board Committee meetings
for which they are members, subject to any unusual or
unforeseen circumstances which may prevent them from
attending.
The number of Board and Committee meetings and the
attendance of each Director are set out on page 28.
■ ASX CgC’s Recommendations 2.5, 2.6, 4.4, 8.1, 8.3
8. Committees of the Board
To assist the Board in achieving the highest standards of
corporate governance, the Directors involve themselves
with the critical areas of the group’s activities through
Board Committees.
During the financial year, the Board reviewed the
Committee structure while having regard to changes
stemming from the demerger, and decided to amalgamate
The Board Committees as at the date of this report were:
■■ Audit, Risk and Compliance (see section 9);
■■ Remuneration (see section 10); and
■■ Nomination / succession planning (see section 11).
Information regarding the previous Technology Committee
is disclosed in section 12.
Board Committee membership is restricted to Non
Executive Directors only.
All Non Executive Directors are members of the Audit,
Risk and Compliance Committee and the Nomination
Committee, in addition to membership of other Board
Committees as appointed. Tabcorp’s Board Committee
arrangements reflect similar board committee structures
in other large Australian companies.
Each Board Committee has terms of reference which set out
the roles, responsibilities, composition and processes of each
Committee. These terms of reference are reviewed regularly.
■ The terms of reference for Tabcorp Board Committees
are available from the Corporate governance section
of Tabcorp’s website at www.tabcorp.com.au/about_
governance.aspx.
■ ASX CgC’s Recommendations 1.1, 2.4, 4.1, 4.3, 8.1
9. Audit, Risk and Compliance Committee
The Audit, Risk and Compliance Committee provides the
Board with additional assurance and oversight relating to
financial accounting practices, financial and operational
risk management, compliance management, internal
control systems, external reporting and the internal and
external audit functions.
The roles and responsibilities of the Audit Committee and
the Risk and Compliance Committee were combined into
the Audit, Risk and Compliance Committee at the time of
the demerger.
Audit:
■■ Oversee compliance with statutory responsibilities
relating to financial disclosure, and approval of full
year and half year financial statements as well as the
financial statements in the annual report;
■■ Review the activities of the internal audit function and
the external auditor (Ernst & young) and review their
performance on an annual basis;
■■ Review the adequacy of the group’s internal controls;
■■ Monitor related party transactions and potential
conflicts of interest; and
■■ Review the process for management assurance to the
Board (refer to section 15 of this corporate governance
statement for more information)
Risk and Compliance:
■■ Reviewing and approving the group’s risk and
compliance policies and frameworks;
■■ Assessing the appropriateness of risk and compliance
management systems, related control processes, and
reporting systems;
■■ Monitoring the effectiveness of systems and processes
in place to ensure compliance requirements are being
satisfied and performing adequately (other than the
financial reporting obligations for which the Audit
Committee is responsible);
■■ Evaluating the effectiveness of the group’s systems
and controls to monitor and manage risks that are
significant to the fulfilment of the group’s business
objectives; and
■■ Ensuring that sufficient resources are dedicated to
managing risk and compliance.
The Chairman of the Audit, Risk and Compliance
Committee is required to meet regularly with the external
auditor in the absence of management. The Chairman of
the Audit, Risk and Compliance Committee is also required
to meet with Tabcorp’s group general Manager Audit, Risk
and Compliance on a regular basis.
CONCISE ANNuAl REpORT 2011
15
Corporate governance (continued)
The annual internal audit plan and the scope of work to
be performed is set in consultation with the Audit, Risk
and Compliance Committee. The Committee approves
the annual internal audit plan and reviews progress and
reports made pursuant to that plan.
The Audit, Risk and Compliance Committee is committed
to maintaining auditor independence and limiting the
engagement of the external auditor for only audit related
services, unless exceptional circumstances necessitate the
involvement of the external auditor. The Chairman of the
Audit, Risk and Compliance Committee must approve all
non-audit related work to be undertaken by the external
auditor (if any). Tabcorp will maintain the rotation of the
lead external audit partner every five years or less, as
required by the Corporations Act. The external auditor
attends Tabcorp’s annual general meeting and is available
to answer shareholder questions regarding aspects of the
external audit and their report.
Refer also to section 13 for internal control framework and
section 14 for management of risk.
Composition of the Audit, Risk and Compliance
Committee (from 9 June 2011)
Chairman:
Jane hemstritch
Members:
paula Dwyer
Zygmunt Switkowski
During the financial year and prior to the demerger, all Non
Executive Directors were members of the Audit Committee
and the Risk and Compliance Committee, paula Dwyer was
Chairman of the Audit Committee and John O’Neill was
Chairman of the Risk and Compliance Committee.
■ The terms of reference for the Audit, Risk and
Compliance Committee are available from the
Corporate governance section of Tabcorp’s website at
www.tabcorp.com.au/about_governance.aspx.
■ ASX CgC’s Recommendations 1.1, 2.5, 4.1, 4.2, 4.3, 4.4, 6.2,
7.1, 7.3
16
TABCORp hOlDINgS lIMITED
10. Remuneration Committee
The Remuneration Committee has responsibility for,
among other things:
■■ Reviewing and making recommendations to the Board
on remuneration packages and policies applicable to
the Chairman, Directors, the Managing Director and
Chief Executive Officer, and senior executives reporting
to the Managing Director and Chief Executive Officer;
■■ Reviewing and making recommendations to the
Board on the Tabcorp group’s general remuneration
practices and policies, including terms and conditions
of any employee share ownership and option schemes,
incentive performance packages, superannuation
entitlements, retirement and termination
entitlements;
■■ Reviewing and approving participation of executives in
incentive plans, including option and share plans;
■■ Reviewing and making recommendations to the Board
regarding the group’s remuneration arrangements
with respect to gender;
■■ Reviewing with reference to market benchmarks,
the remuneration arrangements for the Managing
Director and Chief Executive Officer and making
recommendations to the Board; and
■■ Overseeing the preparation of the annual
Details relating to the remuneration of the Chairman,
Directors, the Managing Director and Chief Executive
Officer, the Company Secretary and other senior executives
of the Tabcorp group are set out in the Remuneration
Report on pages 31 to 49.
www.tabcorp.com.au/about_governance.aspx.
■ ASX CgC’s Recommendations 1.1, 2.5, 8.1, 8.2, 8.3
11. Nomination Committee
The main responsibilities of the Nomination Committee
are to:
■■ Manage a process to identify suitable candidates for
appointment to the Board and Board Committees;
■■ Make recommendations to the Board regarding
succession planning for the Board (refer to section 23
for further information);
■■ Make recommendations to the Board on candidates it
considers appropriate for appointment to the Board
and Board Committees, including whether the Board
should support the election or re-election of any
Director required to retire at a general meeting;
■■ Annually review the skills, experience, expertise,
diversity and attributes required of Directors to
discharge the Board’s duties and the extent to which
they are represented in the composition of the Board
and each Board Committee;
■■ Facilitate an independent three yearly assessment of
the effectiveness and performance of the Board, Board
Committees and Directors (refer to section 22 for
further information); and
■■ Ensure that an effective Board induction process is in
place (refer to section 24 for more information).
Composition of the Nomination Committee
Chairman:
paula Dwyer (from 9 June 2011)
Composition of the Remuneration Committee
Members:
Chairman:
Zygmunt Switkowski
Members:
paula Dwyer
John Story (ceased 8 June 2011)
■ The terms of reference for the Remuneration Committee
are available from the Corporate
governance section of Tabcorp’s website at
John Story (ceased 8 June 2011)
paula Dwyer (appointed Chairman
from 9 June 2011)
Jane hemstritch
Justin Milne (from 1 August 2011)
Zygmunt Switkowski
John O’Neill (ceased 8 June 2011)
Brett paton (ceased 8 June 2011)
Justin Milne (from 1 August 2011)
Remuneration Report.
■ The terms of reference for the Nomination Committee
are available from the Corporate governance section
of Tabcorp’s website at www.tabcorp.com.au/about_
governance.aspx.
■ ASX CgC’s Recommendations 1.1, 2.4, 2.5, 2.6
12. Technology Committee
The Technology Committee operated throughout the
financial year, up until the demerger. The oversight of key
strategies, investments, opportunities and risks associated
with information technology will be undertaken by the
Audit, Risk and Compliance Committee or by the Board
where appropriate.
The main responsibilities of the Committee were to:
■■ Review strategies relating to technology and their
alignment with Tabcorp group plans and strategies;
■■ Review and approve Tabcorp group Technology policies
and standards;
■■ Oversee management’s plans for developing new
technologies and transitioning to new technologies for
key products and services;
■■ Review and make recommendations to the Board
concerning large new technology projects, and monitor
these projects once implemented; and
■■ Monitor and review the effectiveness of disaster
recovery plans, technology security measures, major
technology risks, technology risk mitigation strategies
and other applicable controls.
Composition of the Technology Committee
Chairman:
Jane hemstritch
Members:
Brett paton
Zygmunt Switkowski
■ ASX CgC’s Recommendations 1.1, 2.5
13. Internal control framework
The Board reviews and approves the internal control
structure of the Tabcorp group. This includes the role
performed by the group’s internal audit, risk management
and compliance functions.
Also, the group’s strategic plan (see section 26) and a
detailed budget are prepared annually and subject to the
approval of the Board.
Forecasts for the Tabcorp group and each of the operating
divisions are regularly updated and reported to the
Board throughout the year to enable Directors to monitor
performance against the annual budget.
The Tabcorp group has detailed procedural guidelines
for the approval of capital expenditure including annual
budgeting, review and approval of individual proposals
and specific levels of authority between the Board, the
Managing Director and Chief Executive Officer and other
levels of management.
processes for the investment of surplus cash, management
of debt and currency, and interest rate risk management
have been approved by the Board and are the subject
of ongoing reporting to the Board. Tabcorp enters into
interest rate swaps and cross currency swaps to hedge
interest rate and foreign exchange risk on debt. The
Tabcorp group Treasury department is responsible for
managing the Tabcorp group’s finance facilities and
interest rate, credit, liquidity and currency risks in line with
policies set by the Board.
The Tabcorp group’s internal audit function is resourced
by Tabcorp employees supplemented by relevant industry
experts, and is independent of the external auditor.
Internal audit reports are regularly submitted to the
Chief Financial Officer, to the Audit, Risk and Compliance
Committee and, where appropriate, to the Board. The
Audit, Risk and Compliance Committee approves the
internal audit plan annually.
The Tabcorp Compliance policy and Framework was
developed to align with:
■■ Australian Standard AS 3806 – Compliance programs;
■■ Australian Standard AS 8000 – good governance
principles;
■■ Applicable legislation; and
■■ The Tabcorp group’s organisational structure and
strategy.
The Tabcorp group utilises an enterprise wide compliance
system, which provides a consistent and uniform approach
to collating and reporting relevant information from
across all divisions. The system monitors whether practices
and processes designed to ensure compliance have been
operating effectively, increases the visibility of potential
issues, and assists the processes for resolving issues.
■ The standards AS 3806 – Compliance programs and AS
8000 – good governance principles are available from
SAI global’s website at www.saiglobal.com.
■ ASX CgC’s Recommendations 1.1, 3.1, 3.3, 7.1, 7.2, 7.3
14. Management of risk
The Tabcorp group has in place a Risk Management
Framework, policies and procedures, which set out
the roles, responsibilities and guidelines for managing
financial and operational risks associated with the group’s
businesses.
During the financial year Tabcorp’s group Risk and
Compliance department updated and monitored the risk
profiles for each of the group’s operating divisions, namely
the Casinos, gaming and Wagering divisions, and all major
projects. These profiles identify the:
■■ Nature and likelihood of occurrence for specific
material risks;
■■ Key controls that are in place to mitigate and manage
the risk;
■■ Sources and levels of assurance provided on the
effective operation of key controls; and
CONCISE ANNuAl REpORT 2011
17
Corporate governance (continued)
■■ Responsibilities for managing these risks.
The risk profiles for each key operating division are
reported to the Board Audit, Risk and Compliance
Committee and are considered as part of the annual
internal audit planning process. Risks identified within
each business are captured on an on-line risk management
system, which provides ongoing reporting and enhances
the monitoring of the risk profiles throughout the year.
Management Risk and Compliance Committees operate
within each business to:
■■ Establish a platform to coordinate risk management
and compliance across all parts of the business in an
efficient, effective and consistent manner;
■■ provide a stronger risk management and compliance
focus through principled leadership;
■■ Monitor and report on risk management and
compliance activities; and
■■ Transfer organisational learning.
The Tabcorp group’s Risk Management Framework is based
on concepts and principles identified in the Australian/
New Zealand Standard on Risk Management (AS/NZS ISO
31000:2009).
The risk framework, policies and procedures will
continue to be enhanced as the Tabcorp group’s existing
operations develop and its range of activities expands.
The implementation of these policies and procedures is
monitored and reviewed at least annually by the Board
Audit, Risk and Compliance Committee.
■ The terms of reference for the Audit, Risk and
Compliance Committee are available from the
Corporate governance section of Tabcorp’s website at
www.tabcorp.com.au/about_governance.aspx.
■ The standard AS/NZS ISO 31000:2009– Risk
Management is available from SAI global’s website
at www.saiglobal.com.
■ ASX CgC’s Recommendations 7.1, 7.2, 7.3
18
TABCORp hOlDINgS lIMITED
15. Management assurance
At the Board meetings to approve the Tabcorp group’s
annual and half yearly results, the Board received and
considered statements in writing from the Managing
Director and Chief Executive Officer and the Chief
Financial Officer in relation to the Tabcorp group’s system
of risk oversight and management and internal control.
The certificate of assurance stated that the financial
statements had been prepared in conformity with
generally accepted accounting principles and that they
gave a true and fair view of the state of affairs of Tabcorp
and of the Tabcorp group.
The certificate of assurance also stated that the risk
management and internal compliance and control systems
were operating effectively, in all material respects,
based on the AS/NZS ISO 31000:2009– Risk Management
standard adopted by the Tabcorp group. The certificate of
assurance also included statements that all information
had been made available to the external auditor, and
that there were not any irregularities or significant issues
identified that would have a material impact on the
Tabcorp group.
■ The standard AS/NZS ISO 31000:2009– Risk
Management is available from SAI global’s website at
www.saiglobal.com.
■ ASX CgC’s Recommendations 1.1, 4.4, 7.2, 7.3, 7.4
16. Code of Conduct
The Tabcorp group has a group-wide Code of Conduct.
Compliance with the Code of Conduct and associated
policies, guidelines and procedures is a requirement for
all employees, Directors and contractors of the Tabcorp
group. The Code is founded on the Tabcorp group’s values,
and establishes the behaviour that is expected from
all employees, Directors and contractors, including the
maintenance of ethical standards, honesty, teamwork,
fairness, courtesy and integrity.
The Code includes, among other things, references
to specific Tabcorp group policies regarding money
laundering, corruption, bribery, bullying and harassment,
equal opportunity in the workplace, insider trading,
whistleblowing, conflicts of interest and restrictions on the
use of the group’s gambling products.
The Code of Conduct and relevant policies are included
in the Tabcorp group’s induction program, with annual
refresher training and compliance awareness conducted
across the Tabcorp group.
In addition to adhering to the high ethical standards
set by the Code of Conduct, Tabcorp’s Directors and key
personnel are also required to undergo extensive probity
investigation and clearance by applicable gambling
regulators and government Ministers in Australia and
overseas.
■ Tabcorp’s Code of Conduct is available from the
Corporate governance section of Tabcorp’s website at
www.tabcorp.com.au/about_governance.aspx.
■ ASX CgC’s Recommendation 3.1, 3.3
17. Tabcorp Integrity Protection Service (TIPS)
TIpS is an independent, anonymous crime and misconduct
reporting service delivered by Deloitte, an international
consulting and forensic investigations specialist. It is one
of Tabcorp’s processes to prevent, detect, and respond to
crime and misconduct.
TIpS is available 24 hours a day, 7 days a week to Tabcorp’s
people and stakeholders in Australia and overseas.
The program is managed by the Tabcorp group’s
Compliance team and has accountability at the highest
levels with the Chairman of the Board Audit, Risk and
Compliance Committee able to access reports relating
to all employees and review the action taken. TIpS was
introduced to achieve Australian and international best
practice, reflecting Tabcorp’s commitment to integrity and
befitting the responsibilities of a publicly listed company.
■ Tabcorp’s commitment to integrity and information
regarding TIpS are available from the integrity section
of Tabcorp’s website at www.tabcorp.com.au/about_
integrity.aspx.
■ Further information on TIpS is available from its website
at www.tips.deloitte.com.au.
■ ASX CgC’s Recommendation 3.1, 3.3
18. Responsible Gambling
The Tabcorp group takes a leadership position in the
responsible delivery of its gambling products and support
for customers.
The Tabcorp group was one of the first Australian
gambling companies to launch a voluntary Responsible
gambling Code of practice in 2001. Tabcorp’s Responsible
gambling Code of practice set common standards for
the responsible delivery of gambling products for all of
the group’s gambling operations and venue facilities.
Compliance with the Code was independently reviewed by
KpMg each year.
Australian State governments regulate the gambling
industry, and are increasingly moving towards
mandated responsible gambling codes that have varying
requirements. In light of this development, the Tabcorp
group decided in 2008 to gradually replace its group-wide
Code with a specific code for each of its divisions and, in
some cases, for businesses within a division. The evolution
from a group-wide Code to individual codes has enabled
the Tabcorp group to maintain its compliance with the
specific requirements of State governments. The codes
are specific to each division or business and are therefore
more responsive to individual gambler’s circumstances.
The Tabcorp group will continue to refine its responsible
gambling practices and its codes to strengthen its
commitment to customer care.
Further details about the Tabcorp group’s commitment to
responsible gambling are available on page 12 of this report
and on Tabcorp’s website.
■ Tabcorp’s Responsible gambling Codes are available
from the Responsible gambling section of Tabcorp’s
website at www.tabcorp.com.au/responsible.aspx.
■ ASX CgC’s Recommendations 3.1, 3.3
19. Securities trading policy
Tabcorp has a policy regarding trading in Tabcorp securities
which applies to all Directors, employees and contractors.
This policy also extends to any person or entity, which may in
the circumstances be reasonably associated with the Tabcorp
group or any Director, employee or contractor (for example a
spouse, dependent children, family trust, family company or
joint venture partner).
The policy was updated in November 2010 to incorporate
ASX listing Rule amendments which came into effect on
1 January 2011. In accordance with these amendments,
Blackout periods replaced Trading Windows. Directors,
executives reporting directly to the Managing Director and
Chief Executive Officer (“Executives”), all direct reports
to those Executives (“Executive Direct Reports”), and
their associates are not permitted to trade in Tabcorp’s
securities during Blackout periods and subject to the
processes set out in the policy.
The applicable Blackout periods:
■■ commence on 1 January and end on the day Tabcorp
announces its half year results (ASX Appendix 4D)
inclusively;
■■ commence on 1 July and end on the day Tabcorp
announces its preliminary final year results (ASX
Appendix 4E) inclusively.
The Tabcorp Board, Chairman, Chief Executive Officer or
Company Secretary may also decide other Blackout periods
at any time.
