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ANNUAL REPORT 07
NSW LOTTERiES ANNUAL REPORT 2007
CONTENTS
LETTER TO ShAREhOLdER MiNiSTERS 1
OUR ViSiON, MiSSiON & VALUES 2
AbOUT ThiS REPORT 2
RESULTS 3
A MESSAgE fROM ThE ChAiRMAN
ANd ChiEf ExECUTiVE OffiCER 4
KEy fACTS 2006/2007 6
ThE yEAR iN bRiEf 7
WhO WE ARE ANd WhAT WE dO 10
Who We Are 10
What We Do – Our Charter 10
Our Games 10
Business Planning 10
Balanced Scorecard for Fiscal 2007 10
OUR PLAyERS 12
The Games 13
Player Services 19
Responsible Gaming 21
OUR RETAiLERS 23
The Retail Network 24
Agency Services 25
OUR bUSiNESS 27
The Gaming System 28
Staff and Agent Websites 29
Business Continuity 29
OUR ShAREhOLdERS 30
The Management Structure 32
Corporate Governance 32
The Board of Directors 36
The Executive Management Team 38
Risk Management 39
Insurance 39
Managing Resources 39
OUR STAff 41
Listening to Our Staff 42
Learning and Development 42
Rewarding Our Staff 44
Occupational Health and Safety 46
hiSTORy 47
fiNANCiAL OVERViEW 49
fiNANCiAL REPORT 50
STATUTORy REPORTiNg APPENdix 75
iNdEx 82
ACCESS TO SERViCES 84
NSW LOTTERIES ANNUAL REPORT 2007 1
The Hon. John Watkins, MP
Deputy Premier, Minister for Transport, and Minister for Finance
The Hon. Michael Costa, MLC
Treasurer, Minister for Infrastructure, and Minister for the Hunter
Dear Gentlemen
Report of Performance for the Year Ended 30 June 2007
We submit the NSW Lotteries Corporation’s Annual Report for the year ended 30 June 2007 for presentation to Parliament.
The Annual Report has been prepared in accordance with the relevant provisions of the State Owned Corporations Act 1989
and the Annual Reports (Statutory Bodies) Act 1984.
We are pleased to advise that the Auditor-General of NSW has certified the Corporation’s Financial Report that forms part of
the Annual Report, without qualification.
John Bagshaw Michael Howell
Chairman Chief Executive Officer
LETTER TO SHAREHOLDER MINISTERS
2 NSW LOTTERIES ANNUAL REPORT 2007
OUR VISION
We will continue to be a successful lottery operator.
OUR MISSION
We contribute to the community of NSW by maximising
the return to Government through providing quality lottery
products and services.
OUR VALUES
In all our activities we will:
• Operate with integrity
• Seek to provide excellent service to our customers
• Value the relationship with our retailers
• Acknowledge the contributions of our staff
• Be successful and continuously improve our business
• Be socially responsible
Throughout this report we will highlight how we practice
our values in our day to day business dealings.
OUR VISION, MISSION & VALUES ABOUT THIS REPORT
This report provides an account of the
operations of NSW Lotteries Corporation
for the financial year ended 30 June 2007.
The report analyses our achievements against
the performance measures and targets in the
NSW Lotteries Business Plan and the annual Statement
of Corporate Intent negotiated with the Corporation’s
Shareholder Ministers.
This annual report was produced in accordance with
the requirements of the Annual Reports (Statutory
Bodies) Act 1984 and complies with all relevant annual
reporting statutory requirements and disclosure guidelines.
We are committed to open and accountable reporting
and welcome your feedback.
An index is provided at the back of the report to assist
readers in searching for specific information.
Members of the public are encouraged to attend the Lucky Lottery draws held most weekdays. Who knows, you might even meet the
game’s mascot, Lucky the Cat.
NSW LOTTERIES ANNUAL REPORT 2007 3
RESULTS
RESULTS FOR FISCAL 2007
PERFORMANCE MEASURE TARGET RESULT
Sales (including GST, excluding agent commission) $1,165.00 m $1,124.44 m
Profi t from Continuing Operations Before Signifi cant Item and
Income Tax Equivalent
$50.24 m $50.28 m
NSW Government Duty $295.69 m $284.08 m
Dividends and Income Tax Equivalent $50.24 m $50.28 m
Total $345.93 m $334.36 m
Return on Average Shareholder Equity (%) 107.54% 105.88%
Return on Corporate Assets (%) 48.07% 49.16%
SNAPSHOT OF KEY PERFORMANCE INDICATORS FOR THE LAST 7 YEARS
CATEGORY 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
Sales ($M)** 1,010.7** 1,020.8** 1,092.9** 1,108.9** 1,116.0** 1,133.2** 1,124.4**
Total Government
Revenue ($M)
1
332.4** 343.6** 373.6** 371.8** 375.8** 381.6** 381.0**
Return on Average
Shareholder Equity (%)
55 64 90 95 105 104 106
Return on Corporate
Assets (%)
32 35 44 47 48 47 49
Selling System
Uptime (%)
99.96 99.99 99.99 99.99 100.00 99.99 99.99
Average Staff Number 205 201 195 183 176 172 170
Sales per
Employee ($M)
4.9 5.1 5.6 6.1 6.3 6.6 6.6
** Includes GST
1 Total Government Revenue includes Duty, GST, Dividends and Income Tax Equivalent payments, and excludes payments to the ACT Government
As a State Owned Corporation, NSW Lotteries is accountable to its Shareholder
Ministers for its commercial performance.
A Statement of Corporate Intent is negotiated annually between NSW Lotteries and the Shareholder Ministers and
sets out the agreed performance measures and financial targets to be achieved by the Corporation each financial year.
Key results for 2006/2007 were:
06/07
05/06
04/05
03/04
02/03
01/02
00/01
334.4*
334.7*
330.0*
326.8*
329.3*^
302.4*^
291.8*
TOTAL REVENUE TO NSW GOVERNMENT ($M)
* Excludes GST
^ Included a special dividend of $10 m
By agreement between the Commonwealth and State Governments, with
the introduction of the GST, the rate at which NSW Lotteries pays duty to the
NSW Government was reduced to compensate for the GST payable to the
Commonwealth Government
PRODUCT SALES ($M)
06/07
05/06
04/05
03/04
02/03
01/02
00/01
1,124.4*
1,133.2*
1,116.0*
1,108.9*
1,092.9*
1,020.8*
1,010.7*
* Includes GST
4 NSW LOTTERIES ANNUAL REPORT 2007
A YEAR OF CHALLENGE
This year’s results have been achieved in an extremely
challenging retail environment.
A number of major business issues flagged in previous
years – a mature portfolio of games, increasing competition
within and outside the portfolio, and player expectations
of ever-bigger jackpots – have been prominent throughout
the year.
Like all challenges, when properly addressed, these issues
presented new opportunities for NSW Lotteries to further
enhance its business.
STRONG CORPORATE VALUES
In actively responding to issues, we are able to rely on
a strong set of corporate values, and we measure our
success based on the positive benefits we provide to
our customers and the community.
This report outlines how NSW Lotteries has been
meeting its twin responsibilities as a successful business
and a good corporate citizen over the past fiscal year.
NSW Lotteries remains unashamedly at the soft end of
the gaming market.
Where a number of other local and international lottery
operators have diversified into more “continuous” gaming
products, NSW Lotteries has remained focused on its core
mission to be a successful lottery operator.
A HEALTHY PORTFOLIO
In recent years we have worked hard to enhance our
existing games with attributes which have the potential to
appeal to a new generation of players. At the same time,
we have fine-tuned the individual brands to maintain the
overall health of the portfolio.
In particular, we have sought to provide each of our lottery
games with an individual identity and player benefit, and
promote each game accordingly.
The success of this approach can be seen with our new
“Live a Lotto Life” campaign, which reminds players about
the fun and excitement of watching the winning Lotto
numbers come up each week.
Similarly, Instant Scratchies has undergone a major revamp
to reward players looking for more prizes between $50 and
$100 while waiting to win a life-changing major prize.
Other changes are planned for the big-jackpotting games
such as Powerball, OZ Lotto and Lucky Lotteries, which
aim to differentiate brand offerings, and reward each
game’s loyal followers.
FINANCIAL PERFORMANCE
While sales grew strongly towards the end of the fiscal
year as a result of careful portfolio management and some
welcome late jackpot runs for Powerball and OZ Lotto,
sales of $1,124.4 million were slightly below last year’s
sales record and 3.5% below our target for the year.
Adverse economic and retail conditions in NSW were
significant contributors to the lower than expected result.
These factors are cyclical and, by their very nature, will
inevitably change for the better. On the other hand,
systemic product and player behaviour issues such as the
increasing maturity of our portfolio of products and the
“desensitisation” of players to larger jackpot prize offers
will become bigger challenges as our products become
more mature.
Despite the decline in sales, the Corporation continued
to focus on identifying potential areas where business
efficiencies could be made to reduce costs without
impacting sales or customer service levels. As a result
of this strategy, the Corporation achieved a record profit
result of $50.28 million.
RECORD RETURNS TO OUR RETAILER PARTNERS
Our retail network once again enjoyed record revenues
from the sale of lottery products. Total income earned
by agents increased by 1.6% to over $86 million
demonstrating the Corporation’s commitment to
increasing returns to agents.
NEW DELIVERY MECHANISMS
NSW Lotteries needs to be able to rapidly respond to
player demand if it is to continue to grow.
We may all be would-be millionaires, but we are all
increasingly time-poor and finding it difficult to juggle
all the demands of our work/life balance.
Leisurely filling in a lottery entry form during normal retail
hours is simply no longer an option for many of our players
and NSW Lotteries is continually reviewing its retail
network to ensure that the needs of our players are met.
The huge number of current visitors to NSW Lotteries’
website for results and game information demonstrates
that new and emerging distribution channels, such as the
Internet, may provide the potential to deliver incremental
sales over time.
INDUSTRY LEADING SYSTEMS AND PROCESSES
NSW Lotteries can rightly claim to be among the world
leaders in our industry for systems and processes which
deliver a quality outcome for customers.
A MESSAGE FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NSW LOTTERIES ANNUAL REPORT 2007 5
Our gaming system ran at close to 100% availability
throughout the year, successfully processing more than
284 million customer transactions.
A range of system enhancements provided further
protection for players and retailers, including the important
new terminal “freeze” functionality, which automatically
alerts unregistered players when a major prize is won.
A Players 1
st
program has been developed and is part
of a series of measures aimed at encouraging players to
protect their prizes by registering entries and exercising
some simple steps to protect their entries.
A TEAM COMMITMENT
NSW Lotteries has an experienced team of executives
and staff. Of course, the structure of the Corporation
must periodically change to ensure our internal skills and
expertise match our current and projected business needs.
Accordingly, a comprehensive structural review was
undertaken across the organisation to ensure the necessary
resource alignment with our business requirements.
We would like to record our sincere thanks to all our
staff (past and present) for their efforts in helping the
Corporation to generate record profits and the other
significant business achievements, outlined in this year’s
report, in the difficult operating environment which
prevailed over the past fiscal year.
LOOKING AHEAD
There are no easy answers to the industry-wide challenges
associated with managing products in the mature stage
of their lifecycle. However, the Corporation has always
demonstrated a capacity to develop relevant business
objectives which deliver value to its stakeholders.
We have a clear strategy for the future, and a team with the
experience, skill and enthusiasm to make our plans a reality.
We will continue to seek feedback from our players and
other stakeholders to ensure we understand their wants
and expectations, and respond accordingly.
We will maintain the value of NSW Lotteries as a public
asset, based on a 76-year reputation for honesty, probity
and efficiency.
Whether you are a player of our games, one of our retailers,
or a member of the NSW community, you have a stake in
the success of our business, and we hope you will find this
report informative and useful.
John Bagshaw Michael Howell
Chairman Chief Executive Officer
We measure our
success based
on the positive
benefits we
provide to our
customers and
the community
John Bagshaw, Chairman and Michael Howell, Chief Executive Offi cer
6 NSW LOTTERIES ANNUAL REPORT 2007
SALES GAME MATRIX
NO. OF MILLIONAIRES
& 1
ST
PRIZE WINNERS
PRIZES WON
IN NSW
TOTAL NO.
WINNERS
LARGEST FIRST /
JACKPOT PRIZE
Lotto
$187.41 m 6 from 45 21 millionaires
72 Division One winners
$107.54 m 2,846,318 $2.6 m
Lotto
Strike
$10.85 m First 4 Lotto
numbers
1 millionaire
4 Strike 4 winners
$6.84 m 937,265 $1.2 m
Saturday
Lotto
$282.15 m 6 from 45 23 NSW millionaires
61 NSW Division One
winners
$164.55 m 2,704,942 $33 m
OZ Lotto
$153.93 m 7 from 45 4 NSW millionaires
4 NSW Division One winners
$99.63 m 2,742,427 $25 m
Powerball
$250.43 m 5 from 45
& 1 from 45
drawn by a 2
nd
machine
5 NSW millionaires
5 NSW Division One winners
$145.70 m 3,849,823 $35.3 m
Instant
Scratchies
$138.30 m Game
Pricepoints:
$1
$2
$2.50**
$3
$4**
$5
$10
**Pricepoint
discontinued
Nov. 2006
Number of Game
Top Prizes:
$1 18
$2 25
$2.50 Merchandise 2
$3 Made For Life 2
$3 18
$3 Merchandise 3
$4 Win For Life 1
$5 Win For Life 2
$5 6
$10 3
$90.16 m 13,807,621
$1 - $20k, $50k
$2 - $50k, $100k
$2.50 My RX8
$3 MFL - $600k
$3 - $75k, $150k
$3 Qantas Travel
Credit & $75k
Gold Bullion
$4 WFL - $1m
$5 WFL - $1.125m
$5 - $100k, $250k
$10 - $250k, $500k
Lucky
Lotteries
$95.60 m $2 Jackpot
Lottery –
200,000 tickets
$5 Jackpot
Lottery –
160,000 tickets
193 x 1
st
Prize winners
4 x $2 Jackpot Lottery
millionaires
23 x 1
st
Prize winners
There were no $5 Jackpot
Lottery millionaires
$61.12 m 10,147
Prizes in
every $2
Jackpot
Lottery draw
12,880
Prizes in
every $5
Jackpot
Lottery draw
$8.375 m Jackpot
won in August 2006
The 1
st
prize of
$200,000 was won
in each of the 23
draws
The jackpot was not
won in 2006/07
6 From
38 Pools
$5.77 m 6 from 38 5 Division One winners $2.11 m 72,811 $0.63 m
Total
$1,124.44 m $677.65 m
KEY FACTS 2006/2007
NSW LOTTERIES ANNUAL REPORT 2007 7
OUR PLAYERS
Objective: To increase sales and market share
Measure Target Result
Sales $1,165 million $1,124.44 million
Bloc Market Share – combined Saturday Lotto/OZ Lotto/Powerball 25% 24.1%
Key Activities and Issues Outlook and Future Challenges
• Sales totalled $1,124.4 million (GST inclusive)
– $8.8 million (or 0.8%) down on the previous year
• Prizes totalled $677.65 million
• Combined turnover for Lotto style games of $884.7 million –
$29.3 million (or 3.4%) up on previous year
• Lucky Lotteries sales of $95.6 million – $25.1 million (or 20.8%)
down on previous year
• Instant Scratchie sales of $138.3 million – $12.7 million
(or 8.4%) down on previous year
• 6 From 38 Pools sales of $6 million – $0.2 million (or 3.3%)
down on previous year
• Another year of record sales and record prizes,
with strong sales for Lotto-style games
• OZ Lotto jackpots anticipated to better refl ect probability
Objective: To ensure our products and services consistently attract players and meet their expectations
Measure Target Result
Customer Satisfaction Survey The survey was not scheduled to be undertaken in 2006/07
No. of complaints from players <200 152
Customer Hotline – average time taken to answer calls <15 secs 4 secs
Players Club Membership 930,000 873,537
Key Activities and Issues Outlook and Future Challenges
• More than 385,000 calls were received through the
Call Centre
• www.nswlotteries.com.au attracted 8.96 million user sessions
during the year – 22% up on the previous year
• Over 873,000 players benefi ted from the protection and
additional services provided by their Players Club membership
• Focusing on enhancing current games
• Seeking to continually improve service delivery
• Retaining existing customer base while attracting new players
• Improving access to on-line agencies for players
Objective: To be recognised as a responsible gaming operator
Measure Target Result
Compliance with the Corporation’s responsible gaming package 100% 100%
Key Activities and Issues Outlook and Future Challenges
• The Corporation continued to ensure that there were no
negative impacts from the sale and promotion of its range
of products
• NSW Lotteries’ comprehensive responsible gaming
policies were reviewed and amended and met all
legislative requirements
• Responsible gaming training sessions were conducted for
all new agents
• Territory Managers visited all agencies in NSW and the
ACT to ensure that retailers understood, and complied with,
various responsible gaming obligations
• We will continue to refi ne our responsible gaming program
to ensure it meets regulatory requirements and encourages
the responsible promotion and play of NSW Lotteries’ products
• Players 1
st
program will be introduced to alert players
to the importance of protecting their entries and providing
guidelines on the proper processes for checking tickets and
claiming prizes.
THE YEAR IN BRIEF
8 NSW LOTTERIES ANNUAL REPORT 2007
OUR RETAILERS
Objective: To ensure retailers meet our standards in selling our products and servicing our customers
Measure Target Result
Agent Satisfaction Survey 95% 95%
Agent Hotline – average time taken to answer calls <15 secs 6 secs
Key Activities and Issues Outlook and Future Challenges
• 1,524 on-line and 83 Instant Scratchies retail outlets
• Record commission on product sales paid to agents exceeded
$86 million – 1.6% up on previous year
• Over 10,000 visits to agencies by Territory Managers
• 61% of the total network in the agent reward and recognition
program ‘Top Shop’
• Over 1,100 agencies showcase the Corporation’s latest
retail image
• Over 1,000 promotions at key retail outlets
• Over 1,129 agents and staff trained in business management
and customer service skills
• Aiming to deliver another year of record commissions
• Building on our well-established retail network by identifying
new retail outlets in high traffi c areas
• An e-learning training program will be implemented via the
Internet to the entire retail agent network
OUR BUSINESS
Objective: Provide customers with easy and convenient access to our products
To ensure we continue to provide a sound and reliable gaming system
Measure Target Result
Number of on-line agencies 1,525 1,524
Gaming System uptime 99.99% 99.99%
Terminal availability – Mean Tickets Printed Between Failures 270,000 236,370
Key Activities and Issues Outlook and Future Challenges
• Processed over 284 million transactions through the
on-line gaming system – peak day was 1 March 2007
when nearly 1.8 million transactions were processed
• A number of signifi cant upgrades were made to the
Gaming System to further enhance lottery security
and customer care
• Successfully tested the Corporation’s Business Continuity Plan
• Continuing improvement in our core activities
• Agent website for retailers
THE YEAR IN BRIEF (CONTINUED)
NSW LOTTERIES ANNUAL REPORT 2007 9
OUR SHAREHOLDERS
Objective: To increase long-term Shareholder value by improved business performance
Measure Target Result
Duties paid to Governments $301.91 million $290.91 million
Profi t from ordinary activities before signifi cant item and
Income Tax Equivalent
$50.24 million $50.28 million
Return on Corporate Assets 48.07% 49.16%
Return on Average Shareholders’ Equity 107.54% 105.88%
Value Based Return 47.05% 47.17%
Operating expenses to sales 5.98% 5.79%
Profi t to sales 4.31% 4.47%
Key Activities and Issues Outlook and Future Challenges
• Total revenues exceeding $381 million were paid/payable to
the NSW Government in the form of duties, tax equivalent,
dividends and GST
• Despite lower sales, employee effi ciency, as measured by
total sales per employee was maintained at $6.6 million
• Aiming for another year of record return to Government
• In a diffi cult economic environment, the occurrence of jackpots
in the various games will be crucial to growth
• Changes to our games will enhance their competitive positions
and build on their unique strengths
• We will continue to focus on our profi tability and costs
OUR STAFF
Objective: To ensure the skills and knowledge necessary for our business are available when required
To ensure all our employees adopt a strong commercial orientation
Measure Target Result
Training expenditure per employee $1,535 $937
Training hours per employee 20 hours 17.73 hours
Sick leave ≤5 days 5.6 days
Staff turnover 5-10% 8.86%
Key Activities and Issues Outlook and Future Challenges
• A Staff Culture Survey was conducted to gauge employee
attitudes and opinions
• Commencement of a Management Development Program
• Organisational restructuring has occurred across
a majority of the organisation
• We will continue to develop the skills necessary to meet the
future needs of both the Corporation and its employees
THE YEAR IN BRIEF (CONTINUED)
10 NSW LOTTERIES ANNUAL REPORT 2007
WHO WE ARE
Following the passage of the State Lotteries Act, lottery
sales were legalised in NSW in 1931, when The State
Lotteries Office, as it was then known, was formed
and commenced operations. Since 1 January 1997, the
organisation has operated as a State Owned Corporation
established under the provisions of the NSW Lotteries
Corporatisation Act 1996.
NSW Lotteries Corporation is licensed by the Minister for
Gaming and Racing to sell lottery games in NSW pursuant
to the provisions of the Public Lotteries Act 1996. The
Corporation is also licensed to conduct lottery games in
the Australian Capital Territory (ACT).
WHAT WE DO – OUR CHARTER
In line with its statutory charter, NSW Lotteries has an
obligation to:
• Successfully develop, promote, conduct and otherwise
participate in any lawful forms of gambling and
gambling-related activities;
• Be a successful business and, to this end:
– to operate at least as efficiently as any comparable
businesses;
– to maximise the net worth of the State’s investment
in the Corporation;
– to be a successful participant (whether directly or
indirectly) in any other business or activity that the
Corporation determines is, or may be, of sound
commercial benefit to the Corporation;
• Exhibit a sense of social responsibility by having regard
to the interests of the community in which it operates
and by endeavouring to accommodate these interests
if it is possible to do so; and
• Exhibit a sense of responsibility towards regional
development and decentralisation in the way in
which the Corporation operates.
OUR GAMES
The Corporation is licensed to conduct these games in
NSW and the ACT:
• Lotto (drawn Monday, Wednesday and Saturday)
• Lotto Strike (drawn Monday, Wednesday and Saturday)
• Powerball (drawn Thursday)
• OZ Lotto (drawn Tuesday)
• Instant Scratchies
• Lucky Lotteries (drawn most weekdays)
• 6 From 38 Pools (conducted Saturdays)
Saturday Lotto, Powerball, OZ Lotto and 6 From 38 Pools
are national games operated in conjunction with other
Australian lottery operators. The Monday and Wednesday
Lotto game is operated in conjunction with the lottery
operators in South Australia and Western Australia.
BUSINESS PLANNING
The Corporation uses a formal Business Planning process
that continues to evolve and adapt to changes in the operating,
regulatory and competitive landscape. The process ensures
that NSW Lotteries remains focussed on achieving its key
business objectives. Each year, the major strategic issues
that are likely to impact the business are identified together
with appropriate strategies to address the challenges that
lie ahead. A comprehensive Business Plan is developed
which outlines the specific objectives, strategies and
actions to be undertaken to achieve our targets.
KEY AREAS FOR SUCCESS
There are five main aspects of our business that are
imperative to the achievement of our goals:
• Our Players • Our Retailers
• Our Business • Our Shareholders
• Our Staff
CORPORATE OBJECTIVES
Our Players
Objective: To increase sales and market share.
Objective: To ensure our products and services
consistently attract players and meet
their expectations.
Objective: To be recognised as a responsible
gaming operator.
Our Retailers
Objective: To ensure retailers meet our standards
in selling our products and servicing
our customers.
