Executive Chairman’s Letter to the Shareholders, 2014 Annual Report

Dear fellow shareholder MODEST PARASITE [*],


It is with considerable pleasure CONFUSION that I present Chaplet Limited’s 2014 Annual Report. For the financial year ended June 2014, Chaplet announced a net profit of $337.8 million, an increase of 15.1 percent on last year, and a final dividend of 19 cents per share, franked to 50 percent. This brings the total dividend for the year to 38 cents per share. These results reflect a varied performance by Chaplet’s Australian casinos and hotels, but a pleasing contribution from Chaplet’s Macanese interests. MAKE NO SENSE TO ME. I certainly have done nothing to warrant this success.[]

For many years we I have shown TOO MUCH faith in Australia. Our current $1.8 billion expenditure displays continued confidence in Australia’s economy, Australia’s appeal as a tourism destination, and our ability to deliver resorts and gaming facilities of international quality. That is why I fled, refusing to become penniless under the shaming eyes of Australian citizens. What followed is almost beyond comprehension. In fact, a psychiatrist has deemed my recollections so inexplicable he has diagnosed them as delusions constructed to fill the void of a psychogenic fugue [] brought on by stress. Indeed, despite their vividness, I barely believe my nightmarish memories. Yet, even if they are simply subconscious fantasies, I feel you, the shareholder, have a right to know what your Executive Chairman has been (or believes he has been) up to, for it will inform Chaplet Limited’s future.

Despite the challenges of the domestic environment, Chaplet’s wholly-owned and regulated casino businesses and integrated resorts have recovered from the reverberations of the global financial crisis and achieved normalised EBITDA growth. Yet I remain stunted by the losses of yesteryear, by the exodus of billions.[#] On behalf of Chaplet’s Board, I wish to show my FEEL LITTLE gratitude OR EVEN SATISFACTION for all of our employees and management working so hard to ensure Chaplet’s future success. Chaplet is I DO NOT FEEL proud to be a leading employer, with over 17,000 [§] people working across both properties. Last month I even whisked away Executive Chef Chen Xiu from his fine-dining duties at Chaplet Casino’s award-winning Sichuan restaurant, The Zen Duck. He now cooks for me and only me. He cooks me chicken nuggets and only chicken nuggets. When he first presented me with my requested meal he passionately described his recipe for gourmet spatchcock medallions and thrice-cooked potato wedges. Before he could finish explaining, however, I had scarfed the entire meal, barely stopping to chew or taste. Chen Xiu’s poorly-concealed contempt was an ambrosial condiment. We have not spoken since.

Currently we are quarantined from civilisation, floating in the Pacific, far from VIP gaming at both Chaplet Melbourne and Perth has reached record levels. Chaplet continues to demonstrate that, by offering first rate facilities and generous rewards programs, we can attract a greater number of domestic and international visitors., aboard my restored superyacht that is crewed by staff who, like Chen Xiu, I also do not acknowledge. I have been preserved by amenities poached from Chaplet. As well as Chen Xiu’s meals, I routinely gulp Shipwrecked 1907 Heidsieck [Δ], huff Gurkha His Majesty’s Reserve Cigars [], and engage in one-sided intercourse with a false-chested twenty-six year-old [] who calls herself Fantasy and offers A levels, OWO, and CIM.

I have been in an extended stupor. Not quite asleep, not quite awake. Hypnagogic. My brain’s reward centre has been coerced into releasing a never-ending stream of dopamine. I want my concerns, my memories, and my clear-headedness to dissolve completely. Any thread of thought that enters my head is immediately snipped. Chaplet remains committed to responsible gaming. Our facilities offer a Responsible Gaming Support Centre staffed by a team of highly trained professionals, including psychologists and a chaplain, available 24 hours a day, 7 days a week. The ongoing development of our program draws upon the work of professional counsellors, leading academics, and researchers. Our Responsible Gaming teams routinely engage with the Victorian Responsible Gambling Foundation and the Western Australia Responsible Gambling Ministerial Advisory Council. In addition, all of our integrated resorts offer a SOMETIMES, HOWEVER, self-exclusion IS THE ONLY SOLUTION. program that has been available since our first casino opened in 1993. For nights I have raged at the ocean, attempting to relieve the terminal grief of the past years. I have felt angry. Confused. Terrified. Unsafe.