Approval for trading in a Blackout period or within 12
months of acquisition will only be granted in exceptional
circumstances and where the trade is the only reasonable
course of action available. The nature of exceptional
circumstances and the approval process to be followed are
set out in the policy.
Directors are required to obtain written approval from the
Chairman prior to a Director or an associate of a Director
trading in Tabcorp securities. In the case of a proposed
trade by the Chairman or their associate, approval
is required from the Chairman of the Audit, Risk and
Compliance Committee.
If any Executive or Executive Direct Report or any associate
of an Executive or Executive Director Report wishes to
trade in Tabcorp’s securities at any time, the Executive
or Executive Direct Report must obtain the prior written
approval of either the Company Secretary or the Managing
Director and Chief Executive Officer.
The policy also contains restrictions on margin lending.
Directors, Executives and Executive Direct Reports must
receive prior consent from the Chairman (in the case of the
Chairman, prior consent from the Chairman of the Audit,
Risk and Compliance Committee) before entering into
margin loans or similar financing arrangements.
The details of Tabcorp securities held by Directors are
available in the Directors’ Report on page 28.
■ Tabcorp’s Securities Trading policy is available from the
Corporate governance section of Tabcorp’s website at
www.tabcorp.com.au/about_governance.aspx.
■ ASX CgC’s Recommendations 3.2, 3.3
20. Continuous disclosure
The Tabcorp group has a Disclosure and Investor
Communications policy and procedures are in place
to ensure that information is reported to the ASX in
accordance with the continuous disclosure requirements
of its listing Rules. The Board reviews Tabcorp’s compliance
with its continuous disclosure obligations at each of its
meetings.
The Tabcorp group’s Executive general Manager –
Corporate, legal and Regulatory, in her capacity as
Company Secretary, is responsible for coordinating
CONCISE ANNuAl REpORT 2011
19
Corporate governance (continued)
disclosure of information to the ASX, the Australian
Securities and Investments Commission and shareholders.
The Company Secretary is referred to as the Disclosure
Officer in this policy.
■ The terms of reference for each Board Committee are
available from the Corporate governance section of
Tabcorp’s website at www.tabcorp.com.au/about_
governance.aspx.
The Disclosure Officer must be kept informed by
management of disclosure related issues, and each
Executive Committee member must notify the Disclosure
Officer immediately of any information that may require
disclosure.
In addition to the Disclosure Officer, there are a limited
number of authorised Tabcorp spokespersons. Only
authorised Tabcorp spokespersons may speak on the
group’s behalf to people such as analysts, brokers,
journalists and shareholders, and comments must be
limited to their expertise. If an employee of the Tabcorp
group is not an authorised Tabcorp spokesperson, and
receives an inquiry about the group from a journalist,
analyst or other external party, they must refer the inquiry
to an authorised Tabcorp spokesperson.
Authorised Tabcorp spokespersons liaise closely with the
Disclosure Officer to ensure all proposed public comments
are within the bounds of information that is already in the
public domain, and/or is not material.
■ Tabcorp’s Disclosure and Investor Communications
policy is available from the Corporate governance section
of Tabcorp’s website at www.tabcorp.com.au/about_
governance.aspx.
■ ASX CgC’s Recommendations 5.1, 5.2
21. Independent professional advice
An individual Director may, after discussion with the
Chairman, and advising the Managing Director and Chief
Executive Officer, obtain independent professional advice
at the expense of the Tabcorp group. Such advice is to be
made available to all other Directors.
Board Committees and Committee members may also
obtain independent professional advice, subject to the
terms of reference for the applicable committee.
20
TABCORp hOlDINgS lIMITED
■ ASX CgC’s Recommendations 1.1, 2.1, 2.6, 8.1
22. Performance assessment
The Nomination Committee is responsible for facilitating
an independent review of the performance and
effectiveness of the Board, its Committees and Directors
every three years. An independent assessment of Board
performance was undertaken during the 2008/9 financial
year. The assessment process included surveys and
interviews with current Directors and the Executive
Committee. The results were benchmarked against those
of other companies for comparative purposes. The Board
reviewed the findings and recommendations contained in
the report, and further enhancements were implemented.
Formal performance and development evaluations are
conducted every six months for each employee, including
executives and the Managing Director and Chief Executive
Officer. Individual performance is assessed using a
balanced scorecard setting out individual targets that
are aligned to and are supportive of the Tabcorp group’s
annual objectives. Refer to page 36 of the Remuneration
Report for further information. Individuals are also
assessed on whether they have exhibited Tabcorp’s five
values of customer, performance, teamwork, innovation
and integrity. performance assessments for senior
executives were undertaken in relation to the end of the
financial year and half year in accordance with the process
disclosed above.
■ The terms of reference for the Nomination Committee
are available from the Corporate governance section
of Tabcorp’s website at www.tabcorp.com.au/about_
governance.aspx.
■ ASX CgC’s recommendation 1.2, 2.4, 2.5, 2.6
23. Succession planning
The Tabcorp group has a succession plan for members of
its Board and senior management. This plan identifies the
best candidates for leadership and management roles so
that the Board and Executive Committee comprise high
calibre people with the necessary and desirable experience
and competencies that best meet the organisation’s needs.
The Nomination Committee is responsible for making
recommendations to the Board to facilitate the orderly
succession of Board membership and to manage a
process to identify suitable candidates for appointment
to the Board and for the optimal composition of Board
Committees.
Directors regularly discuss succession matters at meetings
of the Board and the Nomination Committee.
■ The terms of reference for the Nomination Committee
are available from the Corporate governance section
of Tabcorp’s website at www.tabcorp.com.au/about_
governance.aspx.
■ ASX CgC’s Recommendation 2.4, 2.6
24. Induction
The appointment of any new Director is subject to
regulatory and government Ministerial approvals. While
these approvals are being sought, the person, with
the approval of the regulators, may attend Board and
Committee meetings as an observer. This assists their
transition into their role, but they may not vote on any
matter.
Each observer undertakes an induction program and
is provided with access to Tabcorp’s online Directors’
Knowledge centre, the Tabcorp group’s strategic plan
and other materials to assist them to participate fully
and actively in all Board decision-making at the earliest
opportunity. In addition, upon being invited to join
the Tabcorp Board, every observer receives a letter of
appointment setting out the key information and terms
and conditions applicable to their appointment as a
Director of Tabcorp.
The induction program aims to provide the observer with
the relevant knowledge regarding the processes of the
Tabcorp Board, Board culture, the role and responsibilities
of a Tabcorp Director, the Tabcorp group’s strategic
direction, the nature of the group’s businesses, industry
matters, the group’s financial position, key senior
management, operational and risk management practices
and the major issues facing the Tabcorp group. The
induction program includes meetings with each Executive
Committee member and their leadership team, site tours,
and specific matters of interest to each observer.
The Board Nomination Committee is responsible for
ensuring that an effective induction process is in place,
and regularly reviews its effectiveness in accordance with
industry best practice and including incorporation of
feedback from newly appointed Directors.
Tabcorp has a formal induction program for all employees,
including executives. This program is conducted by skilled
trainers and provides information about the structure
and operations of the Tabcorp group, Tabcorp’s Code
of Conduct, key employee policies (such as the use of
Tabcorp’s gambling products, harassment and bullying),
occupational health and safety, and equal opportunity.
In addition, employees receive orientation regarding
their specific responsibilities, duties and rights, meet
with executives and team members and undergo
familiarisation in their workplace.
Employees have agreed position descriptions and balance
scorecards that set out their duties, responsibilities,
objectives and key performance indicators. letters of
appointment or employment contracts set out other key
terms of employment, including term of office, rights,
responsibilities, and entitlements on termination of
employment.
■ The terms of reference for the Nomination Committee
are available from the Corporate governance section
of Tabcorp’s website at www.tabcorp.com.au/about_
governance.aspx.
■ ASX CgC’s Recommendation 1.1, 3.1, 3.3
25. Directors’ continuing education
All Directors have access to continuing education to
update and enhance their skills and knowledge to enable
them to continue to carry out their duties as Directors in
an efficient and knowledgeable manner.
The continuing education program includes information
concerning key developments in the Tabcorp group
and the industry and environments within which it
operates, including site visits to the group’s properties,
updates to relevant policies, discussion of relevant legal
developments, corporate governance updates and other
matters of interest for Directors.
■ ASX CgC’s Recommendation 1.1, 2.5
26. Group strategic planning
Tabcorp has a formal strategic planning process whereby
a strategic plan is approved by the Board each year. The
intent of the annual review is to consider a range of
strategies and provide management with guidance on
those strategies that in the Board’s opinion will enhance
shareholder value.
■ ASX CgC’s Recommendation 1.1
27. Sustainability
Tabcorp is committed to the long term sustainability of its
operations and aims to optimise the social, environmental,
workplace and economic impact of its operations for the
benefit of all stakeholders.
Tabcorp’s commitment to responsible gambling, its
employees and community well-being is discussed on
page 12 of this report.
Although the operations of the Tabcorp group are
considered to have minor impact on the environment,
Tabcorp is committed to protecting the environment and
minimising the impact wherever appropriate. Tabcorp’s
environmental performance is set out on page 12 and in
the Directors’ Report on page 28.
Tabcorp’s commitment to long term sustainability is
recognised by its inclusion in several investment indices:
■■ Dow Jones Sustainability Index.
■■ FTSE4good index.
■ ASX CgC’s Recommendation 3.1
28. Engaging shareholders
The Tabcorp group’s Disclosure and Investor
Communications policy sets out Tabcorp’s procedures
and guidelines relating to continuous disclosure and the
communication of information to investors. Information is
communicated to shareholders through Tabcorp’s website,
annual report, dividend mailouts, email broadcasts, the
ASX, and other means where appropriate.
The Tabcorp group’s website provides stakeholders with
a range of information about the group, including its
operations, history, strategies, values, brands, community
involvement, share price performance and shareholder
reports. There is also a facility for any interested person
to receive email notifications of all major Tabcorp news
releases published on the website. Major announcements,
such as the annual and half-year results and the annual
general meeting, are webcast live on Tabcorp’s website.
Webcasts are archived and accessible on the website for at
least twelve months.
Tabcorp provides a service for its shareholders to receive
all shareholder related communications electronically,
including dividend statements, notices of meeting, and
the annual report. This email service provides a quick
and convenient means for receiving this information
while reducing costs and being environmentally friendly.
Shareholders can also use the website to lodge their proxy
appointment prior to the annual general meeting.
Dedicated shareholder relations personnel are available to
assist in responding promptly to all shareholder inquiries.
Contact details are available on the back of this report.
Tabcorp has a Shareholder Enquiries and Complaints policy
that sets out the way in which Tabcorp addresses concerns
and feedback from shareholders.
CONCISE ANNuAl REpORT 2011
21
Corporate governance (continued)
Tabcorp encourages its shareholders to participate
fully at its annual general meeting. Important issues
are presented to shareholders as single resolutions and
full discussion of each item is encouraged. Explanatory
memoranda, where considered appropriate, are included
with the notice of annual general meeting in respect of
items to be voted on at the meeting.
Other shareholder related information is available at the
back of this report.
■ Tabcorp’s website is available at www.tabcorp.com.au.
■ Shareholders can elect to receive all communications
electronically by following the instructions on Tabcorp’s
website at www.tabcorp.com.au/investor_holder_
eshare.aspx.
■ Sign up to receive email notification of major Tabcorp
news releases through the News section of Tabcorp’s
website at www.tabcorp.com.au/news_enews.aspx.
■ Tabcorp’s Disclosure and Investor Communications
policy is available from the Corporate governance section
of Tabcorp’s website at www.tabcorp.com.au/about_
governance.aspx.
■ Tabcorp’s Shareholder Enquiries and Complaints policy
is available from the Corporate governance section of
Tabcorp’s website at www.tabcorp.com.au/about_
governance.aspx.
■ ASX CgC’s Recommendation 6.1, 6.2
22
TABCORp hOlDINgS lIMITED
Directors’ report
The Directors of the Company submit their report for the consolidated entity comprising the
Company and its controlled entities (collectively referred to as the Tabcorp group) in respect
of the financial year ended 30 June 2011.
1. Directors
The names and details of the Company’s Directors in office during the financial year and until
the date of this report (except as otherwise stated) are set out on pages 8 and 9 and below.
Name
Current
Qualifications, experience and special responsibilities
Refer to pages 8 and 9 for current Directors
Former
John Story (i)
Chairman from November 2007 and Non Executive Director from
January 2004 to June 2011
Bachelor of Arts; Bachelor of laws; Fellow of the AICD
John Story has over 18 years’ experience as a Director in the
gambling industry, having joined Tabcorp following its merger
with Jupiters limited in November 2003.
Mr Story is Chairman of Suncorp group limited and a Director of
CSR limited. he is also Chancellor of the university of Queensland
and Commissioner of the public Service Commission (Queensland).
Mr Story was a partner of the law firm Corrs Chambers Westgarth
for 36 years until his retirement on 30 June 2006. he practised in
the areas of corporate and commercial law and served as the firm’s
Queensland Managing partner and National Chairman.
Mr Story was Chairman of the Tabcorp Nomination Committee. he
was also a member of the Tabcorp Audit Committee, the Tabcorp
Remuneration Committee and the Tabcorp Risk and Compliance
Committee.
Name
Elmer Funke Kupper (i) Managing Director and Chief Executive Officer from September
Qualifications, experience and special responsibilities
2007 to June 2011
Bachelor of Business Administration; Master of Business
Administration
Elmer Funke Kupper joined Tabcorp in February 2006. he
commenced as Chief Executive Australian Business and in
March 2007 was appointed as Acting Chief Executive Officer.
In September 2007 he was appointed to the Tabcorp Board as
Managing Director and Chief Executive Officer.
prior to joining Tabcorp, Mr Funke Kupper held several senior
executive positions with the Australia and New Zealand Banking
group limited, including group head of Risk Management, group
Managing Director Asia pacific and Managing Director personal
Banking and Wealth Management. previously Mr Funke Kupper
was a senior management consultant with McKinsey & Company
and AT Kearney.
he is the immediate past Chairman of the Australasian gaming
Council.
John O’Neill AO (i)
Non Executive Director from May 2008 to June 2011
Diploma of law; Fellow of Australian Institute of Bankers;
Foundation Fellow of AICD
John O’Neill is Managing Director and Chief Executive Officer of
Australian Rugby union limited.
he is a former Chief Executive Officer of Football Federation
Australia and was Managing Director and Chief Executive Officer
of the State Bank of New South Wales and Chairman of the
Australian Wool Exchange limited. he was also the inaugural
Chairman of Events New South Wales, which flowed from
the independent reviews he conducted into events strategy,
convention and exhibition space, and tourism on behalf of the
New South Wales government.
Mr O’Neill was Chairman of the Tabcorp Risk and Compliance
Committee. he was also a member of the Tabcorp Audit
Committee and the Tabcorp Nomination Committee.
CONCISE ANNuAl REpORT 2011
23
Directors’ report (continued)
Name
Brett Paton (i)
Qualifications, experience and special responsibilities
Non Executive Director from October 2008 to June 2011
Bachelor of Economics; Member of the Institute of Chartered
Accountants in Australia; Fellow of the Financial Services Institute
of Australasia
Brett paton is Vice Chairman Institutional Clients group for
Australia and New Zealand at Citigroup Inc and is a member of
the Citigroup Australian Management Committee. he is also a
member of the ASX Capital Markets Advisory panel.
Mr paton was Managing Director and Vice Chairman of global
Investment Banking at uBS and was a Member of its Australian
Executive Committee, Chairman of the Equity Markets Committee
and Chairman of the Capital Commitment Committee, its
underwriting committee.
Mr paton was a member of the Tabcorp Audit Committee, Tabcorp
Nomination Committee, Tabcorp Risk and Compliance Committee
and the Tabcorp Technology Committee.
Name
Current
paula Dwyer
David Attenborough
Jane hemstritch
Justin Milne
Zygmunt Switkowski
Former
John Story (iii)
(i) Ceased as a Director of the Company on 8 June 2011 in association with the demerger of Echo Entertainment group
limited from the Company. Information was applicable at the time of cessation as a Director of the Company.
2. Changes to the Board’s composition
Following the implementation of the demerger of Echo Entertainment group limited from
the Company pursuant to Tabcorp’s Scheme Booklet dated 15 April 2011 (Demerger), the
following changes to the Tabcorp Board’s composition occurred in June 2011:
Elmer Funke Kupper (iii)
John O’Neill (iii)
Brett paton (iii)
Listed entity
Period directorship held
Astro Japan property group (i)
Foster’s group limited
healthscope limited
Suncorp group limited (ii)
Nil
Commonwealth Bank of
Australia
Santos limited
pieNETWORKS limited
Quickflix limited
healthscope limited
lynas Corporation limited
Oil Search limited
Suncorp group limited (ii)
February 2005 to present
May 2011 to present
March 2010 to October 2010
April 2007 to present
October 2006 to present
February 2010 to present
March 2011 to present
July 2011 to present
January 2006 to October 2010
February 2011 to present
November 2010 to present
September 2005 to present
Echo Entertainment group
limited (iv)
CSR limited
Suncorp group limited (ii)
Nil
Echo Entertainment group
limited (iv)
Echo Entertainment group
limited (iv)
March 2011 to present
April 2003 to present
January 1995 to present
March 2011 to present
March 2011 to present
■■ Mr Story ceased as Chairman and Non Executive Director;
■■ Ms Dwyer took over as Chairman from Mr Story;
■■ Mr O’Neill and Mr paton ceased as Non Executive Directors;
■■ Mr Funke Kupper ceased as Managing Director and Chief Executive Officer. It is expected
that he will rejoin the Tabcorp Board as a Non Executive Director six months after
ceasing his executive role; and
■■ Mr Attenborough took over as Managing Director and Chief Executive Officer from Mr
Funke Kupper.
In addition, Mr Milne became a Non Executive Director on 1 August 2011 following the
receipt of all necessary regulatory approvals.
3. Directorships of other listed companies
The following table shows, for each person who served as a Director during the financial year
and up to the date of this report (unless otherwise stated), all directorships of companies that
were listed on the ASX or other financial markets operating in Australia, other than Tabcorp,
since 1 July 2008, and the period for which each directorship has been held.
24
TABCORp hOlDINgS lIMITED
(i) Ms Dwyer is a Director of Astro Japan property group limited and Astro Japan property Management limited
which are associated with listed stapled securities of the Astro Japan property group.
(ii)
Includes the period as a Director of Suncorp-Metway limited prior to the corporate restructure of the Suncorp group.
(iii) Ceased as a Director of Tabcorp on 8 June 2011 as a consequence of the Demerger. The directorships disclosed
above were applicable at that time.
(iv) Echo Entertainment group limited shares commenced trading on the ASX on 6 June 2011.
4. Company Secretary
Kerry Willcock joined the Tabcorp group in February 2005 as Executive general Manager,
Corporate and legal. She holds a Bachelor of Arts and a Bachelor of laws, and is a qualified
mediator and member of the Mediation panel of the law Institute of Victoria. She has
extensive commercial, legal, litigation and government relations experience having worked
with Allens Arthur Robinson, Clayton utz and the Australian postal Corporation, where she
held the position of general Counsel. Kerry is also a member of the Australian Corporate
lawyers Association general Counsel group.
