Difficult Budgets, New Ideas23rd March 2010

The Public private partnership structure has enabled the UK government to maximise the value of The UK National Lottery

Under a licence granted by the National Lottery Commission (UK Lottery Regulator), the UK National Lottery is operated by Camelot through a public-private partnership

This approach has enabled the UK government to maximize returns from The National Lottery through aligning the interest of the operator with those of the state

This approach returns to the state 40% of all proceeds received by Camelot

Camelot operates under significant regulatory constraints and faces a highly competitive gaming industry – growth has therefore been driven through innovation

Camelot, delivering a long term strategy for socially responsible growth

The Camelot model is based on high penetration (73% of adult population play) and lower per capita sales

The long-term strategy for growth is based on offering players a regularly refreshed portfolio of games and convenient new ways to play (Interactive, Fast Pay, etc.)

Camelot’s commitment to responsible play is enshrined in its everyday operations and is the guiding principle in all its commercial decision- making

Background behind UK launch of Interactive

Now delivering 13% of total UK National Lottery sales and growing at more than twice the rate of the UK e-commerce industry

Attracts a younger and more affluent player

In the top 5 UK e-commerce sites along with

UK National Lottery online sales have grown since launch – while retail sales also continue to grow

£m

Camelot interactive management model comprises of in-depth expertise in:Player attractionPlayer management and retentionResponsible player growth and cross-selling strategiesInternet marketing optimization

Over 5 million interactive players registered to date and 78% Player retention

Average weekly registrations % Purchasing within period

Month

Longstanding players (registering prior to 07/08) drove 5% more revenue in 08/09 than in 07/08Player registrations and purchasing patterns

Protecting players online

Non-interactive IIWG game demos now give an overview of game play to non-registered players

Interactive lottery enables you to have a direct relationship with players

Comprehensive player protection is key:

Authentication of player’s age and location

Permanent exclusion

Daily buy and try limits on Instant Win Games (interactive scratchcards)

Weekly wallet load limits

“Reality Checks” showing recent spending on account load

Time spent logged-in display

Try for free versions of Instant Win Games (only available to registered players)

Assisting lotteries in global markets

Camelot Global Services was set up to focus on making the most of the knowledge, understanding and expertise acquired in operating the UK National Lottery to assist lotteries outside of the UK market

Camelot Global was recently selected by the California State Lottery to work with them to improve overall performance

We believe in a vendor agnostic philosophy and business model which aligns our interests solely to that of the lottery

Overview of the CA Lottery Partnership

Under this agreement Camelot is partnering, over a four-year period, with the California State Lottery, with the aim to maximize returns to the beneficiaries of the lottery

Purpose: Develop a 3-year business plan and support its implementation

Objective: Build a strategy and execution capability that will substantially and sustainably enhance Net Returns to education

The agreement has created a public private partnership that is unique in its scope:

Clear alignment of incentives for both parties

Camelot Global Services provides an un-conflicted view on the proposed path to success

Although still in its early stages, the partnership is already starting to deliver some immediate and tangible benefits

Public private partnership - value model

Private operator mindset

and capability

Private operator mindset

and capability

US market relevance

US market relevance

StrategyStrategy

Ability toexecute

Ability toexecute

Sustainableprofit growth

Sustainableprofit growth

CA Lottery expertise

CA Lottery expertise

A unique partnership

The engagement is unique in the industry, providing a number of new benefits to the State of California:

Private operator mindset and capability without full scale privatization

Total alignment of incentives model specific to execution

Focus on both top-line growth and operational efficiency to drive bottom-line returns

Teaming with lottery employees to create a sustainable ability to execute – emphasis on staff acceptance, coaching and development

Access to valuable operator knowledge: sales, marketing, games, Scratcher optimization, retailer & stakeholder management, etc

Customer/Operators perspective with respect to main vendors

Results to date

Scratchers

Business Wide

DBG Marketing Retail

•Sales growth this fiscal•Trading mindset

•Mandate and urgency for decisions on game changes

•Refocus on core activities: MegaMillions and Scratcher campaigns

•Agenda of change and focus on performance•Initiation of retail pilot

Very early days, but we are starting to see some tangible effects

•Appetite and enthusiasm for change•Sense of the possible – base potential for $1.7 billion incremental sales over 3 years

Early Benefits – real and tangible

For the scratchers business specifically, there is tangible evidence of the shoots of revenue growth.

Settlements ($m)

28

30

32

34

36

38

40

11

/07

/20

09

25

/07

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09

08

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22

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05

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19

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03

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17

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31

/10

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14

/11

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28

/11

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12

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26

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/01

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10

23

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10

06

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10

20

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10

06

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10

Settlements ($m)

TREND

Quick Wins Implementation

Outlook – CSL

2010 is going to be a very big year for the California Lottery:

Approval of the 3-year business plan

Realization of Quick Wins: achieving this year’s stretch revenue targets (not just stemming the decline!!)

Shaping the implementation Program for success

Integrating the 3-year business plan back into next year’s budget

Critical decisions on draw-based games

Implementation of base initiatives

Outlook – Camelot for 2010

Primary market of focus outside of the UK is the US

Dedicated US-based team with an optimal blend of UK and US experience

We believe Camelot’s model and experience aligns well to the US Market:

States need to increase revenue to deal with budgetary pressures

Aligned incentive model – state wins, Camelot wins

Need for operator expertise with new ideas and an un-conflicted agenda

Strong benefits to be gained through an aligned incentive public private partnership model