1. supporting arizona since 1981 jeff hatch-miller executive director january 2011

1

Supporting Arizona Since 1981

Jeff Hatch-MillerExecutive Director

January 2011

3

“To support Arizona programs for the public benefit by maximizing revenue

in a responsible manner.”

The Arizona Lottery Mission

4

5

Lottery Sales FallNew York January 7, 2010 Bloomberg

William Selway and Timothy R. Homan writing for Bloomberg News, report income from lottery-ticket sales fell to $52.3 billion, a 0.9 percent drop from the previous year

Nationwide: It Was A Tough Year

6

Nationwide: It Was A Tough Year

NJ casinos end 4th straight bad yearJan. 10, 2011, 8:33 p.m. ESTAssociated Press

ATLANTIC CITY, N.J. (AP) — In just four years, the nation's second-largest gambling market has lost nearly a third of its business.

Year-end figures released Monday show Atlantic City's casinos took in $3.6 billion in 2010, down from $5.2 billion in 2006, a decline of nearly 31 percent. The yearly decline was 9.6 percent, marking the fourth year in a row that New Jersey's casinos took in less than the year before.

7

Nationwide: It Was A Tough Year

Indian casino revenue declining

The Business Journal Monday, December 13, 2010

Indian casino gaming revenue declined is expected to drop further this year according to PricewaterhouseCoopers.

Total tribal casino revenue in the United States is expected to decline by 1.9 percent in 2010 to $26 billion the PwC "Playing to win" report released Monday reported.

8

Nationwide: It Was A Tough Year

Arizona Lottery has record-breaking sales in down economyABC15 TelevisionAugust 31, 2010

PHOENIX – The Arizona Lottery ranked number one in the country for an increase in sales over the 2010 fiscal year.

According to LeFleurs analysis of North American lotteries, Arizona ended the year with $551 million in sales, that’s a 13.8 percent jump from last year.

9

The Lottery Is A Business

10

11

Increase Sales and Revenue Strategic Business Planning Increased Per Capita Sales Expanded Retailer Base Maximized Retailer Performance More Attractive, “Audience Tested” Games Right Sized Prize Payouts Focused Advertising

Reduce Cost Of Operations Heighten Productivity Hire Strategically To Increase Revenue Exploit Outsourcing Options Tighten Game Cost Controls Negotiate Lower Services/Materials Prices Limit Consultant Use Maintain Travel/Conference Restrictions

Business Maximization Strategies

12

$100 Million Cash Spectacular delivered the goods. Two years later, it continues to bring in more than $1 million a week, providing needed revenue and helping propel Arizona to the No. 2 position in the U.S. for percentage growth of transferable revenue.

“It was a huge financial commitment for us and the thought of failure was horrific.”

Karen Emery, 2009

13

Right Sized Prize Payouts = Maximized Sales

14

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

1 3 5 7 9 11 13 15 17 19 21 23

Instant “Scratcher” Ticket Life Cycle

Week in Market

New Games Are Required Every 13 to 19 Weeks

15

With

Without

16

Focused Advertising

With

Without

17

Lottery Retailers

2783

Sales Growth

Arizona Ranked #2 in North America for

FY2009

19

20

Flow Of Lottery Funds

21

FY11 Beneficiary Distribution

FY10 Sales vs. FY11 SalesTotal Sales Comparison Graph

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

FY 2010 FY 2011

FY11: $269,160,417

FY10: $256,584,711

% Difference 4.9%

Trailing 12-Month Sales40

178

4020

9

4023

7

4026

8

4029

8

4029

9

4033

0

4036

0

4039

1

4042

2

4045

2

4048

3

4051

3

4054

4

4057

5

4060

3

4063

4

4066

4

4069

5

500

550

600

650

700

Actual Linear (Actual)Goal

Twelve Months Ending

(Mil

lio

ns)

$580

24

FY10 Actual and FY11 Projected Beneficiary Transfers

Projected 5% Increase

Charity “Pull Tab” Games On Sale NowFirst sales -- January 5, 2011

American Games shipping orders

16 licensed charitable organizations

26

The ArizoAdministration issued bonds in the amount of $450 million in 2010.

Principle and interest payments will be made using Arizona Lottery funds. The time to maturity is 20 years.

Additional bonding may be forthcoming as conditions require.na Lottery and Department of

Securitization

27

The Arizona Lottery functions within the limitations imposed by Arizona’s negotiated gaming compacts with the Tribes.

The Lottery will continue to offer new and interesting products that match the qualities being requested by our players.

Our prizes and jackpots are the largest in Arizona. We will work with other states to offer games with even higher jackpots, won more often by more people.

We do not expect to engage in electronic or Internet gaming.

The Lottery’s Long-Term Vision

28

In Summary

Jeff Hatch-MillerExecutive DirectorThe Arizona Lotteryjhatch-miller@azlottery.gov

29

Your Comments and Questions

Jeff Hatch-MillerExecutive DirectorThe Arizona Lotteryjhatch-miller@azlottery.gov

30