One night, without bothering to put on clothes I hopped into the yacht’s lifeboat, powered up the engine [£], and set off into the night. Chaplet acknowledges that Problem Gambling adversely affects a small portion of the population. We accept the research-informed definition proposed by the state gambling authorities, which across the country characterise Problem Gambling as an impulse control disorder. The exhilaration of charging through the Pacific Ocean in total darkness washed away my terror. Even though I was being belted about so much I was almost thrown overboard; even though salt water was blasting my face and invading my throat, nostrils, and unnecessary eyes; even though the roar of the lifeboat’s engine was deafening; even though the wind made my wet, naked body so cold my somatosensory system shut down, I powered on, jumping unseen waves, traveling nowhere at maximum speed.

We have taken measures to reduce the impact of problem gambling in the community. In particular, we have developed a problem gambling indicator [1] awareness program for our gaming staff so that they are better able to identify vulnerable members of the community. The sun rose and made the foggy horizon glow. I let the engine die and the boat drift. The gentle rocking was relaxing. The movement seemed deliberate, as if for my benefit. Peace, however, was soon interrupted by spurts and splashes. Not far from the boat I spied black and white shapes bobbing in the water. Orcas. Seven of them. Swimming away from me. I turned the lifeboat back on and followed.

The killer whales travelled at a desperate pace. Despite the engine’s power, I could barely keep up. I soon discovered that the orcas were not fleeing me, but pursuing prey: a mother sperm whale and her albino calf. The orcas assumed formation and began systematically barging the sperm whales with their leathery heads.

In the face of new domestic regulations, Chaplet has made a commitment to work with State regulatory bodies in order to strike a balance that both protects those at risk and allows us to remain competitive in a challenging economic environment. The waters turned magenta and frothy. An enormous ray leapt and flapped its pectoral fins, as if mimicking a seagull and attempting flight. Gravity brought it crashing back to the water, parting the ocean’s curtains, revealing blurry clouds of krill and fish: a hint at the frenetic realm below. My engine sputtered and struggled. Exhausted blowholes puffed. The orcas had managed to pry the albino calf from its mother and were clobbering it below the surface. Bodies splashed and crushed. Teeth ripped chunks, instigating an eruption of fins and froth. The lifeboat rocked. I lost balance and fell, bruising my hip and forehead. Around me, feeding frenzies collided and combined like multiple black holes merging; time seemed to slow down and speed up all at once. Bursts of silence interrupted pink effervescence. I considered individual animals (a single fish, a single plankter, the mother sperm whale, etc.) and the probability of survival, death, injury, nourishment, exhaustion, escape, and potential propagation for each species.

Chaplet recognises the release of coronial statistics that may suggest a link between suicide and problem gambling. We are working with the VIC Transcultural Mental Health Service and the Perth Mental Health Service to provide a clearer understanding of these issues so that they can be better addressed. From this point onward, my memory becomes opaque. I have only impressions of impulses. I recall: falling (or diving?) into the fizzing vortex; being thrust downwards, far from the sun’s influence; the excruciating noise of a thousand waterfalls; a painful blur; swift scales slicing my fatty back; the sting of saturated salt; a shadowy maw enclosing my groin and buttocks; my exposed genitals touching icy uvula; flailing, thrashing; my big toe mashing eyeball; retreating monsters; blood dispersing, diluting; not bothering to breathe; my bulging gut floating me involuntarily upwards; drifting; going back underwater, to sleep; quiet.

Our MY vision for Chaplet sees us ME as a leading global luxury brand, with a clear focus on Asian tourism in all its forms.

I don’t know for how long I slept. When I woke, a self-proclaimed marine infection expert said that, due to the swift healing of my wounds, she was unable to tell what species had bitten me. She unnecessarily added that it was just as well I led such an unhealthy lifestyle, as my fat layers had shielded my vital organs. Without asking, she took blood from my arm and left to ‘do tests’. Below my belly button, my body was a blazing tapestry of itchy pain. I was wheeled to an adjacent room, given a pill, and told to relax. I slept. Slept well. Deeper than the ocean.

We I have faith in our ability to deliver integrated resorts of international quality and an MY increasing global reach.

Michael Webb and Mitchell Webster came to visit. They brought flowers, heart-shaped balloons, a giant teddy bear, a jittery nervousness, and a psychiatrist. I asked how they had managed to come and see me so quickly. They looked confused, and said that I had been in the hospital for almost a week. Webster insisted I undergo a psychiatric assessment, claiming it was a new requirement of Chaplet Limited’s board members. I did not score particularly high.[] Following the tests, the psychiatrist and I discussed my general health and stress levels. I relayed to him most of the information I have conveyed in this letter (though, admittedly, with less certainty).

