annual report 07 - parliament of nsw

Everyone can win...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 10Who We Are 10What We Do – Our Charter 10Our Games 10Business Planning 10Balanced Scorecard for Fiscal 2007 10

OUR PLAyERS 12The Games 13Player Services 19Responsible Gaming 21

OUR RETAiLERS 23The Retail Network 24Agency Services 25

OUR bUSiNESS 27The Gaming System 28Staff and Agent Websites 29Business Continuity 29

OUR ShAREhOLdERS 30The Management Structure 32Corporate Governance 32The Board of Directors 36The Executive Management Team 38Risk Management 39Insurance 39Managing Resources 39

OUR STAff 41Listening to Our Staff 42Learning and Development 42Rewarding Our Staff 44Occupational 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, MPDeputy Premier, Minister for Transport, and Minister for Finance

The Hon. Michael Costa, MLCTreasurer, 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 HowellChairman 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.


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 GST1 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 mBy 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


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


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 1st 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


SALES GAME MATRIXNO. OF MILLIONAIRES & 1ST 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


$99.63 m 2,742,427 $25 m

Powerball $250.43 m 5 from 45

& 1 from 45

drawn by a 2nd machine

5 NSW millionaires


$145.70 m 3,849,823 $35.3 m

Instant

Scratchies

$138.30 m Game Pricepoints:

$1

$2

$2.50**

$3

$4**

$5

$10

**Pricepointdiscontinued 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 1st Prize winners

4 x $2 Jackpot Lottery millionaires

23 x 1st 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 1st 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


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


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


• 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


Compliance with the Corporation’s responsible gaming package 100% 100%


• 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 1st 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


OUR RETAILERS

Objective: 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 secs 6 secs


• 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


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


• 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)


OUR SHAREHOLDERS

Objective: To increase long-term Shareholder value by improved business performance


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%


• 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


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%


• 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)


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


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.


OUR PLAYERSWE OPERATE WITH INTEGRITY.

The overall portfolio is healthy and well positioned


THE GAMESGAMES 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)


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


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).


Down 3.3% Up 35.7%

22.3% 13.7%

5 (5 NSW millionaires) 4 (4 NSW millionaires)

$35.3 million $25 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


OUR PLAYERSGAMES 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


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


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


• 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


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)


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.


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 1st 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


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.


PLAYERS 1ST

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 1st, 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 1st 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 1st banner and a dedicated brochure on the Players 1st 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 1st 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)


OUR RETAILERSWE VALUE THE RELATIONSHIP WITH OUR RETAILERS.

The diversity of the network continues to grow


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 – YoungBendalong 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


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.


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)


OUR BUSINESSWE CONTINUOUSLY IMPROVE OUR BUSINESS.

All our business processes must be at the forefront of industry best practice


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.


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


OUR SHAREHOLDERSWE ARE SUCCESSFUL.

Our reputation for honesty and integrity is maintained at all costs


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!


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


• 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


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.



• 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.


• 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


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 AODeputy 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 COCKBURNB.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


JOHN JOHNSONK.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 MCCORMACKFAMI, 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 WALSHAppointed 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.


OUR SHAREHOLDERS

THE EXECUTIVE MANAGEMENT TEAMThe 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 BROWNEB. Comm, CA.

Director Corporate

Services

Appointed to position December 2000

MARTIN CASSIDYBSc (Hons), MBA

Director Information

Technology Services

Appointed to position January 2002

BRIAN MCINTYREMComm, FCA,

MAICD

Director Finance

Appointed to position November 1994

NICK NICHLESB. Bus, Grad.Dip.

Mktg.

Director Marketing

and Sales

Appointed to position June 2005

CHRIS PATTERSONDip Tech (Comm)

Director Customer

and Agency Services

Appointed to position May 2000


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.


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


OUR STAFF

Our employees have attachment and commitment to our business

WE ACKNOWLEDGE OUR STAFF.


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.


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.


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.


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.


