TABCORP HOLDINGS LIMITED — AGM Information 2017

Oct 26, 2017

2017 AGM Addresses

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Tabcorp Holdings Limited ABN 66 063 780 709 Annual General Meeting 27 October 2017

CHAIRMAN’S ADDRESS AND MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER’S ADDRESS

CHAIRMAN’S ADDRESS

Introduction

Tabcorp’s origins as an ASX-listed company date back to 1994 when it acquired the gaming and wagering businesses that were then run by the state-operated Victorian TAB.

Tabcorp since has grown to become one of the world’s largest publicly listed wagering and gaming companies. Through our three businesses – Wagering and Media, Gaming Services and Keno – Tabcorp operates a diverse portfolio of market-leading Australian brands and a unique multi-product and multi-channel business model.

Gambling is a significant industry in Australia, largely delivered by operators of government-issued licences, such as Tabcorp. The financial proceeds generated by gambling are shared with governments, providing a substantial source of funding for community services and infrastructure.

Tabcorp has a rich racing heritage. Our Wagering operations underpin the funding of the racing industries in NSW and Victoria, which are among the strongest in the world.

Racing is not only an important part of the social lives of many Australians, it’s also a significant driver of economic activity and employment. In fact, more than 230,000 people are actively employed or involved in Australian racing, including trainers, strappers, jockeys and administrators.

FY17 - An important year

I would now like to provide an overview of the 2017 financial year which, on any analysis, was an important year for Tabcorp.

At an operational level, we continued the repositioning of our businesses. Tabcorp has, over a number of years, transformed from a business with a great retail heritage to a diversified gambling company with a strong digital and media footprint.

At the same time, we have invested in new growth opportunities and executed a number of initiatives that better position the company to deliver long-term value for our shareholders, industry partners, and government and regulatory stakeholders.

Most notably, we announced and progressed the proposed combination with Tatts which is planned to deliver significant value to shareholders and other stakeholders of both companies. Both Tabcorp and Tatts are committed to completing the combination by the end of 2017. I will cover this transaction in more detail shortly.

In August 2016, we launched our UK start-up business Sun Bets. The strategic rationale for Sun Bets was to give us a position in the large and growing UK gambling market under the iconic ‘Sun’ brand. However, in the first 11 months of trading we were reminded of the challenges associated with start-ups, and the performance of the business did not deliver in accordance with our plans.

As a consequence, the Sun Bets operating model and commercial arrangements have been reviewed, and the leadership and capability strengthened. The management team is now tasked

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with improving performance. If performance does not improve to meet forecast expectations, we will give serious consideration to exercising our contractual right to exit operations from 31 December 2019.

As would be expected in the establishment of a start-up business, we have recognised the need quickly to mature our systems and regulatory compliance capability. We are working closely with the UK Gambling Commission, following a review, to ensure we meet regulatory expectations and build a sustainable compliance capability in our dealings with our customers, gambling products and markets.

In December 2016 we acquired Intecq, a gaming systems and monitoring company which is now integrated and has added scale and capability to our Gaming Services business.

During FY17 we continued to invest in our risk management and regulatory compliance capability and embed this across the business to best position us in the evolving gambling landscape. In the past 18 months we have appointed a Chief Risk Officer and significantly upweighted the capability of our risk and compliance function. In July this year, we appointed a new Group General Counsel, who brings a wealth of legal and regulatory expertise.

In February 2017, we settled the AUSTRAC proceedings. Shareholders will recall that AUSTRAC took civil action against Tabcorp for non-compliance with Australia’s AML/CTF legislation between 2010 and 2014. In agreeing a settlement with AUSTRAC, the Board carefully considered the uncertainty associated with protracted litigation, as well as the company’s desire to maintain collaborative and constructive relationships with regulators such as AUSTRAC.

Risk and compliance is, and will continue to be an important area of focus for the Board and management. Every director is a member of the Audit, Risk and Compliance Committee, reflecting the importance we place on this function at Board level. This Committee is now chaired by Vickki McFadden.

We have taken valuable learnings from our experiences over the past few years and we are committed to continuing to invest to ensure our systems and capabilities remain contemporary in an evolving regulatory landscape.

The work that we have done to strengthen our resources is consistent with our aspiration to be the world’s most respected gambling entertainment company.

Core to this is a strong corporate culture centred around ‘doing the right thing’, and underpinned by Company-wide commitments to responsible gambling, integrity, and the highest levels of regulatory compliance for the benefit of all of our stakeholders.

Group results

Turning now to the group’s financial results in 2017.

Tabcorp reported a statutory loss after tax of $20.8 million, as a result of a number of significant items after tax totalling $199.7 million. These largely related to costs associated with our proposed combination with Tatts, the AUSTRAC civil proceedings and an operating loss and related impairment for Sun Bets.