5. Principal activities
The principal activities of the Tabcorp group during the financial year comprised the
provision of leisure and entertainment services (particularly in relation to gambling and
hospitality).
The Demerger of Echo Entertainment group limited from Tabcorp, which was implemented on
15 June 2011, resulted in Tabcorp retaining its wagering, gaming and keno businesses while Echo
Entertainment group limited now holds the casinos business previously held by Tabcorp.
Other than in respect of the discontinued casinos business resultant from the Demerger,
the Tabcorp group’s principal activities remain unchanged from the previous year.
6. Financial results
The financial results of the Tabcorp group include the operations of the casinos business up
until the Demerger was implemented.
Consolidated profit after income tax of the Tabcorp group (including the impact of the
Demerger) for the financial year was $534.8 million, which was 13.9% above the previous
financial year.
Earnings from continuing operations before interest, tax (EBIT) and impairments were
$562.5 million, which was 5.2% above the previous financial year.
Net operating revenue from continuing operations was $2,947.5 million, which was 2.9%
above the previous financial year.
7. Earnings per share
The Tabcorp group’s earnings for the financial year were as follows:
■■ From continuing operations, basic earnings per share were (8.5) cents, compared to
45.3 cents for the previous financial year, and diluted earnings per share were (8.5) cents,
compared to 45.2 cents for the previous financial year.
■■ Total basic earnings per share were 80.7 cents, up 4.6% on the previous financial year,
and diluted earnings per share were 80.4 cents, up 4.4% on the previous financial year.
Earnings per share is disclosed in note 6 to the Financial Report.
8. Dividends
A final dividend of 19 cents per ordinary share has been declared, which is a decrease of six
cents on the previous final dividend. The final dividend will be fully franked and payable
on 23 September 2011 to shareholders registered at 25 August 2011. The ex-dividend date
is 19 August 2011. Tabcorp has entered into an agreement to underwrite its Dividend
Reinvestment plan participation to 50% for this final dividend and the next dividend.
The following dividends have been paid, declared or recommended by the Company since
the end of the preceding financial year:
2011 final dividend
Final fully franked dividend for 2011 of 19 cents per share on ordinary shares as
announced on 16 August 2011 with a record date of 25 August 2011 and payable
on 23 September 2011.
2011 interim dividend
Interim fully franked dividend for 2011 of 24 cents per share on ordinary shares
as announced on 3 February 2011 with a record date of 14 February 2011 and
payable on 21 March 2011.
2010 final dividend
Final fully franked dividend for 2010 of 25 cents per share on ordinary shares as
announced on 5 August 2010 with a record date of 16 August 2010 and payable
on 20 September 2010.
$m
130.7
164.4
153.2
Further information regarding dividends may be found in note 5 to the Financial Report.
9. Change in share capital
pursuant to the Demerger, and in accordance with shareholder approval obtained at
the general Meeting held on 1 June 2011, the Company’s share capital was reduced by
$2,219,808,249. This amount was applied by Tabcorp on behalf of Scheme participants as
payment for the shares in Echo Entertainment group limited to effect the Demerger.
10. Review of operations
Following the Demerger, the Tabcorp group’s divisional structure comprises the following
four continuing businesses:
■■ Wagering;
■■ Media and International;
■■ Victorian gaming; and
■■ Keno.
The Tabcorp group previously operated a Casinos division, which was discontinued when
the Demerger was implemented.
The activities and results for these continuing and discontinuing operations are discussed
below.
10.1. Wagering division
The Tabcorp group conducts wagering activities in Victoria and New South Wales through a
network of agencies, hotels and clubs, and provides on course totalizators at thoroughbred,
harness and greyhound metropolitan and country race meetings. In addition, totalizator
and fixed odds betting is offered on sporting events. The division also operates luXBET.COM,
CONCISE ANNuAl REpORT 2011
25
Directors’ report (continued)
offering a racing, sport and novelty product bookmaking service by telephone and online
based in the Northern Territory.
The Wagering division achieved EBIT before impairments of $220.2 million, which was 4.5%
above the previous financial year. The division’s operating revenue increased by 1.0% to
$1,569.1 million.
10.2. Media and International division
The Tabcorp group also has specialist television and radio operations focused on the racing
industry and other sporting activities, which include Sky Racing, Sky Sports Radio and other
domestic and international broadcasting services.
The Media and International division achieved EBIT of $52.8 million, which was 2.7%
above the previous financial year. The division’s operating revenue increased by 9.3% to
$179.3 million.
10.3. Victorian gaming division
In Victoria, the Tabcorp group owns and operates electronic gaming machines (EgMs) in
licensed hotels and clubs under the Tabaret brand.
The Victorian gaming division achieved EBIT of $241.4 million, which was 7.1% above
the previous financial year. The division’s operating revenue increased by 3.9% to
$1,077.4 million.
10.4. Keno division
The Tabcorp group operates Keno in New South Wales and Queensland, and Club Keno
games through a joint venture arrangement in Victoria.
The Keno division achieved EBIT of $48.8 million, which was 4.7% above the previous
financial year. The division’s operating revenue increased by 7.9% to $169.6 million.
10.5. Discontinued Casinos division
The Tabcorp group operated its Casinos division until the Demerger was implemented. This
division operated four hotel and casino properties: Star City in Sydney; Jupiters on the gold
Coast; Treasury in Brisbane; and Jupiters Townsville. In addition, this division managed
the gold Coast Convention and Exhibition Centre, and had an interest in and managed the
Townsville Entertainment and Convention Centre.
For the period to 15 June 2011, the discontinued Casinos division made the following
contributions to the Tabcorp group. The division achieved EBIT of $347.2 million, which was
33.6% above the previous financial year. The division’s operating revenue increased by 12.3%
to $1,527.2 million.
26
TABCORp hOlDINgS lIMITED
11. Significant changes in the state of affairs
The following events, which may be considered to be significant changes in the state of affairs of
the Tabcorp group, have occurred since the commencement of the financial year on 1 July 2010.
11.1. Demerger
The Demerger of Echo Entertainment group limited from Tabcorp was implemented in
June 2011 by way of a Scheme of Arrangement in accordance with Tabcorp’s Scheme Booklet
dated 15 April 2011. The Demerger resulted in Tabcorp retaining its wagering, gaming
and keno businesses while Echo Entertainment group limited holds the casinos business
previously held by Tabcorp. As referred to in section 9, the Company’s share capital was
reduced by $2,219,808,249, with this amount being applied by Tabcorp on behalf of Scheme
participants as payment for the shares in Echo Entertainment group limited.
As a result of the Demerger, there were a number of changes to the composition of the
Tabcorp Board which are described in section 2.
With regard to the casinos business, which is now operated by Echo Entertainment group
limited, during the period the Tabcorp group announced:
■■ an additional $285 million investment at Star City, bringing the total capital for the Star
City redevelopment to $860 million, in addition to the $100 million licence payment to
the NSW government; and
■■ an expansion of the investment program in the three Queensland casinos, increasing
the total investment at these properties to $625 million.
11.2 Victorian Wagering and Betting Licence
As announced on 19 July 2011, the Victorian government intends to award the new Victorian
Wagering and Betting licence to Tabcorp. The licence period is for 12 years and will
commence in August 2012. At the discretion of the responsible minister, the licence may be
extended for a further period of up to two years.
The licence will allow Tabcorp to offer on-course and off-course wagering and betting on
thoroughbred, harness and greyhound racing and approved sporting and other events
in Victoria. It also allows for the offering of approved simulated racing games and the
operation of a betting exchange.
Tabcorp will need to enter into arrangements with the Victorian racing industry that will
govern its formal relationship with the Victorian racing industry. Discussions are underway
between Tabcorp and the Victorian racing industry to finalise those arrangements.
Tabcorp currently estimates the Victorian Wagering and Betting licence will generate
EBITDA of approximately $120 million in the first full financial year of operation, based on
current assumptions.
Tabcorp will pay a licence fee of $410 million during the financial year ending 30 June 2012.
11.3. Victorian Keno
The Tabcorp group was awarded the Victorian Keno licence, which is for 10 years and will
operate from 15 April 2012. The licence authorises Tabcorp to conduct and distribute Keno
games in approved hotels, clubs (with full and restricted club liquor licences) and wagering
outlets throughout Victoria. The new stand-alone licence also includes the right to offer
approved simulated racing games in a broader range of approved venues.
Tabcorp’s Victorian Keno business is expected to operate across at least 1,000 venues on
full implementation. Based on roll out to 1,000 venues Tabcorp currently expects that the
Victorian Keno business will contribute EBITDA of approximately $20 million per annum
after the second full year of operation.
Tabcorp has made a licence payment of $60 million.
11.4. Entitlement offer
The Company raised $428 million in capital through an accelerated renounceable
entitlement offer during October and November 2010. under the offer, eligible shareholders
were offered the opportunity to acquire new Tabcorp ordinary shares at $6.25 each on the
basis of one new share for every nine existing ordinary shares held as at the record date
of 21 October 2010. New shares were issued on 4 November 2010 under the institutional
component of the offer and on 22 November 2010 under the retail component of the offer.
11.5. Arrangements with Racing NSW and the NSW Government
In the first half of the financial year, Tabcorp reached agreement with Racing NSW and the
NSW government on a funding package for the redevelopment of Randwick racecourse.
under this agreement, Tabcorp received approval to introduce Trackside in its NSW retail
network. Tabcorp will pay Racing NSW a total of $150 million in two installments: the
first was paid on 1 July 2011 and second is payable on 1 July 2012. under the terms agreed,
Trackside is expected to contribute EBITDA in excess of $30 million per annum on full roll-
out in 12 months time.
Separately, the NSW government granted a number of other approvals under its racing
reform program, including fixed odds betting on racing in all channels (including retail),
a reduced tax rate for Tabcorp for premium and overseas customers and international
comingling with NSW as a host.
11.6. Other significant changes in the state of affairs
There were no significant changes in the state of affairs of the Tabcorp group that occurred
during the financial year other than as set out in this Directors’ report.
12. Business strategies
The key strategic priorities of Tabcorp after the Demerger are as follows:
■■ Wagering, Media and International
■● Maintain retail leadership
■● Drive fixed odds expansion
■● Drive online
■● Improve regulatory conditions
■● leverage loyalty program
■● Expand internationally
■■ Victorian gaming
■● Develop Tabcorp gaming Solutions
■■ Keno
■● grow Keno
■● pursue new licences
13. Significant events after the end of the financial year
No matters or circumstances have arisen since the end of the financial year which are
not otherwise dealt with in this report or in the Financial Report, that have significantly
affected or may significantly affect the operations of the Tabcorp group, the results of those
operations or the state of affairs of the Tabcorp group in subsequent financial years. Refer
also to note 29 to the Financial Report.
14. Likely developments and expected results
The Tabcorp group will continue with its strategies, as set out in this report.
The Directors have excluded from this report any further information on the likely developments
in the operations of the Tabcorp group and the expected results of those operations in future
financial years, as the Directors have reasonable grounds to believe that to include such
information will be likely to result in unreasonable prejudice to the Tabcorp group.
15. Auditors
The Tabcorp group’s external auditor is Ernst & young.
The Tabcorp group’s internal audit function is fully resourced by Tabcorp, with KpMg
providing specialist independent external support where necessary.
More information relating to the audit functions can be found in the corporate governance
statement of the Concise Annual Report.
16. Directors’ interests in contracts
Some Directors of the Company, or related entities of the Directors, conduct transactions
with entities within the Tabcorp group that occur within a normal employee, customer or
supplier relationship on terms and conditions no more favourable than those with which
it is reasonable to expect the entity would have adopted if dealing with the Director or
Director-related entity on normal commercial terms and conditions.
CONCISE ANNuAl REpORT 2011
27
Directors’ report (continued)
17. Environmental regulation and performance
The Tabcorp group’s environmental obligations and waste discharge quotas are regulated
under both state and federal laws. The Tabcorp group has a record of complying with, and
in most cases exceeding, its environment performance obligations.
20. Board and Committee meeting attendance
During the financial year ended 30 June 2011 the Company held 21 meetings of the Board of
Directors, of which 11 were standard Board meetings, and 10 Board meetings were held to
discuss special business.
No environmental breaches have been notified to the Tabcorp group by any government agency.
The Tabcorp group is registered for the Federal government’s Energy Efficiency
Opportunities (EEO) initiative, which requires companies that use over 0.5 petajoules of
energy per annum to identify opportunities to reduce energy consumption. The Tabcorp
group publishes its EEO report under the corporate governance section of its website.
The Tabcorp group is also registered for the Federal government’s National greenhouse
Energy Reporting System (NgERS), which requires organisations that meet certain
thresholds in energy consumption or greenhouse gas emissions to report to the
government all energy consumption and greenhouse gas emissions every year.
Each Tabcorp group property applies environmental management procedures and
systems representing best practice standards, which assist in maintaining high levels of
environmental regulation and performance.
18. Risk management
The Tabcorp group has a structured and proactive approach to understanding and
managing risk. The key focus of the risk management approach is to align strategy,
processes, people, technology and knowledge with evaluating and managing the
uncertainties and opportunities faced by the Tabcorp group. Overviews of the Tabcorp
group’s risk management processes and internal control framework are disclosed in the
corporate governance statement of the Concise Annual Report.
19. Directors’ interests in Tabcorp securities
At the date of this report (except as otherwise stated), the Directors had the following
relevant interests in the securities of the Company, as notified to the ASX in accordance with
section 205g(1) of the Corporations Act 2001:
Name
Current
paula Dwyer
David Attenborough
Jane hemstritch
Justin Milne
Zygmunt Switkowski
Former
John Story (i)
Elmer Funke Kupper (i)
John O’Neill (i)
Brett paton (i)
Ordinary Shares
Performance Rights
Tabcorp Bonds
34,292
58,609
23,181
-
84,876
58,194
97,863
-
23,181
-
-
-
-
-
-
1,120,734
-
-
-
-
2,000
-
-
-
1,500
-
3,000
(i) Ceased as a Director on 8 June 2011 in association with the Demerger. The number of Tabcorp securities disclosed
above was applicable at the time of cessation as a Director of the Company.
28
TABCORp hOlDINgS lIMITED
The attendance of the Directors at meetings of the Board and its Committees during the
year in review were:
Audit,
Risk and
Compliance
Committee(i)
Board of
Directors
Audit
Committee(i)
Risk and
Compliance
Committee(i)
Nomination
Committee
Remu-
neration
Committee
Technology
Committee(i)
Name
Current
Paula Dwyer
David
Attenborough(ii)
Jane Hemstritch
Justin Milne(iii)
Zygmunt
Switkowski
Former
John Story(iv)
Elmer Funke
Kupper(ii)(iv)
John O’Neill(iv)
Brett Paton(iv)
A
21
2
21
15
20
19
19
16
18
B
21
2
21
15
21
19
19
19
19
A
B
A
1
1
1
1
1
-
-
-
-
1
1
1
1
1
-
-
-
-
3
-
3
2
3
3
3
3
3
B
3
-
3
2
3
3
3
3
3
A
3
-
3
2
3
3
3
3
3
B
3
-
3
2
3
3
3
3
3
A
2
-
2
1
2
2
2
2
2
B
2
-
2
1
2
2
2
2
2
A
9
-
-
-
9
9
9
-
-
B
9
-
-
-
9
9
9
-
-
A
3
-
4
3
4
-
4
-
4
B
3
-
4
3
4
-
4
-
4
A – Number of meetings attended
B – Maximum number of possible meetings available for attendance
(i) Following the implementation of the Demerger, the Audit Committee and the Risk and Compliance Committee
were combined to form the Audit, Risk and Compliance Committee and the Technology Committee ceased. Ms
Dwyer was not a member of the Technology Committee, however she attended three Technology Committee
meetings.
(ii) The Managing Director and Chief Executive Officer attends Board Committee meetings, but is not a member
of any Board Committee. Only Non Executive Directors are members of Board Committees. In addition to the
meetings above, Mr Attenborough also attended eleven Board meetings, two Risk and Compliance Committee
meetings and one Technology Committee meeting as Managing Director – Wagering prior to becoming a Director.
(iii) Mr Milne attended the meetings above as an Observer prior to his commencement as a Director on 1 August 2011.
he could not vote on any matter at these meetings and was not required to attend these meetings.
(iv) Ceased as a Director on 8 June 2011 in association with the Demerger.
The details of the functions and memberships of the Committees of the Board are set out in
the corporate governance statement of the Concise Annual Report. The terms of reference
for each Board Committee are available from the corporate governance section of the
Company’s website.
21. Indemnification and insurance of Directors and Officers
The Directors and Officers of the Tabcorp group are indemnified against liabilities pursuant
to agreements with the Tabcorp group. Tabcorp has entered into insurance contracts with
third party insurance providers, and in accordance with normal commercial practices, under
the terms of the insurance contracts, the nature of the liabilities insured against and the
amount of premiums paid are confidential.
22. Non-statutory audit and other services
Ernst & young, the external auditor to the Company and the Tabcorp group, provided non-
statutory audit services to the Company during the financial year ended 30 June 2011. The
Directors are satisfied that the provision of non-statutory audit services during this period
was compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The nature and scope of each type of non-statutory audit service
provided means that auditor independence was not compromised. These statements are made
in accordance with advice provided by the Company’s Audit, Risk and Compliance Committee.
The Company’s Board Audit, Risk and Compliance Committee reviews the activities of the
independent external auditor and reviews the auditor’s performance on an annual basis.
The Chairman of the Audit, Risk and Compliance Committee must approve all non-statutory
audit and other work to be undertaken by the auditor (if any). Further details relating to the
Audit, Risk and Compliance Committee and the engagement of auditors are available in the
corporate governance statement of the Concise Annual Report.
Ernst & young, acting as the Company’s external auditor, received or are due to receive the
following amounts in relation to the provision of non-statutory audit services to the Company:
Description of services
Other audit services
Other regulatory audit services
Other assurance (i)
Total of all non-statutory audit and other services
$000
351
137
1,725
2,213
(i)
Includes the preparation of the Investigating Accountants Report for the Scheme Booklet and attendance at the
Scheme and general Meetings relating to the Demerger.
Amounts paid or payable by the Company for audit and non-statutory audit services are
disclosed in note 3 to the Financial Report.
23. Corporate governance
The Directors of the Company support and adhere to the principles of corporate governance,
recognising the need for the highest standard of corporate behaviour and accountability.
In recognition of changes stemming from the Demerger and the Company’s ongoing
commitment to maintaining best practice, the Company adopted new practices and
optimised its existing practices. The Company’s corporate governance statement is
contained in the Concise Annual Report, and associated information is available under the
corporate governance section of the Company’s website at www.tabcorp.com.au/about_
governance.aspx.
24. Rounding of amounts
Tabcorp holdings limited is a company of the kind specified in Australian Securities
and Investments Commission Class Order 98/0100. In accordance with that Class Order,
amounts in the financial report and the Directors’ report have been rounded to the nearest
hundred thousand dollars unless specifically stated to be otherwise.
