EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared for the information of shareholders in connection with the second Annual General Meeting of the Company to be held at The Barnet Long Room, Customs House, Level 1, 31 Alfred Street, Circular Quay, Sydney, Australia on 11 February 2009 commencing at 10.00am.

This Explanatory Memorandum should be read in conjunction with the accompanying Notice of Annual General Meeting. A glossary of defined terms is contained at the end of this memorandum.

The Directors recommend that shareholders vote in favour of Resolutions 1 to 5 (inclusive). In relation to Resolution 6, the Directors (other than Jim Minto who has abstained from making a recommendation due to his personal interest in the Resolution) recommend that shareholders vote in favour of the Resolution.

Receipt of Financial Reports
The financial results for the financial year ended 30 September 2008 are set out in the Company's 2008 Annual Report.

The Corporations Act requires that the Financial Report, the Directors' Report, Directors' Declaration and the Audit Report be received and considered at the meeting. Each of the reports and the declaration are contained in the 2008 Annual Report which is available on the Company's website at www.toweraustralia.com.au.

Shareholders will be provided with the opportunity to raise questions or make comments on the reports and the management of the Company. The Company's auditor will be present and will answer qualifying questions during the discussion of this Item.

Resolution 1 - Re-election of Elana Rubin
Under clause 19.12 of the Company's Constitution, at each Annual General Meeting of the Company one-third of the Directors (other than the Managing Director) are subject to retirement by rotation (or, if the number of Directors is not three or a multiple of three then the number nearest to one-third must retire). Any other Director who has held office for three years or more since the Director's last election or re-election, must also retire from office at each Annual General Meeting.

Such Directors, being eligible, are entitled to offer themselves for re-election as a Director at the Annual General Meeting which coincides with their retirement.

At this meeting, the following Director automatically retires and being eligible, offers herself for re-election.

Resolution 1 - Re-election of Elana Rubin
Elana Rubin was appointed to the Company's Board on 30 November 2007. Elana Rubin is an independent Non-executive Director of the Company, Chair of the Investment Committee and a member of the Audit, Compliance and Risk Management Committee.

Elana Rubin has extensive experience in the superannuation, investments and infrastructure sectors. She is presently Chair of AustralianSuper and the Victorian WorkCover Authority and a Non-executive Director of the Transport Accident Commission and Industry Super Property Trust.

Elana Rubin retires by rotation and offers herself for re-election.

Resolutions 2 to 4 - Election of Directors
In accordance with the ASX Listing Rules and clauses 19.17 and 19.18 of the Company's Constitution, any Director who is appointed to the Board to fill a casual vacancy during the year, holds office until the end of the next Annual General Meeting. The Director is eligible for election by the shareholders at that meeting.

Resolution 2 - Election of Donald Findlater
On 7 July 2008, Donald Findlater was appointed as a Director to fill a casual vacancy on the Board. In accordance with the ASX Listing Rules and the Company's Constitution, Donald Findlater holds office until the end of the Annual General Meeting.

Donald Findlater is an independent Nonexecutive Director of the Company and the Chairman of the Audit, Compliance and Risk Management Committee.

Donald Findlater has over 40 years of professional audit, accounting and advisory experience with a wide range of Australian financial institutions. He was a partner with KPMG from 1 July 1981 to 4 July 2008 having joined the company's predecessor firm, Peat Marwick Mitchell in 1968. Throughout his career at KPMG, Donald Findlater was the APRA approved auditor for a significant number of life and general insurance companies.

Donald Findlater is presently a Non-executive Director of Elders Financial Services Group Pty Limited, Elders Trustees Limited, Elders Insurance Limited and Elders Insurance Agencies Pty Limited.

Donald Findlater having been appointed by the Board on 7 July 2008 now offers himself for election.

Resolution 3 - Election of Takayuki Kotani

Takayuki Kotani was appointed as a Director to fill a casual vacancy on the Board on 8 December 2008. In accordance with the ASX Listing Rules and the Company's Constitution, Takayuki Kotani holds office until the end of the Annual General Meeting.

Takayuki Kotani is a Non-executive Director of the Company.

Takayuki Kotani is the General Manager, International Business Management Department of The Dai-ichi Mutual Life Insurance Company (Dai-ichi Life). He is responsible for the management of Dai-ichi Life's entire international business, including new business developments and management of the existing international businesses in Taiwan, Vietnam, India, Thailand and Australia. Takayuki Kotani joined Dai-ichi Life in 1982 and has held senior positions in both international and domestic planning and research areas.

Takayuki Kotani having been appointed by the Board on 8 December 2008 now offers himself for election.

Resolution 4 - Election of Tetsuya Kikuta
Tetsuya Kikuta was appointed as a Director to fill a casual vacancy on the Board on 8 December 2008. In accordance with the ASX Listing Rules and the Company's Constitution, Tetsuya Kikuta holds office until the end of the Annual General Meeting.

Tetsuya Kikuta is a Non-executive Director of the Company.

Tetsuya Kikuta is the Managing Director of Dai-ichi Life International (Asia Pacific) Limited. He is currently responsible for Dai-ichi Life's business in the Asia Pacific region with particular focus on the expansion of new business development and was involved in and responsible for all of Dai-ichi Life's business expansion deals in Taiwan, Vietnam, India, Thailand and Australia. Tetsuya Kikuta joined Dai-ichi Life in 1987 and has significant experience, particularly in the investment area. He has also had six years of experience working for Dai-ichi Life International (USA) in New York.

