2008 Full Year Result Directors Report
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TEN NETWORK HOLDINGS LIMITED
ANNUAL REPORT
For the year ended
31 August 2008
ABN 14 081 327 068
This financial report covers both Ten Network Holdings Limited as an individual entity and the consolidated entity consisting of Ten Network Holdings Limited and its controlled entities.
Ten Network Holdings Limited is a company limited by shares, incorporated and domiciled in Australia.
The Directors of Ten Network Holdings Limited present their report on the consolidated entity, consisting of Ten Network Holdings Limited (“the Company”) and its controlled entities, for the year ended 31 August 2008. Directors
The Directors that have been in office during the year and since year end are:
Mr NG Falloon (Chairman)
Mr JJ Cowin (Alternate Mr JB Studdy)
Mr PV Gleeson (Alternate Mr NG Falloon)
Mr JB Studdy (Alternates Mr JJ Cowin and Mr AJ Peschar) C
Mr PD Viner (Alternates Mr LJ Asper, Mr TC Strike and Mr JE Maguire)
Mr TC Strike (Alternate Mr LJ Asper) B
Mr LJ Asper B
A: Resigned as directors effective 25 October 2007.
Mr LS Freedman (Alternate Mr NG Falloon) A
Mr PPA Harris (Alternate Mr PV Gleeson) A
Ms IYL Lee (Alternate Mr JB Studdy) A
Mr GH Levy (Alternate Mr PV Gleeson) A
Mr R Magid (Alternate Mr NG Falloon) A
Mr BM Sherman (Alternate Mr B Sechos)A
B: Appointed as directors on 26 October 2007.
C: Mr A Peschar resigned as Alternate Director for Mr JB Studdy on 11 September 2007.
Principal Activities
The principal activity of Ten Network Holdings Limited is the investment in The Ten Group Pty Limited (“Ten Group”) and controlled entities, whose principal activities are the operation of commercial television licences in Sydney, Melbourne, Brisbane, Adelaide and Perth, and out-of-home advertising.
Results
The consolidated profit after income tax for the year ended 31 August comprises:
| | 2008 $’000 | 2007 $’000 |
| Earnings before interest, tax, depreciation and amortisation | 215,026 | 248,346 |
| Depreciation | (32,193) | (25,566) |
| Amortisation | (2,870) | (3,524) |
| Earnings before interest and tax | 179,963 | 219,256 |
| Subordinated debenture interest | - | (50,883) |
| Net interest expense – other | (48,916) | (42,698) |
| Profit before income tax | 131,047 | 125,675 |
| Income tax revenue/ (expense) | 142,958 | (47,152) |
| Profit after income tax | 274,005 | 78,523 |
| Profit attributable to minority interest | (523) | (12,392) |
| Profit attributable to members of the Company | 273,482 | 66,131 |
Dividends
Since the end of the previous financial year a fully franked dividend of 10.0 cents per share ($92,214,908) was paid on 4 January 2008 and a fully franked dividend of 3.5 cents per share ($32,465,475) was paid on 16 July 2008 in respect of the results for the period to 30 June 2008.
Review of Operations
The Directors were satisfied with the results of the consolidated entity for the year.
Significant Changes in the State Of Affairs
Exchange of minority shareholders in The Ten Group Pty Limited
During February 2008, AMP Life Limited ('AMP') and Copplemere Pty Limited ('Copplemere') exchanged their remaining interests (totalling 5,435,916 shares) in The Ten Group Pty Limited into the equivalent number of new shares in Ten Network Holdings Limited. The value of the shares exchanged was recorded at the prevailing market value of $13.1m in total.
Tax Consolidations
Following the above exchange, Ten Network Holdings Limited now holds 100% of the shares in The Ten Group Pty Limited and as a result becomes the head of a new tax consolidated group. This triggers the requirement to reassess the tax cost bases of the tax consolidated group – broadly with reference to proportional market values. An income tax benefit of $188.1m was booked to the income statement as a result of this calculation. Of this benefit, an amount of $186.4m relates to a reduction to deferred tax liabilities arising from an uplift of $621.4m in the tax cost base of television licences. The remaining benefit of $1.6m relates to uplifts in the tax cost bases of other depreciable assets, particularly fixed assets such as plant and equipment.
Share Buybacks
On 3 July 2008, Ten Network Holdings announced that it proposed to acquire up to 10% of the Company's issued shares via an on-market share buyback. As at 31 August 2008, Ten Network Holdings Limited has purchased 2,348,280 of issued shares valued at $3,608,042. As a consequence, Canwest's interest in Ten Network Holdings Limited has now increased to 56.6% at 31 August 2008.
Other than the above, there were no significant changes in the state of affairs of the consolidated entity during the year.
Events Subsequent to Balance Date
No matters or circumstances have arisen since balance date that have significantly affected or may significantly affect:
- the operations in financial years subsequent to 31 August 2008 of the consolidated entity; or
- the results of those operations; or
- the state of affairs in financial years subsequent to 31 August 2008 of the consolidated entity.
Likely Developments
Information as to likely developments in the operations of the consolidated entity and the expected results of those operations in subsequent financial years has not been included in this report because, in the opinion of the Directors, it would prejudice the interests of the consolidated entity.