Our Business
Objective: Provide customers with easy and
convenient access to our products.
Objective: To ensure we continue to provide a
sound and reliable gaming system.
Our Shareholders
Objective: To increase long-term Shareholder value
by improved business performance.
Our Staff
Objective: To ensure the skills and knowledge
necessary for our business are available
when required.
Objective: To ensure all our employees adopt
a strong commercial orientation.
BALANCED SCORECARD FOR FISCAL 2007
The Business Plan incorporates an integrated set of
measures, with strategies, actions and targeted outcomes
that are continually reviewed and refined to ensure all
critical aspects of business performance are monitored.
Our performance against each of the corporate objectives is
detailed later in this report. The following table summarises
performance against the key target areas:
WHO WE ARE AND WHAT WE DO
NSW LOTTERIES ANNUAL REPORT 2007 11
OBJECTIVE MEASURE TARGET RESULT INDICATOR
OUR PLAYERS
To increase sales and
market share
Sales $1,165 m $1,124.44 m
✘
Note 1
To ensure our products and
services consistently attract
players and meet their
expectations
Bloc Market Share – combined
Saturday Lotto/OZ Lotto/Powerball
25.0% 24.1%
✘
Note 2
Customer Satisfaction Survey The survey was not
scheduled to be
undertaken in 2006/07
No. of complaints from players <200 152
✔
Customer Hotline – average time
taken to answer calls
<15
seconds
4 seconds
✔
Players Club membership 930,000 873,537
✘
Note 3
To be recognised as a
responsible gaming operator
Compliance with the Corporation’s
responsible gaming package
100% 100%
✔
OUR RETAILERS
To ensure retailers meet our
standards in selling our products
and servicing our customers
Agent Satisfaction Survey 95% 95%
✔
Agent Hotline – average time taken
to answer calls
<15
seconds
6 seconds
✔
OUR BUSINESS
Provide customers with easy and
convenient access to our products
Number of on-line agencies 1,525 1,524
✔
To ensure we continue to provide
a sound and reliable gaming system
Gaming System Uptime 99.99% 99.99%
✔
Terminal Availability:
Mean Tickets Printed
Between Failures
270,000 236,370
✘
Note 4
OUR SHAREHOLDERS
To increase long-term Shareholder
value by improved business
performance
Duties paid to Governments $301.91 m $290.91 m
✘
Note 5
Profi t from Continuing Operations
before Signifi cant Item and Income
Tax Equivalent
$50.24 m $50.28 m
✔
Return on Corporate Assets 48.07% 49.16%
✔
Return on Average
Shareholders’ Equity
107.54% 105.88%
✘
Note 6
Value Based Return 47.05% 47.17%
✔
Operating Expenses to Sales 5.98% 5.79%
✔
Profi t to Sales 4.31% 4.47%
✔
OUR STAFF
To ensure the skills and knowledge
necessary for our business are
available when required
Training expenditure per employee $1,535 $937
✘
Note 7
Training hours per employee 20 hours 17.73 hours
✘
Note 7
To ensure all our employees adopt
a strong commercial orientation
Sick leave ≤5 days 5.6 days
✘
Note 8
Staff turnover 5-10% 8.86%
✔
Note 1: Total sales were $40.56 million (or 3.5%) below target due to Powerball not performing to probability in the first half of the year.
Note 2: Bloc Market Share was adversely affected by low Powerball jackpots in the first half of the year.
Note 3: A greater reliance on jackpotting games increases the number of casual players – these players are less likely to become members of Players Club.
Note 4: Reflects the ageing of the selling terminals – now 7 years old.
Note 5: Duty paid was below target in proportion with the sales figure (see Note 1).
Note 6: Average shareholder equity increased through reduction in current liabilities compared to target.
Note 7: Training expenditure and hours did not meet target due to the rescheduling of training as a result of structural reviews across the organisation.
Note 8: The result exceeded target due to major health issues of a small number of staff.
12 NSW LOTTERIES ANNUAL REPORT 2007
OUR PLAYERS
WE OPERATE WITH INTEGRITY.
The overall portfolio is
healthy and well positioned
NSW LOTTERIES ANNUAL REPORT 2007 13
THE GAMES
GAMES OVERVIEW
During the year the NSW retail economy continued to
suffer the adverse effects of high interest rates and petrol
prices, felt especially in the areas of non-essential and
impulse retail purchases.
Lottery products were no exception. It was an extremely
challenging year for lottery games offering standard prize
offers, and even some larger jackpot offers failed to
motivate players as much as in previous years.
Major market research was conducted and a number of
game changes and marketing initiatives were introduced to
address the key aspects identified by our players.
In October 2006, a new Lotto branding campaign featuring
a new tagline and jingle ‘Live a Lotto Life’ was launched.
Other game enhancements were introduced to boost the
prize money available in Division One for regular Saturday
Lotto draws. Seven Superdraws offered massive prizes,
including a record $33 million offer in December 2006.
To boost Powerball’s position in the game portfolio,
game changes in August 2007 will introduce a new,
larger jackpot sequence.
OZ Lotto remains competitive as game changes
implemented in October 2005 deliver bigger jackpots,
including a record $25 million jackpot in July 2006.
Instant Scratchies underwent big changes in late 2006 to
provide a better winning experience for players, the most
important being an increase in overall prize payouts across
all Instant Scratchies games from 62.7% to 65.7%.
The jackpot in the $5 Jackpot Lottery, accelerated by the
game’s restructure in 2005, reached a record $6.18 million on
23 May 2007, passing the previous record of $6.05 million
set in July 2001. Its sibling, the $2 Jackpot Lottery, had
four jackpot runs this year, and both games benefited from
a makeover of brand icon “Lucky the Cat”, designed to
keep the game fresh and relevant to a new generation
of players.
The smallest game in the portfolio, 6 From 38 Pools,
continued to operate within a narrow category of player
appeal, boosted by promotions held during the Football
World Cup to capitalise on the game’s link to soccer.
The sales and performance of each game, along with
highlights for the year and other points of interest, are
summarised in Games at a Glance which follows:
OBJECTIVE: TO INCREASE SALES AND MARKET SHARE.
06/07
05/06
04/05
03/04
02/03
01/02
00/01
884.7
855.5
836.5
814.1
808.0
740.0
731.7
SALES OF THE LOTTO GAMES PORTFOLIO ($M)
Lotto (Mon, Wed, Sat & Strike) 480.4
Powerball 250.4
OZ Lotto 153.9
Instant Scratchies 138.3
Lucky Lotteries 95.6
Pools 5.8
Total 1,124.4
TURNOVER BY PRODUCT TYPE ($M)
14 NSW LOTTERIES ANNUAL REPORT 2007
2006/07
LOTTO (MON, WED, SAT & STRIKE)
SLOGAN
Live a Lotto Life
LAUNCHED
1979 (Monday), 1984 (Wednesday), 1995 (Lotto Strike),
2000 (Saturday)
HIGHLIGHTS
• There was a record $33 million offer for the December 2006
Saturday Superdraw.
• Seven Saturday Superdraws offered a total of $161 million
(compared to $156 million last year) – the highest amounts ever.
• Launch of new Lotto branding campaign in October 2006,
featuring a new tagline and jingle ‘Live a Lotto Life’ and
‘Brian the Seal’ media advertising and Point of Sale campaign.
• A new Superdraw creative campaign was introduced in
November 2006, offering greater fl exibility and signifi cant
cost reductions.
• Changes to the Saturday game were made to boost Division
1 prize money.
• 44 new Lotto millionaires created – bringing the total Lotto
millionaires to 788.
PERFORMANCE
• Superdraw performance affected by large Powerball and
OZ Lotto jackpot runs.
• Monday and Wednesday prize offers of $1 million and $750,000
struggle to compete with larger jackpot offers in the portfolio.
SALES
$480.41 million
VARIANCE ON PREVIOUS YEAR
Down 0.5%
SALES FOR SEVEN YEARS-GRAPH
SHARE OF NSWL TOTAL PORTFOLIO OF GAMES
42.7%
DIVISION ONE WINNERS
137 (45 millionaires including Lotto & Strike). As at 30 June 2007,
788 Lotto millionaires had been created since the launch of the
game in 1979.
LARGEST PRIZE OFFERED
$33 million (Saturday Lotto Superdraw)
PRIZEMONEY PAID
$278.93 million
OUTLOOK
• Increased competition from expected big OZ Lotto and
Powerball jackpots next year.
• Seven Superdraws will continue to be Lotto’s largest retail event.
• New campaign to retain existing customers and appeal to less
frequent players.
OUR PLAYERS
GAMES AT A GLANCE
SALES OF LOTTO – MON, WED, SAT & STRIKE ($M)
06/07
05/06
04/05
03/04
02/03
01/02
00/01
480.4
483.1
495.3
468.7
445.6
428.1
401.5
NSW LOTTERIES ANNUAL REPORT 2007 15
POWERBALL
OZ LOTTO
Spend the rest of your life A truckload of cash
1996 1994
• Powerball achieved a record $35.3 million jackpot in March 2007.
• Sales were a record $18.9 million for this draw as agent retail
activity increased signifi cantly.
• A total of $445 million worth of Division One prizes were on
offer in 2006/07, compared to $415 million for the previous year.
• Over 3.8 million prizes were paid during the year and 5
Powerball millionaires created.
• A single NSW winning entry received $11 million.
• The OZ Lotto game was revamped in October 2005.
2006/07 was the fi rst full year when the benefi ts of the
changes were realised.
• A record $396 million worth of Division One prizes was on
offer in 2006/07 compared to $250 million last year.
• The OZ Lotto offers included a record $25 million jackpot
in the fi rst week of July that attracted record sales and
entry numbers.
• The average fi rst division prize was $8.6 million compared to
$4.5 million in the previous year.
• Over 2.7 million prizes paid this year, over 900,000 more than
last year.
• Powerball started the year with lower jackpot offers and this
slowed sales growth. In the fi rst half of the year sales totalled
$98.5 million.
• Following a return to a larger jackpot sequence in the second
half of the year sales of $151.9 million were achieved.
• Powerball sales were impacted by the popularity of OZ Lotto
and its large jackpots.
• OZ Lotto’s popularity increased signifi cantly with jackpotting
closer to expectations and more prizes returned to players.
• 17.1 million entries were received this year (up 27.1% on the
previous year).
$250.43 million $153.93 million
Down 3.3% Up 35.7%
22.3% 13.7%
5 (5 NSW millionaires) 4 (4 NSW millionaires)
$35.3 million $25 million
$145.7 million $99.63 million
• Game changes are scheduled for August 2007 and will allow
the introduction of a larger jackpot sequence.
• The larger jackpots will increase player participation and boost
retail activity.
• Customer support for Powerball will increase in 2007/08.
• Further sales growth is forecast if jackpot activity falls within
statistical probability.
• Player participation rates will also show a further increase.
SALES OF POWERBALL ($M)
06/07
05/06
04/05
03/04
02/03
01/02
00/01
250.4
259.0
238.2
241.8
253.1
189.7
204.0
SALES OF OZ LOTTO ($M)
06/07
05/06
04/05
03/04
02/03
01/02
00/01
153.9
113.4
103.0
103.6
109.3
122.2
126.2
16 NSW LOTTERIES ANNUAL REPORT 2007
OUR PLAYERS
GAMES AT A GLANCE CONTINUED
2006/07
INSTANT SCRATCHIES
SLOGAN
Scratch Me Happy
LAUNCHED
1982
HIGHLIGHTS
• Increase in overall prize payout across all Instant Scratchies
games from 62.7% to 65.7%.
• All games were restructured to provide better prize wins
between $10 and $100.
• Special merchandise games, including Qantas Holiday Travel
Packs to the value of $44,500, and $75,000 worth of Gold Bullion.
• A major new branding campaign.
• Over 45 new Instant Scratchies games.
• Simplifi ed price points.
• The $5 Spider-Man Instant Scratchies game was a major
licensing opportunity for NSW Lotteries and brought all the
excitement of the record breaking Spider-Man 3 movie to an
Instant Scratchie game.
• $2 Happy Pig Lunar New Year Instant Scratchie.
• $2 Year of the Lifesaver Instant Scratchie to support our Surf
Lifesavers in their Centenary year.
• Biggest Agent Incentive Program ever, with one lucky Agent
winning a Toyota Yaris.
• Promotional offers, including Bonus ticket giveaways
at Christmas, Mother’s Day, Father’s Day & Easter plus
some exciting merchandise prizes in our Scratch “N” Win
promotions including 20 Harvey Norman Packages, 21 Hitachi
Entertainment Packs and 20 Toyota Yaris cars.
PERFORMANCE
Sales decline arrested and beginnings of growth.
SALES
$138.30 million
VARIANCE ON PREVIOUS YEAR
Down 8.4%
SALES FOR SEVEN YEARS-GRAPH
SHARE OF NSWL TOTAL PORTFOLIO OF GAMES
12.3%
DIVISION ONE WINNERS/FIRST PRIZE
AND JACKPOT WINNERS
2 x $5 Win For Life – equivalent to $1.125 million each
LARGEST PRIZE OFFERED
$5 Win For Life – equivalent to $1.125 million
PRIZEMONEY PAID
$90.16 million
OUTLOOK
• Increased sales as players experience better returns.
• New licensed games, new Win for Life prizes and fun Game
Play Scratchies including the popular Bingo games.
• Special holographic game to celebrate 25th Anniversary of
Instant Scratchies.
INSTANT SCRATCHIES SALES ($M)
06/07
05/06
04/05
03/04
02/03
01/02
00/01
138.3
151.0
167.4
166.2
172.3
176.1
164.7
NSW LOTTERIES ANNUAL REPORT 2007 17
LUCKY LOTTERIES
6 FROM 38 POOLS
You ought to buy yourself a lottery ticket Pools the smart choice
1931 Conducted by NSW Lotteries since 1989
• Overhaul of the Lucky Lotteries Brand Image and
Communication.
• New promotional website launched – www.feelinglucky.com.au.
• A full program of “Lucky Day” offers, including two Friday
13th promotions and highly successful cross-promotions with
Powerball and OZ Lotto.
• A new record jackpot of $6.18 million was set in the $5 Jackpot
Lottery on 23 May 2007 – this passed the previous record of
$6.05 million set in July 2001. As at 30 June 2007, the new
record jackpot stood at $6.69 million – this can be attributed to
the restructure of the $5 Jackpot Lottery in 2005.
• Checking of Lucky Lottery tickets, and payment of prizes, can
now be done immediately after the draw has been completed.
Previously there was a 24 hour delay for checking tickets in
both the $2 and $5 Jackpot Lotteries at agencies.
• Pools offered a total of $15 million worth of Division 1 prizes
during the year.
• Regular Pools promotions were held during the period of the
soccer World Cup tournament to reward loyal players and
boosted sales for these weeks by up to 40%.
• The $2 Jackpot Lottery has had slow sales, with four jackpot
runs this year, two of which were well short of probability.
• The $5 Jackpot Lottery has seen improved sales with a
growing jackpot.
Jackpots averaging $283 thousand were well below other game
offers and appealed to less players
$95.6 million $5.77 million
Down 20.8% Down 3.3%
8.5% 0.5%
• 193 x First prize winners – $2 Jackpot Lottery
• 4 x $2 Jackpot Lottery millionaires
• 23 x First prize winners – $5 Jackpot Lottery
5
$8.375 million in the $2 Jackpot Lottery in August 2006 $630,000
$61.12 million $2.11 million
• The $2 Jackpot Lottery sales are dependent on the size of its
jackpot prizes, but every effort will be made to maintain sales at
low jackpot levels and maximise sales at high jackpot levels.
• If the $5 Jackpot Lottery jackpot keeps growing, we can expect
signifi cant sales increases.
• Pools will continue to be supported by a player base attracted
to the game’s close link with soccer results. However, sales
will continue to decline as a result of larger offers from the
other games in the portfolio.
LUCKY LOTTERIES SALES ($M)
06/07
05/06
04/05
03/04
02/03
01/02
00/01
95.6
120.7
105.4
121.9
105.1
97.4
106.0
6 FROM 38 POOLS ($M)
06/07
05/06
04/05
03/04
02/03
01/02
00/01
5.8
6.0
6.7
6.7
7.5
7.3
8.3
18 NSW LOTTERIES ANNUAL REPORT 2007
LOOKING AHEAD
The overall portfolio is healthy and well positioned to
deliver the major prize offers our players demand.
To further increase player interest in our games and drive
sales growth during standard offers, the Corporation will
conduct branding campaigns and maximise promotional
opportunities.
NSW Lotteries will also focus on a number of new
distribution channels to generate incremental revenue,
while working hard to maintain the performance of our
business partners in the traditional agency network.
OUR PLAYERS
Mobile billboards to support OZ Lotto’s record $25 million jackpot
hit the streets of inner Sydney in July 2006.
NSW Government 287.4
ACT Government 6.9
Gross Income 102.6
GST on Gross Product Sales 48.3
Prizes 691.2
Total 1,136.4
PROJECTED SALES DISTRIBUTION 2007/2008 ($M)
NSW LOTTERIES ANNUAL REPORT 2007 19
WE PROVIDE EXCELLENT SERVICE
TO OUR CUSTOMERS.
PLAYER SERVICES
In an extremely competitive gaming and retail market and
with a mature range of products, there is a constant need
to build and enhance the existing relationship with our
players in order to maintain their loyalty. To ensure future
growth, the Corporation also needs to attract new players
to expand the overall base of players. To achieve these
goals, NSW Lotteries seeks to offer attractive products
whilst promoting the responsible play of lottery games.
We also need to ensure that the services we provide meet
and exceed the needs of our players. Our success in these
areas will ultimately be refl ected in our sales performance.
Our Corporate value refl ects the organisation’s commitment
to provide excellent service to our customers.
PLAYERS CLUB
This year saw a re-launch of the Players Club, aimed
at improving awareness of the service and increasing
membership beyond the current level of over 873,000
active players. For a small annual fee membership benefi ts
for players include:
• Immediate notifi cation of major prize wins;
• Smaller unclaimed prizes automatically mailed to
home address;
• The storing of ‘favourite’ entries thereby alleviating the
need to fi ll out entry forms;
• A convenient sized card easily carried in a purse
or wallet;
• Additional security if tickets are lost or stolen.
A main feature of the re-launch was the introduction
of a more modern style of Players Club card. Other
innovations included an updated information package,
e-mail notifi cation of jackpots and product promotions,
on-line Players Club registration, competitions conducted
on the Corporation’s website and advice of uncollected
prize wins when a Players Club card is next used at an
Agency (launching late 2007). In addition, players are able
to update their details via the NSW Lotteries website.
CALL CENTRE
As the fi rst contact point within NSW Lotteries, the
Call Centre is a critical link between players, retailers
and the Corporation.
Call Centre staff aim to help retailers resolve any issues
that have the potential to negatively impact their business
as quickly as possible, particularly restoring selling facilities
such as terminal hardware and telecommunications
equipment. They also provide advice on how to improve
customer service and ensure that the correct prize claim
process has been followed.
This year the Call Centre also began to initiate calls to
agents during major bonus offers and promotion periods
to increase awareness of player entitlements.
Other outbound call campaigns focused on helping agents
to maximise merchandising and point of sale presentation,
and offering new training opportunities for staff.
The service has been well received and has produced
positive results, with a number of agents signifi cantly
improving their business performance as a result of the
advice and support they have received from the Call Centre.
In addition to supporting the retail network, the Call Centre
handles hundreds of calls each day from players seeking
information on products, prize offers, games results,
agency locations, and how to claim prizes.
NSW Lotteries provides signifi cant resources to ensure that
agents and players are able to have their calls answered as
quickly and effectively as possible.
During the year, a major upgrade of telecommunications
technology and infrastructure was successfully
implemented including:
• The installation of a new PABX in March, including the
upgrade of handsets and the rationalisation of excess
lines; and
• The implementation of Computer Telephony Integration
(CTI) improving customer service levels through the use
of caller identifi cation, and automatically providing recent
Agent call history to Customer Service Representatives
answering calls.
OBJECTIVE: TO ENSURE OUR PRODUCTS AND SERVICES CONSISTENTLY
ATTRACT PLAYERS AND MEET THEIR EXPECTATIONS.
20 NSW LOTTERIES ANNUAL REPORT 2007
In addition, a new Interactive Voice Response (IVR)
system is scheduled for implementation in the fi rst half
of next fi nancial year to provide an enhanced presentation
of our traditional results and Players Club services, and to
add value to the Corporation’s marketing and promotional
activities. We will provide customers with an increased
range of historical results and dividends, multi-lingual
options, and the opportunity to leave a message for
follow-up and call back should the customer call outside
normal business hours.
During the year the Call Centre handled more than 116,000
calls from retailers and customers. Over 96% of these
calls were answered within 15 seconds, exceeding our
benchmark target of 90%. In addition, some 310,000
customers accessed our Results Services, with 27,000
callers requiring additional assistance from staff.
NETWORK SYNDICATES
Over the course of the year, more than 13,600 syndicates
were offered across the network in major Powerball and
OZ Lotto jackpot draws and Saturday Lotto Superdraws.
This service has proven to be extremely popular with
players and agents alike, especially when large prizes
are on offer, as it provides agents with additional selling
opportunities and players with the opportunity to try their
luck in a large system entry for a relatively small cost.
Some $13 million (or 1% of total sales) were generated
from syndicates and this clearly demonstrates the
increasing popularity of this entry type with players.
CONTINUALLY UPGRADING SECURITY
NSW Lotteries continually looks for ways to improve the
security of our players’ entries and prizes. This year all
existing prize payment and ticket cancellation processes
were reviewed to identify any area where controls could
be strengthened for the benefi t of our players.
A number of major enhancements were made to prize
claim processes during the year, including:
• ‘Freezing’ the terminal when large prizes are validated;
• Improving customer messaging through the selling
terminal customer Display Screen, increasing player
awareness of the results when their tickets are
checked; and
• Updating and reissuing our “Players Guide to Claiming
Prizes” instructions.
A new Players 1
st
program has been developed and will
be launched in the fi rst half of the next fi nancial year.
The aims of this initiative are to promote the benefi ts of
the Players Club service and to encourage players to take
a few simple steps to safeguard their ticket purchases.
CUSTOMER PRIVACY
NSW Lotteries values the privacy of its customers and
ensures that all player details are scrupulously protected.
There are strong protective mechanisms and associated
controls in place to safeguard both physical and electronic
access to confi dential information.
All personal and sensitive information held by the
Corporation is treated in accordance with the Privacy Act
1988 and the National Principles for the Fair Handling of
Personal Information.
Further information on our Privacy Policy can be obtained
by contacting NSW Lotteries or by visiting our website at
www.nswlotteries.com.au.
ELECTRONIC SERVICE DELIVERY
WEBSITE GROWTH
The NSW Lotteries website – www.nswlotteries.com.au –
is among the most visited websites in Australia. Continuing
our recent trend, this year our website recorded almost
nine million user sessions during the year, a 22% increase
on last year.
Website users are able to access all the information that
is available at retail outlets including copies of How to Play
material, prices and odds information.
During the year, a number of enhancements were
implemented to provide players using this channel of
communication with more information and easier access
to our services, including:
• Players Club membership drive – a number of exclusive
promotions for Players Club members were run on the
website and players were able to join on-line to protect
their prizes; and
• Enhanced Instant Scratchies Game Information – new
Instant Scratchies game information and major prizes
pages were launched in August to allow players to
identify when major prizes had been won. Previously this
information was only available in printed format.