Net Profit after Tax before Significant Items was $178.9 million. Our core businesses – TAB, Media, Gaming Services and Keno - performed well, with Group revenues growing 1.9% to $2.2 billion. However, earnings were impacted by growth in operating expenses of 7.1%, driven by investments in Intecq, technology, marketing, and risk and compliance.

Shareholders received a full year ordinary dividend of 25 cents per share, fully franked. This was the maximum amount payable under the Merger Implementation Deed with Tatts. While this

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exceeded our stated dividend policy, it was the Board’s decision to reward Tabcorp shareholders with the maximum possible dividend prior to the proposed combination taking effect. The Company’s Dividend Reinvestment Plan was also suspended in FY17 in accordance with the terms of the Merger Implementation Deed.

Our dividend target for FY18 will be 90% of NPAT before significant items, amortisation of the Victorian Wagering and Betting Licence, and Sun Bets.

Proposed Tatts combination

I would now like to provide shareholders with an update on the proposed combination with Tatts.

In October 2016, Tabcorp and Tatts announced that the companies had reached agreement to combine and create a world-class, diversified gambling entertainment group.

Over the past twelve months we have been working closely with Tatts to implement the transaction, and planning for the integration of our two businesses.

The proposed combination will bring together two highly complementary businesses and a strong pool of talent from within each organisation, ensuring that the combined entity is well positioned to invest, innovate and compete in a rapidly evolving environment.

The proposed transaction is expected to unlock substantial value for Tatts and Tabcorp shareholders, with at least $130 million per annum of EBITDA from synergies and business improvements expected to be delivered in the first full year after integration of the companies. The proposed combination will also deliver substantial financial and other benefits for our customers, business partners and other stakeholders.

Tabcorp has incurred considerable upfront cost to bring the proposed combination to life. These include the cost of acquiring an economic exposure to Tatts, and the legal and advisory expenses associated with securing the required regulatory approvals.

These costs have not been incurred lightly. While this is a complex transaction, it is the result of a considered decision by the Board, weighing the inherent risks in undertaking a transformational transaction of this size against the significant benefits of the proposed combination.

In June 2017, the Australian Competition Tribunal granted authorisation for the transaction. However, the Tribunal’s decision was challenged by the ACCC and CrownBet. This resulted in a judicial review of the Tribunal’s decision by the Federal Court, which was heard in late August.

While the Court dismissed the CrownBet application for review, an aspect of one of the ACCC’s grounds for review was upheld, and the matter was referred back to the Tribunal for redetermination.

The Tribunal considered the matter over two days this week and we are awaiting the decision.

Separately, as previously announced, all of the necessary pre-implementation approvals to give effect to the proposed combination have been received from the relevant state and territory gambling authorities.

As I mentioned last year, the proposed transaction will be implemented by way of a Tatts Scheme of Arrangement that will be voted on by Tatts shareholders at a Scheme Meeting, which is planned to take place on the 30[th] of November.

Subject to Tatts shareholders voting in favour at the Scheme Meeting – and approval by the Court of the scheme - we are expecting implementation to take place in December.

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Developments in gambling regulation

A number of reforms were announced during the year which are supported by Tabcorp, and will lead to a more balanced and responsible approach to the way gambling is offered and promoted.

Pleasingly, the Federal Government introduced a Bill to amend the Interactive Gambling Act, which became law in September 2017. Among a number of things, this has made it clear that online betting on live sport is illegal, addressing the activity of operators that were circumventing the previous legislation. Additionally, the Government introduced measures to end the offering of credit to customers by online bookmakers, which will come into force in February 2018.

The Federal Government has also announced an intention to restrict gambling advertising during live sports broadcasts from next year, and is making significant progress on a National Consumer Protection Framework.

Board of Directors

I will now turn to the Board of Directors. I would like to take this opportunity to welcome Bruce Akhurst and Vickki McFadden who formally commenced as Non-Executive Directors on 1 July 2017. Bruce and Vickki bring diverse skills and deep commercial and Board experience to Tabcorp and have been making a significant contribution to Board deliberations.

They are both standing for election today and you will have the opportunity to hear from them later in the meeting.

Jane Hemstritch is retiring from the Board today. Jane joined the Tabcorp Board in 2008 and has been Chairman of the Board Audit, Risk and Compliance Committee since 2011. I would like to thank Jane for her contribution to Tabcorp over a number of years and, on behalf of the Board, extend our best wishes for her retirement.

Partnerships and employees

I would like to acknowledge our many stakeholders and business partners for their collaboration and contribution during the 2017 financial year. Approximately 70 per cent of Tabcorp’s revenues are returned to the racing industry, to licensed venues and to the community through taxes. Our business generated more than $1.26 billion of taxes and racing industry funding in FY17. This evidences the integral role Tabcorp plays in our industry.