Information on Directors
| | Particulars of Directors’ Interests in Shares and Options of The Company
|
| Director | Responsibilities | Ordinary Shares |
Options
|
| | | | |
| Chairman - Executive | | | |
| NG Falloon | Executive Chairman of Board of Directors. Member of Remuneration Committee | 740,836 | - |
| Non-Executive Directors | | | |
| JJ Cowin | Member of Audit and Chair of Remuneration Committee | 1,000,000 | - |
| PV Gleeson | Chair of Audit and Member of Remuneration Committee | 15,228,608 | - |
| JB Studdy | Member of Audit Committee and Chair of Nomination Committee | 50,000 | - |
| PD Viner A | | - | - |
| TC Strike B | Member of Audit Committee. | | |
| LJ Asper C | Member of Remuneration Committee. | | |
A: Mr Viner has 50,000 subordinate voting shares of CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.6% ownership in Ten Network Holdings Limited.
B: Mr Strike has 57,981 subordinate voting shares of CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.6% ownership in Ten Network Holdings Limited.
C: Mr Asper holds an interest in 1,361,773 subordinate voting shares plus 25,595,325 multiple voting shares in CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.6% ownership in Ten Network Holdings Limited.
All Directors are members of the Nomination Committee.
The qualifications and experience of each Director are detailed below.
Nicholas G Falloon BMS (Age 51)
Appointed Executive Chairman of the Company in February 2002. Previously served as Chief Executive Officer of Publishing and Broadcasting Limited from 1998 to 2001. Prior to that Mr Falloon held other senior executive positions within the PBL organisation. He has also been a Director of a number of companies including Foxtel, Fox Sports and ecorp.
Mr Falloon is a member of the Nomination and Remuneration Committees of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Jack J Cowin
BA (Age 66)
Director of the Company since April 1998. Founder and Chairman of Competitive Foods Australia Limited and is on the board of directors of SOPA.
Mr Cowin is Chairman of the Remuneration Committee and is a member of the Nomination and Audit Committees of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Paul V Gleeson
BEc, ACA (Age 55)
Director of the Company since February 1998. He is a member of the Institute of Chartered Accountants in Australia.
Mr Gleeson is Chairman of the Audit Committee and is also a member of the Nomination and Remuneration Committees of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
John B Studdy AM
BEc, FCA (Age 79)
Director of the Company since June 1998. Chairman of the Company from 1998 to February 2002 and Chairman of The Ten Group Pty Limited from May 1993 to February 2002. Mr Studdy is also Director of IWPE Nominees Pty Limited. Recipient of Centenary Medal 2003. Mr Studdy is an Honorary Vice President of the International Federation of MS Societies, Emeritus President of the MS Society and Chairman of the Pain Management Research Institute and of ING Australia Foundation.
Mr Studdy is Chairman of the Nomination Committee and is also a member of the Audit Committee of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: Director of Angus & Coote (Holdings) Limited, Director of Westfield Group, a stapled security which comprises Westfield Holdings Limited and Westfield Management Limited as the responsible entity of Westfield Trust and Westfield America Management Limited as the responsible entity of Westfield America Trust, and Director of Westfield Management Limited as the responsible entity of Carindale Property Trust.
Peter D Viner
(Age 63)
Director of the Company since April 1998. Served as Chief Executive Officer of The Ten Group Pty Limited from 1993 to 1997. Currently Executive Vice-President of Canwest Global Communications Corp.
Mr Viner is a member of the Nomination Committee of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Thomas C Strike
BA, BCom (Hons), CA, CF (Age 54) Director of the Company since October 2007. President, Corporate Development & Strategy Implementation of Canwest Global Communications Corp. Director of a number of media and entertainment companies associated with the Canwest Group.
Mr Strike is a member of the Audit Committee and Nomination Committee of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Leonard J Asper
BA, LLB (Age 44)
Director of the Company since 2007. President and Chief Executive and a director of Canwest Global Communications Corp. Director of a number of media and entertainment companies associated with the Canwest Group.
Mr Asper is a member of the Nomination and Remuneration Committees of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Company Secretary
Stephen Partington was appointed as Company Secretary of The Ten Group Pty Limited in October 1996 and as Company Secretary of Ten Network Holdings Limited in June 2001. He also holds the position of Group General Counsel.
Previously he held the position of General Counsel and Group Secretary at Advance Bank where he was employed from 1982 to 1996. Mr Partington graduated with a Bachelor of Commerce and Bachelor of Laws from the University of New South Wales and Masters of Laws from each of Sydney University and University of Technology, Sydney.He is a fellow of Chartered Secretaries Australia and has been admitted as a solicitor in New South Wales since 1980.