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 12 10 14 7 7

Total number of employees who participated in a rehabilitation program

– 3 1 1 2 1

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:


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)


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


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


FINANCIAL REPORT


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 REPORTFor the year ended 30 June 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 HowellChair Director and Chief Executive Offi cer


INDEPENDENT AUDIT REPORT


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 STATEMENTFor the year ended 30 June 2007


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 SHEETAs at 30 June 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 STATEMENTFor the year ended 30 June 2007


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 EQUITYFor the year ended 30 June 2007


NOTES TO THE FINANCIAL STATEMENTSFor 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 complianceThe 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 approvalThe 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 costThe 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 concernThe 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 revenueInvestment revenue is recognised as it accrues, taking into account the effective yield on the fi nancial asset.

Sale of non-current assetsThe 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 AssetsProperty, 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.

DepreciationDepreciation 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:



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.

AmortisationAmortisation 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 PrizesUnpaid 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 FundsPrize 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 LeaveSalaries 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 LeaveLong 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.

SuperannuationNSW 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.



(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 –

ImpairmentNSW 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 GoodNSW 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 AssetsDeferred 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 LeaveThe 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 LivesThe 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.



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



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



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 reportingdate 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



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


7,554 9,707

Other plant and equipment – at fair value 7,230 7,269


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.



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



(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 EquipmentEstimated 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 –


Buildings – at fair value


Additions 13 51

Revaluation increment 1,198 –

Depreciation (281) (371)


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


Additions 298 696

Disposals (21) –

Depreciation (2,430) (2,443)


Other plant and equipment – at fair value


Additions 577 2,307

Disposals (341) (585)

Depreciation (491) (593)


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



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


Additions 1,181 492

Amortisation (1,327) (1,541)


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:



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 thebeginning 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


Interest cost on benefi t obligations (415) (111) (2,046) (2,572)



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)




2007 2007 2007 2007

$’000 $’000 $’000 $’000


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% paExpected return on assets backing current pension liabilities 7.6% paExpected return on assets backing other liabilities 7.6% paExpected 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% paExpected rate of return on fund assets backing other liabilities 7.0% paExpected salary increase rate 4.0% paExpected 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.




2006 2006 2006 2006

$’000 $’000 $’000 $’000


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)


Interest cost (411) (101) (2,061) (2,573)

Contributions by fund participants (151) – (280) (431)


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



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


Interest cost on benefi t obligations (411) (103) (2,061) (2,575)

Expected return on plan assets 504 163 2,821 3,488


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




2006 2006 2006 2006

$’000 $’000 $’000 $’000


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% paExpected rate of return on fund assets backing other liabilities 7.0% paExpected salary increase rate 4.0% paExpected 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.



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)


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



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 Capital100 Ordinary Shares of $1.00 each – $100 (2006 - $100)

Issued and Paid-up Capital2 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 –


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



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 PositionMs S. Browne Director Corporate ServicesMr M. Cassidy Director Information Technology ServicesMr B. McIntyre Director FinanceMr N. Nichles Director Marketing and SalesMr 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



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


STATUTORY REPORTING APPENDIXFor 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.



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 Groups1

% of Total Staff2

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 Groups1

Distribution Index3

Benchmark

EEO Group or target 2004 2005 2006 2007

Women 100 82 83 81 82

Aboriginal people and Torres Strait Islanders 100 nc4 nc4 nc4 nc4

People whose fi rst language was not English 100 89 87 90 87

People with a Disability 100 nc4 nc4 nc4 nc4

People with a Disability Requiring Work-Related Adjustment 100 nc4 nc4 nc4 nc4

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:



Eth

nic

Aff

air

s

Init

iati

ve

Key R

esu

lt

Are

aS

trate

gie

s/T

asks

Resp

on

sib

ilit

y

Reso

urc

es/

Bu

dg

et

Tim

eli

ne

Ind

ica

tors

Pe

rfo

rma

nce

Re

po

rt

Tim

elin

e

Ind

ica

tors

fo

r

Fis

ca

l 2

00

8

(Se

e N

ote

1

be

low

)

1. C

ontin

ue t

o pr

ovid

e C

omm

unity

La

ngua

ge

Allo

wan

ce S

chem

e (C

LAS

) com

mun

ity

lang

uage

spe

aker

s fo

r cu

stom

ers

of

NS

W L

otte

ries.

1. S

ocia

l Ju

stic

e (1

.7

- Acc

ess

to

Inte

rpre

ters

&

Tran

slat

ors)

1. R

ecru

itmen

t &

te

stin

g of

inte

rest

ed

staf

f.

2. In

form

sta

ff o

f C

LAS

sp

eake

r av

aila

bilit

y.

