2012 Annual Report 年度報告 Annual Report 年度報告. Wynn Macau, Limited Rua Cidade de Sintra, NAPE, Macau (853)

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2012 Annual Report 年度報告 2012 Annual Report 年度報告 Wynn Macau, Limited Rua Cidade de Sintra, NAPE, Macau (853) Corporate Information 4 Highlights 5 Management Discussion and

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2012 Annual Report 年度報告 2012 Annual Report 年度報告 Wynn Macau, Limited Rua Cidade de Sintra, NAPE, Macau (853) 2 Corporate Information 4 Highlights 5 Management Discussion and Analysis Contents 26 Directors and Senior Management 37 Report of the Directors 59 Corporate Governance Report 74 Independent Auditors Report Financial Summary 171 Definitions 177 Glossary 2 Wynn Macau, Limited Corporate Information BOARD OF DIRECTORS Executive Directors Mr. Stephen A. Wynn (Chairman of the Board) Ms. Linda Chen Mr. Ian Michael Coughlan Non-Executive Directors Mr. Matthew O. Maddox (appointed on 28 March 2013) Mr. Marc D. Schorr (retired on 28 March 2013) Dr. Allan Zeman, GBM, GBS, JP (Vice-chairman of the Board) Independent Non-Executive Directors Mr. Jeffrey Kin-fung Lam, GBS, JP Mr. Bruce Rockowitz Mr. Nicholas Sallnow-Smith AUDIT COMMITTEE Mr. Nicholas Sallnow-Smith (Chairman) Mr. Bruce Rockowitz Dr. Allan Zeman, GBM, GBS, JP REMUNERATION COMMITTEE Mr. Nicholas Sallnow-Smith (Chairman) Mr. Jeffrey Kin-fung Lam, GBS, JP Mr. Matthew O. Maddox (appointed on 28 March 2013) Mr. Bruce Rockowitz Mr. Marc D. Schorr (retired on 28 March 2013) NOMINATION AND CORPORATE GOVERNANCE COMMITTEE Mr. Jeffrey Kin-fung Lam, GBS, JP (Chairman) Mr. Nicholas Sallnow-Smith Dr. Allan Zeman, GBM, GBS, JP COMPANY SECRETARY Ms. Kwok Yu Ching, FCIS, FCS (resigned on 28 February 2013) Ms. Ho Wing Tsz Wendy, FCIS, FCS (appointed on 28 February 2013) AUTHORIZED REPRESENTATIVES Dr. Allan Zeman, GBM, GBS, JP Ms. Kwok Yu Ching, FCIS, FCS (resigned on 28 February 2013) Ms. Ho Wing Tsz Wendy, FCIS, FCS (appointed on 28 February 2013) (Mrs. Seng Sze Ka Mee, Natalia as alternate) AUDITORS Ernst & Young Certified Public Accountants LEGAL ADVISORS As to Hong Kong and U.S. laws: Skadden, Arps, Slate, Meagher & Flom As to Hong Kong law: Mayer Brown JSM As to Macau law: Alexandre Correia da Silva As to Cayman Islands law: Maples and Calder Annual Report Corporate Information REGISTERED OFFICE P.O. Box 309 Ugland House Grand Cayman KY Cayman Islands HEADQUARTERS IN MACAU Rua Cidade de Sintra NAPE, Macau SAR HONG KONG SHARE REGISTRAR Computershare Hong Kong Investor Services Limited STOCK CODE 1128 COMPANY WEBSITE PRINCIPAL PLACE OF BUSINESS IN HONG KONG Level 28, Three Pacific Place 1 Queen s Road East Hong Kong PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE Appleby Trust (Cayman) Limited 4 Wynn Macau, Limited Highlights FINANCIAL HIGHLIGHTS For the year ended 31 December HK$ HK$ (in thousands, except per share amounts or otherwise stated) Casino revenues 26,706,712 27,755,965 Other revenues 1,745,512 1,742,127 EBITDA 7,737,793 7,951,286 Profit attributable to owners 6,439,693 5,921,013 Earnings per Share basic and diluted (HK$) KEY SHAREHOLDER DATES FOR 2013 Annual general meeting May 2013 Release of announcement of interim results in respect of the six months ending 30 June 2013 August 2013 Release of interim report in respect of the six months ending 30 June 2013 September 2013 Annual Report Management Discussion and Analysis OVERVIEW Wynn Macau opened to the public on 6 September 2006 at the center of casino activities on the urban Macau peninsula. In December 2007 and November 2009, Wynn Macau completed expansions, adding more gaming space and additional food and beverage and retail amenities. Encore at Wynn Macau, a further expansion of Wynn Macau that added a fully integrated resort hotel, opened in April Our Macau resort complex features: Approximately 275,000 square feet of casino space, offering 24-hour gaming and a full range of games, including private gaming salons, sky casinos and a poker pit; Two luxury hotel towers with a total of 1,008 spacious rooms and suites; Casual and fine dining in eight restaurants; Approximately 55,000 square feet of high-end, brand-name retail shopping, including stores and boutiques such as Bvlgari, Cartier, Chanel, Dior, Dunhill, Ermenegildo Zegna, Ferrari, Giorgio Armani, Graff, Gucci, Hermes, Hugo Boss, Jaeger LeCoultre, Louis Vuitton, Miu Miu, Piaget, Prada, Roger Dubuis, Rolex, Tiffany, Tudor, Vacheron Constantin, Van Cleef & Arpels, Versace, Vertu, and others; Recreation and leisure facilities, including two health clubs and spas, a salon, a pool; and Lounges and meeting facilities. The following table presents the number of casino games available at our Macau Operations: As at 31 December VIP table games Mass market table games Slot machines Poker tables In response to on-going evaluation of our operations and feedback from our guests, we have been, and will continue to make enhancements and refinements to our resort complex. 