| Directors’ Meetings | | | | | |
| |
| The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 31 August 2008 , and the number of meetings attended by each Director were: |
|
|
|
| Meeting of Directors | Audit Committee | Remuneration Committee | Nomination Committee |
| Director’s Name
Alternate name (if applicable) | Date appointed | Date
resigned | A | B | A | B | A | B | A | B |
| NG Falloon | 13/02/02 | Continuing | 6 | 6 | - | - | 2 | 2 | 1 | 1 |
| JJ Cowin | 03/04/98 | Continuing | 6 | 5 | 2 | 2 | 2 | 2 | 1 | 1 |
| JB Studdy (Alternate) | 27/04/01 | Continuing | - | 1 | - | - | - | - | - | - |
| LS Freedman | 16/02/98 | 25/10/07 | 1 | 1 | - | - | - | - | - | - |
| PV Gleeson | 16/02/98 | Continuing | 6 | 6 | 3 | 3 | 2 | 2 | 1 | 1 |
| PPA Harris | 16/02/98 | 25/10/07 | 1 | 1 | 1 | 1 | - | - | - | - |
| IYL Lee | 13/10/00 | 25/10/07 | 1 | - | 1 | | - | - | - | - |
| JB Studdy (Alternate) | 22/10/03 | 25/10/07 | - | 1 | - | 1 | - | - | - | - |
| GH Levy | 03/04/98 | 25/10/07 | 1 | - | - | - | - | - | - | - |
| PV Gleeson (Alternate) | 06/07/04 | 25/10/07 | - | 1 | 1 | - | - | - | - | - |
| R Magid | 03/04/98 | 25/10/07 | 1 | 1 | - | 1 | - | - | - | - |
| BM Sherman | 16/02/98 | 25/10/07 | 1 | 1 | - | - | - | - | - | - |
| JB Studdy | 04/06/98 | Continuing | 6 | 6 | 2 | 2 | - | - | 1 | 1 |
| PD Viner | 03/04/98 | Continuing | 6 | 6 | - | - | - | - | 1 | - |
| TC Strike | 26/10/07 | Continuing | 5 | 4 | 2 | 2 | - | - | 1 | 1 |
| LJ Asper (Alternate) | 26/10/07 | Continuing | - | 1 | - | - | - | - | - | - |
| LJ Asper | 26/10/07 | Continuing | 5 | 5 | - | - | 2 | 2 | 1 | 1 |
| | | | | | | | | | | |
A Number of meetings held during the year during which the Director was in office B Number of meetings attended
Remuneration Report
Principles Used to Determine the Nature and Amount of Remuneration
The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:
- Competitiveness and reasonableness
- Acceptability to shareholders
- Performance linkage / alignment of executive compensation
- Transparency
- Capital management.
In consultation with external remuneration consultants, the Company has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation.
Alignment to shareholders’ interests:
- Has economic profit (earnings before interest and tax – “EBIT”) as a core component of plan design
- Focuses on sustained growth in share price and delivering constant return on assets as well as focusing the executive on key non-financial drivers of value
- Attracts and retains high calibre executives.
Alignment to program participants’ interests:
- Rewards capability and experience
- Reflects competitive reward for contribution to shareholder growth
- Provides a clear structure for earning rewards
- Provides recognition for contribution.
The framework provides a mix of fixed and variable pay, and a blend of short and deferred incentives. As Executives gain seniority with the group, the balance of this mix shifts to a higher proportion of “at risk” rewards.
Non-Executive Directors Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. The Nomination Committee has responsibility for reviewing and recommending the level of remuneration for non-executive Directors in relation to Board and Committee duties. The non-executive Directors do not participate in any share option plans.
Remuneration for non-executive Directors consists of annual fees and superannuation contributions made in accordance with superannuation guarantee legislation for the Directors performing their duties on the Board of the Company and on various committees.
Directors’ fees have been determined on the basis that it will be attractive to proposed Board members and ensure the Company’s Board is comprised of skilled and well-qualified Directors.
There are no retirement allowances for non-executive Directors.
Executive Pay
The executive pay and reward framework has four components:
- Base pay and benefits
- Short-term performance incentives through cash bonuses
- Deferred incentives through participation in the Ten Deferred Incentive Plan, and
- Other remuneration such as superannuation.
Executives in the past have been granted share options under the Ten Executive Option Plan. This Plan is currently suspended.
The combination of these components comprises the Executives’ total remuneration.
Base Pay
Base pay is structured as fixed remuneration that may be delivered as a combination of cash and salary packaged benefits including motor vehicles.
External remuneration consultants periodically provide analysis and advice to ensure base pay is set to reflect the market for a comparable role. Base pay for senior Executives is reviewed annually to ensure the Executive’s pay is competitive with the market. Some Executives have fixed annual base pay increases included as a term of their employment contract.
Retirement Benefits Retirement benefits are delivered under defined contribution superannuation funds.
Short-Term Incentives
Short-term incentives are available through cash bonuses to certain Executives as determined by the Remuneration Committee. Short-Term Incentive Scheme ('STI') targets are established in each financial year with 25% of the incentive dependent on group EBIT targets, as approved by the Board, and the remainder based on achievement of specific individual and leadership related targets, objectives and measures plus a discretionary component based on individual contribution to the business. EBIT is deemed to be the most appropriate measure in determining incentive remuneration in line with company performance. Short-term incentives are payable in December of each year. Using a combination of financial and non-financial targets ensures variable reward is linked to shareholder value consistent with the business plan.
Each Executive has a target short-term incentive opportunity depending on the accountabilities of the role and impact on organisation or business unit performance. For senior Executives (other than the Executive Chairman, CEO – Television and CEO - Eye Corp) the maximum target bonus opportunity varies between 15-35% of fixed remuneration. The Executive Chairman can receive up to a maximum target bonus of 75% of fixed remuneration. The CEO - Television can receive up to a maximum target bonus of 50% of fixed remuneration and the CEO - Eye Corp can receive up to a maximum target bonus of 35% of fixed remuneration. Each year, the Remuneration Committee reviews both the prescribed targets for the forthcoming year and recommended payments for the completed year under the plan. Performance against STI objectives is measured via a confidential 360-degree feedback review plus a discretionary payment based on individual contribution to the business. The Executive Chairman's performance is assessed by the Board Remuneration Committee annually against pre-determined performance criteria weighted heavily to the performance of the Group.