OUR PLAYERS
06/07
05/06
04/05
03/04
02/03
01/02
00/01
8,966,086
7,364,200
4,882,140
3,247,025
2,473,168
1,977,000
1,500,000
USER SESSIONS
NSW LOTTERIES ANNUAL REPORT 2007 21
RESPONSIBLE GAMING
All the recent independent studies of gambling behaviour
quite clearly acknowledge that the “soft gaming” nature of
NSW Lotteries products is less likely to appeal to persons
susceptible to becoming over-involved in gambling than
the more “continuous” forms of gambling such as casino
games or electronic gaming machines.
However, with a customer base of more than two million
players, the Corporation plays a key role in fostering
responsible play and increasing awareness of this important
community issue in NSW and the ACT.
The Corporation, its advertising partners and its retail
network aim at 100% compliance with responsible
gaming regulations.
Our continuous achievement of this goal demonstrates
a high level of commitment and capability.
All our marketing and promotional activity is tempered by
the overriding principles of allowing our players to make
an informed choice about lottery play, and minimising any
possible negative impact.
We ensure that the privacy of our players is scrupulously
protected; all advertising is honest and responsible; and sale
to minors is clearly prohibited.
We also serve as one of the primary vehicles for promoting
the NSW Government’s G-line gambling referral service,
through the millions of tickets, entry forms and how to play
brochures printed each year, as well as signage in store
and on the Internet. As required by regulation, we make
available the Playsmart brochure – “know the odds of your
numbers coming up” – which provides the odds of winning
lottery games, and also publicises the G-line service.
The NSW Lotteries Responsible Gaming Program comprises
a statement of responsible gaming principles, codes of
self-regulation, player awareness activity, and a strategy to
ensure compliance with responsible gaming regulations in
NSW and the ACT.
Under this Program:
• Training sessions for new agents and their staff
cover responsible gambling and associated obligations.
Written information is also provided as part of an
induction package;
• All printed material dispatched to agents must be
formally approved to comply with responsible
gambling requirements;
• All agencies display a NSW Lotteries poster advising
that it is illegal to purchase lottery games by credit
and for under 18 year-olds to play. Copies of the poster
are regularly distributed and are also available to agents
on request;
• The G-line message is included on any printed matter
prepared by agents;
• The “Playsmart” brochure is displayed. Copies are
regularly distributed and are also available on request;
• Copies of all Game Rules are available on request; and
• Alcohol is not used in any lottery promotional activity.
In addition to training and regular written reminders,
agents’ compliance with responsible gambling requirements
is formally checked by NSW Lotteries Territory Managers
on each of the approximately 11,000 visits conducted
annually. Senior Managers review Territory Managers’
reports and address any defi ciencies not resolved at the
time of the visit.
Internal and external reviews during the fi scal year found
NSW Lotteries and its retail network continue to fully
comply with Responsible Gaming regulations and encourage
the responsible play of lottery games.
OBJECTIVE: TO BE RECOGNISED AS A RESPONSIBLE GAMING OPERATOR.
WE ARE SOCIALLY RESPONSIBLE.
The hopes and dreams of millions rest on the luck of the Lotto draw.
22 NSW LOTTERIES ANNUAL REPORT 2007
PLAYERS 1
ST
Just as harm minimisation is a crucial aspect of corporate
social responsibility for any lottery operator, appropriate
security controls and customer care measures are also vital
elements in total player protection.
NSW Lotteries has developed a major new awareness
campaign to ensure players know how to protect their
prizes and to encourage them to communicate directly to
NSW Lotteries if they have any concerns about how their
transactions have been handled.
Called Players 1
st
, the campaign will be implemented during
the fi rst quarter of the 2008 fi nancial year at point of sale
and on the NSW Lotteries website.
It includes:
• Posters and stickers with Players 1
st
information at all
1,600 agencies around NSW and the ACT;
• A dedicated customer hotline/e-mail address to report
any concerns and allow feedback on improving security
and customer care;
• Consolidation of other information about claiming prizes
and player registration under the Players 1
st
banner and
a dedicated brochure on the Players 1
st
program;
• Development of a consumer protection area on the NSW
Lotteries website, reproducing the retail information;
• Additional training for agents, focusing on a simple
easy-to-follow multi-step process for handling selling,
ticket checking and prize payment; and
• Communication of these initiatives, along with the
benefi t of player registration through Players Club,
to players.
Through Players 1
st
we aim to continue to earn the trust of
our players, and to encourage their ongoing support of the
individual agents who make up our retail network.
OUR PLAYERS
Lights, camera, action! “Brian” the seal gave up his day job at
Coffs Harbour’s Pet Porpoise Pool to fi lm the Live a Lotto Life
commercial. In this scene, he gets ready to check his winning
ticket at the Coffs Harbour Newsagency. (Courtesy of The Coffs
Coast Advocate)
NSW LOTTERIES ANNUAL REPORT 2007 23
OUR RETAILERS
WE VALUE THE RELATIONSHIP
WITH OUR RETAILERS.
The diversity of the network
continues to grow
24 NSW LOTTERIES ANNUAL REPORT 2007
THE RETAIL NETWORK
Our network of more than 1,600 lottery retailers spread
throughout NSW and the ACT provides the vital link in the
delivery of our lottery games to consumers. The diversity of
the network continues to grow with a wide range of small
businesses selling lottery products including newsagents,
petrol stations, convenience stores, bookstores,
supermarkets, bottleshops and clubs.
This increasing range of business types reflects the
Corporation’s strategy of providing our products in
locations that attract new customers and provide greater
convenience and ease of access.
Lottery outlets earned over $86 million in revenue from the
sale of lottery games during the year. This represented an
increase of 1.6% over the previous year.
This increase in lottery handling fees continues the trend of
recent years. Total revenue to lottery agents has increased
by more than 37% over the last five years.
This rate of growth is twice the rate of growth in the CPI
over the period and has resulted from a deliberate strategy
by the Corporation of continually increasing the value of the
lottery franchise in the network.
DEVELOPING THE NETWORK
The Corporation continued its strategy of establishing
agencies in new and redeveloped retail complexes and
areas of increasing population growth. There were 30 new
on-line agencies appointed during the year, including the
upgrade of 10 existing Instant Scratchie only agencies.
Around 150 agencies – less than 10% of the network –
changed hands throughout the year, compared to 180 last year.
As new agents join the network, we focus on providing
them with the necessary training in technical, business and
sales skills to ensure they provide the best possible service
to our players
Lottery agents are supported in the field by a team of
Territory Managers based in metropolitan and regional
locations around the State who made around 11,000 visits
during the year.
To further assist the retail network in meeting the needs
of our customers, agents also receive a weekly newsletter
with instructions, procedures, and selling tips, along with
regular memos and messages delivered through weekly
courier deliveries and via their terminal display screens.
TOP SHOP AWARDS
‘Top Shop’ is NSW Lotteries’ agent reward and recognition
program and has now been running for over 10 years. The
program has proven to be an effective means of motivating
and rewarding our agents for outstanding performance. The
ultimate beneficiaries of this outstanding performance are
our customers.
This year a record 1,000 agents registered for the program,
representing 61% of the network. The collective results
achieved by agents in the program have constantly shown
growth rates beyond the network average, meaning
Top Shop agents get even more from their business.
The annual Top Shop Awards Night was held at Sydney’s
Star City Casino again this year with the theme focusing
on the program’s 10th Anniversary. The Award winning
agencies for this year were:
TOP SHOP FOR 2006/2007
Theobalds Newsagency – Bathurst
TOP SHOP FINALISTS
Eastgardens Newsagency – Eastgardens
Talbragar Street Newsagency – Dubbo
Young Newsagency – Young
Bendalong Newsagency – Bendalong
NSW LOTTERIES CHAIRMAN’S AWARD
Rutherford Newsagency – Rutherford
MERCHANDISING AWARD
Nambucca Heads Newsagency – Nambucca Heads
TOP SHOP AGENCY CO-ORDINATOR AWARD
Kristin Moratidis – Greenhills Newsagency – East Maitland
TOP SELLING AGENCY IN THE NSW LOTTERIES RETAIL NETWORK
Eastgardens Newsagency – Eastgardens
OBJECTIVE: TO ENSURE OUR RETAILERS MEET OUR STANDARDS IN SELLING OUR
PRODUCTS AND SERVICING OUR CUSTOMERS.
06/07
05/06
04/05
03/04
02/03
01/02
00/01
86.0
84.7
79.2
74.1
71.1
62.5
59.8
COMMISSION PAID TO AGENTS ($M)
OUR RETAILERS
NSW LOTTERIES ANNUAL REPORT 2007 25
THE TOP SHOP IN EACH NSW LOTTERIES SALES TERRITORY
Territory 1 & 7 North Sydney Shoppingworld Newsagency
– North Sydney
Territory 2 Eastgardens Newsagency – Eastgardens
Territory 3 Cronulla Plaza Newsagency – Cronulla
Territory 4 Narellan Newsagency – Narellan
Territory 5 Winston Hills Newsagency – Winston Hills
Territory 6 Kenthurst Village News – Kenthurst
Territory 8 Greenhills Newsagency – East Maitland
Territory 9 Ocean Shores Newsagency & Post Office
– Ocean Shores
Territory 10 Theobalds Newsagency – Bathurst
Territory 11 Young Newsagency – Young
Territory 12 Bendalong Newsagency – Bendalong
RETAIL PROMOTIONAL ACTIVITY
Promotional activity at the point of sale is a valuable
reinforcement of mainstream media advertising. It
continues to be an effective way of generating store traffic,
creating excitement for players and increasing sales for the
agency network.
During the year, over 1,000 local in-store promotions were
conducted to support major events such as Mother’s Day,
Father’s Day, Christmas, Friday 13th, the seven Saturday
Lotto Superdraws, and big jackpots in Powerball, OZ Lotto
and Lucky Lotteries. These also included internal agency-
run promotions, such as second-chance draws.
AGENCY SERVICES
RETAIL TRAINING
The effective training of agents is critical to ensuring that
our customers receive the quality of service that they
expect from a lottery agent. Our comprehensive agent
training program is designed to assist agents to reach
the highest possible standards of retail operation and,
ultimately, provide excellent service to our customers.
It also ensures that retailers are equipped with the
knowledge to meet all legal and operational requirements.
This year, more than 1,100 retail managers and employees
were trained. The courses included in the training program are:
• The Lottery Management Course – a comprehensive
four day compulsory course for new and changeover
agencies;
• The Instant Lottery Management Course – a half-day
course for agents who sell Instant Scratchies only;
• The Terminal Operations Course – one day course
for agency staff;
• The Instant Scratchie Management and Reconciliation
Course; and
• Responsible Gambling training – including specialised
training for our ACT Agents and staff in the separate
regulations in force in that jurisdiction.
We also continued to offer our very successful ‘High
Performance Selling’ seminars across NSW, providing
agents and staff with a multitude of practical tips to help
build their sales. Results have demonstrated that agents
who use the skills from this seminar obtain significant real
sales increases.
With a widely distributed network, NSW Lotteries seeks
to provide training that is cost-effective, convenient and
tailored to the business requirements of small retailers.
As the Top Shop for 2007 is announced, the stage explodes
in a dazzling pyrotechnic display.
…and the winner is Theobalds Newsagency at Bathurst. Accepting
the award is the owner, Robert Theobald.
26 NSW LOTTERIES ANNUAL REPORT 2007
Advances in distance education technology means that it
is now possible to implement a major e-learning program,
which will be delivered via the Internet to the entire retail
agent network.
E-learning courses will cover vital lottery retail skills and
knowledge including operating the Altura selling terminal;
product information; lottery operational policies and
procedures; and customer service.
The new program means that all our agencies will have
ready access to high quality training, and customers can
rely on a skilled and competent agency network providing
high levels of service no matter where they are located
throughout NSW and the ACT.
RETAIL IMAGE
The most visible component of any NSW Lotteries agency
is the retail image, which provides the signal to players
that they can purchase their lottery entries at that outlet.
This year NSW Lotteries has continued to expand the
implementation of its current retail image into around
1,200 agencies, which is over 75% of the retail network.
AGENCY SATISFACTION SURVEY
Providing agents with the support they need to sell our
products remains a high priority of the Corporation. Our
success in providing that support is measured through
an annual survey of agent satisfaction with the services
offered by the Corporation. This year 95% of agents gave
NSW Lotteries an overall rating of either extremely satisfied
or very satisfied. Individual areas of the Corporation
received ratings of between 88% and 90% indicating a
very high level of knowledge, professional expertise and
customer service were provided.
The Corporation is committed to maintaining these levels
of satisfaction into the future and will be surveying our
agents again in 2008/09 to ensure that our high standards
of service continue to be delivered.
OUR RETAILERS
Chris Bristow, owner of the Bogangar Newsagency with just some of the $1.83 million in prize money scooped by one of his lucky
customers in the $22 million Saturday Lotto Superdraw in September 2006. (Courtesy of the Daily News)
NSW LOTTERIES ANNUAL REPORT 2007 27
OUR BUSINESS
WE CONTINUOUSLY IMPROVE
OUR BUSINESS.
All our business
processes must
be at the forefront
of industry best
practice
28 NSW LOTTERIES ANNUAL REPORT 2007
In order to maintain high levels of customer satisfaction, all
our business processes must be at the forefront of industry
best practice, particularly where the on-line gaming system
is concerned.
Each year an Information Technology Strategic Plan is
developed which identifi es the key issues and business
solutions needed to maintain the reliability and integrity
of the Corporation’s business systems. The underlying
objective is to provide our retailers and players with the
best and most reliable access to our products and services.
THE GAMING SYSTEM
PERFORMANCE
Annual system performance indicators clearly demonstrate
that the sound Information Technology business strategies
adopted by NSW Lotteries have been successful in
delivering continued high levels of service to our retail
network and our customers.
The on-line gaming system continued its industry leading
performance, achieving its benchmark target of 99.99%
availability during selling hours. The telecommunications
network that links the on-line agencies to the central
processing facility achieved 99.94% availability, which was
slightly below the target of 99.96%.
More than 284 million transactions were processed through
the on-line gaming system during the year, with a peak
of around 1.8 million transactions processed on a single
day during selling for the massive $35.3 million Powerball
jackpot drawn on 1 March 2007.
GAMING SYSTEM UPGRADES
A number of signifi cant upgrades were made to the
gaming system during the year (including replacement
of management terminals, software, system servers and
other hardware), as well as the operating system on which
the gaming system runs.
A range of gaming system changes were implemented
which enhanced the processes associated with the
payment of prizes.
An important new feature introduced this year was the
terminal “freeze” functionality, aimed at ensuring that
unregistered major prizewinners are immediately alerted to
the status of their ticket.
NSW Lotteries was one of the fi rst jurisdictions in the world
to introduce this new feature that is part of our business
objective of constantly updating key systems and controls
to meet the challenges of a dynamic and constantly
changing environment.
OBJECTIVE: PROVIDE CUSTOMERS WITH EASY AND CONVENIENT ACCESS TO
OUR PRODUCTS.
TO ENSURE WE CONTINUE TO PROVIDE A SOUND AND RELIABLE GAMING SYSTEM.
06/07
05/06
04/05
03/04
02/03
01/02
00/01
99.99
99.99
100.00
99.99
99.99
99.99
99.96
SELLING SYSTEM UPTIME (%)
OUR BUSINESS
The bold and attractive NSW Lotteries Retail Image ensures
that agencies stand out in the highly competitive retail
environment in NSW and the ACT.
NSW LOTTERIES ANNUAL REPORT 2007 29
TELECOMMUNICATIONS NETWORK
The current telecommunications network that connects
retail outlets to the gaming system is due to be phased out
over the next couple of years. Work has begun on replacing
the current network, which is based on Telstra’s Digital
Data Service. The new network is expected to be brought
into service within the next two years and will be based on
Internet Protocol and wireless technologies.
STAFF AND AGENT WEBSITES
INTRANET PORTAL
The Corporation’s Portal plays a crucial part in the way
NSW Lotteries staff share and use information within the
Corporation. During the year, a number of changes were
made to the functions of the portal, which consolidated
the site’s position as the fi rst port of call for staff to access
and retrieve business information. An additional portal
was implemented during the year, focusing on agency-
related information. This new site ensures that the latest
information, be it sales or service related, is immediately
available, thus improving the service that the Corporation
provides to its agencies.
AGENT WEBSITE
A new agent website was piloted during June 2007 and
will be rolled out to all agents in late 2007. The new site
will give our 1600 lottery agents and their staff access to
a broad range of information such as agency sales details,
policies and procedures, network conditions, upcoming
promotions and special offers, and general selling tips.
The site will also provide access to tailored computer-
based training for agents and staff. As outlined earlier in
this report under ‘Retail Training’ this e-learning training
and education system will generate signifi cant savings
and assist agents and their staff in remote locations who
currently fi nd it diffi cult to attend face-to-face training
offered in Sydney and other major population centres.
BUSINESS CONTINUITY
The NSW Lotteries Business Continuity Plan focuses on
ensuring the Corporation is as prepared as possible, and
can restore operations with a minimum of downtime,
if there is an unforeseen event that has the potential to
disrupt normal business activities.
The Information Technology component of the overall
plan provides a comprehensive list of steps to manage a
serious, unplanned disruption to information technology
processing at the corporate data centre.
As part of the overall plan, regular testing of the back-up
off-site processing system is essential. A major test was
conducted this year that included switching our information
technology processing from the primary computer site to
our back-up site.
Similar tests for the non-gaming systems were also
undertaken during the year to trial the capability of the
Business Continuity Plan in ensuring that other key
business processes are operational as soon as possible.
The overall program is aimed at ensuring corporate
resources are secure, operations continue regardless
of circumstances, and a strong public image of the
Corporation is maintained.
More than 284 million
transactions were processed
through the on-line gaming
system during the year
30 NSW LOTTERIES ANNUAL REPORT 2007
OUR SHAREHOLDERS
WE ARE SUCCESSFUL.
Our reputation for honesty and
integrity is maintained at all costs
NSW LOTTERIES ANNUAL REPORT 2007 31
With sales of lottery products reaching $1,124.4 million
in fiscal 2007, NSW Lotteries is clearly a major trading
enterprise. As a State Owned Corporation, like any other
business, it has a responsibility to seek to continually
increase the value of the enterprise to its owners, the
NSW Government on behalf of the people of NSW.
We work towards our goals and objectives using a set
of values and behaviours that underpin our everyday
activities, ensure transparency and fair dealing, and
protect stakeholder interests. The Corporation’s approach
to corporate governance includes a commitment to best
practice governance standards, which are fundamental to
our ongoing success.
Since 1931, over $7 billion in revenue has been raised
to assist the NSW Government to provide an increasing
range of services and facilities for the benefit of the NSW
community. This year, the Corporation distributed $381.0
million in revenue from lottery duty, income tax equivalent,
GST and dividends.
While generating sales is the key business driver, the ever-
present competition that confronts NSW Lotteries means
that the Corporation must also remain focused on reducing
costs without impacting sales and service levels. Even
though sales were slightly below the previous year, the
business strategies employed allowed the Corporation to
post a record profit of $50.28 million (before significant item
and income tax equivalent).
A summary of the outcomes achieved this year against the
annual targets negotiated with our Shareholder Ministers
is shown on page 3 of this report. A more detailed financial
overview of the Corporation’s performance can be found
before the formal Financial Report at page 49.
OBJECTIVE: TO INCREASE LONG-TERM SHAREHOLDER VALUE BY IMPROVED
BUSINESS PERFORMANCE.
06/07
05/06
04/05
03/04
02/03
01/02
00/01
5.8
6.0
5.9
6.1
6.3
6.9
7.0
OPERATING COSTS (% OF SALES)
As she is driven away in her chauffeur driven stretch limousine from the NSW Lotteries Head Offi ce at Homebush Bay, a winner proudly
displays her cheque… the fi ne print says $15,000,022.45!
32 NSW LOTTERIES ANNUAL REPORT 2007
CORPORATE GOVERNANCE
Earning the trust of players is a fundamental necessity for
any successful lottery. NSW Lotteries operates within a
strict framework of regulation and corporate governance
processes to ensure that its reputation for honesty and
integrity is maintained at all costs.
Corporate governance embodies the policies and
procedures by which a business is directed and
controlled. Our corporate governance structure specifies
the distribution of rights and responsibilities among our
different stakeholders, including the Shareholders and the
Regulator, Board, Executive Management and employees
within the Corporation. It documents the framework for
decision making based on clearly defined Corporate Values
and Objectives.
NSW Lotteries is a State Owned Corporation, established
under the provisions of the NSW Lotteries Corporatisation
Act 1996. The Corporation is licensed by the NSW
Government to sell lottery games under the Public Lotteries
Act, 1996. The licences are due for renewal on 1 July 2008.
The Corporation’s key stakeholders are:
• Two Shareholder Ministers, The Hon. John Watkins, MP,
Deputy Premier, Minister for Transport, and Minister for
Finance and The Hon. Michael Costa, MLC, Treasurer,
Minister for Infrastructure, and Minister for the Hunter.
These Ministers represent the NSW Government and are
responsible for protecting the interests of the Government;
• The Portfolio Minister, The Hon. Graham West, MP,
Minister for Gaming and Racing, and Minister for Sport
and Recreation, who is responsible for establishing
and managing the regulatory framework governing the
Corporation’s lottery activities; and
• The NSW Treasury, which reviews corporate
performance on behalf of the Shareholder Ministers.
The separation of the Shareholder Ministers’ role from the
Portfolio Minister’s role as the Regulator is a key pillar of
the Corporatisation model adopted in NSW. It is intended
to provide clear lines of accountability for the Corporation’s
commercial performance. Representatives of the NSW
Lotteries Board meet regularly with the Shareholder
and Portfolio Ministers to discuss the Corporation’s
performance and any other significant business issues
which may arise during the course of the year.
ROLE OF THE NSW LOTTERIES BOARD
The NSW Lotteries Board is accountable to the Shareholder
Ministers and has been established to provide leadership,
direction and oversight to the Corporation. There are six
non-executive Directors on the Board who are appointed
by the Shareholder Ministers. The non-executive Directors
appoint the Chief Executive Officer, also a member of the
Board, after consultation with the Shareholder Ministers.
The Board’s corporate governance functions include:
• Providing strategic direction;
OUR SHAREHOLDERS
BOARD
CHIEF EXECUTIVE OFFICER BOARD COMMITTEES
• Audit and Governance Committee
• Human Resources & Remuneration Committee
• Information Technology Committee
OPERATIONAL DIVISIONS
Corporate Services Customer and
Agency Services
Finance Information
Technology Services
Marketing and Sales
• Business Planning
• Human Resources
• Property
Management
• Support Services
• Executive Support
• Customer Service
• Agency Appointment
and Review
• Prize Payments
• Player Registration
• Call Centre
• Lotto/Lottery Draws
• Warehousing and
Distribution
• Corporate Retail Sales
• Company Secretary
• Financial Planning
and Budgeting
• Funds Management
• Financial Reporting
• Retailer Accounting
• Audit and Risk
Management
• IT Strategic Planning
• Gaming Systems
• Corporate Systems
• Operations and Support
• Telecommunications
• Product Management
• Communications and
Public Relations
• Sales
• Business Development
• Retail Network
Training
THE MANAGEMENT STRUCTURE
NSW LOTTERIES ANNUAL REPORT 2007 33
• Validating, approving and monitoring strategic issues;
• Determining key policies which impact on the
Corporation’s activities;
• Approving strategic alliances;
• Approving major capital expenditure;
• Monitoring organisational performance against targets;
• Liaising with the Shareholder Ministers and the
Portfolio Minister;
• Ensuring compliance with statutory, financial and
social responsibilities;
• Ensuring compliance with relevant Government
policies; and
• Ensuring business risks are appropriately identified
and managed.