25. Auditor’s independence declaration
Attached is a copy of the auditor’s independence declaration provided under section 307C of
the Corporations Act 2001 in relation to the audit for the financial year ended 30 June 2011.
This auditor’s independence declaration forms part of this Directors’ report.
This report has been signed in accordance with a resolution of Directors.
Paula Dwyer
Chairman
Melbourne
16 August 2011
CONCISE ANNuAl REpORT 2011
29
Directors’ report (continued)
30
tabcorp holdings limited
Remuneration report (audited)
Introduction
This Remuneration report outlines the remuneration policy and arrangements for Tabcorp’s
Directors, executives and senior management in accordance with the requirements of the
Corporations Act 2001 and its Regulations. The information provided in this Remuneration
report has been audited as required by section 308(3C) of the Corporations Act.
The Remuneration report relates to the group’s key management personnel (KMp) and the
five executives that received the highest remuneration during the year in the Company
and the group. KMp are those persons having authority and responsibility for planning,
directing and controlling the activities of the group, and comprises all the Directors of
Tabcorp and certain members of the Executive Committee. The same group of individuals
is regarded as KMp for both the Company and the group.
As detailed in this Remuneration report, the annual reward structure for the most senior
managers comprises three components: a fixed base salary, a short term cash incentive
and a long term incentive in the form of performance rights. For KMp at least 50% of the
total annual reward is ‘at risk’ in the form of short term or long term incentives tied to the
achievement of specific business objectives and performance targets.
For the year ending 30 June 2011, short term incentives were awarded to senior managers,
and were, on average, higher than the previous financial year. With regard to long term
incentives, an allocation of performance Rights was made for the year ending 30 June 2010
to 15 senior managers in accordance with their employment contracts. An allocation of
performance Rights under the long term incentive plan to the former Managing Director
and Chief Executive Officer was made following shareholder approval.
Whether the allocated performance Rights generate value for the senior managers will
depend on the Company’s Total Shareholder Returns over a three to four year period. If the
minimum performance hurdles are not met, all performance Rights will lapse. The total
number of performance Rights will vest only if the highest performance threshold is met.
Retesting was removed for allocations of Rights made under the Company’s long term
incentive plan after 30 June 2010. For these and future allocations, a single test will apply
after three years.
As a result of the demerger of Echo Entertainment group limited (Echo) from the Company
pursuant to Tabcorp’s Scheme Booklet dated 15 April 2011 (the Demerger), the Board
determined to collapse all existing Employee Share Schemes prior to the implementation
of the Demerger. Details of the treatment of these schemes are set out in Sections 6.3.2.9,
6.3.3.1 and 6.5.1.4.
The Board reviews the remuneration for Non Executive Directors each calendar year. In
2011, the Board also considered the implications of the Demerger for Non Executive Director
remuneration. The Board resolved that following the Demerger, Non Executive Director
remuneration should be adjusted to reflect the changes in Tabcorp. As a result, the fees for
the 2012 financial year will be lower than the fees for the 2011 financial year. The details of
Non Executive Director remuneration are included in Section 5.3.
1. Significant changes since 30 June 2010
1.1 Non Executive Directors
upon the implementation of the Demerger of Echo the composition of the Board changed.
Three Non Executive Directors (Mr John Story, Mr John O’Neill and Mr Brett paton) resigned
from the Board on 8 June 2011.
Following the Demerger, the Tabcorp Board will initially comprise:
■■ Ms paula Dwyer as Non Executive Chairman and Director; and
■■ Ms Jane hemstrich and Dr Zygmunt Switkowski as Non Executive Directors.
Mr Justin Milne joined the Tabcorp Board as a Non Executive Director on 1 August 2011,
following the receipt of all regulatory approvals.
1.2 Executives
Tabcorp’s former Managing Director and Chief Executive Officer, Mr Elmer Funke Kupper,
led the Company for most of the 2011 financial year and through the Demerger period. On
Demerger, Mr David Attenborough became Managing Director and Chief Executive Officer
of Tabcorp and Mr larry Mullin became Managing Director and Chief Executive Officer of
Echo. It is expected that Mr Funke Kupper will join the Board of Tabcorp as a Non Executive
Director six months after ceasing his executive role.
Before his appointment as Managing Director and Chief Executive Officer of Tabcorp post
Demerger, Mr Attenborough was Managing Director of the Company’s Wagering Division.
Mr Attenborough commenced employment on 9 April 2010.
1.3 Due Diligence Committee
In December 2010, the Board established a Due Diligence Committee to oversee the due
diligence process of the Demerger. Mr Brett paton was Chairman of the committee, and
Ms paula Dwyer was a committee member. The Committee concluded its work in June 2011
when the Demerger was implemented.
1.4 Treatment of Employee Share Schemes under the Demerger
The Board considered the impact of the Demerger on the Company’s various Employee Share
Schemes and made decisions in relation to the treatment of each of the schemes under
the Demerger. The details of this treatment were set out in the Scheme Booklet sent to
shareholders on 15 April 2011.
The treatment of the relevant securities under the Demerger is described in Sections 6.3.2.9,
6.3.3.1 and 6.5.1.4.
CONCISE ANNuAl REpORT 2011
31
Remuneration report (audited) (continued)
2. Governance
The main responsibilities of the Board Remuneration Committee are:
■■ Establishing and maintaining fair and reasonable remuneration policies and practices
that apply to the group;
■■ Reviewing and recommending to the Board the remuneration of KMp and the terms and
conditions of any incentive plans; and
■■ Agreeing benchmarks against which annual salary reviews are evaluated.
In exercising its responsibilities, the Board Remuneration Committee assesses the
appropriateness of the nature and amount of remuneration of Directors and executives
every year by reference to relevant employment market conditions with the overall objective
of ensuring maximum stakeholder benefit from the retention of a high quality and high
performing Board and executive team.
To assist in exercising its responsibilities, the Board Remuneration Committee receives
independent advice on matters such as remuneration strategies, mix and structure.
The Board Remuneration Committee is governed by its Terms of Reference, which are
available on Tabcorp’s website at www.tabcorp.com.au under the About Us – Corporate
Governance section.
3. Remuneration philosophy
The key objective of Tabcorp’s remuneration philosophy is to enable Tabcorp to attract,
motivate and retain high calibre individuals at both Board and senior management level. To
achieve this, Tabcorp’s remuneration framework is based upon the following key principles:
■■ Creating shareholder value relative to our peer group;
■■ Maintaining market competitiveness; and
■■ Measuring and rewarding individual, divisional and group performance.
For executive and senior management remuneration, this involves aligning the reward
components with the individual’s ability to influence results and to increase the focus on
variable reward that is leveraged for superior performance.
There has been no significant change in the remuneration strategy since the previous
financial year.
4. Key management personnel (KMP)
Name
Non Executive Directors
Current
paula Dwyer
Position held
Chairman and Director (Non Executive)
Period in position
if less than full year
Chairman from
9 June 2011
Director (Non Executive)
Director (Non Executive)
Jane hemstritch
Zygmunt Switkowski
Future, pending regulatory approval
Justin Milne (i)
Former
John Story
John O’Neill
Brett paton
Will be appointed Director (Non Executive)
Chairman and Director (Non Executive)
Director (Non Executive)
Director (Non Executive)
Executives
Current Executive Director
David Attenborough (ii)
Managing Director and
Chief Executive Officer
Managing Director, Wagering
Current Executives
Mohan Jesudason
Kerry Willcock
Managing Director, gaming &
group Marketing
Managing Director, gaming
Executive general Manager,
Corporate, legal and Regulatory
Executive general Manager,
Corporate and legal
Future Executive, pending regulatory approval
Damien Johnston (iii)
Former Executive Director
Elmer Funke Kupper
Chief Financial Officer
Managing Director and
Chief Executive Officer
Former Executives
larry Mullin
Matt Bekier
louise Marshall
Chief Executive Officer, Casinos
Chief Financial Officer
Executive general Manager, human
Resources
N/A
until 8 June 2011
until 8 June 2011
until 8 June 2011
From 9 June 2011
From 29 July 2010
until 8 June 2011
From 9 June 2011
until 8 June 2011
From 9 June 2011
until 8 June 2011
N/A
until 8 June 2011
until 8 June 2011
until 8 June 2011
until 8 June 2011
32
TABCORp hOlDINgS lIMITED
(i) Commenced as a Director and a KMp on 1 August 2011, following the receipt of all necessary regulatory approvals.
(ii) Commenced employment on 9 April 2010, and as a KMp on 29 July 2010 following the receipt of all necessary
regulatory approvals.
(iii) Commenced in position on 9 June 2011, and as a KMp on 12 July 2011 following the receipt of all necessary
regulatory approvals.
Details of Director qualifications, experience and other responsibilities are set out on pages
8 to 9 and 23 of the Directors’ report.
5. Non Executive Director Remuneration
5.1 Remuneration framework
The Board Remuneration Committee has responsibility for reviewing and recommending to
the Board appropriate remuneration arrangements for Non Executive Directors, taking into
consideration factors including:
■■ The group’s remuneration philosophy;
■■ The level of fees paid to Board members of other publicly listed Australian companies;
■■ Operational and regulatory complexity;
■■ The responsibilities and workload requirements of each Board member; and
■■ Advice from independent remuneration consultants.
Non Executive Directors’ fees are reviewed annually and the current aggregate limit
(including superannuation contributions) is set at $2 million, as approved by shareholders at
the Annual general Meeting on 28 November 2005.
Non Executive Directors do not receive any performance or incentive payments and are
not eligible to participate in any of Tabcorp’s incentive plans. This policy aligns with the
principle that Non Executive Directors act independently and impartially.
5.2 Structure
Non Executive Directors’ remuneration comprises the following components:
■■ Board fee;
■■ Board Committee fees; and
■■ Superannuation (9% of total fees, uncapped).
Some Directors may receive additional remuneration and associated superannuation
(where applicable) for:
■■ Chairmanship of the Victorian Joint Venture Management Committee, receiving a fee
equivalent to Chairman of the Remuneration Committee;
■■ Observer fees, equivalent to the applicable Board and Committee fees (for attending
Board and Committee meetings and induction whilst awaiting regulatory approval); or
■■ Membership of other Committees, such as the Demerger Due Diligence Committee.
Board fees are structured by having regard to the responsibilities of each position within
the Board. Board Committee fees are structured to recognise the differing responsibilities
and workload associated with each Committee, and the additional responsibilities of each
Committee Chairman.
Board fees are not paid to the Managing Director and Chief Executive Officer, or to
executives for directorships of any subsidiaries.
5.3 Current annual fees
The annual fees are detailed in Figure 1 for Non Executive Directors and Board Committee
memberships. Following its annual review of these fees (benchmarked to the ASX100
companies), the Board decided to increase the fees from 1 July 2010. Non Executive Director
Remuneration had not increased since January 2007.
CONCISE ANNuAl REpORT 2011
33
Remuneration report (audited) (continued)
Figure 1: Non Executive Director and Board Committee fixed annual fees
Position
Up to the Demerger (8 June 2011)
Chairman
Non Executive Director
Committee Chairman
Committee Member
Following the Demerger (9 June 2011)
Chairman
Non Executive Director
Committee Chairman
Committee Member
(i) Fees exclude superannuation contributions.
Board fees (i)
$
Audit (ii)
$
Risk and
Compliance (ii)
$
Remuneration
$
Nomination
$
Technology (ii)
$
Due Diligence (iii)
$
Board Committee fees (i)
380,000
140,000
350,000
120,000
50,000
15,000
25,000
15,000
25,000
10,000
Audit, Risk & Compliance (ii)
40,000
20,000
25,000
10,000
7,500
7,500
7,500
7,500
25,000
10,000
40,000
40,000
N/A
N/A
N/A
N/A
(ii) Following the implementation of the Demerger, the Audit Committee and the Risk and Compliance Committee were combined to form the Audit, Risk and Compliance Committee, and the Technology Committee ceased and became the
responsibility of the full Board.
(iii) Committee commenced in December 2010 to oversee the due diligence process for the Demerger and concluded in June 2011.
6. Senior management remuneration (including Executive Director)
The Remuneration Committee and the Board has responsibility for reviewing the remuneration framework of the Company and recommending to the Board the appropriate remuneration
arrangements. The Remuneration Committee approves the remuneration and incentives for members of the Executive Committee and makes recommendations to the Board in relation to the
Managing Director and Chief Executive Officer.
6.1 Remuneration framework
The remuneration framework for senior management comprises a mix of both fixed and variable remuneration components. The level of fixed remuneration reflects the scope and
responsibilities of the role and the level of knowledge, skills and experience of the individual. Variable remuneration depends on the achievement of group, divisional and individual
performance targets, and shareholder value hurdles. Variable remuneration may be delivered in the form of cash or a mix of cash and Restricted Shares for achievement of short term
performance targets, and performance Rights (and performance Options prior to 30 June 2007) for achievement of long term performance targets.
The objective of structuring a remuneration framework comprising both fixed and variable components is to ensure remuneration is market competitive and aligned to:
■■ Shareholders’ interests through:
■● The use of financial measures, such as net profit after tax (to date measured on a normalised basis and before non-recurring items) as the primary reward measure for short term
performance outcomes.
■● Rewarding long term company performance measured by reference to a comparable group of companies in the S&p/ASX 100 index, which over the long term should lead to attractive
value creation for shareholders.
■● Aligning group, divisional and individual performance targets to the performance objectives in Tabcorp’s annual and long term strategic plans.
34
TABCORp hOlDINgS lIMITED
Fixed
+
Short
term
incentive
+
Long
term
incentive
)
k
s
i
r
t
a
(
e
l
b
a
i
r
a
V
=
Total Annual Reward
(TAR)
■● Attracting, motivating and retaining individuals of the highest calibre.
■● Fostering a culture of high performance in a team based environment.
■■ Senior managements’ interests through:
■● Differentiating reward outcomes based upon individual performance and capability.
■● linking the form of reward delivery with the ability to influence results.
■● providing upside opportunity for superior group performance and increased
shareholder value.
The reward structure is outlined in Figure 2.
Figure 2: Senior management reward structure
Component
Delivery
Performance
alignment
Strategic
objective
Cash(i)
Superannuation
Market median
Figure 3: KMP target reward mix
KMP
Current
Mohan Jesudason
Kerry Willcock
Future
Damien Johnston
Former
larry Mullin
Matt Bekier
louise Marshall
% target reward mix
Variable (at risk)
incentives
Short term
(cash)
Long term
(equity)
Fixed
45
50
50
42
45
50
30
25
25
42
30
25
25
25
25
16
25
25
Total
Annual
Reward
100
100
100
100
100
100
Cash(i), or mix of Cash
and Restricted Shares(ii)
Group performance
Divisional performance
Individual performance
Short term targets
(12 month period)
6.3 Variable (at risk) remuneration
6.3.1 Short term incentive (STI)
Performance Rights(iii)
Total shareholder
return
Shareholder value creation
(3 year period)
6.3.1.1 Overview
The STI is designed to reward employees for the achievement of group, divisional and
individual performance goals over the relevant 12 month performance period, which are
aligned to and supportive of the group’s annual objectives for each financial year.
(i) May voluntarily elect to salary sacrifice for additional superannuation contributions and motor vehicle novated
leases (for fixed component only).
(ii) Applicable to certain senior management, issued under the Tabcorp Employee Deferred Share plan and subject to
a three year service condition.
6.3.1.2 Determining Factors
The incentive is based upon three key factors:
(iii) May vest on the third anniversary after the grant, subject to meeting relevant performance based hurdles.
Figure 4: STI calculation
6.2 KMP target reward mix
The target reward mix aims to position Total Annual Reward (TAR) at the market median
when all performances have been achieved at target. It is set after benchmarking against a
wide range of organisations to ensure that the incentive and TAR are competitive, fair and
reasonable. Senior management with greater responsibility in key divisions have a greater
proportion of at risk remuneration.
The target reward mix for the KMp (other than Non Executive Directors and the Managing
Director and Chief Executive Officer) is outlined in Figure 3. This target reward mix excludes
appointment incentives (refer Sections 6.4.2 and 6.6.2). Refer Sections 6.4 and 6.5 for details
of the Managing Director and Chief Executive Officer’s remuneration.
X
Group Funding
Multiplier or
Divisional
Multiplier
X
Individual
Performance
Multiplier
=
Short Term
Incentive
Target STI
($)
Target STI
This amount is based on a percentage of the individual’s Total Annual Reward (TAR) (refer to
Figure 3 above).
CONCISE ANNuAl REpORT 2011
35
Remuneration report (audited) (continued)
■■ Group Funding Multiplier (GFM) or Divisional Multiplier (DM)
The first step is to determine the gFM. This is linked to the achievement of Tabcorp’s target
normalised net profit after tax before non recurring items as approved by the Board. The
gFM determines the overall STI pool available for distribution. If the minimum financial
performance target is not met, individual awards may be funded at a reduced level, at the
discretion of the Board.
If the minimum financial performance target is met, the second step is to determine
the DM. This creates differentiation between divisions based on their performance and
contribution to the group. The DM is determined by reference to the performance of each
division against financial targets, non financial targets and execution of the division’s key
strategic objectives. Senior management working in group functions generally receive the
gFM.
■ Individual Performance Multiplier (IPM)
Individual performance is assessed using a balanced scorecard of individual measures
that align to and are supportive of the group’s annual objectives. The balanced scorecard
assesses four performance areas – customers, people, organisation, and shareholders.
Specific key performance objectives (KpOs) are agreed upon for each performance area at
the start of the financial year against which the individual is assessed.
To be eligible to receive a STI, participants need to demonstrate required levels of behaviours
in line with group values and must not have any significant controllable compliance
breaches.
6.3.1.3. Delivery
The STI is delivered in cash, or a mix of cash and Restricted Shares. It is mandatory for
participants at a senior management level, where the target STI is 30% or more of TAR and
who do not participate in the long term incentive, to defer one third of their total STI into
Restricted Shares. Restricted Shares are subject to a three year service condition during
which time the shares may not be traded, however participants have full entitlement to
dividends and voting rights.
As a result of the Demerger, the Board waived the disposal restrictions for past allocations.
At the date disposal restrictions and forfeiture provisions were waived, the fair value of the
Restricted Shares was fully expensed.
6.3.1.4 Accounting treatment
The financial impact of the STI (excluding any Restricted Shares) is expensed in the relevant
financial year and is reflected in the remuneration disclosures for KMp. Restricted Shares are
expensed on a straight line basis over a three year period, commencing from the time the
Restricted Shares are granted to the participant, which occurs after the end of the financial year.
36
TABCORp hOlDINgS lIMITED
6.3.1.5 STI performance
For the year ended 30 June 2011, short term incentive targets were derived from the Board
approved business plan. The Board awarded short term incentives to senior management
that reflected the financial performance of the Company against the targets set. On
average, they were higher than the previous year.
6.3.2 Long term incentive (LTI)
6.3.2.1 Overview
The lTI is principally designed to reward senior management for contributions to long-
term shareholder value creation, measured on the third anniversary after the date of grant
(grants prior to 1 July 2010 were measured between the third and fourth anniversary).
ultimate value from the lTI is only delivered to senior management if certain shareholder
returns are achieved on the test date, resulting in the equity instruments vesting.