Ten Deferred Incentive Plan A limited number of senior Executives are invited to participate in a deferred incentive share plan. Ten Network Holdings Limited wishes to give eligible employees an opportunity to participate in the Ten Deferred Incentive Plan (“Ten Deferred Incentive Plan”) to encourage retention of key employees, provide an incentive for future performance and align employee interests with shareholder value in the future.
For participants, a maximum “incentive amount” is determined at the Remuneration Committee's discretion. The incentive amount is payable with reference to certain profit and personal targets.
Shares equal to the incentive amount are bought on market upfront and vest in four equal tranches over three years. The first tranche vests on the date of purchase with the next three tranches of shares vesting on or about each successive anniversary of the first acquisition date.
The plan rules contain a restriction on removing the 'at risk' aspect of the instruments granted to executives. Plan participants may not enter into any transaction designed to remove the 'at risk' aspect of an instrument before it vests.
Whilst employed by the Company the tranches of shares are subject to a trading lock until the applicable anniversary of the first acquisition date.
Ten Executive Share Option Plan
Executives in the past have been granted share options under the Ten Executive Option Plan. This Plan is currently suspended.
Details of Remuneration Executive Director of Ten Network Holdings Limited
* Cash bonuses include one-off payments to the Executive Director and certain Other Executives totalling $1,582,286. These payments were in relation to a proposed sale process and were reimbursed to the Consolidated Entity by CanWest.
Directors of Ten Network Holdings Limited
Other Executives of the Consolidated Entity
* Cash bonuses include one-off payments to the Executive Director and certain Other Executives totalling $1,582,286. These payments were in relation to a proposed sale process and were reimbursed to the Consolidated Entity by CanWest.
Executive Director of Ten Network Holdings Limited
Directors of Ten Network Holdings Limited
Other Executives of the Consolidated Entity
Cash Bonuses and Options
In the past, options have been granted to Executives under the Ten Executive Option Plan, details of which are set out in Note 33 to the financial statements. The Ten Executive Option Plan is currently suspended.
Shares granted as part of the Ten Deferred Incentive Plan were issued on a discretionary basis. The amounts disclosed above as part of 'Share-Based Payment' represent the estimated amount accrued in line with the accounting requirements of AASB 2 Share-Based Payment.
Remuneration and other terms of employment for the Executive Director and the five Executives of the consolidated entity receiving the highest emoluments are formalised in service agreements. Each of these agreements provide for the provision of short-term performance-related incentives, other benefits including car leases and participation when eligible, in the Ten Executive Option Plan and the Ten Deferred Incentive Plan. Major provisions of the agreements relating to remuneration are set out below.
Nicholas Falloon, Executive Chairman
Term of agreement – 3 years commencing 1 September 2005.
- Effective 1 September 2007 fixed remuneration of $2,184,000 inclusive of superannuation, to be reviewed annually by the Remuneration Committee and increased by an amount not less than any rise in the annual CPI during the relevant period.
- A short-term incentive (STI) of up to 75% of current fixed remuneration may be paid against a set of targets and objectives heavily weighted to the financial performance of the Group.
- Deferred Incentives of up to a maximum of $1,500,000 of Ten Network Holdings Limited shares may be paid against a set of targets to be determined annually and weighted heavily to the financial performance of the Group. Shares must be held by Mr Falloon for a period of not less than 18 months from date of acquisition.
Variation Agreement – Initial term of 12 months commencing 1 September 2008, thereafter continuing until terminated by notice.
- Effective 1 September 2008, fixed remuneration of $1,135,680 inclusive of superannuation, to be reviewed annually by the Remuneration Committee and increased by an amount not less than any rise in the annual CPI during the relevant period.
- A three month notice period exists for Mr Falloon and the employer which may be given no earlier than 31 May 2009.
- A short-term incentive (STI) of up to 75% of current fixed remuneration may be paid against a set of targets and objectives heavily weighted to the financial performance of the Group.
- Deferred Incentive of up to $750,000 to be used to acquire Ten Network Holdings shares.
- Payment of termination benefit on early termination by the employer, other than for gross misconduct, is based on fixed remuneration plus pro-rated short and deferred incentive payments.
- Termination benefit for resignation, immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.
- One month's notice of termination may be given by Mr Falloon within ninety days after there is any diminution in the nature of the duties or responsibilities to be performed by him which results from a change in control. A payment equal to 12 months' fixed remuneration together with short-term and deferred incentive payments is required to be paid to Mr Falloon in such circumstances.
Grant Blackley, Chief Executive Officer – Television
Term of agreement – commencing 1 September 2007 and expiring 1 September 2011.
- Effective 1 September 2007 fixed remuneration salary, inclusive of superannuation is $1,100,000 to be reviewed annually by the Executive Chairperson of the board of directors of The Ten Group Pty Limited (currently Mr Falloon), and increased by an amount not less than any rise in the CPI.
- Fixed remuneration will be reviewed each year with effect from 1 September 2008.