I would also like to recognise the management team and our more than 3,000 employees for their significant additional efforts during the 2017 financial year.

Conclusion

As I mentioned at the outset, FY17 was an important but challenging year for Tabcorp.

We strengthened our risk and compliance capability and further invested in our core businesses to make them stronger and more resilient in the face of increased competition and disruption. I am confident that Tabcorp has entered the 2018 financial year in a better position to deliver long-term value for our shareholders and other stakeholders.

We will continue to invest with discipline to strategically position the business for the future.

Our priority remains to successfully complete the proposed combination with Tatts, which will be transformational for Tabcorp.

I will now hand you over to our Managing Director and Chief Executive Officer, David Attenborough, for his account of the 2017 financial year.

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MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER’S ADDRESS

Thank you Chairman.

As the Chairman has outlined, we made a number of decisions and investments in FY17 which were about driving growth and delivering long-term, sustainable returns to shareholders and other stakeholders.

In terms of financial performance, the Group recorded a statutory loss of $20.8 million, which reflects the significant items covered in the Chairman’s address.

Before significant items, Net Profit after Tax was $178.9 million, down 3.8%. Group revenues were $2.2 billion, up 1.9% on the prior year.

A planned increase in operating expenses was driven by the acquisition of Intecq, and the investments we’ve been making across the business. We have been conducting a thorough review of the group’s cost base and are targeting an opex-to-revenue ratio, excluding Sun Bets, of approximately 22.5% in FY18.

Wagering & Media KPIs

I would now like to take you through the performance of each of our businesses, commencing with Wagering and Media, which operates the iconic TAB in Victoria, NSW and the ACT, as well as Sky Racing, Sky Sports Radio and Luxbet.

Wagering and Media revenues were $1.87 billion, in line with FY16, while EBITDA was $350.0 million, down 8.4%.

The core TAB business remained in good shape, with our key performance metrics in digital and fixed odds delivering double digit growth in a highly competitive market. Digital turnover grew 13.9% to $4.36 billion and fixed odds revenues were $817.4 million, up 15.0%.

We also saw solid growth in customer acquisition, with active TAB account customers up almost 10% to 475,000 and, importantly, good retention rates.

However, the overall Wagering result was impacted by the underperformance of discrete areas of the business, namely Luxbet and Trackside. Luxbet recorded an EBIT loss of $13 million, while Trackside revenues declined 14.6% to $81.6 million. Since year end, we have been conducting a strategic review of Luxbet. We have also completed a review of Trackside’s product and marketing activity, with a program of initiatives already underway to promote growth.

Wagering & Media FY17 initiatives

During the year we made good progress on our strategy to invest in the digital experience, strengthen the integration between retail and digital, and forge even closer partnerships with our retail venues.

We successfully rolled out a digital commissions model to our retail partners, which means they now receive a commission on all TAB digital activity in their venues, as well as benefit from signing up account customers.

Digital commissions are a key part of new partnerships that we established with the Australian Hotels Association in NSW and Victoria, and with Community Clubs Victoria.

We launched further new products during FY17 and I will touch on two examples. Firstly, Check and Collect allows customers to scan physical tickets on their phone and have winnings deposited into their TAB accounts. This product evidences our strategy of bringing our digital capability into our

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retail venues to give customers a more convenient and contemporary experience. It also delivers efficiency benefits for our venue partners.

Quaddie Cash Out is another product we took to market in FY17. It’s the first parimutuel product in the world that allows a customer to cash out a live bet, and we saw growth in the Quaddie as a bet type on the back of this innovation during the year.

We also continued to make investments in improved programming, talent and graphics on Sky, and secured access to the key media rights that came up during the year, including all of Western Australian racing and South Australian thoroughbred racing. Sky continues to offer customers the complete suite of Australian racing across all codes, as well as the best of international racing.

Sun Bets is a strategic investment that has given us a position in the attractive UK online wagering and gaming market, accessed through the iconic Sun brand.

However, Sun Bets’ trading has disappointed. We have reset the business in terms of leadership and capability. While yet to gain traction, recent initiatives we have introduced include improved integration of the Dream Team fantasy football game, sportsbook and casino enhancements, and revised marketing and CRM strategies. Sun Bets’ performance remains under review.

Gaming Services KPIs

Our Gaming Services business works with licensed gaming venues to provide a mix of strategic advice, specialised services and financing to optimise venue performance. The business also provides gaming machine monitoring services in Queensland under the Odyssey brand.

Gaming Services continued to perform well in FY17, enhanced by the integration of Intecq.

Gaming Services achieved revenue growth of 34.2% to $143.9 million, and EBITDA was $82.1 million, up 17.1%. Excluding seven months of Intecq trading, revenues were $115.6 million, up 7.8%, and EBITDA was $72.9 million, up 4.0%.