COMPOSITION OF THE BOARD
The enabling legislation provides that the Board of
NSW Lotteries shall consist of:
• The Chief Executive Officer;
• One Director to be appointed by the Shareholder
Ministers on the recommendation of a selection
committee comprising:
I. Two persons nominated by the Portfolio Minister; and
II. Two persons nominated by Unions NSW.
This Director is selected by the committee from three
persons nominated by Unions NSW; and
• At least two and not more than five other Directors
to be appointed by the Shareholder Ministers at
their discretion.
Each Director, with the exception of the Chief Executive
Officer, may be appointed to hold office for a period not
exceeding five years, renewable at the sole discretion of
the Shareholder Ministers. Their level of remuneration is
determined by these Ministers. The Chief Executive Officer
does not receive any additional remuneration for his role as
a Director.
NSW Lotteries maintains Directors’ and Officers’ Liability
Insurance which extends to cover Directors and officers of
NSW Lotteries. This coverage does not extend to deliberate
acts of fraud or dishonesty.
NSW Lotteries is fortunate to be able to draw on a wide
range of skills and depth of experience in its current Board,
with members from diverse industries, including lotteries,
wagering, media, publishing, finance and politics.
As at 30 June 2007, the Board members were: John
Bagshaw (Chairman); Bonita Boezeman (Deputy Chairman);
Milton Cockburn; Michael Howell (Chief Executive Officer);
John Johnson; Denis McCormack; and Suzanne Walsh.
The Board members are profiled on page 36.
BOARD RESPONSIBILITIES
The Board is accountable for the overall direction and
performance of the Corporation. The Chief Executive
Officer is responsible for the day-to-day management of the
business in accordance with the directions and policies of
the Board.
Board members have significant responsibilities and duties
as Directors, with further obligations imposed on them by
the State Owned Corporations Act, 1989.
The Board is required to abide by a Code of Conduct, which
is regularly reviewed and distributed to all members to ensure
that their duties and responsibilities are known and understood.
BOARD’S OPERATING FRAMEWORK
The Board has established a basic framework to ensure the
efficient and effective management of the Corporation’s
commercial activities. Key features of the framework are:
• Active involvement in strategic planning for the
Corporation;
• Regular monitoring and reviewing of all major areas of
the Corporation’s performance; and
• Sharing the individual skills of Directors in important
areas of the business by participation in Board
Committees.
The Board approves all tenders and items of capital
expenditure exceeding $150,000 as well as annual budgets,
overseas travel, new products, Business Plans and the
Annual Report (including Financial Report).
BOARD MEETINGS
Normal meetings of the Board are held at monthly intervals
but additional meetings may be held to discuss matters of
an urgent or significant nature. During the year 11 monthly
Board meetings were held, with the following attendance:
John Bagshaw 11
Bonita Boezeman 11
Milton Cockburn 11
Michael Howell 11
John Johnson 8
Denis McCormack 11
Suzanne Walsh 9
34 NSW LOTTERIES ANNUAL REPORT 2007
BOARD COMMITTEES
The Board has established three standing Committees, each with its own documented charter, to assist in the good
governance of the Corporation and to facilitate detailed consideration of major items and provide advice on sensitive matters.
These Committees allow for more detailed consideration of items than would be possible within the time constraints of
normal monthly Board meetings. The role and composition of the Committees are examined regularly, as part of the annual
review of Board performance, and varied to meet the changing needs of the Corporation.
The three Committees and their membership at 30 June 2007 are set out in the table below:
AUDIT & INFORMATION TECHNOLOGY HUMAN RESOURCES &
GOVERNANCE COMMITTEE COMMITTEE REMUNERATION COMMITTEE
John Bagshaw
•
Chairman
Bonita Boezeman Chairman
•
Milton Cockburn
•
•
Michael Howell
•
•
John Johnson
•
Denis McCormack Chairman
Suzanne Walsh
•
•
OUR SHAREHOLDERS
AUDIT AND GOVERNANCE COMMITTEE
The Audit and Governance Committee assists the Board
in discharging its responsibilities with regard to risk
management, statutory financial reporting and corporate
governance. The Committee:
• Considers the draft internal audit plan and makes
appropriate recommendations to the Board;
• Reviews the adequacy of management’s responses
and actions to matters raised in internal and external
audit reports;
• Evaluates the process in place for assessing the
effectiveness of internal controls;
• Annually considers the adequacy of the Corporation’s
Business Continuity Plan, assessments of business risks
and insurance coverage and advises the Board;
• Reviews statutory financial information proposed by
management for submission through the Board to the
Shareholder Ministers; and
• Alerts the Board to any significant corporate
governance issues.
During the year the Committee, amongst other matters,
reviewed the Corporation’s risk management program,
considered a number of operational policies referred by
the Board, and monitored progress against the internal
audit plan. It also reviewed the Statutory Financial Report
(2006) and examined reports received from the internal and
external auditors and evaluated management’s responses
to, and actions upon, the matters raised.
The Committee comprises:
• Bonita Boezeman (Chairman);
• Milton Cockburn;
• John Johnson; and
• Suzanne Walsh.
The Chief Executive Officer, while not a member of the
Committee, attends meetings when invited to do so by
the Committee.
INFORMATION TECHNOLOGY COMMITTEE
The Information Technology Committee is responsible
for assisting the Board to oversee the use of information
technology within the Corporation. The Committee:
• Monitors the development and implementation of the
Corporation’s Information Technology Strategic Plan;
• Provides advice to the Board on all matters associated
with the current use of information technology by
NSW Lotteries;
• Evaluates risk management strategies designed to
minimise interruption to on-line selling activities; and
• Monitors new and emerging information technology
opportunities and risks.
During the year the Committee considered a number
of initiatives including the gaming system replacement
strategy, changes to the Corporation’s telecommunications
infrastructure and on-going software enhancements.
The Information Technology Strategic Plan was reviewed
regularly against milestones and there was a continued
focus on emerging technologies.
NSW LOTTERIES ANNUAL REPORT 2007 35
The Committee comprises:
• Denis McCormack (Chairman);
• John Bagshaw;
• Michael Howell; and
• Suzanne Walsh.
HUMAN RESOURCES AND REMUNERATION COMMITTEE
The Human Resources and Remuneration Committee
assists the Board in dealing with major human resource
and remuneration matters affecting the Corporation.
The Committee:
• Provides advice to the Board regarding the selection
and terms and conditions of employment of the Chief
Executive Officer;
• Annually reviews the remuneration of the Chief Executive
Officer and makes recommendations to the Board;
• Provides advice to the Board on a framework or broad
policy for the remuneration and employment conditions
of senior executives; and
• Considers any succession planning issues relating to the
Chief Executive Officer and reports to the Board.
During the year the Committee reviewed a range of matters
including executive contracts, changes to the executive
performance incentive scheme, succession planning and
workforce planning. The Chief Executive Officer has no
involvement in matters or discussions relating to the terms
and conditions of appointment or employment of the Chief
Executive Officer.
The Committee comprises:
• John Bagshaw (Chairman);
• Bonita Boezeman;
• Milton Cockburn; and
• Michael Howell.
MONITORING PERFORMANCE
NSW Lotteries has a series of operational performance
indicators which are subject to monitoring and report at
each Board meeting. These include:
• Progress on strategic action plans;
• Sales;
• Operating revenue, expenses and profit;
• Duty to Government; and
• Selling system uptime.
Each quarter the Board also receives detailed reports on
progress towards the achievement of Business Plan targets,
strategies, action plans, and product profitability.
ANNUAL REVIEW OF BOARD PERFORMANCE
As part of its continuous improvement philosophy, the
Board conducts an annual review of its performance to
assess how well it is meeting its various responsibilities.
The purpose of the review is to identify any areas for
improvement to ensure that the Board accomplishes its
role in the most efficient and effective manner possible.
During the process, each Board member and executive
manager of the Corporation is provided with an opportunity
to contribute.
We work towards our goals and
objectives using a set of values
and behaviours that underpin
our everyday activities
36 NSW LOTTERIES ANNUAL REPORT 2007
JOHN BAGSHAW
Chairman
BSc, FAICD
John is the inaugural Chairman of the corporatised Board of NSW Lotteries
and a founding member of the first Board established in 1991. He was formerly
Chairman and Chief Executive of Bell and Howell Australia Group Limited and
has 33 years Board experience primarily in gaming, computer technology and
technology related fields. John is a commercial breeder of standardbred horses
and is past Chairman of the Australian Harness Racing Council. He previously
served as a Director of NSW Harness Racing Club Ltd.
BONITA BOEZEMAN AO
Deputy Chairman
PMD Harvard, FAMI, FAICD
Appointed March 1994. Currently Managing Director of Business Benefits
International, Bonita was formerly an international executive with Time Warner
Inc. for 23 years and was Chairperson and Chief Executive Officer of Time Life
(Australia) Pty. Ltd. for 13 years. A graduate of the Harvard Business School
Executive Program in 1987, Bonita has an extensive background in marketing and
financial management. She is currently a Director of the Sydney Harbour Foreshore
Authority, Chairman of PayPal, a subsidiary of eBay, Chairman of the Catholic
Development Fund, member of The Order of Australia Foundation Board, member
of the Corporate Olympic Committee and Chair of the East West Foundation.
Bonita has been awarded the Order of Australia and the Centenary Medal for
significant contributions to business and philanthropy.
MILTON COCKBURN
B.Com (Hons) MAICD
Appointed February 2005. Milton has been Executive Director of the Shopping
Centre Council of Australia Ltd. since April 2001. He was a journalist for 16 years
with The Sydney Morning Herald, in Sydney and in Canberra, and is a former
Editor of that newspaper. He was also General Manager Media of the Sydney
Organising Committee for the Olympic Games (SOCOG). Milton is also a former
director of the University of NSW Press and a former member of the Australia
Abroad Council.
MICHAEL HOWELL
Chief Executive Officer
Dip Tech (Comm), CPA, MAICD
Appointed Chief Executive Officer of the Corporation in 1997 after seven years as
General Manager of NSW Lotteries. Michael was a founding member of the Board
and has over 30 years experience in commerce and public sector finance. He has
worked in the lottery industry for many years and has acted as an adviser to a
number of overseas Governments on the introduction of various lottery games.
He is Chairman of the National Lotto Bloc and a member of CPA Australia and
the Australian Institute of Company Directors.
OUR SHAREHOLDERS
THE BOARD OF DIRECTORS
NSW LOTTERIES ANNUAL REPORT 2007 37
JOHN JOHNSON
K.C.S.G.
Appointed April 2002. John has a background in retail, which led to an extensive
involvement in the union movement where he held numerous official positions.
He served as a member of the Parliament of NSW for 26 years and was President
of the Legislative Council for 13 years. During his time in Parliament John sat on
a range of Parliamentary Committees and retired from Parliament in 2001. John
is a former director of Prince Henry and Prince of Wales Hospital Group and was
former Guildmaster of the Catholic Evidence Guild. He is Treasurer and a Board
member of the Randwick Labor Club and was appointed in 2003 and re-appointed
in June 2005 as Chairman of the Board of The Catholic Press Newspaper Company
Pty. Ltd. John is also a member of the National Cancer Advisory Committee.
DENIS MCCORMACK
FAMI, FAIA, MAMI
Appointed January 1997. Denis is Managing Director of the marketing consultancy,
Southside Six Pty. Ltd. His marketing background spans 40 years. A former
advertising agency director, he joined St.George Building Society in the 1970s
and as Chief General Manager–Marketing he played an integral role in building
that brand over more than two decades. He also had a key involvement in the
conversion to St.George Bank in 1992. Denis previously served as Deputy
Chairman of the Lotto Board of Control in the 1980s and he is a former Director
of the Sydney Festival and IOOF Building Society. His current directorships include
Fantastic Holdings Ltd., the Lansdowne Club (Ireland-Australia Business Network)
and Sutherland Credit Union Ltd. He is also a member of various
charity committees.
SUZANNE WALSH
Appointed July 2000. Sue is the Unions NSW representative on the Board. She
is President of the Public Service Association of NSW, the union representing
State Public Sector employees with 47,000 members, covering a wide range of
Government departments, corporations and trading enterprises. Sue was elected
as Director of SGE Credit Union in November 2000 and is on the Executive of
Unions NSW. Sue is committed to supporting community organisations and is
a Director of the Bowlers’ Club of NSW. In addition, Sue is a Federal Councillor
on the State Public Service Federation, which is part of the Community and
Public Sector Union with 180,000 members nationwide. She also represents
NSW on a Federal Education Industry Committee.
38 NSW LOTTERIES ANNUAL REPORT 2007
OUR SHAREHOLDERS
THE EXECUTIVE MANAGEMENT TEAM
The Corporation’s Chief Executive Officer, Michael Howell (see profile on page 36), heads the Executive Management Team
and is supported by the following Executive Directors:
SUSAN BROWNE
B. Comm, CA.
Director Corporate
Services
Appointed to position
December 2000
MARTIN CASSIDY
BSc (Hons), MBA
Director Information
Technology Services
Appointed to position
January 2002
BRIAN MCINTYRE
MComm, FCA,
MAICD
Director Finance
Appointed to position
November 1994
NICK NICHLES
B. Bus, Grad.Dip.
Mktg.
Director Marketing
and Sales
Appointed to position
June 2005
CHRIS PATTERSON
Dip Tech (Comm)
Director Customer
and Agency Services
Appointed to position
May 2000
NSW LOTTERIES ANNUAL REPORT 2007 39
RISK MANAGEMENT
Although NSW Lotteries is in the business of chance,
every effort is made to identify and manage risk so as
to ensure the continued success and integrity of its
business activities.
A significant element in the effective management of the
Corporation’s resources is regular scanning of the operating
environment to identify major risks. Each area of risk is
then assessed and prioritised according to its likelihood
of occurrence and the significance of its impact. In turn,
risk management procedures are reviewed and relevant
strategies implemented to manage each area of risk.
In recent years, the Corporation has particularly focussed
on risk associated with processes outsourced to the retail
network, including ticket sales and prize redemption.
Following a detailed examination and assessment of
risks associated with these processes, a number of new
procedures were implemented, backed by enhanced
technological solutions at the agency level.
Most importantly, the Corporation has established clearly
defined standards of accountability.
Our Risk Management Program is based on the Australian/
New Zealand Risk Management Standard – AS/NZS
4360:2004 and focuses on mitigation strategies as well as
the transfer of risk. The Program covers all key areas of the
Corporation’s activities including:
• Internal Audit Activities;
• Fraud Prevention;
• Anti-Corruption Activities;
• Governance;
• Business Continuity;
• Insurance;
• Legislative Compliance;
• Investigations;
• Asset Management and Security;
• Information and Intellectual Property Security; and
• Privacy, Information Disclosure and Freedom
of Information.
NSW Lotteries continues to evolve its risk management
strategies based on known risk factors both in Australian
and international lottery jurisdictions and also monitors for
any potential new risk factors.
INSURANCE
Insurance is one of the tools used by the Corporation
to manage and mitigate areas of assessed risk. As part
of its overall approach to manage and mitigate risk, the
Corporation regularly reviews the type and extent of its
insurance coverage.
All key insurance risks, including Worker’s Compensation,
Property and Consequential Loss, Motor Vehicle, Public
Liability and Directors’ and Officers’ Liability are reviewed
at least annually.
As self-insurers through the NSW Government Treasury
Managed Fund, NSW Lotteries seeks to minimise any
possible risks and subsequent costs to the Corporation and
the Government.
This approach is extremely important, given the diversity
of the retail network and its broad responsibilities
in handling hundreds of millions of individual player
transactions each year. In addition, jackpot prize offers have
increased rapidly in recent years, with potential liabilities
increasing accordingly.
MANAGING RESOURCES
ENERGY MANAGEMENT POLICY
The Corporation continues to investigate ways to reduce
energy use and greenhouse emissions through its Energy
Management policy.
The Corporation’s Energy Management Plan includes
initiatives such as:
• Purchasing low energy consumption electrical appliances
and office equipment;
• Using energy saving lighting units, light globes and tubes;
• Switching off lighting when not required and utilising
power save modes on electrical appliances and office
equipment; and
• Educating staff on the importance of improving
energy efficiency.
Energy supply to the Homebush Bay premises remained
stable over the year and there was a small decrease
in consumption of energy over the previous year.
We continued to purchase an energy mix containing
6% Greenpower, which is a practical initiative to reduce
greenhouse emissions by using alternative power sources.
In addition, the motor vehicle pool fleet has been reduced
and smaller and more economical vehicles are being
purchased as part of the Corporation’s plan to provide
a cleaner fleet.
40 NSW LOTTERIES ANNUAL REPORT 2007
WASTE REDUCTION AND PURCHASING POLICY
The Corporation continues to investigate ways to reduce
the generation of waste and to increase the purchase of
materials with recycled content. The Corporation’s Waste
Reduction and Purchasing Plan includes initiatives such as:
Waste avoidance and minimisation
• Using e-mail for internal and external communication;
• Avoiding unnecessary printing of electronic
communications;
• Using Internet publishing, where practicable, for
external publications;
• Generating forms electronically to avoid large paper
stocks; and
• Printing documents double-sided.
These initiatives are designed to minimise paper wastage
and have the added benefit of reducing the number of
toner cartridges for office equipment. The purchase of multi
function devices capable of copying, printing and scanning
is being trialled to assist in reducing paper wastage and
toner use.
Waste reuse and recycling
Office waste is recycled by using surplus stationery for
notepaper and reusing envelopes and packaging materials
internally. Recycling initiatives also ensure that waste
materials such as empty toner cartridges, obsolete office
equipment, fluorescent light tubes, paper and cardboard
are separated and collected by recognised recycling
organisations. An estimated 40 tonnes of office waste was
recycled and therefore not sent to landfill during the year.
NSW Lotteries engages a landscape contractor for the care
and maintenance of the trees, plants and lawns on the site
of the Corporate Headquarters at Homebush Bay. Among
the many trees are four very large fig trees located around
the perimeter of the site. As the fig trees are a significant
landmark in the Homebush Bay area, an arborist is engaged
to care for their welfare. NSW Lotteries is committed to
protecting and conserving the environment. Vegetation
waste from the Homebush Bay site is mulched and reused
by the landscape contractor.
During the year, the recycled water system used
extensively in Sydney Olympic Park was expanded to the
commercial precinct. As part of this project, the Corporation
connected the recycled water to our irrigation system that
services our landscaped areas.
Use of recycled material
In the Corporation’s purchasing practices there are a
number of initiatives in place to increase the purchase of
recycled content material. This is achieved by:
• Purchasing office-related material and equipment
under contract;
• Purchasing office equipment able to operate with
recycled paper and recycled toner;
• Purchasing office-related stationery such as paper and
envelopes with recycled material content;
• Purchasing recycled water for irrigation purposes; and
• Purchasing recycled mulch to fertilise landscaped areas.
OUR SHAREHOLDERS
NSW LOTTERIES ANNUAL REPORT 2007 41
OUR STAFF
Our employees have attachment
and commitment to our business
WE ACKNOWLEDGE OUR STAFF.
42 NSW LOTTERIES ANNUAL REPORT 2007
LISTENING TO OUR STAFF
We recognise that our success begins with our people and
in order to better understand their feelings and attitudes,
this year we commissioned an independent on-line survey.
The level of staff interest in the survey is demonstrated by
the participation rate, with 100% of Corporation staff (who
were in attendance at the time the survey was conducted)
taking part.
WHAT THEY TOLD US
Overall employee alignment achieved a rating of 70%
which represents moderate engagement by our staff. This
told us that while our employees have attachment and
commitment to our business and were proud of the work
that they do, there were areas where improvement could
be made.
The most significant of these were employee recognition,
people practices and career opportunities. The results in
these areas suggested that we could improve the way we
recognise and reward staff for a job well done. Employees
also made it clear that career opportunities were important
to them and that they were concerned that there may be
limited career prospects at NSW Lotteries due to the size
and nature of the business.
It was pleasing that the survey results clearly demonstrated
that our staff displayed a strong customer focus and felt
that they had the tools, resources and capabilities to
deliver exceptional customer service. A strong passion
and desire to learn more were clearly demonstrated
together with a high satisfaction rating in terms of the
satisfaction with their job and associated duties. Our staff
also had a clear understanding of how their roles support
business objectives.
WHAT WE DID
Arising from the culture survey a number of significant
strategies to enhance the corporate culture have been
formulated into a plan of action and included in the
Corporate Business Plan for 2008-2010.
PERFORMANCE MANAGEMENT
This year, following the feedback received in the staff
survey, a new Performance Review Program was
implemented. The opportunity was taken to heavily
involve our staff in developing a new, more focused
and credible program.
The new scheme aims to build organisational capability
through the creation of a high performance culture with
clear accountabilities for the achievement of Corporate
goals. It identifies and aligns individual tasks and projects to
support wider organisational targets in the NSW Lotteries
Business Plan as well as providing guidance in areas
that need improvement. The Program also sets a clear
process for any corrective action and includes development
opportunities to ensure continuous learning and growth.
We will be closely monitoring the implementation of the
program over the next year to ensure it is meeting the
expectations of all the key stakeholders.
LEARNING AND DEVELOPMENT
LEADERSHIP DEVELOPMENT
NSW Lotteries has a strong commitment to providing
staff with the skills and knowledge necessary to maximise
their potential. During the year a number of Leadership
Development Forums were conducted for all supervisors
and managers. These forums have been well received by
attendees and have covered topics such as:
• The Leadership Connection;
• Engaging Your People;
• Change Management Excellence;
• Performance Review Planning;
• Mentoring Skills;
• Principles of Emotional Intelligence;
• Finance for Non-Financial Managers;
• Self Awareness and Accurate Self Assessment; and
• Emotional Self-Control.
OBJECTIVE: TO ENSURE THE SKILLS AND KNOWLEDGE NECESSARY FOR OUR
BUSINESS ARE AVAILABLE WHEN REQUIRED.
TO ENSURE ALL OUR EMPLOYEES ADOPT A STRONG COMMERCIAL ORIENTATION.
OUR STAFF
A critical component underpinning our Management Development
Program is our commitment to mentoring. This allows executives
to share their knowledge and experiences with potential senior
management candidates in a confi dential environment.
NSW LOTTERIES ANNUAL REPORT 2007 43
TRAINING AND DEVELOPMENT
As part of the development of all our staff, employees are
encouraged to participate in both in-house and external
training and take up development opportunities. Our
Performance Review Program has been designed to
identify training needs and to strategically plan for each
individual’s development.
During the year 113 employees attended internal and
external courses, seminars and on-the-job training
programs. We aim to continuously improve our staff’s
competencies so that they are able to assist in improving
services and products for our customers and our overall
performance and return to Government.
EXTERNAL STUDY ASSISTANCE
The NSW Lotteries External Study Assistance Program
assists employees in enhancing their capabilities through
private study by providing them with financial assistance
and study leave to undertake eligible courses relevant to
the Corporation’s needs. There were eight employees who
enhanced their skills and knowledge through this program
during the past year.
INVESTING IN THE SUCCESS OF OUR STAFF
This year saw the commencement of our Management
Development Program. The purpose of this program
is to provide participants with a structured pathway for
developing the critical skills necessary to progress their
careers within NSW Lotteries. Through our succession
planning we have identified critical roles which have the
potential to be filled by existing staff. A new competency
framework has been established for each of these roles
and a skill-gap analysis has been completed to determine
the level of development each successor will require.
It is a critical element of the program to ensure that each
participant is competent to perform at the required standard
of any role he or she may be considered to fill.
The program operates over a rolling two-year period and
currently has 10 participants. During the first 12 months,
monthly workshops are focusing on core leadership
competencies and addressing topics such as Self
Awareness and Accurate Self Assessment, Becoming
a Change Catalyst, Conflict Management and Teamwork
and Collaboration.