The lTI is delivered through performance Rights that provide the senior manager with the
opportunity to acquire shares, subject to meeting market based performance hurdles and
service conditions, at no cost to the senior manager. performance Rights are considered an
effective instrument for delivering incentives to senior management which is aligned to
achieving shareholder value over the three year period.
performance Rights issued under the lTI plan have the following features:
■■ Tested against the relevant performance hurdle at the third anniversary of the date of
grant (and at a further two subsequent six monthly intervals for grants prior to 1 July
2010);
■■ May vest at the third anniversary of the date of grant, with any unvested performance
Rights lapsing immediately;
■■ Senior management have until the seventh anniversary of the date of grant to exercise
vested performance Rights, otherwise they lapse;
■■ upon exercise the Company will issue or transfer ordinary shares to the senior manager;
and
■■ The fair value will be expensed over a three year period (and four year period for grants
prior to 1 July 2010) from the grant date in accordance with Accounting Standards.
6.3.2.2 Allocation
The performance Rights under the lTI are generally allocated annually in September in
arrears. The number of performance Rights allocated is calculated as outlined in Figure 5.
Figure 5: Allocation calculation
Target LTI
($)
÷
Fair
Value of
Performance
Right
=
Number of
Performance
Rights
allocated
6.3.2.3 Vesting conditions
The vesting of performance Rights issued under the lTI is dependent on two conditions, as
discussed below.
■■ Time based
performance Rights may vest at the third anniversary of the date of grant (Test Date),
subject to meeting the relevant performance based hurdle (refer Figure 6). The Test Date
aligns with Tabcorp’s long term business strategy. The performance Rights are tested
against the performance hurdle at the Test Date.
Retesting was removed under the lTI in relation to offers made after 30 June 2010.
For allocations made prior to 1 July 2010, performance Rights were tested against the
performance hurdle at six monthly intervals over a twelve month period commencing on
the third anniversary of the date of grant.
Figure 6: Time based vesting conditions (subject to meeting performance hurdle)
Performance period
Test Date
Exercise period
Year 0
Grant date
Year 1
Year 2
Year 3
Years 4 to 7
■■ Performance based
The performance hurdle for performance Rights issued under the lTI is relative Total
Shareholder Return (TSR).
TSR measures the return received by shareholders (capital returns, dividends and share
price movement) over a specific period relative to a peer group of companies. If there is
any change in the dividend payment timetable of a company in the peer group (including
Tabcorp), then the TSR performance of that company is adjusted to remove any artificial
distortion in the outcome. Tabcorp engages an external consultant to calculate Tabcorp’s
TSR relative to the peer group of companies.
The peer group used for assessing Tabcorp’s relative TSR is based upon the following
companies.
Basis
S&p/ASX 100 index ■■ property trusts;
Exclusions
■■ Infrastructure groups; and
■■ Mining companies
Represented by the S&p global Industry Classification Standards of
Oil & gas, Metals & Mining, Transportation Infrastructure and Real
Estate.
The composition of the peer group may change as a result of specific external events,
such as mergers and acquisitions, capital returns, delistings and capital reconstruction.
The Board Remuneration Committee has agreed guidelines for adjusting the peer group
following such events, and has the discretion to determine any adjustment to the peer
group of companies.
The table below sets out the percentage of performance Rights that will vest depending on
Tabcorp’s relative TSR ranking as at the applicable test dates:
Tabcorp’s relative TSR ranking
Below 50th percentile
At 50th percentile
Above 50th and below 75th percentile
At or above 75th percentile
Percentage of Performance Rights that will vest
0%
50%
pro-rata between 50% (at 50th percentile) and
100% (at 75th percentile)
100%
For grants prior to 1 July 2010, if Tabcorp’s relative TSR ranking on a test date is higher than
that measured on a previous test date(s), then a further number of performance Rights may
vest to senior management in addition to those that may have already vested. Alternatively,
if Tabcorp’s relative TSR ranking is lower than as measured on a previous test date(s), then
no further performance Rights will vest. The maximum number of performance Rights that
will have vested to senior management will accord with the highest measure of Tabcorp’s
relative TSR ranking on test dates during the test period.
This testing schedule and vesting criteria are common practice adopted by the companies in
the S&p/ASX100 index, which is consistent with Tabcorp’s remuneration philosophy (refer to
section 3) and senior management remuneration framework (refer to section 6.1).
upon exercise of performance Rights, senior management will be allocated an equivalent
number of fully paid ordinary shares in the Company, and will receive full voting and
dividend rights corresponding to the rights of all other holders of ordinary shares.
CONCISE ANNuAl REpORT 2011
37
Remuneration report (audited) (continued)
6.3.2.4 Lapsing conditions
performance Rights that have not vested after testing will lapse.
performance Rights which have vested will be exercisable by senior management until the
seventh anniversary after the grant date. Following the seventh anniversary, any vested
performance Rights which have not been exercised will lapse.
6.3.2.5 Cessation of employment
All unvested performance Rights will lapse immediately upon cessation of employment.
however, the Board Remuneration Committee has discretion in special circumstances to
determine the number of performance Rights (and performance Options, where applicable)
retained and the terms applicable. Special circumstances include events such as retirement,
redundancy, death and permanent disability.
Vested performance Rights are exercisable by the individual for a period of 90 days after
termination of employment, following which they will lapse.
6.3.2.6 Accounting treatment
performance Rights issued under the lTI are expensed on a straight line basis over a three
year period, commencing from the grant date (or four year period for grants prior to
1 July 2010). under Accounting Standards, Tabcorp is required to recognise an expense
irrespective of whether the performance Right ultimately vests to the senior manager.
A reversal of the expense is only recognised in the event the performance Rights lapse due
to cessation of employment within the three or four year period.
The ‘Remuneration of KMp’ tables at section 7.1 (Figures 12B & 12D) reflect the accounting
expense recognised in the relevant financial year, not the total fair value of performance
Rights allocated to the executive during the year, which is disclosed in Figure 13E.
6.3.2.7 Former LTI plan
prior to the implementation of the current lTI plan, which was approved by shareholders at
the Company’s Annual general Meeting in 2003, senior managers were provided with the
opportunity to participate in the Tabcorp Senior Executive long Term Incentive plan. This plan
ceased being offered to senior managers in 2003, however during the financial year to 30 June
2011 Mr Mohan Jesudason, a KMp during the year, continued to participate in this plan.
This former lTI plan enabled senior managers to receive a loan to acquire Tabcorp shares.
The dividends received from the shares acquired under the plan were applied towards
paying interest on the outstanding loan balance, a cash payment to cover the personal
income tax liability associated with the dividend, and loan principal repayments. The loan
was required to be repaid upon cessation of employment.
As a result of the Demerger, the former lTI plan was collapsed prior to the implementation
of the Demerger.
38
TABCORp hOlDINgS lIMITED
6.3.2.8 LTI performance
In the 2011 financial year, there were five scheduled test dates for past allocations under the
lTI. The performance based criteria for vesting was achieved during the second test for the
29 November 2007 grant, however, was not achieved for any other allocations. Therefore
performance Rights only vested for the 29 November 2007 grant.
6.3.2.9
Treatment of LTI under the Demerger (other than the former Managing Director
and Chief Executive Officer)
As a result of the Demerger, the application of performance hurdles for unvested
performance Rights and performance Options would be distorted, as the relative TSR on
Tabcorp Shares would exclude (at lease in part) the value of Echo Shares and distributions
on such Shares during the testing period. As a consequence, the financial performance
of Tabcorp would not be fairly or accurately represented if the performance hurdles were
applied in these circumstances. Further, the value of a Tabcorp Share received upon the
exercise of a vested performance Right or performance Option would be diminished by the
value of an Echo Share.
Accordingly, the Board decided to accelerate the testing of relevant performance conditions
to the date on which the Scheme became effective on 3 June 2011 (the Effective Date). The
acceleration applied only to the pro rata portion of the unvested performance Rights that
was equal to the proportion of the standard vesting period of three years that had elapsed
at 3 June 2011.
The performance conditions tested remained unchanged, i.e. they were the same
performance conditions applying since the grant of the relevant performance Right or
performance Option, except only to the extent that the testing date is brought forward.
Any performance Rights or performance Options that did not vest upon testing lapsed.
Any performance Rights that did not qualify for testing on a pro rated basis were cancelled.
With respect to these cancelled performance Rights, Tabcorp paid the holder an amount
equal to 50% of their fair value as at their date of grant.
The fair value of all performance Rights and performance Options were fully expensed at
the date of accelerated testing or cancellation.
6.3.3. Appointment/retention incentives
6.3.3.1 Criteria for issue
Restricted Shares may be issued to senior managers as an incentive upon appointment
(either on joining Tabcorp or transfer to a new position internally) or for retention. These
are ordinary shares in the Company, and in order to act as a retention mechanism are
subject to time based restrictions of up to three years.
Additionally, senior managers may also be issued performance Rights (and performance Options
prior to 30 June 2007) upon appointment. These instruments are issued under the lTI and are
subject to the same performance hurdles and vesting conditions (refer section 6.3.2).
A combination of equity instruments such as Restricted Shares, subject to time based
restrictions, and performance Rights, subject to performance and time based hurdles, are
employed to attract, retain and compensate senior management for equity forfeited.
Appointment incentives that were provided in prior financial years that remained subject to
trading restrictions or vesting criteria are disclosed in sections 6.4.2.1 and 6.6.3.
As a result of the Demerger, the Board determined to waive the disposal restrictions and
forfeiture provisions in respect of the Restricted Shares issued pursuant to the Deferred
Share plan Rules.
6.3.3.2 Accounting treatment
The fair value of Restricted Shares is expensed as remuneration over the relevant restriction
period. At the date disposal restrictions and forfeiture provisions were waived, the fair
value of the Restricted Shares was fully expensed.
As performance Rights (and performance Options prior to 30 June 2007) are issued under
the lTI, they are expensed in the same manner as described in section 6.3.2.6.
6.3.4 Policy prohibiting hedging
participants in the incentive plans (STI and lTI) are restricted from hedging the value of
Restricted Shares and unvested performance Options and performance Rights, and must
not enter into a derivative arrangement in respect of the equity instruments granted under
these plans. Breaches of the restriction will result in equity instruments being forfeited by
the senior manager.
These prohibitions are included in Tabcorp’s Securities Trading policy, available from the
Corporate governance section of Tabcorp’s website at www.tabcorp.com.au and in the
terms and conditions of the incentive plans.
Equity instruments granted under the incentive plans can only be registered in the name of
the participant, are identified as non tradable on the share register, and cannot be traded or
transferred to another party until vested or until any trading restriction period has expired
(where applicable).
The Board at its discretion can request a senior manager to provide a statutory declaration
that the senior manager has complied with this policy. During the year, the Board did not
require any such declarations.
6.4
6.4.1
Executive director contract – Managing Director and Chief Executive
Officer
Current contract
David Attenborough commenced his new role as Managing Director and Chief Executive
Officer on 9 June 2011 after all conditions precedent to implement the Demerger were
satisfied or waived. In accordance with his employment contract, Mr Attenborough
receives fixed remuneration and the opportunity to receive variable remuneration through
short term and long term incentive arrangements. Mr Attenborough’s contract is for a
continuing term capable of being terminated on 6 months’ notice by Mr Attenborough and
12 months’ notice by Tabcorp. The contract does not require any termination payments,
other than payment in lieu of notice (if applicable).
6.4.1.1 Fixed remuneration
Mr Attenborough receives fixed remuneration (inclusive of superannuation) of $900,000
per annum.
6.4.1.2 Short term incentive
Mr Attenborough is eligible to receive a short term performance award based on his
individual performance and the Company’s performance over the annual performance
review period. Mr Attenborough’s short term performance award is equivalent to $600,000
if targets are met, and is delivered in cash, with the opportunity for Mr Attenborough to
voluntarily sacrifice part of the award into additional superannuation contributions. This
short term incentive is similar to that which applies to the STI in section 6.3.1, other than as
set out above.
6.4.1.3 Long term incentive
The Company intends that the long term incentive component of Mr Attenborough’s
remuneration package will involve annual grants of performance Rights or Options, which
would be subject to performance hurdles, with the grant of such performance Rights or
Options being subject to obtaining any necessary shareholder approvals at the relevant
time. This long term incentive is similar to that which applies to the lTI in section 6.3.2,
other than as set out in this section.
The performance Rights or Options granted will be tested on the test date to determine
whether the applicable performance hurdles have been met. The performance hurdle is
relative TSR, which is based on the Company’s TSR ranking compared to a peer group of
companies measured over the period from the effective date to the applicable test date.
upon termination of employment (other than at the discretion of the Board in special
circumstances such as, but not limited to, death and permanent disablement), all
unvested performance Rights or Options will lapse immediately. In all circumstances
of termination of employment (other than for serious misconduct, in which case all
vested (but not exercised) and all unvested performance Rights or Options will lapse
CONCISE ANNuAl REpORT 2011
39
Remuneration report (audited) (continued)
immediately), all performance Rights or Options that have vested at the date of termination
will be exercisable by Mr Attenborough for a period of 90 days following termination of
employment, following which they will lapse.
6.4.1.4 Other benefits
Mr Attenborough’s contract includes benefits comprising of:
Living away from home expenses – Mr Attenborough receives reimbursement of up to $3,500
per week for living away from home expenses (such as accommodation) until 9 April 2014;
Home leave – Mr Attenborough receives 4 return business class tickets for travel between
Australia and South Africa each year until 9 April 2014.
FBT – Tabcorp bears the cost of any fringe benefits tax payable in respect of housing and
location assistance until 9 April 2014.
These benefits are consistent with Mr Attenborough’s previous contract.
6.4.2 Previous contracts
6.4.2.1 Appointment incentive
Mr Attenborough was provided an appointment incentive in the prior year upon
commencement with the Company as Managing Director, Wagering of approximately $500,000
comprising cash of $166,667 and Restricted Shares of approximately $333,333 as follows:
Instrument type Number
Trading restrictions and vesting conditions
Restricted Shares
47,483
Subject to trading restrictions lifting in 2 tranches on
9 April 2011 and 9 April 2012
As a result of the Demerger, the Board determined to waive the disposal restrictions and
forfeiture provisions in respect of the Restricted Shares issued pursuant to the Deferred
Share plan Rules.
6.5
6.5.1
Executive director contract – former Managing Director and Chief
Executive Officer
Current contract
Elmer Funke Kupper was Managing Director and Chief Executive Officer until 8 June 2011. In
accordance with an employment contract, Mr Funke Kupper received fixed remuneration
and the opportunity to receive variable remuneration through short term and long term
incentive arrangements. Mr Funke Kupper’s contract was for a continuing term capable
of being terminated on 6 months’ notice by Mr Funke Kupper and 12 months’ notice by
Tabcorp. The contract did not require any termination payments, other than payment in
lieu of notice (if applicable).
40
TABCORp hOlDINgS lIMITED
6.5.1.1 Fixed remuneration
Mr Funke Kupper received fixed remuneration (inclusive of superannuation) of $1,500,000
per annum.
6.5.1.2 Short term incentive
Mr Funke Kupper was eligible to receive a short term performance award based on his
individual performance and the Company’s performance over the annual performance
review period. Mr Funke Kupper’s short term performance award was equivalent to
$1,500,000 if targets were met, and was delivered in cash, with the opportunity for Mr
Funke Kupper to voluntarily sacrifice part of the award into additional superannuation
contributions. This short term incentive was similar to that which applies to the STI in
section 6.3.1, other than as set out above.
Following an assessment by the Board of Mr Funke Kupper’s performance for the 2011
financial year, a short term performance award of $2,475,000 was made. The award
reflected the Board’s assessment that Mr Funke Kupper’s leadership and performance
exceeded targeted outcomes with regard to a range of financial and non-financial goals,
including but not exclusive to, positioning the business for the execution of the demerger,
the award of the Victorian Keno licence and the submission for the Victorian Wagering and
Betting licence.
6.5.1.3 Long term incentive
The long term incentive component of Mr Funke Kupper’s remuneration package involved
annual grants of performance Rights, which were subject to performance hurdles, with the
grant of such performance Rights subject to obtaining any necessary shareholder approvals
at the relevant time. This long term incentive was similar to that which applies to the lTI in
section 6.3.2, other than as set out in this section.
Since being appointed as Managing Director and Chief Executive Officer, Mr Funke Kupper
received four grants of performance Rights under the Tabcorp long Term performance plan,
which were approved by Shareholders at the Company’s 2007, 2008, 2009 and 2010 Annual
general Meeting. These were as follows:
Effective Date
Number Test dates
Expiry date
13 July 2007
100,000 30 June 2011 and 30 June 2012
26 November 2014
15 September 2008
281,425
15 September 2011, 15 March 2012
and 15 September 2012
15 September 2015
17 June 2009
326,086 17 June 2012, 17 December 2012
17 June 2016
and 17 June 2013
14 September 2010
413,223
14 September 2013
14 September 2017
The performance Rights granted were to be tested on each test date to determine whether
the applicable performance hurdles were met. however, due to the Demerger, no stated
test dates occurred and the treatment of unvested performance Rights is detailed in Section
6.5.1.4. The performance hurdle was relative TSR, which was based on the Company’s
TSR ranking compared to a peer group of companies measured over the period from the
effective date to the applicable test date.
Further information relating to these performance Rights is available in the notices of
meeting for the Company’s 2007, 2008, 2009 and 2010 Annual general Meetings.
6.5.1.4 Treatment under the Demerger – Performance Rights held by Mr Funke Kupper
The Board determined that the 100,000 performance Rights granted to Mr Funke Kupper
in 2007 automatically lapsed upon him ceasing employment, in accordance with Mr Funke
Kupper’s contract.
In relation to the performance Rights granted in 2008, 2009 and 2010, upon Mr Funke
Kupper ceasing employment a pro-rata portion remained in existence, with the balance of
those grants automatically lapsing, in accordance with Mr Funke Kupper’s contract and the
terms and conditions applicable to those performance Rights. The pro-rata portion of each
of those grants that remained in existence were determined on the basis of the period of
employment from the relevant grant date to the cessation date. The performance Rights
that remained in existence are referred to collectively as the Pro-rated Rights.
No payment was made to Mr Funke Kupper in respect of any of the performance Rights that
lapsed.
The Board determined that, in relation to the pro-rated Rights, it would exercise its
discretion under Mr Funke Kupper’s contract and under the terms and conditions of the
performance Rights to allow potential vesting of those performance Rights immediately
following cessation of his employment.
Where performance Rights have lapsed, the remuneration previously recognised in relation
to these performance Rights was reversed on cessation of employment. The fair value of all
other performance Rights was fully expensed on cessation of employment.
6.6 Executive Contracts - KMP
6.6.1 Current contracts
The table below contains details of the contracts of the executives who are KMps, excluding
the Managing Director and Chief Executive Officer. The current contracts do not provide for
any termination payments, other than payment in lieu of notice.