3. M

onito

r &

rep

ort

on

CLA

S s

peak

er u

sage

.

Man

ager

Hum

an

Res

ourc

es

Sal

arie

s B

udge

tJu

ne 2

007

Pho

ne D

irect

ory

to

all s

taff

of

upda

ted

C

LAS

list

.

Rep

ort

July

200

7

Leve

l of

cove

rage

Tim

ely

info

rmat

ion

diss

emin

atio

n

Tim

elin

ess

Bas

ed o

n re

cord

ed p

ract

ice,

tra

nsla

tion

serv

ice

prov

ided

to

cust

omer

s an

d ag

ents

usi

ng k

ey c

omm

unity

la

ngua

ges

espe

cial

ly C

hine

se,

Viet

nam

ese

and

Ara

bic

lang

uage

s

Info

rmat

ion

on a

vaila

ble

tran

slat

ors

regu

larly

upd

ated

Ser

vice

is p

rovi

ded

in a

tim

ely

fash

ion

on d

eman

d

June

200

8

Pho

ne D

irect

ory

to

all s

taff

of

upda

ted

CLA

S li

st

Rep

ort

July

200

8

2.M

arke

ting

com

mun

icat

ions

st

rate

gies

will

incl

ude

an e

thni

c co

mpo

nent

w

here

app

ropr

iate

.

Pro

mot

ions

will

fu

rthe

r re

cogn

ise

back

grou

nds

and

need

s of

NS

W

Lott

erie

s cu

stom

ers.

1. Id

entif

y &

use

ap

prop

riate

eth

nic

med

ia f

or a

dver

tisin

g,

prom

otio

ns &

sp

onso

rshi

p.

2. P

rovi

de p

rodu

ct &

se

rvic

e in

form

atio

n fo

r N

on E

nglis

h S

peak

ing

Bac

kgro

und

(NE

SB

) co

mm

uniti

es.

3. D

evel

op p

rom

otio

nal

activ

ities

for

spe

cifi c

et

hnic

com

mun

ities

. U

se m

ultil

ingu

al

prom

otio

nal s

taff

.

Dire

ctor

Mar

ketin

g &

Sal

esM

arke

ting

budg

et

– C

orpo

rate

P

rom

otio

ns &

A

dver

tisin

g

Incl

usio

n

Dev

elop

men

t of

act

iviti

es

Tim

elin

ess

Lott

o ha

s pr

omot

ed t

he S

atur

day

Sup

erdr

aws

thro

ugh

in-la

ngua

ge r

adio

(in

Ara

bic,

Chi

nese

and

Vie

tnam

ese)

an

d in

-lang

uage

pre

ss (i

n C

hine

se,

Viet

nam

ese

and

Ara

bic)

. How

to

Pla

y le

afl e

ts h

ave

been

tra

nsla

ted

into

C

hine

se, A

rabi

c an

d Vi

etna

mes

e.

Pow

erba

ll ha

s pr

omot

ed la

rge

jack

pots

thr

ough

in-la

ngua

ge p

ress

(in

Chi

nese

, Ara

bic

and

Viet

nam

ese)

and

in

-lang

uage

rad

io (C

hine

se, V

ietn

ames

e an

d A

rabi

c).

Tran

slat

ions

of

the

How

To

Pla

y br

ochu

res

for

Lott

o, P

ower

ball

and

OZ

Lott

o w

ere

mad

e av

aila

ble

on t

he

NS

W L

otte

ries

web

site

(in

Chi

nese

, Vi

etna

mes

e an

d A

rabi

c)

Inst

ant

Scr

atch

ies

laun

ched

the

$2

Hap

py P

ig g

ame

to c

eleb

rate

the

Lun

ar

New

Yea

r. Th

e ga

me

was

sup

port

ed b

y an

in-s

tore

pro

mot

ion

in s

elec

ted

NS

W

Lott

erie

s ag

ents

.

Med

ia in

clud

ed in

-lang

uage

pre

ss a

nd

radi

o (in

Chi

nese

and

Vie

tnam

ese)

.

Dev

elop

ed a

glo

ssar

y of

lott

ery

term

inol

ogy

desi

gned

to

assi

st a

gent

s fr

om N

ES

B.