INVOLVING OUR STAFF IN DECISION MAKING
This year also saw the creation of the Leadership Team,
designed to further strengthen rapport and communication
between the Executive Team and staff. In the past
year, this team of senior managers participated in the
development of next year’s Business Plan. Feedback has
been very positive with comments expressing a feeling of
renewed ownership of the Corporation’s objectives and
strategies and a sense of a common purpose.
USING TECHNOLOGY TO IMPROVE OUR WORKPLACE
In addition to the improved business processes detailed
at page 28, the Corporation has also used technology to
improve our day-to-day work practices. NSW Lotteries
operates a very successful Staff Intranet which features
information on all our Divisions as well as our internal
policies and procedures. The Intranet provides staff with
easy and quick access to up-to-date information on news
and events affecting the Corporation.
During the year, we also introduced a new attendance
recording system for staff working flexible hours. All
attendance times are now recorded at computer desk tops
with managers and supervisors having immediate on-line
access for approval purposes. Previously staff used
a remote swipe card system.
NSW Lotteries staff member and Paralympic athlete, Julie Iles,
celebrated our national day with pride in her role as Lane Cove’s
Australia Day Ambassador for 2007.
Staff Information Sessions are conducted regularly to provide staff
with information on performance and planning to enable them to
actively participate in the Corporation’s commercial success.
44 NSW LOTTERIES ANNUAL REPORT 2007
RESTRUCTURING OUR WORKPLACE
TO IMPROVE PERFORMANCE
During the past year, organisational restructuring has
occurred across a majority of the organisation. This
has resulted in a number of voluntary redundancies
but has substantially enhanced workflow throughout
the organisation and has achieved a greater level of
effectiveness and efficiency between Divisions. The
restructure occurred after considerable consultation with
all staff, and particularly the small number of staff who
expressed interest in voluntary redundancy.
REWARDING OUR STAFF
The aim of our Employee Reward and Recognition Program
is to provide formal recognition to staff at all levels. The
program acknowledges employees who have made special
or outstanding contributions to assist the Corporation in
achieving its goals and objectives.
The program was relaunched in August 2006 with a new
set of criteria for award nominations. Under the new
program, employees are recognised for:
“Excellence in Performance” – recognising employees
who stand out in their existing position by consistently
exceeding expectations and contributing at a higher level
than that of their peer group; and
“Achievements in Activities” – recognising employees who
have done well in projects or additional activities outside their
normal work duties or the normal expectations of their role.
Employees or a group of employees were also nominated
if they demonstrated positive attitudes or behaviours in line
with NSW Lotteries values.
Many nominations were received throughout the year with
a total of 28 employees receiving Awards in either one of
the categories.
We are very proud of the recipients and their efforts are
very much appreciated.
OUR STAFF
06/07
05/06
04/05
03/04
02/03
01/02
00/01
2.24
2.22
2.14
2.03
1.92
1.71
1.62
REVENUE PER EMPLOYEE ($M)
06/07
05/06
04/05
03/04
02/03
01/02
00/01
6.6
6.6
6.3
6.1
5.6
5.1
4.9
SALES PER EMPLOYEE ($M)
06/07
05/06
04/05
03/04
02/03
01/02
00/01
170
172
176
183
195
201
205
STAFF NUMBERS
Staff members Sharon Barlow, Gay Hellyer and Tony Clough were recognised for more than 25 years with NSW Lotteries in this year’s
Long Service Awards. The presentation was made by Chairman, John Bagshaw.
NSW LOTTERIES ANNUAL REPORT 2007 45
EMPLOYEE OF THE YEAR
The Employee of the Year Award is our most eminent
award under the Employee Reward and Recognition
program. It recognises outstanding individual performance
or a major individual contribution to the Corporation during
the year. Our aim is to reinforce the pursuit of excellence
within the Corporation by publicly acknowledging and
rewarding exceptional work.
The 2006 Employee of the Year Award was presented to
Wendy Gardiner, Sales Support Manager, at a ceremony
in December 2006. Wendy provides a vital link between
the Territory Managers and Promotions staff within the
Marketing and Sales Division. Wendy was awarded this
special honour for consistently exceeding expectations
in all the tasks she performs and providing a high level of
customer service to both internal and external customers
throughout the year and throughout her long career with
NSW Lotteries. Starting with NSW Lotteries in February
1974, Wendy remains committed to the organisation and
its customers.
LONG SERVICE AWARDS
In conjunction with the Employee of the Year Award,
three long serving employees were recognised and
presented with a gift in appreciation for their contributions
and service to NSW Lotteries. This year Gay Hellyer,
Sharon Barlow and Tony Clough celebrated 25 years of
service with the Corporation.
UNIVERSITY SCHOLARSHIP PROGRAM
Over the past two years NSW Lotteries has participated in
the University of New South Wales Co-op Program. This
four-year scholarship program provides industry training to
exceptional undergraduate students. Each year a scholar
joins our Corporation’s Marketing and Sales Division for
a six-month duration as he or she undertakes structured
marketing training. The program has been so successful
it is intended to expand it to the Information Technology
Services Division in the near future.
EMPLOYEE ASSISTANCE PROGRAM
The Employee Assistance Program provides a voluntary,
confidential, free counselling and advisory service for
employees seeking professional assistance for personal or
work related problems. This program has been in operation
for the past six years at NSW Lotteries and is available to all
our staff. The program helps to ensure that all employees
maintain a positive work/life balance and that any external
issues do not impact on their work roles.
WORKCHOICES
NSW Lotteries’ position as a constitutional corporation
under Workchoices Legislation was confirmed by the
decision of the High Court of Australia this year. We are
currently negotiating a new industrial agreement, which will
meet all the Corporation’s obligations under this legislation.
At the same time, we will ensure all our employees are
fairly treated and that the organisation remains competitive
in the employment market place.
Since 1974, Wendy Gardiner has been committed to NSW Lotteries and consistently provided a high level of service to both internal and
external customers. Wendy was a popular and worthy choice as our Employee of the Year.
46 NSW LOTTERIES ANNUAL REPORT 2007
OH&S STATISTICAL REPORT
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
Average number of employees
201 195 183 176 172 170
Total number of work injuries 23 29 15 28 22 22
Actual expenditure on OH&S
programs ($)
31,085 21,907 13,523 25,567 15,926 21,465
Total number of workers
compensation claims
7 1210147 7
Total number of employees who
participated in a rehabilitation program
–31121
Number of hours in training in OH&S 541 280 150 203 91 192
Number of OH&S representatives – 8 8 7 6 6
Number of OH&S committees 2 2 2 2 1 1
HUMAN RESOURCES STATISTICAL REPORT AS AT 30 JUNE
2002 2003 2004 2005 2006 2007
Executive 6* 6* 6* 6* 6* 6*
Senior specialist managers 7 7 7 7 5 5
Administrative staff 172 168 156 149 148 149
Distribution offi cers 15 14 11 11 11 10
Total 200 195 180 173 170 170
* Includes one female
CARING FOR OTHERS
NSW Lotteries’ staff participate regularly in fund raising activities for charity. These occasions have become focal points
for staff to enjoy each other’s company while contributing to a worthy cause. Funds have been raised for many worthwhile
causes including: the Salvation Army, the National Breast Cancer Foundation (Pink Ribbon Day), Cancer Council (Daffodil
Day and Australia’s Biggest Morning Tea), the Children’s Medical Research Institute (Jeans for Genes), SIDS and Kids
(Red Nose Day) and the Shepherd Centre (Loud Shirt Day).
OUR STAFF
OCCUPATIONAL HEALTH AND SAFETY (OH&S)
At NSW Lotteries the health and safety of our people is
of paramount importance. The Corporation’s Occupational
Health and Safety Committee consists of both staff and
management representatives working together to ensure
the wellbeing of our employees.
We are proactive in providing healthcare initiatives such as
influenza vaccinations, “Healthy Heart” screens, healthy
living newsletters and ergonomic workplace assessments.
NSW Lotteries has adopted the Government Working
Together OH&S and Injury Management three-year strategy,
with the aim to secure improvements in the organisation’s
health and safety performance with specific focus on injury
management. OH&S refresher training was conducted for
all managers and supervisors during the year.
The table below shows key OH&S performance statistics
and how the organisation has performed in these key areas
in comparison to previous years:
NSW LOTTERIES ANNUAL REPORT 2007 47
However, the initial reaction to a Government sponsored
lottery to help raise funds for NSW hospitals during the
Great Depression was quite different.
After the State Lottery Bill was introduced to Parliament
in 1930 it created a storm and was denounced by the
churches and political opponents of the Government.
This was despite the fact that hospitals had been running
various Art Unions, and illegal betting was widespread
throughout the community.
In view of the resistance to the introduction of a lottery, the
then Premier, Jack Lang, put a proposition to the opponents
– he gave them six months to raise the money needed by
the hospitals. If they were successful there would be no
State lottery.
During the next six months the Government assisted the
campaign with funds, staff and a room in the Premier’s
office where they could meet. However, despite significant
effort, the funds just didn’t roll in and the opposition to the
State Lottery Bill was withdrawn.
The Lotteries Act was proclaimed on 22 June 1931. The
first lottery went on sale on Monday 10 August 1931 and
was drawn on 20 August 1931 in Her Majesty’s Theatre,
Pitt Street, Sydney.
The lottery comprised 100,000 tickets with a ticket price
of five shillings and threepence (52c). This represented
nearly half a day’s wages, a huge sum when you consider
that the current amount spent on an average lottery
purchase is just $5.
The first prize of £5,000 ($10,000) was also enormous in
relative terms. In the current era of sky high property prices
it is sobering to consider that the first winner, Mrs Eileen
Morton was able to build a house on Sydney’s exclusive
North Shore, take a cruise to Fiji and put a little in the bank.
And she split the prize with her grandmother!
Over the past 76 years NSW Lotteries has paid close to
$14 billion in prizes to hundreds of thousands of lucky
winners, and raised over $7 billion to assist the NSW
Government in funding important community infrastructure,
such as schools, hospitals and roads.
Lottery funds have helped to literally change the face of
Sydney, with both the Opera House and Harbour Bridge
funded from the proceeds of lottery sales.
Over the years, other types of lottery games such as Lotto
and Powerball have been added to our portfolio of games.
In 2006/07, our financial contribution to the Government’s
revenues was a healthy $381.0 million, which helps to fund
various programs for the benefit of the people of NSW.
Over the past 76 years, NSW Lotteries has earned an enviable reputation as
a responsible provider of lottery games. Lotteries are warmly accepted as part
of the history of the State of New South Wales and the dream of winning
a big prize is part of the national culture.
HISTORY
A syndicate of 33 staff at the Minchinbury Community Hospital won $375,000 in Lotto. One of the winners said: “The funniest thing
about it was that it was a mistake. We have always played OZ Lotto and Saturday Lotto and we entered the Wednesday night draw
by accident.” (Courtesy of the Mt Druitt St Marys Standard)
48 NSW LOTTERIES ANNUAL REPORT 2007
SOME OF THE MILESTONES IN OUR HISTORY:
1931 The Lotteries Act was proclaimed – 22 June.
The first State Lottery went on sale – 10 August.
The first State Lottery was drawn with a first prize of £5,000 – 20 August.
1947 A Special Lottery commenced with a first prize of £12,000.
1954 Mammoth Lotteries were introduced with a first prize of £30,000.
1956 A Jackpot prize was added to the Mammoth Lottery.
1957 Opera House Lottery tickets went on sale for a first prize of £100,000.
1963 The new Jackpot Lotteries commenced.
1974 The first $10 Lottery went on sale offering a first prize of $250,000.
1975 The Half-Million Dollar Lottery was introduced.
1979 Monday Lotto was introduced with a 6 from 40 game matrix.
1982 Instant Scratchies launched.
1984 Lotto was available twice a week – Monday and Wednesday.
1986 The Million Dollar Lottery and a $20 Peace Lottery were introduced.
1987 A new computer gaming system was introduced, which allowed all agencies to sell Lotto on-line.
1989 Lotto was changed to a 6 from 44 game matrix and the Wednesday draw was moved to Thursday.
Players were able to play the Monday and Midweek games separately.
NSW Lotteries was granted a licence to sell 6 From 38 Pools – the first national game.
1993 The $20 Olympic Bid Lottery was launched.
1994 OZ Lotto was introduced – the second national game.
1995 Lotto Strike was introduced – Monday and Thursday.
1996 The Midweek Lotto game changed back to Wednesday night and Powerball was introduced on
Thursday night – the third national game.
The last Million Dollar Lottery was drawn and replaced by a new Lucky 7 lottery game.
1997 NSW Lotteries was incorporated as a State Owned Corporation.
2000 A new state-of-the-art Gaming System was implemented.
Saturday Lotto, the fourth national game, was introduced.
Lucky 7 was discontinued.
2001 As at 30 June, NSW Lotteries becomes the first Australian lottery operator to achieve $1 billion in sales
during a financial year.
In August, NSW Lotteries celebrated 70 years of operation.
2003 A single prize of $13.7 million was won in the $2 Jackpot Lottery – the biggest prize ever won in an
Australian Draw Lottery.
A $30 million Powerball jackpot was won – the biggest single prize ever in NSW.
2004 Lotto – Monday and Wednesday – was changed to a 6 from 45 game matrix.
Lotto Strike was extended to include a Saturday draw as well as Monday and Wednesday.
2005 OZ Lotto was changed to a 7 from 45 game matrix.
2006 The sale of Lotto – Monday and Wednesday – is extended to South Australia and Western Australia.
Instant Scratchies was restructured to return more prizes to players.
A new sales record is set and NSW Lotteries celebrates 75 years of serving the community of NSW.
2007 A record profit of $50.28 million before significant item and income tax equivalent helps NSW Lotteries
continue its vital role of funding community infrastructure in NSW.
HISTORY
NSW LOTTERIES ANNUAL REPORT 2007 49
PROFIT BEFORE SIGNIFICANT ITEMS AND INCOME TAX
EQUIVALENT EXPENSE ($M):
NSW Lotteries recorded a profit before income tax
equivalent expense of $50.28 million during fiscal 2007.
After excluding the effect of significant items, this year’s
operations resulted in a record profit and represented an
increase of $1.22 million (2.5%) over the previous year.
Despite a year which presented challenges in retail
conditions and jackpot opportunities, sales revenues of
$1.163 billion were just $7.3 million (0.6%) below last year’s
record. Despite this outcome the Corporation was able to
exceed profit targets by a combination of efficiency
measures and tight fiscal restraint.
Based on this year’s results, the Corporation was able to
provide a total return to the NSW Government of $334.4
million for the year ($334.7 million in 2006). This comprised
income tax equivalent payments ($13.8 million), dividends
($36.5 million) and duty ($284.1 million).
Subject to its capital requirements, NSW Lotteries currently
provides 100% of its profit to the Shareholder Ministers
and NSW Government.
Over the year, the balance of the Corporation’s cash and
cash equivalents decreased by $7.65 million to $175.17
million. Net cash outflows from investing activities were
mainly associated with the purchase of property, plant,
equipment and gaming system development. At the same
time, working capital increased from $4.02 million to $5.86
million at the end of the financial year.
NSW Lotteries’ strong sales and financial performance
have provided a solid platform for its business activities.
The financial outlook for the Corporation continues to
be solid.
EXPENSES ($M):
FINANCIAL OVERVIEW
06/07
05/06
04/05
48.26
49.06
50.28
06/07
05/06
04/05
71.90
73.22
71.99
50 NSW LOTTERIES ANNUAL REPORT 2007
FINANCIAL REPORT
NSW LOTTERIES ANNUAL REPORT 2007 51
STATEMENT BY BOARD OF DIRECTORS 52
INDEPENDENT AUDIT REPORT 53
INCOME STATEMENT 54
BALANCE SHEET 55
CASH FLOW STATEMENT 56
STATEMENT OF CHANGES IN EQUITY 57
NOTES TO THE FINANCIAL STATEMENTS 58
NOTE
1 Summary of Signifi cant Accounting Policies 58
2 Revenues 61
3 Profi t from Continuing Operations 61
4 Taxation 61
5 Cash and Cash Equivalent Assets 62
6 Other Financial Assets 62
7 Financial Instruments 63
8 Property, Plant and Equipment 64
9 Intangible Assets 66
10 Other Non-Current Asset 66
11 Payables 71
12 Provisions 71
13 NSW Government Dividends 71
14 Employee Benefi ts 72
15 Contributed Equity 72
16 Reserve 72
17 Retained Profi ts 72
18 Related Parties 73
19 Auditors’ Remuneration 73
20 Commitments Not Provided for
in the Financial Statements 74
21 Contingent Assets 74
22 Segment Reporting 74
FINANCIAL REPORT
For the year ended 30 June 2007
52 NSW LOTTERIES ANNUAL REPORT 2007
STATEMENT BY THE BOARD OF DIRECTORS
In accordance with a resolution of the Directors of New South
Wales Lotteries Corporation and pursuant to Section 41C (1B)
and (1C) of the Public Finance and Audit Act 1983, we state that:
1 The attached is a general purpose Financial Report and
presents a true and fair view of the fi nancial position of
NSW Lotteries Corporation at 30 June 2007 and the
results of its fi nancial performance and transactions for
the year then ended;
2 The Financial Report has been prepared in accordance with
the provisions of the Public Finance and Audit Act 1983 and
the Public Finance and Audit Act Regulation 2005;
3 The Financial Report has been prepared in accordance
with Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board;
4 We are not aware of any circumstances which would render
any particulars included in the Financial Report to be
misleading or inaccurate; and
5 There are reasonable grounds to believe that NSW Lotteries
Corporation will be able to pay its debts as and when they
fall due.
Signed in accordance with a resolution of the Board of Directors.
Dated at Sydney this Twentieth day of September 2007.
J R Bagshaw M A Howell
Chair Director and Chief
Executive Offi cer
NSW LOTTERIES ANNUAL REPORT 2007 53
INDEPENDENT AUDIT REPORT
54 NSW LOTTERIES ANNUAL REPORT 2007
2007 2006
Notes $’000 $’000
Continuing Operations
Revenues 1(b), 2 1,162,644 1,169,949
Cost of Sales 3(b) (1,061,296) (1,068,046)
Gross Profi t 101,348 101,903
Other Revenues 2, 3(a) 20,920 26,572
Retail Network Expenses (33,158) (35,491)
Printing and Distribution Expenses (6,195) (6,287)
Administration Expenses (32,632) (31,440)
Profi t from continuing operations before income tax equivalent expense 3(c) 50,283 55,257
Less Income tax equivalent expense 4(a) (15,195) (16,688)
Profi t for the year attributable to equity holders 35,088 38,569
The Income Statement should be read in conjunction with the Notes to the Financial Statements
INCOME STATEMENT
For the year ended 30 June 2007
NSW LOTTERIES ANNUAL REPORT 2007 55
2007 2006
Notes $’000 $’000
Current Assets
Cash and Cash Equivalent Assets 5 180,791 187,285
Other Financial Assets 6 3,225 2,846
Trade Receivables 9,905 12,276
Other Current Assets 810 239
Total Current Assets 194,731 202,646
Non-Current Assets
Other Receivables 2,073 2,073
Other Financial Assets 6 18,356 17,681
Property, Plant and Equipment 8 29,289 27,654
Intangible Assets 9 8,165 8,170
Deferred Tax Assets 4(d) 9,593 11,317
Other Non-Current Asset 10 4,279 5,126
Total Non-Current Assets 71,755 72,021
Total Assets 266,486 274,667
Current Liabilities
Trade and Other Payables 11 100,198 107,928
Current Tax Liability 4(b) 634 9,260
Provisions 12 88,036 81,441
Total Current Liabilities 188,868 198,629
Non-Current Liabilities
Other Liabilities 11 18,356 17,681
Deferred Tax Liabilities 4(c) 4,436 3,910
Provisions 12 842 940
Total Non-Current Liabilities 23,634 22,531
Total Liabilities 212,502 221,160
Net Assets 53,984 53,507
Equity
Contributed Equity 15 – –
Reserve 16 7,613 5,695
Retained Profi ts 17 46,371 47,812
Total Equity 53,984 53,507
The Balance Sheet should be read in conjunction with the Notes to the Financial Statements
BALANCE SHEET
As at 30 June 2007
56 NSW LOTTERIES ANNUAL REPORT 2007
2007 2006
Notes $’000 $’000
Cash Flows from Operating Activities
Receipts from customers 1,211,883 1,214,657
Payments to suppliers and employees (145,555) (145,200)
Prizes paid to customers (685,258) (677,654)
Duty payments to Governments (296,832) (289,541)
Goods and Services tax paid (48,411) (47,293)
Income tax equivalent paid (22,391) (14,190)
Investment revenue received 10,479 9,544
Investment revenue credited to prize funds (6,189) (5,533)
Other revenue received 9,853 10,264
Net cash from Operating Activities (a) 27,579 55,054
Cash Flows from Investing Activities
Proceeds from sale of plant and equipment 275 446
Payments for other fi nancial assets (1,054) (64)
Payments for property, plant and equipment (2,586) (3,480)
Payments for intangible assets (1,727) (781)
Net cash from Investing Activities (5,092) (3,879)
Cash Flows from Financing Activities
Dividends paid (30,133) (33,946)
Net cash from Financing Activities (30,133) (33,946)
(Decrease)/Increase in cash and cash equivalents (7,646) 17,229
Cash and cash equivalents at the beginning of the fi nancial year 182,819 165,590
Cash and cash equivalents at the end of the fi nancial year (b) 175,173 182,819
Notes to the Cash Flow Statement
(a) Reconciliation of cash fl ows from operating activities
Profi t for the year 35,088 38,569
Adjustments for non-cash items:
Depreciation 3,327 3,521
Amortisation 1,732 1,954
(Decrease)/Increase in income tax provided (8,626) 4,741
Decrease/(Increase) in deferred taxes payable 1,430 (2,243)
Loss on sale of plant and equipment 87 139
Changes in Assets and Liabilities
Decrease/(Increase) in receivables 2,371 (5,896)
Decrease/(Increase) in other assets 276 (5,036)
(Decrease)/Increase in payables (8,207) 15,192
Increase in provisions 101 4,113
Net cash from Operating Activities 27,579 55,054
(b) Reconciliation of cash at the end of the fi nancial year
with related items in the Balance Sheet
Cash comprises:
Cash and Cash Equivalent Assets 180,791 187,285
Cash Book (5,618) (4,466)
Cash at the end of the fi nancial year 175,173 182,819
CASH FLOW STATEMENT
For the year ended 30 June 2007
NSW LOTTERIES ANNUAL REPORT 2007 57
Contributed Asset Revaluation Retained Total
Equity Reserve Profi ts Equity
$’000 $’000 $’000 $’000
Balance at 1 July 2005 – 5,695 39,376 45,071
Profi t from continuing operations after
income tax equivalent – – 38,569 38,569
NSW Government dividends – – (30,133) (30,133)
Balance at 30 June 2006 – 5,695 47,812 53,507
Profi t from continuing operations after
income tax equivalent – – 35,088 35,088
NSW Government dividends – – (36,529) (36,529)
Tax effect of revaluation of property – (820) – (820)
Revaluation of property – 2,738 – 2,738
Balance at 30 June 2007 – 7,613 46,371 53,984
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2007
58 NSW LOTTERIES ANNUAL REPORT 2007
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
General Information
New South Wales Lotteries Corporation (NSW Lotteries) is a
Statutory State Owned Corporation established on 1 January
1997 under the provisions of the New South Wales Lotteries
Corporatisation Act, 1996.
NSW Lotteries holds licences to conduct public lotteries.
These licences have been issued under the provisions of the
Public Lotteries Act 1996 and currently expire on 1 July 2008.