- For the financial year commencing from 1 September 2007 short-term incentives are available under a short-term incentive scheme equivalent to 50% of fixed remuneration on achievement of agreed STI targets.
- Deferred incentives of up to 50% of fixed remuneration are available through participation in the Ten Deferred Incentive Plan, subject to Mr Blackley satisfying individual and corporate performance criteria.
- Payment of termination benefit on early termination by the employer, other than for gross misconduct, prior to 1 September 2008 shall be 18 month's fixed remuneration to the employee or on or after 1 September 2008 shall be 12 month's fixed remuneration to the employee.
- In addition, 100% of the eligible STI is paid on a pro-rated period remaining in the financial year, such pro rata amount being calculated using the percentage of the maximum short term incentive payment achieved in the previous financial year.
- Deferred incentives allocated but not vested will be additionally delivered.
- Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration, any STI amount due and payable and leave unpaid at the date of termination.
- Six months' notice of termination may be given by Mr Blackley no earlier than six months prior to the expiration of the contract. A payment of fixed remuneration to date of termination and short term incentive payments is required to be paid to Mr Blackley in such circumstances.
Gerry Thorley, Chief Executive Officer – Eye Corp
Term of agreement – commencing 1 January 2007.
- Effective 1 January 2007 fixed remuneration, inclusive of superannuation is $725,000 increasing to $754,000 on 1 January 2008 and by no less than 4% annually.
- Short-term incentives are available under a short-term incentive scheme equivalent to 35% of fixed remuneration on achievement of specific STI targets weighted heavily to the financial performance of the Group.
- Deferred incentives equivalent to 20% of fixed remuneration are available through participation in the Ten Deferred Incentive Plan.
- The company may terminate the contract at any time by providing twelve months' fixed remuneration.
- Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.
- 21 days' notice may be given by the employee if there is a substantive change to his role.
- A payment equivalent to twelve months' fixed remuneration must be paid if there is a substantive change in his role leading to termination.
- Six months' notice of termination may be given by Mr Thorley on or after the fourth anniversary of the commencement date.
David Mott, Chief Programming Officer
Term of agreement – 4 years commencing 1 January 2006.
- Fixed remuneration, inclusive of superannuation, for the year ended 31 December 2006 of $650,000, increasing to $680,000 on 1 January 2007, $710,000 on 1 January 2008 and $740,000 on 1 January 2009.
- A sign on bonus of $200,000 was payable upon commencement of this agreement.
- Short-term incentives are available under a short term incentive scheme equivalent to 25% of fixed remuneration on achievement of specific STI targets.
- Deferred incentives are available through participation in the Ten Deferred Incentive Plan.
- Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.
Kerry Kingston, Chief Operating Officer
Term of agreement – 3 years commencing 1 January 2006.
- Fixed remuneration, inclusive of superannuation, for the year ended 31 December 2007 of $555,450, increasing to $577,668 on 1 January 2008.
- Short-term incentives are available under a short-term incentive scheme equivalent to 25% of fixed remuneration on achievement of specific STI targets.
- Deferred incentives are available through participation in the Ten Deferred Incentive Plan.
- Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.
Term of agreement – 3 years commencing 1 July 2008.
- Fixed remuneration, inclusive of superannuation, for the year ended 30 June 2009 of $630,000, increasing to $665,000 on 1 July 2009 and $700,000 on 1 July 2010.
- Short-term incentives are available under a short-term incentive scheme equivalent to 25% of fixed remuneration on achievement of specific STI targets.
- Deferred incentives are available through participation in the Ten Deferred Incentive Plan.
- Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.
John Kelly, Chief Financial Officer
Term of agreement – 4 years commencing 1 January 2007.
- Fixed remuneration, inclusive of superannuation, for the year ended 31 December 2007 of $550,000, increasing to $577,500 on 1 January 2008, no less than 5% on 1 January 2009 and no less than 5% on 1 January 2010.
- Short-term incentives are available under a short-term incentive scheme equivalent to 25% of fixed remuneration on achievement of specific STI targets.
- Pro rata short-term incentive payment payable at end of contract based on completed calendar months in fiscal year.
- Deferred incentives are available through participation in the Ten Deferred Incentive Plan.
- Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.
Stephen Partington, Group General Counsel and Company Secretary
Term of agreement – 3 years commencing 1 October 2007.
- Fixed remuneration, inclusive of superannuation, for the year ended 30 September 2008 of $375,000, with an increase of no less than the greater of 4% or CPI for years ended 30 September 2009 and 30 September 2010.
- Short-term incentives are available under a short term incentive scheme equivalent to 25% of base salary on achievement of specific STI targets.
- Deferred incentives are available through participation in the Ten Deferred Incentive Plan.
There are no unissued ordinary shares of Ten Network Holdings Limited under option at the date of this report.
3: Mr Strike has 57,981 subordinate voting shares of CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.6% ownership in Ten Network Holdings Limited.
4: Mr Asper has 1,361,773 subordinate voting shares and 25,595,325 multiple voting shares of CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.6% ownership in Ten Network Holdings Limited.
5: Mr Viner has 50,000 subordinate voting shares of CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.6% ownership in Ten Network Holdings Limited.
4: Mr Viner has 50,000 subordinate voting shares of CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.7% ownership in Ten Network Holdings Limited.