Impl

emen

ted

form

al p

rogr

am t

o id

entif

y tr

aini

ng n

eeds

and

to

prov

ide

any

addi

tiona

l nec

essa

ry s

uppo

rt.

Mul

tilin

gual

pro

mot

ions

con

duct

ed f

or

all p

rodu

cts

Ong

oing

Ong

oing

Ong

oing

Not

e 1:

The

exi

stin

g st

rate

gies

will

con

tinue

in 2

007/

08

ETHN

IC A

FFAI

RS P

RIOR

ITIE

S ST

ATEM

ENT

2006

/07

PERF

ORM

ANCE

REP

ORT



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.



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;


• ‘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 1st – 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.



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



INDEXFor the year ended 30 June 2007

AA 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

BBalanced 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

CCall 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

EEconomic 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] 76-77Executive Management Team [ARSBR Schedule 1] 38 Exemptions from the Reporting Provisions [ARSBR c19(4)] 76

FFinancial Overview 49Financial 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

GGames at a Glance 14-17Games – Key Facts 6 Gaming System 28 Guarantee of Service – standards and provision of service [ARSBR Schedule 1] 11, 19-20

HHearing Impaired Service 84History 47Hours of Business (Corporate) 84Human 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

IInformation Technology 28-29Instant Scratchies 16Internet Address IBCInsurance [ARSBR Schedule 1] 39Investment Management Performance [ARSBR c12, TC 03/09] 78

KKey Facts 2006/07 6

LLand Disposal (Property Disposal) [ARSBR Schedule 1] 78Legal change (Legislative changes) – in Acts or signifi cant legislation [ARSBA s9(1)(f), ARSBR Schedule 1] 78Letter to Shareholder Ministers [ARSBA s9A, SOCA s24A(5)] 1Liability Management Performance [ARSBR c13, TC 03/09] 78Looking Ahead 18Lotto 14Lotto Strike 14Lucky Lotteries 17


INDEXFor the year ended 30 June 2007

MManagement 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, 78-79Management 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] 32Mission 2

NNetwork Syndicates 20

OObjectives 10Occupational Health and Safety [ARSBR Schedule 1] 46Organisation Chart [ARSBR Schedule 1] 32Our Business 27-29Our Games 10Our Players 12-22Our Retailers 23-26Our Shareholders 30-40Our Staff 41-46Overseas travel [ARSBR Schedule 1] 78 OZ Lotto 15

PPayment of accounts [ARSBR Schedule 1, TC 06/26] 75Performance of Executive Offi cers [ARSBR c11] 78-79 Performance Measures 3, 7-9, 11 Player Services 19Players 1st 22Players Club 19Pools (6 From 38 Pools) 17 Powerball 15Privacy 20 Promotion [ARSBR Schedule 1] 80 Property Disposal [ARSBR Schedule 1] 78Publications – summary list of promotional material [ARSBR Schedule 1] 80

RResearch 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, 28Resources 39-40

Results 3Retail Image 26 Retail Network 24 Retail Training 25 Responsible Gaming 21 Risk Management and Insurance Activities [ARSBR Schedule 1] 39

SSaturday Lotto 14Service Standards 7-9, 11Shareholders 32Staff Training 42-43Statement of Corporate Intent 3 Statement of Performance for Executive Offi cers 78-79Summary Review of Operations – Narrative summary of signifi cant operations

[ARSBR Schedule 1] 4-5 – Operational information [ARSBR Schedule 1] 7-9

TTerritory Managers 24 The Games 13The Year in Brief 7-9 Top Shop Awards 24-25

VValues 2Vision 2

WWaste Reduction and Purchasing Policy [ARSBR Schedule 1] 40Website Address (Corporate) IBC Websites – Staff and Agent 29Who We Are and What We Do 10Workforce Planning 43

ABBREVIATIONSARSBA Annual Report (Statutory Bodies) Act 1984ARSBR Annual Report (Statutory Bodies) Regulation 2005FOIA Freedom of Information Act 1989FOIR Freedom of Information Regulation 2005FOIM Freedom of Information Manual 1994IBC Inside Back CoverIFC Inside Front CoverPC Premier’s CircularPF&AA Public Finance and Audit Act 1983PM Premier’s MemorandumSOCA State Owned Corporations Act 1989TC Treasury CircularTD Treasurer’s Direction


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 1st 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

[email protected]

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

[email protected]