Growth ex-Intecq was driven by the commencement of a number of new venues in NSW, including Panthers Group in the second half. At the end of FY17 TGS had around 10,650 machines under contract in NSW and Victoria, and our venues outperformed the market in both states.

This outperformance validates the TGS business model and gives us confidence as we focus on expansion.

Keno KPIs

Keno is played in more than 3,600 licensed venues and TABs across NSW, Victoria, Queensland and the ACT. In FY17 the Keno business recorded 2.0% growth in revenue to $212.7 million, and EBITDA was $72.0 million, up 2.4%. While we saw strong performance in NSW, Victoria and the ACT, our Queensland result was soft, influenced by a decline in economic activity in a state that was heavily impacted by drought and floods.

Pleasingly, we made significant progress on rolling out a range of new customer initiatives, and continued our transformation of Keno.

Jackpot pooling is now in place across each of our jurisdictions, and we went live with the new Mega Millions game in NSW and the ACT.

We also rolled out a digital in-venue offer in NSW to more than 200 venues by the end of FY17, with more than 13,000 new account holders.

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Our people and culture

At Tabcorp, we recognise the responsibilities that we have to our many stakeholders.

That includes our customers, the communities in which we operate, our team, our business partners, regulators and governments, as well as you, our shareholders.

For Tabcorp to continue to deliver for all of our stakeholders, we need to have an ongoing focus on driving a strong culture of integrity, putting the customer first, win-win partnerships, and excellence across all of our businesses. This is fundamental to our social licence to operate, and our ability to generate value for all of our stakeholders over the long term.

It’s common wisdom that culture begins at the top. We have a strong Senior Executive Leadership Team. We have strengthened the skills and capabilities of this team, particularly in the areas of legal, regulatory, governance, strategy, risk and compliance, with the appointment of several key leaders. These include a new Chief Risk Officer, Group General Counsel, Company Secretary and Chief Strategy Officer.

As we announced in late August, we are also transitioning the leadership of our Wagering and Media business in anticipation of the retirement of Craig Nugent later this year.

We are pleased to have appointed Adam Rytenskild from within the business to take the reins, so to speak, from Craig. Adam is an experienced wagering executive, having been with Tabcorp since 2000, and is well placed to grow the business in line with our purpose and values. I would also like to take this opportunity to acknowledge Craig’s contribution to Tabcorp and the racing industry more broadly, as he approaches his retirement.

Making Tabcorp a great place to work

Now, culture may begin at the top, but we all know it certainly doesn’t end there. For strong cultural values to flow through our entire business, our team of over 3,000 employees need to be aligned and motivated around our purpose, and to drive the right outcomes across the business. Our employees and those of our business partners, also participate in mandatory training to ensure their knowledge of regulations, including AML/CTF, is contemporary.

I am pleased to report that our employee engagement indicators continued to trend positively as we shared with you in the Annual Report.

Our commitments to diversity and inclusion, including gender equality and flexible work practices, are helping to support this. Tabcorp was the only gambling company recognised as an Employer of Choice for Gender Equality in FY17, and this remains an important area of focus for the business.

Trading update

I would now like to provide an update on our first quarter trading, as contained in the ASX release lodged this morning. While it is no longer the Company’s practice to provide quarterly trading updates, it is appropriate in this instance, in light of the proposed combination with Tatts.

Group revenues for the three months to 30 September 2017 were $578.8 million, up 5.7% on the prior corresponding period.

Wagering & Media revenues were $481.5 million, up 4.5%. Excluding Luxbet, Wagering & Media revenues were up 5.7%.

Gaming Services revenue was $41.4 million, up 47.8% on the prior corresponding period, driven by the contribution from Intecq and benefits from TGS expansion. Excluding Intecq Gaming Services revenue was up 8.3%.

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Keno revenue was $54.8 million, down 5.3%, reflecting the cycling of a strong jackpot sequence in the same period last year.

As highlighted in our full year results announcement, Tabcorp reviewed its cost base during the first quarter. We expect to achieve an opex to revenue ratio of approximately 23% in the first half of FY18, and are targeting a full year ratio of approximately 22.5%.

Conclusion

In conclusion, our FY18 priorities centre on the successful completion of the proposed Tatts combination, disciplined execution of our business strategy, and continuing to strengthen our capability in the areas that will support the next chapter of our growth.

At the same time, we are focused on ensuring the highest levels of regulatory compliance across our businesses and maintaining a disciplined approach to operating expenses and capital expenditure.

I hope you have a great Spring Racing Carnival and I will now hand you back to the Chairman.

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These addresses will be webcast live on Tabcorp’s website at www.tabcorp.com.au from 10.00am (AEDT – Melbourne time) and will be archived on the website for viewing later today.

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