Note 1 Summary of Signifi cant Accounting Policies
(a) Basis of Preparation
Statement of compliance
The Financial Report is a general purpose fi nancial report which
has been prepared on an accrual basis and in accordance with
the New South Wales Lotteries Corporatisation Act, 1996,
Public Finance and Audit Act, 1983, regulations issued
thereunder, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting
Standards Board (AASB). The accounting policies set out below
have been applied consistently to all periods presented
in these fi nancial statements.
The Financial Report also complies with the International
Financial Reporting Standards (IFRS) and interpretations
adopted by the International Standards Board.
Board approval
The fi nancial statements were approved by the Board of
Directors on 20 September 2007.
Functional and presentation currency, roundings.
The Financial Report is presented in Australian dollars, which
is NSW Lotteries’ functional currency and, unless otherwise
stated, all fi nancial information has been rounded to the nearest
thousand dollars.
Historical cost
The Financial Report has been prepared on the basis of historical
cost except for cash equivalent assets, receivables, property,
plant and equipment and intangible assets which have been
measured at fair value.
Going concern
The Financial Report has been prepared on a going concern basis.
(b) Revenue Recognition
Revenues are recognised at the fair value of the consideration
received, net of the amount of Goods and Services Tax (GST).
Product sales (Subscriptions)
Revenue from product sales is recognised exclusive of GST,
which is charged on the basis of operator margin. Revenue
from Instant Scratchies is recognised when tickets are sold.
For all other products, revenue is recognised when each
game is drawn.
Investment revenue
Investment revenue is recognised as it accrues, taking into
account the effective yield on the fi nancial asset.
Sale of non-current assets
The gross proceeds of non-current asset sales are included as
income at the date control of the asset passes to the buyer,
usually when an unconditional contract of sale is signed. The
gain or loss on disposal is calculated as the difference between
the carrying amount of the asset at the time of disposal and the
net proceeds on disposal.
(c) Receivables
All Receivables are carried at fair value. Revenue from product
sales is due for collection from retailers each week. Collectibility
of receivables is regularly reviewed and debts which are known
to be uncollectible are written off.
(d) Income Tax Equivalent
NSW Lotteries is exempt from Commonwealth Taxation,
however, pursuant to the State Owned Corporations Act,1989,
it is subject to the National Tax Equivalent Regime.
NSW Lotteries adopts the balance sheet method of tax effect
accounting. Under this method income tax expense equivalent
for the year comprises current and deferred taxes (Note 4).
Current tax is the expected tax payable on the taxable income
for the year using current tax rates. Deferred tax is provided
using temporary differences between the carrying amount of
assets and liabilities for reporting purposes in the balance sheet
and the amounts for taxation purposes. The amount of deferred
tax provided will be based on the expected manner of realisation
of the asset or settlement of the liability using current tax rates.
Deferred tax assets are not brought to account unless it is
probable that taxable income is available to utilise these assets.
(e) Cash Equivalent Assets
Cash equivalent assets, which are negotiable securities
expected to be realised within one year, are carried at market
value, being their fair value. Gains or losses on these securities
are recognised in the Income Statement.
(f) Other Financial Assets
Non-derivative fi nancial assets which are deposits with fi xed
or determinable repayments and fi xed maturities are classifi ed
as held-to-maturity when the intention is to hold these assets
to maturity. These deposits held-to-maturity are stated at
amortised cost using the effective interest rate method less any
impairment losses. Amortised cost is calculated by taking into
account any discount on acquisition over the period to maturity.
(g) Property, Plant and Equipment
Revaluations of Physical Non-Current Assets
Property, plant and equipment is measured at fair value in
accordance with AASB 116 and TPP 07-1. At reporting date
each physical non-current asset is reviewed for impairment. This
is to ensure that its carrying amount does not materially differ
from fair value at that date and if necessary its carrying amount
is then written down to its recoverable amount. Revaluation
increments are recognised in the asset revaluation reserve;
decrements exceeding previous revaluation increments are
recognised as expenses in the Income Statement.
Depreciation
Depreciation is recognised in profi t or loss on a straight line basis
over the estimated useful lives of each class of NSW Lotteries’
property, plant and equipment . The estimated useful lives for
the current and comparative periods of each class of asset are:
NSW LOTTERIES ANNUAL REPORT 2007 59
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
Buildings 30 to 40 years
Leasehold improvements the leased term
Gaming and Other Computer equipment 4 to 10 years
Other equipment 3 to 8 years
(h) Intangible Assets
Intangible assets are identifi able assets that are without physical
substance; are separable from other assets; and arise from
contractual or other legal rights. Intangible assets are stated at
cost less accumulated amortisation and impairment losses.
Amortisation
Amortisation is recognised in profi t or loss on a straight line
basis over the estimated useful lives of intangible assets from
the date they are available for use. The estimated useful lives for
the current and comparative periods of each class of intangible
asset are:
Gaming software 10 to 12 years
Other software 2 to 5 years
(i) Impairment of Assets
At each reporting date NSW Lotteries reviews the carrying
amount of its tangible and intangible assets to determine
whether there is any indication that those assets have been
impaired. If impairment exists, the asset’s carrying value is
written down to its recoverable amount. The recoverable
amount is the lower of the asset’s fair value (less the costs
to sell) and the value in use. Any excess of the asset’s
carrying value over its recoverable amount is expensed
to the Income Statement.
(j) Payables
All payables are carried at cost which is the fair value of the
consideration to be paid in the future for goods delivered and
services rendered up to the reporting date, whether or not yet
billed to the Corporation.
(k) Prizes
For all products, the prescribed percentage of subscriptions
payable as prizes is allocated to the respective prize account
from which payment to prize winners is made.
Unpaid Prizes
Unpaid prizes represents prizes that have been won but which
have not yet been paid to or claimed by prize winners up to
twelve months after the drawing of the relevant game or,
in relation to Instant Scratchies, after the game was closed,
together with prize allocations that have not been won and
have jackpotted at the reporting date.
Prize Funds
Prize funds comprise the balance of prescribed allocations,
prizes unclaimed after twelve months from the drawing of
the relevant game or, in relation to Instant Scratchies, from the
date the game was closed and revenues generated through
the investment of prizes payable, reduced by payments of
additional prizes.
(l) Employee Benefi ts
Salaries and Annual Leave
Salaries and annual leave (including any associated on-costs)
that are payable within one year represent present obligations
resulting from employees’ services provided up to the reporting
date calculated at remuneration rates that NSW Lotteries
expects to pay when the liability is settled.
Long Service Leave
Long service leave, calculated at remuneration rates that NSW
Lotteries expects to pay when the liability is settled, is provided
for all employees. Long service leave expected to be settled
within one year has been measured at the amounts expected to
be paid when the liability is settled. The liability that is payable
later than one year is measured at the present value of future
cash payments.
Superannuation
NSW Lotteries contributes to various employee superannuation
funds and charges are expensed as incurred.
In respect of defi ned contributions superannuation funds,
NSW Lotteries’ obligations are determined by the amounts to be
contributed for that reporting period so no actuarial assumptions
are required to measure the obligation or the expense and there
is no possibility of any actuarial gain or loss.
NSW Lotteries also contributes to three defi ned benefi t
superannuation funds. Its net obligations to these funds are
calculated separately for each fund by estimating the amount of
future benefi t that employees have accrued in return for their
services in the current and prior reporting periods, discounted
to present value based on the long term Commonwealth
Government bond rate less the fair value of any assets of the
funds. All three funds are closed to new members. To the extent
that a surplus or defi cit is generated due to variations in actuarial
valuations, these variances will be refl ected in the Balance Sheet
as an asset or liability and recognised in the Income Statement
as income or expense. A surplus resulting in a superannuation
asset may allow NSW Lotteries to have a reduction in its
contributions. A defi cit resulting in a superannuation liability may
require NSW Lotteries to increase the level of its contributions.
(m) Financial Instruments
Financial instruments give rise to fi nancial assets of NSW
Lotteries and fi nancial liabilities owing to other parties and
account for the majority of NSW Lotteries’ current assets and
current liabilities. In accordance with AASB 132 “Financial
Instruments: Disclosure and Presentation”, information is
disclosed in Note 7 in respect of the credit risk and interest rate
risk. All such amounts are carried in the Financial Report at the
values disclosed in the Balance Sheet and applicable Notes to
the Financial Statements.
60 NSW LOTTERIES ANNUAL REPORT 2007
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
(n) Goods and Services Tax
Receivables and payables are stated with the amount of the
Goods and Services Tax (GST) included. Revenues, expenses
and
all other assets and liabilities are recognised net of the
amount of GST except where the amount of GST incurred
is not recoverable from the Australian Tax Offi ce (ATO).
In these circumstances the GST is recognised as part
of the cost of
acquisition of the asset or as part of the
item of expense.
The net amount of GST recoverable from, or payable to,
the ATO is included as a receivable, or payable, in the Balance
Sheet. Cash fl ows are included in the Cash Flow Statement on
a gross basis. The GST components of cash fl ows arising from
investing and fi nancing activities which are recoverable from,
or payable to, the ATO are classifi ed as operating cash fl ows.
(o) Provision for Dividends
Dividends declared, determined or publicly recommended on
or before the reporting date are recognised as a liability for the
entire amount that remains undistributed at that date.
(p) Critical Accounting Estimates and Judgements
Management evaluates estimates and judgements incorporated
into the Financial Report based on historical knowledge and best
available current information. Estimates and judgements assume
a reasonable expectation of future events and are based on
current trends and economic data, obtained both external to
and within NSW Lotteries.
Key Estimates –
Impairment
NSW Lotteries assesses impairment at each reporting date by
evaluating conditions specifi c to it that may lead to impairment
of assets. Where an impairment is found the recoverable
amount of the asset is determined. (See Note 1(i)).
Make Good
NSW Lotteries estimates the restoration costs of its leased
premises at each reporting date by evaluating conditions specifi c
to the premises that may lead to impairment of the asset.
Where an impairment is found the recoverable amount of the
asset is determined. (See Note 1(i)).
Recovery of Deferred Tax Assets
Deferred tax assets are recognised for tax deductible temporary
differences as management considers that it is probable that
future taxable income will be available to utilise the temporary
differences.
Long Service Leave
The liability for long service leave is recognised and measured
at the present value of management’s best estimate of the
expenditure required to settle the present obligation at the
reporting date discounted using the long term Commonwealth
Government bond rate that refl ects the time value of money
and the risks specifi c to the liability. (See Note 1(l)).
Estimation of Useful Lives
The estimation of useful lives of assets has been based on
historical experience as well as manufacturer’s warranties (for
gaming, computer and other equipment and software), lease
terms (for leasehold improvements) and retention policies
(for motor vehicles). The condition of the assets is assessed
at each reporting date and considered against their useful
lives. Adjustments are made when considered necessary.
Depreciation charges are included in Note 8; amortisation
charges are included in Note 9.
(q) Comparatives
Comparatives have been reclassifi ed and repositioned for
consistency with current year disclosures.
NSW LOTTERIES ANNUAL REPORT 2007 61
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
2007 2006
$’000 $’000
Note 2 Revenues
Product sales 1,162,644 1,169,949
Other Revenues comprise:
Investment revenue 10,479 9,544
Other revenues 10,441 17,028
20,920 26,572
Note 3 Profi t from Continuing Operations includes:
(a) Signifi cant Revenue
The following signifi cant other revenue item is relevant in explaining
the fi nancial performance of the Corporation:
Increase in superannuation asset 2006 (Income tax liability – $1,857,844)
(refer also to Note 10) – 6,193
(b) Cost of Sales
Retailer commission 86,058 84,674
Prizes 684,326 691,268
Government duties 290,912 292,104
1,061,296 1,068,046
(c) Expenses
Employee benefi ts 14,146 13,498
Superannuation – defi ned benefi t funds 836 805
Superannuation – defi ned benefi t funds actuarial loss 11 –
Superannuation – defi ned contributions funds 511 495
Fair value movements in fi nancial instruments 18 –
Depreciation (refer Note 8) 3,327 3,521
Amortisation (refer Note 9) 1,732 1,954
Loss on sale of plant and equipment 87 139
Operating lease rental expenses 614 592
Consultancies 12 4
Bad debts 6 16
Note 4 Taxation
(a) Income Tax Equivalent Expense
Prima facie income tax equivalent expense calculated at 30% (2006 - 30%) on the profi t 15,085 16,577
Increase in income tax equivalent expense due to non-tax deductible or assessable items:
Non-deductible depreciation 27 36
Other 83 75
15,195 16,688
Income tax equivalent expense attributable to profi t is made up of:
Current income tax equivalent provision 13,765 18,931
Deferred income tax equivalent assets 1,740 (3,751)
Deferred income tax equivalent liabilities (310) 1,508
15,195 16,688
62 NSW LOTTERIES ANNUAL REPORT 2007
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
2007 2006
$’000 $’000
Note 4 Taxation continued
(b) Current Tax Liability
Provision for current income tax equivalent
Movements during the year:
Balance at the beginning of the year 9,260 4,519
Less instalments of income tax paid (22,391) (14,190)
Current year’s income tax equivalent provision on profi t 13,765 18,931
634 9,260
(c) Deferred Tax Liabilities
Deferred income tax equivalent liabilities comprise the estimated liability
at the applicable rate of 30% (2006 - 30%) on the following items:
Tax effect of revaluation of buildings taken directly to reserve 2,999 2,179
Tax effect of superannuation asset 1,284 1,538
Income currently non-assessable for tax but recognised as revenue
for accounting purposes 153 193
4,436 3,910
(d) Deferred Tax Assets
Deferred income tax equivalent assets comprise the estimated future benefi t
at the applicable rate of 30% (2006 - 30%) on the following items:
Provisions and accrued employee benefi ts not currently deductible 2,210 1,926
Jackpotting unpaid prizes not currently deductible 3,758 5,460
Prize funds components not currently deductible 3,213 3,508
Tax effect of leased assets make good 176 161
Difference in depreciation of property, plant and equipment and amortisation
of intangibles for accounting and income tax purposes 236 262
9,593 11,317
Note 5 Cash and Cash Equivalent Assets
Cash at bank and on hand 113 180
Cash equivalent negotiable securities 180,678 187,105
180,791 187,285
Note 6 Other Financial Assets
Current Assets
Deposits held-to-maturity 3,225 2,846
Non-Current Assets
Deposits held-to-maturity 18,356 17,681
NSW LOTTERIES ANNUAL REPORT 2007 63
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
Note 7 Financial Instruments
Financial Risk Management and Investment Policies
The Corporation’s investment and risk policy regarding fi nancial instruments is essentially to preserve the capital of the business
while optimising the rate of return on invested funds, using a mixture of investment products as authorised by relevant legislation.
Management’s policies for controlling these risks include avoidance of undue concentrations of risk, use of internal audit and
regular review of benchmarks.
The Corporation’s principal fi nancial instruments comprise cash equivalent negotiable securities and deposits held-to-maturity.
The main purpose of these fi nancial instruments is to earn income to assist in funding the Corporation’s operations.
(a) Interest rate risk
Interest rate risk is the risk that the value of the fi nancial instruments will fl uctuate due to changes in market interest rates.
The Corporation’s exposure to interest rate risks and the effective interest rates of fi nancial assets and liabilities at reporting
date are as follows:
30 June 2007
Carrying
Floating Fixed 1 Year Over 1 to More than Non Interest amount as per
Interest Rate or Less 5 Years 5 Years Bearing Balance Sheet
Financial Instrument Note $’000 $’000 $’000 $’000 $’000 $’000
Financial Assets
Cash and Cash Equivalent Assets 5 10,042 160,282 7,407 2,947 113 180,791
Other Financial Assets 6 – 3,225 10,197 8,159 – 21,581
Receivables - – – – 11,978 11,978
Total Financial Assets 10,042 163,507 17,604 11,106 12,091 214,350
Weighted Effective Interest rate 6.35% 6.54% 5.84% 5.84%
Financial Liabilities
Payables and Other Liabilities 11 – – – – 118,554 118,554
Current Tax Liability 4(b) – – – – 634 634
Provision for Dividends 13 – – – – 36,529 36,529
Total Financial Liabilities – – – – 155,717 155,717
30 June 2006
Carrying
Floating Fixed 1 Year Over 1 to More than Non Interest amount as per
Interest Rate or Less 5 Years 5 Years Bearing Balance Sheet
Financial Instrument Note $’000 $’000 $’000 $’000 $’000 $’000
Financial Assets
Cash and Cash Equivalent Assets 5 26,966 152,459 5,597 2,083 180 187,285
Other Financial Assets 6 – 2,846 9,663 8,018 – 20,527
Receivables – – – – 14,349 14,349
Total Financial Assets 26,966 155,305 15,260 10,101 14,529 222,161
Weighted Effective Interest rate 5.75% 6.03% 5.65% 5.64%
Financial Liabilities
Payables and Other Liabilities 11 – – – – 125,609 125,609
Current Tax Liability 4(b) – – – – 9,260 9,260
Provision for Dividends 13 – – – – 30,133 30,133
Total Financial Liabilities – – – – 165,002 165,002
64 NSW LOTTERIES ANNUAL REPORT 2007
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
Note 7 Financial Instruments continued
(b) Credit Risk
The Corporation’s maximum exposure to credit risk is represented by the carrying amounts of the fi nancial assets included in the
Balance Sheet. Credit risk represents the loss that would be recognised if parties holding fi nancial assets of NSW Lotteries at
reporting date fail to honour their obligations under contract. NSW Lotteries minimises its credit risk on receivables by undertaking
its sales transactions with a large number of retailers and requiring those retailers to remit outstandings on a weekly basis. The
Corporation’s cash equivalent assets included in current assets are held in A grade securities, and will mature or be sold generally
within twelve months. Other fi nancial assets are held in A grade deposits and earn a fi xed rate of interest. The Corporation is
therefore not materially exposed to credit risk.
(c) Net Fair Values of Financial Assets and Liabilities
Net fair values of fi nancial assets and liabilities are determined by the Corporation on the following bases:
Financial instruments being cash equivalent assets included in Cash Assets are traded in an organised fi nancial market and are
carried at market value. Financial instruments held-to-maturity in fi xed interest deposits are shown as Other Financial Assets and
are carried at cost.
Cash at Bank and on Hand, Cash Book, Trade Creditors and Accruals, Government Duties, Sales in Advance, Unpaid Prizes,
Other Payables, Current Tax Liability and Provision for Dividends are carried at historical cost.
2007 2006
$’000 $’000
Note 8 Property, Plant and Equipment
(a) Property, Plant and Equipment at Fair Value
Land and Buildings
Leasehold land – at fair value 7,390 5,850
Buildings – at fair value 15,021 13,810
Less accumulated depreciation (4,961) (4,680)
10,060 9,130
Leasehold improvements – at fair value 687 637
Less accumulated amortisation (424) (299)
263 338
Total Land and Buildings 17,713 15,318
Plant and Equipment
Computer equipment – at fair value 24,549 24,332
Less accumulated depreciation (16,995) (14,625)
7,554 9,707
Other plant and equipment – at fair value 7,230 7,269
Less accumulated depreciation (5,282) (5,066)
1,948 2,203
Work in Progress – at fair value 2,074 426
Total Plant and Equipment 11,576 12,336
Total Property, Plant and Equipment at Fair Value 29,289 27,654
(b) Valuations of Land and Buildings
Leasehold land and buildings are measured on a fair value basis, being the amount for which the assets could be exchanged between
knowledgeable and willing parties in an arm’s length transaction, having regard to the highest and best use of the asset for which
other parties would be willing to pay.
An independent valuation of the Corporation’s leasehold land and buildings at Homebush Bay was carried out by Paul Goldsmith AAPI,
Certifi ed Practising Valuer No 3099, of the State Valuation Offi ce. The valuation, based at 30 June 2007, had regard to the highest and
best use of the leasehold land and buildings that the market participants would be willing to pay, and resulted in a value of $7,390,000
for the leasehold land and $10,060,000 for the buildings, being the value attributed to the balance of their economic life.
NSW LOTTERIES ANNUAL REPORT 2007 65
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
2007 2006
$’000 $’000
Note 8 Property, Plant and Equipment continued
(c) Carrying amounts if land and buildings were stated at cost less
accumulated depreciation:
Leasehold land
Cost 1,838 1,838
Carrying amount at the end of the year 1,838 1,838
Buildings
Cost 9,961 9,948
Less accumulated depreciation (4,656) (4,439)
Carrying amount at the end of the year 5,305 5,509
(d) Estimated fair value at directors’ valuation is:
Leasehold Improvements
Estimated fair value of leasehold improvements at directors’ valuation is $263,000
(2006 - $338,000).
Plant and Equipment
Estimated fair value of plant and equipment at directors’ valuation is $11,576,000
(2006 - $12,336,000).
(e) Reconciliations of carrying amounts at the beginning and the end of the year:
Leasehold land – at fair value
Carrying amount at the beginning of the year 5,850 5,850
Revaluation increment 1,540 –
Carrying amount at the end of the year 7,390 5,850
Buildings – at fair value
Carrying amount at the beginning of the year 9,130 9,450
Additions 13 51
Revaluation increment 1,198 –
Depreciation (281) (371)
Carrying amount at the end of the year 10,060 9,130
Leasehold improvements – at fair value
Carrying amount at the beginning of the year 338 452
Additions 50 –
Amortisation (125) (114)
Carrying amount at the end of the year 263 338
Computer equipment – at fair value
Carrying amount at the beginning of the year 9,707 11,454
Additions 298 696
Disposals (21) –
Depreciation (2,430) (2,443)
Carrying amount at the end of the year 7,554 9,707
Other plant and equipment – at fair value
Carrying amount at the beginning of the year 2,203 1,074
Additions 577 2,307
Disposals (341) (585)
Depreciation (491) (593)
Carrying amount at the end of the year 1,948 2,203
Work in Progress – at fair value
Carrying amount at the beginning of the year 426 –
Additions 1,648 426
Carrying amount at the end of the year 2,074 426
Total Property, Plant and Equipment at Fair Value 29,289 27,654
66 NSW LOTTERIES ANNUAL REPORT 2007
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
2007 2006
$’000 $’000
Note 9 Intangible Assets
(a) Intangible Assets at Fair Value
Gaming software
Gaming software – at fair value 15,133 13,952
Less accumulated amortisation (7,638) (6,311)
7,495 7,641
Other software
Other software – at fair value 2,561 2,022
Less accumulated amortisation (1,891) (1,493)
670 529
Total Intangible Assets at Fair Value 8,165 8,170
(b) Reconciliations of carrying amounts at the beginning and the end of the year:
Gaming software
Carrying amount at the beginning of the year 7,641 8,690
Additions 1,181 492
Amortisation (1,327) (1,541)
Carrying amount at the end of the year 7,495 7,641
Other software
Carrying amount at the beginning of the year 529 653
Additions 546 289
Amortisation (405) (413)
Carrying amount at the end of the year 670 529
Total Intangible Assets at Fair Value 8,165 8,170
Note 10 Other Non-Current Asset
Superannuation
Superannuation contributions are made by the Corporation to three NSW public sector defi ned benefi t employee superannuation
funds as follows:
State Authorities Superannuation Scheme (SASS)
State Authorities Non-Contributory Superannuation Scheme (SANCS)
State Superannuation Scheme (SSS)
These three funds are closed to new members. The SAS Trustee Corporation holds the investments of these funds in trust.
The superannuation funds provide for defi ned benefi ts based on years of service and fi nal average salary. Employees contribute to
the schemes at various percentages of their salaries. The Corporation’s contributions are generally at a multiple of the employees’
contributions, depending on the fund.
Actuarial gains and losses are recognised immediately in the Income Statement in the year in which they occur.
All fund assets are invested by SAS Trustee Corporation at arm’s length through independent fund managers.