6 Wynn Macau, Limited Management Discussion and Analysis Cotai Development In September 2011, the Group formally accepted the terms and conditions of a draft land concession contract from the Macau Government for approximately 51 acres of land in the Cotai area of Macau (the Cotai Land ). On 2 May 2012, the land concession contract was gazetted by the government of Macau evidencing the final step in the granting of the land concession for the Cotai Land. The Group is constructing a full scale integrated resort containing a casino, luxury hotel, convention, retail, entertainment and food and beverage offerings on the Cotai Land. The Group estimates the project budget to be in the range of approximately HK$27.2 billion to HK$31.0 billion. The Group expects to set a guaranteed maximum price for the project construction costs in the first half of The Group expects to open the resort in Cotai during the first half of The initial term of the land concession contract is 25 years from 2 May 2012, and it may be renewed with government approval for successive periods. The total land premium payable, including interest as required by the land concession contract, is MOP1,547.4 million (approximately HK$1,502.4 million). An initial payment of MOP500 million (approximately HK$485.4 million) was paid in December The Group will make eight additional semi-annual payments of approximately MOP130.9 million (approximately HK$127.1 million) each (including required interest at 5%). The first payment was made in November The land concession contract also requires that WRM, as a gaming concessionaire operate and manage gaming operations on the Cotai Land. As of 31 December 2012, with respect to the Cotai Land, the Group has recorded an obligation and related asset with HK$216.5 million included as a current liability and HK$590.6 million included as a long-term liability. The Group will also be required to make annual lease payments of MOP6.2 million (approximately HK$6.0 million) during the development period and annual payments of approximately MOP8.6 million (approximately HK$8.4 million) once development is completed. Cotai Land Contract On 10 May 2012, the Group made a US$50 million (approximately HK$389 million) payment to an unrelated third party in consideration of that party s relinquishment of certain rights in and to any future development on the Cotai Land. The Group had previously disclosed the requirement to make this payment. The Group accrued this US$50 million (approximately HK$389 million) obligation as a current liability included in other accrued liabilities as of 31 December 2011, when the Group accepted the draft land concession from the Macau Government. Annual Report Management Discussion and Analysis Macau Macau, which was a territory under Portuguese administration for approximately 450 years, was transferred from Portuguese to Chinese political control in December Macau is governed as a special administrative region of China and is located approximately 37 miles southwest of, and approximately one hour away via ferry from, Hong Kong. Macau, which has been a casino destination for more than 40 years, consists principally of a peninsula on mainland China, and two neighboring islands, Taipa and Coloane. We believe that Macau is located in one of the world s largest concentrations of potential customers. According to Macau Statistical Information, casinos in Macau generated approximately HK$295.3 billion in gaming revenue during the year ended 31 December 2012, an increase of approximately 13.5% over the approximate HK$260.1 billion generated in the year ended 31 December 2011, making Macau the largest gaming market in the world. FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION Tourism The levels of tourism and overall gaming activities in Macau are key drivers of our business. Both the Macau gaming market and visitation to Macau have grown significantly in the last few years except that tourist arrivals to Macau remained stable in 2012 as compared to We have benefited from the rise in visitation to Macau over the past several years. Macau s gaming market is primarily dependent on tourists. Tourist arrivals of 28.0 million in 2012 were flat compared to The Macau market has experienced tremendous growth in capacity since the opening of Wynn Macau. As at 31 December 2012, there were 26,069 hotel rooms and 5,485 table games in Macau, compared to 12,978 hotel rooms and 2,762 table games as at 31 December Gaming customers traveling to Macau typically come from nearby destinations in Asia including mainland China, Hong Kong, Taiwan, South Korea and Singapore. According to the Macau Statistics and Census Service Monthly Bulletin of Statistics, approximately 89% of visitors to Macau for the year ended 31 December 2012 were from mainland China, Hong Kong and Taiwan. Tourism levels in Macau are affected by a number of factors, all of which are beyond our control. Key factors affecting tourism levels in Macau may include, among others: Prevailing economic conditions in mainland China and Asia; Various countries policies on currency restrictions and the issuance of travel visas that may be in place