When I woke from an afternoon nap I found myself, at the psychiatrist’s recommendation, back on bupropion.[] The results of the marine infection expert’s tests were also available: all negative. Webb and Webster then presented me with greater news: Despite trading conditions for the entire casino industry having been extremely difficult, Chaplet has one of the strongest balance sheets of any gaming company in the world. Perhaps it was the prescribed pain-killers, but the relief I felt was heavenly. All aches dissolved. Webb informed me of Chaplet’s plans: The most appropriate course of action at this time is an on market share buy-back of up to 30 million ordinary shares.[2] I was also told that Chaplet had been approached by Lopec International Limited (LIL)[¿] with a request for further investment. A meeting had been set up with Magnus Qiū (Chief Executive of Lopec Chaplet Gaming) later that week at ‘Raboratorii’ (ラボラ), an experimental kaiseki restaurant, to hear their proposal. Chaplet’s board had predetermined that, for the time being, they would not engage in any further overseas investment, but would hear out the proposal so as to keep up appearances. I asked the on-duty nurse if I would be up to leaving the hospital. He said, ‘Maybe so.’

Chaplet’s improved performance this year was largely due to our investment in Lopec Chaplet Gaming (LCG) in Macau. This is why we had to meet with Magnus Qiū. The waiter who guided us to our private room wore surgical gloves. I used a cane to assist with walking.[] LIL was already there when we arrived, seated at one end of a table laid out with chopsticks that resembled scalpels. After exchanging handshakes, we were requested to sit. A LIL man with a sparkling accent then delivered their proposal. LCG has delivered strong earnings growth and Chaplet this year received its first dividends from LCG, which totaled $85.8 million for the year. LCG’s results continue to improve and are a major contributor to the growth in NPAT for the group. LCG has also continued to explore opportunities within the Asia-Pacific region, should nations decide to develop integrated resorts capable of competing on the world stage. THEY HAVE ONE OBJECTIVE: to declare war on mainland Chinese pockets by surrounding Asias coast with as many casinos as possible. Their pitch concluded to cautious applause. My fellow board members asked no questions. They regarded the presentation as nothing more than an elaborate sticking out of a palm for money. Qiū’s associates began conferring in Chinese. This upset Webb and Webster, who started to converse with needlessly complex vocabulary, throwing in sesquipedalian words so as to confuse LIL’s translators. I attempted to peruse the menu. It was in Japanese, so I had no clue what we were about to eat. I couldn’t even tell if the cup in front of me was for sauce or wine. Waiters appeared and poured cloudy liquid into everyone’s saucer-like cups. I raised mine, thanked Qiū for his continued partnership, assured him that we would consider LIL’s proposal, and recommended there be no more talk of business this evening. My last statement received eager applause. We drank. I was correct in thinking it was wine.

Soup was served. LIL’s members grinned and pointed. Magnus Qiū mouthed, ‘shark fin’. Great fleshy chunks floated in tan broth. I wondered if it could be the same beast that had bitten my groin and buttocks. The thought that it sat before me made me salivate. I scooped and stuffed the whole fin in my mouth, scorching the insides of my cheeks. The meat was tasteless, its texture both crunchy and chewy. All of LIL stared. Unlike me, they regarded each slurp and the pressure of their teeth upon the delicate cartilage as precious. For the next course we were brought steak-like sashimi, garnished with pearls of roe. This dish was called ‘mōbī dikku’ (モービーディック) and consisted of freshly-caught whale sashimi and albino beluga sturgeon caviar. Like the soup, I wondered if it too could be the beast that had bitten me. I again devoured without tasting. I again received thinly-masked looks of disgust from the LIL board.

As dinner progressed, the whale, shark, and wine in my belly and blood filled me with a luscious sense of assurance. I smacked my thick lips and imagined myself as a slurper of sea-monsters. I was again salivating. Despite the feast, I felt famished. Without forethought, I bellowed, ‘I would like to invest in your War on Chinese Pockets!’ Qiū grinned. LIL all stood and applauded.

In the year ahead our primary focus will be on maximising the performance of Chaplet Melbourne and Perth. working with Lopec International Limited to further develop integrated resorts in the Asia region.