The overall level of executive reward takes into account the performance of the consolidated entity over a number of years. Over the past five years, the consolidated entity's normalised EBIT has grown at an average of around 2% per annum, and shareholder wealth (normalised earnings per share) has declined at an average rate of around 4% per annum. During the same period, average executive remuneration (Executive Director and the top five remunerated Executives) has grown by approximately 13% per annum. Excluding the Executive Director, remuneration for the top five remunerated Executives has grown by 9%. Details of changes to the remuneration of the Executive Director are detailed on page 16 of the financial statements. Executive remuneration includes the accounting impact of deferred incentives in line with AASB 2 Share-Based Payment.
Non-Audit Services
- All non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor
- None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.
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| | | Consolidated |
| | | 2008 $’000 | 2007 $’000 | |
| Audit and other assurance services: | | | | |
| Auditors of the Company – PricewaterhouseCoopers | | | | |
| - Audit or review of financial reports | | 580 | 573 | |
| - Other audit related work | | 179 | 143 | |
| - Other assurance services | | 32 | 539 | |
| Other Auditors | | | | |
| - Audit or review of financial reports – Horwath Clark Whitehill LLP | | 104 | 44 | |
| | | 895 | 1,299 | |
| Other services: | | | | |
| Auditors of the Company – PricewaterhouseCoopers | | | | |
| - Advisory services | | 36 | 186 | |
| - Taxation | | 594 | 415 | |
| Other Auditors – Horwath Clark Whitehill LLP | | | | |
| - Taxation | | - | 5 | |
| | | 630 | 606 | |
| | | | | |
| | | 1,525 | 1,905 | |
| | | | | | | | |
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
Auditor's Independence Declaration
During the financial year, Competitive Foods Australia Limited entered into agreements in respect of the purchase of television airtime (through an advertising agency) from a controlled entity on normal commercial terms and conditions. Mr JJ Cowin, a Director of the Company, is Chairman of, and has a substantial interest in, Competitive Foods Australia Limited. The value of such transactions, which are at arm's-length, is not material to the consolidated entity.
Insurance of Officers
During the financial year, the Company arranged for directors and officers liability insurance cover for officers of the Company and related parties. An insurance premium was paid in relation thereto. The officers of the Company covered by this insurance includes all Directors and all employees in positions of responsibility.
The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ insurance contracts as such disclosure is prohibited under the terms of the contract.
Indemnification of Officers
The Company has entered into deeds to indemnify each Director of the Company in accordance with the approval given at the Annual General Meeting of the Company held on 7 December 1999.
In broad terms, the deeds of indemnity entrench a Director’s rights to:
- access the books and records of the Company which relate to the period the Director acted as a Director of the Company;
- be indemnified by the Company to the maximum extent permitted by law; and
- require the Company to take out an appropriate directors’ and officers’ insurance policy to protect the Director from liability (to the maximum extent permitted by law).
Separately, a deed of indemnity has been provided by The Ten Group Pty Limited to Directors and officers of that company and its controlled entities.
Additionally, separate deeds of indemnity cover other executives of controlled entities who have been requested to act as directors on the boards of other companies in which the Group holds an interest.
No liability has arisen under these indemnities at the date of this report.
Environmental Regulations
The consolidated entity is not subject to significant environmental regulations, with the exception that a controlled entity holds environmental licences for its manufacturing site in Victoria. The licenses require discharge to air and water to be below specified levels. These requirements arise under the Environmental Protection Authorities Regulations.
The Directors are not aware of any breaches to environmental regulations and are not aware of any infringement notices being issued.
Rounding of Amounts to Nearest Thousand Dollars
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in the directors report. Amounts in the directors' report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Signed in Sydney on 16 October 2008 in accordance with a resolution of the Directors.
NG Falloon
Chairman
TEN NETWORK HOLDINGS LIMITED
ANNUAL REPORT
For the year ended
31 August 2008
ABN 14 081 327 068
This financial report covers both Ten Network Holdings Limited as an individual entity and the consolidated entity consisting of Ten Network Holdings Limited and its controlled entities.
Ten Network Holdings Limited is a company limited by shares, incorporated and domiciled in Australia.
The Directors of Ten Network Holdings Limited present their report on the consolidated entity, consisting of Ten Network Holdings Limited (“the Company”) and its controlled entities, for the year ended 31 August 2008. Directors
The Directors that have been in office during the year and since year end are:
Mr NG Falloon (Chairman)
Mr JJ Cowin (Alternate Mr JB Studdy)
Mr PV Gleeson (Alternate Mr NG Falloon)
Mr JB Studdy (Alternates Mr JJ Cowin and Mr AJ Peschar) C
Mr PD Viner (Alternates Mr LJ Asper, Mr TC Strike and Mr JE Maguire)
Mr TC Strike (Alternate Mr LJ Asper) B
Mr LJ Asper B
A: Resigned as directors effective 25 October 2007.
Mr LS Freedman (Alternate Mr NG Falloon) A
Mr PPA Harris (Alternate Mr PV Gleeson) A
Ms IYL Lee (Alternate Mr JB Studdy) A
Mr GH Levy (Alternate Mr PV Gleeson) A
Mr R Magid (Alternate Mr NG Falloon) A
Mr BM Sherman (Alternate Mr B Sechos)A
B: Appointed as directors on 26 October 2007.