from time to time could affect travel to Macau; 8 Wynn Macau, Limited Management Discussion and Analysis Competition from other destinations which offer gaming and leisure activities; Occurrence of natural disasters and disruption of travel; and Possible outbreaks of infectious disease. Economic and Operating Environment Our operating environment remained stable in However, economic conditions can have a significant impact on our business. A number of factors, including a slowdown in the global economy, contracting credit markets, reduced consumer spending, various countries policies that affect travel to Macau and any outbreak of infectious diseases can negatively impact the gaming industry in Macau and our business. Competition Since the liberalization of Macau s gaming industry in 2002, there has been a significant increase in the number of casino properties in Macau. Currently, there are six gaming operators in Macau, including WRM. The three concessionaires are WRM, SJM, and Galaxy which opened Galaxy Macau, a major resort in the Cotai area, in The three subconcessionaires are Melco Crown, MGM Macau, and Venetian Macau which opened Sands Cotai Central in 2012 in the Cotai area. As at 31 December 2012, there were approximately 35 casinos in Macau, including 20 operated by SJM. Each of the current six operators has operating casinos and expansion plans announced or underway. Wynn Macau faces competition from casinos located in other areas of Asia, such as Resorts World Sentosa and Marina Bay Sands, respectively, in Singapore and Genting Highlands Resort located outside of Kuala Lumpur, Malaysia. Wynn Macau also faces competition from casinos in the Philippines where several major casino resorts are scheduled to open over the next few years. Wynn Macau encounters competition from other major gaming centers located around the world, including Australia and Las Vegas, cruise ships in Asia that offer gaming, and other casinos throughout Asia. Further, if current efforts to legalize gaming in other Asian countries are successful, Wynn Macau will face additional regional competition. Gaming Promoters A significant amount of our casino play is brought to us by gaming promoters. Gaming promoters have historically played a critical role in the Macau gaming market and are important to our casino business. Annual Report Management Discussion and Analysis Gaming promoters introduce premium VIP players to Wynn Macau and often assist those clients with their travel and entertainment arrangements. In addition, gaming promoters often grant credit to their players. In exchange for their services, Wynn Macau generally pays the gaming promoters a commission which is a percentage of the gross gaming win generated by each gaming promoter. Approximately 80% of these commissions are netted against casino revenues, because such commissions approximate the amount of the commission returned to the VIP players by the gaming promoters, and approximately 20% of these commissions are included in other operating expenses, which approximate the amount of the commission ultimately retained by the gaming promoters as compensation. The total amount of commissions paid to promoters and netted against casino revenues was HK$7.5 billion and HK$8.1 billion for the years ended 31 December 2012 and 2011, respectively. Commissions decreased 6.5% for the year ended 31 December 2012 compared to the year ended 31 December 2011, due to decreased volumes of play generated by gaming promoters and a lower win percentage. We typically advance commissions to gaming promoters at the beginning of each month to facilitate their working capital requirements. These advances are provided to a gaming promoter and are offset by the commissions earned by such gaming promoter during the applicable month. The aggregate amounts of exposure to our gaming promoters, which is the difference between commissions advanced to each individual gaming promoter, and the commissions payable to each such gaming promoter, were HK$646.5 million and HK$367.1 million as at 31 December 2012 and 2011, respectively. At the end of each month, any commissions outstanding are cleared no later than the fifth day of the succeeding month and prior to the advancement of any further funds to a gaming promoter. We believe we have developed strong relationships with our gaming promoters. Our commission percentages have remained stable throughout our operating history. In addition to commissions, gaming promoters each receive a monthly complimentary allowance based on a percentage of the turnover their clients generate. The allowance is available for room, food and beverage and other products and services for discretionary use with the gaming promoter s clients. Premium Credit Play We selectively extend credit to our VIP players contingent upon our marketing team s knowledge of the players, their financial background and payment history. We follow a series of credit procedures and require from each credit recipient various signed documents that are intended to ensure among other things that, if permitted by applicable law, the debt can be legally enforced in the jurisdiction where the player resides. In the event the player does not reside in a jurisdiction where gaming debts are legally enforceable, we can attempt to assert jurisdiction over assets the player maintains in jurisdictions where gaming debts are recognized. In addition, we typically require a check in the amount of the applicable credit line from credit players, collateralizing the credit we grant to a player. 