Name
Current
Mohan Jesudason
Kerry Willcock
Future
Damien Johnston (i)
Contract
duration
Open ended
Open ended
Position
Managing Director,
gaming & group
Marketing
Executive general
Manager, Corporate,
legal and Regulatory
Chief Financial
Officer
Open ended
Minimum notice period
(months)
Executive
Tabcorp
6
6
6
9
12
9
(i) Commenced as a KMp on 12 July 2011 following the receipt of all necessary regulatory approvals.
6.6.2 Additional Compensation
Managing Director, Gaming & Group Marketing
pro-rated Rights that were allowed to vest in this way were the lesser of 340,245 (being one
third of the total performance Rights granted in 2008, 2009 and 2010) and the number
determined according to the extent that the applicable performance conditions were met at
the Effective Date of the Demerger.
Mr Jesudason’s contract includes additional compensation that requires him to be an
employee of Tabcorp on 30 September 2012 and satisfy certain business outcomes. The
maximum compensation payable is $1,000,000. It was put in place in 2010 and any payment
will be made during the 30 June 2013 financial year.
Vesting was determined as if the testing date for measuring the performance hurdles
applicable to each grant was the date the Scheme became effective (3 June 2011). If any of
the pro-rated Rights did not vest in this way, they did not lapse at that time but remained
on foot and will be tested on the testing dates originally provided for under their terms of
grant. however, the performance hurdles applying in respect of those performance Rights
that remain on foot will not be adjusted to reflect the fact that following the Demerger, the
total shareholder return on Tabcorp Shares will exclude (at least in part) the value of Echo
Shares and any distributions on such shares during the testing period.
Chief Financial Officer
Mr Johnston’s contract includes additional compensation that requires him to be an
employee of Tabcorp on 30 June 2012. The additional compensation of $182,000 was put in
place in 2008 and will be paid during the 30 June 2013 financial year.
Executive General Manager – Corporate, Legal and Regulatory
Ms Willcock’s contract includes additional compensation that requires her to be an
employee of Tabcorp on 15 December 2012 and satisfy certain business outcomes.
CONCISE ANNuAl REpORT 2011
41
Remuneration report (audited) (continued)
The additional compensation of $525,000 was put in place in 2010 and will be paid during
the 30 June 2013 financial year.
6.6.3 Previous contracts
The table below contains details of the contracts of the executives who were KMps. These
contracts did not provide for any termination payments, other than payment in lieu of
notice.
Minimum notice period
(months)
Other benefits - Chief Executive Officer, Casinos
Mr Mullin’s contract included benefits comprising of living away from home expenses and
relocation costs for a period of four years.
6.7 Performance of Tabcorp and shareholder wealth
Tabcorp’s annual financial performance (on a pre impairment basis) and indicators of
shareholder wealth over the five year period ending 30 June 2011 are highlighted in the
graphs below.
Figure 7: Net profit after tax (i)
Figure 8: EPS (basic) – pre impairment (i)
Name
Former
larry Mullin (i)
Matt Bekier (i)
louise Marshall (ii)
Position
Contract
duration
Executive
Tabcorp
560
540
4 years
Chief Executive
Officer, Casinos
Chief Financial Officer Open ended
Open ended
Executive general
Manager, human
Resources
6
3
3
9
9
9
)
m
$
(
x
a
t
r
e
t
f
a
t
f
o
r
p
t
e
N
520
500
480
460
440
420
)
m
$
(
x
a
t
r
e
t
f
a
t
f
o
r
p
t
e
N
560
540
520
500
480
543.0
543.0
541.5
541.5
521.7
521.7
469.5
469.5
452.6
460
452.6
440
420
)
s
t
n
e
c
(
e
r
a
h
s
r
e
p
s
g
n
n
r
a
E
i
120
120
)
s
t
n
e
c
(
e
r
a
h
s
r
e
p
s
g
n
n
r
a
E
i
100
80
60
40
20
0
60
40
20
0
100
86.2
80
103.4
86.2
103.4
93.2
93.2
77.1
80.7
77.1
80.7
(i) Ceased employment and as a KMp on 8 June 2011.
(ii) Ceased as a KMp on 8 June 2011.
Appointment Incentives - Chief Executive Officer, Casinos
Mr Mullin was provided an appointment incentive during the year ended 30 June 2009
of approximately $1,500,000 comprising cash of $900,000 and Restricted Shares of
approximately $600,000 as follows:
Instrument type
Restricted Shares
Number
90,931
Trading restrictions and vesting conditions
Subject to trading restrictions lifting in 3 tranches on
2 February 2010, 2011 and 2012
As a result of the Demerger, the Board determined to waive the disposal restrictions and
forfeiture provisions in respect of the Tabcorp Shares issued pursuant to the Deferred Share
plan Rules.
Out performance incentive - Chief Executive Officer, Casinos
Mr Mullin’s contract included an Out performance Incentive (OpI), which would have been
payable if certain earnings threshold results for the Casinos Division were met for the
30 June 2012 financial year. The maximum OpI payable would have been $2,700,000, and
any payment was to be made following the release of the 30 June 2012 financial results.
however, as a result of the Demerger, Mr Mullin was issued a new employment contract
with Echo and therefore, the Tabcorp OpI no longer applies.
42
TABCORp hOlDINgS lIMITED
400
400
06/07
06/07
07/08
07/08
08/09
08/09
09/10
09/10
10/11
10/11
06/07
06/07
07/08
07/08
08/09
08/09
09/10
09/10
10/11
10/11
Figure 9: Full year dividend in respect
of each financial year (includes,
interim final and special dividends) (ii)
Figure 10: Company share price at the end
of each financial year (iii)
100
90
80
70
60
50
40
30
20
10
0
d
e
k
n
a
r
f
y
l
l
u
f
e
r
a
h
s
r
e
p
s
t
n
e
C
94.0
94.0
94.0
65.0
65.0
55.0
55.0
43.0
43.0
100
94.0
90
d
e
k
n
a
r
f
y
l
l
u
f
e
r
a
h
s
r
e
p
s
t
n
e
C
80
70
60
50
40
30
20
10
0
06/07
06/07
07/08
07/08
08/09
08/09
09/10
09/10
10/11
10/11
18
16
14
12
10
8
6
4
2
0
)
$
(
e
c
i
r
p
e
r
a
h
S
17.15
18
17.15
16
14
12
10
8
6
4
2
)
$
(
e
c
i
r
p
e
r
a
h
S
9.81
9.81
7.16
7.16
6.33
6.33
4.11
4.11
3.29
3.29
0
06/07
06/07
07/08
07/08
08/09
08/09
09/10
09/10
10/11
10/11
(i) After income tax before both impairment and gain on demerger of Echo Entertainment group, net of tax.
(ii) The 07/08 year includes the special dividend declared in August 2008 of 47.0 cents per share. This dividend was
declared as a substitute for the final dividend for the 07/08 year.
(iii) The closing share price for 07/08 includes the effect of the Victorian government’s announcement in April 2008
regarding its decision to change the Victorian gambling industry. The closing share price for 10/11 is after the
Demerger. The Echo closing share price for 10/11 is also shown.
Figure 11 shows Tabcorp’s TSR performance relative to the peer group of companies at test
dates during the test periods for lTI allocations.
Figure 11: Relative TSR ranking
7. Remuneration tables
7.1 Remuneration of KMP (including five highest paid executives,
in accordance with the Corporations Act 2001)
Figure 12A: KMP remuneration for the year ended 30 June 2011 – Non Executive Directors
TSR result at test date
KMP
Current
paula Dwyer
Jane hemstritch
Zygmunt Switkowski
Former
John Story (ii)
John O’Neill (ii)
Brett paton (ii)
Total
Short term
Salary & fees (i)
$
Post employment
Superannuation
$
297,500
200,379
210,076
401,591
176,136
216,136
1,501,818
26,775
18,034
18,907
36,143
15,852
19,452
135,163
Total
$
324,275
218,413
228,983
437,734
191,988
235,588
1,636,981
(i) Comprises salary and fees.
(ii) Ceased as a KMp on 8 June 2011 as a result of the Demerger to join Echo.
Grant date
1 Dec 2003
7 Sep 2004
3 Mar 2005
7 Sep 2005
3 Mar 2006
17 Nov 2006
17 Nov 2006
29 Nov 2007
15 Sep 2008
23 Oct 2008
17 Jun 2009
19 Oct 2009
14 Sep 2010
25 Oct 2010
Expiry date per
original grant
1 Dec 2010
7 Sep 2011
3 Mar 2012
7 Sep 2012
3 Mar 2013
17 Nov 2013
17 Nov 2013
29 Nov 2014
15 Sep 2015
15 Sep 2015
17 Jun 2016
17 Jun 2016
14 Sep 2017
14 Sep 2017
Accelerated
expiry date (i)
N/A
N/A
N/A
N/A
N/A
N/A
9 June 2011
9 June 2011
9 June 2011
N/A
9 June 2011
N/A
9 June 2011
N/A
(i)
Refer Section 6.3.2.9 for details.
First
44.1
17.3
32.9
16.5
39.7
16.7
16.7
40.9
N/A
N/A (iii)
N/A
N/A (iii)
N/A
N/A (iii)
Second
33.3
12.2
31.5
21.1
21.5
20.3
27.7
50.7
N/A
N/A (iii)
N/A
N/A (iii)
N/A
N/A (iii)
Third
31.0
21.4
18.9
24.3
37.3
27.7
N/A
N/A
N/A
N/A (iii)
N/A
N/A (iii)
N/A
N/A (iii)
Accelerated
test date
3 June 2011 (ii)
N/A
N/A
N/A
N/A
N/A
N/A
42.3
50.7
78.2
78.2
68.1
68.1
95.8
95.8
(ii)
As outlined in Section 6.3.2.9, the accelerated testing of performance conditions applied to all performance
Rights and performance Options retained by holders who are employees and former employees, other than the
performance Rights retained by the former Managing Director and Chief Executive Officer as outlined in Section
6.5.1.4.
(iii) In relation to the former Managing Director and Chief Executive Officer as outlined in Section 6.5.1.4, there are
232,136 performance Rights left on foot and will continue to be tested at the respective dates. The performance
hurdles applying in respect of those performance Rights that remain on foot will not be adjusted to reflect the
fact that following the Demerger, the TSR on Tabcorp Shares will exclude (at least in part) the value of Echo Shares
and distributions on such shares during the testing period.
CONCISE ANNuAl REpORT 2011
43
Remuneration report (audited) (continued)
Figure 12B: KMP remuneration for the year ended 30 June 2011 – Executives (including five highest paid executives)
Short term
Long
term
Post
Employment
Charge for share based
allocations(iv)
Accelerated Charge for
Share based payments (v)
Non-
monetary
benefits (ii)
$
Bonus
$
Other (iii)
$
Long
service
leave
$
Super-
annuation
$
Total
excluding
charge for
share based
allocations
$
Performance
Options &
Rights
$
Restricted
Shares
$
Performance
Options &
Rights
$
Restricted
shares &
former LTI
loans
$
Performance
related (vi)
%
Termination
benefits
$
Total
$
Salary &
fees (i)
$
717,685
470,000
10,881
168,435
2,040
15,199
1,384,240
22,109
201,387
66,326
69,444
1,743,506
638,249
514,436
67,811
475,000
350,000
23,868
1,386,938 2,475,000
13,322 300,000
-
-
-
-
-
-
41,863
26,556
38,422
15,199
15,199
1,483,633
906,191
351,204
244,314
921
131,022
-
(58,106)
15,199
3,819,031
1,330,928
-
-
-
-
555,022
394,171
422,584
-
2,812,443
1,544,676
-
-
131,022
28%
29%
38%
18%
-
-
-
-
(294,357)
- 4,855,602
78% 3,000,000
1,272,356
728,771
379,651
1,268,182
587,121
253,636
5,705,897 5,902,807
276,311
-
-
281,054
30,779
-
300,514 780,268
2,797
17,399
3,972
74,943
-
15,199
14,278
91,194
3,100,700
1,379,269
651,537
12,855,623
182,292
417,120
107,512
2,655,479
119,508
-
-
320,895
500,000
661,991
253,425
2,136,578
44,533
3,947,033
- 2,458,380
1,012,474
-
536,561 18,505,136
37%
41%
36%
-
-
337,500
3,337,500
KMP
Current Executive Director
David
Attenborough (vii) (viii)
Current Executives
Mohan Jesudason
Kerry Willcock
Future Executive
Damien Johnston (ix)
Former Executive Director
Elmer Funke
Kupper (x)
Former Executives
larry Mullin (vii) (xi) (xii)
Matt Bekier (xii)
louise Marshall (xiii)
Total
(i) Comprises salary, salary sacrificed benefits (including superannuation, motor vehicle novated leases and school fees) and annual leave expense.
(ii) Comprises the cost to the Company for providing low interest loan to acquire shares in the Company pursuant to issues made under a previous employee share plan, car parking, accommodation, airfares and travel costs, where applicable.
(iii) Comprises cash appointment incentives, relocation expenses, living away from home benefits and retention payments, where applicable.
(iv) Represents the fair value of share based payments expensed by the Company, which includes amounts expensed on cessation of employment where equity instruments are retained, and reversal of previously recognised remuneration on
cessation of employment where equity instruments lapse. Value only accrues to the KMp when conditions have been met.
(v) As a result of the Demerger, the remaining fair value of share based payments not already recognised was expensed where the date of testing was accelerated, the equity instruments were cancelled or disposal restrictions and forfeiture
provisions were waived. The balance includes the reversal of previously recognised remuneration where equity instruments lapse on cessation of employment resulting from the Demerger.
(vi) Represents the sum of bonus, performance Options and performance Rights (excluding accelerated charge) as a percentage of total remuneration, excluding termination payments.
(vii) Share based allocations include Restricted Shares that were granted as appointment incentives.
(viii) Commenced employment on 9 April 2010, and as a KMp on 29 July 2010 following the receipt of all necessary regulatory approvals. Total remuneration for the period whilst a KMp was $1,620,485.
(ix) Commenced in role on 9 June 2011. Salary & fees reflects increase in annual leave accrual due to new salary level. Commenced as a KMp on 12 July 2011 following the receipt of all necessary regulatory approvals. Total remuneration for the
period whilst a KMp was nil.
(x) Ceased employment and as a KMp on 8 June 2011. In addition to the amounts disclosed above, payment of annual leave on cessation amounted to $188,335.
(xi) Received cash in lieu of superannuation, due to being a senior executive temporary resident of Australia. These amounts are disclosed under salary and fees.
(xii) Ceased employment and as a KMp on 8 June 2011 as a result of the Demerger to join Echo.
(xiii) Ceased as a KMp on 8 June 2011 as a result of the Demerger. Termination benefits will be paid during the year ended 30 June 2012.
44
TABCORp hOlDINgS lIMITED
The amounts that appear under the heading ‘charge for share based allocations’ are the
amounts required under the Accounting Standards to be expensed by the Company in
respect of the allocation of long term incentives and Restricted Shares to KMp. Each year,
the Board may decide to allocate long term incentives to executives. Currently, these long
term incentives are allocated in the form of performance Rights, which are expensed by
the Company over the three to four year vesting period. Figures 12B and 12D represent the
expenses incurred during the year in respect of current and past incentive allocations.
These amounts are therefore not amounts actually received by executives during the year.
Whether executives receive any value from the allocation of long term incentives in the
future will depend on the performance of the Company relative to a peer group of listed
companies. The mechanism which determines whether or not long term incentives vest in
the future is described in Sections 6.3.2 and 6.4.1.3.
The amounts that appear under the heading ‘Accelerated Charge for Share Based payments’
are the amount required under the accounting standards to be expensed by the Company,
in respect of the allocation of long Term Incentives and Restricted Shares to KMp, resulting
from the collapsing of the Company’s Employee Share Schemes prior to the implementation
of the Demerger. These amounts are therefore not amounts actually received by executives
during the year. The value of equity instruments exercised and lapsed during the year are
disclosed in Figure 13E.
Figure 12C: KMP remuneration for the year ended 30 June 2010 – Non Executive Directors
KMP
Current
John Story
paula Dwyer
Jane hemstritch
John O’Neill
Brett paton
Zygmunt Switkowski
Former
Anthony hodgson (ii)
Total
Short term
Salary & fees (i)
$
Post employment
Superannuation
$
410,500
241,500
175,671
181,500
173,171
198,167
36,945
21,735
15,810
16,335
15,585
17,835
Total
$
447,445
263,235
191,481
197,835
188,756
216,002
67,500
1,448,009
6,075
130,320
73,575
1,578,329
(i) Comprises salary and fees.
(ii) Retired at the Company’s Annual general Meeting on 19 October 2009.
CONCISE ANNuAl REpORT 2011
45
Remuneration report (audited) (continued)
Figure 12D: KMP remuneration for the year ended 30 June 2010 – Executives
Short term
Long
term
Post
employ-
ment
Charge for share based
allocations (iv)
Salary &
fees (i)
$
Bonus
$
Non-
monetary
benefits (ii)
$
Other (iii)
$
Long
service
leave
$
Super-
annuation
$
Total
excluding
charge for
share based
allocations
$
Performance
Options &
Rights
$
Restricted
Shares
$
Performance
related (v)
%
Termination
benefits
$
Total
$
1,549,319
1,125,000
-
-
17,879
14,461
2,706,659
909,749
-
3,616,408
1,428,172
747,237
613,076
476,372
366,677
800,000
375,000
312,500
210,000
150,000
666,467
-
576
-
-
292,763
-
-
-
-
4,903
8,991
29,085
13,847
3,128
-
14,461
14,461
14,461
14,461
3,192,305
1,145,689
969,698
714,680
534,266
62,500
353,658
295,936
202,955
62,741
283,250
-
-
-
-
3,538,055
1,499,347
1,265,634
917,635
597,007
167,719
110,000
-
255,859
415
3,615
537,608
-
62,500
600,108
371,049
5,719,621
-
3,082,500
578
667,621
52,994
601,616
(14,277)
63,971
7,231
83,151
417,575
10,218,480
(351,145)
1,536,394
-
345,750
66,430
12,100,624
56%
24%
49%
48%
45%
36%
18%
0%
-
-
-
-
-
-
-
-
-
KMP
Current Executive Director
Elmer Funke Kupper (vi)
Current Executives
larry Mullin (vi)(vii)
Matt Bekier
Mohan Jesudason
Kerry Willcock
louise Marshall
Future Executive
David Attenborough (vi)(viii)
Former Executive
Robert Nason (ix)
Total
(i) Comprises salary, salary sacrificed benefits (including superannuation, motor vehicle novated leases and share purchases) and annual leave expense.
(ii) Comprises the cost to the Company for providing low interest loan to acquire shares in the Company pursuant to issues made under a previous employee share plan, car parking, accommodation, airfares and travel costs, where applicable.
(iii) Comprises cash appointment incentives, relocation expenses, living away from home benefits and mortgage interest subsidy payments, where applicable.
(iv) Represents the fair value of share based payments expensed by the Company, which includes amounts expensed on cessation of employment where equity instruments are retained, and reversal of previously recognised remuneration on
cessation of employment where equity instruments lapse. Value only accrues to the KMp when conditions have been met.
(v) Represents the sum of bonus, performance Options and performance Rights as a percentage of total remuneration, excluding termination payments.