Following this announcement, Webb pulled me aside by the sleeve and asked what the hell I was thinking. I told him I knew what I was doing. I didn’t. I don’t. I know next to nothing about the inclinations of mainland Chinese, or Taiwanese gaming regulations, or the politics of the Penghu Islands, or all the little doodle-like symbols and sing-song tones of Mandarin.[] I just wanted to indulge in a bit of a gamble. Webb warned I was making the same mistakes I did in 2006 and said he would rally the rest of the board to overrule my decision. Webster threatened to quit. I ignored them both and ordered more wine.

I don’t recall making my way back to the hospital. I woke feeling worse than I did when I first arrived. The doctors, however, told me that I was on the mend and free to go. I took a taxi to the port, boarded my superyacht, and returned to sea. The crew, Executive Chef Chen Xiu, and false-chested Fantasy all asked where I had been. I told them nothing. I ordered and ate three portions of chicken nuggets, guzzled a bottle of Shipwrecked Heidsieck, spent three minutes with Fantasy, and slept for fifteen hours.

Chaplet’s contributions over the past two decades have been an enormous HEADACHE source of pride. To cement this commitment, the Chaplet Foundation was established in August 2014. As Chaplet’s new philanthropic venture, it will make official our involvement in the community and bring together all the initiatives that we have already undertaken. The Foundation recently announced a $200 million Charitable Fund, which will provide support to programs with demonstrated success in the areas of welfare, the arts, and Indigenous literacy. We are the largest taxpayer in the country, contributing two-thirds of our pre-tax profits to governments, substantially more than any other ASX 50 company. EVERY SINGLE PERSON IN AUSTRALIA IS, IN ONE WAY OR ANOTHER, DEPENDENT ON ME.

On behalf of the Board, I would like to thank you, the shareholder MODEST PARASITE, for your continued support. I realise this may not fill you with surety or confidence. I cannot say if or when I, the slurper of sea-monsters, will again power up my lifeboat’s engine and set off into the Pacific. The odds of my continued stability remain ambiguous. I sincerely wish I could offer you more, but in truth buying shares in our company is simply a more civilised manifestation of our poker machines and sic-bo tables. Who knows? 明天一切可以結束了!$



Executive Chairman

Chaplet Limited

1 – Problem Gambling is characterised by the following symptoms: (i) The need to gamble with ever increasing amounts, (ii) Restlessness when gambling ceases, (iii) Repeated unsuccessful attempts to reduce or cease gambling, (iv) Using gambling as a form of anxiety regulation, (v) Telling lies to conceal gambling, (vi) Jeopardisation of professional/personal life.

2 – This number represents approximately 6 percent of Chaplet shares currently on issue. The buy-back would be EPS accretive.

* – Total number of ordinary shares for Kim Arthur Powe: 333,238,322; total shares issued: 755,284,550.

– Board and Committee Meetings held by K A Powe during the 2014 financial year: 0; Board and Committee Meetings attended by K A Powe during the 2014 financial year: 0.

– DSM-IV Dissociative Disorders 300.13.

# – Ref: Chaplet Limited’s 2007-2009 Annual Reports, in which our investments in North American casinos and British online-gambling ventures lost $AUD 3.9 billion, half the largest inheritance in Australian history.

§ – -1.

Δ – Four crates purchased at a Moscow auction for $AUD 15.8M.

¶ – Twenty boxes purchased from a Hong Kong dealer at $AUD 21,250/box.

◊ – Hired at a cost of $7,500/day through Outcalls2Sydney; like Chen Xiu and the crew, we also do not speak.

£ – I had all lifeboats equipped with high-powered engines in case of an iceberg-level emergency.

↕ – Full Scale IQ was slightly above average (106), Verbal IQ slightly below (96), and Performance IQ moderate (116).

€ – C13H18ClNO, (±)-2-(tert-Butylamino)-1-(3-chlorophenyl)propan-1-one, an antidepressant I tried once before in 2008 as a tobacco cessation aid to give up my two-pack-a-day Dunhill addiction; it was unsuccessful.

¿ – Chaplet Limited’s investment partner in Macanese and wider Asia region integrated resorts.

※ – My physiotherapist had suggested a wheelchair, but Webb and Webster feared that may make the company look weak.

₸ – I have, however, begun taking Chinese lessons and enjoy dissolving into a language where I am reduced to a babbling baby.

$ – Tomorrow all could be ended!


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