C: Mr A Peschar resigned as Alternate Director for Mr JB Studdy on 11 September 2007.
Principal Activities
The principal activity of Ten Network Holdings Limited is the investment in The Ten Group Pty Limited (“Ten Group”) and controlled entities, whose principal activities are the operation of commercial television licences in Sydney, Melbourne, Brisbane, Adelaide and Perth, and out-of-home advertising.
Results
The consolidated profit after income tax for the year ended 31 August comprises:
| | 2008 $’000 | 2007 $’000 |
| Earnings before interest, tax, depreciation and amortisation | 215,026 | 248,346 |
| Depreciation | (32,193) | (25,566) |
| Amortisation | (2,870) | (3,524) |
| Earnings before interest and tax | 179,963 | 219,256 |
| Subordinated debenture interest | - | (50,883) |
| Net interest expense – other | (48,916) | (42,698) |
| Profit before income tax | 131,047 | 125,675 |
| Income tax revenue/ (expense) | 142,958 | (47,152) |
| Profit after income tax | 274,005 | 78,523 |
| Profit attributable to minority interest | (523) | (12,392) |
| Profit attributable to members of the Company | 273,482 | 66,131 |
Dividends
Since the end of the previous financial year a fully franked dividend of 10.0 cents per share ($92,214,908) was paid on 4 January 2008 and a fully franked dividend of 3.5 cents per share ($32,465,475) was paid on 16 July 2008 in respect of the results for the period to 30 June 2008.
Review of Operations
The Directors were satisfied with the results of the consolidated entity for the year.
Significant Changes in the State Of Affairs
Exchange of minority shareholders in The Ten Group Pty Limited
During February 2008, AMP Life Limited ('AMP') and Copplemere Pty Limited ('Copplemere') exchanged their remaining interests (totalling 5,435,916 shares) in The Ten Group Pty Limited into the equivalent number of new shares in Ten Network Holdings Limited. The value of the shares exchanged was recorded at the prevailing market value of $13.1m in total.
Tax Consolidations
Following the above exchange, Ten Network Holdings Limited now holds 100% of the shares in The Ten Group Pty Limited and as a result becomes the head of a new tax consolidated group. This triggers the requirement to reassess the tax cost bases of the tax consolidated group – broadly with reference to proportional market values. An income tax benefit of $188.1m was booked to the income statement as a result of this calculation. Of this benefit, an amount of $186.4m relates to a reduction to deferred tax liabilities arising from an uplift of $621.4m in the tax cost base of television licences. The remaining benefit of $1.6m relates to uplifts in the tax cost bases of other depreciable assets, particularly fixed assets such as plant and equipment.
Share Buybacks
On 3 July 2008, Ten Network Holdings announced that it proposed to acquire up to 10% of the Company's issued shares via an on-market share buyback. As at 31 August 2008, Ten Network Holdings Limited has purchased 2,348,280 of issued shares valued at $3,608,042. As a consequence, Canwest's interest in Ten Network Holdings Limited has now increased to 56.6% at 31 August 2008.
Other than the above, there were no significant changes in the state of affairs of the consolidated entity during the year.
Events Subsequent to Balance Date
No matters or circumstances have arisen since balance date that have significantly affected or may significantly affect:
- the operations in financial years subsequent to 31 August 2008 of the consolidated entity; or
- the results of those operations; or
- the state of affairs in financial years subsequent to 31 August 2008 of the consolidated entity.
Likely Developments
Information as to likely developments in the operations of the consolidated entity and the expected results of those operations in subsequent financial years has not been included in this report because, in the opinion of the Directors, it would prejudice the interests of the consolidated entity.
Information on Directors
| | Particulars of Directors’ Interests in Shares and Options of The Company
|
| Director | Responsibilities | Ordinary Shares |
Options
|
| | | | |
| Chairman - Executive | | | |
| NG Falloon | Executive Chairman of Board of Directors. Member of Remuneration Committee | 740,836 | - |
| Non-Executive Directors | | | |
| JJ Cowin | Member of Audit and Chair of Remuneration Committee | 1,000,000 | - |
| PV Gleeson | Chair of Audit and Member of Remuneration Committee | 15,228,608 | - |
| JB Studdy | Member of Audit Committee and Chair of Nomination Committee | 50,000 | - |
| PD Viner A | | - | - |
| TC Strike B | Member of Audit Committee. | | |
| LJ Asper C | Member of Remuneration Committee. | | |
A: Mr Viner has 50,000 subordinate voting shares of CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.6% ownership in Ten Network Holdings Limited.
B: Mr Strike has 57,981 subordinate voting shares of CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.6% ownership in Ten Network Holdings Limited.
C: Mr Asper holds an interest in 1,361,773 subordinate voting shares plus 25,595,325 multiple voting shares in CanWest Global Communications Corp., whose subsidiary, CanWest MediaWorks Ireland Holdings, has 56.6% ownership in Ten Network Holdings Limited.
All Directors are members of the Nomination Committee.
The qualifications and experience of each Director are detailed below.
Nicholas G Falloon BMS (Age 51)
Appointed Executive Chairman of the Company in February 2002. Previously served as Chief Executive Officer of Publishing and Broadcasting Limited from 1998 to 2001. Prior to that Mr Falloon held other senior executive positions within the PBL organisation. He has also been a Director of a number of companies including Foxtel, Fox Sports and ecorp.