(vi) Share based allocations include Restricted Shares that were granted as appointment incentives.
(vii) Received cash in lieu of superannuation, due to being a senior executive temporary resident of Australia. These amounts are disclosed under salary and fees.
(viii) Commenced employment on 9 April 2010, and as a KMp on 29 July 2010 following the receipt of all necessary regulatory approvals. Total remuneration for the period whilst a KMp was nil.
(ix) Ceased employment and as a KMp on 31 December 2009. In addition to the amounts disclosed above, payment of annual leave on cessation amounted to $96,378.
46
TABCORp hOlDINgS lIMITED
7.2 Other remuneration tables
Figure 13A: Short term incentive (STI) achieved
For the year ended 30 June 2011
KMP
Current
David Attenborough
Mohan Jesudason
Kerry Willcock
Future
Damien Johnston
Former
Elmer Funke Kupper
larry Mullin
Matt Bekier
louise Marshall
Actual STI
payment
as a % of
maximum
STI (i)
Actual STI
payment
as a % of
target STI
STI not
achieved
as a % of
target STI
Actual STI
payment $
470,000
475,000
350,000
45%
49%
59%
23,868
58%
2,475,000
1,268,182
587,121
253,636
73%
44%
53%
53%
101%
110%
133%
131%
165%
100%
120%
120%
-
-
-
-
-
-
-
-
(i) Maximum STI for KMps may vary, as it is subject to Board discretion.
Figure 13B: Terms and conditions of Performance Rights granted during the year
Grant date
For the year ended 30 June 2011:
14 September 2010 (i)
25 October 2010 (i)
Fair value at
grant date
$
3.63
4.50
For the year ended 30 June 2010:
19 October 2009 (iii)
3.92
Exercise
price
$
First
exercise
date
Last exercise/
expiry date per
original grant
Accelerated
exercise/
expiry date (ii)
-
-
-
14 September
2013
14 September
2013
14 September
2017
14 September
2017
9 June 2011
9 June 2011
17 June 2012
17 June 2016
N/A (iii)
(i) Terms and conditions of the performance Rights are the same. grant date differs due to performance Rights
granted to the former Managing Director and Chief Executive Officer which required shareholder approval at the
AgM. Fair value is determined at grant date.
(ii) Refer Section 6.3.2.9 and 6.5.1.4 for details.
(iii) Allocation to the former Managing Director and Chief Executive Officer. unvested performance Rights remain on
foot per original grant conditions. Refer Section 6.5.1.4 for details.
Figure 13C: Performance Rights granted during the year
For the year ended 30 June 2011
KMP
Current
David Attenborough
Mohan Jesudason
Kerry Willcock
Former
Elmer Funke Kupper
larry Mullin
Matt Bekier
louise Marshall
Total
For the year ended 30 June 2010
KMP
Current
Elmer Funke Kupper
larry Mullin
Matt Bekier
Mohan Jesudason
Kerry Willcock
louise Marshall
Future
David Attenborough
Former
Robert Nason
Total
Rights granted
14 September 2010
Number
Rights granted
25 October 2010
Number
24,362
95,654
68,871
-
137,741
114,784
55,096
496,508
-
-
-
413,223
-
-
-
413,223
Rights granted
19 October 2009
Number
326,086
-
-
-
-
-
-
-
326,086
CONCISE ANNuAl REpORT 2011
47
Remuneration report (audited) (continued)
Figure 13D: Performance Options and Performance Rights vested and exercised during the year
For the years ended 30 June 2011 and 30 June 2010
KMP
Current
David Attenborough
Mohan Jesudason
Kerry Willcock
Future
Damien Johnston (i)
Former
Elmer Funke Kupper (ii)
larry Mullin (iii)
Matt Bekier (iii)
louise Marshall (iii)
Total
During the year ended 30 June 2011
Vested Number
Exercised
Number
Amount paid per
Performance Right
5,851
140,628
97,875
5,851
140,628
97,875
-
51,937
340,245
63,772
166,253
49,594
864,218
340,245
63,772
166,253
49,594
916,155
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(i) Commenced in role on 9 June 2011 and a KMp on 12 July 2011. No performance Options or performance Rights
vested after commencement date.
(ii) Vesting and exercise of performance Rights occurred after the individual ceased as a KMp.
(iii) Exercise of performance Rights occurred after the individual ceased as a KMp.
No performance Options and performance Rights vested or were exercised during the prior year.
Figure 13E: Value of Performance Options and Performance Rights granted as part of
remuneration (i)
KMP
Current
David Attenborough
Mohan Jesudason
Kerry Willcock
Future
Damien Johnston (v)
Former
Elmer Funke Kupper (vi)
larry Mullin (vi)
Matt Bekier (vi)
louise Marshall (vi)
Total
During the year ended 30 June 2011
Granted (i)
$
Exercised (ii)
$
Lapsed (iii)
$
As a % of
remuneration (iv)
%
88,434
347,224
250,002
43,707
1,050,491
734,103
-
222,366
162,154
-
387,969
-
1,859,504
500,000
416,666
199,998
3,661,828
2,541,630
476,377
1,241,910
370,467
6,846,654
4,204,413
36,524
211,245
19,486
4,856,188
5%
32%
41%
-
21%
17%
44%
36%
(i) Represents the value of performance Rights granted during the year, granted in arrears. For details on the
valuation of the performance Options and performance Rights, including models and assumptions used, refer to
Note 26 of the Tabcorp Financial Report.
(ii) Represents the value of performance Rights exercised whilst a KMp during the year. The value is calculated based
on the market value of Tabcorp shares at the date of exercise.
(iii) Represents the value of performance Rights as a result of not satisfying the performance conditions during the
year and at the accelerated test date for all holders other than Mr Funke Kupper. In relation to Mr Funke Kupper,
the value of the lapsed performance Rights are in relation to those that lapsed (a) upon cessation of employment
and (b) as a result of not satisfying the performance conditions during the year. The value is determined
assuming the performance conditions had been achieved, and is calculated based on the market value of Tabcorp
shares at the date of lapsing, less any exercise amount payable.
(iv) Represents the fair value of performance Options and performance Rights expensed during the year (including
accelerated charge) as a percentage of total remuneration, excluding termination payments. Total remuneration
includes share based payments.
(v) Commenced in role on 9 June 2011 and a KMp on 12 July 2011. No performance Options or performance Rights were
granted or lapsed after commencement date.
(vi) Exercise of performance Rights occurred after the individual ceased as a KMp.
48
TABCORp hOlDINgS lIMITED
Figure 13F: Modification to Performance Rights during the year
During the year to 30 June 2011 as a result of the Demerger, the testing of relevant performance conditions for a pro rata portion of outstanding unvested performance Rights (other than for
the former Managing Director and Chief Executive Officer) was accelerated to the date on which the Scheme became effective. The effective date was 3 June 2011. The modification to the
affected performance Rights occurred on that date.
The conditions affecting the vesting and exercise of the performance Rights prior to the alteration are outlined in section 6.3.2.3, and after the alteration are outlined in section 6.3.2.9.
The market price of the underlying instruments, being Tabcorp Shares, at the date of the alteration was $7.72.
The alteration, being the bringing forward of the test date, has made no difference to the total fair value of the performance Rights.
All of the modified performance Rights expired on 9 June 2011.
Details of the modification to performance Rights is outlined below:
29 November 2007
15 September 2008
17 June 2009
14 September 2010
Performance Rights – granted:
KMP
Current
David Attenborough
Mohan Jesudason
Kerry Willcock
Former
larry Mullin
Matt Bekier
louise Marshall
Total
Testing
brought forward
Number
Original
expiry date
Testing
brought forward
Number
Original
expiry date
Testing
brought forward
Number
Original expiry
date
Testing
brought forward
Number
N/A
17,276
11,662
N/A
20,156
N/A
49,094
N/A
29 Nov 2014
29 Nov 2014
N/A
29 Nov 2014
N/A
N/A
56,656
38,242
N/A
66,098
19,994
180,990
N/A
15 Sep 2015
15 Sep 2015
N/A
15 Sep 2015
15 Sep 2015
N/A
49,425
35,586
35,586
59,311
18,979
198,887
N/A
17 Jun 2016
17 Jun 2016
17 Jun 2016
17 Jun 2016
17 Jun 2016
5,851
22,974
16,541
33,082
27,569
13,233
119,250
Original
expiry date
14 Sep 2017
14 Sep 2017
14 Sep 2017
14 Sep 2017
14 Sep 2017
14 Sep 2017
Modifications to performance Rights for the former Managing Director and Chief Executive Officer are outlined in section 6.5.1.4, with original conditions outlined in section 6.5.1.3.
CONCISE ANNuAl REpORT 2011
49
Income statement
For the year ended 30 June 2011
Revenue
Other income
government taxes and levies
Commissions and fees
Employment costs
Depreciation and amortisation
property costs
Advertising and promotions
professional and contract services
Other expenses
Profit before income tax expense, net finance costs and impairment
Impairment
Finance income
Finance costs
Profit from continuing operations before income tax expense
Income tax expense
Profit/(loss) from continuing operations after income tax
Discontinued operations
profit from discontinued operations and net gain on demerger of Echo
Entertainment group, net of tax
Net profit after tax
Other comprehensive income
Change in fair value of cash flow hedges taken to equity
Recycling of discontinued cash flow hedges to income statement
Actuarial gain on defined benefit plan
Income tax (expense)/benefit on items of other comprehensive income
Other comprehensive income/(loss) for the period, net of income tax
Total comprehensive income for the period
Earnings per share:
From continuing operations
Basic earnings per share
Diluted earnings per share
From continuing operations before impairment
Basic earnings per share
Diluted earnings per share
Total attributable to shareholders of Tabcorp
Basic earnings per share
Diluted earnings per share
2011
$m
2,947.5
35.7
(887.5)
(977.5)
(163.4)
(124.3)
(38.5)
(30.9)
(13.2)
(185.4)
562.5
(358.0)
9.7
(144.1)
70.1
(126.5)
(56.4)
591.2
534.8
7.1
(40.5)
1.3
9.6
(22.5)
512.3
(8.5)
(8.5)
45.5
45.4
80.7
80.4
2010
$m
2,865.6
35.4
(876.2)
(952.6)
(153.3)
(114.5)
(37.4)
(33.0)
(21.4)
(178.0)
534.6
-
6.7
(153.6)
387.7
(112.0)
275.7
193.8
469.5
13.1
-
0.5
(4.0)
9.6
479.1
45.3
45.2
45.3
45.2
77.1
77.0
50
TABCORp hOlDINgS lIMITED
Balance sheet
As at 30 June 2011
Current assets
Cash and cash equivalents
Receivables
Inventories
Other
Total current assets
Non current assets
property, plant and equipment
Intangible assets - licences
Intangible assets - other
Other receivables
Derivative financial instruments
Other
Total non current assets
TOTAL ASSETS
Current liabilities
payables
Interest bearing liabilities
Current tax liabilities
provisions
Derivative financial instruments
Other
Total current liabilities
Non current liabilities
payables
Interest bearing liabilities
Deferred tax liabilities
provisions
Derivative financial instruments
Other
Total non current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Issued capital
Accumulated losses
Reserves
TOTAL EQUITY
Echo Entertainment group was
demerged in June 2011.
2011
$m
147.1
80.1
9.4
14.5
251.1
280.5
430.0
1,805.7
56.8
-
14.4
2,587.4
2,838.5
367.7
449.8
59.5
65.9
3.7
5.4
952.0
75.0
515.2
63.3
6.2
15.1
0.8
675.6
1,627.6
1,210.9
1,973.0
(91.9)
(670.2)
1,210.9
2010
$m
261.9
80.5
13.8
24.9
381.1
1,762.9
652.6
3,627.5
8.1
2.8
22.7
6,076.6
6,457.7
510.3
175.0
46.8
76.4
22.0
15.5
846.0
-
1,816.8
273.4
10.6
53.9
2.3
2,157.0
3,003.0
3,454.7
3,733.9
(310.0)
30.8
3,454.7
CONCISE ANNuAl REpORT 2011
51
Cash flow statement
For the year ended 30 June 2011
Cash flows from operating activities
Net cash receipts in the course of operations
payments to suppliers, service providers and employees
payment of government levies, betting taxes and gST
Interest revenue received
Finance costs paid
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
2011
$m
2010
$m
4,439.3
4,280.2
(2,357.2)
(2,213.6)
(1,075.2)
(1,038.0)
8.1
(159.2)
(197.7)
658.1
6.6
(155.0)
(179.0)
701.2
payment for property, plant and equipment and intangibles
(595.6)
(408.1)
proceeds from sale of property, plant and equipment and intangibles
loans advanced to customers
Net cash flows used in investing activities
Cash flows from financing activities
proceeds from issue of shares
payment of transaction costs for share issue
payment of transaction costs for capital reduction
payment of transaction costs for demerger
Net repayments of short term borrowings
proceeds from long term borrowings
Repayment of long term borrowings
Cash reduction through demerger of entities
Dividends paid
payments for on-market share buy back
proceeds from sale of treasury shares
loans advanced to related party
Net cash flows used in financing activities
Net decrease in cash held
Cash at beginning of year
Cash at end of year
2.1
(47.6)
2.7
(4.7)
(641.1)
(410.1)
427.7
(12.7)
(21.1)
(64.7)
(210.0)
1,090.0
(938.6)
(124.5)
(269.7)
(9.8)
1.6
-
(131.8)
(114.8)
261.9
147.1
-
-
-
-
(15.0)
-
-
-
(303.4)
(1.9)
0.7
(1.0)
(320.6)
(29.5)
291.4
261.9
52
TABCORp hOlDINgS lIMITED
The cash flow statement includes the cash flows of the Echo Entertainment group for the period up to the demerger date.
Statement of changes in equity
For the year ended 30 June 2011
Issued capital
Ordinary shares
$m
Treasury
shares
$m
Accumulated
losses
$m
Net unrealised
gains reserve
$m
Employee equity
benefit reserve
$m
Demerger
reserve
$m
Total equity
$m
2011
Balance at beginning of year
profit for the period
Other comprehensive income
Total comprehensive income for the period
Dividends paid
Dividend reinvestment plan
Echo Entertainment group demerger
distribution
Ordinary shares issued
Transaction costs for share issue and
capital reduction
Transfers
Restricted shares issued
Share based payments expense
payment on performance Rights
cancellation
Net outlay to purchase shares (i)
Disposal of shares
Balance at end of year
2010
Balance at beginning of year
profit for the period
Other comprehensive income
Total comprehensive income for the period
Dividends paid
Dividend reinvestment plan
Transfers
Restricted shares issued
Share based payments expense
Disposal of shares
Balance at end of year
3,737.6
(3.7)
-
-
-
-
47.9
(2,219.8)
427.7
(24.4)
12.8
-
-
-
(8.8)
-
1,973.0
-
-
-
-
-
-
-
-
-
(1.0)
3.1
-
-
1.6
-
3,674.9
(4.2)
-
-
-
-
60.0
2.7
-
-
-
3,737.6
-
-
-
-
-
-
(1.9)
1.5
0.9
(3.7)
(310.0)
534.8
0.9
535.7
(317.6)
-
-
-
-
-
-
-
-
-
-
(91.9)
(416.5)
469.5
0.4
469.9
(363.4)
-
-
-
-
-
(310.0)
23.1
-
(23.4)
(23.4)
-
-
-
-
-
-
-
-
-
-
-
(0.3)
13.9
-
9.2
9.2
-
-
-
-
-
-
23.1
(i) Net outlay for the purchase of Company shares for performance Rights exercised by certain executives in lieu of issuing new share capital.
7.7
-
-
-
-
-
-
-
-
(12.8)
-
6.6
(1.5)
-
-
-
8.7
-
-
-
-
-
(2.7)
-
1.7
-
7.7
-
-
-
-
-
-
(669.9)
-
-
-
-
-
-
-
-
(669.9)
-
-
-
-
-
-
-
-
-
-
-
3,454.7
534.8
(22.5)
512.3
(317.6)
47.9
(2,889.7)
427.7
(24.4)
-
(1.0)
9.7
(1.5)
(8.8)
1.6
1,210.9
3,276.8
469.5
9.6
479.1
(363.4)
60.0
-
(1.9)
3.2
0.9
3,454.7
CONCISE ANNuAl REpORT 2011
53
Notes to the concise financial statements
For the year ended 30 June 2011
1.
Accounting policies
3.
Segment information
This concise financial report has been prepared in accordance with the Corporations
Act 2001 and Accounting Standard AASB 1039 Concise Financial Reports. The financial
statements and specific disclosures required by AASB 1039 are an extract of, and have been
derived from the group’s full financial report for the financial year. Other information
included in the concise financial report is consistent with the group’s full financial report.
All amounts are presented in Australian Dollars.
A full description of the accounting policies adopted by the group is provided in the 2011
financial statements which form part of the full financial report.
The group’s operating segments have been determined based on the internal management
reporting structure and the nature of products and services provided by the group. They
reflect the business level at which financial information is provided to management for
decision making regarding resource allocation and performance assessment.
The group has four operating segments:
Wagering
Totalisator and fixed odds betting activities.
Media & International
National and international broadcasting of racing and
sporting events.
Victorian Gaming
Electronic gaming machine operations in licensed
hotels and clubs within Victoria.
2011
$m
2010
$m
Keno
Keno operations in licensed clubs and hotels within
Victoria, NSW and Queensland.
2 Dividends
Dividends declared and paid during the year on ordinary shares:
(a) Interim dividend for 2011 of 24.0 cents per share paid on 21 March
2011 (2010: 30.0 cents per share paid on 22 March 2010)
164.4
182.3
Media & International was created as a separate operating segment during the period.
previously Media & International was included in the Wagering operating segment. The
prior period has been restated accordingly.
(b) Final dividend for 2010 of 25.0 cents per share paid on 20 September
2010 (2009: 30.0 cents per share paid on 18 September 2009)
153.2
317.6
181.1
363.4
The Star City and Queensland Casino segments were demerged from the group effective
June 2011. Information about these discontinued segments is provided in note 33 to the
financial statements which form part of the full financial report.
Dividends declared after balance date
Since the end of the financial year, the directors declared the following
dividend:
Final dividend for 2011 - 19.0 cents per share (2010: 25.0 cents per share)
130.7
153.2
The financial effect of this dividend has not been brought to account in the financial
statements and will be recognised in subsequent financial reports (refer to note 4).
Dividends on ordinary shares are fully franked at a tax rate of 30%.