10 Wynn Macau, Limited Management Discussion and Analysis Number and Mix of Table Games and Slot Machines The mix of VIP table games, mass table games and slot machines in operation at our resort changes from time to time as a result of marketing and operating strategies in response to changing market demand and industry competition. The shift in the mix of our games will affect casino profitability. ADJUSTED EBITDA Adjusted EBITDA is earnings before finance costs, taxes, depreciation, amortization, pre-opening costs, property charges and other, share-based payments, and other non-operating income and expenses. Adjusted EBITDA is presented exclusively as a supplemental disclosure because our Directors believe that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Our Adjusted EBITDA presented herein also differs from the Adjusted EBITDA presented by Wynn Resorts, Limited for its Macau segment in its filings with the SEC, primarily due to the inclusion of royalty fees, adjustments for IFRS differences with U.S. GAAP, corporate support and other support services in arriving at operating profit. The following table sets forth a quantitative reconciliation of Adjusted EBITDA to its most directly comparable IFRS measurement, operating profit, for the years ended 31 December 2012 and For the year ended 31 December HK$ HK$ (in thousands) Operating profit 6,697,507 5,982,291 Add Depreciation and amortization 918,929 1,016,421 Pre-opening costs 3,610 Property charges and other 49, ,853 Share-based payments 20,567 49,196 Wynn Macau, Limited corporate expenses 48,109 37,525 Adjusted EBITDA 7,737,793 7,951,286 Annual Report Management Discussion and Analysis REVIEW OF HISTORICAL OPERATING RESULTS Summary Breakdown Table The following table presents certain selected statement of comprehensive income line items and certain other data. For the year ended 31 December HK$ HK$ (in thousands, except for averages, daily win figures and number of tables and slot machines) Total casino revenues (1) 26,706,712 27,755,965 Rooms (2) 143, ,464 Food and beverage (2) 185, ,157 Retail and other (2) 1,417,342 1,413,506 Total operating revenues 28,452,224 29,498,092 VIP table games turnover 925,181, ,373,801 VIP gross table games win (1) 26,294,331 28,055,558 Mass market table games drop 21,448,092 21,559,019 Mass market gross table games win (1) 6,539,887 6,132,171 Slot machine handle 36,445,817 42,044,263 Slot machine win (1) 1,916,505 2,157,439 Average number of gaming tables (3) Daily gross win per gaming table (4) 183, ,862 Average number of slots (3) Average daily win per slot (4) 5,567 5,916 12 Wynn Macau, Limited Management Discussion and Analysis Notes: (1) Total casino revenues do not equal the sum of VIP gross table games win, mass market gross table games win and slot machine win because casino revenues are reported net of the relevant commissions and discounts. The following table presents a reconciliation of the sum of VIP gross table games win, mass market gross table games win and slot machine win to total casino revenues. For the year ended 31 December HK$ HK$ (in thousands) VIP gross table games win 26,294,331 28,055,558 Mass market gross table games win 6,539,887 6,132,171 Slot machine win 1,916,505 2,157,439 Poker revenues 151, ,260 Commissions and discounts (8,195,406) (8,714,463) Total casino revenues 26,706,712 27,755,965 (2) Promotional allowances are excluded from revenues in the accompanying consolidated statement of comprehensive income prepared in accordance with IFRS. Management also evaluates non-casino revenues on an adjusted basis. The following table presents a reconciliation of net non-casino revenues as reported in our consolidated statement of comprehensive income to gross non-casino revenues calculated on the adjusted basis. The adjusted non-casino revenues as presented below are used for management reporting purposes and are not representative of revenues as determined under IAS 18. Annual Report Management Discussion and Analysis For the year ended 31 December HK$ HK$ (in thousands) Room revenues 143, ,464 Promotional allowances 769, ,438 Adjusted room revenues 912, ,902 Food and beverage revenues 185, ,157 Promotional allowances 571, ,053 Adjusted food and beverage revenues 756, ,210 Retail and other revenues 1,417,342 1,413,506 Promotional allowances 51,810 37,486 Adjusted retail and other revenues 1,469,152 1,450,992 (3) For purposes of this table, we calculate average number of gaming tables and average number of slots as the average number of gaming tab
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