Tetsuya Kikuta having been appointed by the Board on 8 December 2008 now offers himself for election.

The Remuneration Report is set out on pages 8 - 17 of the 2008 Annual Report and discusses matters including, but not limited to:

• Board policy for determining remuneration of Directors and executives;
• remuneration details for the Directors and executives of the Company;
• a discussion of the link between Directors and executives remuneration and the Company's performance; and
• details of any element of remuneration of Directors and executives that is dependent on the satisfaction of a performance condition.

Consistent with section 250R of the Corporations Act, the Company submits to shareholders for consideration and adoption, the Remuneration Report for the financial year ended 30 September 2008. The shareholder vote is a non-binding resolution undertaken for advisory purposes only and does not bind the Directors or the Company.

There will be reasonable opportunity for discussion of the Remuneration Report at the Annual General Meeting.

Resolution 6 - Approval of grant of Performance Share Rights to Jim Minto
ASX Listing Rule 10.14 provides that the Company may only permit a Director to acquire securities under an employee incentive scheme where that Director's participation has been approved by an ordinary resolution of shareholders.

The TOWER Executive Share and Option Plan (Plan) is an important feature of the Company's remuneration policy in terms of retaining the strong skill base currently within the Company's businesses and Jim Minto is the only Director currently entitled to participate in the Plan.

The Board has approved the grant of 250,000 Performance Share Rights to the Managing Director, Jim Minto under the Plan and the Company seeks shareholder approval for this grant.

The Performance Share Rights will be granted at no cost to Mr Minto and each Performance Share Right entitles him to one Share, subject to the satisfaction of performance criteria as specified by the Board.

If shareholder approval is obtained, it is intended that the Performance Share Rights will be granted shortly after the meeting, but no later than 12 months after the meeting.

The Plan was approved by shareholders at the previous Annual General Meeting of the Company on 6 February 2008 and provides for eligible employees to be offered conditional entitlements to Shares (Performance Share Rights) subject to meeting specified performance criteria within a set performance period.

Under the Rules of the Plan, a recipient of Performance Share Rights has no rights or entitlements in relation to the underlying Shares until the Shares vest according to satisfaction of the performance criteria. If the recipient ceases to be employed by the Company or its related body corporate other than because of a "qualifying reason" (ie death or total and permanent disability or other qualifying reason as determined by the Board), then any rights to the underlying unvested Shares will lapse immediately. Where the recipient ceases to be employed by the Company or its related body corporate because of a qualifying reason, the Board may determine that the recipient will become immediately entitled to the underlying unvested Shares notwithstanding that the performance criteria have not yet been satisfied.

If shareholder approval is obtained, and subject to the Rules of the Plan, Mr Minto will become entitled to Shares (ie the Performance Share Rights will "vest") on 30 September 2010 subject to satisfaction of the following performance criteria:

Based on the three year straight line progressive growth in the Company's underlying profit for the period up to 30 September 2010:

1. 250,000 Shares will vest if there is an increase of 73% or more in the underlying profit over the period;
2. 187,500 Shares will vest if there is a 52% increase in the underlying profit over the period and all rights in relation to the remaining Shares will lapse immediately;
3. 125,000 Shares will vest if there is a 33% increase in the underlying profit over the period and all rights in relation to the remaining Shares will lapse immediately; and
4. A straight line interpolation will apply to determine the portion of Shares which will vest at underlying profit levels between the three set levels. All rights to Shares will lapse if the increase in underlying profit over the period is less than 33%.

The number of Performance Share Rights to be granted to Mr Minto was determined in consultation with independent remuneration advisers and is considered by the Board to be reasonable.

The following options and Shares have previously been awarded to Jim Minto under the Plan:

Grant Date	No of Options granted	Options Exercise Price	Fair Value at Grant Date	Value of Options at Grant Date	Date Options can be exercised	Expiry Date
27 Feb 07	539,267	$0.794	$0.29	$156,387	1 Apr 07	31 Mar 10
27 Feb 07	1,049,783	$1.21	$0.35	$367,424	9 Aug 08	8 Aug 11
27 Feb 07	4,000,000	$1.88	$0.65	$2,600,000	21 Nov 09	20 Nov 12

Details of all options and Shares issued under the Plan and the applicable performance hurdles are outlined in the 2008 Annual Report on pages 13 -15.

Forum for Shareholder Questions and Comments
At the conclusion of the formal business of the Annual General Meeting, the Chairman will open the meeting to shareholder questions and comments.

Shareholders may also ask questions of PricewaterhouseCoopers, the Company's external auditor, about the conduct of its external audit and the preparation and content of its audit report. The auditor will also be present at the Annual General Meeting.

If you have a question that you would like to raise for discussion by the external auditor at the Annual General Meeting please send your question to the Company at:

Postal deliveries:
TOWER Australia Share Registry
C/- Computershare Investor Services Pty Ltd
GPO Box 242
Melbourne VIC 3001

or

The Company Secretary
TOWER Australia Group Limited
80 Alfred Street
MILSONS POINT NSW 2061

Fax Number:
TOWER Australia Group Limited
+ 61 2 9929 5792

or

Computershare Investor Services Pty Ltd
+ 61 3 9473 2555

Written questions submitted to the external auditor, must relate to the content of the auditor's report or the conduct of the audit. A list of qualifying questions received will be made available at the Annual General Meeting.

Please note that all questions must be received at least five business days before the Annual General Meeting, that is, by no later than 5pm on 4 February 2009.