1. Lottery Sales Update for FY 2011-12 Presentation to California State Lottery Commission April 26, 2012 Director’s Report 6b

2. YTD Sales: Over 28% Higher Than Last Year Sales thru April 14, 2012: Over $3.4 billion Increase of 28.5% over same period last Fiscal Year (first 41 weeks) Sales stand at 103% of the YTD Sales Goal All products except Hot Spot running ahead of goal

3. Record Breaking MEGA Millions Jackpot Creating Record Sales The past month has totally changed sales picture for MEGA Millions Last Update Mar 10: $352 million Sales thru April 14: $627 million Already surpassed last fiscal year’s total Now, YTD sales up 35% from same time last yr YTD Sales running at 153% of YTD Goal

4. Exponential Growth With Big Jackpot; Draw Sales Higher in 2012 than Prior Year Jackpot Amount (in millions)

5. Super Lotto Plus Sales Continue to be Better than Anticipated SLP Sales thru 4-14-12: over $340 million Down 1% compared to last year But, YTD sales at 107% of YTD Goal The 6-year slide in sales has been arrested

6. Daily Games: $268 million Daily Games thru 4-14: $268 million Sales up 2% over last year –Daily 3, Daily Derby and Fantasy 5 have higher sales YTD sales continues at 104% of YTD Goal

7. Hot Spot: $103 million Sales thru 4-14: $103 million Even with first 41 weeks of last year YTD Sales running at 96% of YTD Goal Current Hot Spot promotion is resulting in highest weekly sales for this fiscal year and will run through May 20 th

8. Scratchers Sales Continue to Grow this Year Consumer Sales thru 4-14-2012 over $2.1 billion –All 12 months of last FY: $2.002 billion in sales –July, 2011 - Apr 14, 2012 : Scratchers up 40% compared to first 41 weeks of last year YTD Sales running at 103% of YTD Sales Goal $5 game has been largest selling price point for past 6 weeks

9. Scratchers Sales Continue to be Above Expected Levels Since February, weekly sales averaging above $60 million Since January, sales above anticipated levels by more than 9%

10. FY 2011-12 Sales Estimates Assumptions Scratchers: –Continue trend of being ahead of expected sales –Weekly Sales range from $56 MM-$63 MM per week (May-June) –Based on advertising and improvements at retail MEGA Millions: –Conservative estimate with highest jackpot for the remainder of the year being $75 million Other Games: –Estimates based on trend analysis

11. FY 2011-12 Sales Estimates Scratchers, Super Lotto Plus and Daily Games will exceed Annual Goals Year will end at $4.4 billion in sales Total Sales will be 28% higher (or $962 million higher) than Last Year Sales will be $310 million above Annual Goal

12. FY 2011-12 Profit Estimates Goal: $1.19 billion to public education Current Estimate: $1.289 billion to public schools About $160 million additional dollars to education than last year And, $240 million more over the AB 142 Base Year (FY 2008-09) Resulting in the Lottery’s Best Year Ever in terms of Sales and Dollars to Public Education

13. Business and Product Review Presentation to California State Lottery Commission April 26, 2012 Director’s Report 6b

14. Purpose Highlight some of the analyses conducted –Reviewing U. S. business and lottery trends –CA data on Lottery sales, playership and Performance Measures Identifies some of the strategic opportunities Preview some major initiatives and themes of the FY 2012-13 Business Plan to be fully presented at next meeting

15. Lottery Industry Data

16. Selling Both MEGA Millions and Powerball Powerball: First Multi-State Game –Smaller states combined to form larger jackpots –Initially named “Lotto America” MEGA Millions (formerly “Big Game”) –Larger states bordering Powerball states create game 1-31-2010: Cross-sell begins (selling both games) CA continued to sell just MEGA Millions and FL continued to sell just Powerball

17. CA and Multi-State Games CA increased MEGA Millions sales by 20% compared to other MM states combined sales (MM + Powerball) were up just 8% –52 weeks after Cross-Sell began vs. 52 weeks prior CA began selling MEGA Millions game 2005 MEGA Millions sales in CA have become stronger – Could now handle a competing game like Powerball

18. Changes to Powerball January 15, 2012: Powerball game change Starting Jackpot of $40 million 2 nd Prize of $1 million $2 Price Point Slightly Improved odds from prior game Results: Quickly achieved a $336 million jackpot on February 11 th - record sales for many lotteries With differentiating game features, new Powerball fits better in our portfolio

19. Hot Spot – A Stronger Seller in Many Other States due to Higher Payout Best practice: higher prize payout With Payout Relief, Hot Spot next benefactor Other factor for varying sales is # and type of retailers

20. $5 Game: Dominant Price Point in Most Large Selling States

21. calottery Product Data

22. Need to Address Weaker Scratchers Sales in Summer Season

23. Level of Playership Has Significantly Declined over Past 10 Years

24. Retail Initiatives and Impact on Scratchers Sales Efforts to increase % of retailers selling the “best mix of Scratchers games” impact sales A Pilot Test in 6 territories in San Francisco: –Saw a 4% increase in weekly Scratchers sales –By concentrating sales rep’s time on key tasks Recent data show potential gains of $16 million or more per year from getting just a % of retailers to switch one game

25. State of Loyalty Club Marketplace More than 2 billion memberships held by Americans in 2011 –Total Number up 16% since 2008 –Total Number up 56% since 2006 Gaming category – 6 th Largest w/ 133 million but grew 26% between 2008 and 2011 –Financial Services #1 in size; Airlines #2 Average Household holds 18 memberships –But, “active” with only 8.4 of those Programs As such, need to “engage” members

26. In Less than 3 Years, Over 1.4 Million Members of Scratchers Players Club Replay Program Started May, 2009

27. Positive Metrics for New Website March data from New Public Website: Traffic up Time engaged on site is up But, March had big MM jackpot