Mr Falloon is a member of the Nomination and Remuneration Committees of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Jack J Cowin
BA (Age 66)
Director of the Company since April 1998. Founder and Chairman of Competitive Foods Australia Limited and is on the board of directors of SOPA.
Mr Cowin is Chairman of the Remuneration Committee and is a member of the Nomination and Audit Committees of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Paul V Gleeson
BEc, ACA (Age 55)
Director of the Company since February 1998. He is a member of the Institute of Chartered Accountants in Australia.
Mr Gleeson is Chairman of the Audit Committee and is also a member of the Nomination and Remuneration Committees of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
John B Studdy AM
BEc, FCA (Age 79)
Director of the Company since June 1998. Chairman of the Company from 1998 to February 2002 and Chairman of The Ten Group Pty Limited from May 1993 to February 2002. Mr Studdy is also Director of IWPE Nominees Pty Limited. Recipient of Centenary Medal 2003. Mr Studdy is an Honorary Vice President of the International Federation of MS Societies, Emeritus President of the MS Society and Chairman of the Pain Management Research Institute and of ING Australia Foundation.
Mr Studdy is Chairman of the Nomination Committee and is also a member of the Audit Committee of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: Director of Angus & Coote (Holdings) Limited, Director of Westfield Group, a stapled security which comprises Westfield Holdings Limited and Westfield Management Limited as the responsible entity of Westfield Trust and Westfield America Management Limited as the responsible entity of Westfield America Trust, and Director of Westfield Management Limited as the responsible entity of Carindale Property Trust.
Peter D Viner
(Age 63)
Director of the Company since April 1998. Served as Chief Executive Officer of The Ten Group Pty Limited from 1993 to 1997. Currently Executive Vice-President of Canwest Global Communications Corp.
Mr Viner is a member of the Nomination Committee of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Thomas C Strike
BA, BCom (Hons), CA, CF (Age 54) Director of the Company since October 2007. President, Corporate Development & Strategy Implementation of Canwest Global Communications Corp. Director of a number of media and entertainment companies associated with the Canwest Group.
Mr Strike is a member of the Audit Committee and Nomination Committee of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Leonard J Asper
BA, LLB (Age 44)
Director of the Company since 2007. President and Chief Executive and a director of Canwest Global Communications Corp. Director of a number of media and entertainment companies associated with the Canwest Group.
Mr Asper is a member of the Nomination and Remuneration Committees of the Company.
Other Current Australian Listed Company Directorships: None
Former Australian Listed Company Directorships in Last 3 Years: None
Company Secretary
Stephen Partington was appointed as Company Secretary of The Ten Group Pty Limited in October 1996 and as Company Secretary of Ten Network Holdings Limited in June 2001. He also holds the position of Group General Counsel.
Previously he held the position of General Counsel and Group Secretary at Advance Bank where he was employed from 1982 to 1996. Mr Partington graduated with a Bachelor of Commerce and Bachelor of Laws from the University of New South Wales and Masters of Laws from each of Sydney University and University of Technology, Sydney.He is a fellow of Chartered Secretaries Australia and has been admitted as a solicitor in New South Wales since 1980.
| Directors’ Meetings | | | | | |
| |
| The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 31 August 2008 , and the number of meetings attended by each Director were: |
|
|
|
| Meeting of Directors | Audit Committee | Remuneration Committee | Nomination Committee |
| Director’s Name
Alternate name (if applicable) | Date appointed | Date
resigned | A | B | A | B | A | B | A | B |
| NG Falloon | 13/02/02 | Continuing | 6 | 6 | - | - | 2 | 2 | 1 | 1 |
| JJ Cowin | 03/04/98 | Continuing | 6 | 5 | 2 | 2 | 2 | 2 | 1 | 1 |
| JB Studdy (Alternate) | 27/04/01 | Continuing | - | 1 | - | - | - | - | - | - |
| LS Freedman | 16/02/98 | 25/10/07 | 1 | 1 | - | - | - | - | - | - |
| PV Gleeson | 16/02/98 | Continuing | 6 | 6 | 3 | 3 | 2 | 2 | 1 | 1 |
| PPA Harris | 16/02/98 | 25/10/07 | 1 | 1 | 1 | 1 | - | - | - | - |
| IYL Lee | 13/10/00 | 25/10/07 | 1 | - | 1 | | - | - | - | - |
| JB Studdy (Alternate) | 22/10/03 | 25/10/07 | - | 1 | - | 1 | - | - | - | - |
| GH Levy | 03/04/98 | 25/10/07 | 1 | - | - | - | - | - | - | - |
| PV Gleeson (Alternate) | 06/07/04 | 25/10/07 | - | 1 | 1 | - | - | - | - | - |
| R Magid | 03/04/98 | 25/10/07 | 1 | 1 | - | 1 | - | - | - | - |
| BM Sherman | 16/02/98 | 25/10/07 | 1 | 1 | - | - | - | - | - | - |
| JB Studdy | 04/06/98 | Continuing | 6 | 6 | 2 | 2 | - | - | 1 | 1 |
| PD Viner | 03/04/98 | Continuing | 6 | 6 | - | - | - | - | 1 | - |
| TC Strike | 26/10/07 |