Tatts Pokies gaming licence in Victoria was subject to renewal by the Victorian Government from 2012. Despite Tatts long standing record as a responsible provider of gaming in Victoria, the Victorian Government has made the decision not to renew this licence. As a result, from 2012 the current Tatts Pokies business will cease to operate and the clubs and hotels will assume the licence to operate gaming machines.

The Victorian Government announced they have formed a view that Tatts is not entitled to compensation. This is not a view shared by Tatts. We are considering all options available to us to protect shareholder value.

Firstly, it is important to recognise that the recent merger and acquisitions have ensured that the Tatts Group has good diversified businesses with secure licences that continue to perform well. Our immediate focus is on further developing these businesses. While it is extremely disappointing to lose the Pokies business, Tatts Pokies has 4 years remaining under its current gaming licence. During this period, we will operate the Tatts Pokies business more efficiently than has previously been possible.

As we highlighted in April, we have now escalated our review of other strategic opportunities to continue the diversification and growth strategy that we have been successfully pursuing. Critical to this is remaining focussed on utilising our strong balance sheet and key skill sets to pursue complementary investments that add long term shareholder value.

There is currently insufficient detail to determine the extent of any possible role for Tatts in the Victorian gaming industry post 2012. Maxgaming is likely to seek a licence for gaming machine monitoring in Victoria, similar to its existing operations in Queensland and NSW. Bytecraft may benefit through a greater role in the installation and maintenance of gaming and other machines in Victoria post 2012. We will also consider competing for the Keno licence to be issued post 2012.

Tatts Group, through UNiTAB Wagering, is well placed to seek a wagering licence in Victoria. UNiTAB has existing wagering operations in Queensland, South Australia and the Northern Territory supported by excellent systems and capabilities. Tatts will evaluate the Victorian wagering licence opportunity once more detail has been made available by the Victorian Government, which is expected in the second half of the 2008 calendar year.

From 1 July, Tatts Lotteries ceased to distribute scratchies and other State only games in Victoria. Importantly, Tatts has retained the licence to distribute the major bloc lotto games in Victoria – Tattslotto, Powerball, Super7’sOzLotto, Super 66 and The Pools. These games account for approximately 85% of the previous revenue of the Tatts Lotteries division and contribute nearly all the profit of this division. Tatts has been active in preparing the business for the new competitive environment and welcomes the challenge this brings.

UNiTAB Wagering has recovered well from EI. After wagering sales declined by 5% in the first half of the year as a result of EI, wagering has demonstrated its resilience to recover ground in the second half. Importantly, the impact of EI is a temporary blip that does not rebase the business.

Clearly the Victorian Government decision in April 2008 in relation to the gaming industry in Victoria has had a significant impact on the Tatts share price. Beyond that, the share price is a matter for the market to determine. The analysts and investment markets make their own assessment of value based on their forecasts, assumptions and view of the future.

The Company is in a good financial position and the fundamentals are strong. The Board and Management of the Company are focussed on the company’s performance and making considered decisions for the long term benefit of shareholders, not managing for the short term share price.

Prior to October 2006, the company was predominately a Victorian based company. However, now that Tatts operates in all Australian jurisdictions and has over 90,000 shareholders across every State and Territory in Australia, the issue of where our AGM will be held in the future is a matter the Board will need to consider each year. The 2008 AGM will be held in Melbourne.

The Board decided that as a technology company Tatts should be leading the way in the use of technology in all facets of our business. The increased use of technology in banking and electronic funds transfer (EFT) allow us to (a) pay shareholders their dividends quicker and (b) save shareholders the hassle of having dividend cheques not being banked immediately because they have been lost or stolen.

This move was overwhelmingly supported by shareholders at our 2007 AGM. Increased company costs make it imperative that we remain focussed on initiatives that improve our efficiencies while still delivering excellent services to our customers and shareholders. We believe it is in the interests of all shareholders to make savings where possible and the production of dividend cheques costs the company money.

The dividend payout ratio is a decision for the Board based on the financial results and the fundamentals of the business. The past two dividends paid have represented 90.4% and 96.5% of Net Profit after Tax paid out to shareholders. With Tatts Group’s strong balance sheet, profitability and cash flow, we do not foresee this dividend payout ratio materially altering.

The Board intends that you will still receive a dividend this year. Due to the asset write-offs resulting from the Government’s licence announcement flowing from complex accounting issues, this dividend will likely be called a special dividend rather than a final dividend for this year only. However it is anticipated that this special dividend will substitute in amount and timing for the final dividend.