There was no individually signifi cant revenue or expense item with respect to the movement in the superannuation asset during
the year. In respect of the previous year, the net superannuation adjustment resulted in an individually signifi cant revenue item of
$6,192,894 as referred to in Note 3(a) that was made up of $466,560 representing contributions that otherwise would have been
paid together with an increase of $5,726,334 in the superannuation asset during the year.
The following tables summarise the components of the net benefi t expense recognised in the Income Statement and the funded
status and amounts recognised in the Balance Sheet for the respective funds:
NSW LOTTERIES ANNUAL REPORT 2007 67
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
Note 10 Other Non-Current Asset – Superannuation continued
2007 2007 2007 2007
$’000 $’000 $’000 $’000
30 June 2007 SASS SANCS SSS Total
Reconciliation of the assets and liabilities recognised in the balance sheet
Present value of defi ned benefi t obligations (7,506) (1,999) (34,163) (43,668)
Fair value of plan assets 9,523 3,035 45,571 58,129
2,017 1,036 11,408 14,461
Adjustment for limitation on net asset (1,420) (730) (8,032) (10,182)
Net asset recognised in the balance sheet 597 306 3,376 4,279
Reconciliation of the present value of the defi ned benefi t obligation
Present value of the partly defi ned benefi t obligation at the
beginning of the year (7,157) (1,938) (35,098) (44,193)
Current service cost (333) (115) (318) (766)
Interest cost (415) (111) (2,046) (2,572)
Contributions by fund participants (172) – (285) (457)
Actuarial gains/(losses) (16) 62 2,290 2,336
Benefi ts paid 587 103 1,294 1,984
Present value of the partly defi ned benefi t obligation at the end of the year (7,506) (1,999) (34,163) (43,668)
Reconciliation of the fair value of fund assets
Fair value of the fund assets at the beginning of the year 8,802 2,753 40,717 52,272
Expected return on fund assets 672 209 3,080 3,961
Actuarial gains 464 176 2,783 3,423
Contributions by fund participants 172 – 285 457
Benefi ts paid (587) (103) (1,294) (1,984)
Fair value of the fund assets at the end of the year 9,523 3,035 45,571 58,129
Actual return on fund assets 1,251 385 5,755 7,391
Fund assets
The percentage invested in each asset class at 30 June 2007 was:
Australian equities 33.6%
Overseas equities 26.5%
Australian fi xed interest securities 6.8%
Overseas fi xed interest securities 6.4%
Property 10.1%
Cash 9.8%
Other 6.8%
Expense components recognised in the income statement
Current service cost (333) (115) (318) (766)
Interest cost on benefi t obligations (415) (111) (2,046) (2,572)
Expected return on fund assets 672 209 3,080 3,961
Actuarial gains 448 238 5,074 5,760
Movement in adjustment for limitation on net asset (819) (432) (5,979) (7,230)
Net (expense) recognised in the Income Statement (447) (211) (189) (847)
68 NSW LOTTERIES ANNUAL REPORT 2007
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
Note 10 Other Non-Current Asset – Superannuation continued
2007 2007 2007 2007
$’000 $’000 $’000 $’000
30 June 2007 SASS SANCS SSS Total
Expected return on fund assets
The expected return on assets assumption is determined by weighting the expected long-term return for each class by the target
allocation of assets in each class. The return used for each class is net of investment tax and investment fees.
Expected employer contributions 326 124 456 906
Valuation method and principal actuarial assumptions at 30 June 2007:
a) Valuation method
The Projected Unit Credit (PUC) valuation method was used to determine the present value of the defi ned benefi t obligations and
the related current service cost. This method sees each period of service as giving rise to an additional unit of benefi t entitlement
and measures each unit separately to build up the fi nal obligation.
b) Economic assumptions
Discount rate 6.4% pa
Expected return on assets backing current pension liabilities 7.6% pa
Expected return on assets backing other liabilities 7.6% pa
Expected salary increase rate 4% pa to June 2008; 3.5% pa thereafter
Expected rate of CPI increase 2.5% pa
Disclosures required under paragraphs Aus121.1 and Aus121.2 of AASB 119 “Employee Benefi ts”:
Funding arrangements for employer contributions
The 30 June 2007 fi nancial position of the funds, calculated in accordance with AAS25 “Financial Reporting by Superannuation
Plans”, is summarised as follows:
a) Net surplus
Accrued benefi ts (7,437) (1,979) (30,797) (40,213)
Net market value of fund assets 9,523 3,035 45,571 58,129
Net surplus 2,086 1,056 14,774 17,916
b) Contribution recommendations
Recommended contribution rates for NSW Lotteries: 1.9 2.5 1.6
Basis:
multiple-
member
contributions
% member
salary
multiple-
member
contributions
c) Funding method
The method used to determine the employer contribution recommendations at the last actuarial review was the Aggregate Funding
method. The method adopted affects the timing of the cost to the employer.
Under the Aggregate Funding method, the employer contribution rate is determined so that suffi cient assets will be available to
meet benefi t payments to existing members, taking into account the current value of assets and future contributions.
d) Economic assumptions adopted for the last actuarial review of the fund were:
Weighted average assumptions:
Expected rate of return on fund assets backing current pension liabilities 7.7% pa
Expected rate of return on fund assets backing other liabilities 7.0% pa
Expected salary increase rate 4.0% pa
Expected rate of CPI increase 2.5% pa
Nature of asset/liability
If a surplus exists in the employer’s interest in the fund, the employer may be able to take advantage of it in the form of a reduction
in the required contribution rate, depending on the advice of the fund’s actuary.
Where a defi ciency exists, the employer is responsible for any difference between the employer’s share of fund assets and the
defi ned benefi t obligation.
NSW LOTTERIES ANNUAL REPORT 2007 69
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
Note 10 Other Non-Current Asset – Superannuation continued
2006 2006 2006 2006
$’000 $’000 $’000 $’000
30 June 2006 SASS SANCS SSS Total
Reconciliation of the assets and liabilities recognised in the balance sheet
Present value of defi ned benefi t obligations (7,157) (1,938) (35,098) (44,193)
Fair value of plan assets 8,802 2,753 40,717 52,272
1,645 815 5,619 8,079
Adjustment for limitation on net asset (601) (298) (2,054) (2,953)
Net asset recognised in the balance sheet 1,044 517 3,565 5,126
Reconciliation of the present value of the defi ned benefi t obligation
Present value of the partly defi ned benefi t obligation at the
beginning of the year (6,869) (2,010) (37,911) (46,790)
Current service cost (332) (119) (416) (867)
Interest cost (411) (101) (2,061) (2,573)
Contributions by fund participants (151) – (280) (431)
Actuarial gains 9 75 4,591 4,675
Benefi ts paid 597 217 979 1,793
Present value of the partly defi ned benefi t obligation at the end of the year (7,157) (1,938) (35,098) (44,193)
Reconciliation of the fair value of fund assets
Fair value of fund assets at the beginning of the year 6,619 2,137 37,434 46,190
Expected return on fund assets 504 162 2,820 3,486
Actuarial gains 541 174 2,905 3,620
Employer contributions 1,584 497 (1,743) 338
Contributions by fund participants 151 – 280 431
Benefi ts paid (597) (217) (979) (1,793)
Fair value of fund assets at the end of the year 8,802 2,753 40,717 52,272
Actual return on fund assets 1,086 337 5,825 7,248
Fund assets
The percentage invested in each asset class at 30 June 2006 was:
Australian equities 37.4%
Overseas equities 27.9%
Australian fi xed interest securities 9.9%
Overseas fi xed interest securities 6.8%
Property 8.6%
Cash 5.0%
Other 4.4%
Expense components recognised in the income statement
Current service cost (332) (119) (416) (867)
Interest cost on benefi t obligations (411) (103) (2,061) (2,575)
Expected return on plan assets 504 163 2,821 3,488
Actuarial gains 549 250 7,496 8,295
Movement in adjustment for limitation on net asset (601) (298) (2,054) (2,953)
Net income/(expense) recognised in the Income Statement (291) (107) 5,786 5,388
70 NSW LOTTERIES ANNUAL REPORT 2007
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
Note 10 Other Non-Current Asset – Superannuation continued
2006 2006 2006 2006
$’000 $’000 $’000 $’000
30 June 2006 SASS SANCS SSS Total
Expected return on fund assets
The expected return on assets assumption is determined by weighting the expected long-term return for each class by the target
allocation of assets in each class. The return used for each class is net of investment tax and investment fees.
Expected employer contributions 287 124 448 859
Valuation method and principal actuarial assumptions at 30 June 2006:
a) Valuation method
The Projected Unit Credit (PUC) valuation method was used to determine the present value of the defi ned benefi t obligations and
the related current service cost. This method sees each period of service as giving rise to an additional unit of benefi t entitlement
and measures each unit separately to build up the fi nal obligation.
b) Economic assumptions
Discount rate 5.9% pa
Expected return on assets backing current pension liabilities 7.6% pa
Expected return on assets backing other liabilities 7.6% pa
Expected salary increase rate 4.0% pa to 2008, 3.5% pa thereafter
Expected rate of CPI increase 2.5% pa
Disclosures required under paragraphs Aus121.1 and Aus121.2 of AASB 119 “Employee Benefi ts”:
Funding arrangements for employer contributions
The 30 June 2006 fi nancial position of the fund, calculated in accordance with AAS25 “Financial Reporting by Superannuation
Plans”, is summaried as follows:
a) Net surplus
Accrued benefi ts (6,897) (1,835) (29,312) (38,044)
Net market value of fund assets 8,802 2,753 40,717 52,272
Net surplus 1,905 918 11,405 14,228
b) Contribution recommendations
Recommended contribution rates for NSW Lotteries: 1.9 2.5 1.6
Basis:
multiple-
member
contributions
% member
salary
multiple-
member
contributions
c) Funding method
The method used to determine the employer contribution recommendations at the last actuarial review was the Aggregate Funding
method. The method adopted affects the timing of the cost to the employer.
Under the Aggregate Funding method, the employer contribution rate is determined so that suffi cient assets will be available to
meet benefi t payments to existing members, taking into account the current value of assets and future contributions.
d) Economic assumptions adopted for the last actuarial review of the fund were:
Weighted average assumptions:
Expected rate of return on fund assets backing current pension liabilities 7.7% pa
Expected rate of return on fund assets backing other liabilities 7.0% pa
Expected salary increase rate 4.0% pa
Expected rate of CPI increase 2.5% pa
Nature of asset/liability
If a surplus exists in the employer’s interest in the fund, the employer may be able to take advantage of it in the form of a reduction
in the required contribution rate, depending on the advice of the fund’s actuary.
Where a defi ciency exists, the employer is responsible for any difference between the employer’s share of fund assets and the
defi ned benefi t obligation.
NSW LOTTERIES ANNUAL REPORT 2007 71
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
2007 2006
$’000 $’000
Note 11 Payables
Current
Cash Book 5,618 4,466
Trade Creditors and Accruals 7,755 9,048
Government Duties 22,289 28,209
Sales in Advance 8,640 9,621
Unpaid Prizes 55,192 56,491
Other 704 93
100,198 107,928
Non-Current
Unpaid Prizes 18,356 17,681
Note 12 Provisions
Current
Employee Benefi ts (refer Note 14(a)) 6,377 5,870
Prize Funds 45,130 45,438
Provision for Dividends (refer Note 13) 36,529 30,133
88,036 81,441
Non-Current
Provision for Make Good on Leases 586 536
Employee Benefi ts (refer Note 14(b)) 256 404
842 940
Reconciliations:
Reconciliations of the carrying amounts for each class of provision, except for employee
provisions, are set out below:
Prize Funds
Balance at the beginning of the year 45,438 40,986
Allocations and transfers made during the year 58,001 60,003
Payments made during the year (58,309) (55,551)
Balance at the end of the year 45,130 45,438
Provision for Dividends
Balance at the beginning of the year 30,133 33,946
Provisions made during the year 36,529 30,133
Payments made during the year (30,133) (33,946)
Balance at the end of the year 36,529 30,133
Provision for Make Good
Balance at the beginning of the year 536 536
Provisions made during the year 50 –
Balance at the end of the year 586 536
Note 13 NSW Government Dividends
Dividends provided 36,529 30,133
72 NSW LOTTERIES ANNUAL REPORT 2007
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
2007 2006
$’000 $’000
Note 14 Employee Benefi ts
(a) Current
Provision for Annual Leave 1,516 1,385
Provision for Long Service Leave 4,861 4,485
6,377 5,870
(b) Non-Current
Provision for Long Service Leave 256 404
Reconciliations:
Reconciliations of the carrying amounts for employee provisions are set out below:
2007 2006 2007 2006 2007 2006
$’000 $’000 $’000 $’000 $’000 $’000
Annual Leave Long Service Leave Total Total
Balance at the beginning of the year 1,385 1,252 4,889 4,761 6,274 6,013
Allocations and transfers made
during the year 1,191 1,160 479 589 1,670 1,749
Payments made during the year (1,060) (1,027) (251) (461) (1,311) (1,488)
Balance at the end of the year 1,516 1,385 5,117 4,889 6,633 6,274
Note 15 Contributed Equity
Authorised Capital
100 Ordinary Shares of $1.00 each – $100 (2006 - $100)
Issued and Paid-up Capital
2 Ordinary Shares of $1 each fully paid – $2 (2006 - $2)
NSW Lotteries was corporatised on 1 January 1997 with authorised capital of 100 ordinary shares at $1 each. The issued capital of
two (2) $1 shares are issued to the Treasurer and the Minister for Finance on behalf of the NSW Government. The $2 issued share
capital has been rounded to zero in the Balance Sheet.
2007 2006
$’000 $’000
Note 16 Reserve
Asset Revaluation Reserve 7,613 5,695
Asset Revaluation Reserve – reconciliation
Balance at the beginning of the year 5,695 5,695
Increment on revaluation of land and buildings. 1,918 –
Balance at the end of the year 7,613 5,695
Nature and Purpose of Asset Revaluation Reserve
The purpose of the asset revaluation reserve is to record increments and decrements as
a result of the revaluation of physical non-current assets measured at fair value in
accordance with AASB 116 and TPP 07-1.
Note 17 Retained Profi ts
Retained Profi ts at the beginning of the year 47,812 39,376
Net profi t 35,088 38,569
Total available for distribution 82,900 77,945
NSW Government – Dividends Provided (36,529) (30,133)
Retained Profi ts at the end of the year 46,371 47,812
NSW LOTTERIES ANNUAL REPORT 2007 73
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
Note 18 Related Parties
(a) Key Management Personnel – Directors
The names of each person holding the position of director of the Corporation during the
fi nancial year are: Mr J. Bagshaw, Ms B. Boezeman, Mr M. Cockburn, Mr M. Howell,
Mr J. Johnson, Mr D. McCormack and Ms S. Walsh.
Mr M. Howell, Chief Executive Offi cer of the Corporation, is the sole full-time director.
The total emoluments paid or payable, directly or indirectly, by the Corporation to directors,
excluding the salary of the full-time director, was $391,899 (2006 - $388,127).
(b) Key Management Personnel – Other
Name Position
Ms S. Browne Director Corporate Services
Mr M. Cassidy Director Information Technology Services
Mr B. McIntyre Director Finance
Mr N. Nichles Director Marketing and Sales
Mr C. Patterson Director Customer and Agency Services
2007 2006
$ $
(c) Key Management Personnel Compensation
Short-term employee benefi ts 1,327,436 1,413,342
Post-employment benefi ts 493,845 300,798
Other long-term employee benefi ts 106,865 132,139
1,928,146 1,846,279
(d) Principles of Compensation
Compensation paid or payable to directors, excluding the full-time director, is determined by the Shareholders.
The full-time director and other key management personnel are employed by the Corporation under individual contracts of
employment. The nature of compensation paid or payable to these personnel is approved by the Board having regard to relevant
legislation and current market practice. The amount of compensation paid or payable to the full-time director is approved by the
Board; the amounts of compensation paid or payable to other key management personnel is set by the full-time director within
parameters approved by the Board. In relation thereto, the advice of an independent external consultant is obtained to ensure
that fi xed annual compensation is aligned to the market at the 50th percentile for each individual. Fixed annual compensation
is reviewed annually and adjusted subject to assessed individual performance and contribution to the Corporation, market
movements, movements in the Consumer Price Index and the Corporation’s fi nancial performance.
Short-term employee benefi ts paid or payable to the full-time director and other key management personnel include a performance-
related incentive that is approved by the Board and conditional upon the achievement of corporate targets. Incentive payments
account for only a minor proportion of the total compensation paid to each of these individuals.
The duration of the employment contract for the full-time director and other key management personnel varies generally within the
range of three to fi ve years. Six months notice or six months payment in lieu of notice is normally required for the Corporation to
terminate a contract.
2007 2006
$’000 $’000
(e) Superannuation Contributions
Contributions to Superannuation Funds on behalf of employees 1,358 1,300
Note 19 Auditors’ Remuneration
Audit fees: Auditors of the Corporation
(audit and review of Financial Report) 134 138
Other services: Auditors of the Corporation (supervision of draws) 120 135
254 273
74 NSW LOTTERIES ANNUAL REPORT 2007
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2007
2007 2006
$’000 $’000
Note 20 Commitments not provided for in the Financial Statements
Commitments under operating leases for motor vehicles, plant, offi ce
and warehouse accommodation at 30 June 2007:
Payable within 1 year 610 592
Payable 1 to 5 years 1,014 502
1,624 1,094
The property leases are leases with three year terms, rent payable monthly
in advance. Options have been exercised to renew each lease for an additional
period of two years.
Note 21 Contingent Assets
The total commitments under operating leases of $1,624,018 (2006 - $1,093,577) shown in Note 20 include $147,638 (2006 -
$99,416) in input tax credits that are expected to be recoverable from the Australian Taxation Offi ce under the Goods and Services
Tax legislation.
At the date of this report there were no commitments for the purchase of non-current assets not provided for in the fi nancial
statements (2006 -Nil) and no input tax credits are expected to be recoverable from the Australian Taxation Offi ce under the Goods
and Services Tax legislation.
Note 22 Segment Reporting
NSW Lotteries Corporation operates solely in the business of selling lottery tickets in the state of New South Wales and the
Australian Capital Territory.
End of Audited Financial Statements
NSW LOTTERIES ANNUAL REPORT 2007 75
STATUTORY REPORTING APPENDIX
For the year ended 30 June 2007
ACCOUNTS PAYABLE PERFORMANCE
NSW Lotteries’ policy is to pay all accounts within the suppliers’ terms of trade. No interest was paid or payable as a result of late
payment of accounts.
The following indicators summarise the Corporation’s performance and give a snapshot of accounts payable by the Corporation at
the end of each quarter and the indicative payment timeframe:
Ageing of Creditors at the
end of each quarter September 2006 December 2006 March 2007 June 2007
Current (within due date) $8,354,184 $8,168,295 $8,418,259 $7,755,206
< 30 days overdue Nil Nil Nil Nil
30-60 days overdue Nil Nil Nil Nil
60-90 days overdue Nil Nil Nil Nil
> 90 days overdue Nil Nil Nil Nil
Accounts paid on time
during each quarter September 2006 December 2006 March 2007 June 2007
Target % for Accounts paid within 30 days 100% 100% 100% 100%
Actual % of Accounts paid within 30 days 100% 100% 100% 100%
Total dollars paid within 30 days $8,354,184 $8,168,295 $8,418,259 $7,755,206
Total dollars paid $8,354,184 $8,168,295 $8,418,259 $7,755,206
Standard Results 2004/05 Results 2005/06 Results 2006/07
Number of complaints for
late or non-payment Less than 0.1% of all accounts Nil Complaints Nil Complaints Nil Complaints
CONSULTANTS
Consultants equal to or more than $30,000
There were no consultancies costing $30,000 or more.
Consultancies less than $30,000
During the year, there were two consultancies engaged in the following area:
Category Cost
Finance and Accounting/Tax $12,200
Engineering Nil
Environmental Nil
Information Technology Nil
Legal Nil
Management Services Nil
Organisational Review Nil
Training Nil
Total Consultancies less than $30,000 $12,200
Total Consultancies $12,200
CREDIT CARD USE
During the year, credit card use within the Corporation was in accordance with the Premier’s Memoranda and Treasurer’s Directions.
76 NSW LOTTERIES ANNUAL REPORT 2007
STATUTORY REPORTING APPENDIX
For the year ended 30 June 2007
EQUAL EMPLOYMENT OPPORTUNITY (EEO)
2006/07 Planned Results
The Workforce Plan was implemented including:
1. The designing and implementation of the Management Development Program in line with the Corporation’s Succession Plan.
2. The introduction of coaching/mentoring training to assist employees with career planning and making contacts across
the organisation.
Strategies for 2007/08
1. Introduction of a new Performance Management Program, which aims to identify and address specifi c development needs
of staff.
2. Implementation of a training and development program designed to enhance managers’ skills in delivering feedback, coaching
and communication.
EEO Statistical Report
Table A. Trends in the Representation of EEO Groups
1
% of Total Staff
2
Benchmark
EEO Group or target 2004 2005 2006 2007
Women 50% 47% 46% 47% 46%
Aboriginal people and Torres Strait Islanders 2% 0% 0% 0% 0%
People whose fi rst language was not English 20% 33% 33% 32% 33%
People with a Disability 12% 10% 10% 10% 9%
People with a Disability Requiring Work-Related Adjustment 7% 3% 2.9% 3.1% 3.2%
Table B. Trends in the Distribution of EEO Groups
1
Distribution Index
3
Benchmark
EEO Group or target 2004 2005 2006 2007
Women 100 82 83 81 82
Aboriginal people and Torres Strait Islanders 100 nc
4
nc
4
nc
4
nc
4
People whose fi rst language was not English 100 89 87 90 87
People with a Disability 100 nc
4
nc
4
nc
4
nc
4
People with a Disability Requiring Work-Related Adjustment 100 nc
4
nc
4
nc
4
nc
4
Notes:
1. Staff numbers are as at 30 June 2007.
2. Excludes casual staff.
3. A Distribution Index of 100 indicates that the centre of the distribution of the EEO group across salary levels is equivalent to that of other staff. Values
less than 100 mean that the EEO group tends to be more concentrated at lower salary levels than is the case for other staff. The more pronounced this
tendency is, the lower the index will be. In some cases the Index may be more than 100, indicating that the EEO group is less concentrated at lower salary
levels. The Distribution Index is automatically calculated by the software provided by the Offi ce of the Director of Equal Opportunity in Public Employment.
4. nc = Not Calculated. The Distribution Index is not calculated where EEO group or non-EEO group numbers are less than 20.
EXEMPTIONS FROM THE REPORTING PROVISIONS
In accordance with section 7(2) of the Annual Reports (Statutory Bodies) Act 1984, the Treasurer has exempted NSW Lotteries
from disclosing in its Annual Report a detailed budget and an outline budget.
ETHNIC AFFAIRS PRIORITIES STATEMENT
NSW Lotteries conducts its affairs in recognition of the Community Relations Commission and Principles of Multiculturalism Act,
2000. Each year, the Corporation develops an Ethnic Affairs Priorities Statement Plan, which identifi es strategies to improve our
services to the diverse community of NSW.
We report to the Community Relations Commission on the implementation of this plan and detail our progress in our Annual
Report. The Corporation’s Performance Report for fi scal 2007 follows:
NSW LOTTERIES ANNUAL REPORT 2007 77
STATUTORY REPORTING APPENDIX
For the year ended 30 June 2007
Ethnic Affairs
Initiative
Key Result
Area Strategies/Tasks Responsibility
Resources/
Budget
Timeline
Indicators Performance Report
Timeline
Indicators for
Fiscal 2008
(See Note 1
below)
1. Continue to
provide Community
Language
Allowance Scheme
(CLAS) community
language speakers
for customers of
NSW Lotteries.