54
TABCORp hOlDINgS lIMITED
Wagering
$m
Media &
International
$m
Victorian
Gaming
$m
Keno
$m
Total
$m
Reconciliation of reportable segment revenue and profit
2011
Revenue - external
Revenue - intersegment
Segment revenue
Segment profit before
impairment, interest and tax
Segment profit/(loss) before
interest and tax
Depreciation and
amortisation
Impairment losses recognised
in the income statement
Capital expenditure (i)
1,569.1
-
1,569.1
220.2
(137.8)
67.3
(358.0)
217.8
130.5
48.8
179.3
1,077.4
-
1,077.4
169.6 2,946.6
48.8
169.6 2,995.4
-
52.8
241.4
48.8
563.2
52.8
241.4
48.8
205.2
7.0
-
9.9
38.2
11.8
124.3
-
26.1
-
75.8
(358.0)
329.6
(a) Revenue
Segment revenue
unallocated items
Intersegment revenue elimination
Consolidated revenue
(b) Segment profit before interest and tax
unallocated items:
- finance income
- other income and expenses
- finance costs
profit from continuing operations before income tax expense
2011
$m
2010
$m
2,995.4
0.9
(48.8)
2,947.5
2,911.9
-
(46.3)
2,865.6
205.2
534.1
9.7
(0.7)
(144.1)
70.1
6.7
0.5
(153.6)
387.7
(i) Wagering capital expenditure includes $150.0 million for the NSW Trackside concessions. Keno capital
expenditure includes $61.0 million for the Victorian Keno licence.
Subsequent events
4.
(a) Dividends
2010
Revenue - external
Revenue - intersegment
Segment revenue
Segment profit before
interest and tax
Depreciation and
amortisation
Capital expenditure
1,553.5
-
1,553.5
210.7
63.6
75.8
117.7
46.3
164.0
1,037.2
-
1,037.2
157.2 2,865.6
46.3
2,911.9
-
157.2
Since 30 June 2011, the directors have declared a final dividend of 19.0 cents per ordinary
share. The total amount of the final dividend is $130.7 million. This has not been provided
for in the 30 June 2011 financial statements (refer to note 2).
(b) Victorian Wagering and Betting Licence
51.4
225.4
46.6
534.1
5.0
16.6
36.7
36.3
9.2
11.4
114.5
140.1
On 19 July 2011 the Victorian government announced its intention to award the Victorian
Wagering and Betting licence to the group. The twelve year licence commences August
2012 and requires the group to make an upfront premium payment to the government of
$410.0 million in the next financial year.
(c)
Funding
Since 30 June 2011, the group signed a binding commitment letter for a bridge financing
facility of $450.0 million to support refinancing of the medium term notes maturing in
October 2011.
CONCISE ANNuAl REpORT 2011
55
Directors’ declaration
In the opinion of the directors of Tabcorp holdings limited the accompanying concise
financial report of the consolidated entity, comprising Tabcorp holdings limited and its
controlled entities for the year ended 30 June 2011:
(a) has been derived from or is consistent with the full financial report for the financial
year; and
(b) complies with Accounting Standard AASB 1039 Concise Financial Reports.
This declaration has been made after receiving the declarations required to be made to the
directors in accordance with sections 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors.
Paula Dwyer
Chairman
Melbourne
16 August 2011
56
TABCORp hOlDINgS lIMITED
Independent audit report
concise annual report 2011
57
Five year review
Total revenue 1
EBITDA - pre impairment
profit before interest and tax
profit after income tax attributable to
members of parent entity 2
profit after income tax - pre impairment 2
Dividend 3
Cash and deposits
Other current assets
Intangible assets - licences
Intangible assets - other
Other non current assets
Total assets
Current interest bearing liabilities
Other current liabilities
Non current interest bearing liabilities
Other non current liabilities
Total liabilities
Shareholders’ funds
Capital expenditure - payments
Earnings per share - pre impairment
Earnings per share
Dividends per share 3
Operating cash flow per share 4
Return on shareholders’ funds - pre
impairment
Return on shareholders’ funds
Net assets per share
Revenue 5
Casinos 6
Wagering
Media & International 7
gaming
Keno 8
unallocated/elimination
Normalisation adjustment
Total
58
TABCORp hOlDINgS lIMITED
2011
$m
4,469.6
1,132.7
856.3
2010
$m
4,219.8
998.0
794.4
2009
$m
4,211.3
1,072.6
895.4
2008
$m
3,992.5
1,075.2
174.7
521.7
521.7
367.6
291.4
111.8
688.1
534.8
892.8
295.1
147.1
104.0
430.0
1,805.7
351.7
2,838.5
449.8
502.2
515.2
160.4
(164.6)
469.5
543.0
469.5
493.4
335.5
173.2
261.9
128.3
119.2
723.9
652.6
3,641.8 3,506.8
3,627.5
1,589.5
1,796.5
1,606.3
6,121.7
6,457.7 6,339.4
-
-
615.8
697.0
2,269.7
1,816.8 2,040.9
478.9
324.7
340.2
1,627.6 3,003.0 3,062.6 3,364.4
2,757.3
1,210.9
222.0
595.6
3,276.8
256.5
3,454.7
408.1
175.0
671.0
cents
134.8
80.7
43.0
9.4
cents
77.1
77.1
55.0
48.2
cents
93.2
93.2
65.0
74.3
cents
103.4
(31.4)
94.0
82.0
2007
$m
3,875.1
947.8
803.3
450.4
452.6
493.5
202.2
80.5
1,220.8
3,680.7
1,542.3
6,726.5
390.0
514.9
1,950.6
486.8
3,342.3
3,384.2
166.8
cents
86.2
85.8
94.0
84.2
30.9%
18.5%
$1.83
13.9%
13.9%
$5.68
17.8%
17.8%
$5.86
17.0%
-5.1%
$5.25
13.4%
13.3%
$6.45
$m
1,439.4
1,569.1
179.3
1,077.4
169.6
(53.0)
87.8
4,469.6
$m
1,371.9
1,553.5
164.0
1,037.2
157.2
(51.8)
(12.2)
4,219.8
$m
1,357.7
1,593.4
-
1,069.4
156.1
(5.9)
40.6
4,211.3
$m
1,323.2
1,477.6
-
1,154.2
-
(3.9)
41.4
3,992.5
$m
1,343.1
1,477.1
-
1,101.6
-
(2.1)
(44.6)
3,875.1
EBITDA - Earnings before interest, tax, depreciation and amortisation.
1
2
Excludes net gain on demerger of Echo Entertainment group before income tax benefit of $304.6 million.
Includes net gain on demerger of Echo Entertainment group of $351.2 million.
3 Dividends attributable to the year, but which may be payable after the end of the period. 2008 includes a special
dividend declared in August 2008.
4 Net operating cash flow per the statement of cashflows does not include payments for property, plant and
equipment and intangibles, whereas these items are included in the calculation for the operating cash flow per
share ratio.
5
6
7
8
Revenue includes both external and internal revenue.
The Casino revenues are normalised.
Included in Wagering prior to 2010.
Included in gaming prior to 2009.
Shareholder information as at 18 August 2011
Ordinary shares
Tabcorp has on issue 688,019,737 fully paid ordinary shares. The issued capital has increased
from last year due to ordinary shares issued pursuant to Tabcorp’s Dividend Reinvestment
plan and shares issued under the 1 for 9 accelerated renounceable entitlement offer
announced in October 2010. There currently isn’t a share buy-back in operation in respect of
the company’s ordinary shares.
Tabcorp Bonds
Tabcorp has on issue 2,844,712 Tabcorp Bonds which are five year debt securities listed on
the Australian Securities Exchange (ASX) under the code TAhhA. They were initially issued
on 1 May 2009 to successful applicants pursuant to the Tabcorp Bonds prospectus dated 1
April 2009.
holders of Tabcorp Bonds are entitled to receive quarterly interest payments and $100 cash
per Tabcorp Bond upon redemption (on 1 May 2014).
The interest rate is equal to the three month bank bill rate plus a fixed margin of 4.25% p.a.
and is paid every three months.
Shareholding restrictions
Tabcorp’s Constitution, together with an agreement entered into with the State of
Queensland, contain various shareholder prohibitions and restrictions, including a
prohibition on a person from having a voting power of more than 10% in the Company
without obtaining the relevant written consents. The Company may refuse to register
any transfer of shares which would contravene these shareholding restrictions or require
divestiture of the shares that cause an individual to exceed the shareholding restrictions.
Information may be requested to determine whether an individual has a prohibited
shareholding interest.
Voting rights
All ordinary shares issued by Tabcorp holdings limited carry one vote per share. Tabcorp
Bonds and performance Rights do not carry any voting rights. Failure to comply with
certain provisions of the Victorian gambling Regulation Act 2003 or Tabcorp’s Constitution,
including the shareholder restrictions discussed above, may result in suspension of voting
rights.
Shareholder Benefits Scheme
Tabcorp introduced a benefits scheme for shareholders in April 2004. The scheme provides
free entry into nominated thoroughbred, harness and greyhound racing events and special
offers on accommodation, food and beverages, merchandise and other selected benefits at
the hotel and casino properties previously operated by the Company prior to the demerger.
The current benefits expire on 31 March 2012. Tabcorp will review the future of the scheme
having regard to changes which stemmed from the demerger. Details of the scheme and its
terms and conditions are available on Tabcorp’s website, www.tabcorp.com.au.
Substantial shareholders
The following is a summary of the current substantial shareholders pursuant to notices
lodged with the ASX in accordance with section 671B of the Corporations Act 2001:
Name
perpetual limited
BlackRock Investment Management
(Australia) ltd
Date of
interest
9 August 2011
Number
of ordinary
shares (i)
55,988,365
% of issued
capital (ii)
8.14
19 July 2011
43,333,881
6.30
(i) As disclosed in the last notice lodged with the ASX by the substantial shareholder.
(ii) The percentage set out in the notice lodged with the ASX is based on the total issued share capital of Tabcorp at
the date of interest.
Marketable parcel
There were 41,270 shareholders holding less than a marketable parcel of ordinary shares
($500, equivalent to 156 ordinary shares) based on a market price of $3.21 at the close of
trading on 18 August 2011.
CONCISE ANNuAl REpORT 2011
59
Shareholder information as at 18 August 2011 (continued)
Twenty largest registered shareholders and bondholders*
Investor group name
National Nominees limited
hSBC Custody Nominees (Australia) limited
J p Morgan Nominees Australia limited
RBC Dexia Investor Services Australia Nominees pty limited
Citicorp Nominees pty limited
Cogent Nominees pty limited
AMp life limited
uBS Wealth Management Australia Nominees pty ltd
uBS Nominees pty ltd
Queensland Investment Corporation
Warbont Nominees pty ltd
CS Fourth Nominees pty ltd
Argo Investments limited
Questor Financial Services limited
MlEQ Nominees pty limited
Citicorp Nominees pty limited
Australian united Investment Co limited
Brispot Nominees pty ltd
Ecapital Nominees pty limited
Australian Reward Investment Alliance
Total of top 20 registered shareholders
* On a grouped basis
Distribution of securities held
Number of
ordinary shares
124,246,658
123,364,689
103,691,163
38,776,523
37,047,133
12,015,741
11,468,318
7,335,656
6,878,548
5,665,860
3,294,193
2,560,361
2,455,345
2,155,991
2,100,000
2,025,539
2,000,000
1,492,710
1,309,006
1,218,106
491,101,540
% of issued
capital
18.06
17.93
15.07
5.64
5.38
1.75
1.67
1.07
1.00
0.82
0.48
0.37
0.36
0.31
0.31
0.29
0.29
0.22
0.19
0.18
71.38
Investor group name
uBS Wealth Management Australia Nominees pty ltd
National Nominees limited
hSBC Custody Nominees (Australia) limited
uBS Nominees pty ltd
J p Morgan Nominees Australia limited
Citicorp Nominees pty limited
Brispot Nominees pty ltd
Questor Financial Services limited
Dimbulu pty ltd
ANZ Trustees limited
First Option Credit union ltd
Invia Custodian pty limited
Jonwen Staff Super Nominees pl
RBC Dexia Investor Services Australia Nominees pty limited
Cogent Nominees pty limited
link Enterprises (International) pty ltd
Avanteos Investments limited
Jilliby pty ltd
Delmos pty ltd
Merrill lynch (Australia) Nominees pty ltd
Total of top 20 registered bondholders
Number of
Tabcorp Bonds
251,591
124,135
121,564
87,634
52,500
48,393
44,038
20,464
20,000
19,000
18,852
15,571
15,000
11,738
10,850
10,000
8,064
7,500
7,000
7,000
900,894
% of total
Bonds
8.84
4.36
4.27
3.08
1.85
1.70
1.55
0.72
0.70
0.67
0.66
0.55
0.53
0.41
0.38
0.35
0.28
0.26
0.25
0.25
31.67
Number of
securities held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Ordinary Shares(i)
Tabcorp Bonds
Rights(ii)
Number of
holders
94,496
39,224
4,436
2,038
92
140,286
Number of
securities
31,485,438
82,674,846
30,870,757
41,246,890
501,741,806
688,019,737
Number of
holders
6,258
219
9
12
2
6,500
Number of
securities
1,442,201
517,375
66,059
443,351
375,726
2,844,712
Number of
holders
-
-
-
-
1
1
Number of
securities
-
-
-
-
232,136
232,136
(i) Ordinary Shares includes Restricted Shares and Deferred Shares offered to employees under the Company’s incentive arrangements
(ii) Rights were issued pursuant to the Company’s long term incentive arrangements.
Refer to the Remuneration Report on pages 31 to 49 for more information about the Company’s incentive arrangements.
60
TABCORp hOlDINgS lIMITED
Online shareholder services
Use the internet to easily manage your shareholding
On-line share registry facility
Shareholders can use the on-line share registry facility on the Company’s website,
www.tabcorp.com.au, or through www.investorcentre.linkmarketservices.com.au to
conduct standard shareholding enquiries and transactions, including:
■■ Download dividend statements
■■ update registered address
■■ Check current and previous shareholding balances
■■ Appoint a proxy to vote at the Annual general Meeting
■■ lodge or update banking details
■■ participate in the Dividend Reinvestment plan
■■ Notify Tax File Number / Australian Business Number
Dividend payments
All dividends paid by Tabcorp to shareholders with a registered address in Australia are paid
by direct credit into a nominated bank account with an Australian financial institution.
payments are electronically credited on payment date, allowing shareholders to utilise their
funds immediately without any mailing or handling delays. There are also no misplaced or
un-deposited cheques, and reduces the likelihood of mail fraud. Shareholders can provide or
update their bank account details by using the on-line share registry facility or by contacting
the share registry.
Dividend reinvestment plan (DRP)
Tabcorp operates a DRp which enables participants to reinvest their dividends into
acquiring additional Tabcorp shares without incurring any brokerage or handling costs. A
2.5% discount was applied to the price at which shares were issued under the DRp in respect
of the final dividend payable on 23 September 2011. To elect to participate in the Company’s
DRp, use the online share registry facility or contact the share registry.
Annual report
Tabcorp’s interactive annual reports are available on-line from the Company’s website,
www.tabcorp.com.au. Annual reports are sent to those shareholders who have requested
to receive a copy. Shareholders who no longer wish to receive a hard copy of the annual
report or wish to receive the annual report electronically should contact the share registry
or make their election by using the on-line share registry facility at www.tabcorp.com.au.
Major Announcements
Tabcorp’s major Company announcements since the previous annual report are
listed below. These announcements are available on the Company’s website at
www.tabcorp.com.au following their release to the Australian Securities Exchange.
2011
16 Aug
20 Jul
19 Jul
11 Jul
29 Jun
3 Jun
3 Jun
1 Jun
30 May
21 Apr
11 Mar
3 Feb
13 Jan
2010
11 Dec
25 Oct
18 Oct
11 Oct
14 Sep
Full year results – normalised net profit after tax of $486.3 million, up 1.9%
Standard and poor’s affirms ‘BBB’ rating for Tabcorp
Tabcorp to be awarded Victorian Wagering and Betting licence
Sky Racing World channel broadcasting into 14 million uK and Irish households
Demerger Class Ruling, including capital gains treatment and taxation
implications for shareholders
Tabcorp’s Demerger approved by Supreme Court of Victoria
Standard & poor’s assigns ‘BBB’ rating to Tabcorp
Tabcorp’s Demerger approved by shareholders
Echo Entertainment group raised uS$460 million debt in uS private placement
Despatch of Demerger documents to shareholders
Victorian Keno licence awarded to Tabcorp
half year results – normalised net profit after tax of $272.0 million, up 3.0%
Tabcorp donated $1 million to Queensland premier’s Flood Relief Appeal
proposed $625 million expansion of Tabcorp’s Queensland casinos
Speeches and presentation at Tabcorp’s annual general meeting
Tabcorp announces Demerger and $430 million accelerated renounceable
entitlement offer
Tabcorp reaches in principle agreement with Racing NSW and NSW
government to provide funding of $150 million
Tabcorp again receives global recognition for gambling leadership
Company directory
Registered office
Tabcorp holdings limited
Share Registry
link Market Services limited
5 Bowen Crescent
Melbourne VIC 3004
Australia
Telephone: 03 9868 2100
Facsimile: 03 9868 2300
E-mail: investor@tabcorp.com.au
Website
www.tabcorp.com.au
Stock exchange listing
The Company’s securities are
quoted on the Australian Securities
Exchange (ASX) under the codes
“TAh” for ordinary shares and
“TAhhA” for Bonds.
locked Bag A14
Sydney South NSW 1235
Telephone: 1300 665 661 (local call
cost within Australia)
Telephone: 02 8280 7418
Facsimile: 02 9287 0303
Facsimile: 02 9287 0309 (proxy
forms only)
E-mail: tabcorp@
linkmarketservices.com.au
Website: www.linkmarketservices.
com.au
New South Wales office
495 harris Street
ultimo NSW 2007
Telephone: 02 9218 1000
Queensland office
level 16
15 Adelaide Street
Brisbane QlD 4000
Telephone: 07 3243 4100
Sky Racing /
Sky Sports Radio
79 Frenchs Forest Road
Frenchs Forest NSW 2086
Telephone: 02 9451 0888
Key dates
2011
Annual general Meeting
(Sofitel, Melbourne)
26 October
2012*
half-year results announcement
9 February
Ex-dividend for interim dividend
14 February
Record date for interim dividend
20 February
Interim dividend payment
End of financial year
26 March
30 June
Full-year results announcement
9 August
Ex-dividend for final dividend
16 August
Record date for final dividend
22 August
Final dividend payment
26 September
Annual general Meeting
31 October
* These dates may change.
See the Company’s website for updates.
About this Annual Report
Currency
Investment warning
Tabcorp’s Annual Report consists of two documents – the
Concise Annual Report (which incorporates the concise
financial statements) and the Financial Report. The concise
financial statements included in the Concise Annual Report
cannot be expected to provide as full an understanding
of Tabcorp’s performance, financial position and investing
activities as provided by the full Financial Report. A copy
of Tabcorp’s Financial Report is available, free of charge, on
request and can be accessed via the Company’s website at
www.tabcorp.com.au.
References to currency are in Australian dollars unless
otherwise stated.
Copyright
Information in this report has been prepared by Tabcorp,
unless otherwise indicated. Information may be reproduced
provided it is reproduced accurately and not in a misleading
context. Where the material is being published or issued
to others, the sources and copyright status should be
acknowledged.
past performance of shares is not necessarily a guide to
future performance. The value of investments and any
income from them is not guaranteed and can fall as well
as rise. Tabcorp recommends investors seek independent
professional advice before making investment decisions.
Privacy
Tabcorp respects the privacy of its stakeholders. Tabcorp’s
privacy policy is available on the Company’s website at
www.tabcorp.com.au.