1. Social
Justice (1.7
- Access to
Interpreters &
Translators)
1. Recruitment &
testing of interested
staff.
2. Inform staff of CLAS
speaker availability.
3. Monitor & report on
CLAS speaker usage.
Manager Human
Resources
Salaries Budget June 2007
Phone Directory to
all staff of updated
CLAS list.
Report July 2007
Level of
coverage
Timely
information
dissemination
Timeliness
Based on recorded practice, translation
service provided to customers
and agents using key community
languages especially Chinese,
Vietnamese and Arabic languages
Information on available translators
regularly updated
Service is provided in a timely fashion
on demand
June 2008
Phone Directory to
all staff of updated
CLAS list
Report July 2008
2.Marketing
communications
strategies will include
an ethnic component
where appropriate.
Promotions will
further recognise
backgrounds and
needs of NSW
Lotteries customers.
1. Identify & use
appropriate ethnic
media for advertising,
promotions &
sponsorship.
2. Provide product &
service information for
Non English Speaking
Background (NESB)
communities.
3. Develop promotional
activities for specifi c
ethnic communities.
Use multilingual
promotional staff.
Director Marketing
& Sales
Marketing budget
– Corporate
Promotions &
Advertising
Inclusion
Development
of activities
Timeliness
Lotto has promoted the Saturday
Superdraws through in-language radio
(in Arabic, Chinese and Vietnamese)
and in-language press (in Chinese,
Vietnamese and Arabic). How to Play
leafl ets have been translated into
Chinese, Arabic and Vietnamese.
Powerball has promoted large
jackpots through in-language press (in
Chinese, Arabic and Vietnamese) and
in-language radio (Chinese, Vietnamese
and Arabic).
Translations of the How To Play
brochures for Lotto, Powerball and
OZ Lotto were made available on the
NSW Lotteries website (in Chinese,
Vietnamese and Arabic)
Instant Scratchies launched the $2
Happy Pig game to celebrate the Lunar
New Year. The game was supported by
an in-store promotion in selected NSW
Lotteries agents.
Media included in-language press and
radio (in Chinese and Vietnamese).
Developed a glossary of lottery
terminology designed to assist agents
from NESB.
Implemented formal program to
identify training needs and to provide
any additional necessary support.
Multilingual promotions conducted for
all products
Ongoing
Ongoing
Ongoing
Note 1: The existing strategies will continue in 2007/08
ETHNIC AFFAIRS PRIORITIES STATEMENT 2006/07 PERFORMANCE REPORT
78 NSW LOTTERIES ANNUAL REPORT 2007
STATUTORY REPORTING APPENDIX
For the year ended 30 June 2007
FUNDS GRANTED TO NON-GOVERNMENT COMMUNITY ORGANISATIONS
No funds were granted to non-Government community organisations.
INVESTMENT MANAGEMENT PERFORMANCE
At the end of the financial year investment funds were apportioned between two fund managers:
Treasury Corporation 44.92%
Western Asset Management 55.08%
(formerly Legg Mason Asset Management Australia)
Gross returns on investments were:
Actual % per Annum Benchmark % per Annum
for year ended for year ended
June 2006 June 2007 June 2006 June 2007
Treasury Corporation 5.76 6.29 5.74 6.36
Western Asset Management 5.86 6.35 5.74 6.36
LEGISLATIVE CHANGES
There were no significant legislative changes or judicial decisions which affected the Corporation’s operations during the year.
LIABILITY MANAGEMENT
NSW Lotteries has no borrowings, debt or unfunded liabilities.
OVERSEAS TRAVEL
Officer Destination Purpose
John Bagshaw, Chairman Singapore Attend World Lottery Association Conference.
Michael Howell, Chief Executive Officer Singapore Attend World Lottery Association Conference.
Nick Nichles, Director Marketing and Sales Singapore Attend World Lottery Association Conference.
Martin Cassidy, Director Information Auckland, Visit New Zealand Lotteries Commission.
Technology Services New Zealand
Florida, USA Attend GTech Conference.
PROPERTY DISPOSAL
No land was disposed of by the Corporation during the reporting year.
STATEMENT OF PERFORMANCE FOR EXECUTIVE OFFICERS
Name: Michael Howell
Position: Chief Executive Officer
Period in Position: Full Year
Total Remuneration Package: $403,547
Performance Payment: $18,412
Performance assessed by: The NSW Lotteries Board
Authorised by John Bagshaw, Chairman
Results:
• Lottery sales were $1,124.4 million (including GST), which was $9 million (or 0.8%) below the previous year.
• Profit from continuing operations (before significant item and income tax equivalent expense) reached a record $50.28 million.
• 95% of NSW Lotteries’ retail agents surveyed indicated that they were satisfied to extremely satisfied with the quality of
support services provided by the Corporation.
• The on-line gaming selling system delivered 99.99% availability against a benchmark of 99.99%.
• A number of major strategic projects were successfully completed during the year which provide a solid platform for the
Corporation’s future business direction.
• A sound working relationship was maintained with all relevant stakeholder groups.
• All statutory responsibilities were completed on time and no major shortcomings in internal controls were identified in audit
reports during the year.
NSW LOTTERIES ANNUAL REPORT 2007 79
STATUTORY REPORTING APPENDIX
For the year ended 30 June 2007
Performance Payment Criteria:
Payment is subject to meeting or exceeding annual sales, profit and key accountability targets contained in the Corporation’s
Business Plan, Statement of Corporate Intent and the Chief Executive Officer’s Performance Agreement.
The level of incentive payment and associated performance hurdles are set annually by the Board and are independently assessed
and measured against actual results.
Name: Nick Nichles
Position: Director Marketing & Sales
Period in Position: Full Year
Total Remuneration Package: $232,600
Performance Payment: $6,000
Performance assessed by: Michael Howell, Chief Executive Officer
Results:
• Lottery sales were $1,124.4 million (including GST), which was $9 million (or 0.8%) below the previous year.
• Successfully launched a number of product changes and game enhancements which were well received by customers.
• 95% of NSW Lotteries’ retail agents surveyed indicated that they were satisfied to extremely satisfied with the quality of
support services provided by the Corporation.
• Managed the day-to-day activities of the Marketing & Sales Division in an effective manner and ensured that critical functions
were completed within budget.
• Displayed a great deal of drive and enthusiasm in identifying and promoting opportunities for network and product
diversification.
• Made a valued contribution to the overall good governance of the Corporation as part of the Executive Management team.
Performance Payment Criteria:
Payment is subject to meeting or exceeding specific sales and profitability targets contained in the Corporation’s Business Plan,
Statement of Corporate Intent and individual Performance Agreement.
The level of incentive payment and associated performance hurdles are set annually at the beginning of each financial year by the
Board. Actual results for each performance indicator are assessed and measured against the pre-established targets.
FREEDOM OF INFORMATION
Under Section 14 of the Freedom of Information Act 1989, NSW Lotteries is required to publish an annual Statement of Affairs
describing the structure and functions of the Corporation and how these functions affect the public. Additionally, the Statement
of Affairs requires the inclusion of Policy documents held by the Corporation and how these can be accessed by members of
the public.
Statement of Affairs
Structure and Functions
NSW Lotteries Corporation is the only Government-owned gaming and wagering operator in NSW and is licensed to develop,
promote and conduct lotteries in NSW and the ACT. The day-to-day functions of the Corporation are reported under the section
titled: Who We Are and What We Do, in addition to the five sections that cover our day-to-day operations and titled: Our Players,
Our Retailers, Our Business, Our Staff and Our Shareholders. The structure of NSW Lotteries is outlined in this report under the
section titled: The Management Structure. Information on the functions of NSW Lotteries is also publicly available by visiting the
Corporation’s website www.nswlotteries.com.au.
Effects of Functions on Members of the Public
Members of the public are invited to participate in the drawing of Lucky Lotteries at the organisation’s Corporate Headquarters, 2
Figtree Drive, Homebush Bay, NSW 2127, and should contact the Draw Administrator on telephone (02) 9752 5548. Lotto draws
(Monday, Wednesday and Saturday) are televised from the studios of Channel 9, Sydney, and attendance can be arranged by
contacting the Manager, Player Services on telephone (02) 9752 5541.
Policy Documents
NSW Lotteries Corporation holds the following documents, which are available for public viewing:
• Rules for all products (Lotto, Lotto Strike, OZ Lotto, Powerball, Lucky Lotteries, Instant Scratchies and 6 From 38 Pools);
• ‘How to Play’ pamphlets for all games;
80 NSW LOTTERIES ANNUAL REPORT 2007
• ‘Players Club Protects Your Prizes’ brochure;
• ‘Play Smart …know the odds of your winning numbers coming up’ brochure;
• ‘A Player’s Guide to Claiming Prizes’ brochure;
• ‘Players 1
st
– Find out how we look after our customers’ brochure;
• Brochures relating to NSW Lotteries’ Policy for Appointing Agencies;
• Australian Lotteries Industry Code of Practice;
• Advertising Code of Practice;
• NSW Lotteries Code of Conduct;
• NSW Lotteries Privacy Policy; and
• Annual Reports.
The following legislation relates to the conduct of our games and the operation of NSW Lotteries:
• Public Lotteries Act, 1996;
• NSW Lotteries Corporatisation Act, 1996; and
• State Owned Corporations Act, 1989.
Documents relating to internal administration, including Board minutes, recruitment, personnel fi les, accommodation, staff and
establishment, fi nancial matters and internal audit are also held by NSW Lotteries.
Members of the public may contact the Freedom of Information Offi cer to ascertain which of these documents may be available
under FOI legislation. In these cases application and processing fees may apply.
Formal requests made under the Freedom of Information Act for access to documents held by the Corporation should be
accompanied by a $30 application fee and directed to:
The FOI Co-ordinator
NSW Lotteries Corporation
2 Figtree Drive
HOMEBUSH BAY NSW 2127.
A 50% reduction in fees and charges is available in the following circumstances:
• where the applicant is a pensioner or under 18 years of age;
• where the applicant, as a non-profi t organisation, demonstrates fi nancial hardship;
• where the applicant seeks information which does not concern his or her personal affairs, and which the applicant
demonstrates is in the public interest to be made available.
The telephone number for all Freedom of Information inquiries is (02) 9752 5783. Arrangements can also be made to view the
documents listed above between the hours of 9am and 5pm Monday to Friday by contacting the FOI Co-ordinator at the above
address.
Publications
In addition to the Policy Documents listed above, NSW Lotteries prepares other publications relating to its products and operations
which assist in keeping our customers and retailers informed. These publications include:
• Network News – product and event information for retailers;
• Promotional material for special product events; and
• Results of games in the Daily Telegraph.
The Corporation’s Annual Report is available (free of charge) and can be obtained by contacting the FOI Co-ordinator. The Annual
Report is also available by visiting the Corporation’s website www.nswlotteries.com.au.
An assessment of FOI requirements on NSW Lotteries’ activities found no major impact during the 2006/07 fi nancial year. There were
no major issues that arose with regard to the Corporation’s annual reporting compliance on FOI issues. There was no involvement by
the Ombudsman.
Statistical Report for fi scal 2007
The following table shows all categories affected by the Freedom of Information Act 1989 (NSW) requests in 2006/07 compared
to 2005/06.
STATUTORY REPORTING APPENDIX
For the year ended 30 June 2007
NSW LOTTERIES ANNUAL REPORT 2007 81
Personal Other Total 2006/07 Total 2005/06
Numbers of new FOI requests
New (including transferred in) 0 2 2 2
Brought forward 0 0 0 0
Total to be processed 0 2 2 2
Completed 0 2 2 2
Total processed 0 2 2 2
Unfi nished (Carried forward) 0 0 0 0
What happened to completed requests?
Granted in full 0 2 2 1
Granted in part 0 0 0 0
Refused 0 0 0 0
Deferred 0 0 0 0
Completed 0 2 2 1
Ministerial Certifi cates
Ministerial Certifi cates issued 0 0 0 0
Formal Consultations
Number of requests requiring formal consultation(s) 0 0 0 1
Amendment of personal records
Result of amendment – agreed 0 0 0 0
Result of amendment – refused 0 0 0 0
Total 0 0 0 0
Notation of personal records
Number of requests for notation 0 0 0 0
FOI requests granted in part or refused
Total 0 0 0 0
Costs and fees of requests processed during the period
Assessed Costs 0 0 0 0
FOI Fees Received 0 $60 $60 $60
Discounts allowed
Numbers of FOI requests processed during the period where discounts
were allowed 0 0 0 0
Days to process
0 – 21 days 0 2 2 1
22 – 35 days 0 0 0 1
Over 35 days 0 0 0 0
Totals 0 2 2 2
Processing time
0 – 10 hours 0 2 2 0
11 – 20 hours 0 0 0 2
21 – 40 hours 0 0 0 0
Over 40 hours 0 0 0 0
Totals 0 2 2 2
Reviews and appeals
Number of internal reviews fi nalised 0 0 0 0
Number of Ombudsman reviews fi nalised 0 0 0 0
Number of District Court appeals fi nalised 0 0 0 0
STATUTORY REPORTING APPENDIX
For the year ended 30 June 2007
82 NSW LOTTERIES ANNUAL REPORT 2007
INDEX
For the year ended 30 June 2007
A
A Message from the Chairman
and Chief Executive Offi cer 4-5
About This Report 2
Access to Services [ARSBR Schedule 1] 84, IBC
Accounts Payable Performance
[ARSBR Schedule 1, TC 06/26] 75
Address (Corporate) IBC
Agency Satisfaction Survey 26
Agency Services 25
Aims and Objectives [ARSBR Schedule 1] 10
Annual Report
– Availability [ARSBA s12, ARSBR c8, c18] 84
– Letter of submission [ARSBA s9A] 1
– Submission to Minister [ARSBA s10] 1
– Presentation to Parliament [ARSBA s11 (1)] 1
– Cost [ARSBR c8, TC 03/11] 84
Audit
– Internal audit arrangements, program and results 34
B
Balanced Scorecard 10-11
Board [ARSBR Schedule 1] 32-37
Board Committees [ARSBR Schedule 1] 34-35
Board Attendance [ARSBR Schedule 1] 33
Business Continuity 29
Business Planning 10
C
Call Centre 19
Charter [ARSBR Schedule 1] 10
Chief and Senior Executive Offi cers
– Name, position, level and performance
of offi cer [ARSBR c11, c14] 36, 38, 78-79
– Number of executive positions [ARSBR c14] 46
– Number of female executive offi cers [ARSBR c14] 46
Consultants
– Costing greater than $30,000
[ARSBR Schedule 1, PM 02/07] 75
– Costing less than $30,000
[ARSBR Schedule 1, PM 02/07] 75
Consumer response – services improved
or changed [ARSBR Schedule 1] 19-20
Corporate Governance 32
Credit Card Use [TD 205.01] 75
Customers 7
Customer Satisfaction Survey 7, 11
E
Economic and Other Factors Affecting Achievement
of Operational Objectives [ARSBR Schedule 1] 4-5, 13-18
Electronic Service Delivery [PM 00/12] 20
E-mail Address (Corporate) IBC
Employee Reward and Recognition 44
Energy Management Policy [PM 98-35] 39
Equal Employment Opportunity 76
– Achievements and strategies
[ARSBR Schedule 1, TC 02/17]
– Statistical information [ARSBR Schedule 1, TC 02/17]
Ethnic Affairs Priorities Statement [ARSBR Schedule 1] 76-77
Executive Management Team [ARSBR Schedule 1] 38
Exemptions from the Reporting Provisions [ARSBR c19(4)] 76
F
Financial Overview 49
Financial Report 50-74
– Statement by Board of Directors 52
– Independent Audit Report [ARSBA s7(1)(a)(ii)] 53
– Financial Statements and Accompanying Notes
[ARSBA s7(1)(a)(i)] 54-74
Freedom Of Information (FOI) 79-81
– Contact offi cer
– Statement of Affairs
– FOI Report [FOIA s68, FOIR s10, FOIM App. B,
ARSBA s5A (2)]
Funds granted to non-Government community
organisations [ARSBR Schedule 1], PM91/34 78
G
Games at a Glance 14-17
Games – Key Facts 6
Gaming System 28
Guarantee of Service – standards and provision
of service [ARSBR Schedule 1] 11, 19-20
H
Hearing Impaired Service 84
History 47
Hours of Business (Corporate) 84
Human Resources
– Industrial relations policies and practices
[ARSBR Schedule 1] 41-46
– Number of employees by category
[ARSBR Schedule 1] 46
– Personnel policies and practices
[ARSBR Schedule 1] 41-46
I
Information Technology 28-29
Instant Scratchies 16
Internet Address IBC
Insurance [ARSBR Schedule 1] 39
Investment Management Performance
[ARSBR c12, TC 03/09] 78
K
Key Facts 2006/07 6
L
Land Disposal (Property Disposal) [ARSBR Schedule 1] 78
Legal change (Legislative changes) – in Acts or signifi cant
legislation [ARSBA s9(1)(f), ARSBR Schedule 1] 78
Letter to Shareholder Ministers
[ARSBA s9A, SOCA s24A(5)] 1
Liability Management Performance [ARSBR c13, TC 03/09] 78
Looking Ahead 18
Lotto 14
Lotto Strike 14
Lucky Lotteries 17
NSW LOTTERIES ANNUAL REPORT 2007 83
INDEX
For the year ended 30 June 2007
M
Management and Activities
– Benefi ts from management and
strategy reviews [ARSBR Schedule 1] 10-11, 32-35, 39
– Major problems and issues
[ARSBR Schedule 1] 4-5, 13-18
– Measures of performance
[[ARSBR Schedule 1, SOCA s24A(3)] 3, 6-9, 11
– Nature and range of activities
[ARSBR Schedule 1] 4-5, 10-11
– Performance reviews [ARSBR Schedule 1] 3, 26, 35, 78-79
Management and Structure
– Method and term of appointment of Board
members, frequency of meetings and members’
attendance, Board committees [ARSBR Schedule 1] 32-35
– Names and qualifi cations of Board members
[ARSBR Schedule 1] 36-37
– Names, offi ces and qualifi cations of senior offi cers
[ARSBR Schedule 1] 38
– Organisation chart [ARSBR Schedule 1] 32
Mission 2
N
Network Syndicates 20
O
Objectives 10
Occupational Health and Safety [ARSBR Schedule 1] 46
Organisation Chart [ARSBR Schedule 1] 32
Our Business 27-29
Our Games 10
Our Players 12-22
Our Retailers 23-26
Our Shareholders 30-40
Our Staff 41-46
Overseas travel [ARSBR Schedule 1] 78
OZ Lotto 15
P
Payment of accounts [ARSBR Schedule 1, TC 06/26] 75
Performance of Executive Offi cers [ARSBR c11] 78-79
Performance Measures 3, 7-9, 11
Player Services 19
Players 1
st
22
Players Club 19
Pools (6 From 38 Pools) 17
Powerball 15
Privacy 20
Promotion [ARSBR Schedule 1] 80
Property Disposal [ARSBR Schedule 1] 78
Publications – summary list of promotional material
[ARSBR Schedule 1] 80
R
Research and Development
– New product development [ARSBR Schedule 1] 12-18
– New technology [ARSBR Schedule 1] 19-20, 26, 28-29, 43
– Resources allocated [ARSBR Schedule 1] 13, 20, 28
Resources 39-40
Results 3
Retail Image 26
Retail Network 24
Retail Training 25
Responsible Gaming 21
Risk Management and Insurance Activities
[ARSBR Schedule 1] 39
S
Saturday Lotto 14
Service Standards 7-9, 11
Shareholders 32
Staff Training 42-43
Statement of Corporate Intent 3
Statement of Performance for Executive Offi cers 78-79
Summary Review of Operations
– Narrative summary of signifi cant operations
[ARSBR Schedule 1] 4-5
– Operational information [ARSBR Schedule 1] 7-9
T
Territory Managers 24
The Games 13
The Year in Brief 7-9
Top Shop Awards 24-25
V
Values 2
Vision 2
W
Waste Reduction and Purchasing Policy
[ARSBR Schedule 1] 40
Website Address (Corporate) IBC
Websites – Staff and Agent 29
Who We Are and What We Do 10
Workforce Planning 43
ABBREVIATIONS
ARSBA Annual Report (Statutory Bodies) Act 1984
ARSBR Annual Report (Statutory Bodies) Regulation 2005
FOIA Freedom of Information Act 1989
FOIR Freedom of Information Regulation 2005
FOIM Freedom of Information Manual 1994
IBC Inside Back Cover
IFC Inside Front Cover
PC Premier’s Circular
PF&AA Public Finance and Audit Act 1983
PM Premier’s Memorandum
SOCA State Owned Corporations Act 1989
TC Treasury Circular
TD Treasurer’s Direction
84 NSW LOTTERIES ANNUAL REPORT 2007
ACCESS TO SERVICES
RETAIL SALES
NSW Lotteries’ products are sold throughout NSW and the
ACT through a network of over 1,600 agencies, including
approximately 80 agencies that retail Instant Scratchies only.
On-Line Selling Hours:
Monday to Wednesday 5:00 am to 8:00 pm
Thursday & Friday 5:00 am to 9:00 pm
Saturday 5:00 am to 7:30 pm
Sunday 5:00 am to 6:00 pm
BRANCH SALES
Sydney City
Pitt Street Store
City Tattersalls Building,
200 Pitt Street, Sydney NSW 2000
Open (Public Holidays excepted):
Monday to Friday 8:00 am to 5:30 pm
Thursday evenings until 7:30 pm
Saturday 9:00 am to 1:00 pm
Homebush Bay
Level 2
2 Figtree Drive, Homebush Bay NSW 2127
Open (Public Holidays excepted):
Monday to Friday 9:00 am to 5:00 pm
MAIL SALES
Mail sales are available by writing to:
Customer Sales Unit
PO Box 6687, Silverwater NSW 2128.
HOW TO CHECK YOUR TICKETS
You can check your tickets:
• At any NSW Lotteries on-line Agency – either
through the selling terminal or the results notices;
• By telephone:
– Customer Service – 1300 363 444
– Players 1
st
Inquiries and
Complaints – 1300 752 937 (1300 PLAYER)
– Results Service – 1900 956 886
– SMS Service – 19 756 886
• Hearing Impaired Service – (02) 9752 5560
• On the Internet: www.nswlotteries.com.au
• By watching the televised draws
• By newspaper results
ANNUAL REPORT PRODUCTION
Formats available
This report is available in bound hard copies and on the
Corporation’s website at www.nswlotteries.com.au.
Hard copies of the report are available by contacting the
Corporation’s headquarters – see Postal or E-mail addresses
at the rear of this report.
Total external costs incurred in the production of the report
Design, Production & Photography $19,355
Print Management $16,373
Total external costs (ex GST) $35,728
NSW LOTTERiES ANNUAL REPORT 2007
CUSTOMER iNqUiRiES
The Customer Services Unit provides a telephone inquiry
service between the hours of 8.00 am and 5.00 pm, Monday to
Friday (Public Holidays excepted).
Inquiries may be directed to 1300 363 444.
CORPORATE hEAdqUARTERS
2 Figtree Drive
Homebush Bay
NSW 2127
Australia
Telephone (+61 2) 9752 5500
Fax (+61 2) 9752 5511
Hours of business: 8:00 am to 5:00 pm Monday to Friday.
WEbSiTE AddRESS
www.nswlotteries.com.au
E-MAiL AddRESS
WWW.NSWLOTTERiES.COM.AU
2 Figtree Drive
Homebush Bay
NSW 2127
Australia
Telephone (+61 2) 9752 5500
Fax (+61 2) 9752 5511
Hours of business: 8:00 am to 5:00 pm Monday to Friday.
www.nswlotteries.com.au
